Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Organ Procurement Organization Reporting and Communication; Transplant Outcome Measures and Documentation Requirements; Electronic Health Record (EHR) Incentive Programs; Payment to Nonexcepted Off-Campus Provider-Based Department of a Hospital; Hospital Value-Based Purchasing (VBP) Program; Establishment of Payment Rates Under the Medicare Physician Fee Schedule for Nonexcepted Items and Services Furnished by an Off-Campus Provider-Based Department of a Hospital

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 2017 to implement applicable statutory requirements and changes arising from our continuing experience with these systems. In this final rule with comment period, we describe the changes to the amounts and factors used to determine the payment rates for Medicare services paid under the OPPS and those paid under the ASC payment system. In addition, this final rule with comment period updates and refines the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program. Further, in this final rule with comment period, we are making changes to tolerance thresholds for clinical outcomes for solid organ transplant programs; to Organ Procurement Organizations (OPOs) definitions, outcome measures, and organ transport documentation; and to the Medicare and Medicaid Electronic Health Record Incentive Programs. We also are removing the HCAHPS Pain Management dimension from the Hospital Value-Based Purchasing (VBP) Program. In addition, we are implementing section 603 of the Bipartisan Budget Act of 2015 relating to payment for certain items and services furnished by certain off-campus provider-based departments of a provider. In this document, we also are issuing an interim final rule with comment period to establish the Medicare Physician Fee Schedule payment rates for the nonexcepted items and services billed by a nonexcepted off-campus provider-based department of a hospital in accordance with the provisions of section 603.

 
CONTENT

Federal Register, Volume 81 Issue 219 (Monday, November 14, 2016)

Federal Register Volume 81, Number 219 (Monday, November 14, 2016)

Rules and Regulations

Pages 79562-79892

From the Federal Register Online via the Government Publishing Office www.gpo.gov

FR Doc No: 2016-26515

Page 79561

Vol. 81

Monday,

No. 219

November 14, 2016

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 414, 416, 419, et al.

Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Organ Procurement Organization Reporting and Communication; Transplant Outcome Measures and Documentation Requirements; Electronic Health Record (EHR) Incentive Programs; Payment to Nonexcepted Off-

Campus Provider-Based Department of a Hospital; Hospital Value-Based Purchasing (VBP) Program; Establishment of Payment Rates Under the Medicare Physician Fee Schedule for Nonexcepted Items and Services Furnished by an Off-Campus Provider-Based Department of a Hospital; Final Rule

Page 79562

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 414, 416, 419, 482, 486, 488, and 495

CMS-1656-FC and IFC

RIN 0938-AS82

Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Organ Procurement Organization Reporting and Communication; Transplant Outcome Measures and Documentation Requirements; Electronic Health Record (EHR) Incentive Programs; Payment to Nonexcepted Off-

Campus Provider-Based Department of a Hospital; Hospital Value-Based Purchasing (VBP) Program; Establishment of Payment Rates Under the Medicare Physician Fee Schedule for Nonexcepted Items and Services Furnished by an Off-Campus Provider-Based Department of a Hospital

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

ACTION: Final rule with comment period and interim final rule with comment period.

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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 2017 to implement applicable statutory requirements and changes arising from our continuing experience with these systems. In this final rule with comment period, we describe the changes to the amounts and factors used to determine the payment rates for Medicare services paid under the OPPS and those paid under the ASC payment system. In addition, this final rule with comment period updates and refines the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program.

Further, in this final rule with comment period, we are making changes to tolerance thresholds for clinical outcomes for solid organ transplant programs; to Organ Procurement Organizations (OPOs) definitions, outcome measures, and organ transport documentation; and to the Medicare and Medicaid Electronic Health Record Incentive Programs. We also are removing the HCAHPS Pain Management dimension from the Hospital Value-Based Purchasing (VBP) Program.

In addition, we are implementing section 603 of the Bipartisan Budget Act of 2015 relating to payment for certain items and services furnished by certain off-campus provider-based departments of a provider. In this document, we also are issuing an interim final rule with comment period to establish the Medicare Physician Fee Schedule payment rates for the nonexcepted items and services billed by a nonexcepted off-campus provider-based department of a hospital in accordance with the provisions of section 603.

DATES: Effective date: This final rule with comment period and the interim final rule with comment period are effective on January 1, 2017.

Comment period: To be assured consideration, comments on: (1) The payment classifications assigned to new Level II HCPCS codes and recognition of new and revised Category I and III CPT codes in this final rule with comment period; (2) the 20-hour a week minimum requirement for partial hospitalization services in this final rule with comment period; (3) the potential limitation on clinical service line expansion or volume of services by nonexcepted off-campus PBDs in this final rule with comment period; and (4) the Medicare Physician Fee Schedule (MPFS) payment rates for nonexcepted items and services furnished and billed by nonexcepted off-campus provider-based departments of hospitals in the interim 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 31, 2016.

ADDRESSES: In commenting, please refer to file code CMS-1656-FC when commenting on the issues in the final rule with comment period and CMS-

1656-IFC when commenting on issues in the interim final rule with comment period. 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-1656-FC or CMS-1656-IFC (as appropriate), 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-1656-FC or CMS-1656-IFC (as appropriate), 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:

  1. 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.)

  2. For delivery in Baltimore, MD--

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

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

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

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

    FOR FURTHER INFORMATION CONTACT: Advisory Panel on Hospital Outpatient Payment (HOP Panel), contact Katherine Eastridge at (410) 786-4474.

    Ambulatory Surgical Center (ASC) Payment System, contact Elisabeth Daniel at (410) 786-0237.

    Page 79563

    Ambulatory Surgical Center Quality Reporting (ASCQR) Program Administration, Validation, and Reconsideration Issues, contact Anita Bhatia at (410) 786-7236.

    Ambulatory Surgical Center Quality Reporting (ASCQR) Program Measures, contact Vinitha Meyyur at (410) 786-8819.

    Blood and Blood Products, contact Lela Strong at (410) 786-3213.

    Cancer Hospital Payments, contact David Rice at (410) 786-6004.

    Chronic Care Management (CCM) Hospital Services, contact Twi Jackson at (410) 786-1159.

    CPT and Level II Alphanumeric HCPCS Codes--Process for Requesting Comments, contact Marjorie Baldo at (410) 786-4617.

    CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck Braver at (410) 786-9379.

    Composite APCs (Low Dose Brachytherapy and Multiple Imaging), contact Twi Jackson at (410) 786-1159.

    Comprehensive APCs, contact Lela Strong at (410) 786-3213.

    Hospital Observation Services, contact Twi Jackson at (410) 786-

    1159.

    Hospital Outpatient Quality Reporting (OQR) Program Administration, Validation, and Reconsideration Issues, contact Elizabeth Bainger at (410) 786-0529.

    Hospital Outpatient Quality Reporting (OQR) Program Measures, contact Vinitha Meyyur at (410) 786-8819.

    Hospital Outpatient Visits (Emergency Department Visits and Critical Care Visits), contact Twi Jackson at (410) 786-1159.

    Hospital Value-Based Purchasing (VBP) Program, contact Grace Im at (410) 786-0700.

    Inpatient Only Procedures List, contact Lela Strong at (410) 786-

    3213.

    Medicare Electronic Health Record (EHR) Incentive Program, contact Kathleen Johnson at (410) 786-3295 or Steven Johnson at (410) 786-3332.

    New Technology Intraocular Lenses (NTIOLs), contact Elisabeth Daniel at (410) 786-0237.

    No Cost/Full Credit and Partial Credit Devices, contact Twi Jackson at (410) 786-1159.

    OPPS Brachytherapy, contact Elisabeth Daniel at (410) 786-0237.

    OPPS Data (APC Weights, Conversion Factor, Copayments, Cost-to-

    Charge Ratios (CCRs), Data Claims, Geometric Mean Calculation, Outlier Payments, and Wage Index), contact David Rice at (410) 786-6004.

    OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar Products, contact Twi Jackson at (410) 786-1159.

    OPPS Exceptions to the 2 Times Rule, contact Marjorie Baldo at (410) 786-4617.

    OPPS Packaged Items/Services, contact Lela Strong at (410) 786-

    3213.

    OPPS Pass-Through Devices and New Technology Procedures/Services, contact Lela Strong at (410) 786-3213.

    OPPS Status Indicators (SI) and Comment Indicators (CI), contact Marina Kushnirova at (410) 786-2682.

    Organ Procurement Organization (OPO) Reporting and Communication, contact Peggye Wilkerson at (410) 786-4857 or Melissa Rice at (410) 786-3270.

    Partial Hospitalization Program (PHP) and Community Mental Health Center (CMHC) Issues, contact Marissa Kellam at (410) 786-3012 or Katherine Lucas at (410) 786-7723.

    Rural Hospital Payments, contact David Rice at (410) 786-6004.

    Section 603 of the Bipartisan Budget Act of 2015--Items and Services Furnished by Off-Campus Departments of a Provider, contact David Rice at (410) 786-6004 or Elisabeth Daniel at (410) 786-0237.

    Section 603 of the Bipartisan Budget Act of 2015--MPFS Payment Rates for Nonexcepted Off-Campus Provider-Based Departments of Hospitals, contact Geri Mondowney at (410) 786-1172, Patrick Sartini at (410) 786-9252, or Isadora Gil at (410) 786-4532.

    Transplant Enforcement, contact Paula DiStabile at (410) 786-3039 or Caecilia Blondiaux at (410) 786-2190.

    All Other Issues Related to Hospital Outpatient and Ambulatory Surgical Center Payments Not Previously Identified, contact Lela Strong at (410) 786-3213.

    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 https://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: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The Addenda relating to the ASC payment system are available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

    Alphabetical List of Acronyms Appearing in This Federal Register Document

    ACOT Advisory Committee on Organ Transplantation

    AHA American Hospital Association

    AMA American Medical Association

    AMI Acute myocardial infarction

    APC Ambulatory Payment Classification

    API Application programming interface

    APU Annual payment update

    ASC Ambulatory surgical center

    ASCQR Ambulatory Surgical Center Quality Reporting

    ASP Average sales price

    AUC Appropriate use criteria

    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

    Page 79564

    CASPER Certification and Survey Provider Enhanced Reporting

    CAUTI Catheter-associated urinary tract infection

    CBSA Core-Based Statistical Area

    CCM Chronic care management

    CCN CMS Certification Number

    CCR Cost-to-charge ratio

    CDC Centers for Disease Control and Prevention

    CED Coverage with Evidence Development

    CERT Comprehensive Error Rate Testing

    CfC Conditions of coverage

    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

    ECD Expanded criteria donor

    EBRT External beam radiotherapy

    ECG Electrocardiogram

    ED Emergency department

    EDTC Emergency department transfer communication

    EHR Electronic health record

    E/M Evaluation and management

    ESRD End-stage renal disease

    ESRD QIP End-Stage Renal Disease Quality Improvement Program

    FACA Federal Advisory Committee Act, Public Law 92-463

    FDA Food and Drug Administration

    FFS Medicare Fee-for-service

    FTE Full-time equivalent

    FY Fiscal year

    GAO Government Accountability Office

    GI Gastrointestinal

    GME Graduate medical education

    HAI Healthcare-associated infection

    HCAHPS Hospital Consumer Assessment of Healthcare Providers and Systems

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

    HCP Health care personnel

    HCPCS Healthcare Common Procedure Coding System

    HCRIS Healthcare Cost Report Information System

    HCUP Healthcare Cost and Utilization Project

    HEU Highly enriched uranium

    HH QRP Home Health Quality Reporting Program

    HHS Department of Health and Human Services

    HIE Health information exchange

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

    HOP Hospital Outpatient Payment Panel

    HOPD Hospital outpatient department

    HOP QDRP Hospital Outpatient Quality Data Reporting Program

    HPMS Health Plan Management System

    IBD Inflammatory bowel disease

    ICC Interclass correlation coefficient

    ICD Implantable cardioverter defibrillator

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

    ICD-10 International Classification of Diseases, Tenth Revision

    ICH In-center hemodialysis

    ICR Information collection requirement

    IME Indirect medical education

    IDTF Independent diagnostic testing facility

    IGI IHS Global Insight, Inc.

    IHS Indian Health Service

    I/OCE Integrated Outpatient Code Editor

    IOL Intraocular lens

    IORT Intraoperative radiation treatment

    IPFQR Inpatient Psychiatric Facility Quality Reporting

    IPPS Hospital Inpatient Prospective Payment System

    IQR Hospital Inpatient Quality Reporting

    IRF Inpatient rehabilitation facility

    IRF QRP Inpatient Rehabilitation Facility Quality Reporting Program

    IT Information technology

    LCD Local coverage determination

    LDR Low dose rate

    LTCH Long-term care hospital

    LTCHQR Long-Term Care Hospital Quality Reporting

    MAC Medicare Administrative Contractor

    MACRA Medicare Access and CHIP Reauthorization Act of 2015, Public Law 114-10

    MAP Measure Application Partnership

    MDH Medicare-dependent, small rural hospital

    MedPAC Medicare Payment Advisory Commission

    MEG Magnetoencephalography

    MFP Multifactor productivity

    MGCRB Medicare Geographic Classification Review Board

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

    432

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

    MLR Medical loss ratio

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

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

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

    MPFS Medicare Physician Fee Schedule

    MR Medical review

    MRA Magnetic resonance angiography

    MRgFUS Magnetic Resonance Image Guided Focused Ultrasound

    MRI Magnetic resonance imaging

    MRSA Methicillin-Resistant Staphylococcus Aures

    MS-DRG Medicare severity diagnosis-related group

    MSIS Medicaid Statistical Information System

    MUC Measure under consideration

    NCCI National Correct Coding Initiative

    NEMA National Electrical Manufacturers Association

    NHSN National Healthcare Safety Network

    NOTA National Organ and Transplantation Act

    NOS Not otherwise specified

    NPI National Provider Identifier

    NPWT Negative Pressure Wound Therapy

    NQF National Quality Forum

    NQS National Quality Strategy

    NTIOL New technology intraocular lens

    NUBC National Uniform Billing Committee

    OACT CMS Office of the Actuary

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

    O/E Observed to expected event

    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

    OPTN Organ Procurement and Transplantation Network

    OQR Hospital Outpatient Quality Reporting

    OT Occupational therapy

    PAMA Protecting Access to Medicare Act of 2014, Public Law 113-93

    PBD Provider-based department

    PCHQR PPS-Exempt Cancer Hospital Quality Reporting

    PCR Payment-to-cost ratio

    PDC Per day cost

    PDE Prescription Drug Event

    PE Practice expense

    PEPPER Program Evaluation Payment Patterns Electronic Report

    PHP Partial hospitalization program

    PHSA Public Health Service Act, Public Law 96-88

    PN Pneumonia

    POS Place of service

    PPI Producer Price Index

    PPS Prospective payment system

    PQRI Physician Quality Reporting Initiative

    PQRS Physician Quality Reporting System

    QDC Quality data code

    QIO Quality Improvement Organization

    RFA Regulatory Flexibility Act

    RHQDAPU Reporting Hospital Quality Data for Annual Payment Update

    RTI Research Triangle Institute, International

    RVU Relative value unit

    SAD Self-administered drug

    SAMS Secure Access Management Services

    SCH Sole community hospital

    SCOD Specified covered outpatient drugs

    SES Socioeconomic status

    Page 79565

    SI Status indicator

    SIA Systems Improvement Agreement

    SIR Standardized infection ratio

    SNF Skilled nursing facility

    SRS Stereotactic radiosurgery

    SRTR Scientific Registry of Transplant Recipients

    SSA Social Security Administration

    SSI Surgical site infection

    TEP Technical Expert Panel

    TIP Transprostatic implant procedure

    TOPs Transitional Outpatient Payments

    USPSTF United States Preventive Services Task Force

    VBP Value-based purchasing

    WAC Wholesale acquisition cost

    Table of Contents

    1. Summary and Background

      1. Executive Summary of This Document

        1. Purpose

        2. Summary of the Major Provisions

        3. Summary of Costs and Benefits

      2. Legislative and Regulatory Authority for the Hospital OPPS

      3. Excluded OPPS Services and Hospitals

      4. Prior Rulemaking

      5. 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

      6. Public Comments Received in Response to CY 2016 OPPS/ASC Final Rule With Comment Period

    2. Updates Affecting OPPS Payments

      1. Recalibration of APC Relative Payment Weights

      1. Database Construction

  3. Database Source and Methodology

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

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

  5. Recommendations of the Advisory Panel on Hospital Outpatient Payment (the Panel) Regarding Data Development

  6. Calculation of Single Procedure APC Criteria-Based Costs

    (1) Blood and Blood Products

    (

  7. Methodology

    (b) Solicitation of Public Comments

    (c) Rapid Bacterial Testing for Platelets

    (2) Brachytherapy Sources

  8. Comprehensive APCs (C-APCs) for CY 2017

    (1) Background

    (2) C-APCs for CY 2017

    (

  9. Additional C-APCs for CY 2017

    (b) New Allogeneic Hematopoietic Stem Cell Transplantation (HSCT) C-APC

  10. Calculation of Composite APC Criteria-Based Costs

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

    (2) Mental Health Services Composite APC

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

    3. Changes to Packaged Items and Services

  11. Background and Rationale for Packaging in the OPPS

  12. Clinical Diagnostic Laboratory Test Packaging Policy

    (1) Background

    (2) ``Unrelated'' Laboratory Test Exception

    (3) Molecular Pathology Test Exception

  13. Conditional Packaging Status Indicators ``Q1'' and ``Q2''

    (1) Background

    (2) Change in Conditional Packaging Status Indicators Logic

    4. Calculation of OPPS Scaled Payment Weights

    1. Conversion Factor Update

    2. Wage Index Changes

    3. Statewide Average Default CCRs

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

      1. Background

      2. Proposed and Finalized Policy for CY 2017

    5. 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 2017

    6. Hospital Outpatient Outlier Payments

      1. Background

      2. Outlier Calculation

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

      1. Beneficiary Copayments

        1. Background

        2. OPPS Copayment Policy

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

      2. OPPS Ambulatory Payment Classification (APC) Group Policies

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

      1. Treatment of New Level II HCPCS Codes Effective April 1, 2016 for Which We Solicited Public Comments in the CY 2017 OPPS/ASC Proposed Rule

      2. Treatment of New CPT and Level II HCPCS Codes Effective July 1, 2016 for Which We Solicited Public Comments in the CY 2017 OPPS/

      ASC Proposed Rule

      3. Process for New Level II HCPCS Codes That Became Effective October 1, 2016 and New Level II HCPCS Codes That Will Be Effective January 1, 2017 for Which Are Soliciting Public Comments in This CY 2017 OPPS/ASC Final Rule With Comment Period

      4. Treatment of New and Revised CY 2017 Category I and III CPT Codes That Will Be Effective January 1, 2017 for Which We Solicited Public Comments in the CY 2017 OPPS/ASC Proposed Rule

    9. OPPS Changes--Variations Within APCs

      1. Background

      2. Application of the 2 Times Rule

      3. APC Exceptions to the 2 Times Rule

    10. New Technology APCs

      1. Background

      2. Additional New Technology APC Groups

      3. Procedures Assigned to New Technology APC Groups for CY 2017

  14. Overall Proposal

  15. Retinal Prosthesis Implant Procedure

    1. OPPS APC-Specific Policies

    1. Cardiovascular Procedures and Services

  16. Cardiac Event Recorder (APC 5071)

  17. Cardiac Telemetry

    2. Eye-Related Services

    3. Gastrointestinal Procedures and Services

  18. Esophageal Sphincter Augmentation (APC 5362)

  19. Esophagogastroduodenoscopy: Transmural Drainage of Pseudocyst (APC 5303)

    4. Musculoskeletal Procedures/Services

  20. Auditory Osseointegrated Implants/Bone Anchored Hearing Systems (APCs 5114, 5115, 1nd 5116)

  21. Bunion Correction/Foot Fusion (APC 5114)

  22. Intervertebral Biomechanical Devices

  23. Percutaneous Vertebral Augmentation/Kyphoplasty (APC 5114)

  24. Strapping and Casting Applications (APCs 5101 and 5102)

    5. Nervous System Procedures/Services

  25. Transcranial Magnetic Stimulation Therapy (TMS) (APCs 5721 and 5722)

  26. Percutaneous Epidural Adhesiolysis (APC 5443)

  27. Neurostimulator (APC 5463)

    6. Radiologic Procedures and Services

  28. Imaging APCs

  29. Radiation Oncology (APCs 5092, 5611, and 5627)

    7. Skin Substitutes (APCs 5053 Through 5055)

    8. Urology System Procedures and Services

  30. Chemodenervation of the Bladder (APC 5373)

  31. Temporary Prostatic Urethral Stent (APC 5372)

  32. Transprostatic Urethral Implant Procedure (TUIP) (APCs 5375 and 5376)

    9. Other Procedures and Services

  33. Cryoablation Procedures (APCs 5114, 5361, 5362, and 5432)

  34. Comprehensive Dialysis Circuit Procedures (APCs 5181, 5192, and 5193)

  35. Blood Product Exchange and Related Services (APCs 5241 and 5242)

  36. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS) (APCs 1537, 5114, and 5414)

  37. Neulastasupreg On-Body Injector

  38. Smoking and Tobacco Use Cessation Counseling (APC 5821)

  39. Radiofrequency Ablation of Uterine Fibroids (APC 5362)

  40. Intrapulmonary Surfactant Administration (APC 5791)

  41. Non-Contact Low Frequency Ultrasound (NLFU) Therapy (APC 5051)

  42. Pulmonary Rehabilitation Services

    1. OPPS Payment for Devices

    1. Pass-Through Payments for Devices

    1. Expiration of Transitional Pass-Through for Certain Devices

  43. Background

  44. CY 2017 Pass-Through Devices

    2. New Device Pass-Through Applications

  45. Background

  46. Applications Received for Device Pass-Through Payment for CY 2017

    (1) BioBagsupreg (Larval Debridement Therapy in a Contained Dressing)

    (2) ENCORETM Suspension System

    (3) Endophys Pressure Sensing System (Endophys PSS) or Endophys Pressure Sensing Kit

    3. Beginning Eligibility Date for Device Pass-Through Payment Status

    4. Policy To Make the Transitional Pass-Through Payment Period 3 Years for All Pass-Through Devices and Expire Pass-Through Status on a Quarterly Rather Than Annual Basis

    Page 79566

  47. Background

  48. CY 2017 Policy

    5. Changes to Cost-to-Charge Ratios (CCRs) That Are Used To Determine Device Pass-Through Payment

  49. Background

  50. CY 2017 Policy

    6. Provisions for Reducing Transitional Pass-Through Payments To Offset Costs Packaged Into APC Groups

  51. Background

  52. CY 2017 Policy

    1. Device-Intensive Procedures

    1. Background

    2. HCPCS Code-Level Device-Intensive Determination

    3. Changes to the Device Edit Policy

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

  53. Background

  54. Policy for CY 2017

    5. Payment Policy for Low-Volume Device-Intensive Procedures

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

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

      1. Background

      2. Policy To Make the Transitional Pass-Through Payment Period 3 Years for All Pass-Through Drugs, Biologicals, and Radiopharmaceuticals and Expire Pass-Through Status on a Quarterly Rather Than Annual Basis

      3. Drugs and Biologicals With Expiring Pass-Through Payment Status in CY 2016

      4. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2017

      5. Provisions for Reducing Transitional Pass-Through Payments for Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals To Offset Costs Packaged Into APC Groups

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

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

  55. Packaging Threshold

  56. Packaging of Payment for HCPCS Codes That Describe Certain Drugs, Certain Biologicals, and Therapeutic Radiopharmaceuticals Under the Cost Threshold (``Threshold-Packaged Policy'')

  57. Policy Packaged Drugs, Biologicals, and Radiopharmaceuticals

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

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

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

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

  61. CY 2017 Payment Policy

  62. Biosimilar Biological Products

    3. Payment Policy for Therapeutic Radiopharmaceuticals

    4. Payment Adjustment Policy for Radioisotopes Derived From Non-

    Highly Enriched Uranium Sources

    5. Payment for Blood Clotting Factors

    6. Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals With HCPCS Codes But Without OPPS Hospital Claims Data

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

      1. Background

      2. Estimate of Pass-Through Spending

    2. OPPS Payment for Hospital Outpatient Visits and Critical Care Services

    3. Payment for Partial Hospitalization Services

      1. Background

      2. PHP APC Update for CY 2017

      1. PHP APC Changes and Effects on Geometric Mean Per Diem Costs

  63. Changes to PHP APCs

  64. Rationale for Changes in PHP APCs

  65. Alternatives Considered

    2. Development of the PHP APC Geometric Mean Per Diem Costs and Payment Rates

  66. CMHC Data Preparation: Data Trims, Exclusions, and CCR Adjustments

  67. Hospital-Based PHP Data Preparation: Data Trims and Exclusions

    3. PHP Ratesetting Process

    1. Outlier Policy for CMHCs

    1. Estimated Outlier Threshold

    2. CMHC Outlier Cap

  68. Summary of Proposal

  69. CY 2017 Final Rule Update and Policy

    3. Implementation Strategy for the 8-Percent Cap on CMHC Outlier Payments

    4. Summary of Policies

    1. Procedures That Will Be Paid Only as Inpatient Procedures

      1. Background

      2. Changes to the Inpatient Only (IPO) List

      3. Response to Solicitation of Public Comments on the Possible Removal of Total Knee Arthroplasty (TKA) Procedures From the IPO List

      1. Background

      2. Discussion of TKA and the IPO List

      3. Topics and Questions for Public Comment

    2. Nonrecurring Policy Changes

      1. Implementation of Section 603 of the Bipartisan Budget Act of 2015 Relating to Payment for Certain Items and Services Furnished by Off-Campus Provider-Based Departments of a Hospital

      1. Background

      2. Defining Applicable Items and Services and Off-Campus Outpatient Department of a Provider as Set Forth in Sections 1833(t)(21)(A) and (B) of the Act

  70. Background on the Provider-Based Status Rules

  71. Exemption of Items and Services Furnished in a Dedicated Emergency Department or an On-Campus PBD as Defined at Sections 1833(t)(21)(B)(i)(I) and (II) of the Act (Excepted Off-Campus PBD)

    (1) Dedicated Emergency Departments (EDs)

    (2) On-Campus Locations

    (3) Within the Distance From Remote Locations

  72. Applicability of Exception at Section 1833(t)(21)(B)(ii) of the Act

    (1) Relocation of Off-Campus PBDs Excepted Under Section 1833(t)(21)(B)(ii) of the Act

    (2) Expansion of Clinical Family of Services at an Off-Campus PBD Excepted Under Section 1833(t)(21)(B)(ii) of the Act

  73. Change of Ownership and Excepted Status

  74. Public Comments Received in Response to Solicitation on Data Collection Under Section 1833(t)(21)(D) of the Act

    3. Payment for Items and Services Furnished in Off-Campus PBDs to Which Sections 1833(t)(1)(B)(v) and 1833(t)(21) of the Act Apply (Nonexcepted Items and Services Furnished by Nonexcepted Off-Campus PBDs)

  75. Background on Medicare Payment for Services Furnished in an Off-Campus PBD

  76. Payment for Items and Services Furnished in Off-Campus PBD That Are Subject to Sections 1833(t)(1)(B)(v) and (t)(21)(C) of the Act

    (1) Definition of ``Applicable Payment System'' for Nonexcepted Items and Services

    (2) Definition of Applicable Items and Services and Section 603 Amendments to Section 1833(t)(1)(B) of the Act and Payment for Nonexcepted Items and Services for CY 2017

    (3) Public Comments Received in Response to Solicitation on Allowing Direct Billing and Payment for Nonexcepted Items and Services in CY 2018

    4. Beneficiary Cost-Sharing

    5. Summary of Proposals

    6. Final Changes to Regulations

    1. Interim Final Rule With Comment Period: Establishment of Payment Rates Under the Medicare Physician Fee Schedule for Nonexcepted Items and Services Furnished by an Off-Campus Provider-

    Based Department of a Hospital

    1. Background

    2. Payment Mechanisms

  77. Relevance of the MPFS for Payment for Nonexcepted Items and Services

  78. Operational Considerations

  79. General MPFS Coding and Billing Mechanisms

    3. Establishment of Payment Rates

  80. Methodology

  81. MPFS Relativity Adjuster

  82. Geographic Adjustments

  83. Coding Consistency

    4. OPPS Payment Adjustments

    5. Partial Hospitalization Services

    6. Supervision Rules

    7. Beneficiary Cost-Sharing

    8. CY 2018, CY 2019, and Future Years

    9. Waiver of Proposed Rulemaking

    10. Collection of Information Requirements

    11. Response to Comments

    12. Regulatory Impact Statement

    1. Changes for Payment for Film X-Ray

    2. Changes to Certain Scope of Service Elements for Chronic Care Management (CCM) Services

      Page 79567

    3. Appropriate Use Criteria for Advanced Diagnostic Imaging Services

      1. CY 2017 OPPS Payment Status and Comment Indicators

    4. CY 2017 OPPS Payment Status Indicator Definitions

    5. CY 2017 Comment Indicator Definitions

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

    6. 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

    7. Treatment of New and Revised Codes

      1. Background on Current Process for Recognizing New and Revised Category I and Category III CPT Codes and Level II HCPCS Codes

      2. Treatment of New and Revised Level II HCPCS Codes and Category III CPT Codes Implemented in April 2016 and July 2016 for Which We Solicited Public Comments in the CY 2017 OPPS/ASC Proposed Rule

      3. Process for Recognizing New and Revised Category I and Category III CPT Codes That Will Be Effective January 1, 2017 for Which We Are Responding to Public Comments in This CY 2017 OPPS/ASC Final Rule With Comment Period

      4. Process for New and Revised Level II HCPCS Codes That Will Be Effective October 1, 2016 and January 1, 2017 for Which We Are Soliciting Public Comments in This CY 2017 OPPS/ASC Final Rule with Comment Period

    8. Update to the List of ASC Covered Surgical Procedures and Covered Ancillary Services

      1. Covered Surgical Procedures

  84. Covered Surgical Procedures Designated as Office-Based

    (1) Background

    (2) Changes for CY 2017 to Covered Surgical Procedures Designated as Office-Based

  85. ASC Covered Surgical Procedures Designated as Device-

    Intensive--Finalized Policy for CY 2016 and Final Policy for CY 2017

    (1) Background

    (2) ASC Device-Intensive Designation by HCPCS Code

    (3) Changes to List of ASC Covered Surgical Procedures Designated as Device-Intensive for CY 2017

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

  87. Additions to the List of ASC Covered Surgical Procedures

    2. Covered Ancillary Services

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

    1. ASC Payment for Covered Surgical Procedures

  88. Background

  89. Update to ASC Covered Surgical Procedure Payment Rates for CY 2017

    2. Payment for Covered Ancillary Services

  90. Background

  91. Payment for Covered Ancillary Services for CY 2017

    1. New Technology Intraocular Lenses (NTIOLs)

      1. NTIOL Application Cycle

      2. Requests To Establish New NTIOL Classes for CY 2017

      3. Payment Adjustment

    2. ASC Payment and Comment Indicators

      1. Background

      2. ASC Payment and Comment Indicators

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

      1. Background

      2. Calculation of the ASC Payment Rates

  92. Updating the ASC Relative Payment Weights for CY 2017 and Future Years

  93. Updating the ASC Conversion Factor

    3. Display of CY 2017 ASC Payment Rates

    1. Requirements for the Hospital Outpatient Quality Reporting (OQR) Program

    1. Background

      1. Overview

      2. Statutory History of the Hospital OQR Program

    2. Hospital OQR Program Quality Measures

      1. Considerations in the Selection of Hospital OQR Program Quality Measures

      2. Retention of Hospital OQR Program Measures Adopted in Previous Payment Determinations

      3. Removal of Quality Measures From the Hospital OQR Program Measure Set

  94. Considerations in Removing Quality Measures From the Hospital OQR Program

  95. Criteria for Removal of ``Topped-Out'' Measures

    4. Hospital OQR Program Quality Measures Adopted in Previous Rulemaking

    5. New Hospital OQR Program Quality Measures for the CY 2020 Payment Determinations and Subsequent Years

  96. OP-35: Admissions and Emergency Department (ED) Visits for Patients Receiving Outpatient Chemotherapy Measure

    (1) Background

    (2) Overview of Measure

    (3) Data Sources

    (4) Measure Calculation

    (5) Cohort

    (6) Risk Adjustment

  97. OP-36: Hospital Visits After Hospital Outpatient Surgery Measure (NQF #2687)

    (1) Background

    (2) Overview of Measure

    (3) Data Sources

    (4) Measure Calculation

    (5) Cohort

    (6) Risk Adjustment

  98. OP-37a-e: Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey Measures

    (1) Background

    (2) Overview of Measures

    (3) Data Sources

    (4) Measure Calculations

    (5) Cohort

    (6) Exemption

    (7) Risk Adjustment

    (8) Public Reporting

  99. Summary of Previously Adopted and Newly Adopted Hospital OQR Program Measures for the CY 2020 Payment Determinations and Subsequent Years

    6. Hospital OQR Program Measures and Topics for Future Consideration

  100. Future Measure Topics

  101. Electronic Clinical Quality Measures

  102. Possible Future eCQM: Safe Use of Opioids-Concurrent Prescribing

    7. Maintenance of Technical Specifications for Quality Measures

    8. Public Display of Quality Measures

    1. Administrative Requirements

      1. QualityNet Account and Security Administrator

      2. Requirements Regarding Participation Status

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

      1. Hospital OQR Program Annual Payment Determinations

      2. Requirements for Chart-Abstracted Measures Where Patient-

      Level Data Are Submitted Directly to CMS for the CY 2019 Payment Determination and Subsequent Years

      3. Claims-Based Measure Data Requirements for the CY 2019 Payment Determination and Subsequent Years and CY 2020 Payment Determination and Subsequent Years

      4. Data Submission Requirements for the OP-37a-e: Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey-Based Measures for the CY 2020 Payment Determination and Subsequent Years

  103. Survey Requirements

  104. Vendor Requirements

    5. Data Submission Requirements for Previously Finalized Measures for Data Submitted via a Web-Based Tool for the CY 2019 Payment Determination and Subsequent Years

    6. Population and Sampling Data Requirements for the CY 2019 Payment Determination and Subsequent Years

    7. Hospital OQR Program Validation Requirements for Chart-

    Abstracted Measure Data Submitted Directly to CMS for the CY 2019 Payment Determination and Subsequent Years

    8. Extension or Exemption Process for the CY 2019 Payment Determination and Subsequent Years

    9. Hospital OQR Program Reconsideration and Appeals Procedures for the CY 2019 Payment Determination and Subsequent Years--

    Clarification

    1. Payment Reduction for Hospitals That Fail To Meet the Hospital OQR Program Requirements for the CY 2017 Payment Determination

      1. Background

      2. Reporting Ratio Application and Associated Adjustment Policy for CY 2017

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

    2. Background

      1. Overview

      2. Statutory History of the ASCQR Program

      Page 79568

      3. Regulatory History of the ASCQR Program

    3. ASCQR Program Quality Measures

      1. Considerations in the Selection of ASCQR Program Quality Measures

      2. Policies for Retention and Removal of Quality Measures From the ASCQR Program

      3. ASCQR Program Quality Measures Adopted in Previous Rulemaking

      4. ASCQR Program Quality Measures for the CY 2020 Payment Determination and Subsequent Years

  105. ASC-13: Normothermia Outcome

    (1) Background

    (2) Overview of Measure

    (3) Data Sources

    (4) Measure Calculation

    (5) Cohort

    (6) Risk Adjustment

  106. ASC-14: Unplanned Anterior Vitrectomy

    (1) Background

    (2) Overview of Measure

    (3) Data Sources

    (4) Measure Calculation

    (5) Cohort

    (6) Risk Adjustment

  107. ASC-15a-e: Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey Measures

    (1) Background

    (2) Overview of Measures

    (3) Data Sources

    (4) Measure Calculations

    (5) Cohort

    (6) Exemption

    (7) Risk Adjustment

    (8) Public Reporting

    5. ASCQR Program Measure for Future Consideration

    6. Maintenance of Technical Specifications for Quality Measures

    7. Public Reporting of ASCQR Program Data

    1. Administrative Requirements

      1. Requirements Regarding QualityNet Account and Security Administrator

      2. Requirements Regarding Participation Status

    2. 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 an Online Data Submission Tool

  108. Requirements for Data Submitted via a Non-CMS Online Data Submission Tool

  109. Requirements for Data Submitted via a CMS Online Data Submission Tool

    4. Claims-Based Measure Data Requirements for the CY 2019 Payment Determination and Subsequent Years

    5. Data Submission Requirements for ASC-15a-e: Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey-Based Measures for the CY 2020 Payment Determination and Subsequent Years

  110. Survey Requirements

  111. Vendor Requirements

    6. Extraordinary Circumstances Extensions or Exemptions for the CY 2019 Payment Determination and Subsequent Years

    7. ASCQR Program Reconsideration Procedures

    1. 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

      1. Transplant Outcomes: Restoring the Tolerance Range for Patient and Graft Survival

    2. Background

    3. Revisions to Performance Thresholds

      1. Organ Procurement Organizations (OPOs): Changes to Definitions; Outcome Measures; and Documentation Requirements

    4. Background

      1. Organ Procurement Organizations (OPOs)

      2. Statutory Provisions

      3. HHS Initiatives Related to OPO Services

      4. Requirements for OPOs

    5. Proposed and Finalized Provisions

      1. Definition of ``Eligible Death''

      2. Aggregate Donor Yield for OPO Outcome Performance Measures

      3. Organ Preparation and Transport-Documentation With the Organ

      1. Transplant Enforcement Technical Corrections and Other Revisions to 42 CFR 488.61

    6. Technical Correction to Transplant Enforcement Regulatory References

    7. Other Revisions to 42 CFR 488.61

      1. Changes to the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs

    8. Background

    9. Summary of Final Policies Included in This Final Rule With Comment Period

    10. Revisions to Objectives and Measures for Eligible Hospitals and CAHs

      1. Removal of the Clinical Decision Support (CDS) and Computerized Provider Order Entry (CPOE) Objectives and Measures for Eligible Hospitals and CAHs

      2. Reduction of Measure Thresholds for Eligible Hospitals and CAHs for 2017 and 2018

  112. Changes to the Objectives and Measures for Modified Stage 2 (42 CFR 495.22) in 2017

  113. Changes to the Objectives and Measures for Stage 3 (42 CFR 495.24) in 2017 and 2018

    (1) Objective: Patient Electronic Access to Health Information (42 CFR 495.24(c)(5))

    (2) Objective: Coordination of Care Through Patient Engagement (42 CFR 495.24(c)(6))

    (3) Objective: Health Information Exchange (HIE) (42 CFR 495.24(c)(7))

    (4) Objective: Public Health and Clinical Data Registry Reporting (42 CFR 495.24(c)(8))

    1. Revisions to the EHR Reporting Period in 2016 for EPs, Eligible Hospitals and CAHs

      1. Definition of ``EHR Reporting Period'' and ``EHR Reporting Period for a Payment Adjustment Year''

      2. Clinical Quality Measurement

    2. Policy To Require Modified Stage 2 for New Participants in 2017

    3. Significant Hardship Exception for New Participants Transitioning to MIPS in 2017

    4. Modifications To Measure Calculations for Actions Outside the EHR Reporting Period

      1. Additional Hospital Value-Based Purchasing (VBP) Program Policies

    5. Background

    6. Removal of the HCAHPS Pain Management Dimension From the Hospital VBP Program

      1. Background of the HCAHPS Survey in the Hospital VBP Program

      2. Background of the Patient- and Caregiver-Centered Experience of Care/Care Coordination Domain Performance Scoring Methodology

      3. Removal of the HCAHPS Pain Management Dimension From the Hospital VBP Program Beginning With the FY 2018 Program Year

      1. Files Available to the Public via the Internet

      2. Collection of Information Requirements

    7. Statutory Requirement for Solicitation of Comments

    8. ICRs for the Hospital OQR Program

    9. ICRs for the ASCQR Program

    10. ICRs Relating to Changes in Transplant Enforcement Performance Thresholds

    11. ICRs for Changes Relating to Organ Procurement Organizations (OPOs)

    12. ICRs Relating to Changes to the Electronic Health Record (EHR) Incentive Program

    13. ICRs Relating to Additional Hospital VBP Program Policies

    14. ICRs for Payment for Off-Campus Provider-Based Departments Policy Changes for CY 2017

      1. Waiver of Proposed Rulemaking and Response to Comments

    15. Waiver of Proposed Rulemaking

    16. Response to Comments

      1. Economic Analyses

    17. Regulatory Impact Analysis

      1. Introduction

      2. Statement of Need

      3. Overall Impacts for the OPPS and ASC Payment Provisions

      4. Detailed Economic Analyses

  114. 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 Effects 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

  115. Estimated Effects of CY 2017 ASC Payment System Policies

    (1) Limitations of Our Analysis

    (2) Estimated Effects of CY 2017 ASC Payment System Policies on ASCs

    Page 79569

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

    (4) Alternative ASC Payment Policies Considered

  116. Accounting Statements and Tables

  117. Effects of Requirements for the Hospital OQR Program

  118. Effects of Requirements for the ASCQR Program

  119. Effects of the Changes to Transplant Performance Thresholds

  120. Effects of the Changes Relating to Organ Procurement Organizations (OPOs)

  121. Effects of the Changes to the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs

  122. Effects of Requirements for the Hospital VBP Program

  123. Effects of Implementation of Section 603 of the Bipartisan Budget Act of 2015 Relating to Payment for Nonexcepted Items and Services Furnished by Nonexcepted Off-Campus Departments of a Provider

    1. Regulatory Flexibility Act (RFA) Analysis

    2. Unfunded Mandates Reform Act Analysis

    3. Conclusion

      1. Federalism Analysis

        Regulation Text

      2. Summary and Background

    4. Executive Summary of This Document

      1. Purpose

      In this document, we are updating the payment policies and payment rates for services furnished to Medicare beneficiaries in hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) beginning January 1, 2017. Section 1833(t) of the Social Security Act (the Act) requires us to annually review and update the payment rates for services payable under the Hospital Outpatient Prospective Payment System (OPPS). Specifically, section 1833(t)(9)(A) of the Act requires the Secretary to review certain components of the OPPS not less often than annually, and to revise the groups, relative payment weights, and other adjustments that take into account changes in medical practices, changes in technologies, and the addition of new services, new cost data, and other relevant information and factors. In addition, under section 1833(i) of the Act, we annually review and update the ASC payment rates. We describe these and various other statutory authorities in the relevant sections of this final rule with comment period. In addition, this 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 addition, we are making changes to the conditions for coverage (CfCs) for organ procurement organizations (OPOs); revisions to the outcome requirements for solid organ transplant programs, transplant enforcement, and for transplant documentation requirements; a technical correction to enforcement provisions for organ transplant centers; modifications to the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs to reduce hospital administrative burden and to allow hospitals to focus more on patient care; and the removal of the HCAHPS Pain Management dimension from the Hospital Value-Based Purchasing (VBP) Program.

      Further, we are implementing section 603 of the Bipartisan Budget Act of 2015 relating to payment for nonexcepted items and services furnished by nonexcepted off-campus provider-based departments (PBDs) of a hospital. In conjunction with implementation of section 603 in this final rule with comment period, we are issuing in this Federal Register document an interim final rule with comment period that establishes payment rates under the MPFS for nonexcepted items and services furnished by nonexcepted off-campus PBDs of hospitals.

      2. Summary of the Major Provisions

      OPPS Update: For CY 2017, we are increasing the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of 1.65 percent. This increase factor is based on the hospital inpatient market basket percentage increase of 2.7 percent for inpatient services paid under the hospital inpatient prospective payment system (IPPS), minus the multifactor productivity (MFP) adjustment of 0.3 percentage point, and minus a 0.75 percentage point adjustment required by the Affordable Care Act. Based on this update, we estimate that total payments to OPPS providers (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix), for CY 2017 will be approximately $773 million, an increase of approximately $5.0 billion compared to estimated CY 2016 OPPS payments.

      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 applies 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 2017, 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 0.91 will be used to determine the CY 2017 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 0.91 for each cancer hospital.

      Comprehensive APCs: For CY 2017, we are not making extensive changes to the already established methodology used for C-

      APCs. However, we are creating 25 new C-APCs that meet the previously established criteria, which, when combined with the existing 37 C-APCs, will bring the total number to 62 C-APCs as of January 1, 2017.

      Chronic Care Management (CCM): For CY 2017, we are making some minor changes to certain CCM scope-of-service elements. We refer readers to the CY 2017 MPFS final rule with comment period for a detailed discussion of these changes to the scope of service elements for CCM. We are applying these changes to CCM furnished to hospital outpatients.

      Device-Intensive Procedures: For CY 2017, we are finalizing our policy of determining the payment rate for any device-

      intensive procedure that is assigned to an APC with fewer than 100 total claims for all procedures in the APC to be based on the median cost instead of the geometric mean cost. We believe that this approach will mitigate significant year-to-year payment rate fluctuations while preserving accurate claims-data-based payment rates for low volume device-intensive procedures. In addition, we are revising the device intensive calculation methodology and calculating the device offset amount at the HCPCS code level rather than at the APC level to ensure that device intensive status is properly assigned to all device-

      intensive procedures.

      Outpatient Laboratory Tests: For CY 2017, we are discontinuing the use of the ``L1'' modifier to identify unrelated laboratory tests on claims. In addition, we are expanding the laboratory packaging exclusion that currently

      Page 79570

      applies to Molecular Pathology tests to all laboratory tests designated as advanced diagnostic laboratory tests (ADLTs) that meet the criteria of section 1834A(d)(5)(A) of the Act.

      Packaging Policies: The OPPS currently packages many categories of items and services that are typically provided as part of the outpatient hospital service (for example, operating and recovery room, anesthesia, among others). Packaging encourages hospital efficiency, flexibility, and long-term cost containment, and it also promotes the stability of payment for services over time. In CY 2014 and 2015, we added several new categories of packaged items and services. Among these were laboratory tests, ancillary services, services described by add-on codes, and drugs used in a diagnostic test or surgical procedure. For CY 2017, we are aligning the packaging logic for all of the conditional packaging status indicators so that packaging would occur at the claim level (instead of based on the date of service) to promote consistency and ensure that items and services that are provided during a hospital stay that may span more than one day are appropriately packaged according to OPPS packaging policies.

      Payment Modifier for X-Ray Films: Section 502(b) of Division O, Title V of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) amended section 1833(t)(16) of the Act by adding new subparagraph (F). New section 1833(t)(16)(F)(i) of the Act provides that, effective for services furnished during 2017 or any subsequent year, the payment under the OPPS for imaging services that are X-rays taken using film (including the X-ray component of a packaged service) that would otherwise be made under the OPPS (without application of this paragraph and before application of any other adjustment) shall be reduced by 20 percent. We are requiring that, effective for services furnished on or after January 1, 2017, hospitals are required to use a modifier on claims for X-rays that are taken using film. The use of this modifier will result in a 20-percent payment reduction for the X-

      ray service, as specified under section 1833(t)(16)(F)(i) of the Act, of the determined OPPS payment amount (without application of paragraph (F) and before any other adjustments under section 1833(t)).

      Payment for Nonexcepted Items and Services Furnished by Nonexcepted Off-Campus Departments of a Provider: We are implementing section 603 of the Bipartisan Budget Act of 2015 (Pub. L. 114-74). This provision requires that certain items and services furnished in certain off-campus PBDs shall not be considered covered OPD services for purposes of OPPS payment and those nonexcepted items and services will instead be paid ``under the applicable payment system'' beginning January 1, 2017. We are finalizing, with modification, the policies we proposed relating to which off-campus PBDs and which items and services furnished by such off-campus PBDs may be excepted from application of payment changes under this provision.

      In addition, we are establishing that the Medicare Physician Fee Schedule (MPFS) will be the ``applicable payment system'' for the majority of the nonexcepted items and services furnished by nonexcepted off-campus PBDs. We are establishing new site-of-service payment rates under the MPFS to pay nonexcepted off-campus PBDs for the furnishing of nonexcepted items and services. These nonexcepted items and services must be reported on the institutional claim form and identified with a newly established claims processing modifier.

      Ambulatory Surgical Center Payment Update: For CY 2017, we are increasing payment rates under the ASC payment system by 1.9 percent for ASCs that meet the quality reporting requirements under the ASCQR Program. This increase is based on a projected CPI-U update of 2.2 percent minus a multifactor productivity adjustment required by the Affordable Care Act of 0.3 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 2017 will be approximately $4,478 million, an increase of approximately $177 million compared to estimated CY 2016 Medicare payments.

      Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital OQR Program, we are establishing measures and policies for the CY 2018 payment determination, the CY 2019 payment determination and the CY 2020 payment determination and subsequent years. For the CY 2018 payment determination and subsequent years, we are finalizing, as proposed, that we will publicly display data on the Hospital Compare Web site, or other CMS Web site, as soon as possible after measure data have been submitted to CMS. In addition, we are finalizing, as proposed, that hospitals will generally have approximately 30 days to preview their data. Lastly, we are finalizing, as proposed, that we also will announce the timeframes for the preview period on a CMS Web site and/or on our applicable listservs. For the CY 2019 payment determination and subsequent years, we are finalizing, as proposed, an extension of the time for filing extraordinary circumstances extensions or exemptions (ECE) requests from 45 days to 90 days from the date that the extraordinary circumstance occurred. For the CY 2020 payment determination and subsequent years, we are finalizing, as proposed, a total of seven measures: Two claims-based measures and five Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey-based measures. The two claims-based measures are: (1) OP-35: Admissions and Emergency Department Visits for Patients Receiving Outpatient Chemotherapy and (2) OP-36: Hospital Visits after Hospital Outpatient Surgery (NQF #2687). The five survey-

      based measures are: (1) OP-37a: OAS CAHPS--About Facilities and Staff; (2) OP-37b: OAS CAHPS--Communication About Procedure; (3) OP-37c: OAS CAHPS--Preparation for Discharge and Recovery; (4) OP-37d: OAS CAHPS--

      Overall Rating of Facility; and (5) OP-37e: OAS CAHPS--Recommendation of Facility.

      Ambulatory Surgical Center Quality Reporting (ASCQR) Program: For the ASCQR Program, we are finalizing our proposals for the CY 2018 payment determination, the CY 2019 payment determination, and the CY 2020 payment determination and subsequent years. For the CY 2018 payment determination and subsequent years, we are finalizing, as proposed, that we will publicly display data on the Hospital Compare Web site, or other CMS Web site, as soon as possible after measure data have been submitted to CMS. In addition, we are finalizing, as proposed, that ASCs will generally have approximately 30 days to preview their data. Lastly, we are finalizing, as proposed, that we will announce the timeframes for the preview period on a CMS Web site and/or on our applicable listservs. For the CY 2019 payment determination and subsequent years, we are finalizing our proposal to change the submission deadline to May 15 for all data submitted via a CMS Web-based tool. We also are finalizing, as proposed, the extension of the submission deadline for filing extraordinary circumstances extensions or exemptions (ECE) requests from 45 days to 90 days. For the CY 2020 payment determination and subsequent years, we are finalizing, as proposed, a total of seven measures: Two measures collected via a CMS Web-based tool and five Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare Providers and

      Page 79571

      Systems (OAS CAHPS) Survey-based measures. The two measures that require data to be submitted directly to CMS via a CMS Web-based tool are: (1) ASC-13: Normothermia Outcome and (2) ASC-14: Unplanned Anterior Vitrectomy. The five survey-based measures are: (1) ASC-15a: OAS CAHPS--About Facilities and Staff; (2) ASC-15b: OAS CAHPS--

      Communication About Procedure; (3) ASC-15c: OAS CAHPS--Preparation for Discharge and Recovery; (4) ASC-15d: OAS CAHPS--Overall Rating of Facility; and (5) ASC-15e: OAS CAHPS--Recommendation of Facility.

      Hospital Value-Based Purchasing (VBP) Program Update: Section 1886(o) of the Act requires the Secretary to establish a Hospital VBP Program under which value-based incentive payments are made in a fiscal year to hospitals based on their performance on measures established for a performance period for such fiscal year. In this final rule with comment period, we are removing the HCAHPS Pain Management dimension from the Hospital VBP Program, beginning with the FY 2018 program year.

      Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs: In this final rule, we are making changes to the objectives and measures of meaningful use for Modified Stage 2 and Stage 3 starting with the EHR reporting periods in CY 2017. Under both Modified Stage 2 in 2017 and Stage 3 in 2017 and 2018, for eligible hospitals and CAHs attesting to CMS, we are eliminating the Clinical Decision Support (CDS) and Computerized Provider Order Entry (CPOE) objectives and measures, and lowering the reporting thresholds for a subset of the remaining objectives and measures, generally to the Modified Stage 2 thresholds. The reduction of measure thresholds is intended to respond to input we have received from hospitals, hospital associations, health systems, and vendors expressing concerns about the established measures. The revised requirements focus on reducing hospital administrative burden, allowing eligible hospitals and CAHs attesting to CMS to focus more on providing quality patient care, as well as focus on updating and optimizing CEHRT functionalities to sufficiently meet the requirements of the EHR Incentive Program and prepare for Stage 3 of meaningful use. Based on the public comments we received, we are finalizing a policy that these changes to the objectives and measures apply for all eligible hospitals and CAHs that attest to CMS, including eligible hospitals and CAHs that are eligible to participate in both the Medicare and Medicaid EHR Incentive Programs.

      In addition, we are changing the EHR reporting period in CY 2016 and 2017 for eligible professionals, eligible hospitals, and CAHs; reporting requirements for eligible professionals, eligible hospitals, and CAHs that are new participants in 2017; and the policy on measure calculations for actions outside the EHR reporting period. Finally, we are making a one-time significant hardship exception from the 2018 payment adjustment for certain eligible professionals who are new participants in the EHR Incentive Program in 2017 and are transitioning to the Merit-Based Incentive Payment System in 2017. We believe these changes are responsive to additional stakeholder feedback received through both correspondence and in-person meetings and will result in continued advancement of certified EHR technology utilization, particularly among those eligible professionals, eligible hospitals and CAHs that have not previously achieved meaningful use, and result in a program more focused on supporting interoperability and data sharing for all participants under the Medicare and Medicaid EHR Incentive Programs.

      Transplant Performance Thresholds: With respect to solid organ transplant programs, we are restoring the effective tolerance range for clinical outcomes that was allowed in our original 2007 rule. These outcome requirements in the Medicare Conditions of Participation (CoPs) have been affected by the nationwide improvement in transplant outcomes, making it now more difficult for transplant programs to maintain compliance with, in effect, increasingly stringent Medicare standards for patient and graft survival. We expect that our policies will increase access to organ transplants while continuing to protect Medicare beneficiaries.

      Organ Procurement Organizations (OPOs) Changes: In this final rule with comment period, we are: Changing the current ``eligible death'' definition to be consistent with the OPTN definition; modifying CMS current outcome measures to be consistent with yield calculations currently utilized by the SRTR; and modifying current requirements for documentation of donor information which is sent to the transplant center along with the organ.

      3. Summary of Costs and Benefits

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

  124. Impacts of the OPPS Update

    (1) Impacts of All OPPS Changes

    Table 52 in section XXIII. 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 2017 compared to all estimated OPPS payments in CY 2016. We estimate that the policies in this final rule with comment period will result in a 1.7 percent overall increase in OPPS payments to providers. We estimate that total OPPS payments for CY 2017, including beneficiary cost-sharing, to the approximate 3,906 facilities paid under the OPPS (including general acute care hospitals, children's hospitals, cancer hospitals, and CMHCs) will increase by approximately $773 million compared to CY 2016 payments, excluding our estimated changes in enrollment, utilization, and case-mix.

    We estimated the isolated impact of our OPPS policies on CMHCs because CMHCs are only paid for partial hospitalization services under the OPPS. Continuing the provider-specific structure that we adopted beginning in CY 2011 and basing payment fully on the type of provider furnishing the service, we estimate a 15.0 percent decrease in CY 2017 payments to CMHCs relative to their CY 2016 payments.

    (2) Impacts of the Updated Wage Indexes

    We estimate that our update of the wage indexes based on the FY 2017 IPPS final rule wage indexes results in no change for urban hospitals and a 0.3 percent increase for rural hospitals under the OPPS. These wage indexes include the continued implementation of the OMB labor market area delineations based on 2010 Decennial Census data.

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

    There are no significant impacts of our CY 2017 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.

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    (4) Impacts of the Proposed OPD Fee Schedule Increase Factor

    We estimate that, for most hospitals, the application of the OPD fee schedule increase factor of 1.65 percent to the conversion factor for CY 2017 will mitigate the impacts of the budget neutrality adjustments. As a result of the OPD fee schedule increase factor and other budget neutrality adjustments, we estimate that rural and urban hospitals will experience increases of approximately 1.7 percent for urban hospitals and 2.2 percent for rural hospitals. Classifying hospitals by teaching status or type of ownership suggests that these hospitals will receive similar increases.

  125. 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 2017 payment rates compared to estimated CY 2016 payment rates ranges between 12 percent for cardiovascular system procedures and -15 percent for hemic and lymphatic system procedures.

  126. Impacts of the Hospital OQR Program

    We do not expect our CY 2017 policies to significantly affect the number of hospitals that do not receive a full annual payment update.

  127. Impacts of the ASCQR Program

    We do not expect our CY 2017 policies to significantly affect the number of ASCs that do not receive a full annual payment update.

  128. Impacts for Implementation of Section 603 of the Bipartisan Budget Act of 2015

    We estimate that implementation of section 603 of Public Law 114-74 in this interim final rule with comment period will reduce Medicare Part B expenditures by approximately $50 million in CY 2017, relative to a baseline where section 603 was not implemented in CY 2017. This estimate is a significantly lower impact than the $330 million reduction estimated for the CY 2017 OPPS proposed rule. This lower impact estimate is primarily a result of changes in technical assumptions regarding the impact of this provision, not a result of the change in payment policy.

    1. Legislative and Regulatory Authority for the Hospital OPPS

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

      The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. The following Acts made additional changes to the OPPS: The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 2006; the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) (Pub. L. 109-432), enacted on December 20, 2006; the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), enacted on December 29, 2007; the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111-

      148), enacted on March 23, 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 (these two public laws are collectively known as the Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012; the American Taxpayer Relief Act of 2012 (Pub. L. 112-240), enacted January 2, 2013; the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) enacted on December 26, 2013; the Protecting Access to Medicare Act of 2014 (PAMA, Pub. L. 113-93), enacted on March 27, 2014; the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 (Pub. L. 114-10), enacted April 16, 2015; the Bipartisan Budget Act of 2015 (Pub. L. 114-74), enacted November 2, 2015; and the Consolidated Appropriations Act, 2016 (Pub. L. 114-113), enacted on December 18, 2015.

      Under the OPPS, we pay for hospital Part B services on a rate-per-

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

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

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

      For new technology items and services, special payments under the OPPS may be made in one of two ways. Section 1833(t)(6) of the Act provides for temporary additional payments, which we refer to as ``transitional pass-through payments,'' for at least 2 but not more than 3 years for certain drugs, biological agents, brachytherapy devices used for the treatment of cancer, and categories of other medical devices. For new technology services that are not

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      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.

    2. 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. In addition, section 1833(t)(1)(B)(v) of the Act authorizes that applicable items and services furnished by nonexcepted off-campus provider-based departments of a hospital on or after January 1, 2017, will not be considered covered outpatient department services as defined under section 1833(t)(1)(B) of the Act for purposes of payment under the OPPS. We set forth the services that are excluded from payment under the OPPS in regulations at 42 CFR 419.22, which was amended by adding paragraph (v) to implement exclusion of items and services furnished by nonexcepted off-campus provider-based departments from the definition of covered outpatient department services.

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

    3. Prior Rulemaking

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

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

    4. 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, the Secretary established the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) to fulfill this requirement. In CY 2011, based on section 222 of the PHS Act which gives discretionary authority to the Secretary to convene advisory councils and committees, the Secretary expanded the panel's scope to include the supervision of hospital outpatient therapeutic services in addition to the APC groups and weights. To reflect this new role of the panel, the Secretary changed the panel's name to the Advisory Panel on Hospital Outpatient Payment (the HOP Panel, or the Panel). The Panel is not restricted to using data compiled by CMS, and in conducting its review, it may use data collected or developed by organizations outside the Department.

      2. Establishment of the Panel

      On November 21, 2000, the Secretary signed the initial charter establishing the HOP Panel, and at that time named the APC Panel. This expert panel is composed of appropriate representatives of providers (currently employed full-time, not as consultants, in their respective areas of expertise), reviews clinical data, and advises CMS about the clinical integrity of the APC groups and their payment weights. Since CY 2012, the Panel also is charged with advising the Secretary on the appropriate level of supervision for individual hospital outpatient therapeutic services. The Panel is technical in nature, and it is governed by the provisions of the Federal Advisory Committee Act (FACA). The current charter specifies, among other requirements, that: The Panel continues to be technical in nature; is governed by the provisions of the FACA; may convene up to three meetings per year; has a Designated Federal Official (DFO); and is chaired by a Federal Official designated by the Secretary. The Panel's charter was amended on November 15, 2011, renaming the Panel and expanding the Panel's authority to include supervision of hospital outpatient therapeutic services and to add Critical Access Hospital (CAH) representation to its membership. The current charter was renewed on November 6, 2014 (80 FR 23009) and the number of panel members was revised from up to 19 to up to 15 members.

      The current Panel membership and other information pertaining to the Panel, including its charter, Federal Register notices, membership, meeting dates, agenda topics, and meeting reports, can be viewed on the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html.

      3. Panel Meetings and Organizational Structure

      The Panel has held multiple meetings, with the last meeting taking place on August 22, 2016. Prior to each meeting,

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      we publish a notice in the Federal Register to announce the meeting and, when necessary, to solicit nominations for Panel membership, to announce new members and to announce any other changes that the public should be aware of. Beginning in CY 2017, we will transition to one meeting per year, which will be scheduled in the summer (81 FR 31941).

      The Panel has established an operational structure that, in part, currently includes the use of three subcommittees to facilitate its required review process. The three current subcommittees are the Data Subcommittee, the Visits and Observation Subcommittee, and the Subcommittee for APC Groups and Status Indicator (SI) Assignments. The Data Subcommittee is responsible for studying the data issues confronting the Panel and for recommending options for resolving them. The Visits and Observation Subcommittee reviews and makes recommendations to the Panel on all technical issues pertaining to observation services and hospital outpatient visits paid under the OPPS (for example, APC configurations and APC relative payment weights). The Subcommittee for APC Groups and SI Assignments advises the Panel on the following issues: The appropriate status indicators to be assigned to HCPCS codes, including but not limited to whether a HCPCS code or a category of codes should be packaged or separately paid; and the appropriate APC assignment of HCPCS codes regarding services for which separate payment is made.

      Each of these subcommittees was established by a majority vote from the full Panel during a scheduled Panel meeting, and the Panel recommended at the August 22, 2016 meeting that the subcommittees continue. We accepted this recommendation.

      Discussions of the other recommendations made by the Panel at the March 14, 2016 and August 22, 2016 Panel meetings are included in the sections of this final rule with comment period that are specific to each recommendation. For discussions of earlier Panel meetings and recommendations, we refer readers to previously published OPPS/ASC proposed and final rules, the CMS Web site mentioned earlier in this section, and the FACA database at: http://facadatabase.gov/.

    5. Public Comments Received on the CY 2016 OPPS/ASC Final Rule With Comment Period

      We received 25 timely pieces of correspondence on the CY 2016 OPPS/

      ASC final rule with comment period that appeared in the Federal Register on November 13, 2015 (80 FR 70298), some of which contained comments on the interim APC assignments and/or status indicators of new or replacement Level II HCPCS codes (identified with comment indicator ``NI'' in OPPS Addendum B, ASC Addendum AA, and ASC Addendum BB to that final rule). Summaries of the public comments on new or replacement Level II HCPCS codes are set forth in this CY 2017 final rule with comment period under the appropriate subject matter headings.

      1. Updates Affecting OPPS Payments

    6. Recalibration of APC Relative Payment Weights

      1. Database Construction

  129. 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 2017 OPPS/ASC proposed rule (81 FR 45615), for CY 2017, we proposed to recalibrate the APC relative payment weights for services furnished on or after January 1, 2017, and before January 1, 2018 (CY 2017), using the same basic methodology that we described in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70309 through 70321). 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.

    For the purpose of recalibrating the proposed APC relative payment weights for CY 2017, we used approximately 163 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for HOPD services furnished on or after January 1, 2015, and before January 1, 2016.

    Addendum N to the proposed rule included the proposed list of bypass codes for CY 2017. The proposed list of bypass codes contains codes that were reported on claims for services in CY 2015 and, therefore, includes codes that were in effect in CY 2015 and used for billing, but were deleted for CY 2016. We retained these deleted bypass codes on the proposed CY 2017 bypass list because these codes existed in CY 2015 and were covered OPD services in that period, and CY 2015 claims data are used to calculate CY 2017 payment rates. Keeping these deleted bypass codes on the bypass list potentially allows us to create more ``pseudo'' single procedure claims for ratesetting purposes. ``Overlap bypass codes'' that are members of the proposed multiple imaging composite APCs were identified by asterisks (*) in the third column of Addendum N to the proposed rule. HCPCS codes that we proposed to add for CY 2017 were identified by asterisks (*) in the fourth column of Addendum N.

    We did not receive any public comments on our general proposal to recalibrate the relative payment weights for each APC based on claims and cost report data for HOPD services or on our proposed bypass code process. Therefore, we are adopting as final the proposed ``pseudo'' single claims process and the final CY 2017 bypass list of 194 HCPCS codes, as displayed in Addendum N to this final rule with comment period (which is available via the Internet on the CMS Web site). For this final rule with comment period, for the purpose of recalibrating the final APC relative payment weights for CY 2017, we used approximately 86 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, 2015, and before January 1, 2016. For exact numbers of claims used and additional details on the claims accounting process, we refer readers to the claims accounting narrative under supporting documentation for this CY 2017 OPPS/ASC final rule with comment period on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

    Table 1 below contains the list of codes that we are removing from the CY 2017 bypass list.

    Table 1--HCPCS Codes Removed From the CY 2017 Bypass List

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

    HCPCS code HCPCS short descriptor

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

    95925............................... Somatosensory testing.

    95808............................... Polysom any age 1-3> param.

    90845............................... Psychoanalysis.

    96151............................... Assess hlth/behave subseq.

    31505............................... Diagnostic laryngoscopy.

    95872............................... Muscle test one fiber.

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

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

    For CY 2017, in the CY 2017 OPPS/ASC proposed rule (81 FR 45616), we

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    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 CY 2017 APC payment rates are based, we calculated hospital-specific overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2015 claims data by comparing these claims data to the most recently available hospital cost reports, which, in most cases, are from CY 2014. For the proposed CY 2017 OPPS payment rates, we used the set of claims processed during CY 2015. 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 2015 (the year of claims data we used to calculate the proposed CY 2017 OPPS payment rates) and found that the National Uniform Billing Committee (NUBC) did not add any new revenue codes to the NUBC 2015 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.b.(1) of the proposed rule (81 FR 45617) and of this final rule with comment period.

    Comment: One commenter supported the CY 2014 final rule transitional policy of excluding providers that use a ``square foot'' methodology to calculate CCRs used to estimate costs associated with the CT and MRI APCs for CYs 2014-2017, as discussed in the CY 2017 OPPS proposed rule claims accounting narrative on pages 33 through 37, that was made available under supporting documentation for the CY 2017 OPPS/

    ASC proposed rule on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. However, the commenter opposed the provision of the CY 2014 final rule policy that was discussed in the CY 2017 OPPS proposed rule claims accounting narrative that sunsets this transitional policy after CY 2017.

    Response: We thank the commenter for its support of our proposed CY 2017 policy. In response to the commenter's concern about the sunset of the transitional policy after CY 2017, while CY 2018 payment policies will be addressed in the CY 2018 OPPS/ASC proposed rule, we note that the sunset of this transitional policy for CY 2018 was discussed in the CY 2014 OPPS/ASC final rule with comment period. We believe that 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. After consideration of the public comment we received on the general CCR process, we are finalizing using the hospital-specific overall ancillary and departmental CCRs to convert charges to estimated costs through application of a revenue code-to-cost center crosswalk and the established methodology for CY 2017.

    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 2017. 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 2015 claims that were used to calculate the payment rates for the CY 2017 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 2017, in the CY 2017 OPPS/ASC proposed rule (81 FR 45616), we proposed to continue to use geometric mean costs to calculate the relative weights on which the CY 2017 OPPS payment rates are based.

    We did not receive any public comments on this proposed process and are finalizing our proposed methodology for calculating geometric mean costs for purposes of creating relative payment weights and subsequent APC payment rates for the CY 2017 OPPS. We used the methodology described in sections II.A.2.a. through II.A.2.d. of this final rule with comment period to calculate the costs we used to establish the relative payment weights used in calculating the final OPPS payment rates for CY 2017 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.

    For details of the claims process used in this final rule with comment period, we refer readers to the claims accounting narrative under supporting documentation for this CY 2017 OPPS/ASC final rule with comment period on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

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  131. Recommendations of the Advisory Panel on Hospital Outpatient Payment (the Panel) Regarding Data Development

    As we discussed in the CY 2017 OPPS/ASC proposed rule (81 FR 45616 through 45617), at the March 14, 2016 meeting of the Panel, we presented our standard analysis of APCs, specifically those APCs for which geometric mean costs in the CY 2015 claims data through September 2015 varied significantly from the CY 2014 claims data used for the CY 2016 OPPS/ASC final rule with comment period. At the March 14, 2016 Panel meeting, the Panel made three recommendations related to the data process. The Panel's data-related recommendations and our responses follow.

    Recommendation: The Panel recommends that CMS provide the Data Subcommittee a list of APCs fluctuating significantly in costs prior to each Panel meeting.

    CMS Response: We accepted this recommendation.

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

    CMS Response: We accepted this recommendation.

    Recommendation: The Panel recommends that Michael Schroyer continue serving as subcommittee Chair for the August 2016 HOP Panel.

    CMS Response: We accepted this recommendation.

    At the August 22, 2016 meeting of the Panel, we provided the Data Committee a list of APCs for CY 2017 for which geometric mean costs in the CY 2015 claims data varied significantly from the CY 2014 claims data used for the CY 2016 OPPS/ASC final rule with comment period. At the August 22, 2016 Panel meeting, the Panel made four recommendations related to the data process. The Panel's data-related recommendations and our responses follow.

    Recommendation: The Panel recommends that CMS provide the Data Subcommittee a list of APCs fluctuating significantly in costs prior to each Panel meeting.

    CMS Response: We are accepting this recommendation.

    Recommendation: The Panel recommends that CMS provide the Data Subcommittee a presentation on the claims accounting process prior to each HOP Panel meeting.

    CMS Response: We are accepting this recommendation.

    Recommendation: The Panel recommends that the work of the data subcommittee continue.

    CMS Response: We are accepting this recommendation.

    Recommendation: The Panel recommends that Michael Schroyer continue serving as Chair of the Data Subcommittee.

    CMS Response: We are accepting this recommendation.

  132. Calculation of Single Procedure APC Criteria-Based Costs

    (1) Blood and Blood Products

    (

  133. Methodology

    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.

    For CY 2017, in the CY 2017 OPPS/ASC proposed rule (81 FR 45617), 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 also 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 CY 2017 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.

    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 2017 would 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 (78 FR 74861 through 74910), the CY 2015 OPPS/ASC final rule with comment period (79 FR 66798 through 66810), and the CY 2016 OPPS/ASC final rule with comment period (80 FR 70325 through 70339), 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. Under this policy, we include the costs of blood and blood products when calculating the overall costs of these C-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 C-

    APCs. Because the costs of blood and blood products will be reflected in the overall costs of the C-APCs (and, as a result, in the payment rates of the C-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 C-APCs (we refer readers to the CY 2015 OPPS/

    ASC final rule with comment period (79 FR 66796)).

    We invited public comments on these proposals. We also referred readers to Addendum B to the proposed rule (which was available via the Internet on the CMS Web site) for the proposed CY 2017 payment rates for blood and blood products (which were 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

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    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).

    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 CY 2017 proposal to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology. The final CY 2017 payment rates for blood and blood products (which are identified with status indicator ``R'') are reflective of the use of the hospital-specific simulated blood-specific CCR methodology and 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) Solicitation of Public Comments

    As discussed in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70323), we are in the process of examining the current set of HCPCS P-codes for blood products, which became effective many years ago. Because these HCPCS P-codes were created many years ago, we are considering whether this code set could benefit from some code descriptor revisions, updating, and/or consolidation to make these codes properly reflect current product descriptions and utilization while minimizing redundancy and potentially outdated descriptors. In the CY 2017 OPPS/ASC proposed rule (81 FR 45617 through 45618), we requested public comments regarding the adequacy and necessity (in terms of the existing granularity) of the current descriptors for the HCPCS P-codes describing blood products. Specifically, there are three main categories of blood products: Red blood cells; platelets; and plasma. In each of these categories, there are terms that describe various treatments or preparations of the blood products, with each, in several cases, represented individually and in combination. For example, for pheresis platelets, there are codes for ``leukocyte reduced,'' ``irradiated,'' ``leukocyte reduced + irradiated,'' and ``leukocyte reduced + irradiated + CMV-negative,'' among others. We asked the blood product stakeholder community whether the current blood product HCPCS P-code descriptors with the associated granularity best describe the state of the current technology for blood products that hospitals currently provide to hospital outpatients. In several cases, the hospital costs as calculated from the CMS claims data are similar for blood products of the same type (for example, pheresis platelets) that have different code descriptors, which indicates to us that there is not a significant difference in the resources needed to produce the similar products. Again, we invited public comments on the current set of active HCPCS P-codes that describe blood products regarding how the code descriptors could be revised and updated (if necessary) to reflect the current blood products provided to hospital outpatients. The current set of active HCPCS P-codes that describe blood products can be found in Addendum B to the proposed rule and this final rule with comment period (which is available via the Internet on the CMS Web site).

    Comment: Several commenters responded to the solicitation for public comments and supported a thorough examination of the current set of HCPCS P-codes for blood products as a necessary undertaking because the HCPCS P-codes were created several years ago. Several commenters recommended that CMS convene a stakeholder group that includes representatives of hospitals, blood banks, the American Red Cross, and others to discuss a framework to systematically review and revise the HCPCS P-codes for blood products. Commenters also encouraged CMS to retain individual HCPCS P-codes for unique blood products with significant therapeutic distinctions, as opposed to creating modifiers to be applied to the existing HCPCS P-codes. Commenters also suggested that CMS establish a ``not otherwise classified (NOC)'' code for blood products, which would allow hospitals to begin immediately billing for a new blood product that is not described by a specific HCPCS P-code. One commenter supported the use of broader descriptions for HCPCS P-

    codes when more granular language is no longer meaningful for differentiating between different types of blood and blood products, and where the costs and volume of the HCPCS P-codes are similar. Other commenters suggested specific modifications to the order, classification, and code descriptors of the blood and blood product HCPCS P-codes.

    Response: We appreciate the commenters' detailed responses. These comments will be taken into consideration in the development of proposals to update the HCPCS P-codes that describe blood products.

    (c) Rapid Bacterial Testing for Platelets

    In March 2016, the Food and Drug Administration (FDA) issued draft guidance for the health care industry entitled, ``Bacterial Risk Control Strategies for Blood Collection Establishments and Transfusion Services to Enhance the Safety and Availability of Platelets for Transfusion'' (available at: http://www.fda.gov/BiologicsBloodVaccines/GuidanceComplianceRegulatoryInformation/Guidances/default.htm). This guidance encourages the use of rapid bacterial testing devices or pathogen-reduction technology for platelets to adequately control the risk of bacterial contamination of platelets.

    In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70322), CMS established three HCPCS P-codes for pathogen-reduced blood products, which became effective January 1, 2016. These codes included: HCPCS code P9070 (Plasma, pooled multiple donor, pathogen reduced, frozen, each unit); HCPCS code P9071 (Plasma (single donor), pathogen reduced, frozen, each unit); and HCPCS code P9072 (Platelets, pheresis, pathogen reduced, each unit).

    The HCPCS Workgroup has decided to revise the HCPCS code established in CY 2016 for pathogen-reduced platelets (HCPCS code P9072) to include the use of pathogen-reduction technology or rapid bacterial testing. Specifically, the descriptor for this code will be revised, effective January 1, 2017, to read as follows: HCPCS code P9072 (Platelets, pheresis, pathogen reduced or rapid bacterial tested, each unit). The payment rate for HCPCS code P9072 is based on a crosswalk to HCPCS code P9037 (Platelets, pheresis, leukocyte reduced, irradiated, each unit). We refer readers to the CY 2016 OPPS/ASC final rule with comment period for a further discussion of crosswalks for pathogen-reduced blood products (80 FR 70323). When claims data become available for HCPCS code P9072, we will establish a payment rate for this code using that data and our blood-specific CCR methodology. The revised HCPCS code descriptor and final payment rate for this service can be found in Addendum B of this final rule with comment period (which is available via the Internet on the CMS Web site).

    (2) 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

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    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 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 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 2016 OPPS/ASC final rule with comment period (80 FR 70323 through 70325) for further discussion of the history of OPPS payment for brachytherapy sources.

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45618), for CY 2017, we proposed to use the costs derived from CY 2015 claims data to set the CY 2017 payment rates for brachytherapy sources because CY 2015 is the same year of data we proposed to use to set the proposed payment rates for most other items and services that would be paid under the CY 2017 OPPS. We proposed to base the payment rates for brachytherapy sources on the geometric mean unit costs for each source, consistent with the methodology that we 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 nonstranded not otherwise specified (NOS) codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest stranded or nonstranded 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). For CY 2017 and subsequent years, 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). Specifically, this 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 2017 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 note that, for CY 2017, we proposed to assign new proposed status indicator ``E2'' (Items and Services for Which Pricing Information and Claims Data Are Not Available) to HCPCS code C2644 (Brachytherapy cesium-131 chloride) because this code was not reported on CY 2015 claims. Therefore, we are unable to calculate a payment rate based on the general OPPS ratesetting methodology described earlier. Although HCPCS code C2644 became effective July 1, 2014, and although we would expect that if a hospital furnished a brachytherapy source described by this code in CY 2015, HCPCS code C2644 should appear on the CY 2015 claims, there are no CY 2015 claims reporting this code. In addition, unlike new brachytherapy sources HCPCS codes, we will not consider external data to determine a proposed payment rate for HCPCS code C2644 for CY 2017.

    Therefore, we proposed to assign new proposed status indicator ``E2'' to HCPCS code C2644.

    We invited public comments on this proposed policy. We 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.

    Comment: One commenter requested that CMS establish a new HCPCS code to specifically describe the use of CivaStringsupreg, a linear, low dose rate polymer encapsulated palladium-103 brachytherapy source. The commenter stated that CivaStringsupreg became commercially available in CY 2013, and providers began reporting charges for the brachytherapy source using HCPCS code C2636 (Brachytherapy linear, non-

    stranded, palladium-103). However, the commenter believed that providers experienced confusion regarding the appropriate reporting of HCPCS code C2636. The commenter stated that six hospitals reported charges using HCPCS code C2636 over the past 6 years, without purchasing a linear, non-stranded palladium-103 brachytherapy source. Moreover, the commenter believed that providers may have inappropriately reported charges using HCPCS code C2636, including instances where providers reported charges for the use of HCPCS code 2636 although acquisition of CivaStringsupreg had not been obtained when it became commercially available in CY 2013. In addition, the commenter stated that the National Correct Coding Initiative (NCCI) established a medically unlikely edit (MUE) for HCPCS code C2636 in the outpatient hospital setting for 150 mm, effective April 1, 2010. Subsequently, in November 2015, the manufacturer of CivaStringsupreg requested that the MUE be increased to 900 mm based on the recommended clinical usage of CivaStringsupreg. In response to that request, the NCCI increased the MUE to 600 mm, effective April 1, 2016. However, the commenter further stated that claims for the use of CivaStringsupreg with the appropriate number of units continued to be denied based on the MUE. Because of these concerns, the commenter requested that CMS establish a new HCPCS code to specifically describe the use of CivaStringsupreg, as well as an increase in the payment rate proposed to adequately pay for the costs of this brachytherapy source.

