TRICARE: Outpatient Hospital Prospective Payment System (OPPS)

As Enacted ( Federal Register)

Cited authorities 10

Cited in

Federal Register: April 1, 2008 (Volume 73, Number 63)

Proposed Rules

Page 17271-17289

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

DOCID:fr01ap08-14

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DEPARTMENT OF DEFENSE

Office of the Secretary

DOD-2007-HA-0048; RIN 0720-AB19

32 CFR Part 199

TRICARE; Outpatient Hospital Prospective Payment System (OPPS)

AGENCY: Office of the Secretary, DoD.

ACTION: Proposed rule.

SUMMARY: This proposed rule implements a prospective payment system for hospital outpatient services similar to that furnished to Medicare beneficiaries, as set forth in section 1833(t) of the Social Security

Act. The rule also recognizes applicable statutory requirements and changes arising from Medicare's continuing experience with this system including certain related provisions of the Medicare Prescription Drug,

Improvement, and Modernization Act of 2003. The Department is publishing this rule to implement an existing statutory requirement for adoption of Medicare payment methods for institutional care which will ultimately provide incentives for hospitals to furnish outpatient services in an efficient and effective manner.

DATES: Written comments received at the address indicated below by June 2, 2008 will be accepted.

ADDRESSES: You may submit comments, identified by docket number and or

Regulatory Information Number (RIN) number and title, by either of the following methods:

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

Mail: Federal Docket Management System Office, 1160

Defense Pentagon, Washington, DC 20301-1160.

Instructions: All submissions received must include the agency name and docket number or RIN for this Federal Register document. The general policy for comments and other submissions from members of the public is to make these submissions available for public viewing on the

Internet at http://regulations.gov as they are received without change, including any personal identifiers or contact information.

FOR FURTHER INFORMATION CONTACT: David E. Bennett, TRICARE Management

Activity, Medical Benefits, and Reimbursement Systems, telephone (303) 676-3494.

SUPPLEMENTARY INFORMATION:

I. Introduction and Background

The OPPS evolved out of Congressional mandates for replacement of

Medicare's cost-based payment methodology with a prospective payment system (PPS). Medicare implemented OPPS for services furnished on or after August 1, 2000, with temporary transitional provisions to buffer the financial impact of the new prospective payment system (e.g., incorporating transitional pass-through adjustments and proportional reductions in beneficiary cost-sharing to lessen potential payment reductions experienced under the new OPPS).

Congress likewise established enabling legislation under section 707 of the National Defense Authorization Act of Fiscal Year 2002

(NDAA-02), Public Law 107-107 (December 28, 2001) changing the statutory authorization [in 10 U.S.C. 1079(j)(2)] that TRICARE payment methods for institutional care shall be determined, to the extent practicable, in accordance with the same reimbursement rules used by

Medicare. Similarly, under 10 U.S.C. 1079(h), the amount to be paid to health care professional and other non-institutional health care providers ``shall be equal to an amount determined to be appropriate, to the extent practicable, in accordance with the same reimbursement rules used by Medicare''. Based on these statutory mandates, TRICARE is adopting Medicare's prospective payment system for reimbursement of hospital outpatient services currently in effect for the Medicare program as required under the Balanced Budget Act of 1997 (BBA 1997),

(Pub. L. 105-33) which added section 1833(t) of the Social Security Act providing comprehensive provisions for establishment of a Medicare hospital OPPS. The Act required development of a classification system for covered outpatient services that consisted of groups arranged so that the services within each group were comparable clinically and with respect to the use of resources. The Act also described the method for determining the Medicare payment amount and beneficiary coinsurance amount for services covered under the outpatient PPS. This included the formula for calculating the conversion factor and data requirements for establishing relative payment weights.

Centers for Medicare & Medicaid Services (CMS) published a proposed rule in the Federal Register on September 8, 1998 (63 FR 47552) setting forth the proposed PPS for hospital outpatient services. On June 30, 1999, a correction notice was published (64 FR 35258) to correct a number of technical and typographical errors contained in the September 8, 1998 proposed rule.

Subsequent to publication of the proposed rule, the Medicare,

Medicaid, and State Child Health Insurance Program (SCHIP) Balanced

Budget Refinement Act of 1999 (BBRA 1999) (Pub. L. 106-133) enacted on

November 29, 1999, made major changes that affected the proposed

Medicare OPPS. The following BBRA 1999 provisions were implemented in a final rule (65 FR 18434) published on April 7, 2000.

Made adjustments for covered services whose costs exceed a given threshold (i.e., an outlier payment).

Established transitional pass-through payments for certain medical devices, drugs, and biologicals.

Placed limitations on judicial review for determining outlier payments and the determination of additional payments for certain medical devices, drugs, and biologicals.

Included as covered outpatient services implantable prosthetics and durable medical equipment and diagnostic x-ray, laboratory, and other tests associated with those implantable items.

Limited the variation of costs of services within each payment classification group.

Required at least annual review of the groups, relative payment weights, and the wage and other adjustments to take into account changes in medical practice, the addition of new services, new cost data, and other relevant information or factors.

Established transitional corridors that would limit payment reductions under the hospital outpatient PPS.

Established hold harmless provisions for rural and cancer hospitals.

Provided that the coinsurance amount for a procedure performed in a year could not exceed the hospital inpatient deductible for the year.

Section 1833(t) of the Social Security Act was subsequently amended by the Medicare, Medicaid, and SCHIP Benefits Improvement and

Protection Act (BIPA) of 2000 (Pub. L. 106-554) and the Medicare

Prescription Drug, Improvement, and Modernization Act (MMA) of 2003

(Pub. L. 108-173) making additional changes in the OPPS.

As a prelude to implementation of the OPPS, Congress enacted the

Omnibus Budget Reconciliation Act of 1986 (OBRA) (Pub. L. 99-509) which paved the way for development of a PPS for hospital outpatient services by prohibiting payment for non-physician services furnished to hospital patients (inpatients and outpatients), unless the services were furnished either directly or under arrangement with the hospital, except for services of physician

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assistants, nurse practitioners and clinical nurse specialists.

Exceptions were also made for clinical diagnostic procedures, the payment of which may only be made to the person or entity that performed, or supervised the performance of, the test; and for exceptionally intensive hospital outpatient services provided to

Skilled Nursing Facility (SNF) residents that lie well beyond the scope of the care that SNFs would ordinarily furnish, and thus beyond the ordinary scope of the SNF care plan. Consolidated billing facilitated the payment of services included within the scope of each ambulatory payment classification (APC). The OBRA also mandated hospitals to report claims for services under the Healthcare Common Procedure Coding

System (HCPCS) which enabled the identification of specific procedures and services used in the development of outpatient PPS rates.