    Response: Section 1833(t)(2)(h) of the Act requires that the Secretary create additional groups of covered outpatient department services that classify brachytherapy sources separately from other services in a manner reflecting the number, isotope, and radioactive intensity of such sources. As such, we believe that HCPCS code C2636 adequately describes the clinical properties of CivaStringsupreg. Therefore, it is not necessary and would be duplicative to create a separate group for another linear, non-stranded palladium-103 source.

    HCPCS code C2636 has been active since January 1, 2005. In response to the commenter's concerns regarding hospitals that may have inappropriately reported charges using HCPCS code C2636 although acquisition of

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    CivaStringsupreg had not been obtained, as a matter of general policy, we rely on hospitals to report all HCPCS codes on claims 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. We stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71838) that the quality and accuracy of reported units and charges significantly 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 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.

    With regard to the MUE value, we note that the MUE for HCPCS code C2636 is a date-of-service edit. This means if billed units of service (UOS) for HCPCS code C2636 are denied based on the MUE value, the provider may appeal the denial. Medicare Administrative Contractors (MACs) may pay UOS in excess of the MUE value if medical record documentation supports medically reasonable and necessary UOS in excess of the MUE value. Therefore, we are not establishing a new HCPCS code for the use of CivaStringsupreg because we believe that HCPCS code C2636 adequately describes the clinical properties of CivaStringsupreg. We refer readers to the facility outpatient services MUE table, which is available on the CMS Web site at: https://www.cms.gov/Medicare/Coding/NationalCorrectCodInitEd/MUE.html.

    Comment: One commenter acknowledged the proposed increased CY 2017 payment rate for brachytherapy sources described by HCPCS code C2616 (Brachytx, non-str, yttrium-90) in comparison to the CY 2016 payment rate, but continued to believe that the proposed CY 2017 payment rate would not adequately pay a hospital's true cost for purchasing the device. The commenter supported the proposed CY 2017 increase in the payment rate for HCPCS code C2616, but remained concerned that the limited increase in payment would not adequately pay for all costs incurred by the hospital such as storage, handling, and disposal costs. In addition, based on the commenter's analysis of Medicare Provider Analysis and Review (MedPAR) data, which contain data from claims for services provided to beneficiaries admitted to Medicare certified inpatient hospitals and skilled nursing facilities, the commenter noted that a few hospitals inconsistently or incorrectly reported revenue code assignments with incorrect facility charge data. As a result of the erroneous and/or inaccurate coding, the commenter believed that the claims data used for CY 2017 ratesetting are adversely affected, which resulted in the inadequate proposed payment rate for HCPCS code C2616. Based on these concerns, the commenter requested that CMS eliminate outlier data that is out of range of other accurately reporting facilities. Specifically, the commenter requested that CMS eliminate claims from facilities that report a purchase price of $1.00 or other costs dramatically less than the $16,000 selling price.

    Response: As previously discussed, under the OPPS, we use cost-

    based weights to determine relative costliness for outpatient items and services. The relativity of weights is used to set APC payment rates for brachytherapy sources, not the invoice cost or list price. Therefore, under a prospective payment system based on relative weights, items and services may not be paid at 100 percent of the reported costs.

    With regard to the commenter's analysis of MedPAR data on claims that reported HCPCS code C2616, we note that MedPAR data consolidate inpatient hospital or skilled nursing facility (SNF) claims data from the National Claims History (NCH) files into stay level records. Because MedPAR data do not include OPPS claims, it is incorrect for the commenter to conclude that the CY 2017 OPPS proposed payment rate is inadequate as a result of erroneous and/or inaccurate coding on inpatient hospital or SNF claims. We have no reason to believe that prospective payment rates based on outpatient claims data from those providers furnishing a brachytherapy source described by HCPCS code C2616 do not appropriately reflect the cost of that source to hospitals. Therefore, we are not excluding or eliminating any claims with paid lines for HCPCS code C2616 in ratesetting for CY 2017.

    Comment: A few commenters expressed concern regarding the outpatient hospital claims data that CMS used to set the prospective payment rates for brachytherapy sources. The commenters stated that high dose rate (HDR) brachytherapy devices are renewable because the devices have a 90-day use span and are used in the treatment of multiple patients during this 90-day span. According to the commenters, the true cost of treatment involving 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. The 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 code C2640, Brachytherapy source, stranded, palladium-103, per source and HCPCS code 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, $77, and $70, respectively. The commenters stated that, based on their experience, stranded palladium-103 sources (HCPCS code C2640) always cost more than non-stranded palladium-103 sources (HCPCS code C2641), which was not reflected in the proposed rule claims data that CMS used.

    In addition, the commenters expressed concern that payment for several brachytherapy sources are unstable and fluctuate significantly since CMS implemented the prospective payment methodology based on source-specific median cost in CY 2010 and geometric mean unit cost in CY 2013.

    As a result of these concerns, the commenters requested that CMS adopt policies that more accurately account for the costs associated with HDR brachytherapy treatment delivery and to limit the overall fluctuation in payment for brachytherapy devices.

    Response: We have received similar public comments regarding payment rates for HDR brachytherapy sources, payment rates for low and high activity palladium sources, and the year-to-year variation in payment rates for most brachytherapy sources in response to prior proposed rules and have addressed these public comments in prior final rules with comment period. We refer readers to 72 FR 66782; 74 FR 60534; 75 FR 71979; 76 FR 74161; 77 FR 68241; 78 FR 74861; 79 FR 66796; and 80 FR 70324 for our past responses to these similar comments. In these rules, we explain the characteristics of a

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    prospective payment system and how low-volume services are more susceptible to payment volatility compared to high-volume services. We also describe our expectation for how hospitals should treat HDR brachytherapy sources that can be used on multiple patients during its use span. In addition, we address concerns on varied cost distributions and their impact on the observed relationship in geometric mean cost between the different types of sources.

    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. In addition, we are finalizing our proposal to assign new status indicator ``E2'' to HCPCS code C2644 because there are no CY 2015 claims reporting use of this code and, therefore, we are unable to determine a payment rate for CY 2017.

    The final CY 2017 payment rates for brachytherapy sources are included in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site) and are identified with status indicator ``U''.

    We continue to invite hospitals and other parties to submit recommendations to us for new codes to describe new brachytherapy sources. Such recommendations should be directed to the Division of Outpatient Care, Mail Stop C4-01-26, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244. We will continue to add new brachytherapy source codes and descriptors to our systems for payment on a quarterly basis.

  134. Comprehensive APCs (C-APCs) for CY 2017

    (1) Background

    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 under the OPPS at the claim level. The policy was finalized in CY 2014, but the effective date was delayed until January 1, 2015, to allow additional time for further analysis, opportunity for public comment, and systems preparation. The comprehensive APC (C-APC) policy was implemented effective January 1, 2015, with modifications and clarifications in response to public comments received regarding specific provisions of the C-APC policy (79 FR 66798 through 66810).

    A C-APC is defined 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 C-APCs as a category broadly for OPPS payment and implemented 25 C-APCs beginning in CY 2015 (79 FR 66809 through 66810). In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70332), we finalized 10 additional C-APCs to be paid under the existing C-APC payment policy.

    Under this policy, we designated a service described by a HCPCS code assigned to a C-APC as the primary service when the service is identified by OPPS status indicator ``J1''. When such a primary service is reported on a hospital outpatient claim, taking into consideration the few exceptions that are discussed below, we make payment for all other items and services reported on the hospital outpatient claim as being integral, ancillary, supportive, dependent, and adjunctive to the primary service (hereinafter collectively referred to as ``adjunctive services'') and representing components of a complete comprehensive service (78 FR 74865 and 79 FR 66799). Payments for adjunctive services are packaged into the payments for the primary services. This results in a single prospective payment for each of the primary, comprehensive services based on the costs of all reported services at the claim level.

    Services excluded from the C-APC policy include services that are not covered OPD services, services that cannot by statute be paid for under the OPPS, and services that are required by statute to be separately paid. This includes certain mammography and ambulance services that are not covered OPD services in accordance with section 1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which also are required by statute to receive separate payment under section 1833(t)(2)(H) of the Act; pass-through drugs and devices, which also require separate payment under section 1833(t)(6) of the Act; 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; and certain preventive services (78 FR 74865 and 79 FR 66800 through 66801). A list of services excluded from the C-

    APC policy is included in Addendum J to this final rule with comment period (which is available via the Internet on the CMS Web site).

    The C-APC policy payment methodology set forth in the CY 2014 OPPS/

    ASC final rule with comment period for the C-APCs and modified and implemented beginning in CY 2015 is summarized as follows (78 FR 74887 and 79 FR 66800):

    Basic Methodology. As stated in the CY 2015 OPPS/ASC final rule with comment period, we define the C-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 are not covered OPD services or that cannot by statute be paid for under the OPPS. Services and procedures described by HCPCS codes assigned to status indicator ``J1'' are assigned to C-APCs based on our usual APC assignment methodology by evaluating the geometric mean costs of the primary service claims to establish resource similarity and the clinical characteristics of each procedure to establish clinical similarity within each APC. In the CY 2016 OPPS/ASC final rule with comment period, we expanded the C-APC payment methodology with the establishment of status indicator ``J2''. The assignment of status indicator ``J2'' to a specific combination of services performed in combination with each other, as opposed to a single, primary service, allows for all other OPPS payable services and items reported on the claim (excluding services that are not covered OPD services or that cannot by statute be paid for under the OPPS) to be deemed adjunctive services representing components of a comprehensive service and resulting in a single prospective payment for the comprehensive service based on the costs of all reported services on the claim (80 FR 70333 through 70336).

    Services included under the C-APC payment packaging policy, that is, services that are typically adjunctive to the primary service and 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 represent services that are provided during the complete comprehensive service (78 FR 74865 and 79 FR 66800).

    Page 79581

    In addition, payment for outpatient department services that are similar to therapy services and delivered either by therapists or non-

    therapists is included as part of the payment for the packaged complete comprehensive service. These services that are provided during the perioperative period are adjunctive services and are deemed to be 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 for under section 1834(k) of the Act, subject to annual therapy caps as applicable (78 FR 74867 and 79 FR 66800). However, certain other services similar to therapy services are considered and paid for as outpatient department services. Payment for these non-therapy outpatient department services that are reported with therapy codes and provided with a comprehensive service is included in the payment for the packaged complete 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. We refer readers to the July 2016 OPPS Change Request 9658 (Transmittal 3523) for further instructions on reporting these services in the context of a C-APC service.

    Items included in the packaged 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 SADs, unless they function as packaged supplies (78 FR 74868 through 74869 and 74909 and 79 FR 66800). We refer readers to Section 50.2M, Chapter 15, of the Medicare Benefit Policy Manual for a description of our policy on SADs treated as hospital outpatient supplies, including lists of SADs that function as supplies and those that do not function as supplies.

    We 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 and 79 FR 66801). We sum all line item charges for services included on the C-APC claim, 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 included in the C-APC service payment bundle.) Charges for services that would otherwise be 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 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 establish a ranking of each primary service (single unit only) to be 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, we 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 use complexity adjustments to provide increased payment for certain comprehensive services. We 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 the next higher paying C-APC in the same clinical family of C-APCs. We 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 in the originating C-APC (cost threshold). After designating a single primary service for a claim, we 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 determine initial C-APC assignments and complexity adjustments using the best available information, crosswalking the new HCPCS codes to predecessor codes when appropriate.

    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 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 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. We do not create new APCs with a comprehensive geometric mean cost that is higher than the highest geometric mean 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 (79 FR 66802).

    We package payment for all add-on codes into the payment for the C-

    APC. However, certain primary service-add-on combinations may qualify for a complexity adjustment. As noted in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70331), all add-on codes that can be appropriately reported in combination with a base code that describes a primary ``J1''service are evaluated for a complexity adjustment.

    To determine which combinations of primary service codes reported in conjunction with an add-on code may

    Page 79582

    qualify for a complexity adjustment for CY 2017, in the CY 2017 OPPS/

    ASC proposed rule (81 FR 45620), we proposed to apply the frequency and cost criteria thresholds 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 thresholds for a complexity adjustment are met, and reassignment to the next higher cost APC in the clinical family is appropriate, we make a complexity adjustment for the code combination; that is, we 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 does not qualify for a complexity adjustment, payment for these services is packaged within the payment for the complete comprehensive service. We listed the complexity adjustments proposed for add-on code combinations for CY 2017, 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). For CY 2017, we proposed to discontinue the requirement that a code combination (that qualifies for a complexity adjustment by satisfying the frequency and cost criteria thresholds described earlier) also not create a 2 times rule violation in the higher level or receiving APC (80 FR 70328). We believe that this requirement is not useful because most code combinations fall below our established frequency threshold for considering 2 times rule violations, which is described in section III.B. of this final rule with comment period. Therefore, because the 2 times rule would not typically apply to complexity-adjusted code combinations, we proposed to discontinue this requirement.

    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 that describe a complex code combination that would qualify for a complexity adjustment and are proposed to be reassigned to the next higher cost C-APC within the clinical family. The combined statistics for all proposed reassigned complex code combinations are represented by an alphanumeric code with the first 4 digits of the designated primary service followed by a letter. For example, the proposed geometric mean cost listed in Addendum J for the code combination described by complexity adjustment assignment 3320R, which is assigned to C-APC 5224 (Level 4 Pacemaker and Similar Procedures), includes all code combinations that are proposed to be reassigned to C-APC 5224 when CPT code 33208 is the primary code. Providing the information contained in Addendum J to 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.

    Comment: Commenters generally supported the proposal to no longer require that a code combination (that qualifies for a complexity adjustment by satisfying the frequency and cost criteria thresholds) be evaluated for a 2 times rule violation in the higher level or receiving APC. One commenter requested that CMS allow the complexity-adjusted pair to move up an additional level in the clinical family if the code combination creates a 2 times rule violation in the receiving APC. Several other commenters requested that CMS review and modify the established C-APC complexity adjustment criteria to allow for complexity adjustments for specific ``J1'' service code combinations or code combinations of ``J1'' services and certain add-on codes that do not qualify under the current criteria.

    Response: We appreciate the commenters' support. We continue to believe that the complexity adjustment criteria, which require a frequency of 25 or more claims reporting a code combination and a violation of the 2 times rule in the originating C-APC in order to receive payment in the next higher cost C-APC within the clinical family, is adequate to determine if a combination of procedures represents a complex, costly subset of the primary service. If a code combination meets these criteria, the combination receives payment at the next higher cost C-APC. Code combinations that do not meet these criteria receive the C-APC payment rate associated with the primary ``J1'' service. A minimum of 25 claims is already very low for a national payment system. Lowering the minimum of 25 claims further could lead to unnecessary complexity adjustments for service combinations that are rarely performed. The complexity adjustment cost threshold compares the code combinations to the lowest cost significant procedure assigned to the APC. If the cost of the code combination does not exceed twice the cost of the lowest cost significant procedure within the APC, no complexity adjustment is made. Lowering this threshold also could remove too many claims from the accounting for the primary J1 service, which would undermine the C-APC policy. We are finalizing the policy proposal to discontinue the requirement that a code combination (that qualifies for a complexity adjustment by satisfying the frequency and cost criteria thresholds) also not create a 2 times rule violation in the higher level or receiving APC as proposed. We are not otherwise changing the complexity adjustment criteria.

    Comment: Other commenters requested that CMS ensure that claims for bilateral C-APC procedures that are correctly reported with modifier ``50'' (a modifier used to report bilateral procedures that are performed at the same operative session as a single line item) are accounted for in the evaluation of complexity adjustments, as well as the C-APC claims accounting. The commenters believed that these claims should be recognized as reporting two units of the service in the evaluation of the frequency of the code combination and the payment of the complexity-adjusted C-APC rate.

    Response: The issue of complexity adjustments for bilateral, status indicator ``J1'' procedures reported with modifier ``50'' was addressed in the April 2016 Integrated OCE Specifications Quarterly Release Files (Attachment A--Integrated OCE Specs, Appendix L: Comprehensive APC Assignment Logic). In that document, the C-APC assignment logic was updated to specify the following: Once the highest ranked comprehensive procedure is determined, if there are multiple comprehensive procedures present with status indicator ``J1'' or there are qualifying add-on procedure codes present (status indicator ``N''), determine if there are any pairings that may qualify for a complexity adjustment. Multiple occurrences or service units of the same comprehensive procedure, or the reporting of modifier ``50,'' may qualify for a complexity adjustment. If there is a qualifying pair present associated with the highest ranked comprehensive procedure, assign the complexity-adjusted comprehensive APC. This change was made retroactive to January 2015. As of January 1, 2015, status indicator ``J1'' procedure claims with modifier ``50'' also will be included in the C-APC claims accounting and the complexity adjustment evaluations.

    Page 79583

    Comment: One commenter requested that CMS eliminate one of the criterion for assignment to status indicator ``J2'' and C-APC 8011 (Comprehensive Observation Services). Specifically, the commenter stated that claims that otherwise would qualify for payment through C-

    APC 8011, but contain a procedure described by a HCPCS code assigned to status indicator ``T'' that is reported with a date of service on the same day or 1 day earlier than the date of service associated with services described by HCPCS code G0378, should not be excluded from receiving payment through C-APC 8011.

    Response: Services that would otherwise qualify for the observation C-APC (C-APC 8011) are not considered to be observation services when they are associated with a surgical procedure (assigned to status indicator ``T''). Instead, they are considered to be perioperative recovery, which is always packaged in with the surgical procedure.

    Comment: Some commenters submitted comments regarding C-APC 5627 (Level 7 Radiation Therapy) and the treatment planning and preparation services involved with stereotactic radiosurgery (SRS) treatment. Commenters urged CMS to continue the policy finalized in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70337) that pays separately for certain SRS planning and preparation services (a policy that is a temporary special exception for APC 5627 to the C-APC packaging policy that packages all adjunctive services (with a few exceptions listed in Addendum J)). Commenters believed that CMS should not package treatment planning and preparation into the C-APC payment rate for Level 7 Radiation Therapy in the future as discussed in the CY 2016 OPPS/ASC final rule with comment period because SRS claims may include other unrelated radiation therapy services.

    Response: For CY 2017, we will continue the policy for the payment of SRS treatment as described in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70337). This policy removes claims reporting certain planning and preparation services for SRS treatment from our geometric mean cost calculation for the CY 2017 payment rate for C-APC 5627 and pays separately for these planning and preparation services. For 2018, we will again examine the claims for cranial single session SRS patients and evaluate the services reported with modifier ``CT'' (Adjunctive service related to a procedure assigned to a comprehensive ambulatory payment classification C-APC procedure). We will consider in the future whether repackaging all adjunctive services (planning, preparation, and imaging, among others) back into cranial single session SRS is appropriate in order to preserve the integrity of the C-

    APC policy and the OPPS as a prospective payment system.

    Comment: Commenters noted that claims that included several insertion codes for brachytherapy devices (namely CPT codes 57155, 20555, 31643, 41019, 43241, 55920, and 58346) often did not also contain a brachytherapy treatment delivery code. The commenters concluded that brachytherapy delivery charges are being underrepresented in ratesetting under the C-APC methodology because a correctly coded claim should always include an insertion and treatment delivery code combination. One commenter suggested that CMS adopt a composite APC methodology for CPT code 57155 similar to the composite methodology for LDR prostate brachytherapy services.

    Response: The calculation of OPPS relative payment weights that reflect the relative resources required for HOPD services is the foundation of the OPPS. 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 (77 FR 68324). Moreover, we generally do not remove claims from the claims accounting when stakeholders believe that hospitals included incorrect information on some claims. Therefore, we are not excluding claims from the ratesetting calculation that include procedures described by CPT codes 57155, 20555, 31643, 41019, 43241, 55920, and 58346. In the future, we will examine the claims for these brachytherapy insertion codes and determine if any future adjustment to the methodology (or possibly code edits) would be appropriate.

    (2) C-APCs for CY 2017

    (

  135. Additional C-APCs for CY 2017

    For CY 2017 and subsequent years, in the CY 2017 OPPS/ASC proposed rule (81 FR 45620), we proposed to continue to apply the C-APC payment policy methodology made effective in CY 2015, as described in detail below. We proposed to continue to define the services assigned to C-

    APCs as primary services or a specific combination of services performed in combination with each other. We also proposed to define a C-APC as a classification for the provision of a primary service or specific combination of services and all adjunctive services and supplies provided to support the delivery of the primary or specific combination of services. We also proposed to continue to follow the C-

    APC payment policy methodology of packaging all covered OPD services on a hospital outpatient claim reporting a primary service that is assigned to status indicator ``J1'' or reporting the specific combination of services assigned to status indicator ``J2,'' excluding services that are not covered OPD services or that cannot by statute be paid under the OPPS.

    As a result of our annual review of the services and APC assignments under the OPPS, we proposed 25 additional C-APCs to be paid under the existing C-APC payment policy beginning in CY 2017. The proposed additional CY 2017 C-APCs were listed in Table 2 of the proposed rule. All C-APCs, including those effective in CY 2016 and those being proposed for CY 2017, also were displayed in Addendum J to this proposed rule. Addendum J to this proposed rule (which is available via the Internet on the CMS Web site) also contained all of the data related to the C-APC payment policy methodology, including the list of proposed complexity adjustments and other information.

    Comment: Many commenters supported the proposal to expand the C-APC policy to include new C-APCs. However, several commenters requested that CMS delay the expansion of the C-APC policy and expressed concerns that the costs of procedures and services paid through a C-APC are not being accurately captured and C-APC payment rates do not adequately cover the costs associated with the primary and adjunctive services. Commenters also requested more information regarding the rationale for the assignment of services to a C-APC and stated that more time is needed to analyze and assess the financial impact of the proposed C-APC policy changes. One commenter expressed concerns that CMS may not be fully considering the impact of adding relatively low cost (below $2,227) procedures to C-APCs and suggested the establishment of a minimum cost threshold for a procedure to be assigned to a C-APC. Other commenters requested a delay in the assignment of new codes, including add-on codes, to C-APCs unless a crosswalk exists from the old code to the new code.

    Response: We appreciate the commenters' support. With regard to the comments relating to delaying the expansion of the C-APC policy, we do

    Page 79584

    not believe that we should delay implementation of the proposed CY 2017 C-APCs. C-APCs were introduced in 2015, and, like all of the payment polices contained in the OPPS, are reviewed annually, as provided at section 1833(t)(9)(A) of the Act. We communicate with various stakeholders on an ongoing basis as a part of our mutual efforts to further improve the OPPS. We believe that sufficient information is available for stakeholders to evaluate how C-APCs affect payment for services, and that there is sufficient time for the public to review and analyze our proposed payment policies. This is evidenced by the many stakeholders that submit public comments, including, for example, analyses of the C-APC payment policy. Regarding the comment about creating a cost threshold for assignment of a procedure to a C-APC, we do not believe that this is necessary. Procedures assigned to C-APCs are primary services (mostly major surgical procedures) that are typically the focus of the hospital outpatient stay. We do not believe that a cost threshold would help to differentiate primary from secondary or adjunctive services. Lastly, we assign new codes to APCs (including C-APCs) based on predecessor code APC assignments, comparisons to similar codes, clinical comparability, and estimates of the resource intensity, as well as other relevant information. If we failed to assign new codes to C-APCs, this could result in significant underpayment for some new codes if a C-APC is the most appropriate APC for the new procedure.

    Comment: A few commenters requested that CMS not convert APCs 5153 through 5155 (Levels 3 through 5 Airway Endoscopy) into C-APCs. The commenters expressed concerns regarding reduced payments for sinus surgeries when a patient has multiple surgeries during a single operative session. The major concern focused on the loss of additional payments for multiple procedures under the C-APC methodology. Commenters stated that multiple procedures (coded either as a bilateral case or with multiple different CPT codes) are common for the treatment of sinus diseases. One commenter noted that the AMA CPT Editorial Panel is in the process of revising some of the sinus surgery codes and bundling some of these codes. Another commenter believed that payment reductions for sinus surgery could negatively affect opportunities for resident training on these procedures.

    Response: The commenters concerns are not unique to sinus surgery. The C-APC methodology relies on the average cost of the range of cases included in the claims accounting for the primary service code. We believe that this approach is better suited to a prospective payment system like the OPPS that relies on average cost payments that sometimes exceed the cost of a given case and other times are less than the cost of a given case. If, as the commenters suggest, bilateral surgery and/or multiple procedures are common in sinus surgery, the costs of this approach would be reflected in the geometric mean cost of the primary procedure under the C-APC methodology. It also seems that, according to one commenter, the AMA is preparing to address what might be fragmented codes in this clinical area. We are finalizing as proposed the conversion of the three highest level airway endoscopy APCs to C-APCs as a part of our continuing effort to direct the OPPS more towards a prospective payment system and away from a per service or per code fee schedule in which every coded item or service results in additional payment. We also do not agree that this payment policy raises concerns regarding the training of otolaryngology residents in sinus surgery, but we will monitor these APCs as we do with all others as a part of our annual OPPS/ASC rulemaking.

    Comment: One commenter stated that while APC 5153 (Level 3 Airway Endoscopy Procedures) is a proposed C-APC for CY 2017, one of the codes assigned to APC 5153, namely CPT code 31649 (Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with removal of bronchial valve(s), each additional lobe (List separately in addition to code for primary procedure)), is assigned a status indicator of ``Q2'' and not ``J1.'' The commenter requested that this procedure be assigned to status indicator ``J1.''

    Response: This procedure is assigned status indicator ``Q2'' because it describes the removal of a device, specifically a bronchial valve. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74926), we finalized a proposal to conditionally package device removal procedures. This procedure is separately paid unless it is billed on the same date of service as a surgical procedure assigned to status indicator ``J1'' or ``T'' that involves repair or replacement of the device. The procedure was placed in a C-APC on the basis of resource and clinical homogeneity. For these reasons, we do not agree with the commenters, and are not assigning CPT code 31649 to status indicator ``J1.''

    After consideration of the public comments we received, we are finalizing the proposal for 25 additional C-APCs to be paid under the existing C-APC payment policy beginning in CY 2017.

    Table 2 below lists the final additional C-APCs for CY 2017, including the C-APCs currently effective for CY 2016. All C-APCs, including those effective in CY 2016 and those finalized for CY 2017, also are displayed in Addendum J to this final rule with comment period. Addendum J to this final rule with comment period (which is available via the Internet on the CMS Web site) also contains all of the data related to the C-APC payment policy methodology, including the list of complexity adjustments and other information.

    Table 1--CY 2017 C-APCs

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

    C-APC CY 2017 APC title Clinical family New C-APC

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

    5072..................................... Level 2 Excision/Biopsy/ EBIDX *

    Incision and Drainage.

    5073..................................... Level 3 Excision/Biopsy/ EBIDX *

    Incision and Drainage.

    5091..................................... Level 1 Breast/Lymphatic BREAS *

    Surgery and Related

    Procedures.

    5092..................................... Level 2 Breast/Lymphatic BREAS *

    Surgery and Related

    Procedures.

    5093..................................... Level 3 Breast/Lymphatic BREAS ...............

    Surgery & Related

    Procedures.

    5094..................................... Level 4 Breast/Lymphatic BREAS ...............

    Surgery & Related

    Procedures.

    5112..................................... Level 2 Musculoskeletal ORTHO *

    Procedures.

    5113..................................... Level 3 Musculoskeletal ORTHO *

    Procedures.

    5114..................................... Level 4 Musculoskeletal ORTHO ...............

    Procedures.

    5115..................................... Level 5 Musculoskeletal ORTHO ...............

    Procedures.

    5116..................................... Level 6 Musculoskeletal ORTHO ...............

    Procedures.

    Page 79585

    5153..................................... Level 3 Airway Endoscopy.... AENDO *

    5154..................................... Level 4 Airway Endoscopy.... AENDO *

    5155..................................... Level 5 Airway Endoscopy.... AENDO *

    5164..................................... Level 4 ENT Procedures...... ENTXX *

    5165..................................... Level 5 ENT Procedures...... ENTXX ...............

    5166..................................... Cochlear Implant Procedure.. COCHL ...............

    5191..................................... Level 1 Endovascular VASCX *

    Procedures.

    5192..................................... Level 2 Endovascular VASCX ...............

    Procedures.

    5193..................................... Level 3 Endovascular VASCX ...............

    Procedures.

    5194..................................... Level 4 Endovascular VASCX ...............

    Procedures.

    5200..................................... Implantation Wireless PA WPMXX *

    Pressure Monitor.

    5211..................................... Level 1 Electrophysiologic EPHYS ...............

    Procedures.

    5212..................................... Level 2 Electrophysiologic EPHYS ...............

    Procedures.

    5213..................................... Level 3 Electrophysiologic EPHYS ...............

    Procedures.

    5222..................................... Level 2 Pacemaker and AICDP ...............

    Similar Procedures.

    5223..................................... Level 3 Pacemaker and AICDP ...............

    Similar Procedures.

    5224..................................... Level 4 Pacemaker and AICDP ...............

    Similar Procedures.

    5231..................................... Level 1 ICD and Similar AICDP ...............

    Procedures.

    5232..................................... Level 2 ICD and Similar AICDP ...............

    Procedures.

    5244..................................... Level 4 Blood Product SCTXX *

    Exchange and Related

    Services.

    5302..................................... Level 2 Upper GI Procedures. GIXXX *

    5303..................................... Level 3 Upper GI Procedures. GIXXX *

    5313..................................... Level 3 Lower GI Procedures. GIXXX *

    5331..................................... Complex GI Procedures....... GIXXX ...............

    5341..................................... Abdominal/Peritoneal/Biliary GIXXX *

    and Related Procedures.

    5361..................................... Level 1 Laparoscopy & LAPXX ...............

    Related Services.

    5362..................................... Level 2 Laparoscopy & LAPXX ...............

    Related Services.

    5373..................................... Level 3 Urology & Related UROXX *

    Services.

    5374..................................... Level 4 Urology & Related UROXX *

    Services.

    5375..................................... Level 5 Urology & Related UROXX ...............

    Services.

    5376..................................... Level 6 Urology & Related UROXX ...............

    Services.

    5377..................................... Level 7 Urology & Related UROXX ...............

    Services.

    5414..................................... Level 4 Gynecologic GYNXX *

    Procedures.

    5415..................................... Level 5 Gynecologic GYNXX ...............

    Procedures.

    5416..................................... Level 6 Gynecologic GYNXX ...............

    Procedures.

    5431..................................... Level 1 Nerve Procedures.... NERVE *

    5432..................................... Level 2 Nerve Procedures.... NERVE *

    5462..................................... Level 2 Neurostimulator & NSTIM ...............

    Related Procedures.

    5463..................................... Level 3 Neurostimulator & NSTIM ...............

    Related Procedures.

    5464..................................... Level 4 Neurostimulator & NSTIM ...............

    Related Procedures.

    5471..................................... Implantation of Drug PUMPS ...............

    Infusion Device.

    5491..................................... Level 1 Intraocular INEYE *

    Procedures.

    5492..................................... Level 2 Intraocular INEYE ...............

    Procedures.

    5493..................................... Level 3 Intraocular INEYE ...............

    Procedures.

    5494..................................... Level 4 Intraocular INEYE ...............

    Procedures.

    5495..................................... Level 5 Intraocular INEYE ...............

    Procedures.

    5503..................................... Level 3 Extraocular, Repair, EXEYE *

    and Plastic Eye Procedures.

    5504..................................... Level 4 Extraocular, Repair, EXEYE *

    and Plastic Eye Procedures.

    5627..................................... Level 7 Radiation Therapy... RADTX ...............

    5881..................................... Ancillary Outpatient N/A ...............

    Services When Patient Dies.

    8011..................................... Comprehensive Observation N/A ...............

    Services.

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

    * New C-APC for CY 2017.

    C-APC Clinical Family Descriptor Key: AENDO = Airway Endoscopy; AICDP = Automatic Implantable Cardiac

    Defibrillators, Pacemakers, and Related Devices; BREAS = Breast Surgery; COCHL = Cochlear Implant; EBIDX =

    Excision/Biopsy/Incision and Drainage; ENTXX = ENT Procedures; EPHYS = Cardiac Electrophysiology; EXEYE =

    Extraocular Ophthalmic Surgery; GIXXX = Gastrointestinal Procedures; GYNXX = Gynecologic Procedures; INEYE =

    Intraocular Surgery; LAPXX = Laparoscopic Procedures; NERVE = Nerve Procedures; NSTIM = Neurostimulators;

    ORTHO = Orthopedic Surgery; PUMPS = Implantable Drug Delivery Systems; RADTX = Radiation Oncology; SCTXX =

    Stem Cell Transplant; UROXX = Urologic Procedures; VASCX = Vascular Procedures; WPMXX = Wireless PA Pressure

    Monitor.

    (b) New Allogeneic Hematopoietic Stem Cell Transplantation (HSCT) C-APC

    Allogeneic hematopoietic stem cell transplantation (HSCT) involves the intravenous infusion of hematopoietic stem cells derived from the bone marrow, umbilical cord blood, or peripheral blood of a donor to a recipient. Allogeneic hematopoietic stem cell collection procedures, which are performed not on the beneficiary but on a donor, cannot be paid separately under the OPPS because hospitals may bill and receive payment only for services provided to a Medicare beneficiary who is the recipient of the HSCT and whose illness is being treated with the transplant. Currently, under the OPPS, payment for these acquisition services is packaged into the APC payment for the allogeneic HSCT when the transplant occurs in the hospital outpatient setting (74 FR 60575). In the CY 2016 OPPS/ASC final rule with comment period, we assigned allogeneic HSCT to APC 5281 (Apheresis and Stem

    Page 79586

    Cell Procedures), which has a CY 2016 OPPS payment rate of $3,015.

    As provided in the Medicare Claims Processing Manual, Pub. 100-04, Chapter 4, section 231.11, donor acquisition charges for allogeneic HSCT may include, but are not limited to, charges for the costs of several services. These services include, but are not necessarily limited to, National Marrow Donor Program fees, if applicable, tissue typing of donor and recipient, donor evaluation, physician pre-

    procedure donor evaluation services, costs associated with the collection procedure (for example, general routine and special care services, procedure/operating room and other ancillary services, apheresis services, among others), post-operative/post-procedure evaluation of donor, and the preparation and processing of stem cells.

    When the allogeneic stem cell transplant occurs in the hospital outpatient setting, providers are instructed to report stem cell donor acquisition charges for allogeneic HSCT separately in Field 42 on Form CMS-1450 (or UB-04) by using revenue code 0819 (Organ Acquisition: Other Donor). Revenue code 0819 charges should include all services required to acquire hematopoietic stem cells from a donor, as defined earlier, and should be reported on the same date of service as the transplant procedure in order to be appropriately packaged for payment purposes. Revenue code 0819 maps to cost center code 086XX (Other organ acquisition where XX is ``00'' through ``19'') and is reported on line 112 (or applicable subscripts of line 112) of the Medicare cost report.

    In recent years, we have received comments from stakeholders detailing concerns about the accuracy of ratesetting for allogeneic HSCT (79 FR 40950 through 40951; 79 FR 66809; and 80 FR 70414 through 70415). Stakeholders have presented several issues that could result in an inappropriate estimation of provider costs for these procedures, including outpatient allogeneic HCST reported on claims being identified as multiple procedure claims that are unusable under the standard OPPS ratesetting methodology. Stakeholders also have indicated that the requirement for the reporting of revenue code 0819 on claims reporting allogeneic HSCTs and the lack of a dedicated cost center for stem cell transplantation donor acquisition costs have led to an overly broad CCR being applied to these procedures, which comprise a very low volume of the services reported within the currently assigned cost center. In addition, commenters noted that it is likely that there are services being reported with the same revenue code (0819) and mapped to the same cost center code (086XX) as allogeneic HSCT donor acquisition charges that are unrelated to these services. Lastly, providers have commented that the donor acquisition costs of allogeneic HSCT are much higher relative to their charges when compared to the other items and services that are reported in the current cost center. Providers also have stated that hospitals have difficulty applying an appropriate markup to donor acquisition charges that will sufficiently generate a cost that approximates the total cost of donor acquisition. Through our examination of the CY 2016 claims data, we believe that the issues presented above provide a persuasive rationale for payment adjustment for donor acquisition costs for allogeneic HCST.

    Stakeholders suggested that the establishment of a C-APC for stem cell transplant services would improve payment adequacy by allowing the use of multiple procedure claims, provided CMS also create a separate and distinct CCR for donor search and acquisition charges so that they are not diluted by lower cost services. In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70414 through 70415), we stated that we would not create a new C-APC for stem cell transplant procedures at that time and that we would instead continue to pay for the services through the assigned APCs while continuing to monitor the issue.

    Based on our current analysis of this longstanding issue and stakeholder input, in the CY 2017 OPPS/ASC proposed rule (81 FR 45623), for CY 2017, we proposed to create a new C-APC 5244 (Level 4 Blood Product Exchange and Related Services) and to assign procedures described by CPT code 38240 (Hematopoietic progenitor cell (HPC); allogeneic transplantation per donor) to this C-APC and to assign status indicator ``J1'' to the code. The creation of a new C-APC for allogeneic HSCT and the assignment of status indicator ``J1'' to CPT code 38240 would allow for the costs for all covered OPD services, including donor acquisition services, included on the claim to be packaged into the C-APC payment rate. These costs also will be analyzed using our comprehensive cost accounting methodology to establish future C-APC payment rates. We proposed to establish a payment rate for proposed new C-APC 5244 of $15,267 for CY 2017.

    In order to develop an accurate estimate of allogeneic HSCT donor acquisition costs for future ratesetting, for CY 2017 and subsequent years, we proposed to update the Medicare hospital cost report (Form CMS-2552-10) by adding a new standard cost center 112.50, ``Allogeneic Stem Cell Acquisition,'' to Worksheet A (and applicable worksheets) with the standard cost center code of ``11250.'' The proposed new cost center, line 112.50, would be used for the recording of any acquisition costs related to allogeneic stem cell transplants as defined in Section 231.11, Chapter 4, of the Medicare Claims Processing Manual (Pub. 100-

    04). Acquisition charges for allogeneic stem cell transplants apply only to allogeneic transplants for which stem cells are obtained from a donor (rather than from the recipient). Acquisition charges do not apply to autologous transplants (transplanted stem cells are obtained from the recipient) because autologous transplants involve services provided to a beneficiary only (and not to a donor), for which the hospital may bill and receive payment. Acquisition costs for allogeneic stem cells are included in the prospective payment. This cost center flows through cost finding and accumulates any appropriate overhead costs.

    In conjunction with our proposed addition of the new ``Allogeneic Stem Cell Acquisition'' standard cost center, we proposed to use the newly created revenue code 0815 (Allogeneic Stem Cell Acquisition Services) to identify hospital charges for stem cell acquisition for allogeneic bone marrow/stem cell transplants. Specifically, for CY 2017 and subsequent years, we proposed to require hospitals to identify stem cell acquisition charges for allogeneic bone marrow/stem cell transplants separately in Field 42 on Form CMS-1450 (or UB-04), when an allogeneic stem cell transplant occurs. Revenue code 0815 charges should include all services required to acquire stem cells from a donor, as defined above, and should be reported on the same date of service as the transplant procedure in order to be appropriately packaged for payment purposes. The proposed new revenue code 0815 would map to the proposed new line 112.50 (with the cost center code of ``11250'') on the Form CMS-2552-10 cost report. In addition, for CY 2017 and subsequent years, we proposed to no longer use revenue code 0819 for the identification of stem cell acquisition charges for allogeneic bone marrow/stem cell transplants. We invited public comments on these proposals.

    Comment: Several commenters supported the proposal to create a new C-APC for allogeneic HSCT (C-APC 5244) and the assignment of status

    Page 79587

    indicator ``J1'' to CPT code 38240. However, many commenters believed that the proposed payment for C-APC 5244 continued to be significantly less than the overall cost of the service. Some commenters stated that CMS used claims to calculate the proposed payment rate for this service that were incomplete and did not adhere to CMS billing instructions for providers for allogeneic bone marrow/stem cell transplants. Specifically, the commenters stated that there were claims included in the geometric mean cost calculation for allogeneic HSCT (CPT code 38240) that did not include donor acquisition costs reported with revenue code 0819 on the same date of service as the transplant. According to the commenters, this resulted in an inaccurate and low estimation of the total cost of this service. The commenters requested that CMS exclude these claims from ratesetting for allogeneic HSCT. Commenters also suggested that CMS institute an edit beginning in CY 2017 that requires both the donor acquisition revenue code and the stem cell transplant CPT code on the claim to ensure that Medicare receives correctly coded claims for this relatively costly service.

    Lastly, commenters stated that the new cost center and revenue code should be utilized for both inpatient and outpatient donor acquisition cost reporting, requested instructions from CMS on how to reclassify expenses into the new cost center from ancillary departments, and also suggested that CMS reconsider the use of cost center line 112.50 because this line is designated for solid organ acquisition costs, which are paid at cost. According to these commenters, these costs do not carry to Worksheet C and, for calculation of CCR, are dropped from cost report after accumulation of overhead. The commenter suggested the use of a cost center in the range of lines 50 through 76.99.

    Response: We are persuaded by the commenters and note that at the summer 2016 meeting of the Advisory Panel on Hospital Outpatient Payment (HOP Panel), the panel also recommended that CMS use only the claims that include both CPT code 38240 and revenue code 0819 in calculating the CY 2017 payment rates for allogeneic HSCT. Therefore, we believe it is preferable to use only the claims with both the CPT code for the transplant (CPT code 38240) and the revenue code for the donor acquisition costs (revenue code 0819) to calculate the payment rate for this service under the new C-APC. We agree, in this case, to use only the subset of claims that include both codes because hospitals were specifically instructed in the CMS Internet Only Manual and in prior final rule preamble language to use revenue code 0819 to report donor acquisition costs. This instruction is different from our general instructions regarding correct coding in that this instruction is very specific and was issued to address problems associated with the reporting of donor acquisition costs. We also agree with the commenters' that implementing a code edit beginning in CY 2017 that will require revenue code 0815 to be on a claim with CPT code 38240 is appropriate because this practice will help to ensure that donor acquisition costs for allogeneic HSCT are reported with the appropriate revenue code and that these costs are accurately recorded in the Medicare hospital cost report. This edit will become effective January 1, 2017, and will return claims to the provider if CPT code 38240 is present for the transplant procedure without a separate line on the claim reporting revenue code 0815 for donor acquisition services. Again, we emphasize that this is an exceptional circumstance. We do not anticipate taking any similar actions for any other existing or future APCs or C-APCs. The combination of forming a new C-APC, providing unusually specific instructions in the CMS Internet Only Manual, needing to create a new cost center on the hospital cost report, and the clear recommendation from the HOP Panel--following both its and our thorough analysis of the issue--make this case particularly unique.

    Regarding the comment related to the use of cost center line 112.50 to report allogeneic HSCT donor acquisition costs, we agree with the commenter that cost report lines 105 through 117 are designated for solid organ acquisition costs and other data for informational purposes. The commenter also indicated that the proposed line 112.50 does not carry over to Worksheet C for the calculation of a CCR and drops off after accumulation of overhead. The commenter makes a valid point regarding the proposed line 112.50, and we agree that the proposed new revenue code 0815 should be mapped to a different cost center. The commenters recommended the use of a cost center in the range of lines 50 through 76.99. However these cost centers have standard cost center descriptions that do not have a logical subscript for the proposed new line ``Allogeneic Stem Cell Acquisition''. Also, line 76 is used for too many variables and would not provide the needed isolation of costs or charges. However, the Medicare hospital cost report contains an available expansion in the range of lines 77 through 87. We are revising our proposal to update the Medicare hospital cost report (Form CMS-2552- 10) by adding proposed new line 112.50 (with the cost center code of ``11250'') and are instead adding a new standard cost center 77, ``Allogeneic Stem Cell Acquisition,'' to Worksheet A (and applicable worksheets) with the standard cost center code of ``07700.'' The new cost center, line 77, will be used for the recording of any acquisition costs related to allogeneic stem cell transplants as defined in Section 231.11, Chapter 4, of the Medicare Claims Processing Manual (Pub. 100-04).

    After consideration of the public comments we received, we are finalizing the proposal for C-APC 5244 (Level 4 Blood Product Exchange and Related Services), with the modification to exclude claims that do not include donor acquisition costs reported with revenue code 0819 from ratesetting. In addition, for CY 2017 and subsequent years, we are finalizing the proposal to no longer use revenue code 0819 for the identification of stem cell acquisition charges for allogeneic bone marrow/stem cell transplants. We are establishing a final payment rate for new C-APC 5244 of $27,752 for CY 2017.

  136. 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 low dose rate (LDR) prostate brachytherapy, mental health services, and multiple imaging services. We refer

    Page 79588

    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 2017 OPPS/ASC proposed rule (81 FR 45623), for CY 2017 and subsequent years, we proposed to continue our composite APC payment policies for LDR prostate brachytherapy services, mental health services, and multiple imaging services, as discussed below.

    At its August 22, 2016 meeting the HOP Panel recommended that CMS develop a composite APC for pathology services when multiple pathology services are reported on a claim with no other payable services.

    Comment: Several commenters supported the HOP Panel's recommendation to develop a composite APC for pathology services when multiple pathology services are reported on a claim with no other payable services and urged CMS to propose and finalize a policy to create such a composite APC. Some commenters also requested that CMS create additional composite APCs for X-ray services, respiratory services, cardiology services, and allergy testing services.

    Response: We appreciate the HOP Panel's recommendation, as well as the commenters' request to create new composite APCs for additional services. However, we did not propose to create any new composite APCs for CY 2017. Therefore, we are not accepting the HOP Panel's recommendation at this time. We may consider this HOP Panel recommendation in conjunction with the commenters' request for the creation of new additional composite APCs for future rulemaking.

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

    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 2017 OPPS/ASC proposed rule (81 FR 45623 through 45624), 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 2016. That is, we proposed to use CY 2015 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 2016 practice, in the CY 2017 OPPS/ASC proposed rule, 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 5375 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC 5641 (Complex Interstitial Radiation Source Application), the APCs to which CPT codes 55875 and 77778 are assigned, respectively. We proposed to continue to calculate the proposed geometric mean costs of procedures or services assigned to APCs 5375 and 5641 using single and ``pseudo'' single procedure claims. We continue to believe that composite APC 8001 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 2015 claims data available for the CY 2017 OPPS/ASC proposed rule, we were able to use 202 claims that contained both CPT codes 55875 and 77778 to calculate the proposed geometric mean cost of approximately $3,581 for these procedures upon which the proposed CY 2017 payment rate for composite APC 8001 was based.

    We did not receive any public comments on this proposal. Therefore, we are finalizing our proposal, without modification, to continue to use the payment rate for composite APC 8001 to pay for LDR prostate brachytherapy services for CY 2017 and to set the payment rate for this APC using our established methodology. Using the CY 2015 claims data available for this CY 2017 final rule with comment period, we were able to use 224 claims that contained both CPT codes 55875 and 77778 to calculate the geometric mean cost of approximately $3,598 for these procedures upon which the final CY 2017 payment rate for composite APC 8001 is based.

    (2) Mental Health Services Composite APC

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45624), 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, 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 composite APC 8010 (Mental Health Services Composite). We also proposed to continue to set the payment rate for

    Page 79589

    composite APC 8010 at the same payment rate that we proposed to establish for APC 5862 (Level 2 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 the payment rate for composite APC 8010. 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 5862 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.

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45667 through 45678), we proposed to combine the existing Level 1 and Level 2 hospital- based PHP APCs into a single hospital-based PHP APC and thereby discontinue APCs 5861 (Level 1 Partial Hospitalization (3 services) for Hospital-

    Based PHPs) and 5862 (Level 2 Partial Hospitalization (4 or more services) for Hospital-Based PHPs) and replace them with proposed new APC 5863 (Partial Hospitalization (3 or more services per day)). This proposal is being finalized in section VIII. of this final rule with comment period. In light of this policy, we are modifying our final policy for CY 2017, as fully discussed below.

    We did not receive any public comments on this proposal. Therefore, we are finalizing our CY 2017 proposal, without modification, that when the aggregate payment for specified mental health services provided by one hospital to a single beneficiary on a single 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 will be paid through composite APC 8010 (Mental Health Services Composite) for CY 2017. In addition, we are finalizing our CY 2017 proposal, with modification, to set the payment rate for composite APC 8010 for CY 2017 at the same payment rate that we established for new APC 5863, which is the maximum partial hospitalization per diem payment rate for a hospital, and that the hospital continue to be paid the payment rate for composite APC 8010.

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

    Effective January 1, 2009, we provide a single payment each time a hospital submits a claim for 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 under 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 based on the payment rate for APC 8008, the ``with contrast'' composite APC.

    We make a single payment for those imaging procedures that qualify for payment based on the composite APC payment rate, which includes 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 2017 OPPS/ASC proposed rule (81 FR 45624 through 45625), 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. 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 2017 payment rates for the five multiple imaging composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) were based on proposed geometric mean costs calculated from a partial year of CY 2015 claims available for the CY 2017 OPPS/ASC proposed rule that qualified for composite payment under the current policy (that is, those claims reporting 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 geometric mean costs for these composite APCs since CY 2014, 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, in accordance with our established methodology as stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74918), were identified by asterisks in Addendum N to the CY 2017 OPPS/ASC proposed rule (which is available via the Internet on the CMS Web site) and were discussed in more detail in section II.A.1.b. of the CY 2017 OPPS/ASC proposed rule. For the CY 2017 OPPS/ASC proposed rule, we were able to identify approximately 599,294 ``single session'' claims out of an estimated 1.6 million potential claims for payment through composite APCs from our ratesetting claims data, which represents approximately 38 percent of all eligible claims, to calculate the proposed CY 2017 geometric mean costs for the multiple imaging composite APCs. Table 7 of the CY 2017 OPPS/

    Page 79590

    ASC proposed rule lists the proposed HCPCS codes that would be subject to the multiple imaging composite APC policy and their respective families and approximate composite APC proposed geometric mean costs for CY 2017.

    We did not receive any public comments on this proposal. Therefore, we are finalizing our proposal to continue the use of multiple imaging composite APCs to pay for services providing more than one imaging procedure from the same family on the same date, without modification. For this CY 2017 final rule with comment period, we were able to identify approximately 635,363 ``single session'' claims out of an estimated 1.7 million potential claims for payment through composite APCs from our ratesetting claims data, which represents approximately 37 percent of all eligible claims, to calculate the final CY 2017 geometric mean costs for the multiple imaging composite APCs. Table 3 below lists the HCPCS codes that are subject to the multiple imaging composite APC policy and their respective families and approximate composite APC geometric mean costs for CY 2017.

    Table 3--Final OPPS Imaging Families and Multiple Imaging Procedure Composite APCs

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

    Family 1--Ultrasound

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

    CY 2017 APC 8004 (ultrasound composite) CY 2017 Approximate APC geometric mean cost = $296

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

    76604......................................... Us exam, chest.

    76700......................................... Us exam, abdom, complete.

    76705......................................... Echo exam of abdomen.

    76770......................................... Us exam abdo back wall, comp.

    76775......................................... Us exam abdo back wall, lim.

    76776......................................... Us exam k transpl w/Doppler.

    76831......................................... Echo exam, uterus.

    76856......................................... Us exam, pelvic, complete.

    76870......................................... Us exam, scrotum.

    76857......................................... Us exam, pelvic, limited.

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

    Family 2--CT and CTA with and without contrast

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

    CY 2017 APC 8005 (CT and CTA without contrast

    composite) * CY 2017 Approximate APC geometric mean cost = $325

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

    70450......................................... Ct head/brain w/o dye.

    70480......................................... Ct orbit/ear/fossa w/o dye.

    70486......................................... Ct maxillofacial w/o dye.

    70490......................................... Ct soft tissue neck w/o dye.

    71250......................................... Ct thorax w/o dye.

    72125......................................... Ct neck spine w/o dye.

    72128......................................... Ct chest spine w/o dye.

    72131......................................... Ct lumbar spine w/o dye.

    72192......................................... Ct pelvis w/o dye.

    73200......................................... Ct upper extremity w/o dye.

    73700......................................... Ct lower extremity w/o dye.

    74150......................................... Ct abdomen w/o dye.

    74261......................................... Ct colonography, w/o dye.

    74176......................................... Ct angio abd & pelvis.

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

    CY 2017 APC 8006 (CT and CTA with contrast

    composite) CY 2017 Approximate APC geometric mean cost = $548

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

    70487......................................... Ct maxillofacial w/dye.

    70460......................................... Ct head/brain w/dye.

    70470......................................... Ct head/brain w/o & w/dye.

    70481......................................... Ct orbit/ear/fossa w/dye.

    70482......................................... Ct orbit/ear/fossa w/o & w/dye.

    70488......................................... Ct maxillofacial w/o & w/dye.

    70491......................................... Ct soft tissue neck w/dye.

    70492......................................... Ct sft tsue nck w/o & w/dye.

    70496......................................... Ct angiography, head.

    70498......................................... Ct angiography, neck.

    71260......................................... Ct thorax w/dye.

    71270......................................... Ct thorax w/o & w/dye.

    71275......................................... Ct angiography, chest.

    72126......................................... Ct neck spine w/dye.

    72127......................................... Ct neck spine w/o & w/dye.

    72129......................................... Ct chest spine w/dye.

    72130......................................... Ct chest spine w/o & w/dye.

    72132......................................... Ct lumbar spine w/dye.

    72133......................................... Ct lumbar spine w/o & w/dye.

    72191......................................... Ct angiograph pelv w/o & w/dye.

    72193......................................... Ct pelvis w/dye.

    72194......................................... Ct pelvis w/o & w/dye.

    73201......................................... Ct upper extremity w/dye.

    73202......................................... Ct uppr extremity w/o & w/dye.

    Page 79591

    73206......................................... Ct angio upr extrm w/o & w/dye.

    73701......................................... Ct lower extremity w/dye.

    73702......................................... Ct lwr extremity w/o & w/dye.

    73706......................................... Ct angio lwr extr w/o & w/dye.

    74160......................................... Ct abdomen w/dye.

    74170......................................... Ct abdomen w/o & w/dye.

    74175......................................... Ct angio abdom w/o & w/dye.

    74262......................................... Ct colonography, w/dye.

    75635......................................... Ct angio abdominal arteries.

    74177......................................... Ct angio abd & pelv w/contrast.

    74178......................................... Ct angio abd & pelv 1+ regns.

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

    * If a ``without contrast'' CT or CTA procedure is performed during the same session as a ``with contrast'' CT

    or CTA procedure, the I/OCE assigns the procedure to APC 8006 rather than APC 8005.

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

    Family 3--MRI and MRA with and without Contrast

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

    CY 2017 APC 8007 (MRI and MRA without contrast

    composite) * CY 2017 Approximate APC geometric mean cost = $631

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

    70336......................................... Magnetic image, jaw joint.

    70540......................................... Mri orbit/face/neck w/o dye.

    70544......................................... Mr angiography head w/o dye.

    70547......................................... Mr angiography neck w/o dye.

    70551......................................... Mri brain w/o dye.

    70554......................................... Fmri brain by tech.

    71550......................................... Mri chest w/o dye.

    72141......................................... Mri neck spine w/o dye.

    72146......................................... Mri chest spine w/o dye.

    72148......................................... Mri lumbar spine w/o dye.

    72195......................................... Mri pelvis w/o dye.

    73218......................................... Mri upper extremity w/o dye.

    73221......................................... Mri joint upr extrem w/o dye.

    73718......................................... Mri lower extremity w/o dye.

    73721......................................... Mri jnt of lwr extre w/o dye.

    74181......................................... Mri abdomen w/o dye.

    75557......................................... Cardiac mri for morph.

    75559......................................... Cardiac mri w/stress img.

    C8901......................................... MRA w/o cont, abd.

    C8904......................................... MRI w/o cont, breast, uni.

    C8907......................................... MRI w/o cont, breast, bi.

    C8910......................................... MRA w/o cont, chest.

    C8913......................................... MRA w/o cont, lwr ext.

    C8919......................................... MRA w/o cont, pelvis.

    C8932......................................... MRA, w/o dye, spinal canal.

    C8935......................................... MRA, w/o dye, upper extr.

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

    CY 2017 APC 8008 (MRI and MRA with contrast

    composite) CY 2017 Approximate APC geometric mean cost = $945

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

    70549......................................... Mr angiograph neck w/o & w/dye.

    70542......................................... Mri orbit/face/neck w/dye.

    70543......................................... Mri orbt/fac/nck w/o & w/dye.

    70545......................................... Mr angiography head w/dye.

    70546......................................... Mr angiograph head w/o & w/dye.

    70547......................................... Mr angiography neck w/o dye.

    70548......................................... Mr angiography neck w/dye.

    70552......................................... Mri brain w/dye.

    70553......................................... Mri brain w/o & w/dye.

    71551......................................... Mri chest w/dye.

    71552......................................... Mri chest w/o & w/dye.

    72142......................................... Mri neck spine w/dye.

    72147......................................... Mri chest spine w/dye.

    72149......................................... Mri lumbar spine w/dye.

    72156......................................... Mri neck spine w/o & w/dye.

    72157......................................... Mri chest spine w/o & w/dye.

    72158......................................... Mri lumbar spine w/o & w/dye.

    72196......................................... Mri pelvis w/dye.

    72197......................................... Mri pelvis w/o & w/dye.

    73219......................................... Mri upper extremity w/dye.

    73220......................................... Mri uppr extremity w/o & w/dye.

    73222......................................... Mri joint upr extrem w/dye.

    73223......................................... Mri joint upr extr w/o & w/dye.

    73719......................................... Mri lower extremity w/dye.

    Page 79592

    73720......................................... Mri lwr extremity w/o & w/dye.

    73722......................................... Mri joint of lwr extr w/dye.

    73723......................................... Mri joint lwr extr w/o & w/dye.

    74182......................................... Mri abdomen w/dye.

    74183......................................... Mri abdomen w/o & w/dye.

    75561......................................... Cardiac mri for morph w/dye.

    75563......................................... Card mri w/stress img & dye.

    C8900......................................... MRA w/cont, abd.

    C8902......................................... MRA w/o fol w/cont, abd.

    C8903......................................... MRI w/cont, breast, uni.

    C8905......................................... MRI w/o fol w/cont, brst, un.

    C8906......................................... MRI w/cont, breast, bi.

    C8908......................................... MRI w/o fol w/cont, breast,.

    C8909......................................... MRA w/cont, chest.

    C8911......................................... MRA w/o fol w/cont, chest.

    C8912......................................... MRA w/cont, lwr ext.

    C8914......................................... MRA w/o fol w/cont, lwr ext.

    C8918......................................... MRA w/cont, pelvis.

    C8920......................................... MRA w/o fol w/cont, pelvis.

    C8931......................................... MRA, w/dye, spinal canal.

    C8933......................................... MRA, w/o&w/dye, spinal canal.

    C8934......................................... MRA, w/dye, upper extremity.

    C8936......................................... MRA, w/o&w/dye, upper extr.

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

    * If a ``without contrast'' MRI or MRA procedure is performed during the same session as a ``with contrast'' MRI

    or MRA procedure, the I/OCE assigns the procedure to APC 8008 rather than APC 8007.

    3. Changes to Packaged Items and Services

  137. 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 a 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 costly 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 item.

    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. 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), the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925), the CY 2015 OPPS/ASC final rule with comment period (79 FR 66817), and the CY 2016 OPPS/ASC final rule with comment period (80 FR 70343). 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). 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 under the OPPS to determine which OPPS services can be packaged to further achieve the objective of advancing the OPPS toward a more prospective payment system.

    For CY 2017, we have examined our OPPS packaging policies, reviewing categories of integral, ancillary, supportive, dependent, or adjunctive items and services that are packaged into payment for the primary service that they support. In the CY 2017 OPPS/ASC proposed rule (81 FR 45628), we proposed some modifications to our packaging policies. The specific proposals and any applicable summations of and responses to any public comments received in response to these proposals are discussed under the sections below.

  138. Clinical Diagnostic Laboratory Test Packaging Policy

    (1) Background

    In CY 2014, we finalized a policy to package payment for most clinical

    Page 79593

    diagnostic laboratory tests in the OPPS (78 FR 74939 through 74942, and 42 CFR 419.2(b)(17)). In CY 2016, we made some minor modifications to this policy (80 FR 70348 through 70350). Under current policy, certain clinical diagnostic laboratory tests that are listed on the Clinical Laboratory Fee Schedule (CLFS) are packaged in the OPPS as integral, ancillary, supportive, dependent, or adjunctive to the primary service or services provided in the hospital outpatient setting. Specifically, we conditionally package laboratory tests and only pay separately for laboratory tests when (1) they are the only services provided to a beneficiary on a claim; (2) they are ``unrelated'' laboratory tests, meaning they are on the same claim as other hospital outpatient services, but are ordered for a different diagnosis than the other hospital outpatient services and are ordered by a different practitioner than the practitioner who ordered the other hospital outpatient services; (3) they are molecular pathology tests; or (4) the laboratory tests are considered preventive services.

    (2) ``Unrelated'' Laboratory Test Exception

    Laboratory tests are separately paid in the HOPD when they are considered ``unrelated'' laboratory tests. Unrelated laboratory tests are tests on the same claim as other hospital outpatient services, but are ordered for a different diagnosis than the other hospital outpatient services and are ordered by a different practitioner than the practitioner who ordered the other hospital outpatient services. Unrelated laboratory tests are designated for separate payment by hospitals with the ``L1'' modifier. This is the only use of the ``L1'' modifier.

    For CY 2017, in the CY 2017 OPPS/ASC proposed rule (81 FR 45628), we proposed to discontinue the unrelated laboratory test exception (and the ``L1'' modifier) for the following reasons: We believe that, in most cases, ``unrelated'' laboratory tests are not significantly different than most other packaged laboratory tests provided in the HOPD. Multiple hospitals have informed us that the ``unrelated'' laboratory test exception is not useful to them because they cannot determine when a laboratory test has been ordered by a different physician and for a different diagnosis than the other services reported on the same claim. We agree with these hospitals, and we also believe that the requirements for ``unrelated'' laboratory tests (different diagnosis and different ordering physician) do not necessarily correlate with the relatedness of a laboratory test to the other HOPD services that a patient receives during the same hospital stay. In the context of most hospital outpatient encounters, most laboratory tests are related in some way to other services being provided because most common laboratory tests evaluate the functioning of the human body as a physiologic system and, therefore, relate to other tests and interventions that a patient receives. Also, it is not uncommon for beneficiaries to have multiple diagnoses, and often times the various diagnoses are related in some way. Therefore, the associated diagnosis is not necessarily indicative of how related a laboratory test is to other hospital outpatient services performed during a hospital stay, especially given the granularity of ICD-10 diagnosis coding. Packaging of other ancillary services in the OPPS is not dependent upon a common diagnosis with the primary service into which an ancillary service is packaged. Therefore, we do not believe that this should be a requirement for laboratory test packaging. Furthermore, we believe that just because a laboratory test is ordered by a different physician than the physician who ordered the other hospital outpatient services furnished during a hospital outpatient stay does not necessarily mean that the laboratory test is not related to other services being provided to a beneficiary.

    Therefore, because the ``different physician, different diagnosis'' criteria for ``unrelated'' laboratory tests do not clearly identify or distinguish laboratory tests that are not integral, ancillary, supportive, dependent, or adjunctive to other hospital outpatient services provided to the beneficiary during the hospital stay, we proposed to no longer permit the use of the ``L1'' modifier to self-

    designate an exception to the laboratory test packaging under these circumstances, and seek separate payment for such laboratory tests at the CLFS payment rates. Instead, we proposed to package any and all laboratory tests (except molecular pathology tests, certain ADLTs, and preventive tests) if they appear on a claim with other hospital outpatient services.

    We invited public comments on this proposal.

    Comment: The majority of commenters supported the proposal. Some of the commenters believed that the proposal would reduce administrative burden. Other commenters opposed the proposal and stated that, despite the burden, they would rather have the opportunity for separate payment for ``unrelated'' laboratory tests. Some commenters believed that the proposal would result in no separate payment for laboratory tests when laboratory tests are the only services provided.

    Response: We appreciate the commenters' support. The proposal was made in response to concerns raised by hospitals about when to use modifier ``L1,'' and because we agreed with the commenters' concerns as noted above. We also do not believe that the discontinuation of the modifier ``L1'' policy is inconsistent with our policy to package items and services that are integral, ancillary, supportive, dependent, or adjunctive to other hospital outpatient services. Also, we stated in the CY 2017 OPPS/ASC proposed rule (81 FR 45628) that ``in the context of most hospital outpatient encounters, most laboratory tests are related in some way to other services being provided because most common laboratory tests evaluate the functioning of the human body as a physiologic system and therefore relate to other tests and interventions that a patient receives.'' Therefore, we do not believe that it is necessary to attempt to identify certain laboratory tests as unrelated to other services furnished to a patient. Finally, the discontinuation of the ``L1'' modifier and the associated policy does not affect the separate payment for laboratory tests when these procedures are the only services that are provided to the beneficiary.

    After consideration of the public comments we received, we are finalizing, as proposed, the discontinuation of the ``unrelated'' laboratory test exception and consequently the ``L1'' modifier.

    (3) Molecular Pathology Test Exception

    In 2014, we excluded from the laboratory packaging policy molecular pathology tests described by CPT codes in the ranges of 81200 through 81383, 81400 through 81408, and 81479 (78 FR 74939 through 74942). In 2016, we expanded this policy to include not only the original code range but also all new molecular pathology test codes. Molecular pathology laboratory tests were excluded from packaging because we believed that these relatively new tests may have a different pattern of clinical use than more conventional laboratory tests, which may make them generally less tied to a primary service in the hospital outpatient setting than the more common and routine laboratory tests that are packaged (80 FR 70348 through 70350).

    In response to the CY 2016 OPPS/ASC proposed rule, commenters argued that CMS' rationale for excluding molecular

    Page 79594

    pathology tests from the laboratory test packaging policy also applies to certain CPT codes that describe some new multianalyte assays with algorithmic analyses (MAAAs).

    In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70349 through 70350), we stated that ``we may consider whether additional exceptions to the OPPS laboratory test packaging policy should apply to tests other than molecular pathology tests in the future.'' After further consideration, we agree with these commenters that the exception that currently applies to molecular pathology tests may be appropriately applied to other laboratory tests that, like molecular pathology tests, are relatively new and may have a different pattern of clinical use than more conventional laboratory tests, which may make them generally less tied to a primary service in the hospital outpatient setting than the more common and routine laboratory tests that are packaged. Therefore, for CY 2017, in the CY 2017 OPPS/ASC proposed rule (81 FR 45628), we proposed an expansion of the laboratory packaging exception that currently applies to molecular pathology tests to also apply to all advanced diagnostic laboratory tests (ADLTs) that meet the criteria of section 1834A(d)(5)(A) of the Act. We believe that some of these diagnostic tests that meet these criteria will not be molecular pathology tests but will also have a different pattern of clinical use than more conventional laboratory tests, which may make them generally less tied to a primary service in the hospital outpatient setting than the more common and routine laboratory tests that are packaged. We proposed to assign status indicator ``A'' (Separate payment under the CLFS) to ADLTs once a laboratory test is designated an ADLT under the CLFS.

    We invited public comments on this proposal.

    Comment: Many commenters supported the proposal. A few commenters suggested that CMS apply the exception not just to ADLTs that meet the criteria of section 1834A(d)(5)(A) of the Act, but to all MAAAs.

    Response: We appreciate the commenters' support. Regarding the suggestion that we exempt all MAAAs from OPPS packaging, we do not believe that this would be prudent, as MAAAs are a broad category of tests. We are limiting the expansion of this exception to only those ADLTs that meet the criteria of section 1834A(d)(5)(A) of the Act, which are defined as tests that provide an analysis of multiple biomarkers of DNA, RNA, or proteins combined with a unique algorithm to yield a single patient-specific result.

    After consideration of the public comments we received, we are finalizing our proposal, without modification, to assign status indicator ``A'' (Separate payment under the CLFS) to ADLTs once a laboratory test is designated an ADLT under the CLFS.

  139. Conditional Packaging Status Indicators ``Q1'' and ``Q2''

    (1) Background

    Packaged payment versus separate payment of items and services in the OPPS is designated at the code level through the assignment of a status indicator to all CPT and HCPCS codes. One type of packaging in the OPPS is conditional packaging, which means that, under certain circumstances, items and services are packaged, and under other circumstances, they are paid separately. There are several different conditional packaging status indicators. Two of these status indicators indicate packaging of the services with other services furnished on the same date of service: Status indicator ``Q1,'' which packages items or services on the same date of service with services assigned status indicator ``S'' (Procedure or Service, Not Discounted When Multiple), ``T'' (Procedure or Service, Multiple Procedure Reduction Applies), or ``V'' (Clinic or Emergency Department Visit); and status indicator ``Q2,'' which packages items or services on the same date of service with services assigned status indicator ``T.'' Other conditional packaging status indicators, ``Q4'' (Conditionally packaged laboratory tests) and ``J1''/``J2'' (Hospital Part B services paid through a comprehensive APC), package services on the same claim, regardless of the date of service.

    (2) Change in Conditional Packaging Status Indicators Logic

    We do not believe that some conditional packaging status indicators should package based on date of service, while other conditional packaging status indicators package based on services reported on the same claim. For CY 2017, we proposed to align the packaging logic for all of the conditional packaging status indicators and change the logic for status indicators ``Q1'' and ``Q2'' so that packaging would occur at the claim level (instead of based on the date of service) to promote consistency and ensure that items and services that are provided during a hospital stay that may span more than one day are appropriately packaged according to OPPS packaging policies (81 FR 45629). We pointed out that this would increase the conditional packaging of conditionally packaged items and services because conditional packaging would occur whenever a conditionally packaged item or service is reported on the same claim as a primary service without regard to the date of service.

    We invited public comments on this proposal.

    Comment: The majority of commenters opposed the proposal. These commenters opposed the proposal primarily because of a general opposition to packaging in the OPPS. Other commenters supported the proposal and acknowledged CMS' efforts to promote consistency in the OPPS. Some commenters requested further information on the impacts of the proposed change.

    Response: We thank the commenters who support this proposal. The commenters who opposed the proposal did not provide specifics as to why the proposed change would be inconsistent with OPPS packaging policies. We believe that conditional packaging should operate at the claim level for an entire hospital stay and not be limited to a single date of service. We refer the commenters interested in the impacts of this and other policies to section XXIII. of this final rule with comment period.

    After consideration of the public comments we received, we are finalizing our proposal, without modification, to align the packaging logic for all of the conditional packaging status indicators and change the logic for status indicators ``Q1'' and ``Q2'' so that packaging occurs at the claim level (instead of based on the date of service).

    4. Calculation of OPPS Scaled Payment Weights

    We established a policy in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68283) of using geometric mean-based APC costs to calculate relative payment weights under the OPPS. In the CY 2016 OPPS/

    ASC final rule with comment period (80 FR 70350 through 70351), we applied this policy and calculated the relative payment weights for each APC for CY 2016 that were shown in Addenda A and B to that final rule with comment period (which were made available via the Internet on the CMS Web site) using the APC costs discussed in sections II.A.1. and II.A.2. of that final rule with comment period. For CY 2017, we proposed to continue to apply the policy established in CY 2013 and calculate relative payment weights for each APC for CY 2017 using geometric mean-based APC costs (81 FR 45629).

    For CY 2012 and CY 2013, outpatient clinic visits were assigned to one of five

    Page 79595

    levels of clinic visit APCs, with APC 0606 representing a mid-level clinic visit. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75036 through 75043), we finalized a policy that created alphanumeric HCPCS code G0463 (Hospital outpatient clinic visit for assessment and management of a patient), representing any and all clinic visits under the OPPS. HCPCS code G0463 was assigned to APC 0634 (Hospital Clinic Visits). 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.

    For CY 2016, we deleted APC 0634 and reassigned the outpatient clinic visit HCPCS code G0463 to APC 5012 (Level 2 Examinations and Related Services) (80 FR 70351).

    For CY 2017, we proposed to continue to standardize all of the relative payment weights to APC 5012 (81 FR 45629). We believe that standardizing relative payment weights to the geometric mean of the APC to which HCPCS code G0463 is assigned maintains consistency in calculating unscaled weights that represent the cost of some of the most frequently provided OPPS services. For CY 2017, in the CY 2017 OPPS/ASC proposed rule (81 FR 45629), we proposed to assign APC 5012 a relative payment weight of 1.00 and to divide the geometric mean cost of each APC by the geometric mean cost for APC 5012 to derive the unscaled relative payment weight for each APC. The choice of the APC on which to standardize the 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 2017 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 2016 scaled relative payment weights to the estimated aggregate weight using the proposed CY 2017 unscaled relative payment weights.

    We did not receive any public comments on our proposal to use the geometric mean cost of renumbered APC 5012 to standardize relative payment weights. Therefore, we are finalizing our proposal and assigning APC 5012 the relative payment weight of 1.00, and using the relative payment weight for APC 5012 to derive the unscaled relative payment weight for each APC for CY 2017.

    For CY 2016, we multiplied the CY 2016 scaled APC relative payment weight applicable to a service paid under the OPPS by the volume of that service from CY 2015 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 2017, in the CY 2017 OPPS/ASC proposed rule (81 FR 45629), we proposed to apply the same process using the estimated CY 2017 unscaled relative payment weights rather than scaled relative payment weights. We proposed to calculate the weight scalar by dividing the CY 2016 estimated aggregate weight by the unscaled CY 2017 estimated aggregate weight.

    For a detailed discussion of the weight scalar 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 2017 OPPS final rule link and open the claims accounting document link at the bottom of the page.

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45630), we proposed to compare the estimated unscaled relative payment weights in CY 2017 to the estimated total relative payment weights in CY 2016 using CY 2015 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 calculated CY 2017 unscaled relative payment weights for purposes of budget neutrality. We proposed to adjust the estimated CY 2017 unscaled relative payment weights by multiplying them by a weight scaler of 1.4059 to ensure that the proposed CY 2017 relative payment weights are scaled to be budget neutral. The proposed CY 2017 relative payment weights listed in Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site) were scaled and incorporated the recalibration adjustments discussed in sections II.A.1. and II.A.2. of the proposed rule.

    Section 1833(t)(14) of the Act provides the payment rates for certain SCODs. Section 1833(t)(14)(H) of the Act provides 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 2017 OPPS.

    We did not receive any public comments on the proposed weight scaler calculation.

    Therefore, we are finalizing our proposal to use the calculation process described in the proposed rule, without modification. Using updating final rule claims data, we are updating the estimated CY 2017 unscaled relative payment weights by multiplying them by a weight scaler of 1.4208 to ensure that the final CY 2017 relative payment weights are scaled to be budget neutral.

    1. 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 2017 IPPS/LTCH PPS final rule (81 FR 56938 through 81 FR 56939), consistent with current law, based on IHS Global Insight, Inc.'s second quarter 2016 forecast of the FY 2017 market basket increase, the FY 2017 IPPS market basket update is 2.7 percent.

      However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(v) 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 2017.

      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

      Page 79596

      (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, and then revised this methodology as discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49509). In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56938 through 81 FR 56939), we discussed the calculation of the final MFP adjustment for FY 2017, which is 0.3 percentage point.

      In the CY 2017 OPPS/ASC proposed rule, we proposed that if more recent data became subsequently available after the publication of the proposed rule (for example, a more recent estimate of the market basket increase and the MFP adjustment), we would use such updated data, if appropriate, to determine the CY 2017 market basket update and the MFP adjustment, which are 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 2017 OPPS/ASC final rule with comment period. Consistent with that proposal, and the FY 2017 IPPS/LTCH PPS final rule, we applied the updated final FY 2017 market basket percentage increase (2.7 percent) and the MFP adjustment (0.3 percent) to the OPD fee schedule increase factor for the CY 2017 OPPS.

      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 2017, section 1833(t)(3)(G)(v) of the Act provides a 0.75 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)(v) of the Act, in the CY 2017 OPPS/

      ASC proposed rule, we proposed to apply a 0.75 percentage point reduction to the OPD fee schedule increase factor for CY 2017.

      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 applying an OPD fee schedule increase factor of 1.65 percent for the CY 2017 OPPS (which is 2.7 percent, the final estimate of the hospital inpatient market basket percentage increase, less the final 0.3 percentage point MFP adjustment, and less the 0.75 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 2017 OPPS/ASC proposed rule, we proposed to amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (8) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2017, 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)(v) 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 0.75 percentage point for CY 2017.

      We did not receive any public comments on the proposed adjustments to the OPD fee schedule increase factor or on the proposed changes to the regulations at 42 CFR 419.32(b)(1)(iv)(B). For the reasons discussed above, we are adjusting the OPD fee schedule increase factor and finalizing the changes to the regulations as proposed. To set the OPPS conversion factor for the CY 2017 proposed rule, we proposed to increase the CY 2016 conversion factor of $73.725 by 1.55 percent. In accordance with section 1833(t)(9)(B) of the Act, we proposed further to adjust the conversion factor for CY 2017 to ensure that any revisions made to the wage index and rural adjustment were made on a budget neutral basis. We proposed to calculate an overall budget neutrality factor of 1.0000 for wage index changes by comparing proposed total estimated payments from our simulation model using the proposed FY 2017 IPPS wage indexes to those payments using the FY 2016 IPPS wage indexes, as adopted on a calendar year basis for the OPPS.

      For the CY 2017 proposed rule, we proposed to maintain the current rural adjustment policy, as discussed in section II.E. of this final rule with comment period. Therefore, the proposed budget neutrality factor for the rural adjustment was 1.0000.

      For the CY 2017 proposed rule, 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 proposed to calculate a CY 2017 budget neutrality adjustment factor for the cancer hospital payment adjustment by comparing estimated total CY 2017 payments under section 1833(t) of the Act, including the proposed CY 2017 cancer hospital payment adjustment, to estimated CY 2017 total payments using the CY 2016 final cancer hospital payment adjustment as required under section 1833(t)(18)(B) of the Act.

      The CY 2017 proposed estimated payments applying the proposed CY 2017 cancer hospital payment adjustment were identical to estimated payments applying the CY 2016 final cancer hospital payment adjustment. Therefore, we proposed to apply a budget neutrality adjustment factor of 1.0000 to the conversion factor for the cancer hospital payment adjustment.

      For CY 2017, we proposed to apply a budget neutrality adjustment factor of 1.0003 to increase the conversion factor to account for our proposal to package unrelated laboratory tests into OPPS payment.

      For the proposed rule, we estimated that proposed pass-through spending for drugs, biologicals, and devices for CY 2017 would equal approximately $148.3 million, which represented 0.24 percent of total projected CY 2017 OPPS spending. Therefore, the proposed conversion factor would be adjusted by the difference between the 0.26 percent estimate of pass-through spending for CY 2016 and the 0.24 percent estimate of proposed pass-through spending for CY 2017, resulting in a proposed adjustment for CY 2017 of 0.02 percent. Proposed estimated payments for outliers would remain at 1.0 percent of total OPPS payments for CY 2017. We estimated for the proposed rule that outlier payments would be 0.96 percent of total OPPS payments in CY 2016; the 1.0 percent for proposed outlier payments in CY 2017 would constitute a 0.04 percent increase in payment in CY 2017 relative to CY 2016.

      Comment: One commenter requested that CMS verify the amount of dollars

      Page 79597

      used to calculate the adjustment of the conversion factor from the policy change to include payments for unrelated laboratory services with modifier ``L1'' that will be packaged into OPPS services starting in CY 2017. The commenter believed that the cost of packaging those services would be approximately $40 million rather than the approximately $22 million that CMS identified using the methodology and claims data from the CY 2017 OPPS/ASC proposed rule (81 FR 45631).

      Response: We appreciate the commenter's review of our analysis. We note that, while estimated cost is generally used for ratesetting purposes to establish the relative payment weights, our proposed policy of including those payments for unrelated laboratory services with the ``L1'' modifier that would be newly packaged would be in the context of budget neutralizing those payments into the OPPS. While the costs used from these services in establishing the relative weights would be approximately $45 million, the payments that would be used for budget neutralization would be approximately $25 million, using the same source claims dataset as in the CY 2017 OPPS/ASC final rule with comment period. We then determine how to adjust the OPPS conversion factor by comparing the CY 2015 aggregate payment of approximately $25 million to the total estimated payment for the CY 2015 OPPS, which results in a final conversion factor adjustment for this final laboratory services policy change of 1.0004.

      For the proposed rule, we also 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 proposed to make all other adjustments discussed above, but use a reduced OPD fee schedule update factor of -0.45 percent (that is, the proposed OPD fee schedule increase factor of 1.55 percent further reduced by 2.0 percentage points). This would result in a proposed reduced conversion factor for CY 2017 of 73.411 for hospitals that fail to meet the Hospital OQR requirements (a difference of -1.498 in the conversion factor relative to hospitals that met the requirements).

      In summary, for CY 2017, we proposed to amend Sec. 419.32(b)(1)(iv)(B) by adding a new paragraph (8) to reflect the reductions to the OPD fee schedule increase factor that are required for CY 2017 to satisfy the statutory requirements of sections 1833(t)(3)(F) and (t)(3)(G)(v) of the Act. We proposed to use a reduced conversion factor of 73.411 in the calculation of payments for hospitals that fail to meet the Hospital OQR Program requirements (a difference of -1.498 in the conversion factor relative to hospitals that met the requirements).

      We invited public comments on these proposals. However, we did not receive any public comments. Therefore, we are finalizing these proposals without modification. For CY 2017, 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. Based on the final rule updated data used in calculating the cancer hospital payment adjustment in section II.F. of this final rule with comment period, the target payment-to-cost ratio for the cancer hospital payment adjustment, which was 0.92 for CY 2016, is 0.91 for CY 2017. As a result, we are applying a budget neutrality adjustment factor of 1.0003 to the conversion factor for the cancer hospital payment adjustment.

      As a result of these finalized policies, the OPD fee schedule increase factor for the CY 2017 OPPS is 1.65 percent (which is 2.7 percent, the estimate of the hospital inpatient market basket percentage increase, less the 0.3 percentage point MFP adjustment, and less the 0.75 percentage point additional adjustment). For CY 2017, we are using a conversion factor of $75.001 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 1.65 percent for CY 2017, the required wage index budget neutrality adjustment of approximately 0.9999, the cancer hospital payment adjustment of 1.0003, the packaging of unrelated laboratory tests adjustment factor of 1.0004, and the adjustment of 0.02 percentage point of projected OPPS spending for the difference in the pass-through spending and outlier payments that result in a conversion factor for CY 2017 of $75.001.

    2. 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). In the CY 2017 OPPS/ASC proposed rule (81 FR 45631), we proposed to continue this policy for the CY 2017 OPPS. We refer readers to section II.H. of this final rule with comment period for a description and an 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 2017 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 OPPS April 7, 2000 final rule with comment period (65 FR 18495 and 18545)), the OPPS adopted the final fiscal year IPPS post-reclassified 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). Section 10324 of the Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act, which defines a frontier State

      Page 79598

      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 at Sec. 419.43(c)(2) and (c)(3) of our regulations. For the CY 2017 OPPS, we proposed to implement this provision in the same manner as we have since CY 2011. Under this policy, the frontier State hospitals would receive a wage index of 1.00 if the otherwise applicable wage index (including reclassification, rural and imputed floors, and rural floor budget neutrality) is less than 1.00. Because the HOPD receives a wage index based on the geographic location of the specific inpatient hospital with which it is associated, the frontier State wage index adjustment applicable for the inpatient hospital also would apply for any associated HOPD. We refer readers to the following sections in the FY 2011 through FY 2017 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; for FY 2015, 79 FR 49971; for FY 2016, 80 FR 49498; and for FY 2017, 81 FR 56922.

      In addition to the changes required by the Affordable Care Act, we note that the FY 2017 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 floor 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 2017 IPPS/LTCH PPS final rule (81 FR 56912 through 56937) for a detailed discussion of all changes to the FY 2017 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 final rule (79 FR 49951 through 49963), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49488 through 49489 and 49494 through 49496), and the FY 2017 IPPS/LTCH PPS final rule (81 FR 56913), the Office of Management and Budget (OMB) issued revisions to the labor market area delineations on February 28, 2013 (based on 2010 Decennial Census data), that included a number of significant changes such as new Core Based Statistical Areas (CBSAs), urban counties that became rural, rural counties that became urban, and existing CBSAs that were 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. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49950 through 49985), we adopted the use of the OMB labor market area delineations that were based on the 2010 Decennial Census data, effective October 1, 2014.

      Generally, OMB issues major revisions to statistical areas every 10 years, based on the results of the decennial census. However, OMB occasionally issues minor updates and revisions to statistical areas in the years between the decennial censuses. On July 15, 2015, OMB issued OMB Bulletin No. 15-01, which provides updates to and supersedes OMB Bulletin No. 13-01 that was issued on February 28, 2013. The attachment to OMB Bulletin No. 15-01 provides detailed information on the update to statistical areas since February 28, 2013. The updates provided in OMB Bulletin No. 15-01 are based on the application of the 2010 Standards for Delineating Metropolitan and Micropolitan Statistical Areas to Census Bureau population estimates for July 1, 2012 and July 1, 2013. The complete list of statistical areas incorporating these changes is provided in the attachment to OMB Bulletin No. 15-01. According to OMB, ``this bulletin establishes revised delineations for the Nation's Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas. The bulletin also provides delineations of Metropolitan Divisions as well as delineations of New England City and Town Areas.'' A copy of this bulletin may be obtained on the Web site at: https://www.whitehouse.gov/omb/bulletins_default.

      OMB Bulletin No. 15-01 made the following changes that are relevant to the IPPS and OPPS wage index:

      Garfield County, OK, with principal city Enid, OK, which was a Micropolitan (geographically rural) area, now qualifies as an urban new CBSA 21420 called Enid, OK.

      The county of Bedford City, VA, a component of the Lynchburg, VA CBSA 31340, changed to town status and is added to Bedford County. Therefore, the county of Bedford City (SSA State county code 49088, FIPS State County Code 51515) is now part of the county of Bedford, VA (SSA State county code 49090, FIPS State County Code 51019). However, the CBSA remains Lynchburg, VA 31340.

      The name of Macon, GA, CBSA 31420, as well as a principal city of the Macon-Warner Robins, GA combined statistical area, is now Macon-Bibb County, GA. The CBSA code remains as 31420.

      In the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25062), we proposed to implement these revisions, effective October 1, 2016, beginning with the FY 2017 wage indexes. In the FY 2017 IPPS/LTCH PPS proposed rule, we proposed to use these new definitions to calculate area IPPS wage indexes in a manner that is generally consistent with the CBSA-based methodologies finalized in the FY 2005 and the FY 2015 IPPS final rules. Implementation of these revisions for the IPPS/LTCH PPS was finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56913). We believe that it is important for the OPPS to use the latest labor market area delineations available as soon as is reasonably possible in order to maintain a more accurate and up-to-date payment system that reflects the reality of population shifts and labor market conditions. Therefore, for purposes of the OPPS, in the CY 2017 OPPS/

      ASC proposed rule (81 FR 45632), we proposed to implement these revisions to the OMB statistical area delineations, effective January 1, 2017, beginning with the CY 2017 OPPS wage indexes. We invited public comments on these proposals for the CY 2017 OPPS wage indexes. We note that Tables 2 and 3 for the FY 2017 IPPS/LTCH PPS final rule and the County to CBSA Crosswalk File and Urban CBSAs and Constituent Counties for Acute Care Hospitals File posted on the CMS Web site reflect the CBSA changes. These two tables are available via the Internet on the CMS Web site.

      In the CY 2017 OPPS/ASC proposed rule, we proposed to use the FY 2017 hospital IPPS post-reclassified wage index for urban and rural areas as the wage index for the OPPS to determine the wage adjustments for both the OPPS payment rate and the copayment standardized amount for CY 2017. Therefore, we stated that any adjustments that were proposed for the FY 2017 IPPS post-reclassified wage index would be reflected in the proposed CY 2017 OPPS wage index, including the revisions to the OMB labor market delineations discussed above, as set forth in OMB Bulletin No.

      Page 79599

      15-01. (We refer readers to the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25062 through 25076) and final rule (81 FR 56912 through 56937), and the proposed and final FY 2017 hospital wage index files posted on the CMS Web site.)

      Hospitals that are paid under the OPPS, but not under the IPPS, do not have an assigned hospital wage index under the IPPS. Therefore, for non-IPPS hospitals paid under the OPPS, it is our longstanding policy to 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 continue this policy for CY 2017. The following is a brief summary of the major FY 2017 IPPS wage index policies and adjustments that we proposed to apply to these hospitals under the OPPS for CY 2017. We further refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56912 through 56937) for a detailed discussion of the final changes to the FY 2017 IPPS wage indexes.

      It has been our longstanding policy to allow 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)). Applying this adjustment is consistent with our 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. For CY 2017, 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 MMA).

      As stated earlier, in the FY 2015 IPPS/LTCH PPS final rule, we adopted the 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. For IPPS wage index purposes, for hospitals that were located in urban CBSAs in FY 2014 but were designated as rural under these revised OMB labor market area delineations, we generally assigned them the urban wage index value of the CBSA in which they were physically located for FY 2014 for a period of 3 fiscal years (79 FR 49957 through 49960). To be consistent, we applied 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 were physically located for FY 2014 for 3 calendar years (until December 31, 2017). Therefore, for the CY 2017 OPPS, consistent with the FY 2017 IPPS/LTCH PPS final rule (81 FR 56912 through 56937), this 3-year transition will continue for the third year in CY 2017.

      In addition, for the FY 2017 IPPS, we extended the imputed floor policy (both the original methodology and alternative methodology) for another year, through September 30, 2017 (81 FR 56919 through 56922). For purposes of the CY 2017 OPPS, we proposed to apply the imputed floor policy to hospitals paid under the OPPS but not under the IPPS so long as the IPPS continues an imputed floor policy.

      For CMHCs, for CY 2017, 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, for CMHCs previously located in urban CBSAs that were designated as rural under the revised OMB labor market area delineations in OMB Bulletin No. 13-01, we finalized a policy to maintain the urban wage index value of the CBSA in which they were physically located for CY 2014 for 3 calendar years (until December 31, 2017). 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.

      We did not receive any public comments on our proposals as discussed above.

      Therefore, for the reasons discussed above and in the CY 2017 OPPS/

      ASC proposed rule, we are finalizing our proposals, without modification, to:

      Continue to use an OPPS labor-related share of 60 percent of the national OPPS payment for the CY 2017 OPPS;

      Use the final FY 2017 IPPS post-reclassified wage index for urban and rural areas in its entirety, including the frontier State wage index floor, the rural floor, geographic reclassifications, and all other applicable wage index adjustments, as the final CY 2017 wage index for OPPS hospitals and CMHCs based on where the facility is located for both the OPPS payment rate and the copayment standardized amount, as discussed above and as set forth in the CY 2017 OPPS/ASC proposed rule (81 FR 45631 through 45633). (We refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56912 through 56937) and the final FY 2017 hospital wage index files posted on the CMS Web site.);

      Implement the revisions to the OMB statistical area delineations set forth in OMB Bulletin No. 15-01 effective January 1, 2017, beginning with the CY 2017 OPPS wage indexes;

      Implement the frontier State floor provisions in the same manner as we have since CY 2011 as discussed above;

      For non-IPPS hospitals paid under the OPPS, continue to 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;

      Apply the imputed floor policy to hospitals paid under the OPPS but not under the IPPS so long as the IPPS continues an imputed floor policy, which CMS has extended for an additional year under the IPPS in the FY 2017 IPPS/LTCH PPS final rule; and

      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 MMA).

      Table 2 associated with the FY 2017 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 2017. We are including the out-migration adjustment information from Table 2 associated with the FY 2017 IPPS/LTCH PPS final rule as Addendum L to this final rule with comment period with the addition of non-IPPS hospitals that will receive the section 505 out-migration adjustment under the CY 2017 OPPS. Addendum L is available via the Internet on the CMS Web site. 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 2017 IPPS wage index tables and Addendum L.

    3. 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

      Page 79600

      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, hospitals that have not accepted assignment of an existing hospital's provider agreement, and hospitals that 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 2017 OPPS/ASC proposed rule (81 FR 45633), we proposed to update the default ratios for CY 2017 using the most recent cost report data. We discussed 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 detail on our process for calculating the statewide average CCRs, we referred readers to the CY 2017 OPPS proposed rule Claims Accounting Narrative that was posted on the CMS Web site. Table 4 published in the proposed rule (81 FR 45634 through 45635) listed the proposed statewide average default CCRs for OPPS services furnished on or after January 1, 2017.

      We did not receive any public comments on the proposed statewide average default CCR policy. 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 final CY 2017 OPPS relative payment weights. Table 4 below lists the statewide average default CCRs for OPPS services furnished on or after January 1, 2017 based on final rule data.

      Table 4--CY 2017 Statewide Average CCRs

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

      Previous default

      State Urban/rural CY 2017 default CCR (CY 2016 OPPS

      CCR final rule)

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

      ALASKA.................................... RURAL....................... 0.449 0.588

      ALASKA.................................... URBAN....................... 0.237 0.269

      ALABAMA................................... RURAL....................... 0.196 0.224

      ALABAMA................................... URBAN....................... 0.158 0.168

      ARKANSAS.................................. RURAL....................... 0.196 0.223

      ARKANSAS.................................. URBAN....................... 0.205 0.218

      ARIZONA................................... RURAL....................... 0.238 0.246

      ARIZONA................................... URBAN....................... 0.176 0.170

      CALIFORNIA................................ RURAL....................... 0.179 0.179

      CALIFORNIA................................ URBAN....................... 0.188 0.190

      COLORADO.................................. RURAL....................... 0.354 0.366

      COLORADO.................................. URBAN....................... 0.208 0.208

      CONNECTICUT............................... RURAL....................... 0.402 0.366

      CONNECTICUT............................... URBAN....................... 0.253 0.257

      DISTRICT OF COLUMBIA...................... URBAN....................... 0.286 0.298

      DELAWARE.................................. URBAN....................... 0.288 0.308

      FLORIDA................................... RURAL....................... 0.169 0.170

      FLORIDA................................... URBAN....................... 0.143 0.150

      GEORGIA................................... RURAL....................... 0.230 0.251

      GEORGIA................................... URBAN....................... 0.196 0.199

      HAWAII.................................... RURAL....................... 0.338 0.339

      HAWAII.................................... URBAN....................... 0.319 0.313

      IOWA...................................... RURAL....................... 0.291 0.305

      IOWA...................................... URBAN....................... 0.252 0.256

      IDAHO..................................... RURAL....................... 0.341 0.337

      IDAHO..................................... URBAN....................... 0.401 0.459

      ILLINOIS.................................. RURAL....................... 0.241 0.234

      ILLINOIS.................................. URBAN....................... 0.209 0.208

      INDIANA................................... RURAL....................... 0.272 0.314

      INDIANA................................... URBAN....................... 0.218 0.237

      KANSAS.................................... RURAL....................... 0.269 0.287

      KANSAS.................................... URBAN....................... 0.194 0.209

      KENTUCKY.................................. RURAL....................... 0.194 0.202

      KENTUCKY.................................. URBAN....................... 0.189 0.203

      LOUISIANA................................. RURAL....................... 0.217 0.256

      LOUISIANA................................. URBAN....................... 0.201 0.202

      MASSACHUSETTS............................. RURAL....................... 0.316 0.324

      MASSACHUSETTS............................. URBAN....................... 0.345 0.330

      MAINE..................................... RURAL....................... 0.425 0.470

      MAINE..................................... URBAN....................... 0.413 0.395

      MARYLAND.................................. RURAL....................... 0.264 0.277

      MARYLAND.................................. URBAN....................... 0.229 0.234

      MICHIGAN.................................. RURAL....................... 0.295 0.317

      MICHIGAN.................................. URBAN....................... 0.324 0.319

      Page 79601

      MINNESOTA................................. RURAL....................... 0.398 0.449

      MINNESOTA................................. URBAN....................... 0.319 0.377

      MISSOURI.................................. RURAL....................... 0.222 0.238

      MISSOURI.................................. URBAN....................... 0.261 0.253

      MISSISSIPPI............................... RURAL....................... 0.224 0.235

      MISSISSIPPI............................... URBAN....................... 0.167 0.169

      MONTANA................................... RURAL....................... 0.450 0.480

      MONTANA................................... URBAN....................... 0.368 0.403

      NORTH CAROLINA............................ RURAL....................... 0.216 0.229

      NORTH CAROLINA............................ URBAN....................... 0.223 0.235

      NORTH DAKOTA.............................. RURAL....................... 0.411 0.443

      NORTH DAKOTA.............................. URBAN....................... 0.334 0.355

      NEBRASKA.................................. RURAL....................... 0.294 0.283

      NEBRASKA.................................. URBAN....................... 0.238 0.238

      NEW HAMPSHIRE............................. RURAL....................... 0.320 0.306

      NEW HAMPSHIRE............................. URBAN....................... 0.279 0.306

      NEW JERSEY................................ URBAN....................... 0.195 0.194

      NEW MEXICO................................ RURAL....................... 0.225 0.280

      NEW MEXICO................................ URBAN....................... 0.280 0.290

      NEVADA.................................... RURAL....................... 0.196 0.219

      NEVADA.................................... URBAN....................... 0.123 0.146

      NEW YORK.................................. RURAL....................... 0.309 0.311

      NEW YORK.................................. URBAN....................... 0.292 0.298

      OHIO...................................... RURAL....................... 0.292 0.295

      OHIO...................................... URBAN....................... 0.207 0.212

      OKLAHOMA.................................. RURAL....................... 0.231 0.255

      OKLAHOMA.................................. URBAN....................... 0.180 0.192

      OREGON.................................... RURAL....................... 0.280 0.265

      OREGON.................................... URBAN....................... 0.344 0.341

      PENNSYLVANIA.............................. RURAL....................... 0.274 0.277

      PENNSYLVANIA.............................. URBAN....................... 0.179 0.195

      PUERTO RICO............................... URBAN....................... 0.527 0.590

      RHODE ISLAND.............................. URBAN....................... 0.291 0.290

      SOUTH CAROLINA............................ RURAL....................... 0.185 0.188

      SOUTH CAROLINA............................ URBAN....................... 0.190 0.197

      SOUTH DAKOTA.............................. RURAL....................... 0.383 0.367

      SOUTH DAKOTA.............................. URBAN....................... 0.229 0.224

      TENNESSEE................................. RURAL....................... 0.181 0.198

      TENNESSEE................................. URBAN....................... 0.180 0.177

      TEXAS..................................... RURAL....................... 0.214 0.238

      TEXAS..................................... URBAN....................... 0.177 0.179

      UTAH...................................... RURAL....................... 0.349 0.493

      UTAH...................................... URBAN....................... 0.315 0.325

      VIRGINIA.................................. RURAL....................... 0.191 0.195

      VIRGINIA.................................. URBAN....................... 0.226 0.233

      VERMONT................................... RURAL....................... 0.426 0.434

      VERMONT................................... URBAN....................... 0.340 0.336

      WASHINGTON................................ RURAL....................... 0.271 0.349

      WASHINGTON................................ URBAN....................... 0.294 0.308

      WISCONSIN................................. RURAL....................... 0.354 0.317

      WISCONSIN................................. URBAN....................... 0.290 0.296

      WEST VIRGINIA............................. RURAL....................... 0.266 0.276

      WEST VIRGINIA............................. URBAN....................... 0.285 0.294

      WYOMING................................... RURAL....................... 0.429 0.433

      WYOMING................................... URBAN....................... 0.311 0.311

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

    4. 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

      Page 79602

      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 Sec. 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 2016. Further, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated the regulations at Sec. 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 2017 OPPS/ASC proposed rule (81 FR 45635), for the CY 2017 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 (80 FR 39244).

      Comment: Commenters supported the proposed payment adjustment for rural SCHs and EACHs, and stated that this adjustment would support access to care in rural areas.

      Response: We appreciate the commenters' support.

      After consideration of the public comments we received, we are finalizing the proposal for CY 2017 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.

    5. Payment Adjustment for Certain Cancer Hospitals for CY 2017

      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 in amount under the OPPS than the payment amount 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'' and 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 or 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 hospitals and other hospitals. Section 1833(t)(18)(B) of the Act provides that, if the Secretary determines that cancer 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. For CY 2015, the target PCR was 0.90. For CY 2016, the target PCR was 0.92, as discussed in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70362 through 70363).

      Page 79603

  140. Proposed and Finalized Policy for CY 2017

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45636), for CY 2017, we proposed to continue our policy to provide additional payments to the 11 specified 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 are available at the time of the development of the proposed rule. To calculate the proposed CY 2017 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 2017 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 2015 claims data that we used to model the impact of the proposed CY 2017 APC relative payment weights (3,716 hospitals) because it is appropriate to use the same set of hospitals that we are using to calibrate the modeled CY 2017 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2012 to 2015. We then removed the cost report data of the 50 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 14 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 3,652 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 92 percent of reasonable cost (weighted average PCR of 0.92). 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 0.92 for each cancer hospital. Table 5 of the proposed rule indicated the proposed estimated percentage increase in OPPS payments to each cancer hospital for CY 2017 due to the cancer hospital payment adjustment policy.

    Comment: Several commenters supported the proposed cancer hospital payment adjustment for CY 2017.

    Response: We appreciate the commenters' support.

    After consideration of the public comments we received, we are finalizing our cancer hospital payment adjustment methodology as proposed. For this final rule with comment period, we are using the most recent cost report data through June 30, 2016 to update the adjustment. This update yields a target PCR of 0.91. We limited the dataset to the hospitals with CY 2015 claims data that we used to model the impact of the CY 2017 APC relative payment weights (3,744 hospitals) because it is appropriate to use the same set of hospitals that we are using to calibrate the modeled CY 2017 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2012 to 2016. We then removed the cost report data of the 49 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 13 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 3,682 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 91 percent of reasonable cost (weighted average PCR of 0.91). Therefore, we are finalizing that the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement will be the additional payment needed to result in a PCR equal to 0.91 for each cancer hospital.

    Table 5 below indicates the final estimated percentage increase in OPPS payments to each cancer hospital for CY 2017 due to the finalized cancer hospital payment adjustment policy. The actual amount of the CY 2017 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital's CY 2017 payments and costs. We note that the requirements contained in 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.

    Table 5--Estimated CY 2017 Hospital-Specific Payment Adjustment for Cancer Hospitals To Be Provided At Cost

    Report Settlement

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

    Estimated percentage increase in

    Provider No. Hospital name OPPS payments for CY 2017 due to

    payment adjustment (%)

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

    050146...................................... City of Hope Comprehensive 25.8

    Cancer Center.

    050660...................................... USC Norris Cancer Hospital.... 14.0

    100079...................................... Sylvester Comprehensive Cancer 32.4

    Center.

    100271...................................... H. Lee Moffitt Cancer Center & 27.3

    Research Institute.

    220162...................................... Dana-Farber Cancer Institute.. 49.8

    330154...................................... Memorial Sloan-Kettering 50.4

    Cancer Center.

    330354...................................... Roswell Park Cancer Institute. 30.0

    360242...................................... James Cancer Hospital & Solove 37.9

    Research Institute.

    390196...................................... Fox Chase Cancer Center....... 16.6

    450076...................................... M.D. Anderson Cancer Center... 52.3

    Page 79604

    500138...................................... Seattle Cancer Care Alliance.. 58.7

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

    1. 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 2015 OPPS/ASC final rule with comment period (79 FR 66832 through 66834), 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 2016, 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 $3,250 (the fixed-dollar amount threshold) (80 FR 70365). 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. In the CY 2017 OPPS/ASC proposed rule (81 FR 45637), we indicated that our estimate of total outlier payments as a percent of total CY 2015 OPPS payment, using CY 2015 claims available for the proposed rule and the revised OPPS expenditure estimate for the FY 2016 President's Budget, was approximately 1.0 percent of the total aggregated OPPS payments. For CY 2015, we continue to estimate that we paid the outlier target of 1.0 percent of total aggregated OPPS payments.

      As stated in the proposed rule, using CY 2015 claims data and CY 2016 payment rates, we estimated that the aggregate outlier payments for CY 2016 would be approximately 1.0 percent of the total CY 2016 OPPS payments. Using an updated claims dataset and OPPS ancillary CCRs, we estimate that we paid approximately 0.96 percent of the total CY 2016 OPPS payments, in OPPS outliers. We provided estimated CY 2017 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: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

      2. Outlier Calculation for CY 2017

      In the CY 2017 OPPS/ASC proposed rule (81 FR 45637), for CY 2017, 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 less than 0.01 percent of outlier payments (or 0.0001 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.C. of the proposed rule and this final rule with comment period, we proposed to continue our longstanding policy that if a CMHC's cost for partial hospitalization services, paid under proposed APC 5853 (Partial Hospitalization for CMHCs), exceeds 3.40 times the payment rate for proposed APC 5853, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the proposed APC 5853 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 2017 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 $3,825.

      We calculated the proposed fixed-dollar threshold of $3,825 using the standard methodology most recently used for CY 2016 (80 FR 70364 through 70365). For purposes of estimating outlier payments for the proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2016 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 2017 hospital outlier payments for the proposed rule, we inflated the charges on the CY 2015 claims using the same inflation factor of 1.0898 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25270 through 25273). We used an inflation factor of 1.0440 to estimate CY 2016 charges from the CY 2015 charges reported on CY 2015 claims. The methodology for determining this charge inflation factor is discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57286). 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.

      Page 79605

      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 2017 IPPS outlier calculation to the CCRs used to simulate the proposed CY 2017 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2017, we proposed to apply an adjustment factor of 0.9696 to the CCRs that were in the April 2016 OPSF to trend them forward from CY 2016 to CY 2017. The methodology for calculating this proposed adjustment was discussed in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25272).

      To model hospital outlier payments for the proposed rule, we applied the overall CCRs from the April 2016 OPSF after adjustment (using the proposed CCR inflation adjustment factor of 0.9696 to approximate CY 2017 CCRs) to charges on CY 2015 claims that were adjusted (using the proposed charge inflation factor of 1.0898 to approximate CY 2017 charges). We simulated aggregated CY 2017 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiplier 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 2017 OPPS payments. We estimated that a proposed fixed-dollar threshold of $3,825, combined with the proposed multiplier 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 APC 5853, exceeds 3.40 times the payment rate for APC 5853, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 5853 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 section 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: One commenter suggested that the OPPS outlier fixed-dollar threshold of $3,825 was too high for CMS to pay the target aggregate outlier payment amount of 1.0 percent of the estimated aggregate total payments under the OPPS for the prospective year. The commenter suggested that CMS reduce the OPPS outlier threshold to compensate for the difference between the proposed and final fixed-dollar thresholds for outlier payments under the IPPS.

      Response: As indicated earlier, we introduced a fixed-dollar threshold in order to better target outlier payments to those high-cost and complex procedures where a very costly service could present a hospital with significant financial loss. We maintain the target outlier percentage of 1.0 percent of estimated aggregate total payment under the OPPS and have a fixed-dollar threshold so that OPPS outlier payments are made only when the hospital would experience a significant loss for furnishing a particular service. The methodology we use to calculate the fixed-dollar threshold for the prospective payment year factors is based on several data inputs that may change from prior payment years. For instance, updated hospital CCR data and changes to the OPPS payment methodology influence projected outlier payments in the prospective year. For this final rule with comment period, we used the same methodology for calculating the outlier fixed-dollar threshold that we used for the proposed rule but used updated data. We do not believe that incorporating the percentage difference between the proposed and final fixed-dollar loss thresholds under the IPPS would improve our methodology to meet our target outlier payment percentage of 1.0 percent.

      After consideration of the public comments we received, we are finalizing our proposal to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS and to use our established methodology to set the OPPS outlier fixed-dollar loss threshold for CY 2017.

      3. Final Outlier Calculation

      Consistent with historical practice, we used updated data for this final rule with comment period for outlier calculations. For CY 2017, we are applying the overall CCRs from the July 2016 OPSF file after adjustment (using the CCR inflation adjustment factor of 0.9688 to approximate CY 2017 CCRs) to charges on CY 2015 claims that were adjusted (using the charge inflation factor of 1.0984 to approximate CY 2017 charges). These are the same CCR adjustment and charge inflation factors that were used to set the IPPS fixed-dollar thresholds for the FY 2017 IPPS/LTCH PPS final rule (81 FR 57286). We simulated aggregated CY 2017 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 2017 OPPS payments. We estimated that a fixed-dollar threshold of $3,825, 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 APC 5853 exceeds 3.40 times the payment rate, the outlier payment will be calculated as 50 percent of the amount by which the cost exceeds 3.40 times APC 5853.

    2. 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 2017 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

      Page 79606

      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 2017 scaled weight for the APC by the CY 2017 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 2017 OPPS/ASC proposed rule (81 FR 45638), 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,'' ``J2,'' ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``Q4,'' ``R,'' ``S,'' ``T,'' ``U,'' or ``V'' (as defined in Addendum D1 to the proposed rule, which is available via the Internet on the CMS Web site), 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 noted 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 did not receive any public comments on these steps under the methodology that we included in the proposed rule to determine the APC payments for CY 2017. Therefore, we are using the steps in the methodology specified below, as we proposed, to demonstrate the calculation of the final CY 2017 OPPS payments using the same parameters.

      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 2017 OPPS fee schedule increase factor.

      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 2017 OPPS policy for continuing to use the OMB labor market area delineations based on the 2010 Decennial Census data for the wage indexes used under the IPPS, 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 2017 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 Sec. 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 2017 IPPS wage indexes, as applied to the CY 2017 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 2017 IPPS, which are listed in Table 2 in the FY 2017 IPPS/LTCH PPS final rule and correction notice tables 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.

      Page 79607

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

      Xa = .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 + Xa.

      Step 6. If a provider is an SCH, as set forth in the regulations at Sec. 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 Sec. 412.64(b), or is treated as being located in a rural area under Sec. 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 5071 (Level 1 Excision/Biopsy/Incision and Drainage). The CY 2017 full national unadjusted payment rate for APC 5071 is approximately $538.88. The reduced national unadjusted payment rate for APC 5071 for a hospital that fails to meet the Hospital OQR Program requirements is approximately $528.10. This reduced rate is calculated by multiplying the reporting ratio of 0.980 by the full unadjusted payment rate for APC 5071.

      The FY 2017 wage index for a provider located in CBSA 35614 in New York is 1.2936. The labor-related portion of the full national unadjusted payment is approximately $418.26 (.60 * $538.88 * 1.2936). The labor-related portion of the reduced national unadjusted payment is approximately $409.89 (.60 * $528.10 * 1.2936). The nonlabor-related portion of the full national unadjusted payment is approximately $215.55 (.40 * $538.88). The nonlabor-related portion of the reduced national unadjusted payment is approximately $211.24 (.40 * $528.10). The sum of the labor-related and nonlabor-related portions of the full national adjusted payment is approximately $633.81 ($418.26 + $215.55). The sum of the portions of the reduced national adjusted payment is approximately $621.13 ($409.89 + $211.24).

      1. 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 Medicare 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 2017 OPPS/ASC proposed rule (81 FR 45640), for CY 2017, 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.) We included the proposed national unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2017, in Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site).

        As discussed in section XIII.E. of the proposed and this final rule with comment period, for CY 2017, the Medicare beneficiary's minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies will equal 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 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).

        In the CY 2004 OPPS final rule with comment period (68 FR 63459), we adopted a new methodology to calculate unadjusted copayment amounts in situations including reorganizing APCs, and we finalized the following rules to determine copayment amounts in CY 2004 and subsequent years.

        Page 79608

        When an APC group consists solely of HCPCS codes that were not paid under the OPPS the prior year because they were packaged or excluded or are new codes, the unadjusted copayment amount would be 20 percent of the APC payment rate.

        If a new APC that did not exist during the prior year is created and consists of HCPCS codes previously assigned to other APCs, the copayment amount is calculated as the product of the APC payment rate and the lowest coinsurance percentage of the codes comprising the new APC.

        If no codes are added to or removed from an APC and, after recalibration of its relative payment weight, the new payment rate is equal to or greater than the prior year's rate, the copayment amount remains constant (unless the resulting coinsurance percentage is less than 20 percent).

        If no codes are added to or removed from an APC and, after recalibration of its relative payment weight, the new payment rate is less than the prior year's rate, the copayment amount is calculated as the product of the new payment rate and the prior year's coinsurance percentage.

        If HCPCS codes are added to or deleted from an APC and, after recalibrating its relative payment weight, holding its unadjusted copayment amount constant results in a decrease in the coinsurance percentage for the reconfigured APC, the copayment amount would not change (unless retaining the copayment amount would result in a coinsurance rate less than 20 percent).

        If HCPCS codes are added to an APC and, after recalibrating its relative payment weight, holding its unadjusted copayment amount constant results in an increase in the coinsurance percentage for the reconfigured APC, the copayment amount would be calculated as the product of the payment rate of the reconfigured APC and the lowest coinsurance percentage of the codes being added to the reconfigured APC.

        We noted in the CY 2004 OPPS final rule with comment period that we would seek to lower the copayment percentage for a service in an APC from the prior year if the copayment percentage was greater than 20 percent. We noted that this principle was consistent with section 1833(t)(8)(C)(ii) of the Act, which accelerates the reduction in the national unadjusted coinsurance rate so that beneficiary liability will eventually equal 20 percent of the OPPS payment rate for all OPPS services to which a copayment applies, and with section 1833(t)(3)(B) of the Act, which is consistent with the Congressional goal of achieving a 20-percent copayment percentage when fully phased in and gives the Secretary the authority to set rules for determining copayment amounts for new services. We further noted that the use of this methodology would, in general, reduce the beneficiary coinsurance rate and copayment amount for APCs for which the payment rate changes as the result of the reconfiguration of APCs and/or recalibration of relative payment weights (68 FR 63459).

        We did not receive any public comments on the copayment policy proposal. For the reasons set forth in this final rule with comment period, we are finalizing our proposed CY 2017 copayment policy 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 5071, $107.78 is approximately 20 percent of the full national unadjusted payment rate of $538.88. 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, 2017, 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 CY 2017 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.

      2. OPPS Ambulatory Payment Classification (APC) Group Policies

    3. 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

      Page 79609

      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 provides payment or more accurate payment for these items or services in a timelier manner than if we 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. For those items, procedures, or services not paid separately under the hospital OPPS, they are assigned to appropriate status indicators. Section XI. of this final rule with comment period provides a discussion of the various status indicators used under the OPPS. Certain payment status indicators provide separate payment while other payment status indicators do not.

      In Table 6 below, we summarize our current process for updating codes through our OPPS quarterly update CRs, seeking public comments, and finalizing the treatment of these new codes under the OPPS.

      Table 6--Comment Timeframe for New or Revised HCPCS Codes

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

      OPPS quarterly update CR Type of code Effective date Comments sought When finalized

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

      April l, 2016............... Level II HCPCS April 1, 2016.............. CY 2017 OPPS/ASC CY 2017 OPPS/ASC

      Codes. proposed rule. final rule with

      comment period.

      July 1, 2016................ Level II HCPCS July 1, 2016............... CY 2017 OPPS/ASC CY 2017 OPPS/ASC

      Codes. proposed rule. final rule with

      comment period.

      Category I July 1, 2016............... CY 2017 OPPS/ASC CY 2017 OPPS/ASC

      (certain vaccine proposed rule. final rule with

      codes) and III comment period.

      CPT codes.

      October 1, 2016............. Level II HCPCS October 1, 2016............ CY 2017 OPPS/ASC CY 2018 OPPS/ASC

      Codes. final rule with final rule with

      comment period. comment period.

      January 1, 2017............. Level II HCPCS January 1, 2017............ CY 2017 OPPS/ASC CY 2018 OPPS/ASC

      Codes. final rule with final rule with

      comment period. comment period.

      Category I and January 1, 2017............ CY 2017 OPPS/ASC CY 2017 OPPS/ASC

      III CPT Codes. proposed rule. final rule with

      comment period.

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

      1. Treatment of New Level II HCPCS Codes Effective April 1, 2016 for Which We Solicited Public Comments in the CY 2017 OPPS/ASC Proposed Rule

      Through the April 2016 OPPS quarterly update CR (Transmittal 3471, Change Request 9549, dated February 26, 2016) we recognized several new Level II HCPCS codes for separate payment under the OPPS. Effective April 1, 2016, we implemented 10 new HCPCS codes and also assigned them to appropriate interim OPPS status indicators and APCs. Specifically, as displayed in Table 7 of the CY 2017 OPPS/ASC proposed rule (81 FR 45642), we provided separate payment for HCPCS codes C9137, C9138, C9461, C9470, C9471, C9472, C9473, C9474, C9475, and J7503. We note that HCPCS code J7503 was initially assigned to OPPS status indicator ``E'' (Not paid by Medicare when submitted on outpatient claims (any outpatient bill type) when the code was established on January 1, 2016. However, we revised its OPPS status indicator from ``E'' to ``G'' (Pass-Through Drugs and Biologicals. Paid under OPPS; separate APC payment) effective April 1, 2016, when the drug associated with HCPCS code J7503 was approved for pass-through payment status under the hospital OPPS.

      In the CY 2017 OPPS/ASC proposed rule, we solicited public comments on the proposed APC and status indicator assignments for the 10 HCPCS codes implemented on April 1, 2016. We indicated that the proposed payment rates for these codes, where applicable, could be found in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site).

      We did not receive any public comments on the proposed APC and status indicator assignments for the HCPCS codes implemented in April 2016. Therefore, we are finalizing the proposed APC assignments and status indicators for the new HCPCS codes that were implemented on April 1, 2016. The final APC and status indicator assignments are listed in Table 7 below.

      We note that, for the CY 2017 update, the HCPCS Workgroup replaced the temporary drug HCPCS C-codes that were listed in Table 7 of the proposed rule with permanent HCPCS J-codes effective January 1, 2017. Because the replacement HCPCS J-codes describe the same drugs with the same dosage descriptors as their predecessor HCPCS C-codes, they will continue to receive pass-through payment status in CY 2017. Therefore, we are assigning the replacement HCPCS J-codes to the same APCs and status indicators as their predecessor HCPCS C-codes, as shown in Table 7 below. 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).

      Table 7--Final CY 2017 Status Indicator (SI) and APC Assignments for the New Level II HCPCS Codes That Were

      Implemented on April 1, 2016

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

      Final CY 2017 Final CY 2017

      CY 2016 HCPCS code CY 2017 HCPCS code CY 2017 long descriptor SI APC

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

      C9137..................... J7207.................... Injection, factor viii, G 1844

      (antihemophilic factor,

      recombinant),

      PEGylated, 1 i.u..

      C9138..................... J7209.................... Injection, factor viii, G 1846

      (antihemophilic factor,

      recombinant), (Nuwiq),

      1 i.u..

      C9461..................... A9515.................... Choline c-11, G 9461

      diagnostic, per study

      dose up to 20

      millicuries.

      Page 79610

      C9470..................... J1942.................... Injection, aripiprazole G 9470

      lauroxil, 1 mg.

      C9471..................... J7322.................... Hyaluronan or G 9471

      derivative, Hymovis,

      for intra-articular

      injection, 1 mg.

      C9472..................... J9325.................... Injection, talimogene G 9472

      laherparepvec, per 1

      million plaque forming

      units.

      C9473..................... J2182.................... Injection, mepolizumab, G 9473

      1 mg.

      C9474..................... J9205.................... Injection, irinotecan G 9474

      liposome, 1 mg.

      C9475..................... J9295.................... Injection, necitumumab, G 9475

      1 mg.

      J7503..................... J7503.................... Tacrolimus, extended G 1845

      release, (Envarsus XR),

      oral, 0.25 mg.

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

      2. Treatment of New CPT and Level II HCPCS Codes Effective July 1, 2016 for Which We Solicited Public Comments in the CY 2017 OPPS/ASC Proposed Rule

      Effective July 1, 2016, we implemented several new CPT and Level II HCPCS codes under the hospital OPPS. Through the July 2016 OPPS quarterly update CR (Transmittal 3523, Change Request 9658, dated May 13, 2016), we assigned nine new Category III CPT codes and nine Level II HCPCS codes that were made effective July 1, 2016, to interim OPPS status indicators and APCs. Specifically, as displayed in Table 8 of the CY 2017 OPPS/ASC proposed rule (81 FR 45643), we established interim OPPS status indicator and APC assignments for Category III CPT codes 0438T, 0440T, 0441T, 0442T, and 0443T, and Level II HCPCS codes C9476, C9477, C9478, C9479, C9480, Q5102, Q9981, Q9982, and Q9983. We noted that Category III CPT codes 0437T, 0439T, 0444T, and 0445T are assigned to OPPS status indicator ``N'' to indicate that the services described by the codes are packaged and their payment is included in the primary procedure codes reported with these codes.

      Table 8 of the CY 2017 OPPS/ASC proposed rule listed the CPT and Level II HCPCS codes that were implemented on July 1, 2016, along with the proposed status indicators and proposed APC assignments, where applicable, for CY 2017. We solicited public comments on the proposed APC and status indicator assignments.

      We received one comment related to the proposed APC assignment for Category III CPT codes 0440T, 0441T, and 0442T, which we address in section III.D.10. of this final rule with comment period. We did not receive any public comments on the proposed APC and status indicator assignments for the other 15 codes that were listed in Table 8 of the CY 2017 OPPS/ASC proposed rule. Therefore, in this final rule with comment period, we are adopting as final, without modification, the proposed APC and/or status indicator assignments for Category III CPT codes 0437T, 0438T, 0439T, 0444T, and 0445T and Level II HCPCS codes C9476, C9477, C9478, C9479, C9480, Q5102, Q9981, Q9982, and Q9983. However, we are modifying the OPPS status indicator for CPT code 0443T from ``T'' to ``N'' because this is an add-on code. Since January 1, 2014, payment for procedures described by add-on codes have been packaged under the hospital OPPS.

      In addition, for the CY 2017 update, the HCPCS Workgroup replaced temporary HCPCS codes C9476, C9477, C9478, C9480, and Q9981 with permanent HCPCS J-codes effective January 1, 2017. Because the replacement HCPCS J-codes describe the same drugs with the same dosage descriptors as their predecessor HCPCS C-codes and Q-codes, they will continue to receive pass-through payment status in CY 2017. Consequently, we are assigning the replacement HCPCS J-codes to the same APCs and status indicators as their predecessor HCPCS C-codes and Q-codes, as shown in Table 8 below. Table 8 lists the CPT and Level II HCPCS codes that were implemented on July 1, 2016, along with the final status indicators and APC assignments for CY 2017. 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).

      Table 8--Final CY 2017 Status Indicators (SI) and APC Assignments for the New Category III CPT and Level II

      HCPCS Codes Implemented on July 1, 2016

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

      Final CY 2017 Final CY 2017

      CY 2016 CPT/HCPCS code CY 2017 CPT/HCPCS code CY 2017 long descriptor SI APC

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

      C9476..................... J9145.................... Injection, daratumumab, G 9476

      10 mg.

      C9477..................... J9176.................... Injection, elotuzumab, 1 G 9477

      mg.

      C9478..................... J2840.................... Injection, sebelipase G 9478

      alfa, 1 mg.

      C9479..................... J7342.................... Instillation, G 9479

      ciprofloxacin otic

      suspension, 6 mg.

      C9480..................... J9352.................... Injection, trabectedin, G 9480

      0.1 mg.

      Q5102..................... Q5102.................... Injection, Infliximab, E2 N/A

      Biosimilar, 10 mg.

      Q9981..................... J8670.................... Rolapitant, oral, 1 mg.. K 1761

      Q9982 *................... Q9982.................... Flutemetamol F18, G 9459

      diagnostic, per study

      dose, up to 5

      millicuries.

      Q9983 **.................. Q9983.................... Florbetaben f18, G 9458

      diagnostic, per study

      dose, up to 8.1

      millicuries.

      0437T..................... 0437T.................... Implantation of non- N N/A

      biologic or synthetic

      implant (e.g.,

      polypropylene) for

      fascial reinforcement

      of the abdominal wall

      (List separately in

      addition to primary

      procedure).

      0438T..................... 0438T ***................ Transperineal placement T 5374

      of biodegradable

      material, peri-

      prostatic (via needle),

      single or multiple,

      includes image guidance.

      0439T..................... 0439T.................... Myocardial contrast N N/A

      perfusion

      echocardiography; at

      rest or with stress,

      for assessment of

      myocardial ischemia or

      viability (List

      separately in addition

      to primary procedure).

      Page 79611

      0440T..................... 0440T.................... Ablation, percutaneous, J1 5432

      cryoablation, includes

      imaging guidance; upper

      extremity distal/

      peripheral nerve.

      0441T..................... 0441T.................... Ablation, percutaneous, J1 5432

      cryoablation, includes

      imaging guidance; lower

      extremity distal/

      peripheral nerve.

      0442T..................... 0442T.................... Ablation, percutaneous, J1 5432

      cryoablation, includes

      imaging guidance; nerve

      plexus or other truncal

      nerve (e.g., brachial

      plexus, pudendal nerve).

      0443T..................... 0443T.................... Real time spectral N N/A

      analysis of prostate

      tissue by fluorescence

      spectroscopy.

      0444T..................... 0444T.................... Initial placement of a N N/A

      drug-eluting ocular

      insert under one or

      more eyelids, including

      fitting, training, and

      insertion, unilateral

      or bilateral.

      0445T..................... 0445T.................... Subsequent placement of N N/A

      a drug-eluting ocular

      insert under one or

      more eyelids, including

      re-training, and

      removal of existing

      insert, unilateral or

      bilateral.

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

      * HCPCS code C9459 (Flutemetamol f18, diagnostic, per study dose, up to 5 millicuries) was deleted June 30,

      2016, and replaced with HCPCS code Q9982 effective July 1, 2016.

      ** HCPCS code C9458 (Florbetaben f18, diagnostic, per study dose, up to 8.1 millicuries) was deleted June 30,

      2016, and replaced with HCPCS code Q9983 effective July 1, 2016.

      *** HCPCS code C9743 (Injection/implantation of bulking or spacer material (any type) with or without image

      guidance (not to be used if a more specific code applies) was deleted June 30, 2016 and replaced with CPT code

      0438T effective July 1, 2016.

      3. Process for New Level II HCPCS Codes That Became Effective October 1, 2016 and New Level II HCPCS Codes That Will Be Effective January 1, 2017 for Which We Are Soliciting Public Comments in This CY 2017 OPPS/

      ASC Final Rule With Comment Period

      As has been our practice in the past, we incorporate those new Level II HCPCS codes that are effective October 1 and January 1 in the final rule with comment period thereby updating the OPPS for the following calendar year. These codes are released to the public through the October and January OPPS quarterly update CRs and via the CMS HCPCS Web site (for Level II HCPCS codes). For CY 2017, we proposed to continue our established policy of assigning comment indicator ``NI'' to these codes to indicate that we are assigning them an interim payment status which is subject to public comment (81 FR 45643). Specifically, the status indicators and the APC assignments for 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. For CY 2017, we proposed to include in Addendum B to the CY 2017 OPPS/ASC final rule with comment period the following new HCPCS codes:

      New Level II HCPCS codes effective October 1, 2016, that would be incorporated in the October 2016 OPPS quarterly update CR;

      New Level II HCPCS codes effective January 1, 2017, that would be incorporated in the January 2017 OPPS quarterly update CR.

      As stated above, the October 1, 2016 and January 1, 2017 codes are flagged with comment indicator ``NI'' in Addendum B to this CY 2017 OPPS/ASC final rule with comment period to indicate that we have assigned the codes an interim OPPS payment status for CY 2017. 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 2018 OPPS/ASC final rule with comment period.

      4. Treatment of New and Revised CY 2017 Category I and III CPT Codes That Will Be Effective January 1, 2017, for Which We Solicited Public Comments in the CY 2017 OPPS/ASC Proposed Rule

      In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66841 through 66844), we finalized a revised process of assigning APC and status indicators for new and revised Category I and III CPT codes that would be effective January 1. Specifically, for the new/revised CPT codes that we receive in a timely manner from the AMA's CPT Editorial Panel, we finalized our proposal to include the 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/revised CPT codes that were received too late for inclusion in the OPPS/ASC proposed rule, we finalized our proposal to establish 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 noted 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 establishing HCPCS G codes and the resulting delay in utilization of the most current CPT codes. In addition, we finalized 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.

      For the CY 2017 OPPS update, we received the CY 2017 CPT codes that will be effective January 1, 2017, from the AMA in time for inclusion in the CY 2017 OPPS/ASC proposed rule. In the proposed rule (81 FR 45643 through 45644), we indicated that the new and revised CY 2017 Category I and III CPT codes could be found in OPPS Addendum B to the proposed rule and were assigned to new comment indicator ``NP'' to indicate that the code

      Page 79612

      is new for the next calendar year or the code is an existing code with substantial revision to its code descriptor in the next calendar year as compared to current calendar year with a proposed APC assignment. We further stated that comments would be accepted on the proposed APC assignment and status indicator.

      In addition, we reminded readers that the CPT code descriptors that appeared in OPPS Addendum B are short descriptors and do not accurately describe the complete procedure, service, or item described of the CPT code. Therefore, we included the 5-digit placeholder codes and their long descriptors in Addendum O to the proposed rule (which is available via the Internet on the CMS Web site) so that the public could adequately comment on our proposed APCs and status indicator assignments. The 5-digit placeholder codes were listed in Addendum O of the proposed rule, specifically under the column labeled ``CY 2017 OPPS/ASC Proposed Rule 5-Digit Placeholder Code.'' We also indicated that the final CPT code numbers would be included in this CY 2017 OPPS/

      ASC final rule with comment period. The final CPT code numbers, along with their corresponding 5-digit placeholder codes, can be found in Addendum O of this final rule with comment period.

      We note that not every code listed in Addendum O of the proposed rule was subject to comment. For the new/revised Category I and III CPT codes, we requested public comments on only those codes that were assigned to comment indicator ``NP.'' We indicated that public comments would not be accepted for new Category I CPT laboratory codes that were not assigned to ``NP'' comment indicator in Addendum O to the proposed rule. We stated that comments to these codes must be submitted at the Clinical Laboratory Fee Schedule (CLFS) Public Meeting, which was scheduled for July 18, 2016.

      We received public comments on several of the new CPT codes that were assigned to comment indicator ``NP'' in Addendum B of the CY 2017 OPPS/ASC proposed rule. We respond to these comments in section III.D. of this CY 2017 OPPS/ASC final rule with comment period.

      The final status indicators, APC assignments, and payment rates for the new CPT codes that will be effective January 1, 2017, can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

    4. 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 Sec. 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 Sec. 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.

      Under the OPPS, we generally pay for covered 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. In the CY 2017 OPPS/ASC proposed rule (81 FR 45644), for CY 2017, we proposed that 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 5012 (Clinic Visits and Related Services). The APC relative payment weights are scaled to APC 5012 because it is the hospital clinic visit APC and clinic visits are among the most frequently furnished services in the hospital outpatient setting.

      2. Application of the 2 Times Rule

      Section 1833(t)(9)(A) of the Act requires the Secretary to review, not less often than annually, and revise the APC 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. 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. We note that the Panel recommendations for specific services for the CY 2017 OPPS and our responses to them are discussed in the relevant specific sections throughout this final rule with comment period.

      In addition, 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).

      Therefore, in accordance with section 1833(t)(2) of the Act and Sec. 419.31 of the regulations, we annually review the items and services within an APC group to determine if there are any APC violations of the 2 times rule and whether there are any appropriate revisions to APC assignments that may be necessary or exceptions to be made. In determining the APCs with a 2 times rule violation, 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

      Page 79613

      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 claims 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 2017 OPPS/ASC proposed rule (81 FR 45644 through 45645), 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.

      For the CY 2017 OPPS update, we identified the APCs with violations of the 2 times rule, and we proposed changes to the procedure codes assigned to these APCs in Addendum B to the CY 2017 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 2017 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, in the CY 2017 OPPS/ASC proposed rule (81 FR 45645), 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 2017 included in the proposed rule are related to changes in costs of services that were observed in the CY 2015 claims data newly available for CY 2017 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 2017. Addendum B to the CY 2017 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 1, 2016 OPPS Addendum B Update (available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Addendum-A-and-Addendum-B-Updates.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 2017 changes compared to the HCPCS codes' status as reflected in the October 2016 Addendum B update.

      3. APC Exceptions to the 2 Times Rule

      Taking into account the APC changes that we proposed for CY 2017, 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 2015 claims data available for the CY 2017 proposed rule, we found 4 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 2017, and identified 4 APCs that met the criteria for an exception to the 2 times rule based on the CY 2015 claims data available for the proposed 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).

      In addition, in the proposed rule, we noted that, for cases in which a recommendation by the Panel appears to result in or allow a violation of the 2 times rule, we may 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 9 of the proposed rule listed the 4 APCs that we proposed to make exceptions for under the 2 times rule for CY 2017 based on the criteria cited above and claims data submitted between January 1, 2015, and December 31, 2015, and processed on or before December 31, 2015. We indicated that, for the final rule with comment period, we intend to use claims data for dates of service between January 1, 2015, and December 31, 2015, that were processed on or before June 30, 2016, and updated CCRs, if available.

      Based on the updated final rule CY 2015 claims data, we found 7 APCs with violations of the 2 times rule for this final rule with comment period. We applied the criteria as described earlier to identify the APCs that are exceptions to the 2 times rule for CY 2015, and identified 4 additional 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 4 additional APCs violated the 2 times rule using the final rule with comment period claims data:

      APC 5181 (Level 1 Vascular Procedures)

      APC 5732 (Level 2 Minor Procedures)

      APC 5821 (Level 1 Health and Behavior Services)

      APC 5823 (Level 3 Health and Behavior Services)

      After considering the public comments we received on APC assignments and our analysis of the CY 2015 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 3 of the 4 proposed APCs from the 2 times rule for CY 2017 (APCs 5521, 5735, and 5771), and also excepting 4 additional APCs (APCs 5181, 5732, 5821, and 5823). APC 5841 (Psychotherapy), which appeared as one of the 4 APCs in Table 9 of the CY 2017 OPPS/ASC proposed rule, no longer met the criteria for exception to the 2 times rule in this final rule with comment period. Table 9 below lists the 7 APCs that we are excepting from the 2 times rule for CY 2017 based on the criteria described earlier 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/

      Page 79614

      Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/

      Hospital-Outpatient-Regulations-and-Notices.html.

      Table 9--Final CY 2017 APC Exceptions to the 2 Times Rule

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

      CY 2017 APC CY 2017 APC title

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

      5181............................. Level 1 Vascular Procedures.

      5521............................. Level 1 Imaging without Contrast.

      5732............................. Level 2 Minor Procedures.

      5735............................. Level 5 Minor Procedures.

      5771............................. Cardiac Rehabilitation.

      5821............................. Level 1 Health and Behavior Services.

      5823............................. Level 3 Health and Behavior Services.

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

    5. New Technology APCs

      1. Background

      In the November 30, 2001 final rule (66 FR 59903), we finalized changes to the time period a service was eligible for payment under a New Technology APC. Beginning in CY 2002, we retain services within New Technology APC groups until we gather sufficient claims data to enable us to assign the service to an appropriate clinical APC. This policy allows us to move a service from a New Technology APC in less than 2 years if sufficient data are available. It also allows us to retain a service in a New Technology APC for more than 2 years if sufficient data upon which to base a decision for reassignment have not been collected.

      For CY 2016, there are 48 New Technology APC levels, ranging from the lowest cost band assigned to APC 1491 (New Technology--Level 1A ($0-$10)) through the highest cost band assigned to APC 1599 (New Technology--Level 48 ($90,001-$100,000)). In the CY 2004 OPPS final rule with comment period (68 FR 63416), we restructured the New Technology APCs to make the cost intervals more consistent across payment levels and refined the cost bands for these APCs to retain two parallel sets of New Technology APCs, one set with a status indicator of ``S'' (Significant Procedures, Not Discounted when Multiple. Paid under OPPS; separate APC payment) and the other set with a status indicator of ``T'' (Significant Procedure, Multiple Reduction Applies. Paid under OPPS; separate APC payment). These current New Technology APC configurations allow us to price new technology services more appropriately and consistently.

      We note that the cost bands for the New Technology APCs, specifically, APCs 1491 through 1599, vary with increments ranging from $10 to $9,999. These cost bands identify the APCs to which new technology procedures and services with estimated service costs that fall within those cost bands are assigned under the OPPS. Payment for each APC is made at the mid-point of the APC's assigned cost band. For example, payment for New Technology APC 1507 (New Technology--Level 7 ($501-$600)) is made at $550.50.

      Every year we receive several requests for higher payment amounts under the New Technology APCs for specific procedures paid under the OPPS because they require the use of expensive equipment. We are taking this opportunity to reiterate our response in general to the issue of hospitals' capital expenditures as they relate to the OPPS and Medicare, as specified in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70374).

      Under the OPPS, one of our goals is to make payments that are appropriate for the services that are necessary for the treatment of Medicare beneficiaries. The OPPS, like other Medicare payment systems, is budget neutral and increases are limited to the annual hospital inpatient market basket increase. We believe that our payment rates generally reflect the costs that are associated with providing care to Medicare beneficiaries, and we believe that our payment rates are adequate to ensure access to services (80 FR 70374).

      For many emerging technologies, there is a transitional period during which utilization may be low, often because providers are first learning about the techniques and their clinical utility. Quite often, parties request that Medicare make higher payment amounts under the New Technology APCs for new procedures in that transitional phase. These requests, and their accompanying estimates for expected total patient utilization, often reflect very low rates of patient use of expensive equipment, resulting in high per use costs for which requesters believe Medicare should make full payment. Medicare does not, and we believe should not, assume responsibility for more than its share of the costs of procedures based on projected utilization for Medicare beneficiaries and does not set its payment rates based on initial projections of low utilization for services that require expensive capital equipment. For the OPPS, we rely on hospitals to make informed business decisions regarding the acquisition of high cost capital equipment, taking into consideration their knowledge about their entire patient base (Medicare beneficiaries included) and an understanding of Medicare's and other payers' payment policies. (We refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68314) for further discussion regarding this payment policy.)

      We note that, in a budget neutral environment, payments may not fully cover hospitals' costs in a particular circumstance, including those for the purchase and maintenance of capital equipment. We rely on hospitals to make their decisions regarding the acquisition of high cost equipment with the understanding that the Medicare program must be careful to establish its initial payment rates, including those made through New Technology APCs, for new services that lack hospital claims data based on realistic utilization projections for all such services delivered in cost-efficient hospital outpatient settings. As the OPPS acquires claims data regarding hospital costs associated with new procedures, we regularly examine the claims data and any available new information regarding the clinical aspects of new procedures to confirm that our OPPS payments remain appropriate for procedures as they transition into mainstream medical practice (77 FR 68314).

      2. Additional New Technology APC Groups

      As stated above, for the CY 2017 update, there are 48 levels of New Technology APC groups with two parallel status indicators; one set with a status indicator of ``S'' and the other set with a status indicator of ``T.'' To improve our ability to pay appropriately for new technology services and procedures, in the CY 2017 OPPS/ASC proposed rule (81 FR 45646), we proposed to expand the New Technology APC groups by adding 3 more levels, specifically, adding New Technology Levels 49 through 51. We proposed this expansion to accommodate the assignment of retinal prosthesis implantation procedures to a New Technology APC, which is discussed in section III.C.3. of this final rule with comment period. Therefore, for the CY 2017 OPPS update, we proposed to establish 6 new groups of New Technology APCs, APCs 1901 through 1906 (for New Technology APC Levels 49 through 51), with procedures assigned to both OPPS status indicators ``S'' and ``T.'' These new groups of APCs have the same payment levels with one set subject to the multiple procedure payment reduction (procedures assigned to status indicator ``T'') and the other set not subject to the multiple procedure

      Page 79615

      payment reduction (procedures assigned to status indicator ``S''). Each proposed set of New Technology APC groups has identical group titles, payment rates, and minimum unadjusted copayments, but a different status indicator assignment. Table 10 of the CY 2017 OPPS/ASC proposed rule included the complete list of the proposed additional 6 New Technology APC groups for CY 2017 (81 FR 45646).

      We did not receive any public comments on the proposed expansion of the New Technology APC groups, specifically, adding New Technology Levels 49 through 51 for New Technology APCs 1901 through 1906. Therefore, we are finalizing our proposal, without modification. Table 10 lists the final CY 2017 New Technology APCs and the group titles for New Technology Levels 49 through 51. The payment rates for New Technology APCs 1901 through 1906 can be found in Addendum A to this final rule with comment period (which is available via the Internet on the CMS Web site).

      Table 10--Final CY 2017 Additional New Technology APC Groups

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

      Final CY 2017

      New CY 2017 APC CY 2017 APC title SI

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

      1901........................... New Technology--Level S

      49 ($100,001-

      $120,000).

      1902........................... New Technology--Level T

      49 ($100,001-

      $120,000).

      1903........................... New Technology--Level S

      50 ($120,001-

      $140,000).

      1904........................... New Technology--Level T

      50 ($120,001-

      $140,000).

      1905........................... New Technology--Level S

      51 ($140,001-

      $160,000).

      1906........................... New Technology--Level T

      51 ($140,001-

      $160,000).

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

      3. Procedures Assigned to New Technology APC Groups for CY 2017

  141. Overall Proposal

    As we explained in the CY 2002 OPPS final rule with comment period (66 FR 59902), we generally retain a procedure in the New Technology APC to which it is initially assigned until we have obtained sufficient claims data to justify reassignment of the procedure to a clinically appropriate APC. However, in cases where we find that our initial New Technology APC assignment was based on inaccurate or inadequate information (although it was the best information available at the time), or we obtain new information that was not available at the time of our initial New Technology APC assignment, or where the New Technology APCs are restructured, we may, based on more recent resource utilization information (including claims data) or the availability of refined New Technology APC cost bands, reassign the procedure or service to a different New Technology APC that more appropriately reflects its cost (66 FR 59903).

    Consistent with our current policy, for CY 2017, in the CY 2017 OPPS/ASC proposed rule (81 FR 45646), we proposed to retain services within New Technology APC groups until we obtain sufficient claims data to justify reassignment of the service to a clinically appropriate APC. The flexibility associated with this policy allows us to reassign a service from a New Technology APC in less than 2 years if sufficient claims data are available. It also allows us to retain a service in a New Technology APC for more than 2 years if sufficient claims data upon which to base a decision for reassignment have not been obtained (66 FR 59902).

    For CY 2016, only two procedure codes, specifically, HCPCS codes C9740 (Cystourethroscopy, with insertion of transprostatic implant; 4 or more implants) and 0100T (Placement of a subconjunctival retinal prosthesis receiver and pulse generator, and implantation of intra-

    ocular retinal electrode array, with vitrectomy) received payment through a New Technology APC. In the CY 2017 OPPS/ASC proposed rule (81 FR 45646 through 45648), we proposed to reassign HCPCS code C9740 from APC 1565 (New Technology--Level 28 ($5000-$5500)) to APC 5376 (Level 6 Urology and Related Services), and to reassign CPT code 0100T from APC 1599 (New Technology--Level 48 ($90,000-$100,000)) to APC 1906 (New Technology--Level 51 ($140,001-$160,000)). We received public comments on the proposed APC assignment revisions for both procedure codes. Below in section III.C.3.b. of this final rule with comment period, we discuss the public comments we received, our responses, and our final policy for CY 2017 for CPT code 0100T on the retinal prosthesis implant procedure. In section III.D.4.a. of this final rule with comment period, we discuss the public comments we received, our responses, and our final policy for CY 2017 for HCPCS code C9740 on cystourethroscopy.

  142. Retinal Prosthesis Implant Procedure

    As stated above, in the CY 2017 OPPS/ASC proposed rule, we proposed to revise the APC assignment for CPT code 0100T from New Technology APC 1599 to New Technology APC 1906. CPT code 0100T describes the implantation of a retinal prosthesis, specifically, a procedure involving use of the Argussupreg II Retinal Prosthesis System. This first retinal prosthesis was approved by the FDA in 2013 for adult patients diagnosed with advanced retinitis pigmentosa. Pass-through payment status was granted for the Argussupreg II device under HCPCS code C1841 (Retinal prosthesis, includes all internal and external components) beginning October 1, 2013, and expired on December 31, 2015. We note that after pass-through payment status expires for a medical device, the payment for the device is packaged into the payment for the associated surgical procedure. Consequently, for CY 2016, the device described by HCPCS code C1841 was assigned to OPPS status indicator ``N'' to indicate that payment for the device is packaged and included in the payment rate for the surgical procedure described by CPT code 0100T. For CY 2016, CPT code 0100T is assigned to APC 1599 with a payment rate of $95,000. This payment includes both the surgical procedure (CPT code 0100T) and the use of the Argussupreg II device (HCPCS code C1841). However, stakeholders (including the device manufacturer and hospitals) believe that the CY 2016 payment rate for the procedure involving the Argussupreg II System is insufficient to cover the hospital cost of performing the procedure, which includes the cost of the retinal prosthesis, which has a retail price of approximately $145,000.

    For the CY 2017 update, analysis of the CY 2015 OPPS claims data used for the CY 2017 proposed rule showed 5 single claims (out of 7 total claims) for CPT code 0100T, with a geometric mean

    Page 79616

    cost of approximately $141,900 based on claims submitted between January 1, 2015, through December 31, 2015, and processed through December 31, 2015. In the proposed rule, we noted that the final payment rate in the CY 2017 OPPS/ASC final rule with comment period would be based on claims submitted between January 1, 2015, and December 31, 2015, and processed through June 30, 2016.

    Based on the CY 2015 OPPS claims data available for the proposed rule and our understanding of the Argussupreg II procedure, we proposed to reassign CPT code 0100T from APC 1599 to APC 1906 with a proposed payment rate of approximately $150,000 for CY 2017. We stated that we believe that APC 1906 is the most appropriate APC assignment for the Argussupreg II procedure. We noted that this payment rate includes the cost of both the surgical procedure (CPT code 0100T) and the retinal prosthesis device (HCPCS code C1841).

    Comment: Several commenters supported CMS' proposal to reassign CPT code 0100T from APC 1599 to APC 1906, which had a proposed CY 2017 payment rate of $150,000, and stated that the proposed payment better aligns with the cost of providing the service. However, one commenter stated that, while this change may benefit some hospitals, it does not help hospitals with a low wage-index value because the cost of the technology itself is not affected by the hospital's wages relative to other hospitals. The commenter further stated that the use of such new technologies as the Argussupreg II procedure underpays hospitals in less costly wage areas and, therefore, limit its use. Consequently, the commenter suggested that CMS consider the effect of setting new technology payments for hospitals assigned to less costly wage areas.

    Response: We appreciate the commenters' support. Based on the updated CY 2015 hospital outpatient claims data used for this final rule with comment period, which is based on claims submitted between January 1, 2015, and December 31, 2015, and processed through June 30, 2016, we believe that APC 1906 remains the most appropriate APC assignment for CPT code 0100T. The latest claims data showed 9 single claims (out of 13 total claims) for CPT code 0100T, with a geometric mean cost of approximately $142,003. We believe that the payment for APC 1906 appropriately captures the cost of providing the service associated with the Argussupreg II procedure.

    With respect to the issue of hospitals with a low wage index, we appreciate the commenter's interest in refining the methodology for new technology APCs under the OPPS. Because we did not propose a change to hospitals with a low wage index values, we will take this comment into consideration in future rulemaking.

    After consideration of the public comments we received, we are finalizing our proposal, without modification, to reassign CPT code 0100T from APC 1599 (New Technology--Level 48 ($90,001-$100,000)) to APC 1906 (New Technology--Level 51 ($140,001-$160,000)), which has a final payment rate of $150,000.50 for CY 2017. We note this payment includes both the surgical procedure (CPT code 0100T) and the use of the Argussupreg II device (HCPCS code C1841).

    1. OPPS APC-Specific Policies

    1. Cardiovascular Procedures/Services

  143. Cardiac Event Recorder (APC 5071)

    We proposed to assign procedures described by CPT code 33284 (Removal of an implantable, patient-activated cardiac event recorder) to APC 5071 (Level 1 Excision/Biopsy/Incision and Drainage) for CY 2017. Based on the CY 2015 claims data used for the proposed rule, the geometric mean cost of procedures described by CPT code 33284 was approximately $733 (2,650 single claims), and the geometric mean cost of APC 5071 was approximately $555. In addition, CPT code 33284 is assigned to status indicator ``Q2,'' which indicates that the service is conditionally packaged under the OPPS. Therefore, when this procedure is performed in conjunction with a revision or replacement procedure, the payment for the procedure described by CPT code 33284 is packaged under the OPPS.

    Comment: One commenter requested that CMS assign procedures described by CPT code 33284 to a higher paying APC. In particular, the commenter requested that procedures described by CPT code 33284 be assigned to APC 5211 (Level 1 Electrophysiologic Procedures) instead of APC 5071. The commenter believed that the procedure described by CPT code 33284 is more similar clinically and in terms of resource use to the services assigned to APC 5211 than to those assigned to APC 5071.

    Response: We disagree with the commenter. We believe that the procedures described by CPT code 33284 are appropriately assigned to APC 5071. Based on updated claims data used for the final rule, the geometric mean cost of CPT code 33284 (approximately $715) is more comparable to the geometric mean cost of APC 5071 (approximately $554) than to the geometric mean cost of APC 5072 (approximately $1,271). Therefore, we do not believe that it would be appropriate to assign procedures described by CPT code 33284 to a higher level within the Excision/Biopsy/Incision and Drainage APC series. In addition, the procedures described by CPT code 33284 are not electrophysiology services and, therefore, do not appropriately correlate with the services assigned to APC 5211. Therefore, we are finalizing our CY 2017 proposal to assign the procedures described by CPT code 33284 to APC 5071.

  144. Cardiac Telemetry (APC 5733)

    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, 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 5722 (Level 2 Diagnostic Tests and Related Services) to APC 5734 (Level 4 Minor Procedures), with a proposed payment rate of $95.66.

    Comment: One commenter disagreed with the proposed reassignment of CPT code 93229 to APC 5734, and stated that the proposed payment rate represents a 60-percent decrease from the CY 2016 payment rate of $220.35. The commenter indicated that the proposed underpayment of $95.66 does not reflect the significant costs involved in providing the service. The commenter added that the wearable device used by the beneficiary costs over $21,000. The commenter explained that because of the significant resource costs associated with performing the service described by CPT code 93229, most hospital outpatient facilities that provide this service contract the work to a remote cardiac monitoring service company because HOPDs do not have the devices, technology, or infrastructure in place to provide the service in-house. In addition, the commenter believed that hospitals are still confused about how to code for remote cardiac diagnostic tests, and indicated that the proposed payment rate of $95.66 for CPT code 93229 is the result of hospitals

    Page 79617

    miscoding the service on claims. The commenter believed that the coding education provided in the April 2015 edition of the Coding Clinic for HCPCS will assist hospitals in coding appropriately for the service. However, until the coding education effort effectuates changes in coding practices, the commenter believed that the true cost of furnishing the service described by CPT code 93229 is more comparable to the OPPS payment rate of approximately $795 made in CY 2012, and recommended that CMS reassign this service to APC 5724 (Level 4 Diagnostic Tests and Related Services), with a proposed payment rate of $870.62. Alternatively, if CMS is unable to reassign the service to APC 5724, the commenter suggested that CMS continue the CY 2016 APC assignment for CPT code 93229 to APC 5722, with a payment rate of $220.35. The commenter further stated that when the service described by CPT code 93229 is provided under the MPFS, the payment rate for performing this service is $732.68. The commenter believed that continuing to assign CPT code 93229 to APC 5722 for CY 2017 will provide payment stability for this service while coding education efforts continue.

    Response: Based on our analysis of the CY 2015 claims data used for the proposed rule, we proposed to reassign CPT code 93229 to APC 5734. Specifically, our analysis showed a geometric mean cost of approximately $77 based on 1,847 single claims (out of 3,747 total claims). Based on its clinical and resource homogeneity to the other services, we proposed to reassign the service described by CPT code 93229 to APC 5734, whose geometric mean cost was approximately $100. We did not propose to continue to assign CPT code 93229 to APC 5722 because the geometric mean cost for this APC was approximately $242, which would result in a significant overpayment for the service. However, based on our review of the updated CY 2015 claims data used for this final rule with comment period, we found the geometric mean cost for CPT code 93229 to be lower than the proposed rule geometric mean cost. We note that the proposed rule claims data were based on claims submitted from January 1, 2015, through December 31, 2015, and processed through December 31, 2015, while the final rule with comment period claims data are based on claims submitted from January 1, 2015, through December 31, 2015, and processed through June 30, 2016. Based on our analysis of the final rule with comment period claims data, we found a geometric mean cost of approximately $71 for the service described by CPT code 93229 based on 2,323 single claims (out of 4,495 total claims). The geometric mean cost for the service described by CPT code 93229 is more similar to that of APC 5733 (Level 3 Minor Procedures), which has a geometric mean cost of approximately $56, than to the geometric mean cost of approximately $103 for APC 5734. Consequently, we believe that CPT code 93229 should be reassigned to APC 5733, rather than APC 5734.

    Also, as we have stated repeatedly, 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. (We refer readers to the CY 2011 OPPS/ASC final rule with comment period (75 FR 71838) for further discussion.) Hospitals are responsible for accurately coding the performance of procedures and services and the items furnished to beneficiaries.

    In summary, after evaluating the public comment we received and our subsequent analysis of the updated claims data for this final rule with comment period, we are modifying our proposal and reassigning the service described by CPT code 93229 to APC 5733 for CY 2017. The final payment rate for this code can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

    2. Eye-Related Services

    Comment: A few commenters requested that CMS assign new CPT code 0465T (Suprachoroidal injection of a pharmacologic agent (does not include supply of medication)) to APC 5694 (Level 4 Drug Administration) instead of APC 5693 (Level 3 Drug Administration) because the commenters believed that the service is clinically similar and similar from a resource-use perspective to CPT code 67028 (Intravitreal injection of a pharmacologic agent (separate procedure), which is assigned to APC 5694.

    Response: We agree with the commenters. We are modifying our proposal and assigning CPT code 0465T to APC 5694 for CY 2017. Because CPT code 0465T is new, we do not have claims data upon which to base an initial APC assignment. However, we believe that the clinical and resource similarities of the procedure described by CPT code 0465T, when compared to the procedure described by CPT code 67028, support assigning CPT code 0465T to APC 5694 at this time. When cost and claims data become available for CPT code 0465T, we will reevaluate the APC assignment.

    Comment: One commenter requested that CMS pay separately for the new CPT codes 0444T (Initial placement of a drug-eluting ocular insert under one or more eyelids, including fitting, training, and insertion, unilateral or bilateral) and 0445T (Subsequent placement of a drug-

    eluting ocular insert under one or more eyelids, including re-training, and removal of existing insert, unilateral or bilateral) instead of unconditionally packaging the payment for these services, as proposed.

    Response: We disagree with the commenters. The procedure to place one of these inserts under an eyelid (as described by these procedure codes) is a very minor service (not unlike delivering eye drops) that requires little time or effort from a nurse or technician. Any associated additional cost associated with performing these procedures are appropriately packaged with another service.

    3. Gastrointestinal Procedures and Services

  145. Esophageal Sphincter Augmentation (APC 5362)

    For CY 2017, we proposed to assign the procedures described by new CPT code 43284 (Laparoscopy, surgical, esophageal sphincter augmentation procedure, placement of sphincter augmentation device, including cruroplasty when performed) to APC 5362 (Level 2 Laparoscopy and Related Services), with a geometric mean cost of approximately $7,183. CPT code 43284 replaces CPT code 0392T, which replaced HCPCS code C9737. HCPCS code C9737 was in effect for the first half of CY 2015, and CPT code 0392T became effective beginning in the second half of CY 2015 and will be deleted at the end of CY 2016. Based on the claims data used for the proposed rule, the geometric mean cost for the procedure described by HCPCS code C9737 was approximately $10,260 (45 single claims) and the geometric mean cost for the procedure described by CPT code 0392T was approximately $8,453 (19 single claims).

    Comment: One commenter disagreed with the proposed APC assignment for procedures described by CPT code 43284 to APC 5362. The commenter stated that the proposed payment rate for APC 5362 does not accurately reflect the anticipated cost of providing the services described by CPT code 43284. The commenter suggested that CMS create a new Level 3 APC within the laparoscopy and related services APC

    Page 79618

    series that would contain the 20 most costly procedures that are currently assigned to APC 5362. According to the commenter, the creation of this new Level 3 Laparoscopy APC would be more representative of the resource costs for services described by CPT code 43284.

    Response: Based on updated claims data for the final rule, we compared the geometric mean cost for procedures described by CPT code 0392T (the predecessor code for CPT code 43284) to the geometric mean cost of APC 5362. The geometric mean cost for procedures described by CPT code 0392T is $8,715 based on 24 single claims, which is $1,551 greater than the geometric mean cost for APC 5362 of $7,164. Furthermore, since CPT code 0392T replaced HCPCS code C9737, the cost of this service has decreased from $10,388 for HCPCS code C9737 to $8,715 for CPT code 0392T. The commenter identified 9,276 single claims using data published with the proposed rule that could be used to create a new Level 3 Laparoscopy and Related Services APC. However, this subgroup of procedures from APC 5362 only contains two significant procedures, and 23 percent of the 40,035 single claims from APC 5362. The services for the suggested Level 3 Laparoscopy and Related Services APC have both sufficient clinical and resource homogeneity to the other procedures assigned to APC 5362. Therefore, we do not believe that there is a need to create another APC for these services.

    After consideration of the public comment we received, we are finalizing our proposal, without modification, to assign procedures described by CPT code 43284 to APC 5362, effective January 1, 2017. The final payment rate for CPT code 43284 can be found in Addendum B to this final rule with comment period, which is available via the Internet on the CMS Web site.

  146. Esophagogastroduodenoscopy: Transmural Drainage of Pseudocyst (APC 5303)

    For CY 2017, we proposed to assign CPT code 43240 (Esophagogastroduodenoscopy, flexible, transoral; with transmural drainage of pseudocyst (includes placement of transmural drainage catheter(s)/stent(s), when performed, and endoscopic ultrasound, when performed)) to APC 5303 (Level 3 Upper GI Procedures), for which we proposed a CY 2017 geometric mean cost of approximately $2,598.