Ongoing changes and refinement to the OPPS have been accomplished through annual proposed and final rulemaking, along with interim transmittals and program memoranda taking into consideration changes in medical practice, addition of new services, new cost data, and other relevant information and factors. TRICARE will recognize to the extent practicable all applicable statutory requirements and changes arising from Medicare's continuing experience with this prospective payment system, including changes to the amounts and factors used to determine the payment rates for hospital outpatient services paid under the prospective payment system [e.g., annual recalibration (updating) of group weights and conversion factors and adjustments for area wage differences (wage index updates)]. The agency will adopt all of

Medicare's CY 2008 OPPS changes published in the Federal Register on

November 27, 2007, (72 FR 66580); e.g., extending the current packaging to include guidance services, image processing services, intraoperative services, imaging supervision and interpretation services, diagnostic radiopharmaceuticals, contrast agents, and observation services; and reduction of payments in cases where a hospital receives a substantial partial credit from the manufacturer toward the cost of a replacement device implanted in a procedure.

While TRICARE intends to remain as true as possible to Medicare's basic OPPS methodology (i.e., adoption and updating of the Medicare data elements used to calculate the prospective payment amounts), there will be some deviations required to accommodate the uniqueness of the

TRICARE program. These deviations have been designed to accommodate existing TRICARE benefit structure and claims processing procedures/ systems implemented under the TRICARE Next Generation Contracts (T-

NEX), while at the same time eliminating any undue financial burden to

TRICARE Prime, Extra, and Standard beneficiary populations. Following is a brief discussion of each of these deviations:

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Outpatient Code Editor (OCE)--The Medicare Outpatient Code

Editor with APC program edits data to help identify possible errors in coding and assigns Ambulatory Payment Classification numbers based on

HCPCS codes for payment under the OPPS. The OPPS APC is an outpatient equivalent of the inpatient Diagnosis Related Group (DRG)-based PPS.

Like the inpatient system based on DRGs, each APC has a pre-established prospective payment amount associated with it. However, unlike the inpatient system that assigns a patient to a single DRG, multiple APCs can be assigned to one outpatient claim. If a patient has multiple outpatient services during a single visit, the total payment for the visit is computed as the sum of the individual payments for each service. Medicare provides updated versions of the OCE, along with installation and user manuals, to its fiscal intermediaries on a quarterly basis. The updated OCE reflects all new coding and editing changes during that quarter.

It was found upon initial testing of the OCE that it could not be used in its present form given the fact that the extensive editing embedded in its software program was specific to Medicare's benefit structure and internal claims processing requirements. As a result, the

Agency has developed a TRICARE-specific OCE which will better accommodate the benefit structure and claims processing systems currently in place under the T-NEX contracts. This modified software package will edit claims data for errors and indicate actions to be taken and reasons why the actions are necessary. This expanded functionality will facilitate the linkage between the action being taken, the reasons for the action, and the information on the claim that caused the action. The edits will be specific for TRICARE, ensuring compliance with current claims processing criteria. The OCE will also assign an APC number for each service covered under the OPPS and return information to be used as input to the TRICARE PRICER program.

Like Medicare's OCE, the TRICARE-specific OCE will be updated on a quarterly basis incorporating, to the extent practicable, all Medicare changes/updates (i.e., those changes initiated through rulemaking and transmittals/program memoranda). Periodic updating of the TRICARE- specific OCE will ensure consistency and accuracy of claims processing and payment under the OPPS.

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Deductible and Cost-Sharing--Medicare's OPPS coinsurance was initially frozen at 20 percent of the national median charge for the services within each APC (wage adjusted for the provider's geographic area) or 20 percent of the APC payment rate, whichever was greater

(i.e., the coinsurance for an APC could not fall below 20 percent of the APC payment rate). This was designed so that, as the total payment to the provider increased each year based on market basket updates, the present or frozen coinsurance amount would become a smaller portion of the total payment until the coinsurance represented 20 percent of the total. Once the coinsurance became 20 percent of the payment amount, annual updates would be applied to the coinsurance so that it would continue to account for 20 percent of the total charge. Wage adjusted coinsurance amounts were further limited by the Medicare inpatient deductible. Subsequent legislation has accelerated the reduction of beneficiary copayment amounts by imposing prescribed percentage limitations off of the APC payment rate. For example, for all services paid under the OPPS in CY 2005, the national unadjusted copayment amount cannot exceed 45 percent of the APC rate. Accelerated reductions were imposed specifically for those APC groups for which coinsurance represented a relatively high proportion of the total payment.

A program payment percentage is calculated for each APC by subtracting the unadjusted national coinsurance amount for the APC from the unadjusted payment rate and dividing the result by the unadjusted payment rate. The payment rate for each APC group is the basis for determining the total payment (subject to wage-index adjustment) that a hospital will receive from the beneficiary and the Medicare program.

Since imposition of Medicare's unadjusted national coinsurance amounts would have an adverse financial impact on TRICARE beneficiaries

(i.e., imposition of significantly higher cost-sharing for Prime beneficiaries), the Agency has opted to use the following hospital

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outpatient deductible and cost-sharing/copayments currently being applied in Tables 1 and 2 below for Prime, Extra, and Standard TRICARE programs for hospital outpatient services:

Table 1.--Hospital Outpatient Deductibles

Active duty family members

TRICARE programs

---------------------------------------------------- Retirees, their family

E1-E4

E5 & above

members & survivors

Prime............................. None.................... None.................... None.

Extra............................. $50 per Individual...... $150 per Individual..... $150 per Individual.

$100 Maximum per family. $300 Maximum per family. $300 Maximum per family.

Standard.......................... $50 per Individual...... $150 per Individual..... $150 per Individual.

$100 Maximum per family. $300 Maximum per family. $300 Maximum per family.

Table 2.--Hospital Outpatient Copayments/Cost-Sharing

TRICARE prime program

Type of service

Active duty family member

TRICARE extra program

TRICARE standard

Retirees, their family

program

E1-E4

E5 & above

members & survivors

Hospital Outpatient Departments:

$0 copayment per

$12 copayment per

Active Duty Family

Clinic visits; therapy visits;

visit.

Members: Cost-share-- Members: Cost-share-- treatment rooms, etc.

...................... ...................... ...................... 15% of fee

20% of the allowable

...................... ...................... ...................... negotiated by

charge.

Emergency Services: Emergency and ...................... ...................... ...................... contractor

Retirees, Their urgently needed care obtained in $0 copayment per

$0 copayment per

$30 copayment per

Retirees, Their

Family Members & hospital emergency room.

visit.

emergency room visit. Family Members &

Survivors: Cost-

share--25% of the share--20% of the

allowable charge. fee negotiated by the contractor

Ambulatory Surgery (same day):

$0 copayment per

$25 copayment

ADFMs: Cost-share--

Hospital-based ambulatory

visit.

No separate copayment/ $25

$25. surgical center.

...................... ...................... cost-share for

Retirees, Their

...................... ...................... separately billed

Family Members &

...................... ...................... professional

Survivors: Cost-

Survivors: Lesser of

...................... ...................... charges.

share--20% of the

25% of group rate or

...................... ...................... ...................... institutional fee

25% of billed

Birthing Centers Prenatal care,

...................... ...................... ...................... negotiated by the

charge. outpatient delivery, and

$0 copayment per

$25 copayment

contractor. postnatal care provided in

visit.

visit. hospital-based birthing center.

Partial Hospitalization Programs

$0 copayment per

40 per diem charge

ADFMs: $20 per diem

(PHPs): Mental health services

visit.

No separate copayment/ charge

charge. provided in authorized hospital-

cost-share for

Retirees, Their

Retirees, Their based PHP.

separately billed

Family Members &

Family Members & professional charges

Survivors: Cost-

Survivors: Cost- share--20% of the

share--25% of the

TRICARE allowed

TRICARE allowed amount

amount.

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Hold-Harmless Protection--Since the inception of the Medicare

OPPS, providers have been eligible to receive additional transitional outpatient payments (TOPs) if the payments they received under the OPPS were less than the payments they could have received for the same services under the payment system in effect before the OPPS. Prior to

January 1, 2004, most hospitals that realized lower payments under OPPS received transitional corridor payments based on a percent of the decreased payments, with the exception of cancer hospitals, children's hospitals and rural hospitals having 100 or fewer beds which were held harmless under this provision and paid the full amount of the decrease in payment under the OPPS. Since transitional corridor payments were intended to be temporary payments to ease the provider's transition from a prior cost-based payment system to a prospective payments system, they were terminated as of January 1, 2004, with the exception of cancer and children's hospitals which were held harmless permanently under transitional corridor provisions of the statute (section 1833(t)(7) of the Social Security Act). The authority for making transitional corridor payments under section 1833(t)(7)(D)(i) of the

Act, as amended by section 411 Public Law 108-173, expired for rural hospitals having 100 or fewer beds, and sole community hospitals (SCHs) located in rural areas as of December 31, 2005. However, subsequent legislation (Section 5105 of Pub. L. 109-171) reinstituted the hold- harmless transitional outpatient payments (TOPs)

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for covered OPD services furnished on or after January 1, 2006, and before January 1, 2009, for rural hospitals having 100 or fewer beds that are not SCHs. This provision provided an increased payment for such hospitals for outpatient services if the OPPS payment they received was less than the pre-BBA payment amount (i.e., the amount that was received prior to implementation of OPPS) that they would have received for the same covered service. When the OPPS payment is less than the payment the provider would have received prior to OPPS implementation, the amount of payment is increased by 90 percent of the amount of that difference for CY 2007, and by 85 percent of the amount of the difference for CY 2008. The amount of payment under section 1833(t)(13)(B) of the Act, as amended by section 411 of Public Law 108- 73, also provided a payment increase for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding drugs, biologicals, brachytherapy seeds and services paid under pass-through payments effective January 1, 2006, if justified by a study of the difference in costs for rural SCHs, which include Medicare essential access community hospitals or EACHs.

While the Agency adopted the hold-harmless TOPs for rural hospitals having 100 or fewer beds and SCHs, it opted to totally exempt cancer and children's hospitals from the OPPS in lieu of imposing the hold- harmless provision, given the administrative complexity of capturing the data required for payment of monthly interim TOP amounts. TOPs would require a comparison of what would have been paid [i.e., billed charges and CHAMPUS Maximum Allowable Charge (CMAC) amounts] prior to implementation of the OPPS for hospital outpatient services to those amounts actually paid under the OPPS for the same services. A TOP would be allowed in addition to the OPPS amount if payment to a cancer or children's hospital was lower than the amount that would have been paid prior to implementation of the OPPS. Since transitional corridor payments were specifically designed to supplement the losses experienced under the OPPS (i.e., to pay for services at the full amount that would have been allowed prior to implementation of the

OPPS), and most, if not all, outpatient services paid at a billed or

CMAC would exceed the OPPS amount, the program cannot justify the administrative burden/expense of maintaining the hold-harmless provisions for cancer and children's hospitals. As a result, TRICARE will continue to reimburse cancer and children's hospitals on a fee- for-services basis using billed charges and CMAC rates; i.e., they will be excluded altogether from the OPPS.

Adoption of the Medicare OPPS has also highlighted other policy considerations which must be addressed in order to accommodate preexisting authorization criteria and reimbursement systems. Following are these identified policy considerations and prescribed resolutions:

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Partial Hospitalization Programs (PHP)--Currently, TRICARE coverage extends to both full- and half-day psychiatric partial hospitalization services furnished by TRICARE-authorized partial psychiatric hospitalization programs and authorized mental health providers for the active treatment of a mental disorder. Each psychiatric partial hospitalization program must be either a distinct part of an otherwise authorized institutional provider or a freestanding program certified pursuant to TRICARE certification standards; i.e., the facility must be accredited by the Joint

Commission on Accreditation of Healthcare Organizations (JCAHO) under the current edition of the Accreditation Manual for Mental Health,

Chemical Dependency, and Mental Retardation/Developmental Disabilities

Services and meet all other requirements as prescribed under 32 CFR 199.6(b)(4)(xii)(A) through (D). These authorized and participating partial hospitalization programs are paid a percentage off of the average inpatient per diem amount per case to both high- and low-volume psychiatric hospitals. Full-day partial hospitalization programs

(minimum of 6 hours) receive 40 percent of the average inpatient per diem, while partial hospitalization programs with less than 6 hours

(with a minimum of three hours) will be paid a per diem of 75 percent of the rate for full-day partial hospitalization programs.

Although the prescribed payment methodology for PHP under OPPS is similar to that currently being used (i.e., payment under a per diem recognizing the provider's overhead costs and support staff), there are subtle differences in that OPPS' all-inclusive per diems represent actual median costs of furnishing a day of partial hospitalization while per diems under the existing TRICARE system as prescribed under 32 CFR 199.14(a)(2)(ix) are extrapolated from inpatient costs based on the intensity of the program (i.e., dependent on whether it is classified as a full- or half-day program). Another notable difference between the two programs is the continuation of reimbursement of half- day PHPs (>= to 3 hrs. but The patient is suffering significant impairment from a mental disorder (as defined in Sec. 199.2) which interferes with age appropriate functioning.