    Comment: Commenters disagreed with CMS' proposal to assign CPT code 43240 to APC 5303. The commenters believed that CPT code 43240 would be more appropriately assigned to APC 5331 (Complex GI Procedures), for which we proposed a CY 2017 geometric mean cost of approximately, based upon the procedure's clinical similarity to other endoscopy procedures involving stent placement currently assigned to APC 5331. Additionally, commenters stated that the proposed CY 2017 geometric mean cost of $2,578 may underrepresent the true costs of the procedure because of underreporting of the C-code for stents.

    Response: We disagree with the commenters' assertion that CPT code 43240 would be more appropriately assigned to APC 5331. While we acknowledge that a number of endoscopy procedures involving stent placement are currently assigned to APC 5331, we continue to believe that based on our claims data available for CY 2017 ratesetting, the proposed assignment of CPT code 43240 to APC 5303 is appropriate.

    After consideration of the public comments we received, we are finalizing our proposal, without modification, to assign CPT code 43240 to APC 5303, which has a final CY 2017 APC geometric mean cost of approximately $2,581. The final payment rate for this code can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

    Comment: One commenter requested that we create a new APC and assign the following four codes to this new APC: (1) HCPCS code G0105 (Colorectal cancer screening; colonoscopy on individual at high risk); (2) HCPCS code G0121 (Colorectal cancer screening; colonoscopy on individual not meeting criteria for high risk); (3) CPT code 44388 (Colonoscopy through stoma; diagnostic, including collection of specimen(s) by brushing or washing, when performed (separate procedure)); and (4) CPT code 45378 (Colonoscopy, flexible; diagnostic, including collection of specimen(s) by brushing or washing, when performed (separate procedure)). The commenters emphasized the clinical importance of colonoscopy in the detection and treatment of colon cancer as a motivation for the creation of this new APC.

    Response: We recognize the importance of colonoscopies to Medicare beneficiaries and believe that the OPPS and ASC payment policies for colonoscopies allow full access to these services. As a part of our multi-year review, which includes restructuring and reorganization and consolidation of the OPPS APCs, we have been creating larger APCs based on simpler and more intuitive clinical groupings. We believe that APC 5311 (Level 1 Lower GI Procedures) is an appropriate APC assignment for these four codes from a clinical and resource perspective. We also fail to recognize any particular advantage of creating the suggested new APC that would contain only four codes. The geometric mean cost of CPT code 45378 drives the payment rate for APC 5311 because it represents 81 percent of the single claims in this APC. As we discuss later in the section on the imaging APCs, we are reassigning HCPCS codes G0105 and G0121 to APC 5311. We believe that all four of these codes are clinically similar (all are similar colonoscopy services) and are similar in terms of resource costs based on their geometric mean costs. We are finalizing the proposal to assign HCPCS codes G0105 and G0121, and CPT codes 44388 and 45378 to APC 5311 for CY 2017.

    Comment: One commenter believed that some of the tube and catheter placement procedure codes (for example, CPT code 32561 (Installation(s), via chest tube/catheter agent for fibrinolysis (e.g., fibrinolytic agent for break up of multiloculated effusion); initial day) that were assigned to APC 5301 (Level 1 Upper GI Procedures) in the proposed rule are not clinically similar to the endoscopy procedures that have traditionally been grouped together in APC 5301 (or its predecessor APC). The commenter requested that CMS reassign the catheter and tube placement procedure codes to other APCs that would be more clinically suitable.

    Response: Upon further review of the procedure codes assigned to APC 5301, we agree with the commenter. Table 11 below shows the final APC reassignments for the tube and catheter placement and removal procedure codes that were assigned to APC 5301 in the proposed rule.

    Page 79619

    Table 11--Tube and Catheter Codes Reassigned from APC 5301

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

    Final CY 2017 Final CY 2017

    CPT code Descriptor APC SI

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

    32552............... Removal of 5181 Q2

    indwelling

    tunneled pleural

    catheter with

    cuff.

    32554............... Thoracentesis, 5181 T

    needle or

    catheter,

    aspiration of

    the pleural

    space; without

    imaging guidance.

    32555............... Thoracentesis, 5181 T

    needle or

    catheter,

    aspiration of

    the pleural

    space; with

    imaging guidance.

    32560............... Instillation, via 5181 T

    chest tube/

    catheter, agent

    for pleurodesis

    (e.g., talc for

    recurrent or

    persistent

    pneumothorax).

    32561............... Installation(s), 5181 T

    via chest tube/

    catheter agent

    for fibrinolysis

    (e.g.,

    fibrinolytic

    agent for break

    up of

    multiloculated

    effusion);

    initial day.

    32562............... (Installation(s), 5181 T

    via chest tube/

    catheter agent

    for fibrinolysis

    (e.g.,

    fibrinolytic

    agent for break

    up of

    multiloculated

    effusion);

    subsequent day.

    32960............... Pneumothorax, 5181 T

    therapeutic,

    intrapleural

    injection of air.

    36575............... Repair of 5181 T

    tunneled or non-

    tunneled central

    venous access

    catheter,

    without

    subcutaneous

    port or pump,

    central or

    peripheral

    insertion site.

    36589............... Removal of 5181 Q2

    tunneled central

    venous catheter,

    without

    subcutaneous

    port or pump.

    61070............... Puncture of shunt 5442 T

    tubing or

    reservoir for

    aspiration or

    injection

    procedure.

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

    We are reassigning all of the procedure codes listed in the above table to APC 5181 (Level 1 Vascular Procedures), except for CPT code 61070 which we are reassigning to APC 5442. We believe that APC 5181 is the most appropriate APC assignment because it currently contains various catheter insertion and removal codes and similar procedures that use catheters. We do not believe that the nine procedures codes that we are reassigning to APC 5181 are sufficiently unique that a new APC specifically for assignment of these nine codes is warranted. We also understand that these codes are at the low end of the cost range for the procedures assigned to APC 5181, but APC 5181 is the lowest cost APC in this series. We also understand that the lung procedures that we are proposing to reassign to APC 5181 are not vascular procedures, but we believe that they are generally sufficiently similar to vascular catheter insertion procedures such that assignment to APC 5181 is clinically appropriate, and that a dedicated lung procedures APC is not necessary. However, to acknowledge that these APCs includes services that are not strictly ``vascular,'' we are renaming the Vascular Procedures APCs (5181 through 5183) Levels 1 through 3 to ``Vascular Procedures & Related Services.''

    4. Musculoskeletal Procedures/Services

    Consistent with CMS' statutory requirement under section 1833(t)(9)(A) 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 costs and clinical coherence of the procedures associated with the Closed Treatment Fracture and Related Services (APCs 5111, 5112, and 5113) and Musculoskeletal Procedures APCs (APCs 5121, 5122, 5123, 5124, and 5125). For the CY 2017 OPPS update, we reviewed the procedures assigned to the Closed Treatment Fracture and Musculoskeletal Procedures APCs, and consolidated the two APC groups into the Musculoskeletal APC group, with six Levels, to improve the homogeneity of the procedures within these two APC groups. Based on our analysis of the CY 2015 hospital outpatient claims data used for the proposed rule, we proposed some modifications to these groups as reflected in Addendum B to the CY 2017 OPPS/ASC proposed rule. Specifically, we proposed to reassign certain procedures from one level within an APC to another; either from a lower-level paying APC to a higher-level paying APC, or from a higher-level paying APC to a lower-

    level paying APC, depending on the geometric mean cost for each procedure code. In addition, we proposed to revise the APC group title from ``Closed Treatment Fracture and Related Services'' to ``Musculoskeletal Procedures,'' and also proposed to establish a new level within the APC, specifically, Level 6, for the assignment of musculoskeletal procedures. We believe that the proposed restructuring and consolidation of the musculoskeletal APCs more appropriately group the musculoskeletal services according to their current resource costs, as well as their clinical characteristics.

    Comment: Some commenters supported the reorganization and the increase in the number of musculoskeletal APC levels from five to six. One commenter expressed approval for the number of procedures assigned to Level 6 within the APC and stated that the methodology for assigning procedures to this level is logical, consistent with other APCs, and leads to more appropriate hospital payments. One commenter also stated that the change will help correct the problem associated with those musculoskeletal procedures that had previously shifted to the more costly inpatient setting because of inadequate payments under the hospital OPPS. Consequently, these commenters requested that CMS finalize the proposal.

    Response: We appreciate the commenters' support.

    Comment: One commenter requested that CMS reevaluate the procedure codes assigned to Level 4 within the Musculoskeletal Procedures APC to ensure that these services are paid appropriately. The commenter expressed concern with the range of costs for the procedures assigned to Level 4 and 5, and stated that the current proposal underpays for some of the procedures assigned to Level 4. To correct the variation of costs between Level 4 and 5, the commenter suggested reassigning some of the procedures from Level 4 to Level 5, or alternatively, establishing a new, intermediate level APC whose geometric mean cost is between Level 4 and 5.

    Response: We appreciate the commenter's suggestion. However, we believe that the proposed structure of the musculoskeletal APCs with six levels, compared to last year's five levels, improves the homogeneity of the procedures within the musculoskeletal APC group. As we do annually, we will again review and evaluate the APC assignments for all items, procedures, and services paid under the hospital OPPS for the CY 2018 rulemaking.

    We also received several public comments concerning the proposed reassignment of certain procedures assigned to the Musculoskeletal Procedures APCs. A summary of the

    Page 79620

    public comments and our responses follow.

  147. Auditory Osseointegrated Implants/Bone-Anchored Hearing Systems (APCs 5114, 5115, and 5116)

    In Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to reassign four auditory osseointegrated implant procedures. Specifically, as listed in Table 12 below, we proposed to reassign CPT code 69714 from APC 5125 (Level 5--Musculoskeletal Procedures) to APC 5115 (Level 5--Musculoskeletal Procedures), CPT code 69715 from APC 5125 to APC 5116 (Level 6--Musculoskeletal Procedures), CPT code 69717 from APC 5123 (Level 3--Musculoskeletal Procedures) to APC 5114 (Level 4--Musculoskeletal Procedures), and CPT code 69718 from APC 5124 (Level 4--Musculoskeletal Procedures) to APC 5115.

    Table 12--Proposed CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Auditory Osseointegrated Procedures

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

    Proposed

    CY 2016 Proposed CY Proposed CY 2017

    CPT code Long descriptors CY 2016 CY 2016 OPPS 2017 OPPS CY 2017 OPPS

    OPPS SI OPPS APC payment SI OPPS APC payment

    rate rate

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

    69714................................ Implantation, osseointegrated J1 5125 $10,537.90 J1 5115 $9,491.00

    implant, temporal bone, with

    percutaneous attachment to

    external speech processor/

    cochlear stimulator; without

    mastoidectomy.

    69715................................ Implantation, osseointegrated J1 5125 10,537.90 J1 5116 14,444.00

    implant, temporal bone, with

    percutaneous attachment to

    external speech processor/

    cochlear stimulator; with

    mastoidectomy.

    69717................................ Replacement (including removal of J1 5123 4,969.26 J1 5114 5,199.03

    existing device),

    osseointegrated implant,

    temporal bone, with percutaneous

    attachment to external speech

    processor/cochlear stimulator;

    without mastoidectomy.

    69718................................ Replacement (including removal of J1 5124 7,064.07 J1 5115 9,491.00

    existing device),

    osseointegrated implant,

    temporal bone, with percutaneous

    attachment to external speech

    processor/cochlear stimulator;

    with mastoidectomy.

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

    Comment: One commenter expressed appreciation for the proposed payment increase for CPT codes 69715, 69717, and 69718. However, several commenters opposed the proposed payment decrease for CPT code 69714. The commenters who disagreed with the APC reassignment indicated that the data used by CMS are flawed and do not accurately capture the cost of performing an osseointegrated implant surgery. Some commenters stated that the proposed payment rate for CPT code 69714 would be inadequate to cover the cost of the procedure. These commenters noted that the list price for a CochlearTM Bahasupreg Implant System ranges from $6,887 to $8,435. Consequently, several commenters requested that CMS not finalize the proposed payment reduction for CPT code 69714 pending the collection of accurate claims data.

    Response: As stated above, section 1833(t)(9)(A) of the Act requires the Secretary to review certain components of the OPPS, not less often than annually, and to revise the groups, relative payment weights, and other adjustments that take into account changes in medical practices, changes in technologies, and the addition of new services, new cost data, and other relevant information and factors. As such, we review on an annual basis all APC assignments for both general appropriateness and for violations of the 2 times rule, and when necessary, reassign CPT codes to more appropriate APCs. Although there was no violation of the 2 times rule within the Closed Treatment Fracture and Related Services and Musculoskeletal Procedures APCs, based on our review of the updated CY 2015 claims data used for this CY 2017 OPPS/ASC final rule with comment period, we believe that revising the Musculoskeletal Procedure APC structure is necessary to maintain the clinical homogeneity and resource characteristics of the procedures within this APC group.

    In addition, review of the latest hospital outpatient claims data used for this final rule with comment period shows the geometric mean cost for CPT code 69714 is approximately $9,407 based on 703 single claims (out of 713 total claims), which is relatively similar to and slightly less than the final rule geometric mean cost of $9,828 for APC 5115. Therefore, we continue to believe that the procedure described by CPT code 69714 is appropriately placed in APC 5115 based on resource and clinical homogeneity to other procedures currently assigned to APC 5115.

    Further, as we do every year, we evaluate our claims data to determine the appropriateness of the APC assignments for all payable services and items under the hospital OPPS. For the CY 2017 OPPS update, based on our review, we proposed to revise the APC assignments for four auditory osseointegrated implant procedures, specifically, CPT codes 69714, 69715, 69717, and 69718. As a result of our APC review for the CY 2017 OPPS update, we note that, based on our review of the final rule with comment period claims data, three of the four procedures, specifically, CPT codes 69715, 69717, and 69718, will receive an increase in payment for CY 2017 under the hospital OPPS.

    Page 79621

    Comment: Some commenters believed that the proposed payment reduction for CPT code 69714 would restrict Medicare beneficiary access to the procedure.

    Response: We disagree with the commenters. We do not believe that the revised payment for CPT code 69714 will affect beneficiaries' access to reasonable and appropriate care. Moreover, we believe that providers will continue to perform this procedure when medically necessary.

    After consideration of the public comments we received, we are finalizing our CY 2017 proposal, without modification, to reassign CPT codes 69714, 69715, 69717 and 69718 to APCs 5115, 5116, 5114, and 5115, respectively. Table 13 below lists the final status indicator and APC assignments, and payment rates for the four auditory osseointegrated procedures.

    Table 13--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Auditory Osseointegrated Procedures

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

    CY 2016 Final CY

    CY 2016 OPPS CY 2016 OPPS Final CY Final CY 2017 OPPS

    CPT code Long descriptors SI OPPS APC payment 2017 OPPS 2017 OPPS payment

    rate SI APC rate

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

    69714................................ Implantation, osseointegrated J1 5125 $10,537.90 J1 5115 $9,557.20

    implant, temporal bone, with

    percutaneous attachment to

    external speech processor/

    cochlear stimulator; without

    mastoidectomy.

    69715................................ Implantation, osseointegrated J1 5125 10,537.90 J1 5116 14,697.92

    implant, temporal bone, with

    percutaneous attachment to

    external speech processor/

    cochlear stimulator; with

    mastoidectomy.

    69717................................ Replacement (including removal of J1 5123 4,969.26 J1 5114 5,219.36

    existing device),

    osseointegrated implant,

    temporal bone, with percutaneous

    attachment to external speech

    processor/cochlear stimulator;

    without mastoidectomy.

    69718................................ Replacement (including removal of J1 5124 7,064.07 J1 5115 9,557.20

    existing device),

    osseointegrated implant,

    temporal bone, with percutaneous

    attachment to external speech

    processor/cochlear stimulator;

    with mastoidectomy.

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

  148. Bunion Correction/Foot Fusion (APC 5114)

    In Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to reassign CPT codes 28297 (Correction, hallux valgus (bunion), with or without sesamoidectoy; lapidus-type) and 28740 (Arthrodesis, midtarsal or tarsometatarsal, single joint) to APC 5114 (Level 4--Musculoskeletal Procedures) with status indicator ``J1.'' Both CPT codes 28297 and 28740 have a CY 2016 payment rate of approximately $7,064 and a proposed CY 2017 payment rate of approximately $5,199.

    Comment: One commenter expressed concern with the reassignment of CPT codes 28297 and 28740 to C-APC 5114, and stated that the proposed payment would result in a significantly lower payment rate for these services. The commenter indicated that its invoices document the total equipment cost at approximately $7,490, which is more than the proposed payment rate for C-APC 5114. The commenter also believed that CPT codes 28297 and 28740 are inappropriately assigned to C-APC 5114 because this APC does not reflect the resource or clinical complexity of these procedures. In addition, the commenter stated that the Musculoskeletal APCs are not granular enough to account for the costs associated with the broad range of orthopedic procedures performed in the hospital outpatient setting. Finally, this same commenter recommended that CMS establish an additional APC level that is not designated as a comprehensive APC for musculoskeletal procedures whose costs are in the range of $7,000 to $7,999. The commenter requested that CMS reassign CPT codes 28297 and 28740 to this new APC level, with a payment rate of approximately $7,500. If CMS is unable to establish an additional APC, the commenter recommended that CMS retain the CY 2016 Musculoskeletal APC structure and payment levels. However, if CMS finalizes the proposal, the commenter requested that CMS ensure that all hospital costs for CPT codes 28297 and 28740 are captured appropriately and that the payment rate for C-APC 5114 is adjusted to reflect the cost of providing these services.

    Response: We do not believe that it is necessary to create an additional APC level for these musculoskeletal procedures. We believe that CPT codes 28297 and 28740 are clinically similar to the other procedures assigned to C-APC 5114 with similar resource costs. As the commenter observed, the musculoskeletal APCs include various orthopedic procedures representing a range of costs from $3,774 (CPT code 27385) to $7,283 (CPT code 28740). The payment for procedures assigned to C-

    APC 5114 is based on the weighted average geometric mean cost for all of the procedures assigned to C-APC 5114. As with most other APCs, because the payment is based on an average of the costs of all of the procedures assigned to the APC, the payment rate can be either above or below the cost of a specific procedure. We believe that the assignment of CPT codes 28297 and 28740 to C-APC 5114 satisfies both the requirement for clinical similarity and resource similarity. There are several other similar foot surgical procedures assigned to C-APC 5114. Further, our claims data do not reveal any 2 times

    Page 79622

    rule violations in C-APC 5114. We also note that certain complex multi-

    procedure cases, including cases involving the procedures described by both CPT code 28297 and 28740, receive a complexity adjustment and reassignment to C-APC 5115, which results in a significantly higher payment for these more costly cases. For CY 2017, the payment rate for C-APC 5115 is approximately $9,557. We remind hospitals that, as we do every year, we will again review the APC assignments for all services under the hospital OPPS for the CY 2018 rulemaking.

    After consideration of the public comments received, we are finalizing our CY 2017 proposal, without modification, to reassign CPT codes 28297 and 28740 to C-APC 5114. Table 14 below lists the final CY 2017 OPPS status indicator and APC assignments, and payment rates for CPT codes 28297 and 28740. We refer readers to Addendum B of this final rule with comment period for the payment rates for all codes reportable under the OPPS. Addendum B is available via the Internet on the CMS Web site. In addition, the list of codes that qualify for complexity adjustments can be found in Addendum J to this final rule with comment period (which is available via the Internet on the CMS Web site). Addendum J to this final rule with comment period also contains the summary cost statistics for each of the code combinations that describe a complex code combination that qualify for a complexity adjustment and are reassigned to the next higher cost C-APC within the clinical family.

    Table 14--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for CPT Codes 28297 and 28740

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

    CY 2016 Final CY

    CY 2016 OPPS CY 2016 OPPS Final CY Final CY 2017 OPPS

    CPT code Long descriptors SI OPPS APC payment 2017 OPPS 2017 OPPS payment

    rate SI APC rate

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

    28297................................ Correction, hallux valgus J1 5124 $7,064.07 J1 5114 $5,219.36

    (bunion), with or without

    sesamoidectomy; lapidus-type

    procedure.

    28740................................ Arthrodesis, midtarsal or J1 5124 7,064.07 J1 5114 5,219.36

    tarsometatarsal, single joint.

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

  149. Intervertebral Biomechanical Devices

    For CY 2017, the AMA CPT Editorial Panel deleted CPT code 22851 and replaced it with three new codes, effective January 1, 2017. Table 15 below lists the long descriptor for the procedure described by CPT code 22851, as well as the replacement codes, specifically, CPT codes 22853, 22854, and 22859. We note that the deleted and replacement codes were listed in Addendum B and Addendum O to the CY 2017 OPPS/ASC proposed rule. Addendum B listed the proposed status indicator assignments for the replacement codes, which are assigned to comment indicator ``NP'' (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, proposed APC assignment; comments will be accepted on the proposed APC assignment for the new code.), while Addendum O listed the placeholder/proposed CY 2017 CPT codes and their long descriptors.

    Table 15--CY 2017 Status Indicator (SI) Assignments for the Application/Insertion of the Intervertebral

    Biomechanical Devices

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

    Proposed CY Final CY 2017

    Proposed CY 2017 CPT code Final CY 2017 CPT code Long descriptors 2017 OPPS SI OPPS SI

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

    22851..................... 22851..................... Application of D D

    intervertebral

    biomechanical

    device(s) (e.g.,

    synthetic cage(s),

    methylmethacrylate)

    to vertebral defect

    or interspace (List

    separately in

    addition to code for

    primary procedure).

    22X81..................... 22853..................... Insertion of interbody N N

    biomechanical

    device(s) (e.g.,

    synthetic cage, mesh)

    with integral

    anterior

    instrumentation for

    device anchoring

    (e.g., screws,

    flanges), when

    performed, to

    intervertebral disc

    space in conjunction

    with interbody

    arthrodesis, each

    interspace (List

    separately in

    addition to code for

    primary procedure).

    22X82..................... 22854..................... Insertion of N N

    intervertebral

    biomechanical

    device(s) (e.g.,

    synthetic cage, mesh)

    with integral

    anterior

    instrumentation for

    device anchoring

    (e.g., screws,

    flanges), when

    performed, to

    vertebral

    corpectomy(ies)

    (vertebral body

    resection, partial or

    complete) defect, in

    conjunction with

    interbody

    arthrodesis, each

    contiguous defect

    (List separately in

    addition to code for

    primary procedure).

    22X83..................... 22859..................... Insertion of N N

    intervertebral

    biomechanical

    device(s) (e.g.,

    synthetic cage, mesh,

    methylmethacrylate)

    to intervertebral

    disc space or

    vertebral body defect

    without interbody

    arthrodesis, each

    contiguous defect

    (List separately in

    addition to code for

    primary procedure).

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

    Comment: One commenter suggested that CMS pay separately for the replacement CPT codes 22X81, 22X82, and 22X83 and assign the new codes to New Technology APCs to enable CMS to collect cost information and determine

    Page 79623

    whether to pay separately or package the procedures in the future. The commenter explained that the cost of providing the procedures associated with these new spine instrumentation codes are costly and include high-cost implants. The commenter also believed that, while CMS has a policy for packaging payment for procedures described by add-on codes under the hospital OPPS, it is not required to do so because its regulation refers only to packaging of certain services described by add-on codes.

    Response: We do not agree with the commenter that the spine instrumentation procedures described by proposed CPT codes 22X81, 22X82, and 22X83 (replacement CPT codes 22853, 22854, and 22859) are new technology procedures that warrant an assignment to a new technology APC. These procedures have been performed for some time now in the hospital outpatient setting, and as evidenced by the predecessor code, CPT code 22851 which was established in 1996, these procedures are not new. In addition, we do not agree with the commenter that we should pay separately for replacement CPT codes 22853, 22854, and 22859 because these codes describe add-on services. Since January 1, 2014, payment for procedures described by add-on codes have been packaged under the hospital OPPS. Because the predecessor CPT code 22851 was assigned to a packaged status indicator under the hospital OPPS, we are assigning CPT codes 22853, 22854, and 22859 to status indicator ``N'' to indicate that payment for these services are packaged under the hospital OPPS for CY 2017.

    After consideration of the public comment we received, we are finalizing our proposal, without modification, to assign CPT codes 22853, 22854, and 22859 to status indicator ``N'' for CY 2017.

  150. Percutaneous Vertebral Augmentation/Kyphoplasty (APC 5114)

    In Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to reassign CPT codes 22513 (Percutaneous vertebral augmentation, including cavity creation (fracture reduction and bone biopsy included when performed) using mechanical device (e.g., kyphoplasty), 1 vertebral body, unilateral or bilateral cannulation, inclusive of all imaging guidance; thoracic) and 22514 (Percutaneous vertebral augmentation, including cavity creation (fracture reduction and bone biopsy included when performed) using mechanical device (e.g., kyphoplasty), 1 vertebral body, unilateral or bilateral cannulation, inclusive of all imaging guidance; lumbar) from APC 5124 (Level 4 Musculoskeletal Procedures) to APC 5114 (Level 4 Musculoskeletal Procedures). Both CPT codes have a CY 2016 payment rate of approximately $7,064 and a proposed CY 2017 payment rate of approximately $5,199. Because CPT code 22515 (Percutaneous vertebral augmentation, including cavity creation (fracture reduction and bone biopsy included when performed) using mechanical device (e.g., kyphoplasty), 1 vertebral body, unilateral or bilateral cannulation, inclusive of all imaging guidance; each additional thoracic or lumbar vertebral body (list separately in addition to code for primary procedure) is an add-on code, we proposed to continue its packaged status.

    Based on the CY 2015 hospital outpatient claims data available for the proposed rule, our analysis revealed a geometric mean cost of approximately $5,434 for APC 5114, while the geometric mean cost for CPT codes 22513 and 22514 is approximately $6,664 and $6,672, respectively. Because the proposed geometric mean cost for APC 5115, which is the Level 5 Musculoskeletal Procedures APC, is significantly higher at $9,920 compared to the geometric mean cost for CPT codes 22513 and 22514, we proposed to assign CPT codes 22513 and 22514 to APC 5114 for CY 2017.

    At the August 22, 2016 HOP Panel meeting, a presenter requested the reassessment of the proposed revised Musculoskeletal APC groupings that result in payment reductions for CPT codes 22513 and 22514. Specifically, the commenter observed that the proposed modification to the musculoskeletal APCs reduces the payment for these procedures by 26 percent for CY 2017. During the Panel discussion, CMS indicated that, in the CY 2016 OPPS/ASC proposed rule, the Agency initially proposed to establish four levels of the musculoskeletal APCs. However, based on the comments received on the CY 2016 proposal, CMS agreed with the request to establish a new level, specifically, Level 5 Musculoskeletal Procedures APC, for the CY 2016 update. In addition, during the discussion at the August 2016 Panel meeting, CMS informed the Panel that, for the CY 2017 update, CMS proposed to establish an additional level, specifically, Level 6 Musculoskeletal Procedures APC, for the musculoskeletal procedures. At the August 2016 HOP meeting, despite the request from the presenter, the Panel made no recommendation related to this issue.

    Comment: Several commenters disagreed with the proposal and stated that the proposed reassignment of these procedures to APC 5114 would result in significant underpayment for these services. Some commenters noted that the proposed CY 2017 payment rate of $5,199.03 for CPT codes 22513 and 22514 is lower than the geometric mean costs of $6,664 for CPT code 22513 and $6,672 for CPT code 22514. These commenters requested that CMS reassign CPT codes 22513 and 22514 to APC 5115 (Level 5 Musculoskeletal Procedures APC), whose proposed CY 2017 payment rate is $9,491.

    Response: We do not agree with the commenters that we should reassign these procedures to APC 5115. Based on the updated CY 2015 hospital outpatient claims data used for this final rule with comment period, our analysis reveals a geometric mean cost of approximately $5,367 for APC 5114, which is lower than the geometric mean cost of approximately $6,674 for CPT code 22513 based on 8,553 single (out of 8,665 total claims), or the geometric mean cost of approximately $6,643 for CPT code 22514 based on 10,451 single claims (out of 10,609 total claims). Because the difference between the geometric mean cost for APC 5115 ($9,828) and the geometric mean costs of CPT code 22513 ($6,674) and CPT code 22514 ($6,643) is significantly greater than the difference between the geometric mean cost of CPT codes 22513 and 22514 and the geometric mean cost of APC 5114 ($5,367), we believe these procedures should be assigned to APC 5114.

    In addition, we do not agree with the commenters' assertion that the current assignment of CPT codes 22513 and 22514 in APC 5114 would result in significant underpayment for these services. OPPS payments are based on the geometric mean costs of all of the services assigned to the APC. By definition the costs of some services must be below the geometric mean and others must be above the geometric mean. As we have stated in the past (72 FR 66639), in some cases, payment exceeds the average cost of the CPT code, and in other cases, payment is less than the average cost of the CPT code.

    Comment: One commenter stated that procedures described by add-on codes are paid separately in physician offices. However, payment for these services are packaged under the hospital OPPS. This difference results in higher payments for percutaneous vertebral augment/

    kyphoplasty procedures performed in the office setting compared to the HOPD setting. The commenter further noted that this discrepancy indicates that CMS

    Page 79624

    may be using a flawed methodology, similar to the CPT Committee and RUC, in determining payment rates for services under the hospital OPPS. Finally, the commenter requested that CMS increase the payment rate for CPT codes 22513 and 22514 to equalize payment for these procedures across all settings.

    Response: The hospital OPPS and the MPFS that applies to physician's office services are fundamentally different payment systems with essential differences in their payment policies and structures. Specifically, the hospital OPPS is a prospective payment system, based on the concept of payment for groups of services that share clinical and resource characteristics. Payment is made under the hospital OPPS according to prospectively established payment rates that are related to the relative costs of hospital resources for services. The MPFS is a fee schedule based on the relative value of each individual component of services. Furthermore, physician fee schedule payments include payment for physician professional work, which is not a part of the OPPS payment to hospitals.

    In addition, consistent with our general add-on code packaging policy, we package payment for certain procedures described by add-on codes under the hospital OPPS. Because CPT code 22515 is an add-on code, we have assigned this code to a packaged payment status. We believe that the procedure is a service that is always furnished in addition to another procedure (in this case, either CPT code 22513 or 22514) and cannot be performed independently. Under the MPFS approach, separate payment is made for add-on procedures provided in the physician's office, but the OPPS packages payment for add-on codes into the associated procedure code payment for the APC group. We recognize that the MPFS pays separately for CPT code 22515, as it does for other add-on codes. However, the MPFS and the OPPS are very different payment systems. Each is established under a different set of statutory and regulatory principles and the policies established under the MPFS do not have bearing on the payment policies under the OPPS. Given the fundamental difference between the MPFS payment mechanism and the OPPS payment mechanism, differences in the degrees of packaged payment and separate payment between these two systems are to be expected.

    After consideration of the public comments we received, we are finalizing our proposal, without modification, to reassign CPT codes 22513 and 22514 to APC 5114. Table 16 below lists the final OPPS status indicator and APC assignments and payment rates for CPT codes 22513 and 22514 for CY 2017.

    Table 16--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Percutaneous Vertebral Augmentation/Kyphoplasty Procedures

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

    CY 2016 Final CY

    CY 2016 OPPS CY 2016 OPPS Final CY Final CY 2017 OPPS

    CPT code Long descriptors SI OPPS APC payment 2017 OPPS 2017 OPPS payment

    rate SI APC rate

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

    22513................................ Percutaneous vertebral J1 5124 $7,064.07 J1 5114 $5,219.36.

    augmentation, including cavity

    creation (fracture reduction and

    bone biopsy included when

    performed) using mechanical

    device (e.g., kyphoplasty), 1

    vertebral body, unilateral or

    bilateral cannulation, inclusive

    of all imaging guidance;

    thoracic.

    22514................................ Percutaneous vertebral J1 5124 7,064.07 J1 5114 5,219.36.

    augmentation, including cavity

    creation (fracture reduction and

    bone biopsy included when

    performed) using mechanical

    device (e.g., kyphoplasty), 1

    vertebral body, unilateral or

    bilateral cannulation, inclusive

    of all imaging guidance; lumbar.

    22515................................ Percutaneous vertebral N N/A Packaged N N/A Packaged.

    augmentation, including cavity

    creation (fracture reduction and

    bone biopsy included when

    performed) using mechanical

    device (e.g., kyphoplasty), 1

    vertebral body, unilateral or

    bilateral cannulation, inclusive

    of all imaging guidance; each

    additional thoracic or lumbar

    vertebral body (list separately

    in addition to code for primary

    procedure).

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

  151. Strapping and Casting Applications (APCs 5101 and 5102)

    For the CY 2016 update, APCs 5101 (Level 1 Strapping and Cast Application) and 5102 (Level 2 Strapping and Cast Application) are assigned to OPPS status indicator ``S'' (Procedure or Service, Not Discounted When Multiple; Paid under OPPS; separate APC payment) to indicate that the procedures and/or services assigned to these APCs are not discounted when two or more services are billed on the same date of service.

    For the CY 2017 update, based on our analysis of the procedures assigned to APCs 5101 and 5102, in the CY 2017 OPPS/ASC proposed rule (81 FR 45648), we proposed to revise the status indicator assignment for these procedures from ``S'' to ``T'' (Procedure or Service, Multiple Procedure

    Page 79625

    Reduction Applies; Paid under OPPS; separate APC payment) to indicate that the services are paid separately under the OPPS, but a multiple procedure payment reduction applies when two or more services assigned to status indicator ``T'' are billed on the same date of service. Because the procedures assigned to APCs 5101 and 5102 are often associated with surgical treatments, we stated that we believe that the proposed reassignment of these procedures to status indicator ``T'' is appropriate and ensures adequate payment for the procedures, even when the multiple procedure discounting policy applies. Also, there is no payment reduction unless there is another status indicator ``T'' procedure reported on the claim describing cast/splint/strap services. Consequently, we also proposed to revise the status indicator assignment for APCs 5101 and 5102 from ``S'' to ``T'' for the CY 2017 OPPS update to appropriately categorize the procedures assigned to these two APCs.

    Comment: Several commenters opposed the status indicator reassignment from ``S'' to ``T'' for APCs 5101 and 5102, and stated that CMS did not provide substantive information for the proposed change, making it difficult for stakeholders to properly analyze the effects of the proposed change. Other commenters indicated that such a change contradicts current coding guidelines.

    Response: As stated above, as part of our annual review, we examine the APC assignments for all items and services under the OPPS, which include review of status indicators, for appropriate placements in the context of our proposed policies for the update year. Although not every code, status indicator, or APC revision is discussed in the preamble of the proposed rule, they are nonetheless listed in Addendum B of the proposed rule. We note that Addendum B of the proposed rule is an Excel file that is arranged in CPT/HCPCS code order and shows the proposed OPPS status indicator and APC assignments, relative payment weights, and payment rates for every procedure code reported under the hospital OPPS.

    Comment: Some commenters indicated that the National Correct Coding Initiative (NCCI) guidelines prevent the reporting of casting/strapping services when performed as part of a surgical procedure. Other commenters stated that the AMA CPT code instructions indicate that CPT codes 29700 through 29799 are only reported when the service is for a replacement procedure following a period of follow-up, or when the service is performed as the primary treatment without an associated restorative treatment or procedure(s). The commenters urged CMS not to finalize the proposal.

    Response: We do not believe that the commenters completely understand the NCCI or CPT coding guidelines associated with the strapping and casting services. While it is true that strapping and casting services cannot be reported separately when performed as part of a surgical procedure, there are certain circumstances when strapping and casting services can be performed separate from a surgical procedure. It should be noted that Chapter IV (Surgery: Musculoskeletal System) of the 2016 NCCI Policy Manual for Medicare Services states that hospitals paid under the OPPS should report the appropriate casting, splinting, or strapping code in certain instances. Specifically, the NCCI Policy Manual specifies that for payment under the OPPS, if a hospital treats a fracture, dislocation, or injury with a cast, splint, or strap as an initial service without any other definitive procedure or treatment, the hospital should report the appropriate casting/splinting/strapping CPT code. In addition, while it is true that the procedures described by CPT codes 29700 through 29799 are only reported when the service is for a replacement procedure following a period of follow-up, or when the service is performed as the primary treatment without an associated restorative treatment or procedure(s), the CPT guidelines also elaborate that these removal/

    repair codes can be reported separately if the initial application of the cast, splint, or strapping was performed by a different entity.

    Comment: Some commenters stated that casting and strapping services are performed in the emergency department for Medicare patients following a fall or injury, and these patients often require an extended period of observation before they are discharged. These commenters stated that revising the status indicator assignment for APCs 5101 and 5102 from ``S'' to ``T'' would no longer qualify hospitals for comprehensive observation service APC payments.

    Response: We do not anticipate that this will be a significant issue because all observation services that are less than 8 hours are packaged into the payment for the emergency department visit. We do not believe that most Medicare beneficiaries would require long periods of observation after receiving cast/splint/strap services in the emergency room. Instead, we believe that physicians would appropriately assess the patient and determine whether the patient should be discharged to home or admitted as an inpatient.

    After consideration of the public comments we received, we are finalizing our proposal, without modification, to revise the status indicator assignment for APCs 5101 and 5102 from ``S'' to ``T'' for CY 2017.

    5. Nervous System Procedures/Services

  152. Transcranial Magnetic Stimulation Therapy (TMS) (APCs 5721 and 5722)

    Currently, three CPT codes exist to describe TMS therapy, specifically, CPT codes 90867, 90868, and 90869. As shown on Table 17 below, for CY 2016, we proposed to assign these codes to APC 5722 (Level 2 Diagnostic Tests and Related Services).

    Table 17--Proposed CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Transcranial Magnetic Stimulation Therapy (TMS) Codes

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

    CY 2016 Proposed CY

    CY 2016 OPPS CY 2016 OPPS Proposed CY Proposed CY 2017 OPPS

    CPT code Long descriptors SI OPPS APC payment 2017 OPPS SI 2017 OPPS payment

    rate APC rate

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

    90867................................ Therapeutic repetitive S 5722 $220.35 S 5722 $231.67

    transcranial magnetic

    stimulation (tms) treatment;

    initial, including cortical

    mapping, motor threshold

    determination, delivery and

    management.

    Page 79626

    90868................................ Therapeutic repetitive S 5722 220.35 S 5722 231.67

    transcranial magnetic

    stimulation (tms) treatment;

    subsequent delivery and

    management, per session.

    90869................................ Therapeutic repetitive S 5722 220.35 S 5721 127.42

    transcranial magnetic

    stimulation (tms) treatment;

    subsequent motor threshold re-

    determination with delivery and

    management.

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

    As we do every year, we review the APC assignments for all services under the hospital OPPS based on the latest claims data. For CY 2017, we did not propose to make any changes to the APC assignment for CPT codes 90867 and 90868, and proposed to continue to assign the procedures described by these procedure codes to APC 5722 because the geometric mean cost for these procedures were within the range of the geometric mean costs for procedures assigned to APC 5722. Specifically, our proposed rule claims data showed a geometric mean cost of approximately $196 based on 136 single claims (out of 136 total claims) for CPT code 90867, and approximately $187 for CPT code 90868 based on 5,239 single claims (out of 5,287 total claims). Because the geometric mean cost of $196 and $187 are relatively similar to the geometric mean cost of $242 for APC 5722, we proposed to continue to assign CPT codes 90867 and 90868 to APC 5722. However, for CPT code 90869, we proposed to reassign CPT code 90869 to APC 5721 (Level 1 Diagnostic Tests and Related Services) based on the latest claims data used for the proposed rule. Specifically, our claims data showed a geometric mean cost of approximately $119 based on 47 single claims (out of 47 total claims). Because the geometric mean cost of $133 for APC 5721 is relatively similar to the geometric mean cost of $119 for CPT code 90869, we proposed to reassign the procedure code to APC 5721.

    Comment: One commenter disagreed with the proposal to reassign CPT code 90869 to APC 5721, and requested that CMS continue to assign the procedure to APC 5722. The commenter believed that the proposed CY 2017 payment rate of $127.42 is the result of low-volume and incorrect revenue code reporting. The commenter noted that, based on its analysis of the claims data, one hospital's inappropriate revenue code assignment resulted in a low cost-to-charge ratio, thereby decreasing the proposed payment rate. In addition, the commenter believed that the proposed payment rate for CPT code 90869, which involves a redetermination and TMS delivery and management services, should be higher than the proposed payment rate for CPT code 90868, which involves only TMS delivery and management services.

    Response: As we have stated in section 20.5 (Clarification of HCPCS Code to Revenue Code Reporting) of Chapter 4 of the Medicare Claims Processing Manual, hospitals are responsible for reporting the correct revenue code on the claim form. Specifically, we state that we do not instruct hospitals on how to report the assignment of HCPCS codes to revenue codes for services provided under OPPS because hospitals' costs vary. Where explicit instructions are not provided, providers should report their charges under the revenue code that will result in the charges being assigned to the same cost center to which the cost of those services are assigned in the cost report. We note that the Medicare cost report form allows hospitals to report in a manner that is consistent with their own financial accounting systems and, therefore, should be accurate for each individual hospital. Moreover, we believe that the cost report data and their use in the OPPS cost estimation and payment rate development process, combined with potential penalties for inaccurate reporting, provide financial incentive for hospitals to report costs accurately. Furthermore, as we have stated repeatedly, 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. (We refer readers to the CY 2011 OPPS/ASC final rule with comment period (75 FR 71838) for further discussion.) Therefore, we will not question the accuracy of the coding and charging practices in this case.

    In addition, based on the latest hospital outpatient claims data used for the final rule with comment period, we believe that APC 5721 is the most appropriate APC assignment for CPT code 90869. Specifically, our claims data show a geometric mean cost of approximately $107 for CPT code 90869 based on 54 single claims (out of 54 total claims), which is similar to the geometric mean cost of approximately $131 for APC 5721. We do not agree with the commenter that maintaining the assignment for CPT code 90869 to APC 5722 is appropriate because its geometric mean cost of approximately $239 is significantly higher than the geometric mean cost of $107 for CPT code 90869. Compared to the geometric mean cost of approximately $239 for APC 5722, we believe that APC 5721 is the most appropriate assignment for CPT code 90869 based on clinical and resource homogeneity with other procedures and services in the APC.

    After consideration of the public comment we received, we are finalizing our proposal, without modification, to assign CPT code 90869 to APC 5721 for CY 2017. In addition, we are adopting as final, without modification, the proposed APC assignments for CPT codes 90867 and 90868 for CY 2017. Table 18 below lists the final status indicator and APC assignments and payment rates for the three TMS CPT codes for CY 2017. We refer readers to Addendum B of this final rule with comment period for the payment rates for all codes reportable under the OPPS. Addendum B is available via the Internet on the CMS Web site.

    Page 79627

    Table 18--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Transcranial Magnetic Stimulation Therapy (TMS) Codes

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

    CY 2016 Final CY

    CY 2016 OPPS CY 2016 OPPS Final CY Final CY 2017 OPPS

    CPT code Long descriptors SI OPPS APC payment 2017 OPPS 2017 OPPS payment

    rate SI APC rate

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

    90867................................ Therapeutic repetitive S 5722 $220.35 S 5722 $232.21

    transcranial magnetic

    stimulation (tms) treatment;

    initial, including cortical

    mapping, motor threshold

    determination, delivery and

    management.

    90868................................ Therapeutic repetitive S 5722 220.35 S 5722 232.21

    transcranial magnetic

    stimulation (tms) treatment;

    subsequent delivery and

    management, per session.

    90869................................ Therapeutic repetitive S 5722 220.35 S 5721 127.05

    transcranial magnetic

    stimulation (tms) treatment;

    subsequent motor threshold re-

    determination with delivery and

    management.

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

  153. Percutaneous Epidural Adhesiolysis (APC 5443)

    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to continue to assign CPT codes 62263 (Percutaneous lysis of epidural adhesions using solution injection (e.g., hypertonic saline, enzyme) or mechanical means (e.g., catheter) including radiologic localization (includes contrast when administered), multiple adhesiolysis sessions; 2 or more days) and 62264 (Percutaneous lysis of epidural adhesions using solution injection (e.g., hypertonic saline, enzyme) or mechanical means (e.g., catheter) including radiologic localization (includes contrast when administered), multiple adhesiolysis sessions; 1 day) to APC 5443 (Level 3 Nerve Injections), with a proposed CY 2017 payment rate of approximately $711.

    Comment: One commenter expressed concern with the proposed payment rate for CPT codes 62263 and 62264. The commenter stated that these codes were paid for appropriately in CY 2014 and CY 2015. However, the commenter believed that the payment for these procedures has declined beginning in CY 2016. The commenter also suggested that CMS reevaluate the APC structure and consider reinstating the APC classification that was in place during CY 2014 and CY 2015 in which the percutaneous adhesiolysis and radiofrequency neurotomy procedures were combined in the same APC. The commenter stated that the payment rate for the percutaneous adhesiolysis procedures should be the same as the radiofrequency neurotomy procedures, which are assigned to APC 5431 (Level 1 Nerve Procedures), with a proposed payment rate of approximately $1,557.

    Response: Based on our analysis of the claims data used for the proposed rule, APC 5443 is the most appropriate APC assignment for CPT codes 62263 and 62264 based on its clinical and resource similarity to the procedures within this APC. Specifically, our analysis revealed a geometric mean cost of approximately $1,149 for CPT code 62263 based on 97 single claims (out of 107 total claims), and a geometric mean cost of approximately $839 for CPT code 62264 based on 2,188 single claims (out of 3,726 total claims). We believe that the geometric mean costs of CPT codes 62263 and 62264 are more similar to the geometric mean cost of approximately $743 for APC 5443. We believe that APC 5431 is not a more appropriate APC for CPT codes 62263 and 62264 because the geometric mean cost for this APC is approximately $1,627.

    We also note that we reviewed the updated CY 2015 claims data used for this final rule with comment period. The proposed rule claims data were based on claims submitted from January 1, 2015 through December 31, 2015 and processed through December 31, 2015, while the final rule with comment period claims data are based on claims submitted from January 1, 2015 through December 31, 2015 and processed through June 30, 2016. Based on our analysis of the final rule with comment period claims data, we found a similar pattern for CPT codes 62263 and 62264. Specifically, we found a geometric mean cost of approximately $1,138 for CPT code 62263 based on 109 single claims (out of 121 total claims), and a geometric mean cost of approximately $842 for CPT code 62264 based on 2,243 single claims (out of 3,972 total claims). We note that the geometric mean costs for the significant procedures within APC 5443 range between $603 (CPT code 62310) and $1,083 (CPT code 64640). Because the geometric mean cost for APC 5431 is approximately $1,607, which is greater than the geometric mean cost for either CPT code 62263 or 62264, we believe that APC 5443 is the more appropriate APC assignment for these procedures.

    After consideration of the public comment we received, we are adopting as final, without modification, the APC assignment to APC 5443 for CPT codes 62263 and 62264 for CY 2017. The final payment rates for these 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).

  154. Neurostimulator (APC 5463)

    For CY 2017, we proposed to assign CPT code 0268T (Implantation or replacement of a carotid sinus baroreflex activation device; pulse generator only (includes intraoperative interrogation, programming, and repositioning when performed)) to APC 5463 (Level 3 Neurostimulator and Related Procedures), for which we proposed a CY 2017 geometric mean cost of approximately $18,325.

    Comment: Commenters disagreed with CMS' proposal to assign CPT code 0268T to APC 5463. The commenters believed that CPT code 0268T would be more appropriately assigned to APC 5464 (Level 4 Neurostimulator and Related Procedures), for which we proposed a CY 2017 geometric mean cost of approximately $27,907. The commenters stated that the relatively

    Page 79628

    few claims submitted to CMS that are eligible for CY 2017 ratesetting do not accurately reflect the cost of performing this procedure.

    Response: We disagree with commenters' assertion that CPT code 0268T would be more appropriately assigned to APC 5464, which has a final CY 2017 APC geometric mean cost of approximately $27,802. Based on available claims data used for CY 2017 ratesetting, the proposed assignment of CPT code 0268T, which has a final CY 2017 geometric mean cost of approximately $21,794, to APC 5463 is appropriate. After consideration of the public comments we received, we are finalizing our proposal, without modification, to assign CPT code 0268T to APC 5463, which has a final CY 2017 APC geometric mean cost of approximately$18,300. The final payment rate for CPT code 0268T can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

    6. Radiologic Procedures and Services

  155. Imaging APCs

    As a part of our CY 2016 comprehensive review of the structure of the APCs and procedure code assignments, we restructured the APCs that contain imaging services (80 FR 70392). The purpose of this restructuring of the OPPS APC groupings for imaging services was to improve the clinical and resource homogeneity of the services classified within the imaging APCs. Recently some stakeholders that provide imaging services in hospitals recommended some further restructuring of the OPPS imaging APCs, again for the purpose of improving the clinical and resource homogeneity of the services classified within these APCs. After reviewing the stakeholder recommendations, we agreed that further improvements can be achieved by making further changes to the structure of the APC groupings of the imaging services classified within the imaging APCs. Therefore, in the CY 2017 OPPS/ASC proposed rule (81 FR 45647), for CY 2017, we proposed to make further changes to the structure of the imaging APCs. In Table 11 of the proposed rule, we listed the CY 2016 imaging APCs, and in Table 12 of the proposed rule we listed our proposed CY 2017 changes to the imaging APCs. This proposal would consolidate the imaging APCs from 17 APCs in CY 2016 to 8 in CY 2017. The specific APC assignments for each service grouping were listed in Addendum B to the proposed rule, which is available via the Internet on the CMS Web site. We noted in the proposed rule that some of the imaging procedures are assigned to APCs that are not listed in the tables of the proposed rule (for example, the vascular procedures APCs). Also, the nuclear medicine services APCs were not included in this proposed APC restructuring. We invited public comments on our proposal to consolidate the imaging APCs from 17 APCs in CY 2016 to 8 in CY 2017.

    Comment: One of the stakeholders mentioned above who suggested further restructuring of the OPPS imaging services earlier this year expressed concern with CMS' proposed restructured imaging APCs. In particular, the stakeholder was disappointed that the proposed restructured imaging APCs differed from its specific recommendations. The stakeholder supported, in part, CMS' proposal; in particular, the reassignment of the interventional radiology procedures from imaging APCs to vascular procedure APCs and the maintenance of separate APCs for nuclear medicine procedures. In addition, several other commenters also agreed with CMS' proposal to not change the nuclear medicine APCs. Further, the stakeholder and other commenters requested that CMS provide additional explanation regarding the clinical similarity of the services assigned to the proposed restructured APCs. These commenters also were displeased that CMS assigned procedures that are primarily performed by cardiologists (for example, echocardiography) to APCs that also include imaging tests that are primarily interpreted by radiologists. They requested that CMS separate echocardiography services from other imaging tests. They also pointed out that the proposed groupings are broader than the APC title (that use the term ``Diagnostic Radiology'') descriptions because the proposed APC groupings include imaging tests that are interpreted by physicians other than radiologists. They also suggested additional APC and HCPCS code-specific assignments that are addressed below. The stakeholder and other commenters asked that CMS not adopt the proposed restructuring, and instead adopt their suggested APC structure, which would consolidate the imaging APCs, but would maintain separate APCs for echocardiography services that do not include x-ray, CT, and MRI services. Other commenters also requested that CMS not adopt the restructured imaging APCs. Some of these commenters suggested alternatives, such as maintaining separate APCs for ultrasound tests, but the commenters' primary focus was the payment rates and APC assignments of specific codes, which we discuss in detail below.

    Response: We appreciate the stakeholder's and the commenters' support. We agree with the stakeholder that the term ``Imaging'' is more accurate for the titles for this series of APCs instead of the term ``Diagnostic Radiology.'' Therefore, we are modifying our proposal and changing the titles of this diagnostic radiology series of APCs to ``Level X Imaging'' (either without contrast or with contrast). Regarding the commenters' request for further explanation on the clinical similarity of the services assigned to the imaging APCs, we remind commenters that we proposed to reassign the interventional radiology procedures to vascular procedure APCs (APCs 5181, 5182, 5183), recognizing the greater clinical similarity of the reassigned interventional services to the vascular/catheterization procedures that are currently assigned to the vascular procedure APCs. The remaining services that are assigned to the restructured imaging APCs are all diagnostic imaging services that almost all belong to one of the following four primary, well-established imaging modalities: x-ray, ultrasound, computed tomography (CT), or magnetic resonance (MR). When these services are performed in the hospital outpatient department, a technician (sometimes aided by a physician) captures the images by operating one of the types of equipment used for x-ray, ultrasound, CT, or MR. These imaging services are assigned to an APC in either the ``without contrast'' imaging series or the ``with contrast'' imaging series, as required by section 1833(t)(2)(G) of the Act. Assignment of an imaging service to a specific APC within each of these two imaging series (with or without contrast) depends upon the use (or non-use) of a contrast agent and the geometric mean cost of the service, with the range of geometric mean costs within an APC governed by the 2 times rule. It is not relevant to the structure of the APC groupings that physicians of different specialties interpret certain tests (for example, cardiologists generally interpret imaging of the heart, radiologists interpret most other imaging tests, orthopedic surgeons interpret extremity images, and neurologists interpret brain images, among others). Furthermore, APC groupings in general do not necessarily correspond to groupings of procedures that are performed by a given physician

    Page 79629

    specialty. Some of the APC groupings resemble to some extent traditional physician specialty classifications (for example, the urology series of APCs), but many others do not. We believe that imaging services, which are diagnostic tests including x-rays, ultrasounds (including echocardiography), CT scans, and MRIs are sufficiently clinically similar for APC grouping purposes. We also believe that there is no special advantage to the current CY 2016 scheme that subdivides imaging services into subclasses for x-rays, ultrasounds, etc. The commenters believed that their suggested restructured APCs that were presented to CMS included APCs that grouped these four modalities together (except echocardiography). We believe that the proposed structure of the imaging services APCs satisfies the requirements of section 1833(t)(2)(B) of the Act with greater flexibility (versus the current structure) and without unnecessarily restrictive groupings limited to clinically insignificant traditional modality classifications (for example, CT and x-ray, among others). We see no compelling reason to separate echocardiography procedures, an imaging test of the heart, from other imaging tests in the APC groupings. Furthermore, all other nonimaging diagnostic tests are grouped in APCs (APCs 5721 through 5724) that are separate and distinct from the imaging services APCs because we believe that these nonimaging diagnostic tests are sufficiently clinically dissimilar to imaging tests to warrant separate APCs.

    Comment: One commenter objected to the proposed exception to the 2 times rule for APC 5521 (Level 1 Diagnostic Radiology without Contrast), and requested that we explain the basis for the exception further. The commenter also requested that CMS reassign CPT code 75571 from APC 5521 to a higher paying APC for CY 2017.

    Response: We explain the basis for the 2 times rule and the proposed exceptions in the CY 2017 OPPS/ASC of the proposed rule (81 FR 45644 through 45645). Table 9 of the CY 2017 OPPS/ASC of the proposed rule listed the proposed APC exceptions to the 2 times rule for CY 2017 (81 FR 45645). The proposal to grant an exception to the 2 times rule for APC 5521 followed from a request made prior to the proposed rule. At that time, the request was that CMS reassign CPT code 75571 from APC 5731 (Level 1 Minor Procedures) to an imaging APC based on greater clinical similarity to other CT services assigned to the imaging APCs. We agreed with the request and proposed to reassign CPT code 75571 to APC 5521, which is the lowest cost imaging APC in the series. Because CPT code 75571 has such a low geometric mean cost ($22.87), its assignment to any imaging APC, even the lowest cost imaging APC 5521 (with a geometric mean cost of $61.53), results in a 2 times rule violation. We proposed to make an exception to the 2 times rule for APC 5521 for CY 2017 because we believed that, for clinical reasons, CPT code 75571 should be assigned to an imaging APC with the other CT services. Therefore, we are finalizing our proposal, without modification, to reassign CPT code 75571 to APC 5521 as a result of the low geometric mean cost of the procedure. The payment rate for CPT code 75571 increases from $12.70 in CY 2016 to $59.84 in CY 2017.

    Comment: Several commenters objected to the proposed assignment of CPT code 77080 (Dual-energy X-ray absorptiometry (DXA), bone density study, 1 or more sites; axial skeleton (e.g., hips, pelvis, spine)) to APC 5521. The proposed assignment would reduce the payment rate for this procedure from its current CY 2016 payment rate of $100.69 to $63.33 in CY 2017. The commenters believed that the payment reduction could impair access to this valuable preventive service. The commenters requested that CMS assign CPT code 77080 to a higher paying imaging APC, along with other services that have greater resource similarity to the procedure described by CPT code 77080.

    Response: We agree with the commenters. Therefore, we are modifying our proposal, and assigning CPT code 77080 to APC 5522 (Level 2 Diagnostic Radiology without Contrast) for CY 2017. CPT code 77080 has a geometric mean cost of $91.08, which increases the probability of a 2 times rule violation when compared to the second lowest-cost significant procedure assigned to APC 5521, the procedure described by CPT code 71010, which has a geometric mean cost of $46.11. We note that we are not comparing the geometric mean cost of CPT code 77080 to that of CPT code 75571, which is a significant procedure assigned to APC 5521 and that has a geometric mean cost of $22.87, for a 2 times rule violation because as described above, this procedure code assignment was the basis for the exception from the 2 times rule for APC 5521 in the proposed rule. In summary, we are assigning CPT code 77080 to APC 5522, with a final payment rate of $112.69 for CY 2017.

    Comment: Several commenters objected to the proposed assignment of HCPCS code G0297 (Low dose CT scan (LDCT) for lung cancer screening) to APC 5521 because it would reduce the payment rate for this procedure from $112.49 in CY 2016 to $63.33 in CY 2017. The commenters expressed concern that such a payment reduction could result in fewer Medicare beneficiaries receiving this service. The commenters also expressed concern about the APC assignment of HCPCS code G0296 (Counseling visit to discuss need for lung cancer screening (LDCT) using low dose CT scan (service is for eligibility determination and shared decision making)) to APC 5821 (Level 1 Health and Behavior Services). The commenters believed that the proposed assignment also would result in a payment reduction from $69.65 in CY 2016 to $25.09 in CY 2017, and could impair access to this cancer screening service. The commenters requested that CMS assign these services to higher paying APCs in the CY 2017 final rule with comment period.

    Response: We agree, in part, with the commenters. There were no claims data for these services in CY 2016. Therefore, the CY 2016 APC assignments reflected our best estimate at an appropriate APC assignment in the absence of cost information. For CY 2017, we have cost information for each of these services from the CY 2015 claims data. For HCPCS code G0296, the final rule geometric mean cost is $130.44, but with only 21 single claims. Therefore, we believe that this service should be assigned to APC 5822 (Level 2 Health and Behavior Services), with a payment rate of $70.23. We believe that the services in APC 5822 have greater resource similarity to the procedure described by HCPCS code G0296 than the services assigned to APC 5821. We will reevaluate the APC assignment of this procedure for the CY 2018 rulemaking. For HCPCS code G0297, the CY 2017 final rule geometric mean cost is $49.38. APC 5521, to which we proposed to assign HCPCS code G0297, has a geometric mean cost of $65.16. The next higher level APC in the imaging without contrast APC series, APC 5522, has a geometric mean cost of $119.56. Because the geometric mean cost of HCPCS code G0297 is more comparable to the geometric mean cost of APC 5521 than APC 5522, we believe that resource homogeneity is better supported by the assignment of HCPCS code G0297 to APC 5521. Therefore, in summary, we are modifying our proposal and assigning HCPCS code G0296 to APC 5822. However, we are finalizing our proposal, without modification, to assign HCPCS code G0297 to APC 5521 for CY 2017.

    Comment: One commenter requested that CMS not reassign CPT code 78811

    Page 79630

    (Positron emission tomography (PET) imaging; limited area (e.g., chest, head/neck) from APC 5594 (Level 4 Nuclear Medicine and Related Services) to APC 5593 (Level 3 Nuclear Medicine and Related Services) for CY 2017. The commenter believed that the reassignment is premature because of the lack of sufficient claims data to support the reassignment from the CY 2016 assignment to APC 5594.

    Response: We disagree with the commenter. Although there are only 117 single claims for this service in the final rule data, we believe that this is a sufficient number upon which to base an APC assignment. The geometric mean cost of CPT code 78811 has been consistent for the past 2 years. In CY 2016 the geometric mean cost was $912.62 (based on 112 single claims), and the geometric mean cost for CY 2017 is $918.39 (based on 117 single claims). Furthermore, the geometric mean cost of CPT code 78811 is significantly lower than the geometric mean cost of APC 5593 ($1,170.73). Therefore, we believe that APC 5593 is the most appropriate APC assignment for CPT code 78811.

    Comment: A few commenters requested that CMS maintain the CY 2016 APC assignment for CPT code 75563 (Cardiac magnetic resonance imaging for morphology and function without contrast material(s), followed by contrast material(s) and further sequences; with stress imaging) to APC 5593 (Level 3 Nuclear Medicine and Related Services), instead of its proposed assignment to APC 5573 (Level 3 Diagnostic Radiology with Contrast). The commenters expressed concern that the proposed payment reduction from $1,108 to $777 could reduce access to this imaging test. The commenters believed that CPT code 75563 has greater clinical and resource similarity to the services in APC 5593 than the services in APC 5573. In particular, the commenters asserted that CPT code 75563 is similar to CPT code 78452 (Myocardial perfusion imaging, tomographic (SPECT) (including attenuation correction, qualitative or quantitative wall motion, ejection fraction by first pass or gated technique, additional quantification, when performed); multiple studies, at rest and/or stress (exercise or pharmacologic) and/or redistribution and/or rest reinjection) because both tests are performed under a stress protocol. The commenter also requested that CMS reassign CPT code 75557 (Cardiac magnetic resonance imaging for morphology and function without contrast material) from APC 5523 (Level 3 Imaging without Contrast) to APC 5591 (Level 1 Nuclear Medicine and Related Services). The commenter believed that such a reassignment would improve clinical and resource similarity with regard to CPT code 75557. Another commenter requested that CMS not assign any non-nuclear medicine services to the nuclear medicine APC series.

    Response: We agree with the commenter that requested that we not assign any of these magnetic resonance procedure codes to nuclear medicine APCs. For instance, APC 5593 contains procedures that describe nuclear medicine tests, and CPT code 75563 is a specific type of MRI and not a nuclear medicine test. Also, the geometric mean cost of CPT code 75563 is $745 and the geometric mean cost of the APC to which it is assigned, APC 5573, is $781. These geometric mean costs are very similar. However, the geometric mean cost of APC 5593 is $1,171, which is significantly higher than the geometric mean cost of CPT code 75563. Therefore, assigning CPT code 75563 to APC 5593 would assign the procedure to an APC with clinically dissimilar nuclear medicine tests and resource dissimilar tests that have a geometric mean cost of $1,171 (as compared to the $745 geometric mean cost of CPT code 75563). Therefore, we are finalizing our proposal, without modification, to assign CPT code 75563 to APC 5573. Similarly, the procedure described by CPT code 75557 is not a nuclear medicine test and, therefore, should not be assigned to a nuclear medicine APC such as APC 5591. The geometric mean cost of CPT code 75557 is $266, and the geometric mean cost of the APC to which it is assigned (APC 5523) is $223. Therefore, we believe that APC 5523 is an appropriate APC assignment for CPT code 75557 from a resource perspective. Also, there are many other MRI procedure codes, like CPT code 75557, assigned to APC 5523. In addition, we are reassigning a related code, CPT code 75559 (Cardiac magnetic resonance imaging for morphology and function without contrast material; with stress imaging), from APC 5592 (Level 2 Nuclear Medicine and Related Services) to APC 5523 (Level 3 Imaging without Contrast). The geometric mean costs of these two APCs are comparable, but because the procedure described by CPT code 75559 is not a nuclear medicine test, we believe that APC 5523 is a more appropriate APC assignment than APC 5592 for reasons of clinical similarity.

    Comment: One commenter requested that CMS reassign CPT code 70559 (Magnetic resonance (e.g., proton) imaging, brain (including brain stem and skull base), during open intracranial procedure (e.g., to assess for residual tumor or residual vascular malformation); without contrast material(s), followed by contrast material(s) and further sequences) from APC 5181 (Level 1 Vascular Procedures) to an imaging APC because the commenter believed that an imaging APC would be more clinically appropriate than a vascular procedures APC.

    Response: We agree with the commenter that CPT code 70559 should be assigned to an imaging APC because this service is more similar to other imaging services than to the procedures assigned to APC 5181. Therefore, we are modifying our proposal, and reassigning CPT code 70559 to APC 5571 (Level 1 Imaging with Contrast).

    Comment: A few commenters requested that CMS reassign four HCPCS/

    CPT codes from APC 5572 (Level 2 Diagnostic Radiology with Contrast) to APC 5573 (Level 3 Diagnostic Radiology with Contrast):

    HCPCS code C8929 (Transthoracic echocardiography, with contrast, or without contrast followed by with contrast, real-time with image documentation (2D), includes M-mode recording, when performed, complete, with spectral Doppler echocardiography, and with color flow Doppler echocardiography);

    CPT code 73722 (Magnetic resonance (e.g., proton) imaging, any joint of lower extremity; with contrast material(s));

    CPT code 73222 (Magnetic resonance (e.g., proton) imaging, any joint of upper extremity; with contrast material(s)); and

    CPT code 72126 (Computed tomography, cervical spine; with contrast material).

    These commenters believed that the procedures described by these four codes have greater clinical and resource similarity to the procedures assigned to APC 5573.

    Response: We agree, in part, with the commenters. In particular, we believe that HCPCS code C8929 belongs in the same APC with the other echocardiography with contrast services, which is APC 5573, based on clinical and resource similarity resulting from the use of contrast. We also believe that the geometric mean costs of CPT code 73722 ($559.13) and CPT code 73222 ($606.13) support the assignment of these procedures to APC 5573, which has a geometric mean cost of $675.23. However, the final rule geometric mean cost for CPT code 72126 is $363.15. Therefore, we believe that APC 5572 is the more appropriate APC assignment for this procedure.

    Page 79631

    Comment: A few commenters requested that CMS reassign HCPCS codes G0105 (Colorectal cancer screening; colonoscopy on individual at high risk) and G0121 (Colorectal cancer screening; colonoscopy on individual not meeting criteria for high risk) from APC 5525 (Level 5 Diagnostic Radiology without Contrast) to a more clinically appropriate gastroenterology APC.

    Response: We agree with the commenters that a gastroenterology APC would be more clinically appropriate for these colonoscopy services. Therefore, we are modifying our proposal, and reassigning HCPCS codes G0105 and G0121 to APC 5311 (Level 1 Lower GI Procedures). With the reassignment of HCPCS codes G0105 and G0121 from APC 5525 to APC 5311, only five procedures remain in APC 5525. We believe that these remaining five procedures (four of which are non-contrast echocardiography services) can be grouped into APC 5524 (Level 4 Diagnostic Radiology without Contrast), which will be renamed Level 4 Imaging without Contrast. APC 5524 contains other clinically similar non-contrast echocardiography services and the reassignment of these five procedures comports with the provision of the 2 times rule. Therefore, we also are reassigning CPT codes 75984, 93312, 93313, 93315, and 93318 from APC 5525 to APC 5524, and deleting APC 5525.

    Comment: Some commenters requested that several procedures be reassigned to the next higher level imaging APC within the APC series. The commenters believed that reassignment of these procedures would improve resource homogeneity within these APCs. These procedures and our responses to this request are listed in Table 19 below.

    Table 19--Services Requested To Be Reassigned to the Next Higher Level Imaging APC

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

    Proposed CY Proposed CY CMS response (agree or disagree Final CY Final CY

    CPT code Long descriptor 2017 SI 2017 APC with commenter) 2017 SI 2017 APC

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

    70545.......................... Magnetic resonance S 5571 Disagree........................... S 5571

    angiography, head; with

    contrast material(s).

    70548.......................... Magnetic resonance S 5571 Disagree........................... S 5571

    angiography, head; with

    contrast material(s).

    70557.......................... Magnetic resonance (e.g., S 5523 Disagree........................... S 5523

    proton) imaging, brain

    (including brain stem and

    skull base), during open

    intracranial procedure

    (e.g., to assess for

    residual tumor or residual

    vascular malformation);

    without contrast material.

    71270.......................... Computed tomography, thorax; Q3 5571 Disagree........................... Q3 5571

    without contrast material,

    followed by contrast

    material(s) and further

    sections.

    76010.......................... Radiologic examination from Q1 5521 Disagree........................... Q1 5521

    nose to rectum for foreign

    body, single view, child.

    76498.......................... Unlisted magnetic resonance S 5521 Disagree........................... S 5521

    procedure (e.g.,

    diagnostic, interventional).

    76641.......................... Ultrasound, breast, Q1 5521 Agree.............................. Q1 5522

    unilateral, real time with

    image documentation,

    including axilla when

    performed; complete.

    76642.......................... Ultrasound, breast, Q1 5521 Disagree........................... Q1 5521

    unilateral, real time with

    image documentation,

    including axilla when

    performed; limited.

    76816.......................... Ultrasound, pregnant uterus, Q1 5521 Agree.............................. Q1 5522

    real time with image

    documentation, follow-up

    (e.g., re-evaluation of

    fetal size by measuring

    standard growth parameters

    and amniotic fluid volume,

    re-evaluation of organ

    system(s) suspected or

    confirmed to be abnormal on

    a previous scan),

    transabdominal approach,

    per fetus.

    76821.......................... Doppler velocimetry, fetal; Q1 5521 Agree.............................. Q1 5522

    middle cerebral artery.

    76857.......................... Ultrasound, pelvic Q3 5521 Agree.............................. Q3 5522

    (nonobstetric), real time

    with image documentation;

    limited or follow-up (e.g.,

    for follicles).

    C8903.......................... Magnetic resonance imaging Q3 5571 Disagree........................... Q3 5571

    with contrast, breast;

    unilateral.

    C8918.......................... Magnetic resonance Q3 5571 Disagree........................... Q3 5571

    angiography with contrast,

    pelvis.

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

    Response: For the procedures in the above table that we disagreed with the commenter regarding the most appropriate APC assignment, the geometric mean cost of each of these procedure codes is very similar to the geometric mean cost of the APC to which we proposed to reassign the procedure in the proposed rule. Therefore, we are finalizing our proposal, without modification, to reassign these proposed procedures to the proposed APCs indicated. For the procedure codes in the table above that we are modifying our proposal to reassign to a different APC than that which was proposed, the geometric mean cost of the procedure is more consistent with the next higher level APC to which we agree supports a more appropriate APC assignment.

    Page 79632

    Comment: One commenter requested that CMS reassign several procedures to APCs other than any of the imaging APCs. The commenter believed that these procedures are not clinically similar to the other imaging services assigned to the imaging APCs. These procedure codes and our responses are listed in Table 20 below.

    Response: We refer readers to the table below for the final CY 2017 APC assignments for the suggested procedure codes. We agree with the commenter that all of the suggested procedures should be reassigned to a different APC, except for the procedures described by CPT code 62303 and HCPCS code C9733. We believe that these two procedure codes describe imaging tests and, therefore, are properly assigned to an APC in the imaging APC series.

    Table 20--Additional Services Requested To Be Reassigned to Non-Imaging APCS

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

    Proposed CY Proposed CY CMS response (agree or disagree Final CY Final CY

    CPT/ HCPCS code Long descriptor 2017 SI 2017 APC with commenter) 2017 SI 2017 APC

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

    36002.......................... Injection procedures (e.g., S 5524 Agree.............................. T 5181

    thrombin) for percutaneous

    treatment of extremity

    pseudoaneurysm.

    43752.......................... Naso- or oro-gastric tube Q3 5523 Agree.............................. Q1 5735

    placement, requiring

    physician's skill and

    fluoroscopic guidance

    (includes fluoroscopy,

    image documentation and

    report).

    43756.......................... Duodenal intubation and Q1 5524 Agree.............................. Q1 5301

    aspiration, diagnostic,

    includes image guidance;

    single specimen (e.g., bile

    study for crystals or

    afferent loop culture).

    47531.......................... Injection procedure for Q2 5524 Agree.............................. Q2 5341

    cholangiography,

    percutaneous, complete

    diagnostic procedure

    including imaging guidance

    (e.g., ultrasound and/or

    fluoroscopy) and all

    associated radiological

    supervision and

    interpretation; existing

    access.

    62303.......................... Myelography via lumbar Q2 5524 Disagree........................... Q2 5524

    injection, including

    radiological supervision

    and interpretation;

    thoracic.

    75801.......................... Lymphangiography, extremity Q2 5524 Agree.............................. Q2 5181

    only, unilateral,

    radiological supervision

    and interpretation.

    91200.......................... Liver elastography, Q1 5521 Agree.............................. Q1 5721

    mechanically induced shear

    wave (e.g., vibration),

    without imaging, with

    interpretation and report.

    93982.......................... Noninvasive physiologic Q1 5521 Agree.............................. Q1 5721

    study of implanted wireless

    pressure sensor in

    aneurysmal sac following

    endovascular repair,

    complete study including

    recording, analysis of

    pressure and waveform

    tracings, interpretation

    and report.

    C9733.......................... Non-ophthalmic fluorescent Q2 5523 Disagree........................... Q2 5523

    vascular angiography.

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

    Comment: One commenter requested that CMS reassign CPT code 91200 from APC 5521 to APC 5721, and modify the proposed status indicator assignment from ``Q1'' (conditionally packaged) to ``S'' (Paid under OPPS; separate APC payment.) in order to separately pay for the test under all circumstances.

    Response: Although we agree with the commenter regarding the APC assignment for clinical similarity purposes, we disagree with the commenter regarding the status indicator assignment. The procedure described by CPT code 91200 is an ancillary ultrasound diagnostic test, not unlike the ultrasound tests that were packaged as a part of our ancillary services packaging policy in CY 2015. (We refer readers to the CY 2015 OPPS/ASC final rule with comment period (79 FR 66819) for a further discussion of the ancillary services packaging policy.) Therefore, we are finalizing our proposal, without modification, to assign CPT code 91200 to APC 5721, with a status indicator of assignment of ``Q1'' for CY 2017.

    Comment: A few commenters requested that CMS modify the status indicator assignment for HCPCS code C9733 from ``Q2'' to a separately payable status indicator (for example, status indicator ``S''). The commenters noted that status indicator ``Q2'' indicates that payment for the procedure described by HCPCS code C9733 is conditionally packaged when provided in conjunction with other procedures assigned to status indicator ``T,'' which are primarily surgical procedures.

    Response: We have responded to this comment in past rules. The service described by HCPCS code C9733 is primarily an intraoperative imaging service. Therefore, it is conditionally packaged under Sec. 419.2(b)(14), which packages intraoperative items and services. When the procedure described by HCPCS code C9733 is not furnished in conjunction with a surgical procedure, then the service is paid separately. We believe that the OPPS payments, separate or packaged, for surgical procedures in which this test is performed in conjunction with (for example, breast reconstruction) are more than adequate to cover the cost of the service described by HCPCS code C9733 for Medicare beneficiaries in need of this service.

    Comment: One commenter requested that CMS assign three procedures from APC 5181 (Level 1 Vascular Procedures) to APC 5182 (Level 2 Vascular Procedures) because the geometric mean costs of these procedures are more

    Page 79633

    comparable to the geometric mean cost of APC 5182 than that of APC 5181:

    CPT code 75731 (Angiography, adrenal, unilateral, selective, radiological supervision and interpretation);

    CPT code 75746 (Angiography, pulmonary, by nonselective catheter or venous injection, radiological supervision and interpretation); and

    CPT code 75810 (Splenoportography, radiological supervision and interpretation).

    Response: We disagree with the commenter. Based on the CY 2017 final rule updated claims data, CPT code 75731 only has one single claim, CPT code 75746 only has 5 single claims, and CPT code 75810 only has 2 single claims. The number of claims for these services is too low upon which to base an APC reassignment for better resource homogeneity. Therefore, we are finalizing our proposal, without modification, to assign these three procedures to APC 5181.

    After consideration of the public comments we received, we are finalizing the proposals, with the modifications as described above in the responses to the comments on the restructuring and reorganization of the imaging APCs. Table 21 below lists the final seven CY 2017 imaging APCs (not including the four nuclear medicine APCs). All of these APCs are assigned to status indicator ``S,'' although payment for some of the procedures assigned to these APCs are conditionally packaged and are instead assigned to status indicator ``Q1'' or ``Q2.''

    Table 21--Final CY 2017 Imaging APCs

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

    CY 2017 APC CY 2017 APC title

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

    5521...................................... Level 1 Imaging without

    Contrast.

    5522...................................... Level 2 Imaging without

    Contrast.

    5523...................................... Level 3 Imaging without

    Contrast.

    5524...................................... Level 4 Imaging without

    Contrast.

    5571...................................... Level 1 Imaging with

    Contrast.

    5572...................................... Level 2 Imaging with

    Contrast.

    5573...................................... Level 3 Imaging with

    Contrast.

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

  156. Radiation Oncology (APCs 5092, 5611, and 5627)

    Comment: A few commenters disagreed with CMS' proposed reassignment of CPT code 19298 (Placement of radiotherapy afterloading brachytherapy catheters (multiple tube and button type) into the breast for interstitial radioelement application following (at the time of or subsequent to) partial mastectomy, includes imaging guidance) to APC 5092 (Level 2 Breast/Lymphatic Surgery and Related Procedures), with a payment rate of approximately $4,395 for CY 2017. In CY 2016, this code is assigned to APC 5093 (Level 3 Breast/Lymphatic Surgery and Related Procedures), with a payment rate of approximately $7,558. The commenters believed that the previous APC assignment to APC 5093 is appropriate and requested that CMS continue to assign CPT code 19298 to APC 5093 for CY 2017.

    Response: The geometric mean cost for CPT code 19298 decreased from approximately $6,269 in CY 2016 to approximately $5,128 for CY 2017. This change prompted the proposed reassignment of this code from the Level 3 APC to Level 2. We do not believe that the CY 2017 geometric mean cost supports continued assignment to APC 5093. After consideration of the public comment we received, we are finalizing our proposal, without modification, and reassigning CPT code 19298 to APC 5092 for CY 2017.

    Comment: A few commenters suggested that CMS reassign CPT codes 77424 (Intraoperative radiation treatment delivery, x-ray, single treatment session) and 77425 (Intraoperative radiation treatment delivery, electrons, single treatment session) to an APC in the radiation therapy series other than APC 5093 (Level 3 Breast/Lymphatic Surgery and Related Procedures) because these radiation treatment services are not clinically similar to the breast procedures that are assigned to APC 5093.

    Response: We agree with the commenters. The assignment of these codes to APC 5093 was intended to be temporary until more claims data for these codes was available. Based on these codes being radiation treatment delivery codes and their geometric mean costs for CPT codes 77424 (approximately $8,701) and 77425 (approximately $7,172), we are reassigning these services to APC 5627 (Level 7 Radiation Therapy), with a geometric mean cost of approximately$7,664. We note that if planning and preparation and imaging services are repackaged into the single session cranial SRS codes (that are assigned to APC 5627) in the future, this could cause the geometric mean cost for the single session cranial SRS codes to increase such that it may no longer be appropriate to group CPT codes 77424 and 77425 with the single session SRS codes in the same APC. However, for CY 2017, APC 5627 is the most appropriate APC for CPT codes 77424 and 77425, both clinically and from a resource-

    cost perspective. The final payment rate for these 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).

    Comment: A few commenters requested that CMS create a fourth level in the Therapeutic Radiation Treatment Preparation APC series and assign CPT code 77301 (Intensity modulated radiotherapy plan, including dose-volume histograms for target and critical structure partial tolerance specifications) to this new APC. The commenters believed that the costs from the claims data for CPT code 77301 are lower than the actual current costs because the AMA CPT Editorial Panel bundled simulation services (that used to be separately coded) into the payment for CPT code 77301.