The patient is unable to maintain himself or herself in the community, with appropriate support, at a sufficient level of functioning to permit an adequate course of therapy exclusively on an outpatient basis (but is able, with appropriate support, to maintain a basic level of functioning to permit partial hospitalization services and presents no substantial imminent risk of harm to self or others).

The patient is in need of crisis stabilization, treatment of partially stabilized mental health disorders, or

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services as a transition from an inpatient program.

The admission into the partial hospitalization program is based on the development of an individualized diagnosis and treatment plan expected to be effective for the patient and permit treatment at a less intensive level.

Based on existing mental health review criteria under 32 CFR 199.4(b)(10) and certification requirements prescribed under 32 CFR 199.6(b)(4)(xii)(A), including accreditation by the JCAHO, under the current edition of the Accreditation Manual for Mental Health, Chemical

Dependency, and Mental Retardation/Developmental Disabilities Services, not all hospital-based PHPs will be assured of receiving payment under the OPPS unless they meet the above prescribed certification requirements and enter into a participation agreement with TRICARE.

CMHC PHPs have been excluded from payment under the TRICARE OPPS since

CMHCs are not recognized as authorized providers under the TRICARE program.

While the authorization standards under 32 CFR 199.6(b)(4)(xii)(A) through (D) will be retained/applied for both hospital-based and freestanding PHPs currently recognized under the Program, including the requirement for a written participation agreement with TRICARE, freestanding PHPs will be exempt from OPPS and will continue to be reimbursed under the old TRICARE PHP per diem system as prescribed under 32 CFR 199.14(a)(2)(ix), subject to their own unique mental health copayment/cost-sharing provisions.

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Ambulatory Surgery Procedures--Currently, ambulatory surgery procedures provided in both freestanding ambulatory surgery centers

(ASCs) and hospital outpatient departments or emergency rooms are paid using prospectively determined rates established on a cost basis and divided into eleven groups as prescribed under 32 CFR 199.14(d). These payment groups are further adjusted for area labor costs based on

Metropolitan Statistical Areas (MSAs). The payment rates established under this system apply only to facility charges for ambulatory surgery

(e.g., standard overhead amounts that include, but are not limited to, nursing and technician services, use of the facility and supplies and equipment directly related to the surgical procedure) and do not include such items as physician's fees, laboratory, X-rays or diagnostic procedures (other than those directly related to the performance of the surgical procedure), prosthetics and durable medical equipment for use in the patient's home. Ambulatory surgery procedures

(both provided in hospital-based and freestanding ambulatory surgery centers) are subject to their own unique copayment/cost-sharing provisions under the current TRICARE ambulatory surgery benefit.

With implementation of the OPPS, hospital-based ambulatory surgery procedures will no longer be reimbursed under the original eleven tier payment system, but will instead be paid on a rate-per-service basis that varies according to the APC group to which the surgical procedure is assigned. The relative weight of the APC group will represent the median hospital cost of the services included in the APC relative to the median cost of services included in APC 0606, Level 3 Clinic Visit.

The prospective payment rate for each APC will be calculated by multiplying the APC's relative weight by a nationally established conversion factor and adjusting it for geographic wage differences. The

APC payment will be subject to the deductible and cost-sharing/ copayment amounts currently being applied under Prime, Extra, and

Standard TRICARE programs for hospital outpatient services. Denial of

Medicare inpatient procedures will also be adhered to under the OPPS

(i.e., denial of inpatient surgical procedures performed in a hospital outpatient setting) except for those inpatient procedures, which upon medical review, could be safely and efficaciously rendered in an outpatient setting due to TRICARE's younger, healthier beneficiary population. Exceptions to Medicare's inpatient surgical procedure listing were based in major part to standardized utilization management review criteria, (i.e., Interqual and Milliman), used by TRICARE

Managed Care Support Contractors' medical review staff. TRICARE- specific APCs will be developed for these designated inpatient procedures based on median costs from the most recent 12 months of claims history. OPPS reimbursement will also be extended for an inpatient procedure performed to resuscitate or stabilize a patient with an emergent, life-threatening condition who dies before being admitted as a patient, which in this case, will be paid under a new technology APC.

Freestanding ASCs will be exempt from OPPS and will continue to be paid under the existing eleven tier payment system. ASC procedures will be placed into one of ten groups by their median per procedure cost, starting with $0 to $299 for Group 1, and ending with $1,000 to $1,299 for Group 9 and $1,300 and above for Group 10, subject to their own unique copayment/cost-sharing provisions under the TRICARE freestanding ambulatory surgery benefit. The eleventh payment tier/group was added to the ASC reimbursement system as of November 1, 1998, for extracorporeal shock wave lithotripsy, with a rate established off of the inpatient Diagnostic Related Group (DRG) 323 which is currently

$3,289.

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Birthing Centers--As described in 32 CFR 199.6(b)(4)(xi), a birthing center is a freestanding or institution-affiliated outpatient maternity care program which principally provides a planned course of outpatient prenatal care and outpatient childbirth services limited to low-risk pregnancies. These all-inclusive maternity and childbirth services are currently being reimbursed in accordance with 32 CFR 199.14(e) at the lower of the TRICARE established all-inclusive rate or the billed charge. The all-inclusive rate includes laboratory studies, prenatal management, labor management, delivery, post-partum management, newborn care, birth assistant, certified nurse-midwife professional services, physician professional services, and the use of the facility to the extent that they are usually associated with a normal pregnancy and childbirth. Since institutional-affiliated maternity centers will continue to be reimbursed under the TRICARE maximum allowable birthing center all-inclusive rate methodology as prescribed under 32 CFR 199.14(e), payment will be equal to the sum of the Class 3 CMAC for total obstetrical care for a normal pregnancy and delivery (CPT code 59400) and the TMA supplied non-professional component amount, which includes both the technical and professional components of tests usually associated with a normal pregnancy and childbirth. As a result, hospital-based birthing centers will continue to be reimbursed the same as freestanding birthing centers except that updating of the hospital-based all inclusive rate, consisting of the

CMAC for procedure code 59400 (Birthing Center, all-inclusive charge, complete) and the state specific non-professional component, will lag two months behind the freestanding birthing center all-inclusive update; i.e., the freestanding birthing center all-inclusive rate components will usually be updated on February 1 of each year to coincide with the annual CMAC file update, followed by the hospital- based birthing center all-inclusive rate component updates on April 1 of the same year.

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Observation Stays--Observation Services are those services furnished on a hospital's premises, including the use of a bed and periodic monitoring by a

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hospital's staff, which are reasonable and necessary to evaluate an outpatient's condition or to determine the need for a possible admission to the hospital as an inpatient. Under Medicare, prior to CY 2008, a hospital may receive separate APC payments for observation services for patients having diagnoses of chest pain, asthma, or congestive heart failure, when billed in conjunction with an evaluation and management visit for a minimum of 8 hours. Since these qualifying diagnoses would greatly restrict separate payment of observation stays currently being reimbursed based solely on medical necessity, they are being expanded to accommodate the special needs of unique TRICARE beneficiary populations (e.g., separate payment for maternity observations stays). Separate payment of maternity observation stays required the modification of the existing conditional criteria for separate payment of observation stays associated with pain, asthma or congestive heart failure. Under the TRICARE OPPS, additional hospital services (e.g., separate emergency room visit or clinic visit) will not be required on a claim with a maternity diagnosis in order to receive separate payment for an observation stay. The minimum time requirements have also been reduced from 8 to 4 hours to ensure maximum coverage of medically necessary maternity observation stays.

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End-State Renal Disease (ESRD) Dialysis Services--In accordance with sections 1881(b)(2) and (b)(7) of the Social Security

Act, a facility that furnishes dialysis services to Medicare patients with ESRD is paid a prospectively determined rate for each dialysis treatment furnished. The rate is a composite that includes all costs associated with furnishing dialysis services except for the costs of physician services and certain laboratory tests and drugs that are billed separately. CMS has exercised the authority granted under section 1833(t)(1)(B)(i) to exclude from the outpatient PPS those services for patients with ESRD that are paid under the ESRD composite rate. Since TRICARE does not have a comparable composite rate in effect for payment of ESRD services, they will be reimbursed under TRICARE's

OPPS.

II. Treatment Settings Subject to Outpatient Prospective Payment System

The outpatient prospective payment system is applicable to any hospital participating in the Medicare program except for Critical

Access Hospitals (CAHs), Indian Health Service hospitals, certain hospitals in Maryland that qualify for payment under the state's cost containment waiver, and hospitals located outside one of the 50 states, the District of Columbia and Puerto Rico and specialty care providers which include: (1) Cancer and children's hospitals; (2) freestanding

ASCs; (3) freestanding Partial Hospitalization Programs (PHPs); (4) freestanding psychiatric and Substance Use Disorder Rehabilitation

Facilities (SUDRFs); (5) Comprehensive Outpatient Rehabilitation

Facilities (CORFs); (6) Home Health Agencies (HHAs); (7) hospice programs; (8) other corporate services providers (e.g., freestanding cardiac catheterization centers, freestanding sleep diagnostic centers, and freestanding hyperbaric oxygen treatment centers); (9) freestanding birthing centers; (10) VA hospitals; and (11) freestanding ESRD centers. Due to their inability to meet the more stringent requirements imposed for hospital-based and freestanding PHPs under the Program,

CMHCs have also been excluded from payment under OPPS for partial hospitalization program (PHP) services since they are not recognized as authorized providers under the TRICARE program.

An outpatient department, remote location hospital, satellite facility, or other provider-based entity must also be either created by, or acquired by, a main provider (hospital qualifying for payment under OPPS) for the purpose of furnishing health care services of the same type as those furnished by the main provider under the name, ownership, and financial administrative control of the main provider, in accordance with the following requirements under 42 CFR Sec. 413.65

(Medicare Regulation) in order to qualify for payment under the OPPS:

Licensure--The outpatient department, remote location hospital, or the satellite facility and the main hospital are operated under the same license, except in areas where the State requires a separate license for the department of the provider.

Clinical integration--Professional staff of the outpatient department, remote location hospital or satellite facility are monitored by, and have clinical privileges at the main hospital. The medical director of the outpatient facility must also maintain a reporting relationship with the chief medical officer at the main hospital that has the same frequency, intensity and level of accountability that exists in the relationship between other departmental medical directors and the chief medical officer of the main hospital. Medical records for patients treated in the facility or organization must be integrated into a unified retrieval system (or cross reference) of the main hospital and there must be full access to all services provided at the main hospital for patients treated in the outpatient facility requiring further care.

Financial integration. The financial operation of the outpatient facility must be fully integrated within the financial system of the main hospital, as evidenced by shared income and expenses between the main hospital and outpatient facility.

Public awareness. The outpatient department, remote location hospital, or a satellite facility is held out to the public and other payers as part of the main provider. When patients enter the outpatient facility they are aware that they are entering the main provider and are billed accordingly.

Having clear criteria for provider-based status is important because this designation can result in additional TRICARE payments for services at the provider-based facility (i.e., the incorporation of additional facility costs for covered outpatient services/procedures).

TRICARE will accept the providers' determination on whether they meet the regulatory criteria for provider-based status for purposes of seeking reimbursement under the TRICARE OPPS.

III. Application of Ambulatory Payment Classification (APC) Model

Payment for services under the OPPS is based on grouping outpatient services into APC groups in accordance with provisions outlined in section 1833(t) of the Social Security Act and its implementing regulation 42 CFR Part 419. This grouping is accommodated through the reporting of HCPCS codes and descriptors that are used to group homogenous services (both clinically and in terms of resource consumption) into their respective APC groups.

During the development of the hospital OPPS it was recognized that certain hospital outpatient services were being paid based on fee schedules or other prospectively determined rates that were being applied across other ambulatory care settings. As a result, the following services were excluded from the OPPS in order to achieve consistency of payment across different service delivery sites: (1)

Physician services; (2) nurse practitioner and clinical nurse specialist services; (3) physician assistant services; (4) certified nurse-midwife services; (5) services of a qualified psychologist; (6) clinical social worker services, except under half- and full-day partial hospitalization programs in which the services are included within the per diem payment amount;

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(7) services of an anesthetist; (8) screening and diagnostic mammographies; (9) clinical diagnostic services; (10) non-implantable

DME, orthotics, prosthetics, and prosthetic devices and supplies; (11) hospital outpatient services furnished to SNF inpatients as part of their comprehensive care plan; (12) physical therapy; (13) speech- language pathology; (14) occupational therapy; (15) influenza and pneumococcal pneumonia vaccines; (16) take-home surgical dressings;

(17) services and procedures designated as requiring inpatient care; and (18) ambulance services. These services will continue to be reimbursed under the current CMAC fee schedule or other TRICARE- recognized allowable charge methodology (e.g., statewide prevailings).

The remaining outpatient procedures which were not being paid under current fee schedules or other prospectively determined rates were grouped under an APC based on the following criteria:

Resource Homogeneity--The amount and type of facility resources (for example, operating room, medical supplies, and equipment) that are used to furnish or perform the individual procedures or services within each APC group should be homogeneous.

That is, the resources used are relatively constant across all procedures or services even though resources used may vary somewhat among individual patients.

Clinical Homogeneity--The definition of each APC should be

``clinically meaningful.'' That is, the procedures or services included within the APC group relate generally to a common organ system or etiology, have the same degree of extensiveness, and utilize the same method of treatment.