    Response: We prefer to wait for the actual claims data before reassigning a code because the cost of a new bundled code is often difficult to predict and often the cost of the new bundled code is significantly less than the sum of the costs of the individual codes that contribute to the bundle. For CY 2017, we are finalizing our proposal to reassign CPT code 77301 to APC 5613.

    Comment: A few commenters requested that CMS not reassign CPT codes 77370, 77280, and 77333 to APC 5611 (Level 1 Therapeutic Radiation Treatment Preparation) for CY 2017. These codes are currently assigned to the Level 2 Therapeutic Radiation Treatment Preparation APC (APC 5612) in CY 2016. The payment would decrease from $167 in CY 2016 to $117 in CY 2017.

    Response: As we do annually, we examined the APCs in this series. We noticed that the difference in the geometric mean costs between Level 1 and 2 was not significant. Therefore, we proposed to consolidate these two APCs into a single APC and reduce the number of levels in the Therapeutic Radiation Treatment Preparation APC series from four to three. We believe that this change promotes resource homogeneity without excessive granularity with consecutive levels having almost the same mean cost. The range of geometric mean costs for significant services in the proposed CY 2017 APC 5611 (Level 1 Therapeutic Radiation Treatment Preparation) is $101 to $197, which comports with the 2 times rule. Therefore, we are finalizing this proposed APC structure and CPT codes 77370, 77280, and 77333 are assigned to APC 5611 for CY 2017.

    Page 79634

    7. Skin Substitutes (APCs 5053 through 5055)

    For CY 2017, we proposed to assign skin substitute procedures to APCs 5053 through 5055 (Level 3 through 5 Skin Procedures). The cost of the procedures is affected by whether the skin substitute product is low cost or high cost, the surface area of the wound, and the location of the wound.

    Comment: Commenters disagreed with the proposed APC assignments for procedures described by HCPCS code C5277 (Application of low cost skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple digits, total wound surface area greater than or equal to 100 cm\2\; First 100 cm\2\ wound surface area, or 1% of body area of infants and children) to APC 5053 (Level 3 Skin Procedures) and procedures described by CPT code 15277 (Application of skin substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple digits, total wound surface area greater than or equal to 100 cm\2\; First 100 cm\2\ wound surface area, or 1% of body area of infants and children) to APC 5054 (Level 4 Skin Procedures). The commenters stated that the proposed payment rates for APC 5053 and APC 5054 do not accurately reflect the cost of providing the services described by HCPCS code C5277 and CPT code 15277. The commenters further stated that the cost of applying a skin substitute product to a larger wound (surface area greater than or equal to 100 cm\2\) should be similar, irrespective of whether the product is applied to the head, genitalia, hands, or feet as compared to the trunk, legs, or arms. The commenters compared the differences between procedures described by HCPCS code C5277 and procedures described by HCPCS code C5273 (Application of low cost skin substitute graft to trunk, arms, legs, total wound surface area greater than or equal to 100 cm\2\; First 100 cm\2\ wound surface area, or 1% of body area of infants and children). Procedures described by HCPCS code C5273 are assigned to APC 5054, which has a higher geometric mean cost than APC 5053. The commenters did a similar comparison between procedures described by CPT code 15277 and procedures described by CPT code 15273 (Application of skin substitute graft to trunk, arms, legs, total wound surface area greater than or equal to 100 cm\2\; First 100 cm\2\ wound surface area, or 1% of body area of infants and children). Procedures described by CPT code 15273 are assigned to APC 5055 (Level 5 Skin Procedures), which has a higher geometric mean cost than APC 5054. One commenter believed that the low volume of single claims for procedures described by HCPCS code C5277 and CPT code 15277 may have resulted in inaccurately low geometric mean costs.

    Response: We disagree with the commenters. We reviewed the services in both APC 5053 and APC 5054 and found that procedures described by HCPCS code C5277 and CPT code 15277 have both clinical and resource homogeneity to the other 11 procedures assigned to these two APCs. Therefore, there is no justification to assign these procedures to APCs with higher geometric mean costs. The final geometric mean cost of procedures described by HCPCS code C5277 is approximately $810 (based on 26 single claims), which is more comparable to the final geometric mean cost of APC 5053 ($466) than the geometric mean cost of APC 5054 ($1,468). Also, regarding the accuracy of the cost data for these codes, we again note our longstanding policy provides that, 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. (We refer readers to 75 FR 71838 for a detailed discussion.) Therefore, after consideration of the public comments we received, we are finalizing our proposal, without modification, to assign HCPCS code C5277 to APC 5053 and CPT code 15277 to APC 5054.

    Comment: Commenters requested that APC 5053 (Level 3 Skin Procedures) be divided into two APCs in order to separate more resource intensive services using skin substitute products (procedures described by HCPCS codes C5271, C5275, and C5277) from other, less resource intensive skin procedures. The commenters believed an additional APC level within the skin procedures APC series between the current level 3 and level 4 would more closely reflect the cost of the low cost skin substitute application procedures. The commenters also believed that the current APC structure incentivizes hospitals to prefer high cost skin substitutes over low cost skin substitutes.

    Response: We disagree with the commenters. We do not believe that it is necessary to expand the skin procedures APC series to six levels. We reviewed the services assigned to APC 5053 and found that all of the procedures assigned to the APC have both sufficient clinical and resource homogeneity. The highest volume low cost skin substitute application procedure, described by HCPCS code C5271 (Application of low cost skin substitute graft to trunk, arms, legs, total wound surface area up to 100 sq cm; first 25 sq cm or less wound surface area), had a final geometric mean cost of $596 (11,256 single claims), and the final geometric mean cost of APC 5053 was $466. While the geometric mean cost of procedures described by HCPCS code C5271 is higher than the geometric mean cost of APC 5053, the difference is well within the span of the two times rule.

    In conclusion, we do not believe that there is justification to create another level within the skin procedures APC series by dividing APC 5053 into two APCs. Therefore, after consideration of the public comments we received, we are finalizing our proposal, without modification, to maintain the current five levels of skin procedures APCs.

    8. Urology System Procedures and Services

  157. Chemodenervation of the Bladder (APC 5373)

    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to continue to assign CPT code 52287 (Cystourethroscopy, with injection(s) for chemodenervation of the bladder) to APC 5373 (Level 3 Urology and Related Services), with a payment rate of approximately $1,642. In addition, we proposed to reassign its status indicator from ``T'' (Procedure or Service, Multiple Procedure Reduction Applies. Paid under OPPS; separate APC payment.) to ``J1'' (Hospital Part B services paid through a comprehensive APC) to indicate that all covered Part B services on the claim are packaged with the primary ``J1'' service for the claim, except for services with OPPS status indicators ``F,'' ``G,'' ``H,'' ``L,'' and ``U''; ambulance services; diagnostic and screening mammography; all preventive services; and certain Part B inpatient services.

    We proposed to continue to assign CPT code 52287 to APC 5373 based on the claims data used for the proposed rule. Specifically, our analysis of the claims data showed a geometric mean cost of approximately $2,219 for CPT code 52287 based on 7,464 single claims (out of 7,609 total claims), which fits more appropriately in APC 5373, whose geometric mean cost is approximately $1,716. We did not propose to assign CPT code 52287 to APC 5374 (Level 4 Urology and Related Services) because we would have overpaid for the procedure because the geometric mean

    Page 79635

    cost for this APC is approximately $2,642.

    Comment: One commenter disagreed with the proposed APC assignment for CPT code 52287, and requested that CMS reassign the procedure to APC 5374. The commenter explained that CPT code 52287 describes a procedure that involves the use of the BOTOXsupreg drug for the treatment of overactive bladder (OAB) and detrusor overactivity associated with a neurologic condition (NDO). The commenter also stated that because of the proposed revision to the code's status indicator from ``T'' to ``J1,'' the BOTOXsupreg used in the procedure would no longer be paid separately, whereas in CY 2016 the drug is paid separately under HCPCS code J0585 (Injection, onabotulinumtoxin a, 1 unit). According to the commenter, the resource cost of performing the procedure with 200 units of the drug is significantly greater than that of furnishing 100 units. Consequently, the commenter stated that the payment rate for APC 5373 is inadequate to cover the resource costs associated with performing the procedure and furnishing the drug. The commenter recommended that CMS reconfigure APCs 5373 and 5374 so that all procedures with a geometric mean cost greater than $2,150 are assigned to APC 5374, and to reassign CPT code 52287 to APC 5374. Alternatively, if CMS does not reassign CPT code 52287 to APC 5374, the commenter suggested that CMS establish a complexity adjustment for those procedures that involve a dose of 200 units of BOTOXsupreg.

    Response: We believe that APC 5373 is the most appropriate APC assignment for CPT code 52287 based on its resource and clinical homogeneity to the other procedures within the APC. Based on updated CY 2015 claims data for this final rule with comment period, the range of geometric mean costs for significant procedures assigned to APC 5373 is between $1,175 and $2,275. The geometric mean cost of $2,196 for CPT code 52287 is within this range. We do not believe that it would be appropriate to assign CPT code 52287 to APC 5374, whose geometric mean cost is approximately $2,613.

    With respect to the issue of the drug cost, the payment for the BOTOXsupreg drug is included in the payment for the procedure described by CPT code 52287. As stated in section II.A.2.c. of this final rule with comment period, the payment for procedures assigned to a ``J1'' status indicator 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, 74909, and 79 FR 66800).

    On the issue of a complexity adjustment, as listed in Addendum J of the CY 2017 OPPS/ASC proposed rule, specifically, in the ``Complexity Adjustments'' tab of the Excel file, we proposed to reassign CPT code 52287 to a complexity adjustment APC. In particular, we proposed to assign CPT code 52287 to APC 5374 when the procedure is performed in conjunction with other procedures during the same hospital stay that meet the complexity adjustment criteria discussed in section II.A.2.c. of this final rule with comment period.

    After consideration of the public comment we received, we are finalizing our proposal, without modification, to assign CPT code 52287 to APC 5373 for CY 2017. The final status indicator and APC assignments and payment rate for this code, 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). The list of the complexity adjustments for add-on code combinations for CY 2017, along with all of the other complexity adjustments, can be found in Addendum J to this final rule with comment period (which is available via the Internet on the CMS Web site). Addendum J to this final rule with comment period also contains the summary cost statistics for each of the code combinations that describe a complex code combination that will qualify for a complexity adjustment and will be reassigned to the next higher cost C-APC within the clinical family.

  158. Temporary Prostatic Urethral Stent (APC 5373)

    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to continue to assign CPT code 53855 (Insertion of a temporary prostatic urethral stent, including urethral measurement) to APC 5372 (Level 2 Urology and Related Services), with a payment rate of approximately $561.

    Comment: One commenter disagreed with the proposed assignment of CPT code 53855 to APC 5372. The commenter believed that the proposed payment rate of approximately $561 for APC 5372 is inadequate to cover the cost of providing the service. The commenter stated that the payment rate of approximately $1,642 for APC 5373 better supports the resource costs and clinical characteristics associated with the procedure described by CPT code 53855 and recommended that CMS reassign the CPT code to this APC for CY 2017.

    Response: Based on our analysis of the updated CY 2015 hospital outpatient claims used for this final rule with comment period, we agree with the commenter. Our claims data showed a geometric mean cost of approximately $1,860 for CPT code 53855 based on 31 single claims (out of 31 total claims), which is similar to the geometric mean cost of approximately $1,691 for APC 5373.

    After consideration of the public comment we received, we are modifying our proposal and assigning CPT code 53855 to APC 5373 for CY 2017. The final CY 2017 payment rate for this procedure can be found in Addendum B to this CY 2017 OPPS/ASC final rule with comment period (which is available via the Internet on the CMS Web site).

  159. Transprostatic Urethral Implant Procedure (TUIP) (APCs 5375 and 5376)

    Currently, there are four procedure codes that describe transprostatic urethral implant procedures, specifically, HCPCS codes C9739 and C9740, and CPT codes 52441 and 52442. As shown in Table 22 below, and as listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to continue to assign HCPCS code C9739 to APC 5375 (Level 5 Urology and Related Services). We also proposed to reassign HCPCS code C9740 from New Technology APC 1565 (New Technology--Level 28 ($5001-$5500)) to APC 5376 (Level 6 Urology and Related Services), and to reassign the status indicator for HCPCS code C9740 from ``T'' to ``J1.'' In addition, we proposed to continue to assign CPT codes 52441 and 52442 to status indicator ``B'' to indicate that these codes are not recognized by OPPS when submitted on a hospital outpatient Part B bill type (12x and 13x). As we discussed in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66853 through 66854), we do not recognize CPT codes 52441 and 52442 because the code descriptors do not accurately capture the number of implants typically provided in a hospital outpatient or ASC setting.

    Page 79636

    Table 22--Proposed CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Transprostatic Urethral Implant Procedures

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

    Proposed

    CY 2016 Proposed CY Proposed CY 2017

    CPT/HCPCS code Long descriptors CY 2016 OPPS CY 2016 OPPS 2017 OPPS CY 2017 OPPS

    SI OPPS APC payment SI OPPS APC payment

    rate rate

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

    C9739................................ Cystourethroscopy, with insertion J1 5375 $3,393.73 J1 5375 $3,460.41

    of transprostatic implant; 1 to

    3 implants.

    C9740................................ Cystourethroscopy, with insertion T 1565 5,250.00 J1 5376 7,389.67

    of transprostatic implant; 4 or

    more implants.

    52441................................ Cystourethroscopy, with insertion B N/A N/A B N/A N/A

    of permanent adjustable

    transprostatic implant; single

    implant.

    52442................................ Cystourethroscopy, with insertion B N/A N/A B N/A N/A

    of permanent adjustable

    transprostatic implant; each

    additional permanent adjustable

    transprostatic implant (list

    separately in addition to code

    for primary procedure).

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

    Comment: One commenter expressed concern with the proposed reassignment of HCPCS code C9740 to APC 5376. The commenter stated that the reassignment may not be aligned with the current clinical homogeneity of other procedures assigned to APC 5376 because the procedure described by HCPCS code C9740 is performed through a natural orifice (urethra) and can be performed with local anesthesia. To ensure clinical homogeneity within APC 5376, the commenter requested that CMS reevaluate the appropriate APC assignment for HCPCS code C9740.

    Response: As we do every year, we review the APC assignments for all services and items paid under the OPPS. Based on resource and clinical homogeneity, we believe that HCPCS code C9740 is more appropriately assigned to the Urology and Related Services APC series. We reviewed the procedures assigned to the Urology and Related Services APCs and, based on its resource cost and clinical homogeneity, we determined that HCPCS code C9740 most appropriately aligns with the other procedures in the Level 6 APC within the Urology and Related Services APC grouping.

    For the proposed rule, our claims data showed a geometric mean cost of approximately $6,312 for HCPCS code C9740 based on 585 single claims (out of 606 total claims), which is relatively similar to the geometric mean cost of approximately $7,723 for APC 5376. We believe that neither APC 5375 (Level 5 Urology and Related Services), whose geometric mean cost is approximately $3,617 or APC 5377 (Level 7 Urology and Related Services), whose geometric mean cost is approximately $15,377, would have been appropriate APC assignments. When compared to the geometric mean cost of $6,312 for HCPCS code C9740, an APC assignment to APC 5375 would underpay for the procedure, while an APC assignment to APC 5377 would overpay for the service. For the final rule with comment period, our updated claims data showed a similar pattern. Specifically, our analysis showed a geometric mean cost of approximately $6,167 for HCPCS code C9740 based on 691 single claims (out of 701 total claims), which is comparable to the geometric mean cost of approximately $7,661 for APC 5376. We believe that an APC assignment to either APC 5375, whose geometric mean cost is approximately $3,581 or APC 5377, whose geometric mean cost is approximately $14,764, would be inappropriate. Based on the updated claims data for the final rule with comment period, we believe that APC 5376 is the most appropriate APC assignment for HCPCS code C9740 based on its clinical homogeneity and resource cost compared to the other procedures within this APC.

    Comment: Several commenters agreed with CMS' proposal to continue to assign HCPCS code C9739 to APC 5375 and to reassign HCPCS code C9740 to APC 5376 for CY 2017. The commenters requested that CMS finalize the proposal.

    Response: We appreciate the commenters' support. After consideration of the public comments we received, we are adopting as final, without modification, the proposed APC and status indicator assignments for HCPCS codes C9739 and C9740, and CPT codes 52441 and 52442 for CY 2017. Table 23 below lists the final status indicator and APC assignments and payment rates for the transprostatic urethral implant procedures for CY 2017. We refer readers to Addendum B of this final rule with comment period for the payment rates for all codes reportable under the OPPS. Addendum B is available via the Internet on the CMS Web site.

    Table 23--Final CY 2017 Status Indicator (SI), APC Assignments and Payment Rates for the Transprostatic Urethral Implant Procedures

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

    CY 2016 Final CY

    CY 2016 OPPS CY 2016 OPPS Final CY Final CY 2017 OPPS

    CPT/HCPCS code Long descriptors SI OPPS APC payment 2017 OPPS 2017 OPPS payment

    rate SI APC rate

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

    C9739................................ Cystourethroscopy, with insertion J1 5375 $3,393.73 J1 5375 $3,482.54

    of transprostatic implant; 1 to

    3 implants.

    Page 79637

    C9740................................ Cystourethroscopy, with insertion T 1565 5,250.00 J1 5376 7,449.52

    of transprostatic implant; 4 or

    more implants.

    52441................................ Cystourethroscopy, with insertion B N/A N/A B N/A N/A

    of permanent adjustable

    transprostatic implant; single

    implant.

    52442................................ Cystourethroscopy, with insertion B N/A N/A B N/A N/A

    of permanent adjustable

    transprostatic implant; each

    additional permanent adjustable

    transprostatic implant (list

    separately in addition to code

    for primary procedure).

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

    9. Other Procedures and Services

  160. Cryoablation Procedures (APCs 5114, 5361, 5362, and 5432)

    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. Based on our analysis of the hospital outpatient claims data used for the proposed rule, we made some modifications to the APC assignments of certain cryoablation procedures. Specifically, for the CY 2017 OPPS update, we proposed to delete APC 5352 (Level 2 Percutaneous Abdominal/Biliary Procedures and Related Procedures), and reassign the cryoablation procedures that were previously assigned to this APC to APC 5361 (Level 1 Laparoscopy and Related Services). As shown in Table 24 below, and as listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to reassign CPT codes 20983, 47383, 50593, and 0340T from APC 5352 to APC 5361. Through our continuing efforts to simplify the APCs through consolidation and to improve clinical and resource homogeneity for the APCs, we believe that these cryoablation procedures that were previously assigned to APC 5352 would be more appropriately assigned to APC 5361 based on their geometric mean costs for the CY 2017 OPPS update. Further, we believe that the proposed revision appropriately categorized these cryoablation procedures in APC 5361 based on clinical coherence and resource costs compared to the other procedures in the same APC.

    Table 24--Proposed CY 2017 Status Indicators (SI), APC Assignments, and Payment Rates for Certain Cryoablation Procedures

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

    Proposed

    CY 2016 Proposed CY Proposed CY 2017

    CPT/HCPCS code Long descriptors CY 2016 OPPS CY 2016 OPPS 2017 OPPS CY 2017 OPPS

    SI OPPS APC payment SI OPPS APC payment

    rate rate

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

    20983................................ Ablation therapy for reduction or T 5352 $4,118.23 J1 5361 $4,178.33

    eradication of 1 or more bone

    tumors (e.g., metastasis)

    including adjacent soft tissue

    when involved by tumor

    extension, percutaneous,

    including imaging guidance when

    performed; cryoablation.

    47383................................ Ablation, 1 or more liver T 5352 4,118.23 J1 5361 4,178.33

    tumor(s), percutaneous,

    cryoablation.

    50593................................ Ablation, renal tumor(s), T 5352 4,118.23 J1 5361 4,178.33

    unilateral, percutaneous,

    cryotherapy.

    0340T................................ Ablation, pulmonary tumor(s), T 5352 4,118.23 J1 5361 4,178.33

    including pleura or chest wall

    when involved by tumor

    extension, percutaneous,

    cryoablation, unilateral,

    includes imaging guidance.

    0440T................................ Ablation, percutaneous, J1 5361 4,001.15 J1 5361 4,178.33

    cryoablation, includes imaging

    guidance; upper extremity distal/

    peripheral nerve.

    0441T................................ Ablation, percutaneous, J1 5361 4,001.15 J1 5361 4,178.33

    cryoablation, includes imaging

    guidance; lower extremity distal/

    peripheral nerve.

    Page 79638

    0442T................................ Ablation, percutaneous, T 5352 4,118.23 J1 5361 4,178.33

    cryoablation, includes imaging

    guidance; nerve plexus or other

    truncal nerve (e.g., brachial

    plexus, pudendal nerve).

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

    Comment: One commenter expressed concern with the proposed assignment of the kidney, lung, liver, bone and nerve cryoablation procedures, specifically, the procedure codes listed in Table 24, to APC 5361. The commenter stated that APC 5361 does not appropriately reflect the clinical nature of the procedures and inadequately recognizes the resources needed to perform the services. The commenter further stated that reassigning the procedures previously assigned to APC 5361 results in a lack of clinical coherence because the APC would include various diagnostic and therapeutic procedures that consist of a wide range of anatomic systems with disparate costs. Consequently, the commenter urged CMS to reevaluate the APC assignments for the cryoablation procedures listed in Table 24, and suggested that CMS either create a new APC that includes both the cryoablation and radiofrequency ablation procedures, or reassign the procedures to APCs that groups the ablation procedures with other clinically similar procedures.

    Response: We reviewed the updated CY 2015 hospital outpatient claims data used for this final rule with comment period. Based on our review, we agree with the commenter that some of these procedures should be reassigned to more appropriate APCs. First, although we have no claims data for CPT codes 0440T, 0441T, and 0442T because these codes are new for CY 2016, we believe that these procedures more appropriately align, based on clinical characteristics, with the procedures in APC 5432 (Level 2 Nerve Procedures). Therefore, we are reassigning CPT codes 0440T, 0441T, and 0442T to APC 5432 for CY 2017. Secondly, based on our analysis, we found a geometric mean of approximately $5,416 for CPT code 20983 based on 98 single claims (out of 100 total claims), which is similar to the geometric mean of approximately $5,367 for APC 5114. Therefore, we are reassigning CPT code 20983 to APC 5114. In addition, we found a geometric mean cost of approximately $5,944 for CPT code 50593 based on 1,811 single claims (out of 1,823 total claims). Furthermore, a high percentage of CPT code 50593 cases were complexity adjusted to APC 5362 in the proposed rule. Given that the geometric mean cost of CPT code 50593 is at the very top of the geometric mean cost range for APC 5361 and the need for a complexity adjustment for many of the cases into APC 5362, we are reassigning CPT code 50593 to APC 5362 for CY 2017. In addition, our analysis of the final rule with comment period data showed a geometric mean costs for CPT codes 0340T (approximately $5,519) and 47383 (approximately $5,178) indicates that the proposed rule assignment to APC 5361 for these cryoablation procedures is appropriate because their geometric mean costs are closer to the geometric mean cost of APC 5361 (approximately $4,316) than to the geometric mean cost of APC 5362 (approximately $7,164).

    After consideration of the public comment we received, we are adopting as final, without modification, the proposal to assign CPT codes 0340T and 47383 to APC 5361. However, we are modifying our proposal and reassigning CPT codes 0440T, 0441T, 0442T, 20983, and 50593 to the final APCs listed in Table 25 below. Table 25 shows the final status indicator, APC assignments, and payment rates for the cryoablation procedures for CY 2017. We refer readers to Addendum B of this final rule with comment period for the payment rates for all codes reportable under the OPPS. Addendum B is available via the Internet on the CMS Web site.

    Table 25--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for Certain Cryoablation Procedures

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

    CY 2016 Final CY

    CY 2016 CY 2016 OPPS Final CY Final CY 2017 OPPS

    CPT/HCPCS code Long descriptors OPPS SI OPPS APC payment 2017 OPPS 2017 OPPS payment

    rate SI APC rate

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

    20983................................ Ablation therapy for reduction or T 5352 $4,118.23 J1 5114 $5,219.36

    eradication of 1 or more bone

    tumors (e.g., metastasis)

    including adjacent soft tissue

    when involved by tumor

    extension, percutaneous,

    including imaging guidance when

    performed; cryoablation.

    47383................................ Ablation, 1 or more liver T 5352 4,118.23 J1 5361 4,197.36

    tumor(s), percutaneous,

    cryoablation.

    50593................................ Ablation, renal tumor(s), T 5352 4,118.23 J1 5362 6,966.89

    unilateral, percutaneous,

    cryotherapy.

    Page 79639

    0340T................................ Ablation, pulmonary tumor(s), T 5352 4,118.23 J1 5361 4,197.36

    including pleura or chest wall

    when involved by tumor

    extension, percutaneous,

    cryoablation, unilateral,

    includes imaging guidance.

    0440T................................ Ablation, percutaneous, J1 5361 4,001.15 J1 5432 4,150.11

    cryoablation, includes imaging

    guidance; upper extremity distal/

    peripheral nerve.

    0441T................................ Ablation, percutaneous, J1 5361 4,001.15 J1 5432 4,150.11

    cryoablation, includes imaging

    guidance; lower extremity distal/

    peripheral nerve.

    0442T................................ Ablation, percutaneous, T 5352 4,118.23 J1 5432 4,150.11

    cryoablation, includes imaging

    guidance; nerve plexus or other

    truncal nerve (e.g., brachial

    plexus, pudendal nerve).

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

  161. Comprehensive Dialysis Circuit Procedures (APCs 5181, 5192, and 5193)

    For CY 2017, the AMA CPT Editorial Panel deleted CPT codes 36147 and 36148 and replaced them with nine new codes, effective January 1, 2017. Table 26 below list the complete descriptors for the deleted and replacement codes. We note that the deleted and replacement codes were listed in Addendum B and Addendum O to the CY 2017 OPPS/ASC proposed rule. Addendum B listed the proposed status indicator assignments for the replacement codes and assigned them to comment indicator ``NP'' (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, proposed APC assignment; comments will be accepted on the proposed APC assignment for the new code.), while Addendum O listed the placeholder/proposed CY 2017 CPT codes and their long descriptors.

    Table 26--Coding Changes for the Dialysis Circuit Procedures Effective

    January 1, 2017

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

    Placeholder/ proposed Final CY 2017 CPT

    CY 2017 CPT code code Long descriptors

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

    36147................. 36147................. Introduction of needle

    and/or catheter,

    arteriovenous shunt

    created for dialysis

    (graft/fistula);

    initial access with

    complete radiological

    evaluation of dialysis

    access, including

    fluoroscopy, image

    documentation and

    report (includes access

    of shunt, injections

    of contrast, and all

    necessary imaging from

    the arterial

    anastomosis and

    adjacent artery through

    entire venous outflow

    including the inferior

    or superior vena cava.

    36148................. 36148................. Introduction of needle

    and/or catheter,

    arteriovenous shunt

    created for dialysis

    (graft/fistula);

    additional access for

    therapeutic

    intervention (list

    separately in addition

    to code for primary

    procedure).

    369X1................. 36901................. Introduction of

    needle(s) and/or

    catheter(s), dialysis

    circuit, with

    diagnostic angiography

    of the dialysis

    circuit, including all

    direct puncture(s) and

    catheter placement(s),

    injection(s) of

    contrast, all necessary

    imaging from the

    arterial anastomosis

    and adjacent artery

    through entire venous

    outflow including the

    inferior or superior

    vena cava, fluoroscopic

    guidance, radiological

    supervision and

    interpretation and

    image documentation and

    report.

    369X2................. 36902................. Introduction of

    needle(s) and/or

    catheter(s), dialysis

    circuit, with

    diagnostic angiography

    of the dialysis

    circuit, including all

    direct puncture(s) and

    catheter placement(s),

    injection(s) of

    contrast, all necessary

    imaging from the

    arterial anastomosis

    and adjacent artery

    through entire venous

    outflow including the

    inferior or superior

    vena cava, fluoroscopic

    guidance, radiological

    supervision and

    interpretation and

    image documentation and

    report; with

    transluminal balloon

    angioplasty, peripheral

    dialysis segment,

    including all imaging

    and radiological

    supervision and

    interpretation

    necessary to perform

    the angioplasty.

    369X3................. 36903................. Introduction of

    needle(s) and/or

    catheter(s), dialysis

    circuit, with

    diagnostic angiography

    of the dialysis

    circuit, including all

    direct puncture(s) and

    catheter placement(s),

    injection(s) of

    contrast, all necessary

    imaging from the

    arterial anastomosis

    and adjacent artery

    through entire venous

    outflow including the

    inferior or superior

    vena cava, fluoroscopic

    guidance, radiological

    supervision and

    interpretation and

    image documentation and

    report; with

    transcatheter placement

    of intravascular

    stent(s) peripheral

    dialysis segment,

    including all imaging

    and radiological

    supervision and

    interpretation

    necessary to perform

    the stenting, and all

    angioplasty within the

    peripheral dialysis

    segment.

    369X4................. 36904................. Percutaneous

    transluminal mechanical

    thrombectomy and/or

    infusion for

    thrombolysis, dialysis

    circuit, any method,

    including all imaging

    and radiological

    supervision and

    interpretation,

    diagnostic angiography,

    fluoroscopic guidance,

    catheter placement(s),

    and intraprocedural

    pharmacological

    thrombolytic

    injection(s).

    Page 79640

    369X5................. 36905................. Percutaneous

    transluminal mechanical

    thrombectomy and/or

    infusion for

    thrombolysis, dialysis

    circuit, any method,

    including all imaging

    and radiological

    supervision and

    interpretation,

    diagnostic angiography,

    fluoroscopic guidance,

    catheter placement(s),

    and intraprocedural

    pharmacological

    thrombolytic

    injection(s); with

    transluminal balloon

    angioplasty, peripheral

    dialysis segment,

    including all imaging

    and radiological

    supervision and

    interpretation

    necessary to perform

    the angioplasty.

    369X6................. 36906................. Percutaneous

    transluminal mechanical

    thrombectomy and/or

    infusion for

    thrombolysis, dialysis

    circuit, any method,

    including all imaging

    and radiological

    supervision and

    interpretation,

    diagnostic angiography,

    fluoroscopic guidance,

    catheter placement(s),

    and intraprocedural

    pharmacological

    thrombolytic

    injection(s); with

    transcatheter placement

    of an intravascular

    stent(s), peripheral

    dialysis segment,

    including all imaging

    and radiological

    supervision and

    interpretation

    necessary to perform

    the stenting, and all

    angioplasty within the

    peripheral dialysis

    circuit.

    369X7................. 36907................. Transluminal balloon

    angioplasty, central

    dialysis segment,

    performed through

    dialysis circuit,

    including all imaging

    and radiological

    supervision and

    interpretation required

    to perform the

    angioplasty (List

    separately in addition

    to code for primary

    procedure).

    369X8................. 36908................. Transcatheter placement

    of an intravascular

    stent(s), central

    dialysis segment,

    performed through

    dialysis circuit,

    including all imaging

    radiological

    supervision and

    interpretation required

    to perform the

    stenting, and all

    angioplasty in the

    central dialysis

    segment (List

    separately in addition

    to code for primary

    procedure).

    369X9................. 36909................. Dialysis circuit

    permanent vascular

    embolization or

    occlusion (including

    main circuit or any

    accessory veins),

    endovascular, including

    all imaging and

    radiological

    supervision and

    interpretation

    necessary to complete

    the intervention (List

    separately in addition

    to code for primary

    procedure).

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

    As shown in Table 27 below, and as listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to package payment for some of these new CY 2017 CPT codes and to also assign the procedures to APC 5181 (Level 1 Vascular Procedures), 5192 (Level 2 Endovascular Procedures), 5193 (Level 3 Endovascular Procedures), or 5194 (Level 2 Endovascular Procedures). Specifically, we proposed to assign CPT code 369X1 (CY 2017 CPT code 36901) to APC 5181, CPT codes 396X2 (CY 2017 CPT code 36902) and 369X4 (CY 2017 CPT code 36904) to APC 5192, CPT codes 396X3 (CY 2017 CPT code 36903) and 369X5 (CY 2017 CPT code 36905) to APC 5193, and CPT code 369X6 (CY 2017 CPT code 36906) to APC 5194. In addition, we proposed to assign CPT codes 369X7 (CY 2017 CPT code 36907), 369X8 (CY 2017 CPT code 36908), and 369X9 (CY 2017 CPT code 36909) to status indicator ``N'' (Items and Services Packaged into APC Rates) to indicate that these service are paid under OPPS. However, their payment is packaged into the payment for other services.

    Table 27--Proposed CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Dialysis Circuit Procedures

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

    Proposed

    CY 2016 Proposed Proposed CY 2017

    Proposed CY 2017 CPT CY 2017 CPT code Short descriptors CY 2016 CY 2016 OPPS CY 2017 CY 2017 OPPS

    code OPPS SI OPPS APC payment OPPS SI OPPS APC payment

    rate rate

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

    36147.................... 36147.................... Access av dial grft for T 5181 *$862.51 D N/A N/A

    eval.

    36148.................... 36148.................... Access av dial grft for N N/A N/A D N/A N/A

    proc.

    369X1.................... 36901.................... Intro cath dialysis N/A N/A N/A T 5181 $867.68

    circuit.

    369X2.................... 36902.................... Intro cath dialysis N/A N/A N/A J1 5192 4,800.45

    circuit.

    369X3.................... 36903.................... Intro cath dialysis N/A N/A N/A J1 5193 9,726.54

    circuit.

    369X4.................... 36904.................... Thrmbc/nfs dialysis N/A N/A N/A J1 5192 4,800.45

    circuit.

    369X5.................... 36905.................... Thrmbc/nfs dialysis N/A N/A N/A J1 5193 9,726.54

    circuit.

    369X6.................... 36906.................... Thrmbc/nfs dialysis N/A N/A N/A J1 5194 14,511.21

    circuit.

    369X7.................... 36907.................... Balo angiop ctr dialysis N/A N/A N/A N N/A N/A

    seg.

    369X8.................... 36908.................... Stent plmt ctr dialysis N/A N/A N/A N N/A N/A

    seg.

    369X9.................... 36909.................... Dialysis circuit embolj. N/A N/A N/A N N/A N/A

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

    Comment: One commenter agreed with the proposed APC assignments for CPT codes 36902, 36903, 36905, and 36906, and requested that CMS finalize the proposal. However, this commenter disagreed with the proposed APC assignment for CPT code 36904 and the proposed status indicator assignment for CPT codes 36907, 36908, and 36909. In particular, the commenter believed that the proposed assignment of APC 5192 fails to reflect the clinical complexity and resource costs associated with performing the procedure described by CPT code 36904. The commenter recommended that CMS assign CPT code 36904 to APC 5193 based on its clinical and resource homogeneity to the other procedures in this APC. In addition, the commenter disagreed with the packaging of payment for services described by CPT codes 36907, 36908, and 36909 because these procedures involve substantial device costs. As an interim measure, the commenter recommended that the procedure codes be assigned to New Technology APC 1564 (New Technology--Level 27 ($4501-

    $5000), with a status indicator of ``S'' (Procedure or Service, Not Discounted When Multiple. Paid under OPPS; separate APC payment.), until sufficient claims data is available on which to base assignment of the new codes to a more appropriate clinical APC. If CMS continued to believe that

    Page 79641

    the New Technology APC assignment is inappropriate, the commenter urged CMS to create a composite APC for the dialysis circuit CPT codes.

    Response: We appreciate the commenter's support for the proposed APC assignments for CPT codes 36902, 36903, 36905, and 36906. We are finalizing our proposal for these codes. However, with respect to the proposed assignment of CPT code 36904, we believe that, based on its similarity to the other procedures in APC 5192, and a comparison to other codes in this series we believe that APC 5192 is the most appropriate APC for this procedure. In addition, because CPT codes 36907, 36908, and 36909 are add-on codes, we assigned these codes to a status indicator that indicates packaged payment status. Because of our packaging policy for add-on codes, we would not consider these codes for a composite APC. We note that since January 1, 2014, payment for services described by add-on codes have been packaged under the hospital OPPS. As we do every year for all items and services under OPPS, we will reevaluate the APC assignments for these services in the CY 2018 OPPS rulemaking.

    In summary, after consideration of the public comment received, we are finalizing our proposal, without modification, to assign the dialysis circuit procedures to the APC and status indicators listed in Table 28 below. Table 28 shows the final status indicator, APC assignments, and payment rates for the dialysis circuit services for CY 2017. We refer readers to Addendum B of this final rule with comment period for the payment rates for all codes reportable under the OPPS. Addendum B is available via the Internet on the CMS Web site.

    Table 28--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Dialysis Circuit Procedures

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

    CY 2016 Final CY

    Proposed CY 2017 CPT CY 2016 CY 2016 OPPS Final CY Final CY 2017 OPPS

    code Final CY 2017 CPT code Short descriptors OPPS SI OPPS APC payment 2017 OPPS 2017 OPPS payment

    rate SI APC rate

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

    36147.................... 36147.................... Access av dial grft for T 5181 $862.51 D .......... ..........

    eval.

    36148.................... 36148.................... Access av dial grft for N .......... .......... D .......... ..........

    proc.

    369X1.................... 36901.................... Intro cath dialysis ........... .......... .......... T 5181 $683.84

    circuit.

    369X2.................... 36902.................... Intro cath dialysis ........... .......... .......... J1 5192 4,823.16

    circuit.

    369X3.................... 36903.................... Intro cath dialysis ........... .......... .......... J1 5193 9,748.31

    circuit.

    369X4.................... 36904.................... Thrmbc/nfs dialysis ........... .......... .......... J1 5192 4,823.16

    circuit.

    369X5.................... 36905.................... Thrmbc/nfs dialysis ........... .......... .......... J1 5193 9,748.31

    circuit.

    369X6.................... 36906.................... Thrmbc/nfs dialysis ........... .......... .......... J1 5194 14,775.90

    circuit.

    369X7.................... 36907.................... Balo angiop ctr dialysis ........... .......... .......... N N/A N/A

    seg.

    369X8.................... 36908.................... Stent plmt ctr dialysis ........... .......... .......... N N/A N/A

    seg.

    369X9.................... 36909.................... Dialysis circuit embolj. ........... .......... .......... N N/A N/A

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

  162. Blood Product Exchange and Related Services (APCs 5241 and 5242)

    For CY 2017, we proposed to assign CPT code 36456 (Partial exchange transfusion, blood, plasma or crystalloid necessitating the skill of a physician or other qualified health care professional, newborn) (described as code 364X1 in the proposed rule) to APC 5241 (Level 1 Blood Product Exchange and Related Services), with a proposed mean geometric mean cost of approximately $364.

    Comment: One commenter disagreed with the CMS proposal to assign CPT code 36456 to APC 5241. The commenter stated that APC 5182 (Level 2 Vascular Procedures) is a more appropriate APC assignment because of the clinical similarity and similar resource intensity to other services assigned to APC 5182.

    Response: We disagree with the commenter's statement. We do not believe that the procedure described by CPT code 36456 is comparable to the services in APC 5182 in terms of resource intensity or clinical similarity. We do believe that CPT code 36456 is similar to the other services assigned to APC 5241, such as CPT code 36450 (Exchange transfusion, blood; newborn). When claims data become available for this new code, we will consider if assignment to another APC is appropriate. After consideration of the public comment we received, we are finalizing our proposal to assign CPT code 36456 to APC 5241.

    Comment: For CY 2017, we proposed to assign CPT codes 38230 (Bone marrow harvesting for transplantation; allogeneic), 38241 (Hematopoietic progenitor cell (HPC); autologous transplantation, 38242 (Allogeneic lymphocyte infusions) and 38243 (HPC Boost) to APC 5242 (Level 2 Blood Product Exchange and Related Services). This APC has a proposed CY 2017 geometric mean cost of approximately $1,129. One commenter stated that the proposed payment rate of approximately $1,078 for this APC was a 66 percent decrease in payment from the final CY 2016 payment rate. The commenter also noted that the services in this APC were not likely to be submitted on a single procedure claim and, as a result, the CMS ratesetting methodology may be based on incorrectly coded claims. In addition, the commenter requested that CMS consider the use of C-APCs to provide for payment for low-volume, clinically significant services.

    Response: The commenter is correct that each of these services represent a low volume in the OPPS. The geometric mean cost for each of the codes is within the geometric mean cost range ($1,111 to $1,518) for significant services assigned to APC 5242. We will monitor these claims and determine if any future adjustment to the methodology (such as the C-APC methodology) would be more appropriate.

  163. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS) (APCs 1537, 5114, and 5414)

    Currently, there are four CPT/HCPCS codes that describe magnetic resonance image guided high intensity focused ultrasound (MRgFUS) procedures. These codes include CPT codes 0071T, 0072T, and 0398T, and HCPCS code C9734. CPT codes 0071T and 0072T are used for the treatment of uterine fibroids, CPT code 0398T is used for the treatment of essential tremor, and HCPCS code C9734 is used for pain palliation for metastatic bone cancer.

    As shown in Table 29 below, and as listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to continue to assign CPT codes 0071T and 0072T to APC 5414, with a payment

    Page 79642

    rate of approximately $2,074. We also proposed to reassign the APC's status indicator to ``J1'' (Hospital Part B services paid through a comprehensive APC) to indicate that all covered Part B services on the claim are packaged with the payment for the primary ``J1'' service for the claim, except for services assigned to OPPS status indicator ``F,'' ``G,'' ``H,'' ``L'' and ``U''; ambulance services; diagnostic and screening mammography; all preventive services; and certain Part B inpatient services. In addition, we proposed to reassign HCPCS code C9734 from APC 5122 (Level 2 Musculoskeletal Procedures) to APC 5114 (Level 4 Musculoskeletal Procedures), with a payment rate of approximately $5,199. We also proposed to reassign the HCPCS code's status indicator from ``T'' to ``J1.''

    Further, we proposed to reassign CPT code 0398T from a nonpayable status indicator, specifically, ``E'' (Not paid by Medicare when submitted on outpatient claims (any outpatient bill type)) to a separately payable APC, specifically, APC 5462 (Level 2 Neurostimulator and Related Procedures), with a payment rate of approximately $5,840. We note that APC 5462 is assigned to status indicator ``J1.'' This APC assignment was based on a comparison to a similar procedure, specifically, HCPCS code C9734, with a geometric mean cost of approximately $8,565 based on 9 single claims (out of 9 total claims). The MRgFUS equipment used in the performance of the procedure described by CPT code 0398T is very similar to the MRgFUS equipment used in the performance of the procedure described by HCPCS code C9734. Both machines are manufactured by the same manufacturer.

    Table 29--Proposed CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Magnetic Resonance Image Guided High Intensity Focused

    Ultrasound (MRgFUS) Procedures

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

    Proposed

    CY 2016 Proposed CY Proposed CY 2017

    CPT/HCPCS code Long descriptor CY 2016 CY 2016 OPPS 2017 OPPS CY 2017 OPPS

    OPPS SI OPPS APC payment SI OPPS APC payment

    rate rate

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

    0071T................................ Focused ultrasound ablation of T 5414 $1,861.18 J1 5414 $2,074.22

    uterine leiomyomata, including

    mr guidance; total leiomyomata

    volume less than 200 cc of

    tissue.

    0072T................................ Focused ultrasound ablation of T 5414 1,861.18 J1 5414 2,074.22

    uterine leiomyomata, including

    mr guidance; total leiomyomata

    volume greater or equal to 200

    cc of tissue.

    0398T................................ Magnetic resonance image guided E N/A N/A J1 5462 5,839.83

    high intensity focused

    ultrasound (mrgfus),

    stereotactic ablation lesion,

    intracranial for movement

    disorder including stereotactic

    navigation and frame placement

    when performed.

    C9734................................ Focused ultrasound ablation/ T 5122 2,395.59 J1 5114 5,199.03

    therapeutic intervention, other

    than uterine leiomyomata, with

    magnetic resonance (mr) guidance.

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

    Comment: All of the commenters disagreed with the proposed assignment of CPT code 0398T to APC 5462 for CY 2017. The commenters stated that the proposed payment severely underestimates the resources required to provide the treatment. Some commenters indicated that compared to HCPCS code C9734, which requires only one physician and 3 hours of MRI time, the resources for CPT code 0398T is significantly greater and requires the services of a multidisciplinary staff (including a neurosurgeon and a radiologist), as well as 6 hours of MRI time. Several commenters indicated that MRgFUS for essential tremor is a better alternative to deep brain stimulation (DBS) because there is no risk of infection or implanted hardware, no need for multiple hospital outpatient visits or postoperative programming sessions, and lower cost because there is no battery to surgically remove and replace every few years. Some commenters pointed out that the cost of providing a DBS procedure is between $40,000 and $50,000, while the MRgFUS procedure costs approximately $20,000. One commenter stated that the capital equipment used in the performance of the procedure described by CPT code 0398T is more costly, at approximately $2 million, compared to the capital equipment used in the performance of the procedure described by HCPCS C9734, which is approximately $750,000. The commenter also stated that CPT code 0398T uses additional equipment (for example, stereotactic head frame) and supplies resulting in higher costs for the procedure. Several commenters expressed concern that the proposed payment for CPT code 0398T is inadequate to cover the hospital cost of providing the service and recommended that CMS reassign CPT code 0398T to either a more appropriate APC that reflects the cost of providing the treatment, or to APC 5463 (Level 3 Neurostimulator and Related Procedures). Some commenters suggested that a low reimbursement rate for the procedure could jeopardize Medicare access to this emerging technology.

    Response: CPT code 0398T is a new code for CY 2016. Therefore, we do not have available claims data for the CY 2017 ratesetting. HCPCS code C9734 describes a similar service that uses the same MRgFUS technology, and as noted above, has a geometric mean cost of $8,565. However, the manufacturer has indicated that the essential tremor MRgFUS service uses a more costly version of the MRgFUS equipment, takes longer, and uses some additional supplies and equipment, which makes the procedure described by CPT code 0398T more costly than the procedure described by HCPCS code C9734. We believe that the procedure described by CPT code 0398T can also be compared

    Page 79643

    to the procedure described by CPT code 77371 (Radiation treatment delivery, stereotactic radiosurgery (SRS), complete course of treatment of cranial lesions(s) consisting of 1 session; multi-source Cobalt-60 based). In particular, both procedures use capital equipment of approximately equal cost, both employ a stereotactic head frame to treat intracranial lesions, and both require similar staffing. CPT code 77371 is assigned to APC 5627 (Level 7 Radiation Therapy), with a final payment rate of approximately $7,453. The final geometric mean cost of CPT code 77371 is $10,105. We believe that the geometric mean cost of CPT code 77371 provides an indication of the initial payment rate for CPT code 0398T relative to the related service described by HCPCS code C9734, for which we have some claims data. Consequently, because there is no clinical APC that contains clinically similar and resource-cost similar services, we believe that the most appropriate initial assignment for CPT code 0398T is APC 1537 (New Technology--Level 37 ($9501-$10000)), which has a final payment rate of approximately $9,751. The assignment to APC 1537 will result in a 67-percent increase in the CY 2017 payment rate compared to the $5,840 proposed payment rate. It is also significantly above the payment rate of approximately $5,219 for HCPCS code C9734, to which CPT code 0398T is comparable but according to the commenters is more costly.

    Finally, we remind hospitals that, as we do every year, we review the APC assignments for all services and items paid under the OPPS. We will reevaluate the APC assignment for CPT code 0398T once we have claims data for this service.

    Comment: One commenter supported CMS' proposal to reassign HCPCS code C9734 to APC 5114, and requested that CMS finalize the proposal.

    Response: We appreciate the commenter's support.

    After consideration of the public comments we received, we are modifying our proposal and reassigning CPT code 0398T to APC 1537 for CY 2017. In addition, we are finalizing our proposal, without modification, to reassign HCPCS code C9734 to APC 5114. Because we did not receive any public comments related to CPT codes 0071T and 0072T, we are finalizing our proposal, without modification, to continue to assign these codes to APC 5414. Table 30 below shows the final status indicator and APC assignments and payment rates for the MRgFUS procedures for CY 2017. We refer readers to Addendum B of this final rule with comment period for the payment rates for all codes reportable under the OPPS. Addendum B is available via the Internet on the CMS Web site.

    Table 30--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Magnetic Resonance Image Guided High Intensity Focused

    Ultrasound (MRgFUS) Procedures

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

    CY 2016 Final CY

    CY 2016 OPPS CY 2016 OPPS Final CY Final CY 2017 OPPS

    CPT/HCPCS code Long descriptors SI OPPS APC payment 2017 OPPS 2017 OPPS payment

    rate SI APC rate

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

    0071T................................ Focused ultrasound ablation of T 5414 $1,861.18 J1 5414 $2,084.59

    uterine leiomyomata, including

    mr guidance; total leiomyomata

    volume less than 200 cc of

    tissue.

    0072T................................ Focused ultrasound ablation of T 5414 1,861.18 J1 5414 2,084.59

    uterine leiomyomata, including

    mr guidance; total leiomyomata

    volume greater or equal to 200

    cc of tissue.

    0398T................................ Magnetic resonance image guided E N/A N/A S 1537 9,750.50

    high intensity focused

    ultrasound (mrgfus),

    stereotactic ablation lesion,

    intracranial for movement

    disorder including stereotactic

    navigation and frame placement

    when performed.

    C9734................................ Focused ultrasound ablation/ T 5122 2,395.59 J1 5114 5,219.36

    therapeutic intervention, other

    than uterine leiomyomata, with

    magnetic resonance (mr) guidance.

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

  164. Neulastasupreg On-Body Injector

    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to assign new CY 2017 CPT code 96377 (Application of on-body injector (includes cannula insertion) for timed subcutaneous injection) to status indicator ``N'' (Items and Services Packaged into APC Rates) to indicate that the service is paid under OPPS; however, its payment is packaged into the payment for other services. We note that CPT code 93677 was listed as placeholder CPT code 963XX in both Addendum B and O of the CY 2017 OPPS/ASC proposed rule. Addendum B listed the short descriptor with the proposed status indicator of ``N,'' while Addendum O listed the complete long descriptor under placeholder CPT code 963XX.

    Comment: Some commenters disagreed with the proposed status indicator assignment of ``N'' for CPT code 963XX (CY 2017 CPT code 96377), and indicated that this is a primary service, not an add-on procedure, that represents a complete and unique drug administration service that a hospital performs for the subcutaneous administration of Neulastasupreg with the on-body injector. The commenters stated that the service is similar to the drug administration service described by CPT code 96372 (Therapeutic, prophylactic, or diagnostic injection (specify substance or drug); subcutaneous or intramuscular), which is assigned to APC 5692 (Level 2 Drug Administration) with a proposed payment rate of about $53. The commenters indicated that the difference between the procedure described by CPT code 96372 and CPT

    Page 79644

    code 96377 is the use of an on-body injector for CPT code 96377.

    Response: We do not believe that the resources necessary to deliver the Neulastasupreg service warrants separate payment under the OPPS. Because payment for CPT code 96377 will be packaged, the payment for use of the on-body injector will be included in the payment for the primary service (for example, chemotherapy administration, clinic visit, among others) that is reported in conjunction with CPT code 96377. Furthermore, we believe that the packaged payment that includes payment for the use of the Neulastasupreg on-body injector adequately covers the costs of the service. After consideration of the public comments we received, we are adopting as final, without modification, the proposal to assign CPT code 96377 to status indicator ``N'' for CY 2017.

  165. Smoking and Tobacco Use Cessation Counseling (APC 5821)

    As shown in Table 31 below, and as listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to continue to assign CPT codes 99406 and 99407 to APC 5821 (Level 1 Health and Behavior Services), with a proposed payment rate of approximately $25. In addition, we proposed to delete HCPCS codes G0436 and G0437 because they were replaced with CPT codes 99406 and 99407. Specifically, we stated in the October 2016 Update, Change Request 9768, Transmittal 3602, dated August 26, 2016, that HCPCS codes G0436 and G0437 were deleted on September 30, 2016, because they were replaced with CPT codes 99406 and 99407, effective October 1, 2016.

    Table 31--Proposed CY 2017 Status Indicator (SI), APC Assignment, and Payment Rate for the Smoking and Tobacco Use Cessation Counseling Services

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

    Proposed

    CY 2016 Proposed CY Proposed CY 2017

    CPT/HCPCS code Long descriptors CY 2016 CY 2016 OPPS 2017 OPPS CY 2017 OPPS

    OPPS SI OPPS APC payment SI OPPS APC payment

    rate rate

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

    99406................................ Smoking and tobacco use cessation S 5821 $27.12 S 5821 $25.09

    counseling visit; intermediate,

    greater than 3 minutes up to 10

    minutes.

    99407................................ Smoking and tobacco use cessation S 5821 27.12 S 5821 25.09

    counseling visit; intensive,

    greater than 10 minutes.

    G0436................................ Smoking and tobacco cessation S 5821 27.12 D ........... ...........

    counseling visit for the

    asymptomatic patient;

    intermediate, greater than 3

    minutes, up to 10 minutes.

    G0437................................ Smoking and tobacco cessation S 5822 69.65 D ........... ...........

    counseling visit for the

    asymptomatic patient; intensive,

    greater than 10 minutes.

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

    Comment: One commenter expressed concern that the proposed payment rate for APC 5821 did not include the costs associated with HCPCS code G0437 because it was previously assigned to APC 5822. The commenter requested that CMS reevaluate the payment rate for APC 5821 and to include the claims data associated with HCPCS code G0437 in the calculation of the geometric mean cost for APC 5821. In addition, because the predecessor HCPCS code G0437 was previously assigned to APC 5822, the commenter believed that CPT code 99407 should also be assigned to the same APC. Moreover, the commenter urged CMS to crosswalk all deleted codes to the same APC assignment as their replacement codes when calculating APC payment rates during the transition.

    Response: While we generally crosswalk the APC assignment of deleted codes to the same APC as its replacement code, we acknowledge that our calculation of the geometric mean cost for APC 5821 in the CY 2017 OPPS/ASC proposed rule did not include costs associated with HCPCS code G0437. We appreciate the commenter bringing this to our attention and have corrected this oversight in this final rule with comment period. In particular, we are assigning CPT codes 99406 and 99407, and HCPCS codes G0436 and G0437 to APC 5821 and are using the geometric mean costs of these procedures in determining the final payment rate for APC 5821. Based on our analysis of the updated claims data for this final rule with comment period, the geometric mean cost of approximately $32 for CPT code 99407 based on 2,859 single claims (out of 4,148 total claims) is relatively similar to the geometric mean cost of approximately $26 for APC 5821. We do not agree with the commenter that CPT code 99407 should be assigned to APC 5822 because its geometric mean cost of approximately $72 is more than twice the geometric mean cost of CPT code 94407. Therefore, based on the resource costs and similar characteristics to the other procedures within APC 5821, we believe that CPT code 99407 is more appropriately assigned to this APC.

    Comment: One commenter expressed confusion regarding the reporting of CPT codes 99406 and 99407, and requested that CMS clarify whether these codes apply to both asymptomatic and symptomatic patients. The commenter noted that the descriptor of HCPCS codes G0436 and G0437 specifically described services for the asymptomatic patient. However, the commenter indicated that this distinction is not included in the code descriptors for CPT codes 99406 and 99407.

    Response: While not explicit in their code descriptors, CPT codes 99406 and 99407 apply to both asymptomatic and symptomatic patients. We note that the more recent preventive service policy related to these codes can be found in section 210.4.1 (Counseling to Prevent Tobacco Use (Effective August 25, 2010)) of the Medicare National Coverage Determination Manual, which is can be viewed on the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/ncd103c1_part4.pdf, as well as on the Medicare Coverage Database Web site at: https://www.cms.gov/medicare-coverage-database/details/medicare-coverage-document-details.aspx?MCDId=32. After consideration of the public comments we received, we

    Page 79645

    are finalizing our proposal, without modification, to continue to assign CPT codes 99406 and 99407 to APC 5821 for CY 2017. Table 32 below shows the final status indicator, APC assignment, and payment rate for CPT codes 99406 and 99407 for CY 2017. We refer readers to Addendum B of this final rule with comment period for the payment rates for all codes reportable under the OPPS. Addendum B is available via the Internet on the CMS Web site.

    Table 32--Final CY 2017 Status Indicator (SI), APC Assignment, and Payment Rate for the Smoking and Tobacco Use Cessation Counseling Services

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

    CY 2016 Final CY

    CY 2016 CY 2016 OPPS Final CY Final CY 2017 OPPS

    CPT/HCPCS code Long descriptors OPPS SI OPPS APC payment 2017 OPPS 2017 OPPS payment

    rate SI APC rate

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

    99406................................ Smoking and tobacco use cessation S 5821 $27.12 S 5821 $25.22

    counseling visit; intermediate,

    greater than 3 minutes up to 10

    minutes.

    99407................................ Smoking and tobacco use cessation S 5821 27.12 S 5821 25.22

    counseling visit; intensive,

    greater than 10 minutes.

    G0436................................ Smoking and tobacco cessation S 5821 27.12 D ........... ...........

    counseling visit for the

    asymptomatic patient;

    intermediate, greater than 3

    minutes, up to 10 minutes.

    G0437................................ Smoking and tobacco cessation S 5822 69.65 D ........... ...........

    counseling visit for the

    asymptomatic patient; intensive,

    greater than 10 minutes.

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

  166. Radiofrequency Ablation of Uterine Fibroids (APC 5362)

    For CY 2017, the AMA CPT Editorial Panel deleted CPT code 0336T (Laparoscopy, surgical, ablation of uterine fibroid(s), including intraoperative ultrasound guidance and monitoring, radiofrequency) and replacing it with CPT code 58674 (Laparoscopy, surgical, ablation of uterine fibroid(s) including intraoperative ultrasound guidance and monitoring, radiofrequency), effective January 1, 2017. We proposed to assign CPT code 58674 to APC 5362 (Level 2 Laparoscopy and Related Services), which is the same APC assignment for the predecessor CPT code 0336T. We note that CPT code 58674 was listed as placeholder CPT code 585X1 in both Addendum B and O of the CY 2017 OPPS/ASC proposed rule. Addendum B listed the short descriptor with the proposed APC assignment and payment rate, while Addendum O listed the complete long descriptor under placeholder CPT code 585X1. We note that both Addendum B and O also assigned this code to comment indicator ``NP'' to indicate that we would be accepting comments on the proposed APC assignment for the new code.

    Comment: One commenter agreed with the proposed APC assignment for new CY 2017 CPT code 58674 to APC 5362 and stated that the assignment is consistent with the APC assignment for its predecessor code (CPT code 0336T). The commenter indicated that the resources required to furnish the service described by CPT code 58674 is similar to the resources of the other procedures assigned to APC 5362. Consequently, the commenter urged CMS to finalize the proposal.

    Response: We appreciate the commenter's support. As noted by the commenter, we assigned new CY 2017 CPT code 58674 to APC 5362 based on its similarity to the other procedures within this APC.

    After consideration of the public comment we received, we are finalizing our proposal, without modification, to assign CPT code 58674 to APC 5362. The final status indicator, APC assignment, and payment rate for CPT code 58674 can be found in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

  167. Intrapulmonary Surfactant Administration (APC 5791)

    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to continue to assign CPT code 94610 (Intrapulmonary surfactant administration by a physician or other qualified health care professional through endotracheal tube) to APC 5791 (Pulmonary Treatment), with a proposed payment rate of approximately $161. We also proposed to continue to assign CPT code 94610 to OPPS status indicator ``Q1'' (STV-Packaged Codes) to indicate that the service is conditionally packaged.

    Comment: One commenter disagreed with CMS' proposal to assign CPT code 94610 to OPPS status indicator ``Q1.'' The commenter indicated that this is a primary service, not an ancillary service as designated by the status indicator, and recommended that CMS reassign the CPT code to OPPS status indicator ``T'' (Procedure or Service, Multiple Procedure Reduction Applies. Paid under OPPS; separate APC payment).

    Response: We believe that the commenter may have misunderstood the meaning of OPPS status indicator ``Q1.'' Assigning a procedure to OPPS status indicator ``Q1'' indicates that payment for the service is conditionally packaged under the OPPS. A criterion under the conditional packaging policy is that payment for a service is packaged when it is provided in combination with a significant procedure on the same date of service, but the service is separately paid when it is reported on the claim without a significant procedure. Addendum D1 to the CY 2017 OPPS/ASC proposed rule (which is available via the Internet on the CMS Web site) showed the definition of status indicator ``Q1.''

    In the case of the procedure described by CPT code 94610, payment for this service is included in the payment for the significant procedure when it is reported in combination with HCPCS codes that are assigned to either status indicators ``S,'' ``T,'' or ``V.'' Alternatively, the service is separately paid when performed alone, or when reported in combination with HCPCS codes that described procedures assigned to a status indicator other than ``S,'' ``T,'' or ``V.'' In addition, assignment to OPPS status indicator

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    ``Q1'' indicates that the service or procedure is assigned a composite APC payment when billed with specific combinations of services based on OPPS composite-specific payment criteria, and payment is packaged into a single payment for specific combinations of services. We disagree with the commenter that CPT code 94610 should be reassigned to OPPS status indicator ``T.'' Based on our understanding of the service, we believe that status indicator ``Q1'' is the most appropriate status indicator assignment for CPT code 94610 because the service is often provided in combination with other services on the same day.

    After consideration of the public comment we received, we are finalizing our proposal, without modification, to continue to assign CPT code 94610 to APC 5791, and to assign status indicator ``Q1'' to the code for CY 2017. The complete list of the OPPS payment status indicators and their definitions for CY 2017 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/Hospital-Outpatient-Regulations-and-Notices.html. Further, we refer readers to Addendum B of this final rule with comment period for the payment rates for all codes reportable under the OPPS. Addendum B is available via the Internet on the CMS Web site.

  168. Non-Contact Low Frequency Ultrasound (NLFU) Therapy (APC 5051)

    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to continue to assign CPT code 97610 (Low frequency, non-

    contact, non-thermal ultrasound, including topical application(s), when performed, wound assessment, and instruction(s) for ongoing care, per day) to APC 5051 (Level 1 Skin Procedures), with a proposed payment rate of approximately $154. In addition, we proposed to continue to assign CPT code 97610 to OPPS status indicator ``Q1'' (STV-Packaged Codes) to indicate that the service is conditionally packaged.

    Comment: One commenter disagreed with CMS' proposal to assign CPT code 97610 to OPPS status indicator ``Q1.'' The commenter indicated that this is a primary service, not an ancillary service, and providers frequently perform NLFU therapy as a standalone, independent procedure. The commenter further stated that CMS' proposed OPPS status indicator assignment of ``Q1'' contradicts AMA's guidance in the June 2014 CPT Assistant, which clearly describes the service as a standalone procedure. The commenter recommended that CMS reassign CPT code 97610 to OPPS status indicator ``T'' (Procedure or Service, Multiple Procedure Reduction Applies. Paid under OPPS; separate APC payment.).

    Response: Assigning CPT code 97610 to OPPS status indicator ``Q1'' indicates that payment for the service is conditionally packaged under the OPPS. A criterion under the conditional packaging policy is that payment for a service is packaged when it is provided in combination with a significant procedure on the same date of service, but the service is separately paid when it is reported on the claim without a significant procedure. Addendum D1 to the CY 2017 OPPS/ASC proposed rule (which is available via the Internet on the CMS Web site) showed the definition of status indicator ``Q1.''

    We note that payment for the procedure described by CPT code 97610 is included in the payment for the significant procedure when it is reported in combination with HCPCS codes that are assigned to any of status indicators ``S,'' ``T,'' or ``V.'' Alternatively, the service is separately paid when performed alone, or when reported in combination with HCPCS codes that describe procedures assigned to a status indicator other than ``S,'' ``T,'' or ``V.'' In addition, assignment to OPPS status indicator ``Q1'' indicates that the service or procedure is assigned a composite APC payment if billed with specific combinations of services based on OPPS composite-specific payment criteria, and payment is packaged into a single payment for specific combinations of services. Based on our understanding of the service, we believe that ``Q1'' is the most appropriate status indicator assignment for CPT code 97610 because the service is provided in combination with other services on the same day.

    After consideration of the public comment we received, we are finalizing our proposal, without modification, to continue to assign CPT code 97610 to APC 5051 and to assign CPT code 97610 to OPPS status indicator ``Q1'' for CY 2017. The complete list of the OPPS payment status indicators and their definitions for CY 2017 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/Hospital-Outpatient-Regulations-and-Notices.html. Further, we refer readers to Addendum B of this final rule with comment period for the payment rates for all codes reportable under the OPPS. Addendum B is available via the Internet on the CMS Web site.

  169. Pulmonary Rehabilitation Services (APCs 5732 and 5733)

    Currently, there are four HCPCS codes that describe pulmonary rehabilitation services, specifically, HCPCS codes G0237, G0238, G0239, and G0424. As shown in Table 33 below and as listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to reassign these services to APCs 5734 (Level 4 Minor Procedures), 5735 (Level 5 Minor Procedures), and 5791 (Pulmonary Treatment). In addition, we proposed to continue their status indicator assignment of ``Q1'' to indicate that these services are conditionally packaged.

    Table 33--Proposed CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Pulmonary Rehabilitation Services

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

    Proposed

    CY 2016 CY 2016 CY 2016 Proposed CY Proposed CY 2017

    HCPCS code Long descriptors OPPS SI OPPS APC OPPS 2017 OPPS CY 2017 OPPS

    payment SI OPPS APC payment

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

    G0237................................ Therapeutic procedures to Q1 5734 $91.18 Q1 5735 $265.56

    increase strength or endurance

    of respiratory muscles, face to

    face, one on one, each 15

    minutes (includes monitoring).

    Page 79647

    G0238................................ Therapeutic procedures to improve Q1 5733 55.94 Q1 5791 161.29

    respiratory function, other than

    described by g0237, one on one,

    face to face, per 15 minutes

    (includes monitoring).

    G0239................................ Therapeutic procedures to improve Q1 5732 30.51 Q1 5734 95.66

    respiratory function or increase

    strength or endurance of

    respiratory muscles, two or more

    individuals (includes

    monitoring).

    G0424................................ Pulmonary rehabilitation, Q1 5733 55.94 Q1 5791 161.29

    including exercise (includes

    monitoring), one hour, per

    session, up to two sessions per

    day.

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

    Comment: Several commenters expressed concern with the proposed status indicator assignment of ``Q1'' for HCPCS code G0424. The commenters stated that Medicare's benefit categories for cardiac and pulmonary rehabilitation programs were codified in section 144 of the Medicare Improvements for Patients and Providers Act of 2008, which provides for payment and coverage of pulmonary and cardiac rehabilitation services. Because the payment for this service was established under a statutory provision, the commenters believed that CMS' proposed status indicator assignment of ``Q1'' for HCPCS code G0424 is an oversight. The commenters requested that CMS reconsider the issue and revise the status indicator assignment to ``S'' (Procedure or Service, Not Discounted When Multiple. Paid under OPPS; separate APC payment), similar to the status indicator assignment for the cardiac rehabilitation codes.

    Response: We appreciate the commenters' feedback and agree, in part, with the commenters' concerns. Consequently, we believe that we should reassign HCPCS code G0424 to status indicator ``S.'' In addition, we believe that we should reassign HCPCS codes G0237, G0238, and G0239 to status indictor ``S'' because these codes also describe pulmonary rehabilitation services. However, the rationale for this modification of the proposal for these codes is not related to the statutory provision of section 144 of the Medicare Improvements for Patients and Providers Act of 2008. We believe that pulmonary rehabilitation is not typically ancillary to the other HOPD services that may be furnished to beneficiaries. Pulmonary rehabilitation is typically a course of treatment that is prescribed after a diagnosis is made and often after other treatments are initiated or completed.

    Comment: Several commenters supported the proposed APC reassignments for HCPCS codes G0237, G0238, G0239, and G0424. These commenters indicated that the proposed payment increase for these services appears to be driven by more accurate and complete costs reports submitted by hospitals providing the service, and recommended that CMS finalize the proposed payment rates.

    Response: We appreciate the commenters' support. We note that we proposed to reassign the HCPCS codes for these services based on the claims data used for the proposed rule that reported these codes as being conditionally packaged. Specifically, our analysis revealed a geometric mean cost of approximately $293 for HCPCS code G0237, which was relatively close to the geometric mean cost of approximately $278 for APC 5735. We also found that the geometric mean costs of approximately $165 for HCPCS code G0238 and approximately $169 for HCPCS code G0424 was relatively similar to APC 5791, which had a geometric mean cost of approximately $169. In addition, we found that the geometric mean cost of approximately $121 for HCPCs code G0239 was comparable to the geometric mean cost of approximately $100 for APC 5374. However, based on our review of the updated CY 2015 claims data used for this final rule with comment period, which included the status indicator revision from ``Q1'' to ``S'' for these codes, we found the geometric mean costs for HCPCS codes G0237, G0238, G0239, and G0424 to be significantly lower than the proposed rule geometric mean costs. This is due to significantly reduced packaged costs from other services after the status indicator was changed from ``Q1'' to ``S.'' We also note that the proposed rule claims data were based on claims submitted from January 1, 2015, through December 31, 2015, and processed through December 31, 2015, while the final rule with comment period claims data are based on claims submitted from January 1, 2015, through December 31, 2015, and processed through June 30, 2016. Based on our analysis of the final rule with comment period claims data, we found a geometric mean cost of approximately $24 for HCPCS code G0237, approximately $22 for HCPCS code G0238, approximately $33 for HCPCS code G0239, and approximately $44 for HCPCS code G0424. As a result of our findings, we are revising the APC assignments for HCPCS codes G0237, G0238, and G0239. Specifically, we found the geometric mean costs for HCPCS code G0237 ($24), G0238 ($22), and G0239 ($33) to be comparable to the geometric mean cost for APC 5732 ($29), while the geometric cost of HCPCS code G0424 ($44) was similar to that of APC 5733 ($56). Based on our analysis of the updated claims data used for the final rule with comment period, we believe that the revised APC assignments for the pulmonary rehabilitation services better reflect their clinical coherence and resource costs.

    In summary, after consideration of the public comments we received and our analysis of the updated claims data for this final rule with comment period, we are modifying our proposal and reassigning HCPCS codes G0237, G0238, G0239, and G0424 to status indicator ``S.'' In addition, we are modifying our

    Page 79648

    proposal and reassigning HCPCS codes G0237, G0238, and G0239 to the final APCs listed in Table 34 below. Table 34 lists the final status indicator, APC assignments, and payment rates for the pulmonary rehabilitation services for CY 2017. We refer readers to Addendum B of this final rule with comment period for the payment rates for all codes reported under the OPPS. Addendum B is available via the Internet on the CMS Web site.

    Table 34--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Pulmonary Rehabilitation Services

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

    CY 2016 Final CY Final CY Final CY

    HCPCS code Long descriptors CY 2016 CY 2016 OPPS 2017 OPPS 2017 OPPS 2017 OPPS

    OPPS SI OPPS APC payment SI APC payment

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

    G0237................................ Therapeutic procedures to Q1 5734 $91.18 S 5732 $28.37

    increase strength or endurance

    of respiratory muscles, face to

    face, one on one, each 15

    minutes (includes monitoring).

    G0238................................ Therapeutic procedures to improve Q1 5733 55.94 S 5732 28.37

    respiratory function, other than

    described by g0237, one on one,

    face to face, per 15 minutes

    (includes monitoring).

    G0239................................ Therapeutic procedures to improve Q1 5732 30.51 S 5732 28.37

    respiratory function or increase

    strength or endurance of

    respiratory muscles, two or more

    individuals (includes

    monitoring).

    G0424................................ Pulmonary rehabilitation, Q1 5733 55.94 S 5733 54.53

    including exercise (includes

    monitoring), one hour, per

    session, up to two sessions per

    day.

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

    1. OPPS Payment for Devices

    1. Pass-Through Payments for Devices

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

  170. 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. The eligibility period is for at least 2 years but no more than 3 years. We may establish a new device category for pass-through payment in any quarter. Under our current 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 note that in this final rule with comment period, in accordance with section 1833(t)(6)(B)(iii)(II) of the Act, we are adopting a policy to base pass-through status expiration for a device category on the first date on which pass-through payment is made under the OPPS.) 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).

  171. CY 2017 Pass-Through Devices

    As stated earlier, section 1833(t)(6)(B)(iii) of the Act requires that, under the OPPS, a category of devices be eligible for transitional pass-through payments for at least 2 years, but not more than 3 years. There currently are four device categories eligible for pass-through payment: (1) HCPCS code C2624 (Implantable wireless pulmonary artery pressure sensor with delivery catheter, including all system components), which was established effective January 1, 2015; (2) HCPCS code C2623 (Catheter, transluminal angioplasty, drug-coated, non-laser), which was established effective April 1, 2015; (3) HCPCS code C2613 (Lung biopsy plug with delivery system), which was established effective July 1, 2015; and (4) HCPCS code C1822 (Generator, neurostimulator (implantable), high frequency, with rechargeable battery and charging system), which was established effective January 1, 2016. The pass-through payment status of the device category for HCPCS code C2624 will end on December 31, 2016. Therefore, in accordance with our current policy, in the CY 2017 OPPS/

    ASC proposed rule (81 FR 45649), we proposed, beginning in CY 2017, to package the costs of the device described by HCPCS code C2624 into the costs related to the procedure with which the device is reported in the hospital claims data. We stated in the proposed rule that the other three codes listed will continue with pass-through status in CY 2017. We did not receive any public comments on this proposal. Therefore, we are finalizing our proposal to expire device pass-through payments for the device described by HCPCS code C2624, effective January 1, 2017.

    2. New Device Pass-Through Applications

  172. Background

    Section 1833(t)(6) of the Act provides for temporary additional payments, referred to as ``transitional pass-through payments,'' for devices and section 1833(t)(6)(B) of the Act requires CMS to use categories in determining the eligibility of devices for transitional pass-through payments. As part of implementing the statute through regulations, we have continued to believe that it is important for hospitals to receive pass-through payments for

    Page 79649

    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, we have noted that the need for additional payments for devices that offer little or no clinical improvement over previously existing devices is less apparent. In such cases, these devices can still be used by hospitals, and hospitals will be paid for them through appropriate APC payment. Moreover, a goal is to target pass-through payments for those devices where cost considerations might be most likely to interfere with patient access (66 FR 55852; 67 FR 66782; and 70 FR 68629).

    As specified in regulations at 42 CFR 419.66(b)(1) through (b)(3), to be eligible for transitional pass-through payment under the OPPS, a device must meet the following criteria: (1) if required by FDA, the device must have received FDA approval or clearance (except for a device that has received an FDA investigational device exemption (IDE) and has been classified as a Category B device by the FDA), or another appropriate FDA exemption; and the pass-through payment application must be submitted within 3 years from the date of the initial FDA approval or clearance, if required, unless there is a documented, verifiable delay in U.S. market availability after FDA approval or clearance is granted, in which case CMS will consider the pass-through payment application if it is submitted within 3 years from the date of market availability; (2) the device is determined to be reasonable and necessary for the diagnosis or treatment of an illness or injury or to improve the functioning of a malformed body part, as required by section 1862(a)(1)(A) of the Act; and (3) the device is an integral part of the service furnished, is used for one patient only, comes in contact with human tissue, and is surgically implanted or inserted (either permanently or temporarily), or applied in or on a wound or other skin lesion. In addition, according to 42 CFR 419.66(b)(4), a device is not eligible to be considered for device pass-through payment if it is any of the following: (1) equipment, an instrument, apparatus, implement, or item of this type for which depreciation and financing expenses are recovered as depreciation assets as defined in Chapter 1 of the Medicare Provider Reimbursement Manual (CMS Pub. 15-1); or (2) a material or supply furnished incident to a service (for example, a suture, customized surgical kit, or clip, other than a radiological site marker).

    Separately, we use the following criteria, as set forth under Sec. 419.66(c), to determine whether a new category of pass-through devices should be established. The device to be included in the new category must--

    Not be appropriately described by an existing category or by any category previously in effect established for transitional pass-

    through payments, and was not being paid for as an outpatient service as of December 31, 1996;

    Have an average cost that is not ``insignificant'' relative to the payment amount for the procedure or service with which the device is associated as determined under Sec. 419.66(d) by demonstrating: (1) the estimated average reasonable costs of devices in the category exceeds 25 percent of the applicable APC payment amount for the service related to the category of devices; (2) the estimated average reasonable cost of the devices in the category exceeds the cost of the device-related portion of the APC payment amount for the related service by at least 25 percent; and (3) the difference between the estimated average reasonable cost of the devices in the category and the portion of the APC payment amount for the device exceeds 10 percent of the APC payment amount for the related service (with the exception of brachytherapy and temperature-monitored cryoblation, which are exempt from the cost requirements as noted at Sec. Sec. 419.66(c)(3) and (e); and

    Demonstrate a substantial clinical improvement, that is, substantially improve the diagnosis or treatment of an illness or injury or improve the functioning of a malformed body part compared to the benefits of a device or devices in a previously established category or other available treatment.

    Beginning in CY 2016, we changed our device pass-through evaluation and determination process. Device pass-through applications are still submitted to us through the quarterly subregulatory process, but the applications will be subject to notice-and-comment rulemaking in the next applicable OPPS annual rulemaking cycle. Under this process, all applications that are preliminarily approved upon quarterly review will automatically be included in the next applicable OPPS annual rulemaking cycle, while submitters of applications that are not approved upon quarterly review will have the option of being included in the next applicable OPPS annual rulemaking cycle or withdrawing their application from consideration. Under this notice-and-comment process, applicants may submit new evidence, such as clinical trial results published in a peer-reviewed journal, or other materials for consideration during the public comment process for the proposed rule. This process allows those applications that we are able to determine meet all the criteria for device pass-through payment under the quarterly review process to receive timely pass-through payment status, while still allowing for a transparent, public review process for all applications (80 FR 70417 through 70418). More details on the requirements for device pass-through payment applications are included on the CMS Web site in the application form itself at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html, in the ``Downloads'' section.

    In addition, CMS is amenable to meeting with applicants or potential applicants to discuss research trial design in advance of any device pass-through application or to discuss application criteria, including the substantial clinical improvement criterion.

  173. Applications Received for Device Pass-Through Payment for CY 2017

    We received three applications by the March 1, 2016 quarterly deadline, which was the last quarterly deadline in time to be included for the CY 2017 OPPS/ASC proposed rule. None of these three applications were approved for device pass-through payment during the quarterly review process. Applications received for the later deadlines for the remaining 2016 quarters (June 1, September 1, and December 1), if any, will be presented in the CY 2018 OPPS/ASC proposed rule. We note that the quarterly application process and requirements have not changed in light of the addition of rulemaking review. Detailed instructions on submission of a quarterly device pass-through payment application are included on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/catapp.pdf. A discussion of the three applications received by the March 1, 2016 deadline is presented below, as detailed in the CY 2017 OPPS/ASC proposed rule (81 FR 45650 through 45653).

    (1) BioBagsupreg (Larval Debridement Therapy in a Contained Dressing)

    BioMonde US, LLC submitted an application for a new device pass-

    through category for the BioBagsupreg (larval debridement therapy in a contained dressing) (hereinafter referred to as the

    Page 79650

    BioBagsupreg). According to the applicant, BioBagsupreg is a biosurgical wound treatment (``maggot therapy'') consisting of disinfected, living larvae (Lucilia sericata) in a polyester net bag; the larvae remove dead tissue from wounds. The BioBagsupreg is indicated for debridement of nonhealing necrotic skin and soft tissue wounds, including pressure ulcers, venous stasis ulcers, neuropathic foot ulcers, and nonhealing traumatic or postsurgical wounds. Debridement, which is the action of removing devitalized tissue and bacteria from a wound, is required to treat or prevent infection and to allow the wound to progress through the healing process. This system contains disinfected, living larvae that remove the dead tissue from wounds and leave healthy tissue undisturbed. The larvae are provided in a sterile polyester net bag, available in different sizes. The only other similar product is free-range (that is, uncontained) larvae. Free-range larvae are not widely used in the United States because application is time consuming, there is a fear of larvae escaping from the wound, and there are concerns about proper and safe handling of the larvae. The total number of treatment cycles depends on the characteristics of the wound, the response of the wound, and the aim of the therapy. Most ulcers are completely debrided within 1 to 6 treatment cycles.