Provider Concentration--The degree of provider concentration associated with the individual services that comprise the

APC is considered. If a particular service is offered only in a limited number of hospitals, then the impact of payment for the services is concentrated in a subset of hospitals. Therefore, it is important to have an accurate payment level for services with a high degree of provider concentration. Conversely, the accuracy of payment levels for services that are routinely offered by most hospitals does not bias the payment system against any subset of hospitals.

Frequency of Service--Unless there is a high degree of provider concentration, creating separate APC groups for services that are infrequently performed is avoided. Since it is difficult to establish reliable payment rates for low-volume groups, HCPCS codes are assigned to an APC that is most similar in terms of resource use and clinical coherence.

Minimal Opportunities for Upcoding and Code

Fragmentation--The APC system is intended to discourage using a code in a higher paying group to define the care. That is, putting two related codes such as the codes for excising a lesion for 1.1 cm and one of 1.0 cm, in different APC groups may create an incentive to exaggerate the size of the lesions in order to justify the incrementally higher payment. APC groups based on subtle distinctions would be susceptible to this kind of coding. Therefore, APC groups were kept as broad and inclusive as possible without sacrificing resource or clinical homogeneity.

These procedures, along with their specific HCPCS coding and descriptors, were used to identify and group services within each established APC group. They included: (1) Surgical procedures

(including hospital-based ASC procedures currently being paid under the eleven tier ASC payment methodology); (2) radiology, including radiation therapy; (3) clinic visits; (4) emergency department visits;

(5) diagnostic services and other diagnostic tests; (6) partial hospitalization for the mentally ill; (7) surgical pathology; (8) cancer therapy; (9) implantable medical items (e.g., prosthetic implants, implantable DME and implantable items used in performing diagnostic x-rays and laboratory tests); (10) specific hospital outpatient services furnished to a beneficiary who is admitted to a

SNF, but in which case the services are beyond the scope of SNF comprehensive care plans; (11) certain preventive services, such as colorectal cancer screening; (12) acute dialysis (e.g., dialysis for poisoning); and (13) ESRD services. These hospital outpatient procedures will be paid on a rate-per-service basis that varies according to the APC group to which they are assigned.

In accordance with section 1833(t)(2) of the Social Security Act, services and items within an APC group cannot be considered comparable with respect to the use of resources in the APC group if the highest median cost is more than 2 times the lowest median cost for an item or service within the same group (referred to a the ``2 times rule'').

Exceptions may be granted in unusual cases, such as low-volume items and services.

IV. Packaging and Special Payment Provisions Under OPPS

The prospective payment system establishes a national payment rate, standardized for geographic wage differences, that includes operating and capital-related costs that are directly related and integral to performing a procedure or furnishing a service on an outpatient basis, which has ultimately resulted in the establishment of distinct groups of surgical, diagnostic, and partial hospitalization services, as well as medical visits. No separate payment is made for packaged services, because the cost of these items is included in the APC payment for the service of which they are an integral part. These costs include, but are not limited to: (1) Use of operating suite; (2) use of procedure room or treatment room; (3) use of recovery room or area; (4) use of an observation bed; (5) anesthesia, along with supplies and equipment for administering and monitoring anesthesia or sedation; (6) certain drugs, biologicals, and other pharmaceuticals; (7) medical and surgical supplies; (8) surgical dressings; (9) devices used for external reduction of fractures and dislocations; (10) intraocular lenses

(IOLs); (11) capital related costs; (12) costs incurred to procure donor tissue other than corneal tissue; (13) incidental services such as venipuncture; (14) implantable items used in connection with diagnostic laboratory tests, and other diagnostics; and (15) implantable prosthetic devices (other than dental) which replace all or part of an internal body organ (including colostomy bags and supplies directly related to colostomy care), including replacement of these devices.

Payments for packaged services under the OPPS are bundled into the payment providers receive for separately payable services provided on the same day and are identified by the status indicator (SI) ``N''

(unconditionally packaged) or SI ``Q'' (conditionally packaged).

Hospitals include charges for packaged services on their claims, and the costs associated with these packaged services are bundled into the costs for separately payable procedures in calculating their payment rates. The following criteria are used in determining whether procedures should be packaged: (1) Whether the service is normally provided separately or in conjunction with other services; (2) how likely it is for the costs of the packaged code to be appropriately mapped to the separately payable codes with which it was performed; (3) whether the APC payment to which the services were packaged will offset the hospital's actual

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costs; and (4) whether the expected cost of the service is relatively low.

Special logic has also been programmed into the OCE which will have the OPPS PRICER automatically assign payment for a special packaged service reported on a claim if there were no other services separately payable under the OPPS claim for the same date. A new status indicator

``Q'' will be assigned to these special packaged codes to indicate that they are usually packaged, except for special circumstances when they are separately payable.

Based on the above packaging criteria, it was determined that certain other expensive items and services which were otherwise considered an integral part of another procedure should not be packaged within that procedure's APC payment rate, since the resulting payment would not offset the costs of those items and services. This could have a potentially negative impact, thereby jeopardizing access to these items and services in a hospital outpatient setting. As a result, the costs associated with these items and services were not packaged within the APC of the primary procedure with which they were normally associated. Instead, separate APCs were developed for payment of these items and services under the following payment provisions:

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Transitional Pass-Through for Additional Costs of Drugs,

Biologicals, and Radiopharmaceuticals. Although the costs of drugs, biologicals and pharmaceuticals are generally packaged into the APC payment rate for the primary procedure or treatment with which the drugs are usually furnished, there are special temporary additional payments or ``transitional pass-through payments'' available under section 1833(t)(6) of the Social Security Act for at least two years, but not more than three years for the following drugs and biologicals:

(1) Current orphan drugs, as designated under section 526 of the

Federal Food, Drugs, and Cosmetics Act; (2) current drugs and biological agents used for treatment of cancer; (3) current radiopharmaceutical drugs and biological products; and (4) new drugs and biologic agents in instances where the item was not being paid as a hospital outpatient service as of December 31, 1996, and where the cost of the item is ``not insignificant'' in relation to the hospital OPPS payment amount.

Section 1833(t)(6)(D)(i) of the Social Security Act sets the payment rate for pass-through eligible drugs as amounts determined under section 1842(o) of the Act. Section 1847A of the Act establishes the use of average sales price (ASP) methodology (i.e., 106 percent of the ASP which is the rate equivalent to the payment that would be received in a physician office setting) as the basis for payment for drugs and biologicals described in section 1842(o)(1)(C) of the Act.