    With respect to the newness criterion at Sec. 419.66(b)(1), the applicant received FDA clearance for BioBagsupreg through the premarket notification section 510(k) process on August 28, 2013, and its March 1, 2016 application was within 3 years of FDA clearance. The applicant claims that BioBagsupreg is an integral part of the wound debridement, is used for one patient only, comes in contact with human skin, and is applied in or on a wound. In addition, the applicant stated that BioBagsupreg is not an instrument, apparatus, or item for which depreciation and financing expenses are recovered. We believe that BioBag could be considered to be a surgical supply similar to a surgical dressing that facilitates either mechanical or autolytic debridement (for example, hydrogel dressings), and therefore ineligible for device pass-through payments under the provisions of Sec. 419.66(b)(4)(ii). In the CY 2017 OPPS/ASC proposed rule (81 FR 45650), we invited public comment on whether BioBagsupreg should be eligible under Sec. 419.66(b) to be considered for device pass-through payment.

    Comment: One commenter, the manufacturer, submitted comments on whether BioBagsupreg should be considered to be a surgical supply similar to a surgical dressing that facilitates either mechanical or autolytic debridement. The commenter stated that BioBagsupreg is a ``treatment for active and physical wound debridement'' that does not function like an autolytic or mechanical debridement, but more like a sharp debridement, surgical debridement or water-jet. The commenter also noted that BioBagsupreg is individualized to the patient and has a limited viability window, and that ordering, manufacturing, storage and handling are different than for a supply.

    Response: For purposes of the device pass-through payment process, we are persuaded by this additional information, and we no longer consider the BioBagsupreg product to be an ineligible supply under Sec. 419.66(b)(4)(ii) of the regulations because the BioBagsupreg is not ``furnished incident to a service,'' as described in Sec. 419.66(b)(4)(ii).

    With respect to the existence of a previous pass-through device category that describes the BioBagsupreg, the applicant suggested a category descriptor of ``Larval therapy for the debridement of necrotic non-healing skin and soft tissue wounds.'' We stated in the proposed rule that we have not identified an existing pass-through payment category that describes the BioBagsupreg, but we welcomed public comments on this issue.

    We did not receive any public comments on this issue and have not identified an existing pass-through payment category that describes BioBagsupreg.

    With respect to the cost criterion, the applicant stated that BioBagsupreg would be reported with CPT code 97602 (Removal of devitalized tissue from wound(s), non-selective debridement, without anesthesia (e.g., wet-to-moist dressings, enzymatic, abrasion), including topical application(s), wound assessment, and instruction(s) for ongoing care, per session). CPT code 97602 is assigned to APC 5051 (Level 1 Skin Procedures), with a CY 2016 payment rate of $117.83, and the device offset is $1.18. The price of BioBagsupreg varies with the size of the bag ($375 to $435 per bag), and bag size selection is based on the size of the wound. To meet the cost significance criterion, there are three cost significance subtests that must be met and calculations are noted below. The first cost significance is that the device cost needs to be at least 25 percent of the applicable APC payment rate to reach cost significance, as follows for the highest-

    priced BioBagsupreg: $435/117.83 x 100 = 369 percent. Thus, BioBagsupreg meets the first cost significance test. The second cost significance test is that the device cost needs to be at least 125 percent of the offset amount (the device-related portion of the APC found on the offset list): $435/1.18 x 100 = 36864 percent. Thus, BioBagsupreg meets the second cost significance test. The third cost significance test is that the difference between the estimated average reasonable cost of the devices in the category and the portion of the APC payment amount determined to be associated with the device in the associated APC exceeds 10 percent of the total APC payment: ($435-

    1.18)/117.83 x 100 = 368 percent. Thus, BioBagsupreg meets the third cost significance test and satisfies the cost significance criterion.

    With respect to the substantial clinical improvement criterion, the applicant cited a total of 18 articles relating to wound debridement, and most of these articles discussed the use of larval therapy for the treatment of ulcers. One peer-reviewed journal article described a randomized controlled trial with 267 subjects who received loose larvae, bagged larvae, or hydrogel intervention.\1\ Results of the study showed that the time to healing was not significantly different between the three groups, but that larval therapy significantly reduced the time to debridement (hazard ratio for the combined larvae group compared with hydrogel was 2.31 (95 percent confidence interval 1.65 to 3.24; PTM Suspension System

    Siesta Medical, Inc. submitted an application for a new device pass-through category for the Encore Suspension System (hereinafter referred to as the EncoreTM System). According to the application, the EncoreTM System is a kit of surgical instruments and implants that are used to perform an adjustable hyoid suspension. In this procedure, the hyoid bone (the U-shaped bone in the neck that supports the tongue) and its muscle attachments to the tongue and airway are pulled forward with the aim of increasing airway size and improving airway stability in the retrolingual and hypopharyngeal airway (airway behind and below the base of tongue). This procedure is indicated for the treatment of mild or moderate obstructive sleep apnea (OSA) and/or snoring, when the patient is unable to tolerate continuous positive airway pressure (CPAP). The current alternative to the hyoid suspension is the hyo-thyroid suspension technique (hyothyroidpexy). The EncoreTM System is designed for hyoid bone suspension to the mandible bone using bone screws and suspension lines. The EncoreTM System kit contains the following items:

    Integrated suture passer pre-loaded with polyester suture;

    Three bone screws and two bone screw inserters;

    Suspension line lock tool;

    Threading tool for suspension lines; and

    Four polyester suspension lines.

    With regard to the newness criterion, the EncoreTM System received FDA clearance through the section 510(k) process on March 26, 2014. Accordingly, it appears that the EncoreTM System is new for purposes of evaluation for device pass-through payments.

    Several components of the EncoreTM System appear to be either instruments or supplies, which are not eligible for pass-through according to Sec. 419.66(b)(4)(i) and (ii). For instance, the suture passer is an instrument and the suture is a supply, the bone screw inserters are instruments, the suspension line lock tool is an instrument, the threading tool for suspension lines is an instrument, and the polyester suspension lines are similar to sutures and therefore are supplies. With respect to the presence of a previously established code, the only implantable devices in the kit are the bone screws, and by the applicant's own admission the bone screws are described by the existing pass-through category HCPCS code C1713 (Anchor/screw for opposing bone-to-bone or soft tissue-to-bone (implantable)). In the CY 2017 OPPS/ASC proposed rule (81 FR 45651), we invited public comments on whether the EncoreTM System bone screws are described by a previously existing category and also whether the remaining kit components are supplies or instruments.

    Comment: One commenter, the manufacturer, stated that the EncoreTM bone screws are designed with unique strength, profile and adjustability functions for the EncoreTM System, and therefore the bone screws are not adequately described by HCPCS code C1713. In addition, the commenter stated that the remaining kit components are custom designed for the procedure, would not be available otherwise within the operating room, and, therefore, would not meet the criteria for supplies and instruments, as specified in Sec. 419.66(b)(4)(i)(ii).

    Response: We note that manufacturers frequently package a number of individual items used with a device for a particular procedure into a kit. Hospitals may not bill for transitional pass-through payments for supplies that may be contained in kits (Medicare Claims Processing Manual (Pub. 100-04, Chapter 4, Section 60.4)). We continue to believe that the suture passer, the bone screw inserters, the suspension line lock tool, and the threading tool for suspension lines are all instruments and that the sutures and polyester suspension lines are supplies, even though they may have been customized for the procedure. Regarding the bone screws, we continue to believe that the bone screws are described by HCPCS code C1713 because, although customized, the bone screws anchor/

    Page 79652

    screw for opposing bone-to-bone (hyoid bone to mandible bone).

    With regard to the cost criterion, the applicant stated that the EncoreTM System would be used in the procedure described by CPT code 21685 (Hyoid myotomy and suspension). CPT code 21685 is assigned to APC 5164 (Level 4 ENT Procedures) with a CY 2016 payment rate of $1,616.90, and the device offset is $15.85. The price of the EncoreTM System as stated in the application is $2,200. To meet the cost criterion, there are three cost significance subtests that must be met and the calculations are noted below. The first cost significance is that the device cost needs to be at least 25 percent of the applicable APC payment rate to reach cost significance: $2,200/

    $1,616.90 x 100 percent = 136 percent. Thus, the EncoreTM System meets the first cost significance test. The second cost significance test is that the device cost needs to be at least 125 percent of the offset amount (the device-related portion of the APC found on the offset list): $2,200/$15.85 x 100 percent = 13880 percent. Thus, the EncoreTM System meets the second cost significance test. The third cost significance test is that the difference between the estimated average reasonable cost of the devices in the category and the portion of the APC payment amount determined to be associated with the device in the associated APC exceeds 10 percent of the total APC payment: ($2,200--$15.85)/$1,616.90 x 100 percent = 135 percent. Thus, the EncoreTM System meets the third cost significance test. Based on the costs submitted by the applicant and the calculations noted earlier, the EncoreTM System meets the cost criterion. However, as stated in the proposed rule, we have concerns about whether the cost criterion would be met if based only on the kit components that are not supplies, not instruments, and not described by an existing category (if any).

    We did not receive any public comments related to the cost criterion of the EncoreTM System application. As noted earlier in this section, the applicant stated that the EncoreTM System would be used in the procedure described by CPT code 21685 (Hyoid myotomy and suspension). CPT code 21685 is assigned to APC 5164 (Level 4 ENT Procedures) with a CY 2016 payment rate of $1,616.90, and the device offset is $15.85. The applicant also stated that the price of the EncoreTM System is $2,200. Based on our determination earlier in this section of this final rule with comment period, the device is described by HCPCS code C1713 and the bone screws and other kit supplies are supplies and instruments. Because of this determination, the cost of the device and the other components in the kit cannot be included in the device costs used to determine whether the device meets the cost criterion. Accordingly, the EncoreTM System does not meet the cost threshold.

    With regard to the substantial clinical improvement criterion, the applicant provided a thorough review of the hyoid myotomy with suspension and other surgical procedures that treat mild or moderate obstructive sleep apnea. However, specific data addressing substantial clinical improvement with the EncoreTM System were lacking. The application included information on a case series of 17 obstructive apnea patients who received an Encore hyo-mandibular suspension as well as a previous or concurrent uvulopalatopharyngoplasty (UPPP). According to the application, the 17 patients studied demonstrated a 76 percent surgical success, and 73 percent median reduction in the Respiratory Disturbance Index (RDI) at 3 months, significantly reduced surgical time, and 1 infection requiring device removal. This study was a retrospective, single center study with no comparator.

    In addition, the American Academy of Otolaryngology Head and Neck Surgery (AAOHNS) ``Position Statement: Tongue Based Procedures'' (accessed on 3.30.2016 and located at: http://www.entnet.org/node/215) considers the Hyoid myotomy and suspension ``effective and non-

    investigational with proven clinical results when considered as part of the comprehensive surgical management of symptomatic adult patients with mild obstructive sleep apnea (OSA) and adult patients with moderate and severe OSA assessed as having tongue base or hypopharyngeal obstruction.'' The AMA CPT Editorial Panel created CPT code 21685 (Hyoid myotomy and suspension) in 2004. The AAOHNS statement and the age of the CPT code indicate that this is an established surgical procedure. The EncoreTM System is a new kit of surgical instruments and implantable materials that are used to perform this procedure. According to the EncoreTM System's section 510(k) Summary, ``the fundamental scientific technology and technological characteristics of the EncoreTM System are the same as the predicate devices,'' which includes the Medtronic AirVance System (another surgical kit used on CPT code 21685). The applicant claimed several advantages of the EncoreTM System over the AirVance System that relate to greater ease of use for the surgeon and better long-term stability. However, there are no studies comparing the EncoreTM System to the AirVance System. There are no clinical data provided by the applicant to suggest that the EncoreTM System kit provides a substantial clinical improvement over other instruments/implants that are used to perform Hyoid myotomy and suspension. In the proposed rule, we invited public comments on whether the EncoreTM System meets the substantial clinical improvement criterion.

    Comment: One commenter stated that the EncoreTM System has ``provided improved and more consistent results than previous hyoid suspension techniques'' and that it is reasonable to assume that a system that provides significantly improved control of the hyoid bone suspension location and greater long-term stability of this surgically modified hyoid bone location will lead to improved and less variable clinical results for the patients treated, including reducing the mortality rate, future hospitalization, and the need for future additional interventions. Numerous commenters who used the EncoreTM System supported the application and stated that, in their experience, the system provided a substantial clinical improvement for performing hyomandibular suspension and was superior to the hyo-thyroid technique. These commenters did not provide any new empirical data in support of the application.

    Response: As stated in the proposed rule, there were no clinical data provided by the applicant to suggest that the EncoreTM System kit provides a substantial clinical improvement over other instruments/implants that are used to perform Hyoid myotomy and suspension. While the commenters provided some suggestions that the EncoreTM System kit had clinical merits, these suggestions were anecdotal and largely based on assumptions, not actual empirical clinical evidence. Because no new significant information or data were provided through the public comments, we are not able to determine that the EncoreTM System represents a substantial clinical improvement relative to existing medical treatments.

    After consideration of the public comments we received, we are not approving device pass-through payment status for the EncoreTM System for CY 2017.

    (3) Endophys Pressure Sensing System (Endophys PSS) or Endophys Pressure Sensing Kit

    Endophys Holdings, LLC. submitted an application for a new device pass-

    Page 79653

    through category for the Endophys Pressure Sensing System or Endophys Pressure Sensing Kit (hereinafter referred to as the Endophys PSS). The applicant suggested a category descriptor within either the HCPCS code C18XX series or the HCPCS code C26XX series and the device was described by the applicant as a stand-alone catheterization sheath that is inserted percutaneously during intravascular diagnostic or interventional procedures. When applied intravascularly, the two separate functions delivering an improved patient outcome include: (1) Continuous intra-arterial blood pressure monitoring using a high-

    precision Fabry-Perot pressure sensor located within the device anterior approaching the distal tip of the system; and (2) a conduit that allows the introduction of other devices for cardiovascular or percutaneous interventional procedures.

    The Endophys PSS is an introducer sheath (including a dilator and guidewire) with an integrated fiber optic pressure transducer for blood pressure monitoring. The Endophys PSS is used with the Endophys Blood Pressure Monitor to display blood pressure measurements. The sheath is inserted percutaneously during intravascular diagnostic or interventional procedures, typically at the site of the patient's femoral artery. This device facilitates the introduction of diagnostic and interventional devices into the coronary and peripheral vessels while continuously sensing and reporting blood pressure during the interventional procedure. Physicians would use this device to pass guidewires, catheters, stents, and coils, to perform the diagnostic or therapeutic treatment on the coronary or other vasculature. The Endophys PSS provides continuous blood pressure monitor information to the treating physician so that there is no need for an additional arterial access site for blood pressure monitoring.

    With respect to the newness criterion, the Endophys PSS received FDA clearance through the section 510(k) process on January 7, 2015, and therefore is new. According to the applicant, the Endophys PSS is an integral part of various endovascular procedures, is used for one patient only, comes in contact with human skin, and is surgically implanted. Endophys PSS is not an instrument, apparatus, implement or item for which depreciation and financing expenses are recovered, and it is not a supply or material.

    With respect to the presence of a previously established category, based on our review of the application, we believe that Endophys PSS may be described by HCPCS code C1894 (Introducer/sheath, other than guiding, other than intracardiac electrophysiological, non-laser). The FDA section 510(k) Summary Product Description Section in the application describes the Endophys PSS as an introducer sheath with an integrated fiber optic pressure transducer. Because the Endophys PSS is an introducer sheath that is not guiding, not intracardiac electrophysiological, and not a laser, we believe that it is described by the previously existing category of HCPCS code C1894 established for transitional pass-through payments. In the CY 2017 OPPS/ASC proposed rule (81 FR 45652), we invited public comment on whether Endophys PSS is described by a previously existing category.

    Comment: One commenter, the manufacturer, disagreed with CMS that the Endophys PSS is described by HCPCS code C1894 and states that HCPCS code C1894 ``describes a device that does not look like the Endophys PSS, does not provide continuous intraarterial blood pressure readings equivalent to a radial arterial line, is not used or monitored by a physician in a similar manner.'' The commenter noted that the design for Endophys PSS is patented. The commenter also noted that FDA has assigned new product codes to the Endophys PSS that are not similar to devices described by HCPCS code C1894.

    Response: We continue to believe that HCPCS code C1894 accurately describes the Endophys PSS because it is a type of introducer/sheath (but with a built-in pressure transducer). Also, a new product code from the FDA, which is used by the FDA to classify and track a medical device, is not relevant in CMS' consideration of whether the device is described by an existing HCPCS C-code. The FDA may provide new product codes for items that we consider to be described more broadly and with an existing HCPCS C-code.

    With respect to the cost criterion, according to the applicant, the Endophys PSS would be reported with CPT code 36620 (Arterial catheterization or cannulation for sampling, monitoring or transfusion (separate procedure); percutaneous). CPT code 36620 is assigned status indicator ``N'', which means its payment is packaged under the OPPS. The applicant stated that its device can be used in many endovascular procedures that are assigned to the APCs listed below:

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

    APC Description

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

    5188............................. Diagnostic Cardiac Catheterization.

    5191............................. Level 1 Endovascular Procedures.

    5526............................. Level 6 X-Ray and Related Services.

    5183............................. Level 3 Vascular Procedures.

    5181............................. Level 1 Vascular Procedures.

    5182............................. Level 2 Vascular Procedures.

    5291............................. Thrombolysis and Other Device

    Revisions.

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

    To meet the cost criterion for device pass-through payment, a device must pass all three tests for cost threshold for at least one APC. For our calculations, we used APC 5291 (Thrombolysis and Other Device Revisions), which has a CY 2016 payment rate of $199.80 and the device offset of $3.38. According to the applicant, the cost of the Endophys PSS is $2,500. The first cost significance test is that the device cost needs to be at least 25 percent of the applicable APC payment rate to reach cost significance: $2,500/199.80 x 100 percent = 1251 percent. Thus, the Endophys PSS meets the first cost significance test. The second cost significance test is that the device cost needs to be at least 125 percent of the offset amount (the device-related portion of the APC found on the offset list): $2,500/3.38 x 100 percent = 73964 percent. Thus, the Endophys PSS meets the second cost significance test. The third cost significance test is that the difference between the estimated average reasonable cost of the devices in the category and the portion of the APC payment amount determined to be associated with the device in the associated APC exceeds 10 percent of the total APC payment: ($2,500-3.38)/199.80 x 100 percent = 1250 percent. Thus, the Endophys PSS meets the third cost significance test. Based on the costs submitted by the applicant and the above calculations, the Endophys PSS meets the cost criterion. In the proposed rule, we invited public comments on this issue.

    We did not receive any public comments on whether the Endophys PSS meets the cost criterion. We continue to believe that the Endophys PSS meets the cost criterion.

    With respect to the substantial clinical improvement criterion, the applicant stated that the Endophys PSS represents a substantial clinical improvement over existing medical therapies because the Endophys PSS includes a built-in pressure sensor, which eliminates the need for a second arterial line to monitor the blood pressure. The applicant stated that the Endophys PSS reduces the time to treatment for the patient (because there is no time needed to establish the second arterial line) and reduces

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    potential complications associated with the second arterial line. While several references were provided in support of this application, there were minimal direct clinical data provided on the Endophys PSS to support substantial clinical improvement. The application included slides with statements pertaining to cost savings, reduced morbidity and life saving for a study of 36 patients, but a published study was not submitted and additional information on study design and other details of the study were not provided. Also, the applicant provided six physician testimonials citing support for the Endophys PSS based on between one and six patient experiences with the device.

    The published articles provided with the application did not provide any information based on usage of the Endophys PSS. Topics addressed in the references included: Articles on intraarterial treatment for acute ischemic stroke; references providing education on blood pressure measurement and monitoring; articles on complications during percutaneous coronary intervention; and a reference on ultrasound guided placement of arterial cannulas in the critically ill. Given the paucity of studies using the Endophys PSS, we stated in the proposed rule that we have not been persuaded that the threshold for substantial clinical improvement has been met. We invited public comments on whether the Endophys PSS meets the substantial clinical improvement criterion.

    Comment: One commenter, the manufacturer, submitted a new publication \4\ that compared a set of patients' radial artery catheterization (RAC) blood pressure measurements, sphygmomanometer readings, and measurements from the Endophys PSS. Study results suggested that the Endophys PSS correlated with the RAC and the blood pressure cuff. The study authors conclude that because the Endophys PSS has ``competitive functionality to that seen with a dedicated radial artery catheter for blood pressure monitoring and is available immediately on sheath insertion without the added risk of RAC . . . , potential complications from RAC could be avoided.'' In addition, in its comment, the commenter noted that validation of the patient benefit due to the lack of a second arterial line for blood pressure monitoring in a randomized clinical trial may not meet the criteria of a well-

    designed clinical investigation and cited three considerations for why this is the case. The commenter noted that the ``clinical evidence is abundant in the published literature reporting the incidence of radial arterial catheterization complications, cost, and patient morbidity. Time saved by eliminating a second RA placement while providing equivalent and continuous arterial pressure readings is obvious, and has cost benefits beyond the purely medical benefits discussed above.'' The commenter further noted that patients who received Endophys PSS ``did not require a RA catheter placement, no serious complications were reported, and that the procedure was completed achieving the therapeutic objective. Reports were received across the centers noting when using accurate continuous arterial pressures the clinician was alerted to serious changes in blood pressure requiring immediate attention. In the absence of the Endophys PSS, the variance would not have been identified causing the patient to suffer complications.''

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

    \4\ Purdy PD, South C. Klucznik RP et al. J NeuroIntervent Surg. Published online first July 16, 2016 doi:10.1136/neurintsurg-2016-

    012536).

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

    Response: We appreciate the submission of the new study as well as the public comment. We note that the study appears to show correlation on blood pressure readings between the Endophys PSS and RAC, and we believe that a clinical trial of the Endophys PSS versus RAC examining complication rates would be necessary to validate the theory of reduction in complication rates with use of the Endophys PSS. Accordingly, we do not believe the study supports a definitive conclusion that this device provides a substantial clinical improvement over existing modalities.

    After consideration of the public comments we received, we are not approving device pass-through payment status for the Endophys PSS for CY 2017.

    3. Beginning Eligibility Date for Device Pass-Through Payment Status

    The regulation at 42 CFR 419.66(g) currently provides that the pass-through payment eligibility period begins on the date CMS establishes a category of devices. In the CY 2017 OPPS/ASC proposed rule (81 FR 45653), we proposed to amend Sec. 419.66(g) such that it more accurately comports with section 1833(t)(6)(B)(iii)(II) of the Act, which provides that the pass-through eligibility period begins on the first date on which pass-through payment is made. We recognize that there may be a difference between the establishment of a pass-through category and the date of first pass-through payment for a new pass-

    through device for various reasons. In most cases, we would not expect this proposed change in the beginning pass-through eligibility date to make any difference in the anticipated pass-through expiration date. However, in cases of significant delay from the date of establishment of a pass-through category to the date of the first pass-through payment, by using the date that the first pass-through payment was made rather than the date on which a device category was established could result in an expiration date of device pass-through eligibility that is later than it otherwise would have been had the clock began on the date the category was first established. We invited public comments on our proposal.

    Comment: Many commenters supported the proposal. The commenters' statements of support included that the proposed policy recognizes that the quarterly implementation date may not be aligned with market availability and starting the device pass-through eligibility period on date of first payment would allow for more robust data collection for the purposes of setting future APC rates to accurately include the device costs.

    Response: We appreciate the commenters' support.

    After consideration of the public comments we received, we are finalizing the proposal to amend Sec. 419.66(g) such that it provides that the pass-through eligibility period begins on the first date on which pass-through payment is made.

    4. Policy To Make the Transitional Pass-Through Payment Period 3 Years for All Pass-Through Devices and Expire Pass-Through Status on a Quarterly Rather Than Annual Basis

  174. Background

    As required by statute, transitional pass-through payments for a device described in section 1833(t)(6)(B)(iii) of the Act can be made for a period of at least 2 years, but not more than 3 years, beginning on the first date on which pass-through payment was made for the product. Our current policy is to accept pass-through applications on a quarterly basis and to begin pass-through payments for new pass-through devices on a quarterly basis through the next available OPPS quarterly update after the approval of a device's pass-through status. However, we expire pass-through status for devices on a calendar-year basis through notice-and-comment rulemaking rather than on a quarterly basis. Device pass-through status currently expires at the end of a

    Page 79655

    calendar year when at least 2 years of pass-through payments have been made, regardless of the quarter in which it was initially approved. This means that the duration of the pass-through eligibility for a particular device will depend upon when during a year the applicant applies and is approved for pass-through payment. For example, a new pass-through device with pass-through payment status effective on April 1 would receive 2 years and 3 quarters of pass-through payment status, while a pass-through device with pass-through payment status effective on October 1 would receive 2 years and 1 quarter of pass-through payment status.

  175. CY 2017 Policy

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45653), we proposed, beginning with pass-through devices newly approved in CY 2017 and subsequent calendar years, to allow for a quarterly expiration of pass-

    through payment status for devices to afford a pass-through payment period that is as close to a full 3 years as possible for all pass-

    through payment devices. This proposed change would eliminate the variability of the pass-through eligibility period, which currently varies based on the timing of the particular application. For example, under this proposal, for a device with pass-through first effective on October 1, 2017, pass-through payment status would expire on September 30, 2020. As stated in the proposed rule, we believe that the payment adjustment for transitional pass-through payments for devices under the OPPS is intended to provide adequate payment for new innovative technology while we collect the necessary data to incorporate the costs for these devices into the calculation of the associated procedure payment rate (66 FR 55861). We believe that the 3-year maximum pass-

    through payment period for all pass-through devices would better insure robust data collection and more representative procedure payments once the pass-through payment devices are packaged. We invited public comments on this proposal.

    Comment: Many commenters, including MedPAC, supported the proposal. Some commenters suggested that, by maximizing the timeframe for receipt of device pass-through payment, there would be more robust cost data that can be utilized for setting future APC rates to accurately include the device costs.

    Response: We appreciate the commenters' support.

    Comment: One commenter asked whether CMS intends to adjust payment rates mid-year to include the costs of newly packaged devices upon expiration of device pass-through payments, when a device pass-through payment status expires mid-year. The commenter was concerned that hospitals might not receive adequate payment for the costs of a device, unless the payment was also adjusted, when the device pass-through payment status expired.

    Response: We do not generally adjust payment rates mid-year and do not anticipate doing so for this proposal. Under our final policy, we will continue to include all device costs in the associated procedure(s) for ratesetting purposes. The final CY 2017 OPPS policy represents an extension of the timeframe for which device pass-through payment policy applies but does not affect the claims available for ratesetting purposes. We note that our not adjusting rates mid-year will not result in double payment for devices. While the device maintains pass-through payment status, we will reduce APC payment by the device offset and add the device pass-through payment; once the device pass-through payment status expires, hospitals will bill for and receive the full APC payment, which includes packaged device costs.

    Comment: Several commenters requested that CMS consider amending the proposal in order to implement the proposed policy retroactively to previously approved devices that were proposed to continue receiving device pass-through payments in CY 2017. The commenters stated that this recommended change would extend the timeframe for receipt of device pass-through payments to current applicants that have already been awarded device pass-through payment status and anticipate receipt of device pass-through payments in CY 2017.

    Response: As proposed, the policy begins with pass-through devices newly approved in CY 2017, and we are not going to this policy for devices that received pass-through payment approval prior to CY 2017.

    After consideration of the public comments we received, we are finalizing, without modification, our proposal to allow for quarterly expiration of pass-through payment status for devices, beginning with newly approved pass-through payment devices in CY 2017 and subsequent calendar years, to afford a pass-through payment period that is as close to a full 3 years as possible for all pass-through payment devices.

    5. Changes to Cost-to-Charge Ratios (CCRs) That Are Used To Determine Device Pass-Through Payments

  176. Background

    Section 1833(t)(6)(D)(ii) of the Act and 42 CFR 419.66(h) describe how payment will be determined for pass-through payment devices. Currently, transitional pass-through payments for devices are calculated by taking the hospital charges for each billed device, reducing them to cost by use of the hospital's average CCR across all outpatient departments, and subtracting an amount representing the device cost contained in the APC payments for procedures involving that device (65 FR 18481 and 65 FR 67809). In the original CY 2000 OPPS final rule, we stated that we would examine claims in order to determine if a revenue center-specific set of CCRs should be used instead of the average CCR across all outpatient departments (65 FR 18481).

    In the FY 2009 IPPS final rule (73 FR 48458 through 48467), CMS created a cost center for ``Medical Supplies Charged to Patients,'' which are generally low cost supplies, and another cost center for ``Implantable Devices Charged to Patients,'' which are generally high-

    cost implantable devices. This change was in response to a Research Triangle Institute, International (RTI) study that was discussed in the FY 2009 IPPS final rule and which determined that there was charge compression in both the IPPS and the OPPS cost estimation of expensive and inexpensive medical supplies. Charge compression can result in undervaluing high-cost items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR (such as the hospital-wide CCR) is applied to items of widely varying costs in the same cost center. By splitting medical supplies and implantable devices into two cost centers, some of the effects of charge compression were mitigated. The cost center for ``Implantable Devices Charged to Patients'' has been available for use for OPPS cost reporting periods beginning on or after May 1, 2009.

    In CY 2013, we began using data from the ``Implantable Devices Charged to Patients'' cost center to create a distinct CCR for use in calculating the OPPS relative payment weights for CY 2013 (77 FR 68225). Hospitals have adapted their cost reporting and coding practices in order to report usage to the ``Implantable Devices Charged to Patients'' cost center, resulting in sufficient data to perform a meaningful analysis. However, we have continued to use the hospital-

    wide CCR in our

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    calculation of device pass-through payments. We have received a request to consider using the ``Implantable Devices Charged to Patients'' CCR in the calculation of device pass-through payment and have evaluated this request. An analysis of the CCR data for the CY 2017 OPPS/ASC proposed rule indicated that about two-thirds of providers have an ``Implantable Devices Charged to Patients'' CCR. At the time of our analysis for the proposed rule, for the hospitals that have an ``Implantable Devices Charged to Patients'' CCR, the median was 0.3911, compared with a median hospital-wide CCR of 0.2035.

  177. CY 2017 Policy

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45654), we proposed to use the more specific ``Implantable Devices Charged to Patients'' CCR instead of the less specific average hospital-wide CCR to calculate transitional pass-through payments for devices, beginning with device pass-through payments in CY 2017. When the CCR for the ``Implantable Devices Charged to Patients'' CCR is not available for a particular hospital, we would continue to use the average CCR across all outpatient departments to calculate pass-through payments. We believe using the ``Implantable Devices Charged to Patients'' CCR will provide more accurate pass-through payments for most device pass-through payment recipients and will further mitigate the effects of charge compression. We invited public comments on this proposal.

    Comment: Many commenters, including MedPAC, supported the proposal. Commenters generally agreed that use of the ``Implantable Devices Charged to Patients'' CCR would result in more accurate measurement of costs for pass-through medical devices, by reducing the effects of charge compression when applying the hospital-wide CCR.

    Response: We appreciate the commenters' support.

    Comment: One commenter suggested that CMS modify the proposal to allow use of the ``Medical Supplies Charged to Patients'' CCR, if the hospital does not have an ``Implantable Devices Charged to Patients'' CCR. The commenter stated that this CCR would be a more accurate cost calculation than the hospital-wide CCR.

    Response: In the FY 2009 IPPS final rule (73 FR 48458 through 48467), we created a cost center for ``Medical Supplies Charged to Patients,'' which generally includes low cost supplies, and another cost center for ``Implantable Devices Charged to Patients,'' which generally includes high-cost implantable devices. This change was in response to a Research Triangle Institute, International (RTI) study that was discussed in the FY 2009 IPPS final rule and which determined that there was charge compression in both the IPPS and the OPPS cost estimation of expensive and inexpensive medical supplies. By splitting medical supplies and implantable devices into two cost centers, some of the effects of charge compression were mitigated. We note that the intent of the ``Medical Supplies Charged to Patients'' CCR is to capture the costs and charges for low cost supplies which would not include implantable devices. Accordingly, in the absence of an ``Implantable Devices Charged to Patients'' CCR, we believe that the hospital-wide CCR would be an appropriate alternative since the hospital-wide CCR should reflect any implantable device costs that were incurred.

    Comment: One commenter stated that providers who have not complied with the requirement to create an ``Implantable Devices Charged to Patients'' cost center should not receive any indirect payment benefits from their noncompliance.

    Response: We note that we provide some flexibility in how hospitals address their cost reporting. As noted in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60344), ``We typically do not specify a revenue-code-to-cost center crosswalk that hospitals must adopt to prepare their cost reporting, recognizing hospitals' need to interpret . . . cost reporting requirements within the context of their own financial systems.''

    After consideration of the public comments we received, we are finalizing, without modification, our proposal to use the ``Implantable Devices Charged to Patients'' CCR instead of the average hospital-wide CCR to calculate transitional pass-through payments for devices, beginning with device pass-through payments in CY 2017. If the CCR for the ``Implantable Devices Charged to Patients'' CCR is not available for a particular hospital, we will instead use the average hospital-

    wide CCR to calculate pass-through payments.

    6. Provisions for Reducing Transitional Pass-Through Payments To Offset Costs Packaged Into APC Groups

  178. 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 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). In the unusual case where the device offset amount exceeds the device pass-through payment amount, the regular APC rate would be paid and the pass-through payment would be $0.

  179. CY 2017 Policy

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45654), for CY 2017, we proposed to calculate the portion of the otherwise applicable Medicare OPD fee schedule amount, for each device-intensive procedure payment rate that can reasonably be attributed to (that is, reflect) the cost of an associated device (the device offset amount) at the HCPCS code level rather than at the APC level (which is an average of all codes assigned to an APC). We refer readers to section IV.B. of the proposed rule and of this final rule with comment period for a discussion of this proposal. Otherwise, as stated in the proposed rule, we will continue our established practice of reviewing each new pass-

    through device category to determine whether device costs associated with the new category replace device costs that are already packaged into the device implantation procedure. If device costs that are packaged into the procedure are related to the new category, then according to our established practice we will deduct the device offset amount from the pass-through payment for the device

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    category. The list of device offsets for all device procedures is posted on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

    We are finalizing, without modification, our proposal to calculate the portion of the otherwise applicable Medicare OPD fee schedule amount for each device-intensive procedure payment rate that can be reasonably attributed to (that is, reflect) the cost of an associated device at the HCPCS code level rather than at the APC level. We refer readers to section IV.B. of this final rule with comment period for a discussion of the proposal to calculate device offsets at the HCPCS level. Otherwise, we will continue our established practice of reviewing each new pass-through device category to determine whether device costs associated with the new category replace device costs that are already packaged into the device implantation procedure. If device costs that are packaged into the procedure are related to the new category, then according to our established practice, we will deduct the device offset amount from the pass-through payment for the device category. The list of device offsets for all device procedures will be posted on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

    1. Device-Intensive Procedures

    1. Background

    Under the OPPS, device-intensive APCs are defined as those APCs with a device offset greater than 40 percent (79 FR 66795). In assigning device-intensive status to an APC, the device costs of all of the procedures within the APC are calculated and the geometric mean device offset of all of the procedures must exceed 40 percent. Almost all of the procedures assigned to device-intensive APCs utilize devices, and the device costs for the associated HCPCS codes exceed the 40-percent threshold. The no cost/full credit and partial credit device policy (79 FR 66872 through 66873) applies to device-intensive APCs and is discussed in detail in section IV.B.4. of this final rule with comment period. A related device policy is the requirement that certain procedures assigned to device-intensive APCs require the reporting of a device code on the claim (80 FR 70422). For further background information on the device-intensive APC policy, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70421 through 70426).

    2. HCPCS Code-Level Device-Intensive Determination

    As stated above, currently the device-intensive methodology assigns device-intensive status to all procedures requiring the implantation of a device, which are assigned to an APC with a device offset greater than 40 percent. Historically, the device-intensive designation has been at the APC level and applied to the applicable procedures within that given APC. In the CY 2017 OPPS/ASC proposed rule (81 FR 45654), for CY 2017, we proposed to modify the methodology for assigning device-intensive status. Specifically, for CY 2017, we proposed to assign device-intensive status to all procedures that require the implantation of a device and have an individual HCPCS code-level device offset of greater than 40 percent, regardless of the APC assignment, as we no longer believe that device-intensive status should be based on APC assignment because APC groupings of clinically similar procedures do not necessarily factor in device cost similarity. In 2016, we restructured many of the APCs, and this resulted in some procedures with significant device costs not being assigned device-intensive status because they were not assigned to a device-intensive APC. Under our proposal, all procedures with significant device costs (defined as a device offset of more than 40 percent) would be assigned device-

    intensive status, regardless of their APC placement. Also, we believe that a HCPCS code-level device offset would, in most cases, be a better representation of a procedure's device cost than an APC-wide average device offset based on the average device offset of all of the procedures assigned to an APC. Unlike a device offset calculated at the APC level, which is a weighted average offset for all devices used in all of the procedures assigned to an APC, a HCPCS code-level device offset is calculated using only claims for a single HCPCS code. We believe that such a methodological change would result in a more accurate representation of the cost attributable to implantation of a high-cost device, which would ensure consistent device-intensive designation of procedures with a significant device cost. Further, we believe a HCPCS code-level device offset would remove inappropriate device-intensive status to procedures without a significant device cost but which are granted such status because of APC assignment.

    Under our proposal, procedures that have an individual HCPCS code-

    level device offset of greater than 40 percent would be identified as device-intensive procedures and would be subject to all the CY 2017 policies applicable to procedures assigned device-intensive status under our established methodology, including our policies on device edits and device credits. Therefore, under our proposal, all procedures requiring the implantation of a medical device and that have an individual HCPCS code-level device offset of greater than 40 percent would be subject to the device edit and no cost/full credit and partial credit device policies, discussed in sections IV.B.3. and IV.B.4. of the proposed rule, respectively. We proposed to amend the regulation at Sec. 419.44(b)(2) to reflect that we would no longer be designating APCs as device-intensive, and instead would be designating procedures as device-intensive.

    Comment: The majority of commenters supported the proposal to revise the device-intensive calculation methodology and calculate at the HCPCS code level rather than at the APC level. One commenter believed that device-intensive procedures should not be assigned to an APC that includes procedures that are not device-intensive. A few commenters asked that CMS provide further detail into how device offsets are calculated, and provide examples of how this proposed change might impact existing APCs for both OPPS and ASC payment prior to implementing. One commenter requested that CMS make further refinements to the methodology if needed to ensure the full breadth of implantable device and supply costs are being captured and recommended moving forward that CMS routinely release the device offset calculations with each year's OPPS/ASC proposed rule. Another commenter requested that CMS create two different device offsets based on differing calculations, with the proposed device offset methodology used to calculate a ``device offset for device intensive policies'' (which would be used to determine if a procedure is device intensive or not) and an alternate methodology used to calculate a ``device offset for pass-through payment policy'' (which would be used to calculate the portion of the otherwise applicable Medicare OPD fee schedule amount for device pass-through status).

    Response: We appreciate the commenters' support. We disagree with the commenter's belief that device-intensive procedures should not be assigned to an APC that includes procedures that are not device-

    intensive. Under our proposed policy, the APC placement of a device-

    intensive

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    procedure will have no bearing on the procedure's device-intensive designation. The device offset is the estimated portion of the payment for a procedure that is attributable to the device. We remind commenters that the list of device offsets for all device procedures is posted on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. In response to the request to create an additional device offset for pass-through payment policy, in addition to a device offset based on the proposed device offset methodology, we do not see the need for the creation of a second device offset. We believe that a device offset calculated based on the proposed device offset methodology is appropriate and an accurate proxy for a procedure's device costs when calculating the portion of the otherwise applicable Medicare OPD fee schedule amount.

    After consideration of the public comments we received, we are finalizing our proposal, without modification, for CY 2017, to assign device-intensive status to all procedures that require the implantation of a device and have an individual HCPCS code-level device offset of greater than 40 percent, regardless of the APC assignment.

    In addition, for new HCPCS codes describing procedures requiring the implantation of medical devices that do not yet have associated claims data, we proposed to apply device-intensive status with a default device offset set at 41 percent until claims data are available to establish the HCPCS code-level device offset for the procedures. This default device offset amount of 41 percent would not be calculated from claims data; instead it would be applied as a default until claims data are available upon which to calculate an actual device offset for the new code. The purpose of applying the 41 percent default device offset to new codes that describe procedures that implant medical devices would be to ensure ASC access for new procedures until claims data become available. However, as stated in the proposed rule (81 FR 45655), in certain rare instances, for example, in the case of a very expensive implantable device, we may temporarily assign a higher offset percentage if warranted by additional information such as pricing data from a device manufacturer. Once claims data are available for a new procedure requiring the implantation of a medical device, device-

    intensive status would be applied to the code if the HCPCS code-level device offset is greater than 40 percent, according to our proposed policy of determining device-intensive status by calculating the HCPCS code-level device offset. The full listing of proposed device-intensive procedures was included in a new Addendum P to the proposed rule (which is available via the Internet on the CMS Web site).

    Comment: A number of commenters supported CMS' proposal to apply a default device offset of at least 41 percent to new implant procedures with the possibility for higher device offset if supported by device costs. Some commenters in support of the proposal asked that CMS specify how additional information can be submitted, including the deadline for submission, the type of information that can be submitted and who it can be submitted by to have CMS consider a higher offset percentage for a new implant procedure. One commenter did not support the proposal under which every new HCPCS code that describes procedures requiring implantation of a device should be assigned a default device offset of 41 percent. This commenter stated that CMS should ensure that all new procedures requiring implantation of a device require use of a device that is described by a device HCPCS code that satisfies the device edit for device intensive procedures, before assigning a default device offset of 41 percent and recognizing the new implantation procedure as a device intensive procedure.

    Response: We appreciate the commenters' support. Additional information for our consideration of an offset percentage higher than the default of 41 percent for new HCPCS codes describing procedures requiring the implantation (or in some cases the insertion) of a medical device that do not yet have associated claims data, such as pricing data or invoices from a device manufacturer, should be directed to the Division of Outpatient Care, Mail Stop C4-01-26, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244-1850, or electronically at outpatientpps@cms.hhs.gov. Additional information can be submitted prior to issuance of an OPPS/ASC proposed rule or as a public comment in response to an issued OPPS/ASC proposed rule. Device offset percentages will be set in each year's final rule. In response to the commenter who did not support this proposal, we note that we are creating a new category HCPCS C-code (described in section IV.B.3. of this final rule with comment period) for providers to report when a device implantation or insertion procedure uses a device that is not described by a specific Level II HCPCS C-code so that these device intensive procedures can satisfy the device edit policy.

    After consideration of the public comments we received, we are finalizing our proposal, without modification, for CY 2017 to apply device-intensive status with a default device offset set at 41 percent for new HCPCS codes describing procedures requiring the implantation of a medical device that do not yet have associated claims data until claims data are available to establish the HCPCS code-level device offset for the procedures. For CY 2017, we also are finalizing our proposal, without modification, that in certain rare instances, we may temporarily assign a higher offset percentage if warranted by additional information.

    3. Changes to the Device Edit Policy

    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66795), we finalized a policy and implemented 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 APCs listed in Table 5 of the CY 2015 OPPS/ASC final rule with comment period (the CY 2015 device-dependent APCs) is reported on the claim. In addition, in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70422), we modified our previously existing policy and applied the device coding requirements exclusively to procedures that require the implantation of a device that are assigned to a device-intensive APC. In the CY 2016 OPPS/ASC final rule with comment period, we also finalized our policy that the claims processing edits are such that any device code, when reported on a claim with a procedure assigned to a device-intensive APC (listed in Table 42 of the CY 2016 OPPS/ASC final rule with comment period (80 FR 70422)) will satisfy the edit.

    As discussed in the CY 2017 OPPS/ASC proposed rule (81 FR 45655), as part of our proposal described in section IV.B.2. of the proposed rule to no longer recognize device-intensive APCs and instead recognize device-intensive procedures based on their individual HCPCS code-level device offset being greater than 40 percent, for CY 2017, we proposed to modify our existing device edit policy. Specifically, for CY 2017 and subsequent years, we proposed to apply the CY 2016 device coding requirements to the newly defined (individual HCPCS code-level device offset greater than 40 percent) device-intensive procedures. In addition, we proposed that any device code, when reported on a claim with a device-

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    intensive procedure, would satisfy the edit.

    Comment: A number of commenters urged CMS to restore the specific device-to-procedure and procedure-to-device edits that CMS used to apply and not keep the current ``any device'' code policy. One commenter asked that CMS require hospitals to report all devices, not just those associated with procedures that CMS has already determined to be device intensive. Another commenter requested that CMS create a miscellaneous C-code for providers to report when a device used does not have a specific Level II HCPCS Category C-code.

    Response: As we stated in the CY 2015 OPPS/ASC final rule with comment period (79 FR 66794), 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 current policy, hospitals are still 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 agree with the commenter that we should create a miscellaneous HCPCS C-code for providers to report when a device used does not have a specific Level II HCPCS C-code. Therefore, effective January 1, 2017, we are creating HCPCS code C1889 (Implantable/

    insertable device for device intensive procedure, not otherwise classified) to recognize devices implanted or inserted during a device-

    intensive procedure that are not described by a specific Level II HCPCS Category C-code.

    After consideration of the public comments we received, we are finalizing our proposal for CY 2017 and subsequent years to apply the CY 2016 device coding requirements to the newly defined (individual HCPCS code-level device offset greater than 40 percent) device-

    intensive procedures. For CY 2017 and subsequent years, we also are finalizing our proposal that any device code, when reported on a claim with a device-intensive procedure, will satisfy the edit. In addition, we are creating HCPCS code C1889 to recognize devices furnished during a device intensive procedure that are not described by a specific Level II HCPCS Category C-code. Reporting HCPCS code C1889 with a device intensive procedure will satisfy the edit requiring a device code to be reported on a claim with a device-intensive procedure.

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

  180. 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 were instructed to report no cost/full credit device 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, hospitals were 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, hospitals were instructed to report as the device charge the difference between the hospital's usual charge for the device being implanted and the hospital's 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 were 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'' modifiers 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. For CY 2015, we continued 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 use 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 (79 FR 66872 through 66873). In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70424), we finalized our policy to no longer specify a list of devices to which the OPPS payment adjustment for no cost/full credit and partial credit devices would apply and instead apply this APC payment adjustment to all replaced devices furnished in conjunction with a procedure assigned to a device-intensive APC when the hospital receives a credit for a replaced specified device that is 50 percent or greater than the cost of the device.

  181. Policy for CY 2017

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45656), for CY 2017, we proposed modifications to our current policy for reducing OPPS payment by the full or partial credit a provider receives for a replaced device, in conjunction with our proposal above to recognize the newly defined (individual HCPCS level device offset greater than 40 percent) device-intensive procedures. For CY 2017 and subsequent years, we proposed to reduce OPPS payment for specified procedures when a hospital furnishes a specified device without cost or with a full or partial credit. Specifically, for CY 2017, we proposed to continue to reduce the OPPS

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    payment, for the device-intensive procedures, 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 value code ``FD'' when the hospital receives a credit for a replaced device that is 50 percent or greater than the cost of the device.

    For CY 2017 and subsequent years, we also proposed to determine which procedures our proposed policy would apply to using three criteria analogous to the three criteria established in the CY 2007 OPPS/ASC final rule with comment period for determining the APCs to which our existing policy applies (71 FR 68072 through 68077).

    Specifically, for CY 2017 and subsequent years, we proposed to use the following three criteria for determining the procedures to which our proposed policy would apply: (1) All procedures 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 procedure must be device-intensive; that is, the device offset amount must be significant, which is defined as exceeding 40 percent of the procedure's mean cost. 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 procedure into which the device cost is packaged, and that the 40-percent threshold is a reasonable definition of a significant cost. As noted earlier in this section, procedures with a device offset that exceed the 40-percent threshold are called device-intensive procedures.

    Comment: One commenter recommended that CMS reinstate the procedure code list that is subject to the no cost/full credit and partial credit devices.

    Response: As stated in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70424), we no longer believe it is necessary to restrict the application of our policy to reduce the OPPS payment by the full or partial credit a provider receives for a replaced device to a specific list of devices. Therefore, we no longer believe it is necessary to specify a list of devices to which the OPPS payment adjustment for no cost/full credit and partial credit devices would apply.

    After consideration of the public comments we received, for CY 2017, we are finalizing our proposed modifications to our current policy for reducing OPPS payment by the full or partial credit a provider receives for a replaced device, in conjunction with our finalized policy to recognize the newly defined (individual HCPCS level device offset greater than 40 percent) device-intensive procedures. Specifically, for CY 2017, we are finalizing our proposal to continue to reduce the OPPS payment, for the device-intensive procedures, by the full or partial credit a provider receives for a replaced device. In addition, for CY 2017 and subsequent years, we are finalizing our proposal to use the following three criteria for determining the procedures to which our final policy will apply: (1) All procedures 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 procedure must be device intensive; that is, the device offset amount must be significant, which is defined as exceeding 40 percent of the procedure's mean cost.

    5. Payment Policy for Low-Volume Device-Intensive Procedures

    For CY 2016, we used our equitable adjustment authority under section 1833(t)(2)(E) of the Act and used the median cost (instead of the geometric mean cost per our standard methodology) to calculate the payment rate for the implantable miniature telescope procedure described by CPT code 0308T (Insertion of ocular telescope prosthesis including removal of crystalline lens or intraocular lens prosthesis), which is the only code assigned to APC 5494 (Level 4 Intraocular Procedures) (80 FR 70388). We note that, as stated in the CY 2017 OPPS/

    ASC proposed rule (81 FR 45656), we proposed to reassign the procedure described by CPT code 0308T to APC 5495 (Level 5 Intraocular Procedures) for CY 2017, but it would be the only procedure code assigned to APC 5495. The payment rates for a procedure described by CPT code 0308T (including the predecessor HCPCS code C9732) were $15,551 in CY 2014, $23,084 in CY 2015, and $17,551 in CY 2016. The procedure described by CPT code 0308T is a high-cost device-intensive surgical procedure that has a very low volume of claims (in part because most of the procedures described by CPT code 0308T are performed in ASCs), and we believe that the median cost is a more appropriate measure of the central tendency for purposes of calculating the cost and the payment rate for this procedure because the median cost is impacted to a lesser degree than the geometric mean cost by more extreme observations. We stated that, in future rulemaking, we would consider proposing a general policy for the payment rate calculation for very low-volume device-intensive APCs (80 FR 70389).

    For CY 2017, we proposed a payment policy for low-volume device-

    intensive procedures that is similar to the policy applied to the procedure described by CPT code 0308T in CY 2016. In particular, we proposed that the payment rate for any device-intensive procedure that is assigned to a clinical APC with fewer than 100 total claims for all procedures in the APC be calculated using the median cost instead of the geometric mean cost, for the reasons described above for the policy applied to the procedure described by CPT code 0308T in CY 2016. We believe that this approach will help to mitigate to some extent significant year-to-year payment rate fluctuations while preserving accurate claims data-based payment rates for low-volume device-

    intensive procedures. For CY 2017, this policy would only apply to a procedure described by CPT code 0308T in APC 5495 because this APC is the only APC containing a device-intensive procedure with less than 100 total claims in the APC. The CY 2017 proposed rule median cost for the procedure described by CPT code 0308T was approximately $17,965 (the median cost was incorrectly stated in the proposed rule as $15,567). The proposed CY 2017 payment rate (calculated using the median cost and the claims that reported the device consistent with our device edit policy for device intensive procedures) was approximately $17,189. We invited public comments on this proposal.

    Comment: The majority of commenters supported the proposal to base payment on the median cost instead of the geometric mean cost for any device-intensive procedure that is assigned to an APC with fewer than 100 total claims (for all of the services assigned to the APC). One commenter recommended that CMS consider whether refinements to the low-

    volume, device-intensive procedure policy are

    Page 79661

    appropriate in future rulemaking, such as using the claims volume at the HCPCS level rather than the APC level.

    Response: We appreciate the commenters' support. At this time, we believe it is only appropriate to calculate the payment rate using median cost instead of the geometric mean for a device-intensive procedure that is assigned to a clinical APC with fewer than 100 total claims for all procedures in the APC.

    After consideration of the public comments we received, we are finalizing our proposal, without modification, that the payment rate for any device-intensive procedure that is assigned to a clinical APC with fewer than 100 total claims for all procedures in the APC be calculated using the median cost instead of the geometric mean cost. The CY 2017 final rule geometric mean cost for the procedure described by CPT code 0308T (based on 19 claims containing the device HCPCS C-

    code in accordance with the device-intensive edit policy) is approximately $21,302, and the median cost is approximately $19,521. The final CY 2017 payment rate (calculated using the median cost) is approximately $18,984.

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

    1. 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 (but is not necessarily limited to) ``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 pass-

      through payment 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 hospital outpatient 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 2017 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. The 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. Policy Change To Make the Transitional Pass-Through Payment Period 3 Years for All Pass-Through Drugs, Biologicals, and Radiopharmaceuticals and Expire Pass-Through Status on a Quarterly Rather Than Annual Basis

      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. Our current policy is to accept pass-through applications on a quarterly basis and to begin pass-through payments for new pass-through drugs and biologicals on a quarterly basis through the next available OPPS quarterly update after the approval of a product's pass-through status. However, we expire pass-through status for drugs and biologicals on an annual basis through notice-and-comment rulemaking (74 FR 60480). This means that because the 2-year to 3-year pass-through payment eligibility period starts on the date of first pass-through payment under 42 CFR 419.64(c)(2), the duration of pass-through eligibility for a particular drug or biological will depend upon when during a year the applicant applies for pass-through status. Under the current policy, a new pass-

      through drug or biological with pass-through status effective on January 1 would receive 3 years of pass-through status; a pass-through drug with pass-through status effective on April 1 would receive 2 years and 3 quarters of pass-through status; a pass-through drug with pass-through status effective on July 1 would receive 2 and \1/2\ years of pass-through status; and a pass-through drug with pass-through status effective on October 1 would receive 2 years and 3 months (a quarter) of pass-through status.

      In the CY 2017 OPPS/ASC proposed rule (81 FR 45657), we proposed, beginning with pass-through drugs and biologicals newly approved in CY 2017 and subsequent calendar years, to allow for a quarterly expiration of pass-through payment status for drugs and biologicals to afford a pass-through period that is as close to a full 3 years as possible for all pass-through payment drugs, biologicals, and radiopharmaceuticals. This proposed change would eliminate the variability

      Page 79662

      of the pass-through payment eligibility period, which currently varies based on the timing of the particular application, as we now believe that the timing of a pass-through payment application should not determine the duration of pass-through payment status. For example, for a drug with pass-through status first effective on April 1, 2017, pass-

      through status would expire on March 31, 2020. This approach would allow for the maximum pass-through period for each pass-through drug without exceeding the statutory limit of 3 years. We invited public comments on this proposal.

      Comment: Several commenters supported CMS' proposal to expire pass-

      through status and payment for pass-through drugs on a quarterly basis rather than an annual basis such that pass-through status would be as close as possible to 3 years for all pass-through drugs and biologicals. Some commenters recommended that CMS apply the proposed policy to all drugs with pass-through payment status in CY 2017 to prevent disparate treatment of such drugs based on their pass-through approval date.

      Response: We appreciate commenters' support. In response to commenters' recommendation to expire pass-through status and payment for pass-through drugs on a quarterly basis rather than an annual basis for all drugs with pass-through payment status in CY 2017, we note that the annual expiration of pass-through payment status for all drugs currently assigned pass-through payment status under the OPPS was finalized in previous years' OPPS/ASC rulemaking and was not proposed to be altered in our CY 2017 proposal.

      After consideration of the public comments we received, we are finalizing our proposal, without modification, beginning with pass-

      through drugs and biologicals newly approved in CY 2017 and subsequent calendar years, to allow for a quarterly expiration of pass-through payment status for drugs and biologicals to afford a pass-through period that is as close to a full 3 years as possible for all pass-

      through drugs, biologicals, and radiopharmaceuticals.

      3. Drugs and Biologicals With Expiring Pass-Through Payment Status in CY 2016

      In the CY 2017 OPPS/ASC proposed rule (81 FR 45657), we proposed that the pass-through status of 15 drugs and biologicals would expire on December 31, 2016, as listed in Table 13 of the proposed rule (81 FR 45658). 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, 2016. These drugs and biologicals were approved for pass-

      through payment status on or before January 1, 2015. With the exception of those groups of drugs and biologicals that are always packaged when they do not have pass-through payment status (specifically, anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure (including diagnostic radiopharmaceuticals, contrast agents, and stress agents); 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 payment 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 $110 for CY 2017), as discussed further in section V.B.2. of this final rule with comment period. In the CY 2017 OPPS/ASC proposed rule (81 FR 45658), we proposed that if the estimated per day cost for the drug or biological is less than or equal to the applicable OPPS drug packaging threshold, to 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 proposed to provide separate payment at the applicable relative ASP-

      based payment amount (which was proposed at ASP+6 percent for CY 2017, and is finalized at ASP+6 percent for CY 2017, as discussed further in section V.B.3. of this final rule with comment period).

      We did not receive any public comments on this proposal. Therefore, we are finalizing our proposal, without modification, to expire the pass-through payment status of the 15 drugs and biologicals listed below in Table 35 on December 31, 2016.

      Table 35--Drugs and Biologicals for Which Pass-Through Payment Status

      Expires December 31, 2016

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

      Final CY 2017

      CY 2017 HCPCS code CY 2017 long status Final CY 2017

      descriptor indicator APC

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

      C9497............... Loxapine, K 9497

      inhalation

      powder, 10 mg.

      J1322............... Injection, K 1480

      elosulfase alfa,

      1 mg.

      J1439............... Injection, ferric N N/A

      carboxymaltose,

      1 mg.

      J1447............... Injection, TBO- N N/A

      Filgrastim, 1

      microgram.

      J3145............... Injection, N N/A

      testosterone

      undecanoate, 1

      mg.

      J3380............... Injection, K 1489

      vedolizumab, 1

      mg.

      J7181............... Injection, factor N N/A

      xiii a-subunit,

      (recombinant),

      per iu.

      J7200............... Factor ix N N/A

      (antihemophilic

      factor,

      recombinant),

      Rixubus, per i.u.

      J7201............... Injection, factor N N/A

      ix, fc fusion

      protein

      (recombinant),

      per iu.

      J7205............... Injection, factor K 1656

      viii fc fusion

      (recombinant),

      per iu.

      J7508............... Tacrolimus, N N/A

      extended

      release,

      (astagraf xl),

      oral, 0.1 mg.

      J9301............... Injection, N N/A

      obinutuzumab, 10

      mg.

      J9308............... Injection, K 1488

      ramucirumab, 5

      mg.

      J9371............... Injection, K 1466

      Vincristine

      Sulfate

      Liposome, 1 mg.

      Q4121............... Theraskin, per N N/A

      square

      centimeter.

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

      Page 79663

      The final packaged or separately payable status of each of these drugs or biologicals is listed in Addendum B to this final rule with comment period (which is available via the Internet on the CMS Web site).

      4. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Payment Status in CY 2017

      In the CY 2017 OPPS/ASC proposed rule (81 FR 45658), we proposed to continue pass-through payment status in CY 2017 for 38 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, 2016. These drugs and biologicals, which were approved for pass-through status between January 1, 2015, and July 1, 2016, were listed in Table 14 of the proposed rule (81 FR 45659). The APCs and HCPCS codes for these drugs and biologicals approved for pass-through payment status through July 1, 2016 were assigned status indicator ``G'' in Addenda A and B to the proposed rule (which 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. For CY 2017, we proposed to continue to pay for pass-through drugs and biologicals at ASP+6 percent, equivalent to the payment rate these drugs and biologicals would receive in the physician's office setting in CY 2017. We proposed that a $0 pass-

      through payment amount would be paid for pass-through drugs and biologicals under the CY 2017 OPPS because the difference between the amount authorized under section 1842(o) of the Act, which was proposed at ASP+6 percent, and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is appropriate, which was proposed at ASP+6 percent, is $0.

      In the case of policy-packaged drugs (which include the following: Anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure (including contrast agents; diagnostic radiopharmaceuticals, and stress agents); 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 2017 because, if not for their 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 2017 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 2017, as is consistent with our CY 2016 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 earlier, 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 2017, 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 was proposed at 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 continue to provide payment at ASP+6 percent for drugs, biologicals, contrast agents, and radiopharmaceuticals that are granted pass-through payment status. Some commenters requested that CMS provide an additional payment for radiopharmaceuticals that are granted pass-through payment status.

      Response: We appreciate the commenters' support. Regarding the commenters' request that CMS provide an additional payment for radiopharmaceuticals that are granted pass-through payment status, we note that, for CY 2017, consistent with our CY 2016 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 earlier, 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 both 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 2017, 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. We continue to believe that a single payment is appropriate for diagnostic radiopharmaceuticals with pass-through payment status in CY 2017, and that the payment rate of ASP+6 percent (or WAC or AWP if ASP is not available) is appropriate to provide payment for both a radiopharmaceutical's acquisition and pharmacy overhead 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. We also refer readers to the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Feefor-ServicePayment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1656-FC.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 payment status during CY 2017, 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. The 47

      Page 79664

      drugs and biologicals that continue to have pass-through payment status for CY 2017 or have been granted pass-through payment status as of January 2017 are shown in Table 36 below.

      Table 36--Drugs and Biologicals With Pass-Through Payment Status in CY 2017

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

      CY 2017 status

      CY 2016 HCPCS code CY 2017 HCPCS code CY 2017 long descriptor indicator CY 2017 APC

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

      A9586..................... A9586..................... Florbetapir f18, G 1664

      diagnostic, per study

      dose, up to 10

      millicuries.

      N/A....................... A9588..................... Fluciclovine f-18, G 9052

      diagnostic, 0.1 mCi.

      N/A....................... A9587..................... Gallium Ga-68, G 9056

      dotatate, diagnostic,

      1 mCi.

      N/A....................... C9140..................... Injection, Factor VIII G 9043

      (antihemophilic

      factor, recombinant)

      (Afstyla), 1 I.U.

      C9137..................... J7207..................... Injection, Factor VIII G 1844

      (antihemophilic

      factor, recombinant)

      PEGylated, 1 I.U.

      C9138..................... J7209..................... Injection, Factor VIII G 1846

      (antihemophilic

      factor, recombinant)

      (Nuwiq), per i.u.

      C9139..................... J7202..................... Injection, Factor IX, G 9171

      albumin fusion protein

      (recombinant),

      Idelvion, 1 i.u.

      C9349..................... Q4172..................... PuraPly, and PuraPly G 1657

      Antimicrobial, any

      type, per square

      centimeter.

      C9447..................... C9447..................... Injection, G 1663

      phenylephrine and

      ketorolac, 4 ml vial.

      C9460..................... C9460..................... Injection, cangrelor, 1 G 9460

      mg.

      C9461..................... A9515..................... Choline C 11, G 9461

      diagnostic, per study

      dose.

      C9470..................... J1942..................... Injection, aripiprazole G 9470

      lauroxil, 1 mg.

      C9471..................... J7322..................... Hyaluronan or G 9471

      derivative, Hymovis,

      for intra-articular

      injection, 1 mg.

      C9472..................... J9325..................... Injection, talimogene G 9472

      laherparepvec, 1

      million plaque forming

      units (PFU).

      C9473..................... J2182..................... Injection, mepolizumab, G 9473

      1 mg.

      C9474..................... J9205..................... Injection, irinotecan G 9474

      liposome, 1 mg.

      C9475..................... J9295..................... Injection, necitumumab, G 9475

      1 mg.

      C9476..................... J9145..................... Injection, daratumumab, G 9476

      10 mg.

      C9477..................... J9176..................... Injection, elotuzumab, G 9477

      1 mg.

      C9478..................... J2840..................... Injection, sebelipase G 9478

      alfa, 1 mg.

      C9479..................... J7342..................... Instillation, G 9479

      ciprofloxacin otic

      suspension, 6 mg.

      C9480..................... J9352..................... Injection, trabectedin, G 9480

      0.1 mg.

      C9481..................... J2786..................... Injection, reslizumab, G 9481

      1 mg.

      C9482..................... C9482..................... Injection, sotalol G 9482

      hydrochloride, 1 mg.

      C9483..................... C9483..................... Injection, G 9483

      atezolizumab, 10 mg.

      N/A....................... J0570..................... Buprenorphine implant, G 9058

      74.2 mg.

      J0596..................... J0596..................... Injection, c-1 esterase G 9445

      inhibitor (human),

      Ruconest, 10 units.

      J0695..................... J0695..................... Injection, ceftolozane G 9452

      50 mg and tazobactam

      25 mg.

      J0875..................... J0875..................... Injection, dalbavancin, G 1823

      5 mg.

      J1833..................... J1833..................... Injection, G 9456

      isavuconazonium

      sulfate, 1 mg.

      J2407..................... J2407..................... Injection, oritavancin, G 1660

      10 mg.

      J2502..................... J2502..................... Injection, pasireotide G 9454

      long acting, 1 mg.

      J2547..................... J2547..................... Injection, peramivir, 1 G 9451

      mg.

      J2860..................... J2860..................... Injection, siltuximab, G 9455

      10 mg.

      J3090..................... J3090..................... Injection, tedizolid G 1662

      phosphate, 1 mg.

      N/A....................... J7179..................... Injection, von G 9059

      willebrand factor

      (recombinant),

      (Vonvendi), 1 i.u.

      vwf:rco.

      J7313..................... J7313..................... Injection, fluocinolone G 9450

      acetonide intravitreal

      implant, 0.01 mg.

      J7503..................... J7503..................... Tacrolimus, extended G 1845

      release, (envarsus

      xr), oral, 0.25 mg.

      J8655..................... J8655..................... Netupitant (300 mg) and G 9448

      palonosetron (0.5 mg).

      J9032..................... J9032..................... Injection, belinostat, G 1658

      10 mg.

      J9039..................... J9039..................... Injection, G 9449

      blinatumomab, 1 mcg.

      J9271..................... J9271..................... Injection, G 1490

      pembrolizumab, 1 mg.

      J9299..................... J9299..................... Injection, nivolumab, 1 G 9453

      mg.

      Q5101..................... Q5101..................... Injection, Filgrastim G 1822

      (G-CSF), Biosimilar, 1

      microgram.

      Q9950..................... Q9950..................... Injection, sulfur G 9457

      hexafluoride lipid

      microsphere, per ml.

      C9459..................... Q9982..................... Flutemetamol F18, G 9459

      diagnostic, per study

      dose, up to 5

      millicuries.

      C9458..................... Q9983..................... Florbetaben F18, G 9458

      diagnostic, per study

      dose, up to 8.1

      millicuries.

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

      5. Provisions for Reducing Transitional Pass-Through Payments for Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals To Offset Costs Packaged Into APC Groups

      Under 42 CFR 419.2(b), nonpass-through drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure are packaged in the OPPS. This category includes diagnostic radiopharmaceuticals, contrast agents, stress agents, and other diagnostic drugs. Also under 42 CFR 419.2(b), nonpass-through drugs and biologicals that function as supplies in a surgical procedure are packaged in the OPPS. This category includes skin substitutes and other surgical-supply drugs and biologicals. As described earlier, 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 policy packaged drugs, biologicals, and radiopharmaceuticals an amount reflecting the portion of the APC payment associated with predecessor products in order to ensure no duplicate payment is made. This amount reflecting the portion of the APC payment associated with predecessor products is called the payment offset. The payment offset policy applies to all policy packaged drugs, biologicals, and

      Page 79665

      radiopharmaceuticals. For a full description of the payment offset policy as applied to diagnostic radiopharmaceuticals, contrast agents, stress agents, and skin substitutes, we refer readers to the discussion in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70430 through 70432). In the CY 2017 OPPS/ASC proposed rule (81 FR 45660), for CY 2017, as we did in CY 2016, we proposed to continue to apply the same policy packaged offset policy to payment for pass-through diagnostic radiopharmaceuticals, pass-through contrast agents, pass-

      through stress agents, and pass-through skin substitutes. The proposed APCs to which a diagnostic radiopharmaceutical payment offset may be applicable were the same as for CY 2016 (80 FR 70430). Also, the proposed APCs to which a stress agent payment offset or a skin substitute payment offset were also the same as for CY 2016 (80 FR 70431 through 70432). The proposed APCs to which a contrast agent payment offset may be applicable are APCs 5571 through 5573 (Levels 1-3 Diagnostic Radiology with Contrast), which were listed in Addendum A to the proposed rule (which is available via the Internet on the CMS Web site).

      We proposed to 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.

      Comment: One commenter recommended that CMS consider the drug offset amount at the HCPCS level to improve accuracy in isolating potentially duplicative packaged payments.

      Response: We thank the commenter for this recommendation. We do not believe that the suggested change is necessary at this time. However, we may consider it in future rulemaking.

      After consideration of the public comments we received, we are finalizing our proposal, without modification, for CY 2017 to continue to apply the same policy packaged offset policy to payment for pass-

      through diagnostic radiopharmaceuticals, pass-through contrast agents, pass-through stress agents, and pass-through skin substitutes as we did in CY 2016. We also are finalizing our proposal to 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.

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

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

  182. Packaging Threshold

    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 $100 for CY 2016 (80 FR 70433).

    Following the CY 2007 methodology, for the CY 2017 OPPS/ASC proposed rule (81 FR 45660), 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 2017 and rounded the resulting dollar amount ($109.03) to the nearest $5 increment, which yielded a figure of $110. 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 these calculations, we proposed a packaging threshold for CY 2017 of $110.

    Following the finalized CY 2007 methodology, for this CY 2017 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 2017 and rounded the resulting dollar amount ($111.65) to the nearest $5 increment, which yielded a figure of $110. 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 series code WPUSI07003) from CMS' Office of the Actuary (OACT). Therefore, for this CY 2017 OPPS/ASC final rule with comment period, using the CY 2007 OPPS methodology, we are establishing a packaging threshold for CY 2017 of $110.

  183. Packaging of Payment for HCPCS Codes That Describe Certain Drugs, Certain Biologicals, and Therapeutic Radiopharmaceuticals Under the Cost Threshold (``Threshold-Packaged Drugs'')

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45660), to determine the proposed CY 2017 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 2015 and were paid (via packaged or separate payment) under the OPPS. We used data from CY 2015 claims processed before January 1, 2016 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.1.d. of the proposed rule, or for the following policy-

    packaged items that we proposed to continue to package in CY 2017: 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 2017, 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

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    (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 2017, as discussed in more detail in section V.B.2.b. of the proposed rule) to calculate the CY 2017 proposed rule per day costs. We used the manufacturer submitted ASP data from the fourth quarter of CY 2015 (data that were used for payment purposes in the physician's office setting, effective April 1, 2016) to determine the proposed rule per day cost.

    As is our standard methodology, for CY 2017, we proposed to use payment rates based on the ASP data from the first quarter of CY 2016 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, 2016. 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 2015 hospital claims data to determine their per day cost.

    We proposed to package items with a per day cost less than or equal to $110, and identify items with a per day cost greater than $110 as separately payable. Consistent with our past practice, we cross-walked historical OPPS claims data from the CY 2015 HCPCS codes that were reported to the CY 2016 HCPCS codes that we displayed in Addendum B to the proposed rule (which is available via the Internet on the CMS Web site) for proposed payment in CY 2017.

    Comment: A few commenters opposed the proposed OPPS packaging threshold of $110 for CY 2017. These commenters recommended that CMS freeze the packaging threshold at the current level ($100) or eliminate the packaging threshold and provide separate payment for all drugs with HCPCS codes.

    Response: We have received and addressed a similar comment in numerous OPPS/ASC rulemakings in the past. As we 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 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 the commenters' recommendations to pay separately for all drugs, biologicals, and radiopharmaceuticals for CY 2017, or to eliminate the packaging threshold, or to freeze the packaging threshold at $100.

    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 2017 packaging threshold of $110. 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 2017 OPPS/ASC final rule with comment period, we used ASP data from the first quarter of CY 2016, 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, 2016, along with updated hospital claims data from CY 2015. We note that we also used these data for budget neutrality estimates and impact analyses for this CY 2017 OPPS/ASC final rule with comment period.

    Payment rates for HCPCS codes for separately payable drugs and biologicals included in Addenda A and B for this final rule with comment period are based on ASP data from the third quarter of CY 2016. 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, 2016. These payment rates will then be updated in the January 2017 OPPS update, based on the most recent ASP data to be used for physician's office and OPPS payment as of January 1, 2017. For items that do not currently have an ASP-based payment rate, we proposed to recalculate their mean unit cost from all of the CY 2015 claims data and updated cost report information available for this CY 2017 final rule with comment period to determine their final per day cost.

    Consequently, as stated in the CY 2017 OPPS/ASC proposed rule (81 FR 45661), the packaging status of some HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals in the proposed rule may be different from the same drug HCPCS code's packaging status determined based on the data used for the final rule with comment period. Under such circumstances, in the CY 2017 OPPS/ASC proposed rule, 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 2017 OPPS drug packaging threshold and the drug's payment status (packaged or separately payable) in CY 2016. These established policies have not changed for many years and are the same as described in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70434).

    We did not receive any public comments on our proposal to recalculate the mean unit cost for items that do not currently have an ASP-based payment rate from all of the CY 2015 claims data and updated cost report information available for this CY 2017 final rule with comment period to determine their final per day cost. We also did not receive any public comments on our proposal to continue to follow the established policies initially adopted for the CY 2005 OPPS (69 FR 65780), when the packaging status of some HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals in the proposed rule may be different from the same drug HCPCS code's packaging status determined based on the data used for the final rule with comment period. Therefore, for CY 2017, we are finalizing these two CY 2017 proposals without modification.

  184. Policy Packaged Drugs, Biologicals, and Radiopharmaceuticals

    As mentioned briefly earlier, in the OPPS we package several categories of drugs, biologicals, and radiopharmaceuticals regardless of the cost of the products. Because the products are packaged according to the policies in 42 CFR 419.2(b), we refer to these packaged drugs, biologicals, and radiopharmaceuticals as ``policy-

    packaged'' drugs, biologicals, and radiopharmaceuticals. Each of these

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    policies are either longstanding or based on longstanding principles and inherent to the OPPS and are as follows:

    Anesthesia, certain drugs, biologicals, and other pharmaceuticals; medical and surgical supplies and equipment; surgical dressings; and devices used for external reduction of fractures and dislocations (Sec. 419.2(b)(4));

    Intraoperative items and services (Sec. 419.2(b)(14));

    Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure (including but not limited to, diagnostic radiopharmaceuticals, contrast agents, and pharmacologic stress agents (Sec. 419.2(b)(15)); and

    Drugs and biologicals that function as supplies when used in a surgical procedure (including, but not limited to, skin substitutes and similar products that aid wound healing and implantable biologicals) (Sec. 419.2(b)(16)).

    The policy at Sec. 419.2(b)(16) is broader than that at Sec. 419.2(b)(14). As we stated in the CY 2015 OPPS/ASC final rule with comment period: ``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'' (79 FR 66875). The category described by Sec. 419.2(b)(15) is large and includes diagnostic radiopharmaceuticals, contrast agents, stress agents, and some other products. The category described by Sec. 419.2(b)(16) includes skin substitutes and some other products. We believe it is important to reiterate that cost consideration is not a factor when determining whether an item is a surgical supply (79 FR 66875).

    Comment: A few commenters objected to the packaging of diagnostic radiopharmaceuticals and contrast agents under Sec. 419.2(b)(15). They argued that the service payments that include the payment for the radiopharmaceutical or contrast agent do not cover the cost of expensive diagnostic radiopharmaceuticals or contrast agents. The commenters believed that separate payment should be made for these products.

    Response: The packaging policy for these products has been in effect since CY 2008. We refer readers to the CY 2008 OPPS final rule (72 FR 66635 through 66646) for an extensive discussion of the original packaging policy for diagnostic radiopharmaceuticals and contrast agents, and to the CY 2014 OPPS/ASC final rule with comment period (78 FR 74927 through 74930) for a discussion of the packaging of diagnostic radiopharmaceuticals and contrast agents under Sec. 419.2(b)(15); that is, the broader packaging policy for drugs and biologicals that function as supplies when used in a diagnostic test or procedure. We are not changing this packaging policy for CY 2017.

    Comment: One commenter, the manufacturer of the stress agent Lexiscansupreg (regadenoson), disagreed with CMS' policy of packaging stress agents under Sec. 419.2(b)(15). The commenter reiterated comments that it has made in the past since CMS packaged stress agents in CY 2014 (78 FR 74927 through 74930). The commenter believed that this packaging policy may create a financial incentive for hospitals to utilize a low-cost stress agent instead of a high-cost stress agent and/or encourage hospitals to reduce appropriate patient care. The commenter requested that CMS create separate APCs for diagnostic tests that use high cost drugs.

    Response: We have responded to this comment in previous final rules (for example, the CY 2014 OPPS/ASC final rule with comment period (78 FR 74928 through 74929) and the CY 2016 OPPS/ASC final rule with comment period (80 FR 70347)). We have no reason to believe that any stress agent that a hospital chooses, regardless of the cost, will not be entirely medically appropriate for the patient. The commenter did not provide any specific information to suggest that a high-cost stress agent (for example, regadenoson) is more clinically appropriate than a low-cost stress agent (for example, adenosine) in certain patients. In fact, we are aware of some evidence that may suggest that the opposite is true (Brink, H.L., Dickerson, J.A., Stephens, J.A. and Pickworth, K.K. (2015), Comparison of the Safety of Adenosine and Regadenoson in Patients Undergoing Outpatient Cardiac Stress Testing. Pharmacotherapy, 35: 1117-1123. Available at: American College of Cardiology Web site at: https://www.acc.org/latest-in-cardiology/journal-scans/2016/01/15/13/40/adenosine-versus-regadenoson-in-cardiac-stress).

    To the extent that this stress agent packaging policy encourages hospitals to utilize the cheaper stress agent--adenosine--instead of regadenoson (as the commenter speculated that it has), we believe that this is a positive effect of the stress agent packaging policy. One important purpose of these packaging policies is to provide hospitals with the financial incentive to choose less expensive alternative drugs, devices, and supplies, as clinically appropriate. In the preambles of our past rulemakings, we have repeatedly stated the following axiom: ``Where there are a variety of devices, drugs, items, supplies, etc. 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'' (78 FR 74925). The potential effect of this policy that the commenter is concerned about (hospitals choosing a lower cost stress agent) is precisely the outcome that we hope to encourage through this packaging policy. Therefore, we believe that this packaging policy supports medically necessary and efficient patient care. We believe that creating separate APCs for diagnostic tests that use high-cost stress agents could undermine this goal and, therefore, is not warranted at this time.