Section 1883(t)(6)(D)(i) also states if a drug or biological is covered under a competitive acquisition contract under section 1847B of the

Act, the payment rate is equal to the average price for the drug or biologicals for all competitive acquisition areas. Thus, drugs and biologicals with pass-through status in CY 2007 will receive payment consistent with the provision of section 1842(o) of the Act, at a rate that is equivalent to the payment they would receive in a physician office setting (106 percent of the ASP) or the rate that would be paid under the competitive acquisitions program, while pass-through radiopharmaceuticals will be paid the hospital's charge for the radiopharmaceutical adjusted to the cost using the hospital's overall cost-to-charge ratio (CCR).

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Packaging and Payment for Drugs, Biologicals and

Radiopharmaceuticals Without Pass-Through Status. Drugs, biologicals, and radiopharmaceuticals that do not have pass-through status are paid in one of two ways: either packaged into the APC payment rate for the procedure or treatment with which the products are usually furnished, or separately based on a packaging threshold which has been set at $55 for CY 2007. Therefore, for CY 2007 and beyond, drugs, biologicals and radiopharmaceuticals that are not new and do not have pass-through status will be packaged if their calculated per-day cost is less than

$55 for CY 2007 or less than the updated threshold (i.e., the packaging threshold inflated annually by the Producer Price Index (PPI) for prescription drugs), with the exception of 5HT3 antiemetics which will continue to be paid separately regardless of their calculated per-day cost.

Section 1833(t)(14) of the Act requires special classification of certain separately payable drugs, biologicals and radiopharmaceuticals and mandates payment under section 1833(t)(14)(A)(iii) of the Act for specified covered outpatient drugs in CY 2006 and subsequent years to be equal to the average acquisition cost for the drug subject to any adjustment for overhead costs, which for CY 2007 is a combined rate of 106 percent of the ASP. Separately payable drugs and biologicals without ASP-based data will be paid at their mean cost calculated from

Medicare CY 2005 hospital claims data. The preadmission-related services associated with intravenous immune globulin (IVIG) will continue to be paid under a New Technology APC with a rate of $75.

Also, payment for blood clotting factors in the outpatient setting will be set at 106 percent of the ASP, plus the updated furnishing fee of

$0.15. The temporary policy of paying radiopharmaceuticals at charges reduced to costs is also being extended for one additional year since it is still considered the best proxy for radiopharmaceutical acquisition and overhead costs. However, separate payment will only apply to those radiopharmaceuticals with per-day costs greater than

$55.

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Payment for Nonpass-Through Drugs, Biologicals, and

Radiopharmaceuticals With HCPCS Codes, But Without OPPS Claims Data.

For CY 2007, hospitals will receive payment for nonpass-through radiopharmaceuticals without hospital claims data that have been assigned HCPCS codes as of January 1, 2007, at the hospital's charge for the radiopharmaceutical adjusted to cost using the hospital's overall cost-to-charge ratio, which will be the same methodology used in the payment for pass-through radiopharmaceuticals. For new drugs without pass-through status or hospitals claims data, payment will be made at the lesser of the ASP or competitive acquisition contract price

(Part B CAP). In rare instances where a drug does not have a Part B drug CAP rate or data available for use for ASP methodology, payment will be made at 95 percent of the product's most recent AWP.

Established drugs without hospital claims data that have been classified as separately payable in CY 2007 will be paid per the ASP- based methodology at a rate of 106 percent of the ASP.

New drugs, biologicals and devices which qualify for separate payment under OPPS, but have not yet been assigned to a transitional

APC (i.e., assigned to a temporary APC for separate payment of an expensive drug or device) will be reimbursed under the TRICARE standard allowable charge methodology. This allowable charge payment will continue until a transitional APC has been assigned (i.e., until CMS has had the opportunity to assign the new drug, biological or device to a temporary APC for separate payment).

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Drug Administration Coding and Payment. For CY 2007, hospitals will be expected to report the full set of CPT drug administration codes in a manner consistent with their descriptors, CPT instructions and correct coding

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principles. They will no longer be able to report the alphanumeric

HCPCS codes (C8950, C8951, C8952, C8954, and C8955) that were recognized prior to January 1, 2007. These newly recognized CPT codes will be assigned to six new drug administration APCs, with payment rates based on median costs for the APCs as calculated from Medicare's

CY 2005 claims data.

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Payment for Blood and Blood Products. Since Medicare's implementation of the OPPS in August 1, 2000, separate payments have been made for blood and blood products through APCs rather than packaging them into the procedures with which they were administered.

Hospital payment for the costs of blood and blood products, as well as the costs of collecting, processing, and storing blood products, are made through the OPPS payments for specific blood product APCs. For CY 2007, these blood product payments will be based on the unadjusted, simulated median costs for blood and blood products that are derived from CY 2005 Medicare claims data, with the exception of the seven products for which there will be a payment adjustment to smooth their transition to full claims-based payments in the future.

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Other Procedure or Service Costs Not Packaged in APC Payment.

Costs for casting, splinting and strapping services, immunosuppressive drugs for patients following organ transplant, and certain other high- cost drugs that are infrequently administered are not packaged into the costs of the primary procedures with which they are normally associated. Instead, new APC groups have been created for these items and services, which will allow separate payment.

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Corneal Tissue Acquisition Costs. Corneal tissue acquisition costs will not be packaged with the APC payment for corneal transplant surgical procedures. Instead, separate payment will be made based on the hospital's reasonable costs incurred to acquire corneal tissue.

Corneal acquisition costs must be submitted using HCPCS code V2785

(Processing, Preserving and Transporting Corneal Tissue), indicating the actual cost of the acquisition rather than the hospital's charge on the bill.

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Transitional Pass-Through Payment for Devices. Transitional payments will only apply to new and innovative medical devices meeting the following criteria: (1) Were not recognized for payment as a hospital outpatient service prior to 1997 (i.e., payment was not being made as of December 31, 1996) or treated as meeting the time constraints under special prescribed conditions; (2) have been approved/cleared for use by the Food and Drug Administration (FDA); (3) are 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; (4) are an integral and subordinated part of the procedure performed; (5) are used for one patient only (except for reprocessed single-use devices meeting FDA's most recent regulatory criteria on single-use devices); (6) are surgically implanted or inserted via a natural or surgically created orifice on incision and remain with the patient after the patient is released from the hospital outpatient department; (7) are not equipment, instruments, apparatus, implements, or such items for which depreciation and financing expenses are recovered as depreciable assets; (8) are not materials and supplies such as sutures, clips or customized surgical kits furnished incidental to a service or procedure; (9) are not material such as biologicals or synthetics that are used to replace human skin; (10) no existing or previously existing device category is appropriated for the device;

(11) associated cost is not insignificant in relation to the APC payment for the service in which the innovative medical equipment is packaged; and (12) it has been demonstrated that utilization of the device provides substantial clinical improvement for beneficiaries compared with currently available treatments, including procedures utilizing devices in existing or previously existing device categories.