    Comment: One commenter, the manufacturer of the drug Omidriasupreg, did not want CMS to package the drug Omidriasupreg (described by HCPCS code C9447, with status indicator ``N'') under Sec. 419.2(b)(14) or (b)(16), after pass-through payment status expires at the end of CY 2017 (80 FR 70347). Specifically, the commenter opposed packaging this drug with cataract surgery effective beginning in CY 2018 and subsequent years. The commenter believed that the surgical supply packaging policy inadvertently conflicts with CMS' broader policies targeting therapeutic products, unintentionally creates financial disincentives for hospitals and ASCs to use Omidriasupreg, and is overly broad. The commenter pointed out that studies have shown that the use of Omidriasupreg can reduce complications during cataract surgery, and therefore Omidriasupreg provides a distinct therapeutic benefit independent of the procedural benefits achieved without Omidriasupreg. The commenter recommended that CMS exclude from the surgical supply packaging policy all drugs and biologicals that have ``a therapeutic indication that provides a benefit independent of the procedure performed without the drug or biological and that may substitute for one or more other subsequent interventions that would otherwise be separately paid by CMS.'' Presumably, according to the commenter, if CMS adopted such an exclusion, it would result in the continued separate

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    payment for Omidriasupreg after pass-through payment status expires.

    Response: We appreciate the commenters' concerns and believe that some additional explanation might be of use. We believe that this comment reflects a misunderstanding of our OPPS packaging policy that packages drugs and biologicals that function as supplies when used in a surgical procedure. We have reviewed Omidriasupreg's indications and, based on those indications, it is unclear what the commenter means when it requested that CMS exclude drugs from the packaging policy that have ``a therapeutic indication that provides a benefit independent of the procedure performed without the drug or biological and that may substitute for one or more other subsequent interventions that would otherwise be separately paid by CMS.'' Omidriasupreg supplements the drugs delivered as preoperative eye drops to dilate the pupil to either improve or prolong dilation in certain cases. The benefit of Omidriasupreg is the facilitation of cataract surgery. The surgical supply packaging policy for drugs and biologicals that function as surgical supplies is intended to apply broadly to drugs and biologicals that are used in surgery or that are used to achieve the surgical objective. In the CY 2014 OPPS/ASC final rule with comment period, in discussing the surgical supplies packaging policy as it applies to another drug used in an eye surgery, we stated that ``we believe packaging is appropriate for items and services that are integral or ancillary or supportive or dependent or adjunctive to the primary procedure. Therefore, items and services that fall within any of these categories may be properly packaged in the OPPS'' (78 FR 74938). Any and all of these descriptive terms apply to Omidriasupreg, which is integral and ancillary and supportive and dependent and adjunctive to cataract surgery. The commenter believes that the packaging policy unintentionally creates financial disincentives for hospitals and ASCs to use Omidriasupreg. We view the financial effect of the packaging policy differently. We believe this approach promotes efficient resource use in hospitals and ASCs. We believe that once its pass-

    through payment status expires, Omidriasupreg should be packaged as are all of these other surgical supplies. In summary, in the CY 2016 OPPS/ASC final rule with comment period, we finalized a policy to package the drug Omidriasupreg (described by HCPCS code C9447) after pass-through payment status expires under our policy that packages drugs and biologicals that function as supplies when used in a surgical procedure. This policy will take effect on January 1, 2018.

    Comment: One commenter, the manufacturer of the drug Cysview (described by HCPCS code C9275) requested that CMS withdraw the packaging policy described by 42 CFR 419.2(b)(15), which packages drugs, biologicals, and radiopharmaceuticals that function as supplies in a diagnostic test or procedure, and pay separately for its drug, Cysview. The commenter pointed out that CMS acknowledged in the CY 2004 OPPS proposed rule that ``. . . packaging payments adversely affect beneficiary access to medically necessary services'' (68 FR 47995). The commenter also asserted that this packaging policy has had a negative effect on the quality of patient care because it has created a significant financial disincentive for hospitals to purchase Cysview. In addition, the commenter stated that Cysview costs $810, but because the APC payment amount for the cystoscopy procedures in which Cysview is used is based on the average costs of many different procedures (most of which do not use Cysview), the cost of Cysview is highly diluted and therefore the cystoscopy procedure payments do not fully reflect the cost of Cysview.

    Response: We begin with the complete quote from the CY 2004 OPPS proposed rule from which the commenter extracted its partial quote described earlier. The full quote is as follows: ``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. Notwithstanding our commitment to package as many costs as possible, we are aware that packaging payments for certain drugs and radiopharmaceuticals, especially those that are particularly expensive or rarely used, might result in insufficient payments to hospitals, which could adversely affect beneficiary access to medically necessary services'' (68 FR 47995) (emphasis added). Separate payment for all products, items, devices, among others, that are the components of a primary service furnished to a patient in the hospital would be inconsistent with a prospective payment system--doing so would make the OPPS essentially a fee schedule in which every coded item resulted in additional payment. Furthermore, the latter part of the quoted statement refers only to particularly expensive or rarely used drugs, and Cysview is neither. Cysview has a fairly broad indication as an adjunct to white light cystoscopy, and $810 is not ``particularly expensive'' for an OPPS drug (many of which cost several thousands of dollars). However, we do note that the price of Cysview has increased 38 percent in the last 5 years (from approximately $588 in 2012). Finally, the commenter stated that the relevant bladder cancer APCs are APC 5373 (Level 3 Urology and Related Services) and APC 5374 (Level 4 Urology and Related Services), and that these APCs contain the procedure codes that primarily use Cysview when blue light cystoscopy is performed. Both of these APCs are being finalized as C-APCs for CY 2017. Part of the C-APC methodology is to package all drugs except for those in pass-through payment status, and this methodology would apply to Cysview because it is not in drug pass-through payment status. Therefore, aside from the diagnostic test supplies packaging policy, Cysview would be packaged when used with any procedure assigned to a C-

    APC.

    In summary, We are not adopting any changes based on the comments received on these three policy-packaged drugs--Lexiscansupreg, Omidriasupreg, and Cysview--for CY 2017.

  185. 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. 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). We continued the high cost/low cost categories policy in CY 2015 and CY 2016, and in the CY 2017 OPPS/ASC proposed rule (81 FR 45661 through 45662), we proposed to continue it for CY 2017. Under this current policy, skin substitutes in the high cost category are reported with the skin substitute application CPT codes and skin substitutes in the low cost category are reported with the analogous skin substitute HCPCS C-codes. For a

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    discussion of the CY 2014 and CY 2015 methodologies for assigning skin substitutes to either the high cost group or the low cost group, we refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 74932 through 74935) and the CY 2015 OPPS/ASC final rule with comment period (79 FR 66882 through 66885).

    For CY 2017, as in CY 2016, we proposed to determine the high/low cost status for each skin substitute product based on either a product's geometric mean unit cost (MUC) exceeding the geometric MUC threshold or the product's per day cost (PDC) (the total units of a skin substitute multiplied by the mean unit cost and divided by the total number of days) exceeding the PDC threshold. For a discussion of the CY 2016 high cost/low cost methodology, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70434 through 70435). We proposed to assign skin substitutes that exceed either the MUC threshold or the PDC threshold to the high cost group. We proposed to assign skin substitutes with a MUC or a PDC that does not exceed either the MUC threshold or the PDC threshold to the low cost group. For this CY 2017 OPPS/ASC final rule with comment period, we analyzed updated CY 2015 claims data to calculate the MUC threshold (a weighted average of all skin substitutes' MUCs) and the PDC threshold (a weighted average of all skin substitutes' PDCs). The final CY 2017 MUC threshold is $33 per cm\2\ (rounded to the nearest $1) (proposed at $25 per cm\2\) and the final CY 2017 PDC threshold is $716 (rounded to the nearest $1) (proposed at $729).

    For CY 2017, as in CY 2016, we proposed to continue to assign skin substitutes with pass-through payment status to the high cost category, and to assign skin substitutes with pricing information but without claims data to calculate a geometric MUC or PDC to either the high cost or low cost category based on the product's ASP+6 percent payment rate as compared to the MUC threshold. If ASP is not available, we stated in the proposed rule that 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 stated in the proposed rule that new skin substitutes without pricing information would be assigned to the low cost category until pricing information is available to compare to the CY 2017 MUC threshold. For a discussion of our existing policy under which we assign skin substitutes without pricing information to the low cost category until pricing information is available, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70436). In addition, as in CY 2016, we proposed for CY 2017 that a skin substitute that is both assigned to the high cost group in CY 2016 and also exceeds either the MUC or PDC in the proposed rule for CY 2017 would be assigned to the high cost group for CY 2017, even if it no longer exceeds the MUC or PDC CY 2017 thresholds based on updated claims data and pricing information used in this CY 2017 final rule with comment period. Table 15 of the CY 2017 OPPS/ASC proposed rule (81 FR 45661 through 45662) displayed the proposed CY 2017 high cost or low cost category assignment for each skin substitute product.

    Comment: One commenter notified CMS of an error in the calculation of the MUC threshold reported in the CY 2017 OPPS/ASC proposed rule (81 FR 45661), and stated that the values for the MUC threshold are different from the values for the PDC threshold. The commenter also requested that skin substitute products that were assigned to the high cost group because of the incorrect lower MUC threshold in the proposed rule, and that would have been classified in the low cost group if the corrected higher MUC threshold had been used in the proposed rule, be reassigned to the low cost group in the final rule.

    Response: We reviewed our calculations and agreed with the commenter that the MUC threshold was incorrect in the proposed rule. We also found a calculation error with the PDC threshold. We have corrected our calculations and used more recent claims data from CY 2015 to revise the MUC threshold and the PDC threshold for this final rule with comment period.

    We disagree with the request of the commenter to move skin substitute products back to the low cost group because of the erroneous calculation of a lower MUC threshold in the proposed rule. The policy we proposed to continue from CY 2016, and which we are finalizing for CY 2017, retains a skin substitute product in the high cost group if the product was assigned to the high cost group in CY 2016 and exceeded either the MUC threshold or the PDC threshold of the proposed rule for CY 2017. The policy does not make exceptions due to calculation errors or revisions by CMS. We will follow this policy and retain all skin substitute products in the high cost group that were assigned to the high cost group in CY 2016 and exceeded either the MUC threshold or the PDC threshold of the proposed rule for CY 2017.

    Comment: One commenter provided information to support that HCPCS code Q4163 (Amnion bio and woundex sq cm) should be assigned to the high cost skin substitute group. The commenter stated that HCPCS code Q4163 is a relatively new skin substitute product and there was not sufficient claims data or pricing information available for the product when the CY 2017 OPPS/ASC proposed rule was released. The commenter stated that regulatory guidance requires CMS to assign a nonpass-

    through skin substitute product to the low cost group when there are no available cost data. The commenter supplied wholesale acquisition cost (WAC) and average wholesale price (AWP) data for HCPCS code Q4163 showing that HCPCS code Q4163 should be assigned to the high cost group.

    Response: We reviewed WAC and ASP data for HCPCS code Q4163, and we agree with the findings of the commenter. After consideration of the public comment we received about HCPCS code Q4163, in this final rule with comment period, we are assigning HCPCS code Q4163 to the high cost skin substitute group for CY 2017.

    Comment: One commenter requested that PuraPly (described by HCPCS code Q4172; previously HCPCS code C9349) have its pass-through payment status end as of December 31, 2016, and not continue through CY 2017. The commenter stated that PuraPly received its pass-through payment status in January 2015 and will have 2 full years of pass-through payment status by December 2016. The commenter also asserted that PuraPly was not a new skin substitute product when approved for pass-

    through payment status in the CY 2015 OPPS/ASC final rule with comment period. The commenter provided evidence that PuraPly, called by its previous name, FortaDerm, was introduced to the market as early as 2002.

    Response: We disagree with the commenter. PuraPly (described by HCPCS code Q4172; previously HCPCS code C9349) was given pass-through payment status under the pass-through payment policy and process for drugs and biologicals that was in effect prior to CY 2015. Pass-through payment status products covered by the policy receive pass-through payments for at least 2 years but for no more than 3 years from the date the first OPPS payment for the product is generated. The assertion by the commenter that PuraPly will have reached 2 years of pass-through payment status by the end of December 2016 is incorrect. PuraPly will not achieve 2 years of pass-through

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    payment status until at least January 2017. The pass-through payment policy for drugs and biologicals that was in effect at the beginning of CY 2015 only allows changes to a pass-through payment designation for a product at the beginning of a calendar year. Therefore, PuraPly must continue to have pass-through status for all of CY 2017. The evidence presented by the commenter that PuraPly was available commercially in 2002 is not relevant, as the product (under any name) did not have pass-through payment status prior to 2015, and there was no newness criterion for drug and biological pass-through payment status eligibility at the time of the PuraPly (formerly FortaDerm) pass-

    through payment application evaluation.

    After consideration of the public comment we received, we are finalizing our proposal, without modification, to continue pass-through status for PuraPly (HCPCS code Q4172; previously HCPCS code C9349) for CY 2017.

    Comment: A few commenters supported the current methodology used by CMS to assign skin substitute products into high cost and low cost categories. Commenters appreciated that either the MUC threshold or the PDC threshold could be used to qualify skin substitute products as high cost. The commenter stated that including the PDC threshold reduces the risk that products with larger sizes would be assigned to the low cost category because of a low MUC. One commenter suggested that using the PDC threshold alone may improve on the current methodology. Another commenter supported the policy assigning skin substitute products to the high cost group that exceeded the MUC threshold or the PDC threshold in the CY 2016 final rule and in the CY 2017 proposed rule, even if analysis for the CY 2017 final rule indicate a product should be assigned to the low cost group.

    Response: We appreciate the commenters' support. We agree that using either a MUC methodology or a PDC methodology along with the policy of automatically assigning skin substitute products to the high cost group if they were identified as high cost for both the CY 2016 final rule and the CY 2017 proposed rule stabilizes cost group assignments.

    Comment: Several commenters expressed concerns about aspects of the current CMS methodology for payment for the use of skin substitute products. The commenters stated that one issue is the accurate reporting of the cost of skin substitute products. The commenters believed that many providers report lower utilization of skin substitutes than what providers are actually using, which leads to lower payment rates. Some commenters were generally opposed to packaging or bundling skin substitute products with other services because of concerns that the cost of skin substitute products is not accurately accounted for in the packaged or bundled rates. Commenters continued to have concerns about the payment for wounds larger than 100 cm\2\ that they believed are too low even after the addition of PDC methodology to determine if a skin substitute product should be in the high cost group.

    Several commenters also suggested changes to the system of assigning skin substitutes to either a high cost or low cost category. Suggestions included creating a three-tiered system to more accurately reflect the prices of individual products, monitoring the current methodology to determine if it was leading to lower reimbursements, and improving transparency by making available MUC and PDC calculations and claims data by product.

    Some commenters made a more general request for overall stability with skin substitute methodology and alternate ways to calculate the cost of products to compare to the MUC and PDC thresholds without using OPPS claims data. The most common suggestion was to use average sales price (ASP) + 6 percent as a primary source of cost data instead of using ASP + 6 percent when no claims data are available for a product.

    Response: We appreciate the feedback we received from the commenters. However, we believe the current cost estimation and payment policies for skin substitutes reasonably reflect the costs incurred to administer these products. Therefore, after consideration of the public comments we received, we are finalizing our proposal to maintain current policies regarding the payment of skin substitute products for CY 2017 without additional modifications.

    Comment: One commenter requested that CMS alter CPT coding instructions that prohibits wound healing products in the form of a gel, liquid, foam, ointment, powder, among others (a form other than a graft-type sheet) from using the skin substitute application CPT codes or that CMS pay separately for these products in the OPPS.

    Response: Skin substitutes and all of their variations and related wound products, regardless of the form or physical state, are packaged in the OPPS as surgical supplies under 42 CFR 419.2(b)(16). Skin substitutes is a broad class of wound products that includes all of the products in the HCPCS skin substitute Q code series and all related products. We cannot change AMA CPT coding guidance. We can (if we choose to do so) provide coding instructions or guidance specifically for Medicare coding and payment purposes. We believe that the AMA coding guidance for the skin substitute codes is sufficient as currently written. The skin substitute graft materials are applied to a wound in a manner that is different from how a liquid or particulate material is applied. In general, there are not very many codes for the application of topical medications such as liquids, creams or ointments because what the applier has to do to put the medication or other medical product on a patient's skin does not typically rise to the level of a service that would need to be described by a code depicting the professional services of a health care provider. In other words, it is generally a very minor activity that requires little time, effort or skill, and often such products are self-administered. Regarding the request that we pay separately for liquid, gel, particulate, powder, or other forms of skin substitutes, we do not agree with this request. It is common in the OPPS that the use of a surgical supply (whether expensive or not) does not correspond to a specific procedure code with a payment that covers the full cost of the supply. In this case, access to particular skin substitute products is generally not our concern because there are so many different skin substitute products available to Medicare beneficiaries in the HOPD that adequate treatment for wounds under the current payment scheme should always be available.

    After consideration of the public comments we received, we are finalizing as proposed our high cost/low cost skin substitute methodology as described above. Table 37 below displays the CY 2017 high cost or low cost category assignment for each skin substitute product.

    Page 79671

    Table 37--Skin Substitute Assignments to High Cost and Low Cost Groups

    for CY 2017

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

    CY 2017 High/low

    CY 2017 HCPCS code CY 2017 short descriptor assignment

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

    C9363................. Integra Meshed Bil Wound High.

    Mat.

    Q4100................. Skin Substitute, NOS.... Low.

    Q4101................. Apligraf................ High.

    Q4102................. Oasis Wound Matrix...... Low.

    Q4103................. Oasis Burn Matrix....... High.

    Q4104................. Integra BMWD............ High.

    Q4105................. Integra DRT............. High.

    Q4106................. Dermagraft.............. High.

    Q4107................. GraftJacket............. High.

    Q4108................. Integra Matrix.......... High.

    Q4110................. Primatrix............... High.

    Q4111................. Gammagraft.............. Low.

    Q4115................. Alloskin................ Low.

    Q4116................. Alloderm................ High.

    Q4117................. Hyalomatrix............. Low.

    Q4119................. Matristem Wound Matrix.. Low.

    Q4120................. Matristem Burn Matrix... High.

    Q4121................. Theraskin............... High.

    Q4122................. Dermacell............... High.

    Q4123................. Alloskin................ High.

    Q4124................. Oasis Tri-layer Wound Low.

    Matrix.

    Q4126................. Memoderm/derma/tranz/ High.

    integup.

    Q4127................. Talymed................. High.

    Q4128................. Flexhd/Allopatchhd/ High.

    Matrixhd.

    Q4129................. Unite Biomatrix......... High.

    Q4131................. Epifix.................. High.

    Q4132................. Grafix Core............. High.

    Q4133................. Grafix Prime............ High.

    Q4134................. hMatrix................. Low.

    Q4135................. Mediskin................ Low.

    Q4136................. Ezderm.................. Low.

    Q4137................. Amnioexcel or Biodexcel, High.

    1cm.

    Q4138................. Biodfence DryFlex, 1cm.. High.

    Q4140................. Biodfence 1cm........... High.

    Q4141................. Alloskin ac, 1cm........ High.

    Q4143................. Repriza, 1cm............ High.

    Q4146................. Tensix, 1CM............. High.

    Q4147................. Architect ecm, 1cm...... High.

    Q4148................. Neox 1k, 1cm............ High.

    Q4150................. Allowrap DS or Dry 1 sq High.

    cm.

    Q4151................. AmnioBand, Guardian 1 sq High.

    cm.

    Q4152................. Dermapure 1 square cm... High.

    Q4153................. Dermavest 1 square cm... High.

    Q4154................. Biovance 1 square cm.... High.

    Q4156................. Neox 100 1 square cm.... High.

    Q4157................. Revitalon 1 square cm... High.

    Q4158................. MariGen 1 square cm..... High.

    Q4159................. Affinity 1 square cm.... High.

    Q4160................. NuShield 1 square cm.... High.

    Q4161................. Bio-Connekt per square Low.

    cm.

    Q4162................. Amnio bio and woundex Low.

    flow.

    Q4163................. Amnion bio and woundex High.

    sq cm.

    Q4164................. Helicoll, per square cm. High.

    Q4165................. Keramatrix, per square Low.

    cm.

    Q4166................. Cytal, per square cm.... Low.

    Q4167................. Truskin, per square cm.. Low.

    Q4168................. Amnioband, 1 mg......... Low.

    Q4169................. Artacent wound, per Low.

    square cm.

    Q4170................. Cygnus, per square cm... Low.

    Q4171................. Interfyl, 1 mg.......... Low.

    Q4172*................ PuraPly, PuraPly antimic High.

    Q4173................. Palingen or palingen Low.

    xplus, per sq cm.

    Q4175................. Miroderm, per square cm. Low.

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

    * Pass-through payment status in CY 2017.

    Page 79672

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

    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 2017 OPPS/ASC proposed rule (81 FR 45662), 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 2017.

    For CY 2017, 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 2015 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 the CY 2017 OPPS/ASC proposed rule, and as is our current policy for determining the packaging status of other drugs, we used the mean unit cost available from the CY 2015 claims data to make the proposed packaging determinations for these drugs: HCPCS code J1840 (Injection, kanamycin sulfate, up to 500 mg), J1850 (Injection, kanamycin sulfate, up to 75 mg) 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 proposed 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 the proposed CY 2017 drug packaging threshold of $110 (so that all HCPCS codes for the same drug or biological would be packaged) or greater than the proposed CY 2017 drug packaging threshold of $110 (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 in CY 2017 was displayed in Table 16 of the CY 2017 OPPS/ASC proposed rule (81 FR 45663).

    We did not receive any public comments on this proposal. Therefore, for CY 2017, we are finalizing our CY 2017 proposal, without modification, 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. Table 38 below displays the final packaging status of each drug and biological HCPCS code to which the finalized methodology applies for CY 2017.

    Table 38--HCPCS Codes to Which the CY 2017 Drug-Specific Packaging

    Determination Methodology Applies

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

    CY 2017 HCPCS code CY 2017 long descriptor CY 2017 SI

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

    C9257..................... Injection, bevacizumab, K

    0.25 mg.

    J9035..................... Injection, bevacizumab, 10 K

    mg.

    J1460..................... Injection, gamma globulin, K

    intramuscular, 1 cc.

    J1560..................... Injection, gamma globulin, K

    intramuscular over 10 cc.

    J2788..................... Injection, rho d immune N

    globulin, human, minidose,

    50 micrograms (250 i.u.).

    J2790..................... Injection, rho d immune N

    globulin, human, full

    dose, 300 micrograms (1500

    i.u.).

    J8520..................... Capecitabine, oral, 150 mg. N

    J8521..................... Capecitabine, oral, 500 mg. N

    J7515..................... Cyclosporine, oral, 25 mg.. N

    J7502..................... Cyclosporine, oral, 100 mg. N

    J2920..................... Injection, N

    methylprednisolone sodium

    succinate, up to 40 mg.

    J2930..................... Injection, N

    methylprednisolone sodium

    succinate, up to 125 mg.

    J3471..................... Injection, hyaluronidase, N

    ovine, preservative free,

    per 1 usp unit (up to 999

    usp units).

    J3472..................... Injection, hyaluronidase, N

    ovine, preservative free,

    per 1000 usp units.

    J1642..................... Injection, heparin sodium, N

    (heparin lock flush), per

    10 units.

    J1644..................... Injection, heparin sodium, N

    per 1000 units.

    J1850..................... Injection, kanamycin N

    sulfate, up to 75 mg.

    J1840..................... Injection, kanamycin N

    sulfate, up to 500 mg.

    J7050..................... Infusion, normal saline N

    solution, 250 cc.

    J7040..................... Infusion, normal saline N

    solution, sterile (500

    ml=1 unit).

    J7030..................... Infusion, normal saline N

    solution, 1000 cc.

    J1020..................... Injection, N

    methylprednisolone

    acetate, 20 mg.

    J1030..................... Injection, N

    methylprednisolone

    acetate, 40 mg.

    J1040..................... Injection, N

    methylprednisolone

    acetate, 80 mg.

    J9250..................... Methotrexate sodium, 5 mg.. N

    J9260..................... Methotrexate sodium, 50 mg. N

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

    Page 79673

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

  187. 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. We refer to this alternative methodology as the ``statutory default.'' Most physician Part B drugs are paid at ASP+6 percent in accordance with 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 2017 OPPS/

    ASC proposed rule (81 FR 45664), 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.

    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). In the CY 2013 OPPS/

    ASC final rule with comment period (77 FR 68386 through 68389), we first adopted the statutory default policy to pay for separately payable drugs and biologicals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) of the Act. We continued this policy of paying for separately payable drugs and biologicals at the statutory default for CY 2014, CY 2015, and CY 2016 (80 FR 70440).

  188. CY 2017 Payment Policy

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45664), for CY 2017 and subsequent years, we proposed to continue our payment policy that has been in effect from CY 2013 to present and pay for separately payable drugs and biologicals at ASP+6 percent in accordance with 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: The majority of commenters supported CMS' proposal to continue to pay for separately payable drugs and biologicals based on the statutory default rate of ASP+6 percent. One commenter recommended that CMS increase payment for separately payable drugs and biologicals without pass-through payment status to adequately cover providers' acquisition and pharmacy overhead costs.

    Response: We thank commenters for their support. We continue to believe that ASP+6 percent based on the statutory default is appropriate for payment of separately payable drugs and biologicals for CY 2017 and that this percentage amount adequately covers acquisition and overhead cost. We see no evidence that an additional payment for overhead is required for separately payable drugs, biologicals, and therapeutic radiopharmaceuticals for CY 2017.

    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 2017. In addition, we are finalizing our proposal 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 2017 payment of ASP+6 percent for separately payable

    Page 79674

    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, 2016, or WAC, AWP, or mean unit cost from CY 2015 claims data and updated cost report information available for this final rule with comment period. In general, these published payment rates are not the same as the actual January 2017 payment rates. This is because payment rates for drugs and biologicals with ASP information for January 2017 will be determined through the standard quarterly process where ASP data submitted by manufacturers for the third quarter of 2016 (July 1, 2016 through September 30, 2016) will be used to set the payment rates that are released for the quarter beginning in January 2017 near the end of December 2016. 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 2016 are based on mean unit cost in the available CY 2015 claims data. If ASP information becomes available for payment for the quarter beginning in January 2017, 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 2016 ASP data) that do not have ASP information available for the quarter beginning in January 2017. As stated in the CY 2017 OPPS/ASC proposed rule (81 FR 45664), these drugs and biologicals will then be paid based on mean unit cost data derived from CY 2015 hospital claims. Therefore, the payment rates listed in Addenda A and B to this final rule with comment period are not for January 2017 payment purposes and are only illustrative of the CY 2017 OPPS payment methodology using the most recently available information at the time of issuance of this final rule with comment period.

  189. Biosimilar Biological Products

    For CY 2016, we finalized a policy to pay for biosimilar biological products based on the payment allowance of the product as determined under section 1847A of the Act and to subject nonpass-through biosimilar biological products to our annual threshold-packaged policy (80 FR 70445 through 70446). In the CY 2017 OPPS/ASC proposed rule (81 FR 45664), for CY 2017, we proposed to continue this same payment policy for biosimilar biological products.

    We received several public comments on the proposed HCPCS coding and modifiers for biosimilar biological products. As proposed, under the OPPS, we will use the HCPCS codes and modifiers for biosimilar biological products based on the policy established under the CY 2016 MPFS final rule with comment period. Therefore, we are considering the public comments received on biosimilar biological product HCPCS coding and modifiers in response to the CY 2017 OPPS/ASC proposed rule to be outside the scope to the proposed rule and we are not addressing them in this CY 2017 OPPS/ASC final rule with comment period. We refer readers to the CY 2017 MPFS final rule with comment period.

    We are finalizing our proposal, without modification, to pay for biosimilar biological products based on the payment allowance of the product as determined under section 1847A of the Act. In addition, we are finalizing our proposal, without modification, to subject nonpass-

    through biosimilar biological products to our annual threshold-packaged policy.

    3. Payment Policy for Therapeutic Radiopharmaceuticals

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45664), for CY 2017, we proposed to continue the payment policy for therapeutic radiopharmaceuticals that began in CY 2010. We 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 2017. Therefore, we proposed for CY 2017 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 2015 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 2017 payment rates for nonpass-through, separately payable therapeutic radiopharmaceuticals were in Addenda A and B to the proposed rule (which are available via the Internet on the CMS Web site).

    Comment: 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 non-

    pass-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

    Page 79675

    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 non-pass-through, separately payable therapeutic radiopharmaceuticals at ASP+6 percent. We also are finalizing our proposal to continue to rely on CY 2015 mean unit cost data derived from hospital claims data for payment rates for therapeutic radiopharmaceuticals for which ASP data are unavailable. The CY 2017 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).

    4. 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. Some of the Technetium-99 (Tc-99m), the radioisotope used in the majority of such diagnostic imaging services, is 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. We expect that 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, beginning in 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 (77 FR 68321).

    We stated in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68321) that our expectation is that this additional payment will be needed for the duration of the industry's conversion to alternative methods to producing Tc-99m without HEU. We also 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 (77 FR 68316). We have reassessed this payment for CY 2017 and did not identify any new information that would cause us to modify payment. Therefore, in the CY 2017 OPPS/ASC proposed rule (81 FR 45665), for CY 2017, we proposed to continue to provide an additional $10 payment for radioisotopes produced by non-HEU sources.

    Comment: Some commenters supported CMS' proposal to provide an additional $10 payment for radioisotopes produced by non-HEU sources and asked that CMS work with stakeholders regarding a phase-out plan based on utilization and adoption of non-HEU technetium by the radiopharmaceutical manufacturers. Another commenter requested that CMS provide an explanation for not applying an annual inflation update to the $10 payment for radioisotopes produced by non-HEU sources, provide details on plans to offset nuclear medicine procedures by the amount of cost paid through the non-HEU policy, and make available to the public data regarding claims submitted to date under this policy. The commenter also stated that CMS should assess whether the beneficiary copayment policy is adversely impacting patient access.

    Response: We appreciate commenters' support. As stated earlier, we support efforts by all of the involved stakeholders to convert all medical radioisotope production to non-HEU sources. Regarding the comment requesting that we increase the $10 payment for HCPCS code Q9969 (by an inflation update or some other amount) for CY 2017, we currently lack sufficient additional information to suggest that an add-on payment greater than $10 would be more appropriate. Regarding the request for payment information for services described by HCPCS code Q9969, the following are the most currently available total Medicare payments for services described by HCPCS code Q9969 for each year in which it has been in effect: CY 2013 ($17,164); CY 2014 ($66,609); and CY 2015 ($106,584). Also, we do not believe that beneficiary copayments for services described by HCPCS code Q9969 are adversely impacting beneficiary access to any medically necessary services. The 20-percent copayment amount on the $10 total payment for HCPCS code Q9969 is only $2. Any Medicare beneficiary who is unable to afford this $2 copayment would almost certainly have some form of government assistance that would cover this copayment amount. Therefore, we do not believe that the copayment requirements for services described by HCPCS code Q9969 are negatively impacting access to medical care for Medicare beneficiaries.

    After consideration of the public comments we received, we are finalizing our proposal, without modification, to continue the policy of providing an additional $10 payment for radioisotopes produced by non-HEU sources for CY 2017, which will be the fifth year in which this policy is in effect in the OPPS. We will continue to reassess this policy annually, consistent with the original policy in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68321).

    5. Payment for Blood Clotting Factors

    For CY 2016, 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 (80 FR 70441). That is, for CY 2016, 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 2016 updated furnishing fee was $0.202 per unit.

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45665), for CY 2017, 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

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    consistent with the methodology applied in the physician's office and in the inpatient hospital setting. These methodologies were 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 with 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: One commenter supported CMS' proposal to continue its longstanding policy for payment of the furnishing fee for blood clotting factors administered or dispensed in the hospital outpatient department at the same level as in the physician office setting.

    Response: We appreciate the commenter's 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.

    6. Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals With HCPCS Codes But Without OPPS Hospital Claims Data

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45665), for CY 2017, we proposed to continue to use the same payment policy as in CY 2016 for nonpass-through drugs, biologicals, and radiopharmaceuticals with HCPCS codes but without OPPS hospital claims data (80 FR 70443). The proposed CY 2017 payment status of each of the nonpass-through drugs, biologicals, and radiopharmaceuticals with HCPCS codes but without OPPS hospital claims data was listed in Addendum B to the proposed rule, which is available via the Internet on the CMS Web site.

    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. Therefore, we are finalizing our CY 2017 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 2017 if pricing information becomes available. The CY 2017 payment status of each of the nonpass-through drugs, biologicals, and radiopharmaceuticals with HCPCS codes but without OPPS hospital claims data is listed in Addendum B to this final rule with comment period, which is available via the Internet on the CMS Web site.

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

      1. 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 2017 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 2017. 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 in the remaining quarters of CY 2016 or beginning in CY 2017. The sum of the CY 2017 pass-through spending estimates for these two groups of device categories equals the total CY 2017 pass-through spending estimate for device categories with pass-through payment 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) use the device pass-

        through process and payment methodology (74 FR 60476). As has been our past practice (76 FR 74335), in the CY 2017 OPPS/ASC proposed rule (81 FR 45666), for CY 2017, we proposed to include an estimate of any implantable biologicals eligible for pass-through payment in our estimate of pass-through spending for devices. Similarly, we finalized a policy in CY 2015 that applications for pass-through payment for skin substitutes and similar products be evaluated using the medical device pass-through process and payment methodology (76 FR 66885 through 66888). Therefore, as we did beginning in CY 2015, for CY 2017, we also proposed to include an estimate of any skin substitutes and similar products 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

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        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. Because we proposed to pay for most nonpass-through separately payable drugs and biologicals under the CY 2017 OPPS at ASP+6 percent, and because we proposed to pay for CY 2017 pass-through drugs and biologicals at ASP+6 percent, as we discussed in section V.A. of the proposed rule, our estimate of drug and biological pass-through payment for CY 2017 for this group of items was $0, as discussed below.

        Furthermore, payment for certain drugs, specifically diagnostic radiopharmaceuticals and contrast agents without pass-through payment status, is 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 the proposed rule and this final rule with comment period. In the CY 2017 OPPS/ASC proposed rule (81 FR 45666), we proposed that all of these policy-packaged drugs and biologicals with pass-through payment status would be paid at ASP+6 percent, like other pass-through drugs and biologicals, for CY 2017. Therefore, our estimate of pass-

        through payment for policy-packaged drugs and biologicals with pass-

        through payment status approved prior to CY 2017 was not $0, as discussed below. In section V.A.5. of the proposed rule, we discussed our 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 proposed to 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 2017. The second group contains drugs and biologicals that we know are newly eligible, or project will be newly eligible in the remaining quarters of CY 2016 or beginning in CY 2017. The sum of the CY 2017 pass-through spending estimates for these two groups of drugs and biologicals equals the total CY 2017 pass-through spending estimate for drugs and biologicals with pass-through payment status.

      2. Estimate of Pass-Through Spending

        In the CY 2017 OPPS/ASC proposed rule (81 FR 45666), we proposed to set the applicable pass-through payment percentage limit at 2.0 percent of the total projected OPPS payments for CY 2017, consistent with section 1833(t)(6)(E)(ii)(II) of the Act and our OPPS policy from CY 2004 through CY 2016 (80 FR 70446 through 70448).

        For the first group, consisting of device categories that are currently eligible for pass-through payment and will continue to be eligible for pass-through payment in CY 2017, there are three active categories for CY 2017. For CY 2016, we established one new device category subsequent to the publication of the CY 2016 OPPS/ASC proposed rule, HCPCS code C1822 (Generator, neurostimulator (implantable), high frequency, with rechargeable battery and charging system), that was effective January 1, 2016. We estimated that the device described by HCPCS code C1822 will cost $1 million in pass-through expenditures in CY 2017. Effective April 1, 2015, we established that the device described by HCPCS code C2623 (Catheter, transluminal angioplasty, drug-coated, non-laser) will be eligible for pass-through payment. We estimated that the device described by HCPCS code C2623 will cost $97 million in pass-through expenditures in CY 2017. Effective July 1, 2015, we established that the device described by HCPCS code C2613 (Lung biopsy plug with delivery system) will be eligible for pass-

        through payment. We estimated that the device described by HCPCS code C2613 will cost $4.7 million in pass-through expenditures in CY 2017. Based on the three device categories of HCPCS codes C1822, C2623, and C2613, we proposed an estimate for the first group of devices of $102.7 million.

        We did not receive any public comments on our proposed estimate for the first group of devices that included HCPCS codes C1822, C2623 and C2613. Therefore, we are finalizing the proposed estimate for this first group of devices of $102.7 million for CY 2017.

        In estimating our proposed CY 2017 pass-through spending for device categories in the second group, we included: device categories that we knew at the time of the development of the proposed rule will be newly eligible for pass-through payment in CY 2017; additional device categories that we estimated could be approved for pass-through status subsequent to the development of the proposed rule and before January 1, 2017; and contingent projections for new device categories established in the second through fourth quarters of CY 2017. In the CY 2017 OPPS/ASC proposed rule (81 FR 45667), 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 2017 pass-through spending for this second group of device categories was $10 million.

        We did not receive any public comments on our proposed estimate for the second group of devices. Therefore, we are finalizing the proposed estimate for this second group of devices of $10 million for CY 2017.

        To estimate proposed CY 2017 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 2017, we proposed to use 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 2017 OPPS utilization of the products.

        For the known drugs and biologicals (excluding policy-packaged diagnostic radiopharmaceuticals, contrast agents, drugs, biologicals, and

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        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 2017, we estimated 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 payment status, we proposed to include in the CY 2017 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 proposed methodology described above, we calculated a CY 2017 proposed spending estimate for this first group of drugs and biologicals of approximately $19.0 million.

        We did not receive any public comments on our proposed spending estimate for this first group of drugs and biologicals. For this final rule with comment period, we calculated a CY 2017 spending estimate for this first group of drugs and biologicals of approximately $20.2 million.

        To estimate proposed CY 2017 pass-through spending for drugs and biologicals in the second group (that is, drugs and biologicals that we knew at the time of development of the proposed rule were newly eligible for pass-through payment in CY 2017, additional drugs and biologicals that we estimated could be approved for pass-through status subsequent to the development of the proposed rule and before January 1, 2016, and projections for new drugs and biologicals that could be initially eligible for pass-through payment in the second through fourth quarters of CY 2017), 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 2017 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 2017 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 $16.6 million.

        We did not receive any public comments on our proposed methodology or the proposed spending estimate for this second group of drugs. Therefore, for CY 2017, we are continuing to use the general methodology described above. For this final rule with comment period, we calculated a CY 2017 spending estimate for this second group of drugs and biologicals of approximately $17.7 million.

        In summary, in accordance with the methodology described earlier 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 2017 and those device categories, drugs, and biologicals that first become eligible for pass-through payment during CY 2017 is approximately $150.6 million (approximately $112.7 million for device categories and approximately $37.9 million for drugs and biologicals), which represents 0.24 percent of total projected OPPS payments for CY 2017. Therefore, we estimate that pass-through spending in CY 2017 will not amount to 2.0 percent of total projected OPPS CY 2017 program spending.

    2. OPPS Payment for Hospital Outpatient Visits and Critical Care Services

      In the CY 2017 OPPS/ASC proposed rule (81 FR 45667), for CY 2017, we proposed to continue with and did not propose any changes to our current clinic and emergency department (ED) hospital outpatient visits payment policies. For a description of the current clinic and ED hospital outpatient visits policies, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70448). We also proposed to continue with and did not propose any change to our payment policy for critical care services for CY 2017. For a description of the current payment policy for critical care services, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70449), and 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 proposed rule, we sought public comments on any changes to these codes that we should consider for future rulemaking cycles. We encouraged those parties who comment to provide the data and analysis necessary to justify any proposed changes.

      We did not receive any public comments on this proposal. Therefore we are finalizing our CY 2017 proposal, without modification, to continue our current clinic and ED hospital outpatient visits and critical care services payment policies.

    3. Payment for Partial Hospitalization Services

      1. Background

        A partial hospitalization program (PHP) is an intensive outpatient program of psychiatric services provided 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 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 CMHC 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

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        Secretary, which include partial hospitalization services (65 FR 18444 through 18445).

        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 section 1833(t)(2)(B) of the Act) 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, section 1833(t)(2)(B) of the Act 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. 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 were used to calculate the relative payment weights for 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 section 1833(t)(2) of the Act 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.

        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). In that final rule, 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.

        In CY 2009, we implemented several regulatory, policy, and payment changes, including a two-tiered payment approach for partial hospitalization services under which we paid one amount for days with 3 services under PHP APC 0172 (Level 1 Partial Hospitalization) and a higher amount for days with 4 or more services under PHP APC 0173 (Level 2 Partial Hospitalization) (73 FR 68688 through 68693). We also 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). We also revised the partial hospitalization benefit to include several coding updates (73 FR 68695 through 68697).

        For CY 2010, we retained the two-tiered payment approach for partial hospitalization services and used only hospital-based PHP data in computing the PHP APC per diem costs, upon which PHP APC per diem payment rates are based. 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 the CY 2011 OPPS/ASC final rule with comment period (75 FR 71994), we established four separate PHP APC per diem payment rates: Two for CMHCs (APC 0172 (for Level 1 services) and APC 0173 (for Level 2 services)) and two for hospital-based PHPs (APC 0175 (for Level 1 services) and 0176 (for Level 2 services)), based on each provider type's own unique data. In addition, 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 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 (75 FR 71990). For CY 2011, we also instituted a 2-year transition period for CMHCs to the CMHC APC per diem payment rates based solely on CMHC data. Under the transition methodology, CMHC APCs Level 1 and Level 2 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 partial hospitalization 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 Medicare 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.

        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 partial hospitalization services provided by CMHCs based on data derived solely from CMHCs and the relative payment weights for partial hospitalization services provided by hospital-based PHPs based exclusively on hospital data.

        In the CY 2013 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 (APCs 0172, 0173, 0175, and 0176), on geometric mean costs rather than on the median costs. We established these 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. For a detailed discussion on this policy, we refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68406 through 68412).

        In the CY 2014 OPPS/ASC proposed rule (78 FR 43621 through 43622), we solicited comments on possible future initiatives that may help to ensure the long-term stability of PHPs and further improve the accuracy of payment for PHP services, but proposed no changes. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75050 through 75053), we summarized the comments received on those possible future initiatives. We also continued 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 data for each provider type. For a detailed discussion on this policy, we

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        refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 75050 through 75053).

        In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66902 through 66908), we continued to apply our established policies to calculate the four PHP APC per diem payment rates based on PHP APC geometric mean per diem costs, using the most recent claims and cost data for each provider type.

        In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70455 through 70465), we again continued to apply our established policies to calculate the four PHP APC per diem payment rates based on PHP APC geometric mean per diem costs, using the most recent claims and cost data for each provider type. We also implemented a trim to remove hospital-based PHP service days that use a CCR that was greater than 5 (CCR>5) to calculate costs for at least one of their component services, and a trim on CMHCs with an average cost per day that is above or below 2 (2) standard deviations from the mean. We also renumbered the PHP APCs which were previously 0172, 0173, 0175, and 0176, to 5851, 5852, 5861, and 5862, respectively. For a detailed discussion of the PHP ratesetting process, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70462 through 70467).

        In the effort to increase the accuracy of the PHP per diem costs, in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70455 through 70461), we completed an extensive analysis of the claims and cost data, which included provider service usage, coding practices, and the ratesetting methodology. This extensive analysis identified provider coding errors that were inappropriately removing costs from ratesetting, and aberrant data from several providers that were affecting the calculation of the proposed PHP geometric mean per diem costs. Aberrant data are claims and/or cost data that are so abnormal that they skew the resulting geometric mean per diem costs. For example, we found claims with excessive CMHC charges resulting in CMHC geometric mean costs per day that were approximately the same as or more than the daily payment for inpatient psychiatric facility services. For an outpatient program like the PHP, which does not incur room and board costs such as an inpatient stay would, these costs per day were excessive. In addition, we found some CMHCs had very low costs per day (less than $25 per day). We stated in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70456) that, without using a trimming process, the data from these providers would inappropriately skew the geometric mean per diem cost for Level 2 CMHC services. Further analysis of the data confirmed that there were a few providers with extreme cost per day values, which led us to propose and finalize a 2 standard deviation trim on CMHC costs per day.

        During our claims and cost data analysis, we also found aberrant data from some hospital-based PHP providers. The existing OPPS 3 standard deviation trim removed very extreme CCRs by defaulting two providers that failed this trim to their overall hospital ancillary CCR. However, the calculation of the 3 standard deviations used to define the trim was influenced by these two providers, which had extreme CCRs greater than 175. Because these two hospital-based PHP providers remained in the data when we calculated the boundaries of the OPPS 3 standard deviation trim in the CY 2016 ratesetting, the upper limit of the trim boundaries was fairly high, at 28.3446. As such, some aberrant CCRs were not trimmed out, and still had high values ranging from 6.3840 to 19.996. We note that, as stated in the CY 2016 OPPS/ASC proposed rule (80 FR 39242 and 39293) and reiterated in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70456), OPPS defines a biased CCR as one that falls outside the predetermined ceiling threshold for a valid CCR; using CY 2014 cost report data, that threshold is 1.5.

        In order to reduce or eliminate the impact of aberrant data received from a few CMHCs and hospital-based PHP providers in the claims data used for ratesetting, we finalized the application of a 2 standard deviation trim on cost per day for CMHCs and a CCR>5 hospital service day trim for hospital-based PHP providers for CY 2016 and subsequent years (80 FR 70456 through 70459). In addition, in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70459 through 70460), a cost inversion occurred in the final rule data with respect to hospital-based PHP providers. A cost inversion exists when the Level 1 PHP APC geometric mean per diem cost for providing exactly 3 services per day exceeds the Level 2 PHP APC geometric mean per diem cost for providing 4 or more services per day. We corrected the cost inversion with an equitable adjustment to the actual geometric mean per diem costs by increasing the Level 2 hospital-based PHP APC geometric mean per diem costs and decreasing the Level 1 hospital-based PHP APC geometric mean per diem costs by the same factor, to result in a percentage difference equal to the average percent difference between the hospital-based Level 1 PHP APC and the Level 2 PHP APC for partial hospitalization services from CY 2013 through CY 2015.

        For a comprehensive description on the background of PHP payment policy, we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70453 through 70455).

      2. PHP APC Update for CY 2017

        1. PHP APC Changes and Effects on Geometric Mean Per Diem Costs

        For CY 2017, in the CY 2017 OPPS/ASC proposed rule (81 FR 45669 through 45673), we proposed to continue to apply our established policies to calculate the 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. However, as explained in greater detail below, we proposed to combine the Level 1 and Level 2 PHP APCs for CMHCs and to combine the Level 1 and Level 2 APCs for hospital-based PHPs because we believe this would best reflect actual geometric mean per diem costs going forward, provide more predictable per diem costs, particularly given the small number of CMHCs, and generate more appropriate payments for these services by avoiding the cost inversions that hospital-based PHPs experienced in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70459).

  190. Changes to PHP APCs

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45669 through 45673), we proposed to combine the existing two-tiered PHP APCs for CMHCs into a single PHP APC and the existing two-tiered hospital-based PHP APCs into a single PHP APC. Specifically, we proposed to replace existing CMHC APCs 5851 (Level 1 Partial Hospitalization (3 services) for CMHCs) and 5852 (Level 2 Partial Hospitalization (4 or more services) for CMHCs) with proposed new CMHC APC 5853 (Partial Hospitalization (3 or More Services Per Day)), and to replace existing hospital-based PHP APCs 5861 (Level 1 Partial Hospitalization (3 services) for Hospital-

    based PHPs) and 5862 (Level 2 Partial Hospitalization (4 or more services) for Hospital-based PHPs) with proposed new hospital-based PHP APC 5863 (Partial Hospitalization (3 or More Services Per Day)). In conjunction with this proposal, we proposed to combine the geometric mean per diem costs for the existing Level 1 and Level 2 PHP APCs for

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    CMHCs (APC 5851 and APC 5852, respectively) to calculate the proposed geometric mean per diem costs for proposed new PHP APC 5853 for CMHCs using only CY 2015 CMHC claims data and the most recent cost data, and to combine the geometric mean per diem costs for the existing Level 1 and Level 2 PHP APCs for hospital-based PHPs (APC 5861 and APC 5862, respectively) to calculate the proposed geometric mean per diem costs for proposed new PHP APC 5863 for hospital-based PHPs using only CY 2015 hospital-based PHP claims data and the most recent cost data, for CY 2017 and subsequent years. We discuss these computations in section VIII.B.2 of this preamble. The proposed geometric mean per diem costs were shown in Table 19 in section VIII.B.2. of the proposed rule.

    Comment: MedPAC supported the proposal to combine the existing Level 1 and Level 2 APCs into a single new APC for providing 3 or more services. MedPAC stated that the logic in payment rates is vital to having a meaningful payment system, and further added that payment rates that are higher for an APC that provides fewer of the same types of services as another APC is not reasonable. However, several commenters opposed the proposal.

    One commenter stated that the proposal would violate the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA, Pub. L. 110-

    343) because it limits mental health care to a cap of 3 or fewer treatment groups per day and reduces payments to below payments for comparable acute care services.

    One commenter urged CMS to monitor the effects of combining the existing two-tiered APCs into a single PHP APC, by provider type, to ensure that these changes do not cause or contribute to any unintended consequences such as reducing access to PHP services, or incentivizing reductions in services provided under the single APC.

    Response: We appreciate the commenters' support. We agree that it is reasonable to combine similar costs and services into the same APC payment. It is also worth noting that in CY 2014, when we requested public comments on possible future initiatives, we received several public comments requesting a single APC payment for PHP services (78 FR 75051).

    We also agree that it is possible that the combined PHP APCs could incentivize a reduction in services under a single APC, with PHP providers providing more days with only 3 services per day, but receiving an APC payment that is heavily weighted toward providing 4 or more services. We have monitored utilization of 3-service days over the years, and found that 3-service days are appropriately infrequent. In the updated CY 2015 claims data reviewed for this final rule with comment period, we found that 5 percent of CMHC paid days and 12 percent of hospital-based PHP paid days indicated that exactly 3 services were provided. In addition, given the intensive nature of partial hospitalization services and that PHP services are provided in lieu of inpatient hospitalization, we have a longstanding eligibility requirement that PHP beneficiaries require at least 20 hours per week in services, as evidenced in their plan of care. We discuss this requirement more fully in section VIII.B.1.b. of this final rule with comment period. We will be monitoring PHP claims beginning in January 2017, to determine whether PHP participants are receiving at least 20 hours per week in partial hospitalization services. In particular, we will monitor whether the frequency of providing 3-service days increases now that the payment incentive to provide 4 or more services per day, as opposed to 3 services per day, has been removed through combining the two PHP APCs. Payments for claims will not be affected at this time. Rather, our goal is to implement claims edits in the future to ensure that eligible Medicare beneficiaries are receiving the intense level of services that the statute and regulations require PHPs to provide. We are soliciting public comments on what facility types, treatment patterns, and other indicators are most important to monitor to ensure adequate provision of services.

    We disagree with the commenter who believed that combining the existing two-tiered PHP APCs would violate the provisions of the MHPAEA. The MHPAEA generally prevents group health plans and health insurance issuers that provide mental health or substance use disorder benefits from imposing less favorable benefit limitations on those benefits than on medical/surgical benefits. The mental health parity requirements of MHPAEA do not apply to Medicare. More information is available about the MHPAEA on the CMS Web site at: https://www.cms.gov/cciio/programs-and-initiatives/other-insurance-protections/mhpaea_factsheet.html.

    In addition, we believe that the commenter is misinterpreting the proposal in stating that combining the two-tiered PHP APCs, by provider type, limits outpatient mental health care to a cap of 3 or fewer group therapy treatments per day. The combined PHP APCs will generate payments for 3 or more services per day, not for 3 or fewer services provided per day. A different policy, the outpatient mental health treatment cap, limits the maximum payment for a day of individually billed outpatient mental health services to the highest hospital-based PHP APC per diem, and is derived from the most recent provider claims and cost data. It does not cap the number of services that can be provided to a beneficiary. Beneficiaries may receive as many services as are reasonable and necessary for their treatment. As noted in the April 7, 2000 OPPS final rule (65 FR 18454 through 18455), our rationale for implementing the mental health treatment cap was that the costs associated with administering a PHP represent the most resource-

    intensive of all outpatient mental health treatment services. Therefore, we do not believe it would be appropriate to pay more for a day of individually billed outpatient mental health services than what is paid for a day providing 3 or more partial hospitalization services. We also are concerned that a provider may disregard a patient's need for the intensive active treatment offered by a PHP and opt to bill for individual services. The geometric mean per diem payment amount represents the cost of an average day of partial hospitalization services (the data used to calculate the geometric mean per diem costs were derived from all of the PHP data and include the most and least intensive days). It would not be appropriate for a provider to obtain more payment through component billing.

    For CY 2017, the outpatient mental health treatment cap will be equal to the combined PHP APC 5863 geometric mean per diem rate for hospital-based PHPs. Because 88 percent of hospital-based PHP service days provide 4 or more services, the mental health cap is heavily weighted toward the cost of providing 4 or more services per day. This cap is applied to each day of outpatient mental health treatment provided outside of the PHP benefit.

    After consideration of the public comments we received, we are finalizing our proposal to replace existing CMHC APCs 5851 (Level 1 Partial Hospitalization (3 services) for CMHCs) and 5852 (Level 2 Partial Hospitalization (4 or more services) for CMHCs) with new CMHC APC 5853 (Partial Hospitalization (3 or More Services Per Day)), and to replace existing hospital-based PHP APCs 5861 (Level 1 Partial Hospitalization (3 services) for Hospital-Based PHPs) and 5862 (Level 2 Partial Hospitalization (4

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    or more services) for Hospital-Based PHPs) with new hospital-based PHP APC 5863 (Partial Hospitalization (3 or More Services Per Day)). We also are finalizing our proposal to combine the geometric mean per diem costs for the existing Level 1 and Level 2 PHP APCs for CMHCs (APC 5851 and APC 5852, respectively) to calculate the final geometric mean per diem costs for new PHP APC 5853 for CMHCs using only CY 2015 CMHC claims data and the most recent cost data, and to combine the geometric mean per diem costs for the existing Level 1 and Level 2 PHP APCs for hospital-based PHPs (APC 5861 and APC 5862, respectively) to calculate the final geometric mean per diem costs for new PHP APC 5863 for hospital-based PHPs using only CY 2015 hospital-based PHP claims data and the most recent cost data, for CY 2017 and subsequent years.

    As we previously noted, we believe that these finalized policies will best reflect actual geometric mean per diem costs in the future; provide more predictable geometric mean per diem costs, particularly given the small number of CMHCs; simplify and reduce administrative burden by only having one APC for each provider type; and generate more appropriate payments for these services by avoiding the cost inversions that hospital-based PHPs experienced in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70459), and which were noted in the CY 2017 OPPS/ASC proposed rule (81 FR 45670 through 45672), and occurred again in geometric mean per diem cost calculations for this final rule with comment period as described in section VIII.B.1.b. of this final rule with comment period. The CY 2017 final geometric mean per diem costs are shown in Table 41 in section VIII.B.2. of this final rule with comment period. As noted earlier, we are soliciting public comments on how we can best target monitoring efforts to ensure adequate provision of services by hospital-based PHPs and CMHC.

  191. Rationale for Changes in PHP APCs

    One of the primary reasons for our decision to replace the existing Level 1 and Level 2 PHP APCs with a single PHP APC, by provider type, is because the new PHP APCs will avoid any further issues with cost inversions and, therefore, generate more appropriate payment for the services provided by specific provider types. As previously stated, a cost inversion exists when the Level 1 PHP APC geometric mean per diem cost for providing exactly 3 services per day exceeds the Level 2 PHP APC geometric mean per diem cost for providing 4 or more services per day, and, as we noted in last year's final rule with comment period, we do not believe that it is reasonable or appropriate to pay more for fewer services provided per day and to pay less for more services provided per day (80 FR 70459 through 70460).

    To determine if the issue with hospital-based cost inversions that occurred in the data used for the CY 2016 OPPS/ASC final rule with comment period (80 FR 70459) would continue, we calculated the CY 2017 hospital-based PHP APC geometric mean per diem costs separately for Level 1 and Level 2 partial hospitalization services provided by hospital-based PHPs. After applying our established trims and exclusions, we determined that the CY 2017 Level 1 hospital-based PHP APC geometric mean per diem cost is $281.35 (proposed at $241.08) and the CY 2017 Level 2 hospital-based PHP APC geometric mean per diem cost is $210.50 (proposed at $187.06), which again demonstrates an inversion.

    For the CY 2017 OPPS/ASC proposed rule, we analyzed the CY 2015 hospital-based PHP claims data used for the CY 2017 proposed rule to determine the source of the inversion between the Level 1 and Level 2 hospital-based PHP APCs geometric mean per diem costs, and found that 13 hospital-based PHPs had high geometric mean per diem costs per day. Two of those providers account for 11.5 percent of Level 1 hospital-

    based PHP service days, but only 1.9 percent of Level 2 hospital-based PHP service days. Eleven of those 13 providers only reported costs for Level 1 hospital-based PHP service days, which increased the geometric mean per diem costs for the Level 1 hospital-based PHP APC. There also were 3 hospital-based PHP providers with very low geometric mean costs per day that accounted for approximately 28 percent of the Level 2 hospital-based PHP service days, which decreased the geometric mean per diem costs for the Level 2 hospital-based PHP APC.

    For this CY 2017 final rule with comment period, we found that the inversion of the Level 1 and Level 2 hospital-based PHP geometric mean per diem costs was caused by 3 providers with high-cost Level 1 service days, accounting for 16 percent of all Level 1 service days, and 1 low-

    cost provider accounting for 15 percent of all Level 2 service days. High volume providers heavily influence the cost data, and we believe that the high volume providers with very low Level 2 hospital-based PHP geometric mean per diem costs per day and high volume providers with very high Level 1 hospital-based PHP geometric mean per diem costs per day contributed to the inversion between the hospital-based PHP APCs Level 1 and Level 2 geometric mean per diem costs. In developing the policy to combine the Level 1 and Level 2 PHP APCs into one APC each for CMHCs and hospital-based providers, we reviewed the reasons why we structured the existing PHP APCs into a two-tiered payment distinguished by Level 1 and Level 2 services for both provider types in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68688 through 68693), to determine whether the rationales continued to be applicable. In the CY 2009 OPPS/ASC final rule with comment period, we referenced the CY 2008 OPPS/ASC final rule with comment period (72 FR 66672), which noted that a significant portion of PHP service days actually provided fewer than 3 services to Medicare beneficiaries. In our CY 2009 OPPS/ASC final rule with comment period, we noted that PHP service days that provide exactly 3 services should only occur in limited circumstances. We were concerned about paying providers a single per diem payment rate when a significant portion of the PHP service days provided 3 services, and believed it was appropriate to pay a higher rate for more intensive service days.

    We evaluated the frequency of claims reporting Level 1 and Level 2 PHP service days in Table 17 of the proposed rule to determine if a significant portion of PHP service days only provided exactly 3 services (81 FR 45671). Table 17 showed that the frequency of claims reporting PHP service days providing exactly 3 services (Level 1 services) has decreased greatly from 73 percent of CMHC service days in the CY 2009 rulemaking to 4 percent of CMHC service days in the CY 2017 proposed rule, and from 29 percent of hospital-based PHP service days in the CY 2009 rulemaking to 12 percent of hospital-based PHP service days in the CY 2017 proposed rule. We have updated this table, as shown below, to reflect updated CY 2015 claims data used for this final rule with comment period, and found that 5 percent of CMHC service days and 12 percent of hospital-based PHP service days have exactly 3 services provided. Level 1 PHP service days represent a small portion of PHP service days, particularly for CMHCs, as shown in Table 39 below. Based on this decline in the frequency of claims reporting Level 1 service days, we believe that the need for the PHP APC Level 1 and Level 2 payment tiers that was present in CY 2009 no longer exists.

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    The utilization data in Table 39 indicate that for the CY 2017 rulemaking year, the Level 2 CMHC service days and the hospital-based PHP Level 2 service days are 95 percent and 88 percent, respectively. Because Level 1 service days are now less common for both provider types, we believe it is no longer necessary to pay a separate rate when 4 or more services are provided compared to when only 3 services are provided. Our new PHP APCs 5853 and 5863 are based on cost data for 3 or more services per day (by provider type). Therefore, the combined cost data used to derive new PHP APCs 5853 and 5863 result in appropriate per diems based on costs for providing 3 or more services per day. We are sensitive to the fact that our payment policy may have influenced this change in service provision because providers were able to obtain higher payment for providing 4 or more services than for providing only 3 services. Therefore, as discussed earlier, we remain concerned that providers may inappropriately provide too few services to beneficiaries enrolled in PHPs, and we are working expeditiously to implement coding edits that will better monitor whether PHP providers are furnishing at least 20 hours of services per week, which eligible beneficiaries require.

    Table 39 below reflects the utilization data used for this CY 2017 final rule with comment period, using the updated CY 2015 claims data.

    Table 39--Utilization of PHP Level 1 Days (Providing Exactly 3 Services Per Day) and PHP Level 2 Days (Providing

    4 or More Services Per Day), From CY 2007 Through Final CY 2015 Claims Data

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

    Hospital-based Hospital-based

    Rulemaking year Claims year CMHC Level 1 CMHC Level 2 PHP Level 1 PHP Level 2

    days (%) days (%) days (%) days (%)

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

    CY 2009....................... CY 2007......... 73 27 29 71

    CY 2010....................... CY 2008......... 66 34 25 75

    CY 2011....................... CY 2009......... 2 98 18 82

    CY 2012....................... CY 2010......... 2 98 19 81

    CY 2013....................... CY 2011......... 3 97 11 89

    CY 2014....................... CY 2012......... 4 96 11 89

    CY 2015....................... CY 2013......... 6 94 11 89

    CY 2016....................... CY 2014......... 5 95 11 89

    CY 2017....................... CY 2015......... 5 95 12 88

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

    When we implemented the PHP APCs Level 1 and Level 2 payment tiers in our CY 2009 rulemaking, we noted that we wanted to provide PHPs with flexibility in scheduling patients. Both the industry and CMS recognized that there may be limited circumstances when it is appropriate for PHPs to receive payment for days when exactly 3 units of service are provided (73 FR 68688 through 68689). Allowing PHPs to receive payment for a Level 1 service day where exactly 3 services are provided gives PHPs some flexibility in scheduling their patients. Our decision to replace the existing two-tiered PHP APCs with new PHP APCs 5853 and 5863 will provide payment for providing 3 or more services per day by CMHCs and hospital-based PHPs, respectively. Therefore, this flexibility in scheduling will remain.

    Another primary reason for our decision to replace the Level 1 and Level 2 PHP APCs with a single PHP APC, by provider type, is the decrease in the number of PHPs, particularly CMHCs. With a small number of providers, data from large providers with a high percentage of all PHP service days and unusually high or low geometric mean costs per day will have a more pronounced effect on the PHP APCs geometric mean per diem costs, skewing the costs up or down. That effect would be magnified by continuing to split the geometric mean per diem costs further by distinguishing Level 1 and Level 2 PHP services. Creating a single PHP APC for each provider type providing 3 or more partial hospitalization services per day will reduce these cost fluctuations and provide more stability in the PHP APC geometric mean per diem costs.

    We also note that our decision to replace the existing Level 1 and Level 2 PHP APCs, by provider type, with a single PHP APC for each provider type is permissible under the applicable statute and regulatory provisions. Section 1833(t)(2)(B) of the Act 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. Moreover, the language that follows paragraph (t)(2) of section 1833 of the Act provides that, for purposes of subparagraph (B), items and services within a group shall not be treated as comparable with respect to use of resources if the highest mean cost for an item or service is more than two times greater than the lowest mean cost for an item or service within the group, with some exceptions. Section 419.31 of our regulations implements this statutory provision, providing that CMS classify outpatient services and procedures that are comparable clinically and in terms of resource use into APC groups. We believe our policy to replace the existing Level 1 and Level 2 PHP APCs for both provider types with a single PHP APC, by provider type, is supported by the statute and regulations and will continue to pay for partial hospitalization services appropriately based upon actual provider costs.

    Both of the existing Level 1 and Level 2 PHP APCs are comprised of services described by the same HCPCS codes. Therefore, the types of services provided under the two payment tiers are the same. The difference is in the quantity of the services provided, where the Level 1 PHP APCs provide for payment for providing exactly 3 services per day, while the Level 2 PHP APCs provide for payment for providing 4 or more services per day. Because the difference in the Level 1 and the Level 2 PHP APCs is in the quantity of the services provided, we expect that the resource use (that is, the geometric mean per diem cost) for providing partial hospitalization services under Level 1 will represent approximately 75 percent or less of the resource use for providing partial hospitalization services under Level 2, by provider type. Table 18 of the proposed rule showed a clear trend for hospital-based PHPs, where the geometric mean per diem costs for providing Level 1 partial hospitalization services have approached the geometric mean per

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    diem costs for providing Level 2 partial hospitalization services, until they exceed the geometric mean per diem costs for providing Level 2 partial hospitalization services beginning in CY 2016. As the percentages in Table 18 of the proposed rule approach 100 percent, the Level 1 and the Level 2 PHP APC geometric mean per diem costs become closer to each other, demonstrating similar resource use. The trend is less clear for CMHCs, but the data still show the cost difference between the two tiers narrowing, except in CY 2016. We are not sure why the cost difference is wider among CMHCs in CY 2016. In the CY 2017 OPPS/ASC proposed rule, we welcomed public comments that could help explain the difference. However, we did not receive any public comments on this issue.

    The data trends reflected in Table 40 below, which is an update of Table 18 in the proposed rule based on final CY 2015 claims data for this final rule with comment period, continue to support the proposals we made, and our decision to change from a two-tiered APC system for CMHCs and for hospital-based PHPs to a combined APC for providing 3 or more services per day for each provider type.

    Table 40--Trends in Level 1 Per Diem Costs as a Percentage of Level 2 Per Diem Costs

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

    CY 2013 (%) CY 2014 (%) CY 2015 (%) CY 2016 (%) CY 2017 * (%)

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

    CMHCs; Level 1 PHP APC per diem 77.5 88.6 84.4 66.1 94.4

    costs/Level 2 PHP APC per diem

    costs..........................

    Hospital-based PHPs; Level 1 PHP 79.2 89.0 91.6 * 110.0 ** 133.7

    APC per diem costs/Level 2 PHP

    APC per diem costs.............

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

    * Based on CY 2015 final claims data.

    ** Cost inversions occurred with the Level 1 PHP APC per diem costs exceeding the Level 2 PHP APC per diem

    costs.

    We evaluated the provision of more costly individual therapy in our CY 2017 analyses to determine if there were differences in its provision for PHP APC Level 1 service days compared to PHP APC Level 2 service days, by provider type, because this could affect our expected difference in resource use (that is, geometric mean per diem costs) between the two payment tiers. Using the updated CY 2015 claims data for this final rule with comment period, we found that individual therapy was provided less frequently on days where exactly 3 services were provided by hospital-based PHPs (in 4.0 percent of PHP APC Level 1 service days and in 6.2 percent of PHP APC Level 2 service days). However, we found that individual therapy was provided more frequently under the Level 1 CMHC service days than under the Level 2 CMHC service days (7.9 percent versus 4.4 percent). The greater frequency of CMHCs' providing more costly individual therapy under Level 1 PHP service days should increase resource use for these service days, narrowing the cost difference between Level 1 and Level 2 CMHC service days. This result reflects the updated claims data used for this final rule with comment period.

    As we described earlier, the services provided under the Level 1 and Level 2 PHP APC payment tiers are comparable clinically and in terms of resource use. Therefore, based on the authority provided under section 1833(t)(2)(B) of the Act and our regulations at Sec. 419.31(a)(1), and to mitigate the policy concerns noted above, as we proposed, we are replacing the Level 1 and Level 2 PHP APCs, for each provider type, with a single PHP APC by provider type for CY 2017 and subsequent years.

    Our decision to replace the existing Level 1 and Level 2 PHP APCs for both provider types with a single PHP APC, by provider type, is designed to continue to pay for partial hospitalization services appropriately based upon actual provider costs. We believe that section 1833(t)(2)(B) of the Act and our regulations at Sec. 419.31(a)(1) provide the Secretary with the authority to classify services that are comparable clinically and in terms of resource use under a single APC grouping, which is the basis for our decision to replace the existing Level 1 and Level 2 PHP APCs for CMHCs and hospital-based PHPs for providing partial hospitalization services with a single PHP APC for each specific provider type. In addition, we believe that our decision to combine the PHP APCs two-tiered payment structure by provider type will more appropriately pay providers for partial hospitalization services provided to Medicare beneficiaries and avoid cost inversions in the future. Our decision to combine the PHP APC payment tiers, by provider type, also will provide more predictable geometric mean per diem costs, particularly given the small number of CMHCs and the cost inversions that hospital-based PHPs have experienced. The cost inversions between PHP APC Level 1 and Level 2 service days in the hospital-based PHP claims data and the small number of CMHCs are the two primary reasons for our policy to replace the two-tiered PHP APCs with a single PHP APC for each provider type. The small percentage of all PHP service days for partial hospitalization services provided under the Level 1 PHP APCs further supports our policy to replace the two-tiered PHP APCs with a single PHP APC for each provider type. As noted previously, we believe that the need for the PHP APC Level 1 and Level 2 payment tiers that was present in CY 2009 no longer exists.

    In summary, we are creating new CMHC APC 5853 to pay CMHCs for partial hospitalization services provided to Medicare beneficiaries for providing 3 or more services per PHP service day to replace existing CMHC APCs 5851 and 5852 for CY 2017 and subsequent years. We also are creating new hospital-based PHP APC 5863 to pay hospital-based PHPs for partial hospitalization services provided to Medicare beneficiaries for providing 3 or more services per PHP service day to replace existing hospital-based PHP APCs 5861 and 5862 for CY 2017 and subsequent years. We discuss the final geometric mean per diem cost for new CMHC APC 5853 and the final geometric mean per diem cost for new hospital-based PHP APC 5863 in section VIII.B.2. of this final rule with comment period.

    By finalizing these proposals, we will pay both CMHCs and hospital-

    based PHP providers the same payment rate for providing 3 partial hospitalization services in a single service day as is paid for providing 4 or more services in a single service day, by the specific provider type. We remind providers that because partial hospitalization services are intensive outpatient services, our regulations at Sec. Sec. 410.43(a)(3) and (c)(1) require that PHP beneficiaries need at least 20 hours of services each week and that PHPs furnish services in accordance with the plan of care

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    reflecting that need. We reiterate that this 20 hour per week requirement is a minimum requirement, and have noted in multiple prior OPPS/ASC final rules with comment periods that a typical PHP would include 5 to 6 hours per day (70 FR 68548, 71 FR 67999, 72 FR 66671, and 73 FR 68687). We want providers to continue to have flexibility in providing PHP services, and we will continue to monitor the utilization of providing 3 services per service day for those limited circumstances when a 3-service day is appropriate. We are considering multiple options for enhancing monitoring of providers to ensure that they furnish appropriate services under PHPs which, according to our regulations at Sec. 410.43(c), are intended for patients who require a minimum of 20 hours per week of therapeutic services as evidenced in their plan of care, and which, according to our regulations at Sec. 424.24(e), require that the services be furnished in accordance with a plan of care that sets forth the frequency and duration of the services, taking into account a reasonable expectation of improvement in the patient's condition. We will communicate how we intend to undertake such enhanced monitoring in subregulatory guidance within the next year.

    Finally, we are concerned about the low frequency of providing individual therapy, which we noted earlier in this section, and we will be monitoring its provision. The PHP is intensive by nature, and PHP services are provided in lieu of inpatient hospitalization. Furthermore, section 1861(ff) of the Act describes the items and services to be included in a PHP, including individual and group therapy. Therefore, we believe that appropriate treatment for PHP patients includes individual therapy. We encourage providers to examine their provision of individual therapy to PHP patients to ensure that patients are receiving all of the services that they may need.

    Comment: One commenter believed that the combined PHP APCs do not appear to have included all of the data from the original Level 1 and Level 2 PHP APCs, and would result in a payment reduction because of implementation of the new policy.

    Response: As described earlier, the combined PHP APCs' geometric mean costs used available CY 2015 claims data and were calculated by following the existing methodology for ratesetting, except that the geometric mean per diem costs for each provider type were calculated for days providing 3 or more partial hospitalization services, rather than calculated separately for days with exactly 3 services, and for days with 4 or more services. The combined PHP APCs' geometric mean costs are similar to a weighted average of actual provider costs. Therefore, the total payments resulting from the combined PHP APC geometric mean per diem cost, by provider type, would be roughly equal to the total payments resulting from the two-tiered PHP APC per diem costs, by provider type. As such, combining the PHP APCs geometric mean per diem costs does not reduce total costs or total payments by provider type. We refer readers to section VIII.B.2. for more detailed specifics on the CY 2017 PHP geometric mean per diem cost calculations.

    Comment: A few commenters stated that the current two-tiered payment structure fostered a continuum of care, and contended that CMS' current policy of distinguishing 3 services per day and 4 or more services per day offers the flexibility of intermediate levels of care between outpatient, office-based visits, and inpatient psychiatric care, and further are differentiated from each other by the provider community as ``Intensive Outpatient Programs'' (IOPs) and PHPs, respectively. The commenters believed that, consequently, replacing the two-tiered payment methodology with a single APC and calculating the geometric mean per diem costs for 3 or more services per day would not recognize the importance and need for the continuum of care.

    Response: We are concerned about the potential misuse of the PHP benefit. A few commenters indicated that some in the provider community recognize an IOP level of care. However, there is no Medicare benefit category for IOPs. Therefore, we cannot recognize or pay for what providers term ``IOPs'' using the PHP benefit. If the individual services that make up these IOPs meet all applicable requirements for non-PHP outpatient services, including coding definitions, and are reasonable and necessary, then conceivably these services could be billed individually under the OPPS. IOPs are typically not only less intensive than PHPs, but, as previously noted, are also a nonexistent Medicare category. In equating IOPs with the statutorily mandated PHP benefit, we believe commenters misunderstood the purpose of the PHP benefit. Specifically, a PHP requires physician certification that the individual would need inpatient psychiatric care if the partial hospitalization services were not provided, as described in Sec. 424.24(e) of the regulations. Furthermore, as required by section 1861(ff) of the Act and by Sec. 424.24(e) of the regulations, a PHP must be prescribed by a physician, and the services provided under the physician's care must be certified and recertified as being reasonable and necessary and under a plan of treatment that sets forth the duration and frequency of services, taking into account a reasonable expectation of improvement in the patient's condition. If a beneficiary is certified for PHP but provided services that meet some lesser level of care, this action could be some indication of fraud. We plan to work with the MACs in order to better educate providers on PHP requirements.

    Finally, combining the PHP APCs does not affect the continuum of care available to Medicare beneficiaries seeking treatment for mental health issues. Our decision to combine the PHP APCs for Level 1 and Level 2 services into a single APC for 3 or more services per day, by provider type, is simply a change in how we pay for PHP services, and does not affect access to mental health care or the ways that non-PHP patients may receive mental health services.

    Comment: One commenter stated that the requirement for a minimum of 20 hours per week of therapeutic services conflicts with accepted treatment parameters and other managed care options, where attendance and minimum hours are not required. The commenter believed that the 20 hour per week minimum imposes a burden on older patients, is not necessary to receive a positive outcome, provides no flexibility, would result in a patient attending the program 5 days a week and, therefore, creates a barrier to providing the most appropriate treatment for a patient's needs.

    Response: When Congress established the PHP benefit in statute, it described a PHP as an intensive program that is provided in lieu of inpatient treatment (we refer readers to sections 1835(a)(2)(F), 1861(ff)(2), and 1861(ff)(3)(A) of the Act). Congress provided discretion to the Secretary to determine the frequency of PHP services. In our CY 2009 rulemaking, we promulgated regulations to establish an eligibility requirement at 42 CFR 410.43(c)(1), which states that PHPs are intended for patients who require a minimum of 20 hours per week of therapeutic services as evidenced in their plan of care. Under Sec. 410.43(a)(3), we also require PHP services to be furnished in accordance with the plan of care and a physician certification.

    Because a PHP is intended for patients who would otherwise be in an inpatient psychiatric setting, and who require an intensive level of services of at least 20 hours per week, it is not an

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    appropriate program for patients who need less intensive mental health services. Medicare provides a number of ways in which patients can receive covered mental health services, which range from inpatient psychiatric care, to PHPs, to other outpatient care provided by physicians or other health professionals in a variety of settings. Our Medicare Benefit Policy Manual (IOM 100-02, Chapter 6) states that PHP patients must be able to cognitively and emotionally participate in the active treatment process, and to tolerate the intensity of a PHP program (we refer readers to section 70.3, Chapter 6 of IOM 100-02, which is available via the Internet on the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c06.pdf). It is possible that mental health treatment provided outside of the PHP benefit may be a more appropriate venue for some patients for whom the 20 hour per week minimum requirement is deemed to be burdensome.

    We are concerned that some PHPs are admitting patients who do not meet the eligibility requirements required by the statute. Many of these PHPs are not providing at least 20 hours per week of services to their patients. As such, in March 2016, we issued a MedLearn Special Edition article to notify PHPs of edits to the claims processing system, which would begin July 1, 2016, and would systematically enforce our existing regulations related to the 20-hour per week minimum requirement. However, in early July 2016, we inactivated the edits, effective July 1, 2016, so that we could consider adding more flexibility to the editing process. (We refer readers to MedLearn Matters SE1607, which is available via the Internet on the CMS Web site at: https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE1607.pdf.)

    In addition, we are considering proposing clarifications to our regulations in our CY 2018 rulemaking to more strongly tie a beneficiary's receipt of at least 20 hours per week of partial hospitalization services under a PHP to payment for those services. We are informing hospital-based PHPs and CMHCs so that they can review their admission procedures, and ensure that the patients they serve are truly eligible for the PHP benefit. In this final rule with comment period, we are requesting public comments on the advantages, disadvantages, and potential challenges of strengthening the tie between payment and furnishing at least 20 hours of services per week to eligible beneficiaries, for consideration in our development of the CY 2018 rulemaking. Individuals should submit their comments as indicated under the DATES section of this final rule with comment period. Finally, as noted previously in this section, we will monitor PHP claims, beginning in January 2017, to determine whether PHP beneficiaries are receiving at least 20 hours per week of partial hospitalization services.

    PHP services can be extremely beneficial to eligible patients and, at the same time, can provide a more cost-effective method for providing care outside of an inpatient setting. We are working to protect vulnerable beneficiaries with mental health conditions by helping to ensure that eligible beneficiaries receive the level of care that is appropriate to the PHP setting.

  192. Alternatives Considered

    As we discussed in the CY 2017 OPPS/ASC proposed rule (81 FR 45672 through 45673), we considered several alternatives to replacing the Level 1 and Level 2 PHP APCs with a single new APC for each PHP provider type. We investigated whether we could maintain the Level 1 and Level 2 PHP APCs if the PHP APC per diem costs were based upon unit costs. However, the same data issues that affected per diem costs also affected unit costs. The hospital-based unit cost data also were inverted such that a Level 1 service day would be more costly than a Level 2 service day. As we have previously noted, we do not believe that it is appropriate to pay more for providing Level 1 services than for providing Level 2 services because only 3 services are provided during Level 1 service days and 4 or more services are provided during Level 2 service days.

    We also considered continuing the two-tiered PHP APC payment structure by provider type, and addressing future cost inversions as they arise. Under this alternative, we could have proposed to use a default methodology for handling cost inversions by only combining the two-tiered PHP APC structure for the provider type with inverted data, and only for the affected calendar year. However, we believe that it could be confusing if one provider type was paid for PHP services based on a two-tiered payment structure, while the other provider type was paid based on a single APC grouping. We also believe that providers would prefer the predictability of knowing whether they would be paid using a single PHP APC or using two-tiered PHP APCs for Level 1 and Level 2 services.

    Another alternative for handling cost inversions could be to apply an equitable adjustment. However, the level of adjustment required would vary depending on the degree of the inversion, which also could fluctuate from year to year. Again, we believe, and providers and their representative associations have informed us, that providers would prefer the predictability afforded by avoiding cost inversions altogether, rather than being subject to an ad hoc adjustment as cost inversions arise.

    We considered whether we should adjust our data trims, but we determined that the cause of the cost inversion was not due to providers with aberrantly high CCRs or costs per day. Rather, we believe that the cause of the cost inversion was largely the influence of high volume providers with high (but not inappropriately high) Level 1 service day costs and low (but not inappropriately low) Level 2 service day costs in the CY 2015 hospital-based PHP claims data used for the CY 2017 rulemaking. This suggested that adjusting data trims may not be an effective method for resolving the inversion. Nevertheless, we reconsidered our analysis of the preliminary CY 2015 claims data for hospital-based PHPs by testing a stricter trim on hospital-based PHP data using the published upper limit CCR that hospitals use for calculating outliers rather than the existing CCR>5 trim. This test of a stricter CCR trim did not remove the inversion, and as a result, we did not propose to change the existing CCR>5 trim on hospital-based PHP service days for our CY 2017 ratesetting.

    Comment: One commenter recommended that CMS maintain the two-tiered system, but combine the APCs for CMHCs and hospital-based PHPs. The commenter noted that CMHCs and hospital-based PHPs provide the exact same services, but are paid differently, although the commenter acknowledged that hospital-based PHPs have higher costs, largely due to overhead allocation. The commenter believed that the APCs distinguished by provider type ``punish'' rather than reward CMHCs for being more cost-effective than hospital-based PHPs. The commenter believed that freestanding CMHCs should not be paid less than hospital-based PHPs, and noted that, in 2015, MedPAC recommended that Congress decrease or eliminate the payment differences between hospital outpatient departments and physician offices. The commenter stated that setting CMHCs' payment rates based on the small

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    number of remaining CMHCs does not reflect the actual cost of providing these services.

    Response: The OPPS system pays for outpatient services, including partial hospitalization services. This system bases payment on the geometric mean per diem costs of providing services using provider data from claims and cost reports. We calculate the PHP APC geometric mean per diem costs based on the data provided for each type of provider to determine payment for these services. We believe that this system provides appropriate payment for partial hospitalization services based on actual provider costs. The final PHP APC geometric mean per diem costs for CY 2017 reflect the costs of what providers expend to maintain such programs, as reported on their claims and cost reports.

    We believe the commenter has misunderstood MedPAC's recommendation in its March 2015 Report to Congress. MedPAC recommended that payment rates be adjusted for more costly hospital outpatient departments so that they more closely align with those of less costly freestanding physician offices providing the same services (Medicare Payment Advisory Commission Report to the Congress: Medicare Payment Policy, Chapter 3, ``Hospital Inpatient and Outpatient Services,'' page 51, March 2015). Congress has since addressed a portion of this recommendation in section 603 of the Bipartisan Budget Act of 2015. We refer readers to section X.A. of this final rule with comment period for a full discussion of the provisions of section 603. The provisions of section 603 do not apply to CMHCs because CMHCs are not a department of a hospital. The difference in payment between CMHCs and hospital-

    based PHPs is based upon differences in resource use (or costs). When Congress required the Secretary to implement an outpatient prospective payment system, it required that this payment system group clinically similar covered services with respect to resource use (section 1833(t)(2) of the Act). Because CMHCs and hospital-based PHPs resource uses are different, these two provider types are paid under different APCs, based on their actual resource use.

    Because the cost of providing partial hospitalization services differs significantly by site of service, we established different PHP payment rates for hospital-based PHPs and CMHCs in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71991 through 71994). However, we allowed a 2-year transition to CMHC payment rates based solely on CMHC data. With respect to the continued use of PHP APC geometric mean per diem costs for determining payment rates by provider type (rather than median costs, which commenters mistakenly referenced), we refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68406 through 68412) for a discussion of the implementation of this policy. The resulting payment rates reflect the geometric mean cost of what providers expend to maintain such programs, based on data provided by CMHCs and hospital-based PHPs, which we believe is an improvement over the two-tiered methodology calculated based on median costs using only hospital-based data.

    Comment: One commenter suggested that CMS consider paying PHPs using a quality-based payment system, and that CMS use value-based purchasing.

    Response: We responded to a similar public comment in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70462) and refer readers to a summary of that comment and our response. To reiterate, sections 1833(t)(2) and 1833(t)(9) of the Act set forth the requirements for establishing and adjusting OPPS payment rates, which include PHP payment 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 Readmission; (2) Group Therapy; and (3) No Individual Therapy. We also refer readers to the CY 2015 OPPS/ASC final rule with comment period (79 FR 66957 through 66958) 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.

    2. Development of the PHP APC Geometric Mean Per Diem Costs and Payment Rates

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45667 through 45678), for CY 2017 and subsequent years, we proposed to follow the detailed PHP ratesetting methodology described in section VIII.B.2. of the CY 2016 OPPS/ASC final rule with comment period (80 FR 70462 through 70466) to determine the PHP APCs' geometric mean per diem costs and to calculate the payment rates for the new single hospital-based PHP APC and CMHC APC. However, as discussed in section VIII.B.1. of this CY 2017 final rule with comment period, in support of our CY 2017 policies to establish single PHP APCs for hospital-based PHPs and CMHCs, we also are combining the geometric mean per diem costs for the two existing hospital-based PHP APCs to calculate a geometric mean per diem cost for new hospital-based PHP APC 5863. Currently, hospital-based PHP service days with exactly 3 service units (based on allowable PHP HCPCS codes) are assigned to Level 1 PHP APC 5861, and hospital-based PHP service days with 4 or more service units (based on allowable PHP HCPCS codes) are assigned to Level 2 PHP APC 5862. Under our CY 2017 proposal, instead of separating the service days between these two APCs, we proposed to combine the service days so that hospital-based PHP service days that provide 3 or more service units per day (based on allowable PHP HCPCS codes) are assigned to new hospital-based PHP APC 5863. We then proposed to continue to follow the existing methodology described in section VIII.B.2.e. of the CY 2016 OPPS/ASC final rule with comment period (80 FR 70465 through 70466) to its end to calculate the geometric mean per diem cost for new hospital-based PHP APC 5863. Therefore, the geometric mean per diem cost for new hospital-based PHP APC 5863 would be based upon actual hospital-based PHP claims and costs for PHP service days providing 3 or more services.

    Similarly, we proposed to combine the geometric mean per diem costs for the two existing CMHC APCs to calculate a geometric mean per diem cost for new CMHC APC 5853. Currently, CMHC service days with exactly 3 service units (based on allowable PHP HCPCS codes) are assigned to Level 1 CMHC APC 5851, and CMHC service days with 4 or more service units (based on allowable PHP HCPCS codes) are assigned to Level 2 CMHC APC 5852. Under our CY 2017 proposal, instead of separating the service days between these two APCs, we proposed to combine the service days so that CMHC service days that provide 3 or more service units (based on allowable PHP HCPCS codes) are assigned to proposed new CMHC APC 5853. We then proposed to continue to follow the existing PHP ratesetting methodology described in section VIII.B.2.e. of the CY 2016 OPPS/ASC final rule with comment period (80 FR 70465 through 70466) to its end to

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    calculate the geometric mean per diem cost for new CMHC APC 5853. Therefore, the geometric mean per diem cost for new CMHC APC 5853 would be based upon actual CMHC claims and costs for CMHC service days providing 3 or more services.

    To prevent confusion, we referred to the per diem costs listed in Table 19 of the proposed rule as the proposed CMHC or hospital-based PHP APC per diem costs or the proposed CMHC or hospital-based PHP APC geometric mean per diem costs. We referred to the CMHC or hospital-

    based PHP per diem payment rates listed in Addendum A to the proposed rule (which is available via the Internet on the CMS Web site) as the proposed CMHC or hospital-based PHP APC per diem payment rates or the proposed CMHC or hospital-based PHP APC geometric mean per diem payment rates. The CMHC or hospital-based PHP APC per diem costs are the provider-specific costs derived from the most recent claims and cost data. The CMHC or hospital-based PHP APC per diem payment rates are the national unadjusted payment rates calculated from the CMHC or hospital-

    based PHP APC per diem costs, after applying the OPPS budget neutrality adjustments described in section II.A.4. of this final rule with comment period.

    We proposed to apply our established methodologies in developing the geometric mean per diem costs and payment rates under this proposal, including the application of a 2 standard deviation trim on costs per day for CMHCs and a CCR>5 hospital service day trim for hospital-based PHP providers. These two trims were finalized in our CY 2016 OPPS/ASC final rule with comment period (80 FR 70455 through 70462) for CY 2016 and subsequent years.

  193. CMHC Data Preparation: Data Trims, Exclusions, and CCR Adjustments

    For the proposed rule, prior to calculating the proposed geometric mean per diem cost for new CMHC APC 5853, we prepared the data by first applying trims and data exclusions, and assessing CCRs as described in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70463 through 70465), so that ratesetting is not skewed by providers with extreme data. Under the 2 standard deviation trim policy, we excluded any data from a CMHC for ratesetting purposes when the CMHC's geometric mean cost per day is more than 2 standard deviations from the geometric mean cost per day for all CMHCs. By applying this trim for CY 2017 ratesetting, in the proposed rule, three CMHCs with geometric mean per diem costs per day below the trim's lower limit of $42.83 were excluded from the proposed ratesetting for CY 2017 (81 FR 45674). We also applied the OPPS 3 standard deviation trim on CCRs to exclude any data from CMHCs with CCRs above or below this range. This trim resulted in the exclusion of one CMHC with a very low CCR of 0.001. Both of these standard deviation trims removed four providers from ratesetting whose data would have skewed the calculated proposed geometric mean per diem cost downward.

    In accordance with our PHP ratesetting methodology, in the proposed rule, we also removed service days with no wage index values because we use the wage index data to remove the effects of geographic variation in costs prior to APC geometric mean per diem cost calculation (80 FR 70465). In our CY 2017 proposed rule ratesetting, one CMHC was excluded because it was missing wage index data for all of its service days.

    In addition to our trims and data exclusions, before determining the PHP APC geometric mean per diem costs, we also assess CCRs (80 FR 70463). Our longstanding PHP OPPS ratesetting methodology defaults any CMHC CCR>1 to the statewide hospital ancillary CCR (80 FR 70457). In our CY 2017 proposed rule ratesetting, we identified one CMHC that had a CCR>1. This CMHC's CCR was 1.185 and was defaulted to its appropriate statewide hospital ancillary CCR for CY 2017 ratesetting purposes.

    These data preparation steps adjusted the CCR for 1 CMHC and excluded 5 CMHCs, resulting in the inclusion of a total of 46 CMHCs in our CY 2017 proposed rule ratesetting modeling, and the removal of 643 CMHC claims from the 17,033 total CMHC claims used. We believe that excluding providers with extremely low geometric mean costs per day or extremely low CCRs protects CMHCs from having that data inappropriately skew the calculation of the CMHC APC geometric mean per diem cost. Moreover, we believe that these trims, exclusions, and adjustments help prevent inappropriate fluctuations in the PHP APC geometric mean per diem payment rates.

    For the CMHC final rule results, we used updated CY 2015 final claims data. The final CY 2015 Outpatient Standard Analytic File used for CY 2017 ratesetting showed that 52 CMHCs had claims in CY 2015. As described in the discussion of the PHP ratesetting process in the CY 2016 final rule (80 FR 70462 through 70467), in section II.A. of this final rule with comment period, and in the OPPS Claims Accounting Document under supporting documentation ``Downloads'' for the CY 2017 OPPS/ASC final rule with comment period (available online at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html), in developing the claims eligible for ratesetting we excluded CMHCs with outlier overall CCRs (1 CMHC). After making this exclusion, our updated CY 2015 claims data showed 51 CMHCs with claims that were eligible for ratesetting. We then applied our ratesetting trims and exclusions. Our 2 standard deviation trim policy excluded 3 CMHCs with geometric mean per diem costs per day below the trim's lower limit of $39.77, and 1 CMHC with geometric mean per diem costs per day above the trim's upper limit of $403.50. This 2 standard deviation trim removed 4 CMHCs from our final rule ratesetting whose data would have skewed the calculation of the final geometric mean per diem cost. For this final rule with comment period, we also applied the OPPS 3 standard deviation trim on CCRs to exclude any data from CMHCs with CCRs above or below this range, but no CMHCs were excluded as a result.

    In accordance with our PHP ratesetting methodology, we also removed service days with no wage index values because we use the wage index data to remove the effects of geographic variation in costs prior to APC geometric mean per diem cost calculation (80 FR 70465). In this CY 2017 final rule ratesetting, 2 CMHCs were excluded because they were missing wage index data for all of their service days.

    In addition to our trims and data exclusions, before determining the PHP APC geometric mean per diem costs, we also assess CCRs (80 FR 70463 through 70464). Our longstanding PHP OPPS ratesetting methodology defaults any CMHC CCR>1 to the statewide hospital ancillary CCR (80 FR 70457). In this CY 2017 final rule ratesetting, we identified 1 CMHC that had a CCR>1. This CMHC's CCR was 1.185 and was defaulted to its appropriate statewide hospital ancillary CCR for CY 2017 final rule ratesetting purposes.

    These data preparation steps adjusted the CCR for 1 CMHC and excluded 6 CMHCs, resulting in the inclusion of a total of 45 CMHCs in our CY 2017 final rule ratesetting modeling, and the removal of 2,395 CMHC claims from the 18,990 total CMHC claims used.

    After applying all of the above trims, exclusions, or adjustments, the geometric mean per diem cost for all

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    CMHCs for providing 3 or more services per day (new CMHC APC 5853) is $124.92 (compared to the proposed $135.30).

  194. Hospital-Based PHP Data Preparation: Data Trims and Exclusions

    For the CY 2017 proposed rule, we followed a data preparation process for hospital-based PHP providers that is similar to that used for CMHCs by applying trims and data exclusions as described in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70463 through 70465) so that our ratesetting is not skewed by providers with extreme data. Before any trimming or exclusions, in the proposed rule there were 404 hospital-based PHP providers in the claims data. For hospital-

    based PHP providers, we applied a trim on hospital service days when the CCR was greater than 5 at the cost center level. The CCR>5 hospital service day trim removed hospital-based PHP service days that use a CCR>5 to calculate costs for at least one of their component services. Unlike the 2 standard deviation trim, which excluded CMHC providers that failed the trim, the CCR>5 trim excluded any hospital-

    based PHP service day where any of the services provided on that day are associated with a CCR>5. Applying this trim removed service days from 8 hospital-based PHP providers with CCRs ranging from 5.8763 to 19.9996 from our proposed rule ratesetting. However, all of the service days for these eight hospital-based PHP providers had at least one service associated with a CCR>5, so the trim removed these providers entirely from our proposed rule ratesetting. In addition, the OPPS 3 standard deviation trim on costs per day removed four providers from proposed rule ratesetting.

    Finally, in our proposed rule ratesetting, we excluded 13 hospital-

    based PHP providers that reported zero daily costs on their claims, in accordance with our proposed rule PHP ratesetting policy (80 FR 70465). Therefore, we excluded a total of 25 hospital-based PHP providers, resulting in 379 hospital-based PHP providers in the data used for proposed rule ratesetting. After completing these data preparation steps, we calculated the geometric mean per diem cost for proposed new hospital-based PHP APC 5863 for hospital-based PHP services. The proposed geometric mean per diem cost for hospital-based PHP providers that provide 3 or more services per service day (new hospital-based PHP APC 5863) was $192.57.

    The proposed CY 2017 PHP APC geometric mean per diem costs for the new CMHC and hospital-based PHP APCs were shown in Table 19 of the proposed rule (81 FR 45674). The proposed PHP APC payment rates were included in Addendum A to the proposed rule (which is available via the Internet on the CMS Web site).

    For this final rule with comment period, for hospital-based PHPs, we used updated CY 2015 final claims data. The final CY 2015 Outpatient Standard Analytic File showed that 482 hospital-based PHPs had claims in CY 2015. As described in the discussion of the PHP ratesetting process in the CY 2016 final rule with comment period (80 FR 70462 through 70467), in section II.A. of this final rule with comment period, and in the OPPS Claims Accounting Document under supporting documentation ``Downloads'' for the CY 2017 OPPS/ASC final rule with comment period (available online at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html), in developing the claims eligible for ratesetting, we excluded providers paid outside of the OPPS (39 hospital-based PHPs), providers without cost report data (9 hospital-based PHPs), and providers with outlier overall CCRs (14 hospital-based PHPs). After making those exclusions, the updated CY 2015 claims data for this final rule with comment period showed 420 hospital-based PHP providers that were eligible for ratesetting. We then applied our ratesetting trims and exclusions.

    For hospital-based PHP providers, for this final rule with comment period, we applied a trim on hospital service days when the CCR was greater than 5 at the cost center level. Applying this trim removed service days from 8 hospital-based PHP providers with CCRs ranging from 5.411 to 17.603. However, all of the service days for these 8 hospital-

    based PHP providers had at least one service associated with a CCR>5, so the trim removed these providers entirely from ratesetting. Also, the OPPS 3 standard deviation trim on costs per day removed 1 provider with costs per day over $4,000 from this final rule ratesetting.

    For this final rule with comment period, we also excluded 15 hospital-based PHP providers that reported zero daily costs on all of their claims, in accordance with our PHP ratesetting policy (80 FR 70465). Finally, we excluded 1 hospital-based PHP without valid wage index data. Therefore, we excluded a total of 25 hospital-based PHP providers, resulting in 395 hospital-based PHP providers in the data used for ratesetting. After completing these data preparation steps, we calculated the geometric mean per diem cost for new hospital-based PHP APC 5863 for hospital-based PHP services. The final geometric mean per diem cost for hospital-based PHP providers that provide 3 or more services per service day (new hospital-based PHP APC 5863) is $213.14 (compared to the proposed $192.57).

    Currently, the highest hospital-based PHP per diem rate, which for CY 2016 was the Level 2 hospital-based PHP per diem rate for APC 5862, serves as the cap for all non-PHP outpatient mental health services provided in a single service day. Because we are finalizing our proposal to replace the existing two-tiered PHP APCs structure with a single APC grouping for these services by specific provider type, the outpatient mental health treatment cap for CY 2017 is the geometric mean per diem rate for new hospital-based PHP APC 5863.

    In the CY 2017 OPPS/ASC proposed rule, we solicited comments on our proposals related to CMHCs and hospital-based PHP APC geometric mean per diem cost calculations and data exclusions.

    Comment: Several commenters expressed concern that the proposed CY 2017 PHP APC geometric mean per diem costs and payment rates were lower than the current CY 2016 PHP APC geometric mean per diem costs and payment rates, and stated that the proposed payment rates would not provide adequate payment of these services.

    Several commenters suggested an alternative payment methodology. Some commenters suggested that CMS delay implementation of the CY 2017 PHP APC per diem payment rates until it can capture and adequately cover hospital-based PHP costs, or that CMS ``freeze'' the CY 2017 PHP APC per diem payment rates at the CY 2016 level. Several commenters recommended that CMS use a median cost phase-in of at least 3 years to allow PHP providers to assess their programs and make necessary changes, using a rolling average of the per diem costs. One commenter stated that this method could minimize the major fluctuations in the payment rates from year to year and provide a more stable basis for hospitals and CMHCs when budgeting and planning. Another commenter stated that the decrease in the PHP APC payment rate would discourage hospitals from offering the PHP benefit to Medicare beneficiaries, ultimately creating a barrier to access to these services, which could place the

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    population at risk. Some commenters stated that the payment rate reduction would impair services and affect the provider network of both service organization types, or that the lower payment rates will force providers to restructure their organization and programs. Other commenters stated that a payment reduction will force providers to cut costs, staff and programming, which would cause them to assist fewer people, and would lead to higher ED visits. Another commenter stated that providers would be unable to absorb the impact of the reduction. Some commenters noted that PHP costs had increased due to rising wages, the new CMHC conditions of participation (CoPs), and a reduction in bad debt reimbursement.

    One commenter mentioned that since last year, another 11 CMHCs closed or discontinued PHP services, and the policy would further decrease valuable resources for the mentally ill. Several commenters believed that PHPs will continue to decrease in numbers without adequate payment. One commenter stated that establishing payment rates that are lower than geometric mean costs is a disincentive for PHPs to continue providing services. Another commenter stated that the 13 percent reduction in hospital-based PHP geometric mean per diem payment rates may prohibit high quality providers from continuing to provide PHP services and exacerbate existing access constraints. A number of commenters noted that PHPs are a vital part of the mental health care continuum, and noted the benefits of the program, which include providing needed care to a vulnerable population, avoiding more costly and less efficient emergency department visits and more costly inpatient stays, and increasing the time between readmission.

    Response: We appreciate the commenters' input regarding the CY 2017 proposed PHP APC payment rates. The final hospital-based PHP APC geometric mean per diem cost for new APC 5863 is higher than the proposed hospital-based PHP per diem cost ($213.14 for this final rule versus $192.57 in the proposed rule). However, the final CMHC geometric mean per diem cost for new APC 5853 is lower than the proposed CMHC geometric mean per diem costs ($124.92 for this final rule versus $135.30 in the proposed rule). As we explained in the CY 2014 OPPS/ASC final rule (78 FR 75049), our calculation of geometric mean per diem costs is based on the actual provider-reported claims and cost data and, therefore, represents the cost of providing PHP services, including, for example, rising staff wages. The resulting PHP APC geometric mean per diem costs and specific payment amounts and the APC payment structure reflect the cost providers expend to maintain such programs. While we proposed the geometric mean per diem costs in this section, section 1833(t)(9)(B) of the Act requires that we apply a budget neutrality adjustment before determining final payment rates, as described in section II.A.4. of this final rule with comment period. That adjustment can result in geometric mean per diem payment rates that are higher or lower than the calculated geometric mean per diem costs. It is also important to note that the reduction to bad debt reimbursement was a result of provisions of section 3201 of the Middle Class Tax Extension and Job Creation Act of 2012. The reduction to bad debt impacted all providers eligible to receive bad debt reimbursement, as discussed in the CY 2013 ESRD final rule (77 FR 67518).

    We remind PHPs that the services of physicians, clinical psychologists, clinical nurse specialists (CNSs), nurse practitioners (NPs), and physician assistants (PAs) furnished to partial hospitalization patients will continue to be billed separately as professional services and costs for these professional services are not considered to be partial hospitalization services. Therefore, payment for partial hospitalization services represents the provider's overhead costs, support staff, and the services of clinical social workers (CSWs) and occupational therapists (OTs), whose professional services are considered to be partial hospitalization services for which payment is made to the provider (65 FR 18452). We encourage CMHCs and hospital-

    based PHPs to review their cost reporting procedures, to ensure that they are accurately reporting PHP costs on their cost reports, and hospital-based PHPs to follow the revenue-code-to-cost-center hierarchy.

    We recognize the commenters' concern regarding variance in payment rates from year to year. As we explained in the CY 2014 OPPS/ASC final rule (78 FR 75049), payment rates for PHP services fluctuate from year to year based on a variety of factors, including direct changes to the PHP APC per diem payment rate, changes to the OPPS, and provider-driven changes. Over the past several years, we have made changes to the PHP APC per diem payment rates to more accurately align the payments with costs. The changes have included establishing separate APCs and associated per diem payment rates for CMHCs and hospital-based providers based on each provider's costs. We also believe that combining the two tiers into one payment tier for 3 or more services will reduce fluctuations and better stabilize the payment rate variance. Combining the tiers systematically addresses chronic issues with inverted costs leading to inverted payment rates and creates a more stable geometric mean per diem cost, given the small number of PHP providers.

    Regarding the recommendation to use median cost, we note that, in the CY 2013 OPPS/ASC final rule with comment period, we finalized our proposal to base the relative payment weights that underpin the OPPS APCs, including the PHP APCs, on geometric mean costs rather than on the median costs (77 FR 68406 through 68412). The use of geometric mean data supports our goal of aligning resource use with appropriate payment.

    In response to commenters' suggestions to delay implementation of the CY 2017 per diem payment rates, or to ``freeze'' the PHP APC per diem payment rates at the CY 2016 level, as we discussed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75049), we cannot establish payment rates that do not accurately reflect current claims and cost report data. Providers attest to the accuracy of the cost reports from which we obtain PHP claims and cost data. In addition, the ratesetting methodology for calculating OPPS APC payment rates as stated in the regulations at 42 CFR 419.31 does not allow us to take an average of prior year and current PHP per diem payment rate data to determine the PHP geometric mean per diem payment rates. Rather, the regulations at Sec. 419.31(b)(1) require us to use the most current available cost data in ratesetting. Therefore, we cannot delay or ``freeze'' the CY 2017 PHP APC per diem payment rates, or base the calculations upon an average of multiple years of data.

    We appreciate the commenters' input regarding the effect any reduction in PHP payment rates would have on access to care. As noted earlier, the final PHP geometric mean per diem cost increased for hospital-based PHPs, but decreased for CMHCs. Our calculated geometric mean per diem costs are based on the actual provider-reported claims and cost data and, therefore, represent the cost of providing PHP services.

    We are working to strengthen continued access to the PHP benefit for eligible beneficiaries. For example, in CY 2016 ratesetting, we conducted an extensive analysis of the ratesetting process, and discovered errors providers

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    had made in claims coding of revenue and HCPCS codes that were leading to lower geometric mean per diem costs. In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70462 through 70467), we also included a detailed description of the ratesetting process to help PHPs record costs correctly so that we can more fully capture PHP costs in ratesetting.

    To address fluctuations in payments and to protect ratesetting from aberrant data, we also implemented trims on the PHP data used in ratesetting in the CY 2016 rulemaking. For example, the CMHC 2 standard deviation trim has protected CMHCs by removing from ratesetting several providers with aberrantly low costs per day, which would have lowered total CMHC geometric mean per diem costs, and thus lowered CMHC geometric mean per diem payment rates.

    We agree that PHPs serve a vulnerable population, and appreciate the care that PHPs provide to Medicare beneficiaries. We also believe that PHPs can help patients avoid emergency department visits and inpatient stays in a cost-efficient fashion. We remain concerned about access to PHP services, and particularly about the declining numbers of CMHCs. We will continue to explore policy options for strengthening the PHP benefit.

    Comment: A few commenters stated that the lack of a required standardized PHP cost center on the Medicare cost report may be creating some cost-finding nuances in the cost report itself (for example, inaccurate step-down of overhead cost allocations to the PHP program, diluted CCRs by the comingling of PHP and ``Intensive Outpatient Program (IOP)'' on the cost report, among others) that may have contributed to this decreased PHP median sic cost. These commenters believed that the cost decreases observed with hospital-

    based PHP costs may not be ``real'' cost decreases, but rather a result of Medicare cost accounting.

    Response: We agree that if PHP costs are combined with other less intensive outpatient mental health treatment costs in the same cost center, the CCR could be diluted, leading to lower geometric mean per diem costs being calculated. We will analyze this further and consider adding a cost center to the hospital cost report for PHP costs only.

    After consideration of the public comments we received, we are finalizing our proposals to replace the four PHP APCs (5851, 5852, 5861, and 5862) with the two new PHP APCs (5853 and 5863) and to calculate the geometric mean per diem costs using the most recent claims and cost data for each provider type. The final CY 2017 PHP APC geometric mean per diem costs for the new CMHC and hospital-based PHP APCs are shown in Table 41 below. The final PHP APC payment rates are included in Addendum A to this final rule with comment period (which is available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html).

    Table 41--CY 2017 PHP APC Geometric Mean Per Diem Costs

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

    PHP APC

    CY 2017 APC Group title geometric mean

    per diem costs

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

    5853.......................... Partial Hospitalization $124.92

    (3 or more services per

    day) for CMHCs.

    5863.......................... Partial Hospitalization 213.14

    (3 or more services per

    day) for hospital-based

    PHPs.

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

    3. PHP Ratesetting Process

    While PHP services are part of the OPPS, PHP ratesetting has some unique aspects. To foster understanding and transparency, we provided a detailed explanation of the PHP APC ratesetting process in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70462 through 70466). The OPPS ratesetting process includes various steps as part of its data development process, such as CCR determination and calculation of geometric mean per diem costs, identification of allowable charges, development of the APC relative payment weights, calculation of the APC payment rates, and establishment of outlier thresholds. We refer readers to section II. of this final rule with comment period and encourage readers to review these discussions to increase their overall understanding of the entire OPPS ratesetting process. We also refer readers to the OPPS Claims Accounting narrative, which is a supporting document to this final rule with comment period, available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html; click on the link to this final rule with comment period to find the Claims Accounting narrative. We encourage CMHCs and hospital-based PHPs to review their accounting and billing processes to ensure that they are following these procedures, which should result in greater accuracy in setting the PHP payment rates.

    1. Outlier Policy for CMHCs

    1. Estimated Outlier Threshold

    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 the genuine cost of outlier cases, and address situations where charges were being inflated to enhance outlier payments.

    We created a separate outlier policy that would be specific to the estimated costs and OPPS payments provided to CMHCs. Beginning in CY 2004, we designated a portion of the estimated OPPS outlier threshold 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 note that, in the CY 2009 OPPS/ASC final rule with comment period, we also established an outlier reconciliation policy to address charging aberrations related to OPPS outlier payments (73 FR 68594 through 68599).

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45675 through 45678), we proposed to continue to designate a portion of the estimated 1.0 percent outlier threshold specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under

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    the OPPS in CY 2017, excluding outlier payments. CMHCs are projected to receive 0.03 percent of total OPPS payments in CY 2017, excluding outlier payments. This policy results in CMHC outliers being paid under limited circumstances associated with costs from complex cases, rather than as a substitute for the standard PHP payment to CMHCs. Therefore, we proposed to designate less than 0.01 percent of the estimated 1.0 percent outlier threshold for CMHCs. As we do for each rulemaking cycle, we have updated the CMHC CCRs and claims data used to model the PHP payments rates.

    Based on our simulations of CMHC payments for CY 2017, in the proposed rule, we proposed to continue to set the cutoff point for CY 2017 at 3.4 times the highest CMHC APC payment rate implemented for that calendar year, which for CY 2017 is the payment rate for new CMHC APC 5853. In addition, we proposed to continue to apply the same outlier payment percentage that applies to hospitals. Therefore, for CY 2017, we proposed to continue to pay 50 percent of CMHC APC geometric mean per diem costs over the cutoff point. For example, for CY 2017, if a CMHC's cost for partial hospitalization services paid under new CMHC APC 5853 exceeds 3.4 times the proposed payment rate for proposed new CMHC APC 5853, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.4 times the payment rate for new CMHC APC 5853.

    In section II.G. of the proposed rule, for the hospital outpatient outlier payment policy, we proposed to set a fixed dollar threshold in addition to an APC multiplier threshold. APC 5853 is the only APC for which CMHCs may receive payment under the OPPS, and is for providing a defined set of services which are relatively low cost when compared to other OPPS services. As such, it is not necessary to also impose a fixed dollar threshold on CMHCs. Therefore, we did not propose to set a dollar threshold for CMHC outlier payments.

    In summary, in this section, we proposed to continue to calculate our CMHC outlier threshold and CMHC outlier payments according to our established policies.

    We did not receive any public comments on these proposals, and are finalizing them without modification.

    2. CMHC Outlier Cap

  195. Summary of Proposal

    As discussed in the CY 2017 OPPS/ASC proposed rule (81 FR 45675 through 45678), prior to receipt of CY 2015 preliminary claims data, we analyzed CY 2014 CMHC final claims data and found that CMHC outlier payments began to increase similarly to the way they had prior to CY 2004. While many CMHCs had small outlier payments or no outlier payments, three CMHCs had very high charges for their CMHC services, which resulted in their collecting large outlier payments that exceeded their total per diem payments. CMHC total per diem payments are comprised of the Medicare CMHC total per diem payments and the beneficiary share of those per diem payments. In total, Medicare paid CMHCs $6.2 million in outlier payments in CY 2014, which was 36 percent of all CMHC total per diem payments. The 36 percent is a stark contrast to the OPPS outlier threshold of 1 percent of total OPPS payments, especially because the CMHC threshold is a fraction of that 1 percent, based on the percentage of projected per diem payments to CMHCs under the OPPS. In CY 2014, three CMHCs accounted for 98 percent of all CMHC outlier payments that year and received outlier payments that ranged from 104 percent to 713 percent of their total per diem payments.

    When a CMHC's outlier payments approach or exceed its total per diem payments, it suggests that outlier payments are not being used as intended, specifically for exceptionally high-cost cases, but instead as a routine supplement to the per diem payment because outlier payments are being made for nearly all patients. The OPPS outlier policy is intended to compensate providers for treating exceptionally resource-intensive cases. As we noted in our CY 2004 OPPS/ASC final rule with comment period (68 FR 63470), outlier payments were never intended to be made for all patients and used as a supplement to the per diem payment amount. Sections 1833(t)(5)(A) and (B) of the Act specify that outlier payments are to approximate the marginal cost of care when charges, adjusted to cost, exceed a cutoff point established by the Secretary. As stated previously, for CMHCs, that cutoff point is 3.4 times the highest CMHC APC payment rate (PHP APC 0173). In the CY 2014 claims, that meant a CMHC was eligible for an outlier payment for a given day if the cost for that day was greater than 3.4 times the CMHC APC 0173 payment rate for Level II services, or 3.4 times $111.73, which equals $379.88 before wage adjustment.

    We examined the total average cost per day for the three CMHCs with outlier payments that were more than 100 percent of their regular payments. In CY 2014, these three CMHCs had a total average cost per day of $1,065, which exceeded the FY 2014 unadjusted daily payment rate for inpatient psychiatric care of $713.19. We do not believe that the cost of a day of intensive outpatient CMHC services, which usually comprises 4 hours of services (mostly group therapy), should equal or exceed the cost of a 24-hour period of inpatient care, which includes 24-hour nursing care, active psychiatric treatment, room and board, drugs, and laboratory tests. Because the outpatient PHP daily payment rate includes payment for fewer items and services than the inpatient psychiatric facility daily payment rate, we believe that the cost of a day of outpatient PHP services should be significantly less than the cost of a day of inpatient psychiatric care. Therefore, we believe that those three CMHCs with total average cost per day of $1,065 demonstrated excessive outlier payments.

    We believe that these excessive outlier payments to some CMHCs are the result of inflated costs, which result from artificially inflated charges. Costs are calculated by multiplying charges by the CCR. The CCR used for calculating outlier payments has established upper limits for hospitals and for CMHCs (we refer readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70456) and the Medicare Claims Processing Internet-only Manual, Chapter 4, Section 10.11.9, available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf). We also believe that these excessive outlier payments do not approximate the marginal cost of care when costs exceed the established cutoff point, as specified in sections 1833(t)(5)(A) and (B) of the Act. The resulting outlier payments would be inappropriate. We are entrusted with accurately paying CMHCs participating in Medicare. Therefore, we are addressing outlier payments resulting from inflated costs. By continuing this pattern of inflated charges for partial hospitalization services, CMHCs will receive a disproportionate share of outlier payments compared to other OPPS providers that do not artificially inflate their charges, thereby limiting outlier payments for truly deserving cases.

    Based on our available claims data, we chose to apply 30 percent of total per diem payments as a cutoff point for reasonable outlier payments. In the CY 2014 claims data, the average charge per day for the 3 CMHCs that received outlier payments greater than or equal to 30 percent of their total per diem payments was $3,233, which was nearly 8 times greater than the average charge

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    per day for the CMHCs that received outlier payments that were less than 30 percent of their total per diem payments. In our review of CY 2015 claims data for the CY 2017 OPPS/ASC proposed rule, the average charge per day for the CMHCs that received outlier payments greater than or equal to 30 percent of their total per diem payments was $1,583, which was more than 3 times greater than the average charge per day for the CMHCs that received outlier payments that were less than 30 percent of their total per diem payments.

    In our review of CY 2015 claims data for the CY 2017 proposed rulemaking, Medicare paid CMHCs $3.2 million in outlier payments, with over 99 percent of those payments made to 4 CMHCs. These outlier payments were 26 percent of all CMHC total per diem payments, and ranged from 39 percent to 179 percent of the individual CMHC's total per diem payments. Total outlier payments to CMHCs decreased from $6.2 million in CY 2014 to $3.2 million in CY 2015 because the CMHC that received the largest outlier payments in CY 2014 no longer had outlier payments in CY 2015. This CMHC revised its charge structure downward. However, two additional CMHCs that did not receive outlier payments in CY 2014 began receiving outlier payments in CY 2015 that were greater than or equal to 30 percent of their total payments, which suggests a continuing, if not growing problem.

    Under the current outlier reconciliation process, a MAC will reconcile a CMHC's outlier payments at the time of final cost report settlement if the CMHC's CCR has changed by 0.10 or more and if the CMHC received any outlier payments. This process is described in Section 10.7.2, Chapter 4, of the Medicare Claims Processing Manual, which is available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf. Typically, final cost report settlement occurs within 12 months of the MAC's acceptance of the cost report. However, because cost reports are filed up to 5 months after the CMHC's fiscal year end, CMHC outlier reconciliation can occur more than a year after outlier overpayments are made. Long timeframes between outlier payment and outlier reconciliation at final cost report settlement have also allowed cases with outlier overpayments to continue and to grow. For example, one CMHC with inflated charges in CY 2013 continued to have inflated charges in CY 2014, and received more than double its CY 2013 outlier payments in CY 2014. This CMHC did not receive outlier payments in CY 2015 because it revised its charge structure downward and, therefore, no longer had costs qualifying for outlier payments.

    Although efforts geared towards limiting very high outlier payments to CMHCs are occurring, such as the outlier reconciliation process, these efforts typically occur after the outlier payments are made. We would prefer to focus on stopping questionable outlier payments before they occur, to avoid the risk that a provider would be unable to repay Medicare after those overpayments occur. Therefore, we considered whether a broader, supplementary policy change to our CMHC outlier payment policy might also be warranted to mitigate possible billing vulnerabilities associated with very high outlier payments, while at the same time ensuring that we adhere to the existing statutory requirements related to covering the marginal cost of care for exceptionally resource-intensive cases. We want to ensure that CMHCs that provide services that represent the cost of care for legitimate high-cost cases are able to continue to receive outlier payments.

    Given these program integrity concerns and our longstanding history of introducing CMHC-specific outlier policies when necessary (the CMHC-

    specific outlier threshold and the CMHC-specific reconciliation process), we proposed to implement a CMHC outlier payment cap to be applied at the provider level, such that in any given year, an individual CMHC would receive no more than a set percentage of its CMHC total per diem payments in outlier payments. This outlier payment cap would only affect CMHCs, and would not affect other provider types. This outlier payment cap would be in addition to and separate from the current outlier policy and reconciliation policy in effect. We proposed that the CMHC outlier payment cap be set at 8 percent of the CMHC's total per diem payments. As noted previously, each CMHC's total per diem payments are comprised of its Medicare CMHC total per diem payments plus the total beneficiary share of those per diem payments. If implemented, this proposal would mean that a CMHC's total outlier payments in a calendar year could not exceed 8 percent of its total per diem payments in that year.

    To determine this CMHC outlier cap percentage, we performed analyses to model the impact that a variety of cap percentages would have on CMHC outlier payments. We want to ensure that any outlier cap policy would not disadvantage CMHCs with truly high-cost cases that merit an outlier payment, while also protecting the benefit from making payments for outlier cases that exceed the marginal cost of care. In the CY 2017 OPPS/ASC proposed rule, we used CY 2015 claims data to perform a detailed impact analysis of CMHC outlier payments. That analysis showed that out of 51 CMHCs with paid claims in CY 2015, 9 CMHCs received outlier payments. We separated these 9 CMHCs into 4 CMHCs that received outlier payments that were greater than or equal to 30 percent of their total CMHC payments in CY 2015, and 5 CMHCs that received outlier payments that were less than 30 percent of their total CMHC payments in CY 2015.

    In the CY 2017 proposed rule, the 5 CMHCs that received outlier payments that were less than 30 percent of their total per diem payments received a total of $11,496 in outlier payments. We believe that these 5 CMHCs are representative of the types of CMHCs we are most concerned about that would be disadvantaged with an outlier payment policy that includes a cap at the individual CMHC level. We tested the effects of CMHC outlier caps ranging from 3 percent to 10 percent on these two groups of CMHCs. Our analysis focused on total CMHC per diem payments, total CMHC outlier payments, and percentage reductions in payments if a CMHC outlier payment cap were imposed, as shown in Table 20 of the proposed rule (81 FR 45677).

    Table 20 of the proposed rule showed that 4 out of the 5 CMHCs that received outlier payments that were less than 30 percent of their total per diem payments received outlier payments that were less than 1 percent of their total per diem payments and, therefore, would be unaffected by a CMHC outlier payment cap. The fifth CMHC received outlier payments that were 9.4 percent of its total per diem payments and is the only CMHC that would have been affected by a CMHC outlier payment cap applied at the provider level. The effect on this CMHC was shown under the various cap percentage options. At the 8 percent level, this CMHC's outlier payments would have been reduced by $1,628. A 10-

    percent cap would have had no effect on this CMHC. The difference in total outlier payments to all CMHCs between the 8 percent and 10 percent cap levels was relatively small (approximately $58,000).

    We also conducted our CMHC outlier cap analysis using final CY 2014 claims data. When we evaluated the effect of the different CMHC provider-level outlier cap percentages on the CMHCs with outlier payments that were less than 30 percent of their total per diem

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    payments, using the final CY 2014 claims data, we found that 5 CMHCs would be affected by an 8-percent cap, and 4 CMHCs would be affected by a 10-percent cap, with a difference in outlier payments of only $4,069. However, an 8-percent cap compared to a 10-percent cap saved more than $37,000 in outlier payments to the CMHCs that were charging excessively (data not shown).

    We considered both the CY 2014 and CY 2015 claims data as we sought to balance our concern about disadvantaging CMHCs with our interest in protecting the benefit from excessive outlier payments by proposing an 8-percent CMHC outlier payment cap. An 8-percent CMHC outlier payment cap would mitigate potential inappropriate outlier billing vulnerabilities by limiting the impact of inflated CMHC charges on outlier payments. The 8-percent cap would have reduced outlier payments to the 4 CMHCs that received outlier payments that were greater than or equal to 30 percent of their total per diem payments in CY 2015 by $3.0 million dollars, or 93.3 percent.

    Therefore, for CY 2017 and subsequent years, we proposed to apply a CMHC outlier payment cap of 8 percent to each CMHC's total per diem payments, such that in any given calendar year, an individual CMHC would not receive more than 8 percent of its CMHC total per diem payments in outlier payments.

    We invited public comments on the CMHC provider-level outlier cap percentage. We also proposed to revise Sec. 419.43(d) of the regulations by adding a paragraph (7) to require that CMHC outlier payments for the calendar year be subject to a CMHC outlier payment cap, applied at the individual CMHC level, that is, 8 percent of each CMHC's total per diem payments for that same calendar year.

    We did not receive any public comments on these proposals.

  196. CY 2017 Final Rule Update and Policy

    Updated analysis using CY 2015 final claims data for this CY 2017 final rule with comment period continued to show that Medicare paid CMHCs $3.2 million in outlier payments, with over 99 percent of those payments made to 4 CMHCs. These outlier payments were 23 percent of all CMHC total per diem payments, and ranged from 42 percent to 163 percent of the individual CMHC's total per diem payments. The updated CY 2015 data showed that out of 52 CMHCs with paid claims in CY 2015, 9 CMHCs received outlier payments.

    Five CMHCs with outlier payments that were less than 30 percent of their total per diem payments received a total of $11,643 in outlier payments. Four CMHCs with outlier payments that were greater than or equal to 30 percent of their total per diem payments received $3.2 million in outlier payments, which was 99.6 percent of all CMHC outlier payments made in CY 2015. The average charge per day for the 4 CMHCs that received outlier payments that were greater than or equal to 30 percent of their total per diem payments was $1,566, which was 3 times greater than the average charge per day for the 5 CMHCs that received outlier payments that were less than 30 percent of their total per diem payments.

    We tested the effects of CMHC outlier caps ranging from 3 percent to 10 percent on these two groups of CMHCs using the final CY 2015 claims data as shown in Table 42 below. Our analysis focused on total CMHC per diem payments, total CMHC outlier payments, and percentage reductions in payments if a CMHC outlier payment cap were imposed. Because 4 out of the 5 CMHCs that received outlier payments that were less than 30 percent of their total per diem payments received outlier payments that were less than 1 percent of their total per diem payments, Table 42 below shows that these providers would be unaffected by a CMHC outlier payment cap. The fifth CMHC with outlier payments that were less than 30 percent of its total per diem payments received outlier payments that were 8.0 percent of its total per diem payments. This CMHC would not have been affected by an 8 percent or 10 percent CMHC outlier payment cap applied at the provider level because its outlier payments did not exceed 8 or 10 percent.

    Table 42--Effect of CMHC Outlier Cap Simulation on Outlier Payments

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    Simulated CMHC outlier payments using final CY 2015 claims data

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

    Total per Actual

    diem outlier 3% cap 5% cap 6% cap 8% cap 10% cap

    payments payments

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

    All 52 CMHCs................................................ $14,022,861 $3,245,624 ........... ........... ........... ........... ...........

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

    Outlier Payments =30% of Total Per Diem Payments

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

    Total Actual Payments (n = 4)............................... $3,154,279 $3,233,981 ........... ........... ........... ........... ...........

    Simulated Outlier Payments.................................. ............ ........... $94,628 $157,714 $189,257 $252,342 $315,428

    Reduction in Outlier Payments............................... ............ ........... $3,150,996 $3,087,910 $3,056,367 $2,993,282 $2,930,196

    % Reduction................................................. ............ ........... 97.4% 95.5% 94.5% 92.6% 90.6%

    CMHCs Affected.............................................. ............ ........... 4 4 4 4 4

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

    As noted in the CY 2017 OPPS/ASC proposed rule, we sought to balance our concern about disadvantaging CMHCs with our interest in protecting the benefit from excessive outlier payments by proposing an 8-percent CMHC outlier payment cap. The updated CY 2015 claims data for this final rule with comment period shows that an 8-percent CMHC outlier payment cap would mitigate potential inappropriate outlier billing vulnerabilities by limiting

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    the impact of inflated CMHC charges on outlier payments. The 8-percent cap would have reduced outlier payments to the CMHCs that received outlier payments that were greater than or equal to 30 percent of their total per diem payments in CY 2015 by $3.0 million dollars, or 92.6 percent, without affecting any of the CMHCs that received outlier payments that were less than 30 percent of their CY 2015 total per diem payments.

    We did not receive any public comments on our proposals and are finalizing them as proposed. As we noted in the proposed rule, our existing outlier reconciliation policy will continue to remain in effect with the final 8 percent CMHC outlier payment cap serving as a complement. We also are finalizing our proposed revision of Sec. 419.43(d) of the regulations by adding a paragraph (7) to require that CMHC outlier payments for the calendar year be subject to a CMHC outlier payment cap, applied at the individual CMHC level, that is, 8 percent of each CMHC's total per diem payments for that same calendar year.

    We will continue to monitor the trends in outlier payments and also monitor these policy effects. Also, we will analyze CMHC outlier payments at the provider level, relative to the 8 percent CMHC outlier cap. Finally, we will continue to utilize program integrity efforts, as necessary, for those CMHCs receiving excessive outlier payments.

    3. Implementation Strategy for the 8-Percent Cap on CMHC Outlier Payments

    CMS envisions that the 8-percent CMHC cap on outlier payments will be managed by the claims processing system. We will provide detailed information on our implementation strategy through sub-regulatory channels. However, to foster a clearer understanding of the CMHC outlier payment cap, we are providing the following high-level summary of the preliminary approach we envision.

    For each CMHC, for a given calendar year, the claims processing system will maintain a running tally of year-to-date (YTD) total CMHC per diem payments (Medicare payments and the beneficiary share) and YTD actual CMHC outlier payments. YTD outlier payments for that calendar year could never exceed 8 percent of YTD CMHC total per diem payments for that CMHC for that calendar year. For example, we will determine whether or not a given provider-specific outlier payment exceeds the 8-

    percent cap on a ``rolling'' basis. Under such an implementation approach, for each CMHC, the claims processing system will maintain a running tally of the YTD total CMHC per diem payments. The claims processing system will ensure that each time an outlier claim for a CMHC is processed, actual outlier payments will never exceed 8 percent of the CMHC's YTD total payments. While a CMHC will receive its per diem payment timely, the outlier portion of the claim will be paid as the CMHC's YTD payments support payment of the outlier. As part of our routine claims processing, we will utilize a periodic review process under which outlier payments that were withheld will subsequently be paid if the CMHC's total payments have increased to the point that its outlier payments can be made. This process will result in additional cash flow to CMHCs. As noted previously, we will also maintain our existing outlier reconciliation policy, which is applied at the time of cost report final settlement if the CMHC's CCR changed by 0.10 or more. With regard to revenue tracking by CMHCs, distinct coding will be used on the CMHC's remittance advice when outlier payments are withheld, assisting receivables accountants in identifying and accounting for the differences between expected and actual payments.

    4. Summary of Policies

    In summary, for CY 2017, we are finalizing our proposals to:

    Continue to designate a portion of the estimated 1.0 percent outlier threshold specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS in CY 2017, excluding outlier payments;

    Implement an 8-percent cap on CMHC outlier payments at the individual CMHC provider level for CY 2017 and subsequent years and change the regulations at Sec. 419.43(d) accordingly;

    Continue to set the cutoff point for CMHC outlier payments in CY 2017 at 3.4 times the highest CMHC APC payment rate implemented for that calendar year, which for CY 2017 is new CMHC APC 5853; and

    Continue to pay 50 percent of CMHC APC geometric mean per diem costs over the cutoff point in CY 2017.

    We believe that these CMHC outlier policies will minimize the impact of inflated CMHC charges on outlier payments, result in a better approximation of the marginal cost of care beyond the applicable cutoff point compared to the current process, and better target outlier payments to truly exceptionally high-cost cases.

    1. Procedures That Will Be Paid Only as Inpatient Procedures

      1. 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 only (IPO) list) and, therefore, will not be paid by Medicare under the OPPS, and on the criteria that we use to review the IPO list each year to determine whether or not any procedures should be removed from the list. The complete list of codes (IPO list) that will be paid by Medicare in CY 2017 as inpatient only procedures is included as Addendum E to this final rule with comment period (which is available via the Internet on the CMS Web site).

      2. Changes to the Inpatient Only (IPO) List

        In the CY 2017 OPPS/ASC proposed rule (81 FR 45678 through 45679), for CY 2017, we proposed to use the same methodology (described in the November 15, 2004 final rule with comment period (69 FR 65834)) of reviewing the current list of procedures on the IPO 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 IPO 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 the above-listed criteria, we proposed to remove the following six codes (four spine procedure codes and two laryngoplasty codes) from the IPO list for CY 2017:

        CPT code 22840 (Posterior non-segmental instrumentation (e.g., Harrington rod technique, pedicle fixation across 1 interspace, atlantoaxial transarticular screw fixation, sublaminar wiring at C1, facet screw fixation) (List

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        separately in addition to code for primary procedure));

        CPT code 22842 (Posterior segmental instrumentation (eg., pedicle fixation, dual rods with multiple hooks and sublaminar wires); 3 to 6 vertebral segments (List separately in addition to code for primary procedure));

        CPT code 22845 (Anterior instrumentation; 2 to 3 vertebral segments (List separately in addition to code for primary procedure));

        CPT code 22858 (Total disc arthroplasty (artificial disc), anterior approach, including discectomy with end plate preparation (includes osteophytectomy for nerve root or spinal cord decompression and microdissection); second level, cervical (List separately in addition to code for primary procedure));

        CPT code 31584 (Laryngoplasty; with open reduction of fracture); and

        CPT code 31587 (Laryngoplasty, cricoid split).

        We reviewed the clinical characteristics of the four spine procedure codes and related evidence, including input from multiple physician specialty societies whose members specialize in spine surgery, and determined the four spine procedure codes listed above to be appropriate candidates for removal from the IPO list. These four spine procedure codes are add-on codes to procedures that are currently performed in the HOPD and describe variations of (including additional instrumentation used with) the base code procedure. Therefore, we believe these spine procedures satisfy criterion 3 listed above as they are related to codes that we have already removed from the IPO list. Because these four spine procedure codes are add-on codes, in accordance with the regulations at 42 CFR 419.2(b)(18), we proposed to package them with the associated procedure and assign them status indicator ``N.''

        We also reviewed the clinical characteristics of the two laryngoplasty procedure codes and related evidence, and determined that the two laryngoplasty procedure codes listed above are appropriate candidates for removal from the IPO list because we believe they satisfy criterion 3 listed above (that is, the procedure is related to codes that we have already removed from the IPO list). These two codes are related to and clinically similar to CPT code 21495 (Open treatment of hyoid fracture), which is currently not on the IPO list. We proposed that the two laryngoplasty procedure codes would be assigned to APC 5165 (Level 5 ENT Procedures) with status indicator ``J1.''

        Comment: Several commenters supported the proposal to remove CPT codes 22840, 22842, 22845, 22858, 31584, and 31587 from the IPO list for CY 2017. One commenter opposed the proposal to remove these codes from the IPO list, stating that although the spine codes were add-on codes for procedures currently performed in the HOPD, these codes represented variations in the instrumentation used which made them more complex than the base code procedures. The commenter also believed that the two laryngoplasty codes were too complex to be performed in the HOPD.

        Another commenter opposed the removal of CPT codes 31584 and 31587 from the IPO list, stating that these procedures often require prolonged use of intravenous pain medications and close monitoring of drainage tubes. The commenter also stated that both procedures frequently involve patient admission to the intensive care unit postoperatively, as they warrant assessments of respiratory status and oxygenation at frequent intervals to evaluate for postoperative swelling.

        Response: We appreciate the commenters' support. We disagree with the commenter that CPT codes 22840, 22842, 22845, 22858, 31584, and 31587 should remain on the IPO list. As discussed in the CY 2017 OPPS/

        ASC proposed rule (81 FR 45678 through 45679), we believe that these codes satisfy criterion 3 for removal from the IPO list; that is, being a procedure that is related to codes that we have already removed from the IPO list. We remind the commenter and the public that removal of a code from the IPO list does not mean that all procedures described by the code or even a majority of procedures must or should be performed in the outpatient setting. Removal of a procedure from the IPO list only means that the procedure is no longer precluded from being paid under the OPPS if it is performed in the outpatient setting. The cases that the commenters are concerned about can all still be performed on an inpatient basis if appropriate.

        Comment: Several commenters disagreed with the proposal to package the four spine codes proposed to be removed from the IPO list with associated procedure and assign them status indicator ``N.'' The commenters requested that CMS allow for separate payment for these procedures.

        Response: As specified in 42 CFR 419.2(b)(18), services described by add-on codes are packaged costs that are integral, ancillary, supportive, dependent, or adjunctive to performing a procedure or furnishing a service on an outpatient basis. The procedures described by the four spinal codes are all procedures described by add-on codes. The costs for the procedures described by these codes are included in the payment rate for the related procedure or service. Therefore, we will not provide separate payment for these codes.

        Comment: Other commenters requested that the following additional codes be removed from the IPO list:

        CPT code 22585 (Arthrodesis, anterior interbody, including disc space preparation, discectomy, osteophytectomy, and decompression of spinal cord and/or nerve roots; each additional interspace (List separately in addition to code for primary procedure));

        CPT code 22633 (Arthrodesis, combined posterior or posterolateral technique with posterior interbody technique including laminectomy and/or discectomy sufficient to prepare interspace (other than for decompression), single interspace and segment; lumbar;

        CPT code 22850 (Removal of posterior nonsegmental instrumentation (eg., Harrington rod);

        CPT code 23472 (Arthroplasty, glenohumeral joint; total shoulder (glenoid and proximal humeral replacement (eg., total shoulder); and

        CPT code 27130 (Arthroplasty, acetabular and proximal femoral prosthetic replacement (total hip arthroplasty), with or without autograft or allograft.

        Response: We agree with the commenter at this time only for removal of the procedure described by CPT code 22585, which is an add-on code, from the IPO list. The base code for CPT code 22585, CPT code 22554 (Arthrodesis, anterior interbody technique, including minimal discectomy to prepare interspace (other than for decompression); cervical below C2), is assigned to APC 5115 (Level 5 Musculoskeletal Procedures). We believe that cases involving CPT codes 22554 and 22585 are sufficiently comparable to cases involving only CPT code 22554, such that it is appropriate to remove CPT code 22585 from the IPO list. Because CPT code 22585 is an add-on code, it is being assigned status indicator ``N.'' After reviewing the clinical characteristics of these procedures described by CPT codes 22633, 22850, 23472, and 27130, we do not believe that removal from the IPO list is warranted at this time.

        After consideration of the public comments we received, we are removing CPT codes 22585, 22840, 22842, 22845, 22858, 31584, and 31587 from the IPO

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        list for CY 2017. The complete list of codes (the IPO list) that will be paid by Medicare in CY 2017 as inpatient only procedures is included as Addendum E to this final rule with comment period (which is available via the Internet on the CMS Web site).

      3. Response To Solicitation of Public Comments on the Possible Removal of Total Knee Arthroplasty (TKA) Procedure From the IPO List

        1. Background

        Total knee arthroplasty (TKA) or total knee replacement, CPT code 27447 (Arthroplasty, knee, condyle and plateau; medical and lateral compartments with or without patella resurfacing (total knee arthroplasty)), has traditionally been considered an inpatient surgical procedure. The procedure described by CPT code 27447 was placed on the original IPO list in the 2000 OPPS final rule (65 FR 18781). In 2000, the primary factors that were used to determine the assignment of a procedure to the IPO list were as follows: (1) The invasive nature of the procedure; (2) the need for at least 24 hours of postoperative care; and (3) the underlying physical condition of the patient who would require the surgery (65 FR 18443 and 18455). In 2000, the geometric mean average length of stay for the DRG to which an uncomplicated TKA procedure was assigned was 4.6 days, and in 2016, the average length of stay for a current uncomplicated TKA procedure for the MS-DRG is 2.8 days.

        Recent innovations have enabled surgeons to perform TKA on an outpatient basis on non-Medicare patients (both in the HOPD and in the ASC). In this context, ``outpatient'' services include both same day outpatient surgery (that is, the patient goes home on the same day that the outpatient surgery was performed) and outpatient surgery that includes one overnight hospital stay for recovery from the surgery. These innovations in TKA care include minimally invasive techniques, improved perioperative anesthesia, alternative postoperative pain management, and expedited rehabilitation protocols. Patients generally benefit from a shorter hospital stay. Some of these benefits include a likelihood of fewer complications, more rapid recovery, increased patient satisfaction, recovery at home with the assistance of family members, and a likelihood of overall improved outcomes. On the contrary, unnecessary inpatient hospitalization exposes patients to the risk of hospital-acquired conditions such as infections and a host of other iatrogenic mishaps.

        Like most surgical procedures, TKA needs to be tailored to the individual patient's needs. Patients with a relatively low anesthesia risk and without significant comorbidities who have family members at home who can assist them would likely be good candidates for an outpatient TKA procedure. On the other hand, patients with severe illnesses aside from their osteoarthritis would more likely require inpatient hospitalization and possibly postacute care in a skilled nursing facility or other facility. Surgeons who have discussed outpatient TKA procedures with us have emphasized the importance of careful patient selection and strict protocols to optimize outpatient TKA outcomes. These protocols typically manage all aspects of the patient's care, including the at-home preoperative and postoperative environment, anesthesia, pain management, and rehabilitation to maximize rapid recovery and ambulation.

        In the CY 2013 OPPS/ASC proposed rule (77 FR 45153), we proposed to remove the procedure described by CPT code 27447 from the IPO list. We proposed to remove the procedure described by CPT code 27447 from the IPO list because we believed that the procedure could be appropriately provided and paid for as a hospital outpatient procedure for some Medicare beneficiaries, based upon the five evaluation criteria for removal from the IPO list discussed earlier. The public comments we received on the CY 2013 proposal varied. There were several surgeons and other stakeholders who supported the proposal. They believed that, given thorough preoperative screening by medical teams with significant experience and expertise involving knee replacement procedures, the TKA procedure could be provided on an outpatient basis for some Medicare beneficiaries. These commenters discussed recent advances in total knee replacement technology and surgical care protocols, including improved perioperative anesthesia, and expedited rehabilitation protocols, as well as significant enhancements to the postoperative process, such as improvements in pain management, early mobilization, and careful monitoring. These commenters also stated that early preventive intervention for the most common medical complications has decreased the average length of hospital stays to the point that a TKA procedure can now be performed on an outpatient basis in certain cases. The commenters noted significant success involving same day discharge for patients who met the screening criteria and whose experienced medical teams were able to perform the procedure early enough in the day for the patients to achieve postoperative goals, allowing home discharge by the end of the day. The commenters believed that the benefits of furnishing a TKA procedure on an outpatient basis will lead to significant enhancements in patient well-being and cost savings to the Medicare program, including shorter hospital stays resulting in fewer medical complications, improved results, and enhanced patient satisfaction. However, the majority of the commenters disagreed with the CY 2013 proposal and believed that it would be unsafe to perform outpatient TKA for Medicare beneficiaries. (We refer readers to 77 FR 68419 for a discussion of these comments.) After consideration of these public comments, we decided not finalize the proposal, and the procedure described by CPT code 27447 remains on the IPO list.

        We also note that, not uncommonly, we receive questions from the public about the IPO list that lead us to believe that some members of the public may misunderstand certain aspects of the IPO list. Therefore, two important principles of the IPO list must be reiterated at the outset of this discussion. First, just because a procedure is not on the IPO list does not mean that the procedure cannot be performed on an inpatient basis. IPO list procedures must be performed on an inpatient basis (regardless of the expected length of the hospital stay) in order to qualify for Medicare payment, but procedures that are not on the IPO list can be and very often are performed on individuals who are inpatients (as well as individuals who are hospital outpatients and ASC patients). Second, the IPO list status of a procedure has no effect on the MPFS professional payment for the procedure. Whether or not a procedure is on the IPO list is not in any way a factor in the MPFS payment methodology.

        2. Discussion of TKA and the IPO List

        Since 2000, when the IPO list was established, there have been significant developments in both TKA technique and patient care. The advances in TKA technique and patient care are discussed in general terms above. As noted above, in 2000, the criteria by which procedures were reviewed to determine IPO list assignment were as follows: (1) The invasive nature of the procedure; (2) the need for at least 24 hours of postoperative care; and (3) the underlying physical condition of the patient who would require the surgery.

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        In order to discuss the possibility of removing TKA procedures from the IPO list, we believe it is helpful to explore each of these criteria in turn as they apply to present-day TKA. In the CY 2017 OPPS/ASC proposed rule (81 FR 45680), we solicited comment from the public on a list of questions that relate to considering removing TKA from the IPO list in the future.

        The first criterion was ``the invasive nature of the procedure.'' We elaborated on this criterion in the 2000 OPPS final rule by stating: ``We believe that certain surgically invasive procedures on the brain, heart, and abdomen, such as craniotomies, coronary artery bypass grafting, and laparotomies, indisputably require inpatient care, and therefore are outside the scope of outpatient services'' (65 FR 18456). TKA does not invade the brain, heart, or abdomen; instead, like several other outpatient orthopedic surgeries, it is an operation on the knee joint. A similar procedure described by CPT code 27446 (Arthroplasty, knee, condyle and plateau; medical OR lateral compartment) (unicompartmental knee replacement) was removed from the IPO list on January 1, 2002, and also was added to the ASC covered surgical procedures list in 2008. The degree of invasiveness of TKA as compared to other major surgical procedures would not appear to prohibit its removal from the IPO list.

        The second IPO list criterion from the 2000 OPPS final rule is ``the need for at least 24 hours of postoperative recovery time or monitoring before the patient can be safely discharged.'' Currently, for procedures that are not on the IPO list, services furnished to patients requiring 24 hours of postoperative recovery time may be payable as either outpatient services or inpatient services, depending on the condition of the patient. Therefore, the need for at least 24 hours of postoperative recovery time or monitoring in many cases should not require IPO list placement.

        The third criterion is ``the underlying physical condition of the patient who would require the surgery.'' For this criterion to be the basis of an IPO list assignment seems to presume a relatively homogeneous and morbid patient population undergoing the surgical procedure. Otherwise, patients with a good underlying physical condition could be considered for outpatient surgery while those with a poor underlying physical condition might be more appropriate for inpatient admission. TKA candidates, although they all have osteoarthritis severe enough to warrant knee replacement, are a varied group in which the anticipated length of hospitalization is dictated more by comorbidities and diseases of other organ systems. Some patients may be appropriate for outpatient surgery while others may be appropriate for inpatient surgery.

        3. Topics and Questions for Public Comment

        In the CY 2017 OPPS/ASC proposed rule (81 FR 45680), we sought public comments on whether we should remove the procedure described by CPT code 27447 from the IPO list from all interested parties, including the following groups or individuals: Medicare beneficiaries and advocate associations for Medicare beneficiaries; orthopedic surgeons and physician specialty societies that represent orthopedic surgeons who perform TKA procedures; hospitals and hospital trade associations; and any other interested stakeholders. We sought public comments on any of the topics discussed earlier in addition to the following questions:

        1. Are most outpatient departments equipped to provide TKA to some Medicare beneficiaries?

        2. Can the simplest procedure described by CPT code 27447 be performed in most outpatient departments?

        3. Is the procedure described by CPT code 27447 sufficiently related to or similar to the procedure described by CPT code 27446 such that the third criterion listed at the beginning of this section for identifying procedures that may be removed from the IPO list, that is, the procedure under consideration for removal from the IPO list is related to codes that we have already removed from the IPO, is satisfied?

        4. How often is the procedure described by CPT code 27447 being performed on an outpatient basis (either in an HOPD or ASC) on non-

        Medicare patients?

        5. Would it be clinically appropriate for some Medicare beneficiaries in consultation with his or her surgeon and other members of the medical team to have the option of a TKA procedure as a hospital outpatient, which may or may not include a 24-hour period of recovery in the hospital after the operation?

        6. CMS is currently testing two episode-based payment models that include TKA: The Comprehensive Care for Joint Replacement (CJR) Model and the Bundled Payment for Care Improvements (BPCI) Model. These models hold hospitals and, in the case of the BPCI, physicians and postacute care providers, responsible for the quality and cost of an episode of care. Providers participating in the CJR model or BPCI Models 2 and 4 initiate episodes with admission to the hospital of a beneficiary who is ultimately discharged under an included MS-DRG. Both initiatives include MS-DRGs 469 (Major Joint Replacement or Reattachment of Lower Extremity with MCC) and 470 (Major Joint Replacement or Reattachment of Lower Extremity without MCC). Depending on the model, the episode ends 30 to 90 days postdischarge in order to cover the period of recovery for beneficiaries. Episodes include the inpatient stay and all related items and services paid under Medicare Part A and Part B for all Medicare fee-for-service (FFS) beneficiaries, with the exception of certain exclusions.

        In the BPCI and CJR models, services are paid on an FFS basis with a retrospective reconciliation for all episodes included in a defined time period (quarterly in BPCI and annually in CJR). At reconciliation, actual spending is compared to a target price. The target price is based on historical episode spending. If CMS were to remove the procedure described by CPT code 27447 from the IPO list and pay for outpatient TKA procedures, the historical episode spending data may no longer be an accurate predictor of episode spending for beneficiaries receiving inpatient TKA procedures. As such, establishing an accurate target price based on historical data would become more complicated. This is because some patients who previously would have received a TKA procedure in an inpatient setting may receive the procedure on an outpatient basis if the procedure is removed from the IPO list.

        We sought public comment on how CMS could modify the CJR and BPCI models if the TKA procedure were to be moved off the IPO list. Specifically, we sought public comment on how to reflect the shift of some Medicare beneficiaries from an inpatient TKA procedure to an outpatient TKA procedure in the BPCI and CJR model pricing methodologies, including target price calculations and reconciliation processes. Some of the issues CMS faces include the lack of historical data on both the outpatient TKA episodes and the average episode spending for beneficiaries who would continue to receive the TKA procedure on an inpatient basis. Because historically the procedure described by CPT code 27447 has been on the IPO list, there is no claims history for beneficiaries receiving TKA on an outpatient basis. In addition, we sought public comment on the postdischarge care patterns for Medicare beneficiaries that may receive an outpatient TKA procedure if it were removed from the IPO list and how this

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        may be similar or different from these beneficiaries' historical postdischarge care patterns. For example, Medicare beneficiaries who are appropriate candidates for an outpatient TKA procedure may be those who, in the past, would have received outpatient physical therapy services as follow-up care after an inpatient TKA procedure. CMS would need to develop a methodology to ensure model target prices account for the potentially higher risk profiles of Medicare beneficiaries who would continue to receive TKA procedures in inpatient settings.

        Comment: Numerous comments responded to CMS' solicitation for discussion of the removal of TKA from the IPO list. The overwhelming majority of the commenters (which included organizations and individuals) supported removing TKA from the IPO list. The commenters who supported the removal of TKA from the IPO list included ASCs, therapeutic professional associations, hospital associations, as well as many surgeons. A number of facilities indicated that they were currently performing TKA procedures on an outpatient basis in both the HOPD and ASC on non-Medicare patients. Several organizations cited innovations such as less invasive surgical techniques, improved perioperative anesthesia, alternative postoperative pain management, expedited rehabilitation protocols, and the similarity of the TKA procedure to other procedures currently being performed as outpatient services (namely CPT code 27446 (Unicompartmental Knee Arthroplasty)) as reasons to remove the procedure from the IPO list. Most organizations in support of the removal of TKA from the IPO list noted that an appropriate patient selection protocol should be used to determine the patients who are best suited for outpatient joint replacement. Some commenters requested that total hip arthroplasty and total shoulder replacement procedures also be removed from the IPO list.

        A few commenters representing professional organizations, health systems, and hospital associations, opposed the removal of a TKA procedure from the IPO list. These commenters believed that the increased likelihood that Medicare patients have comorbidities that require the need for intensive rehabilitation after a TKA procedure preclude this procedure from being performed in the outpatient setting. They also stated that most outpatient departments are not currently equipped to provide TKA procedures to Medicare beneficiaries, which require exceptional patient selection, exceptional surgical technique, and a carefully constructed postoperative care plan. One commenter opined that only exceptional surgeons can perform outpatient TKA procedures, and, for this reason, CMS should not pay for TKA procedures performed in an outpatient setting. One commenter believed that the procedure described by CPT code 27446 can be performed through a much smaller and limited incision than required by CPT code 27447 and, therefore, was a less complex procedure.

        Other commenters were concerned about the implications that the removal of the TKA procedure from the IPO list would have for the pricing methodologies, target pricing, and reconciliation process of the procedure in certain Medicare payment models (that is, the Comprehensive Care for Joint Replacement and the Bundled Payments for Care Improvement models). They requested modifications to these models if the TKA procedure is removed from the IPO list.

        Response: We thank the stakeholder public for the many detailed comments on this topic. We will consider all of these comments in future policy making.

    2. Nonrecurring Policy Changes

      1. Implementation of Section 603 of the Bipartisan Budget Act of 2015 Relating to Payment for Certain Items and Services Furnished by Off-

      Campus Provider-Based Departments of a Hospital

      1. Background

      When a Medicare beneficiary receives services in an off-campus department of a hospital, the total payment amount for the services made by Medicare is generally higher than the total payment amount made by Medicare when the beneficiary receives those same services in a physicians' office. Medicare pays a higher amount for services furnished to beneficiaries in the off-campus department of a hospital because it generally pays two separate claims for these services--one under the OPPS for the institutional services and one under the MPFS for the professional services furnished by a physician or other practitioner. Medicare beneficiaries are responsible for the cost-

      sharing liability, if any, for both of these claims, often resulting in higher total beneficiary cost-sharing than if the service had been furnished in a physician's office.

      In the CY 2017 OPPS/ASC proposed rule (81 FR 45681), we discussed the provision of section 603 of the Bipartisan Budget Act of 2015 (Pub. L. 114-74), enacted on November 2, 2015, which amended section 1833(t) of the Act. Specifically, this provision amended the OPPS statute at section 1833(t) by amending paragraph (1)(B) and adding a new paragraph (21). As a general matter, under sections 1833(t)(1)(B)(v) and (t)(21) of the Act, applicable items and services furnished by certain off-

      campus outpatient departments of a provider on or after January 1, 2017, will not be considered covered OPD services as defined under section 1833(t)(1)(B) of the Act for purposes of payment under the OPPS and will instead be paid ``under the applicable payment system'' under Medicare Part B if the requirements for such payment are otherwise met. We note that, in order to be considered part of a hospital, an off-

      campus department of a hospital must meet the provider-based criteria established under 42 CFR 413.65. Accordingly, in the proposed rule and this final rule with comment period, we refer to an ``off-campus outpatient department of a provider,'' which is the term used in section 603, as an ``off-campus outpatient provider-based department'' or an ``off-campus PBD.''

      As noted earlier, section 603 of Public Law 114-74 made two amendments to section 1833(t) of the Act--one amending paragraph (1)(B) and the other adding new paragraph (21). The provision amended section 1833(t)(1)(B) by adding a new clause (v), which excludes from the definition of ``covered OPD services'' applicable items and services (defined in paragraph (21)(A) of such section) that are furnished on or after January 1, 2017 by an off-campus PBD, as defined in paragraph (21)(B) of such section. The second amendment added a new paragraph (21) to section 1833(t) of the Act, which defines the terms ``applicable items and services'' and ``off-campus outpatient department of a provider,'' requires the Secretary to make payments for such applicable items and services furnished by an off-campus PBD under an applicable payment system (other than OPPS), provides that hospitals shall report on information as needed for implementation of the provision, and establishes a limitation on administrative and judicial review on certain determinations for applicable items and services, applicable payment system, and off-campus outpatient department of a provider, and information required to be reported.

      In defining the term ``off-campus outpatient department of a provider,'' section 1833(t)(21)(B)(i) of the Act specifies that the term means a department of a provider (as defined at 42 CFR 413.65(a)(2) as that regulation was in effect on November 2, 2015, the

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      date of enactment of Pub. L. 114-74) that is not located on the campus of such provider, or within the distance from a remote location of a hospital facility. Section 1833(t)(21)(B)(ii) of the Act excepts from the definition of ``off-campus outpatient department of a provider,'' for purposes of paragraphs (1)(B)(v) and (21)(B) of such section, an off-campus PBD that was billing under section 1833(t) with respect to covered OPD services furnished prior to the date of enactment of Public Law 114-74, that is, November 2, 2015. In the CY 2017 OPPS/ASC proposed rule, we proposed to refer to this exception as providing ``excepted'' status to certain off-campus PBDs and certain items and services furnished by such excepted off-campus PBDs, which would continue to be paid under the OPPS. Moreover, because the definition of ``applicable items and services'' specifically excludes items and services furnished by a dedicated emergency department as defined at 42 CFR 489.24(b) and the definition of ``off-campus outpatient department of a provider'' does not include PBDs located on the campus of a hospital or within the distance (described in the definition of campus at 413.65(a)(2)) from a remote location of a hospital facility, the items and services furnished by these excepted off-campus PBDs on or after January 1, 2017 will continue to be paid under the OPPS.

      In the CY 2017 OPPS/ASC proposed rule (81 FR 45681), we proposed to make a number of proposals to implement section 603 of Public Law 114-

      74. Broadly, we proposed to do three things: (1) Define applicable items and services in accordance with section 1833(t)(21)(A) of the Act for purposes of determining whether such items and services are covered OPD services under section 1833(t)(1)(B)(v) of the Act or whether payment for such items and services shall instead be made under section 1833(t)(21)(C) of the Act; (2) define off-campus PBD for purposes of sections 1833(t)(1)(B)(v) and (t)(21) of the Act; and (3) establish policies for payment for applicable items and services furnished by an off-campus PBD (nonexcepted items and services) under section 1833(t)(21)(C) of the Act. To do so, we proposed policies that would define whether certain items and services furnished by a given off-

      campus PBD may be considered excepted and, thus, continue to be paid under the OPPS; establish the requirements for the off-campus PBDs to maintain excepted status (both for the excepted off-campus PBD and for the items and services furnished by such excepted off-campus PBDs); and describe the applicable payment system for nonexcepted items and services. In addition, we solicited public comments on information collection requirements for implementing this provision in accordance with section 1833(t)(21)(D) of the Act.

      There is no legislative history on record regarding section 603 of Public Law 114-74. However, the Congressional Budget Office estimated program savings for this provision of approximately $9.3 billion over a 10-year period. In January 2016, we posted a notice on the CMS Web site that informed stakeholders that we expected to present our proposals for implementing section 603 of Public Law 114-74 in the CY 2017 OPPS/

      ASC proposed rule. Because we had already received several inquiries or suggestions from stakeholders regarding implementation of the section 603 provision, we provided a dedicated email address for stakeholders to provide information they believed was relevant in formulating the proposals in the proposed rule. We stated in the proposed rule that we had considered this stakeholder feedback in developing the proposed policies.

      Comment: Numerous commenters urged CMS to delay implementation of the section 603 provisions to allow the agency additional time to develop policies that would not impose undue burden on CMS and hospitals. The commenters stated that if all of the proposals related to section 603 are adopted as final without modification, hospitals may not be able to continue to provide the current level of health care necessary in their communities. Commenters who support a delay posited that the delay would provide additional time to collect data that would inform ``implementation'' of section 603. In addition, commenters stated that there is precedence for CMS to delay implementation of legislative provisions, even if the legislation includes a deadline for enactment. The commenters cited the following as examples of CMS delaying implementation of legislative provisions:

      Hospital Outpatient Prospective Payment System for 18 months, from January 1, 1999 to July 1, 2000;

      Ambulance Fee Schedule for 27 months, from January 1, 2000 to April 1, 2002; and

      Medicare Clinical Diagnostic Laboratory Tests Payment System for 12 months, from January 1, 2017 to January 1, 2018.

      Response: As discussed in detail later in this final rule with comment period, we are not delaying implementation of the section 603 provisions of Public Law 114-74, and are finalizing implementation of the provisions, effective January 1, 2017, in this final rule with comment period. In addition, in an interim final rule with comment period presented under section X.B. of this document, we are establishing payment rates under the MPFS to be used by hospitals for billing for nonexcepted items and services. With respect to the comment that a delay would enable CMS to collect appropriate data; we disagree. As discussed in section X.A.3.b.(2) of this final rule with comment period and also in the interim final rule with comment period in section X.B. of this document, we are establishing a modifier for use by hospitals to bill on their claim to identify nonexcepted items and services beginning January 1, 2017. These claims-based data will prove useful for making payment for nonexcepted items and services under the MPFS beginning in January 2017 and will be helpful over time as Medicare is able to collect and analyze hospital data on nonexcepted items and services and use that information to refine payment for nonexcepted items and services. Accordingly, we do not agree with commenters that a delay is appropriate. Moreover, we note that the law requires the section 603 provisions to take effect January 1, 2017.

      Comment: MedPAC commended CMS' effort to ``rigorously implement'' section 603 and further stated that if CMS finalized the proposed policies, it believed the policies would have the potential to reduce the financial burden on taxpayers and beneficiaries, although there would likely be substantial administrative burdens on the agency, its contractors and providers. Other commenters generally supported the proposed policies and believed that the proposals would reduce the incentive for hospitals to purchase physician's offices and convert them to HOPDs without changing their location or patient population.

      Response: We appreciate the commenters' support. We summarize and respond to public comments on specific proposal