The duration of transitional pass-through payments for devices is for at least two, but not more than three years. This period begins with the first date on which a transitional pass-through payment is made for any medical device that is described by the new medical category. The costs of the devices will be packaged into the costs of the procedures with which they are normally billed once they are no longer eligible for pass-through payment.

Device pass-through payments (those procedures designated with a SI

``H'') are calculated by applying the statewide cost-to-charge ratio

(CCR), which is based on the geographical CBSA (2 digit = rural, 5 digit = urban), to the hospital's charges on the claims and subtracting any appropriate pass-through offset. The offset adjustment only applies when a pass-through device is billed in addition to the primary procedure with which it is normally associated.

Provisions are also in place in accordance with 1833(t)(6)(D)(ii) of the Social Security Act for reducing transitional pass-through payments by the estimated 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. Offsets are calculated by comparing the median APC cost without device packaging to the median APC cost

(including device packaging), developed from claims with device codes, to determine the percentage of median APC costs attributable to the associated pass-through device. These percentages are then applied to the APC payment amounts in order to determine the applicable amounts to be deducted from the pass-through payments, known as the ``offset'' amounts. Offset amounts are only applied when it can be determined that an APC contained cost is actually associated with the device.

Currently, there is only one transitional pass-through payment offset in effect for device category C1820 (generator, neurostimulator

(implantable), with rechargeable battery and charging system) with an amount of $8,668.94, which represents 77.65 percent of the CY 2007 payment rate for APC 0222.

Two new device categories have been established for pass-through payment starting in 2007: (1) L8690--auditory osseointegrated device, external sound processor, replacement; and (2) C1821--interspinous process distraction device (implantable). The offset amounts for both of these new device categories were set to $0 for CY 2007, since there were no identifiable device-related costs associated with their procedure APCs (i.e., APC 0256 for L8690 and APC 0050 for C1821). The pass-through status of this rechargeable neurostimulator device (C1820) is scheduled to expire on January 1, 2008.

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Payment When Devices are Replaced Without Cost or Where

Credit for a Replacement Device is Furnished to the Hospital. Payments will be reduced for selected APCs in cases in which an implanted device is replaced without cost to the hospital or with full credit for the removed device in accordance with 42 CFR 419.45. The amount of the reduction to the APC rate will be calculated in the same manner as the offset amount that would be applied if the implanted device assigned to the APC had pass-through status as defined under 42 CFR 419.66. OPPS payments would be contingent on section 1833(t)(2)(E) of the Social

Security Act, which permits equitable adjustments to the OPPS payments contingent on meeting all of the following criteria: (1) All procedures assigned to the selected APCs must require implantable devices that would be reported if device replacement procedures were performed; (2) the

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required devices must be surgically inserted or implanted devices that remain in the patient's body after the conclusion of the procedures, at least temporarily; and (3) the offset percent for the APC (i.e., the median cost of the APC without device costs divided by the median cost of the APC with device costs) must be significant--significant offset percent is defined as exceeding 40 percent.

The presence of the modifier ``FB'' [``Item Provided Without Cost to Provider, Supplier, or Practitioner or Credit Received for

Replacement (examples include, but are not limited to: devices covered under warranty, replaced due to defect, or provided as free samples)''] would trigger the adjustment in payment if the procedure code to which the modifier ``FB'' was amended appeared in Table 3 and was also assigned to one of the APCs listed in Table 4 below.

Table 3.--Devices For Which the FB Modifier Must Be Reported With the

Procedure When Furnished Without Cost or at Full Credit for a

Replacement Device

Device

Description

C1721.................................. AICD, dual chamber.

C1722.................................. AICD, single chamber.

C1764.................................. Event recorder, cardiac.

C1767.................................. Generator, neurostim, imp.

C1771.................................. Rep dev, urinary, w/sling.

C1772.................................. Infusion pump, programmable.

C1776.................................. Joint device (implantable).

C1777.................................. Lead, AICD, endo single coil.

C1778.................................. Lead, neurostimulator.

C1779.................................. Lead, pmkr, transvenous VDD.

C1785.................................. Pmkr, dual, rate-resp.

C1786.................................. Pmkr, single, rate-resp.

C1813.................................. Prostheses, penile, inflatab.

C1815.................................. Pros, urinary sph, imp.

C1820.................................. Generator, neuro, rechg bat sys.

C1882.................................. AICD, other than sing/dual.

C1891.................................. Infusion pump, non-prog, perm.

C1895.................................. Lead, AICD, endo dual coil.

C1896.................................. Lead, AICD, non sing/dual

C1897.................................. Lead, neurostim, test kit.

C1898.................................. Lead, pmkr, other than trans.

C1899.................................. Lead, pmkr/ACID combination.

C1900.................................. Lead coronary venous.

C2619.................................. Pmkr, dual, non rate-resp.

C2620.................................. Pmkr, single, non rate-resp.

C2621.................................. Pmkr, other than sing/dual.

C2622.................................. Prosthesis, penile, non-inf.

C2626.................................. Infusion pump, non-prog, temp.

C2631.................................. Rep dev, urinary, w/o sling.

L8614.................................. Cochlear device/system.

Table 4.--Adjustments to APCs in Cases of Devices Reported Without Cost or For Which Full Credit Is Received

CY 2007

APC

APC group title

offset amt.

(percent)

0039............ S............... Level I Implantation of

78.85

Neurostimulator. 0040............ S............... Percutaneous

54.06

Implantation of

Neurostimulator

Electrodes, Excluding

Cranial Nerve. 0061............ S............... Laminectomy or Incision

60.06 for Implantation of

Neurostimulator

Electrodes, Excluded. 0089............ T............... Insertion/Replacement

77.11 of Permanent Pacemaker and Electrodes. 0090............ T............... Insertion/Replacement

74.74 of Pacemaker Pulse

Generator. 0106............ T............... Insertion/Replacement/

41.88

Repair of Pacemaker and/or Electrodes. 0107............ T............... Insertion of

90.44

Cardioverter-

Defibrillator. 0108............ T............... Insertion/Replacement/

77.75

Repair of Cardioverter-

Defibrillator Leads. 0222............ T............... Implantation of

77.65

Neurological Device. 0225............ S............... Implantation of

79.04

Neurostimulator

Electrodes, Cranial. 0227............ T............... Implantation of Drug

80.27

Infusion Devices. 0229............ T............... Transcatheter Placement

46.17 of Intravascular

Shunts. 0259............ T............... Level IV ENT Procedures

84.61 0315............ T............... Level II Implantation

76.03 of Neurostimulator. 0385............ S............... Level I Prosthetic

83.19

Urological Procedures. 0386............ S............... Level II Prosthetic

61.16

Urological Procedures. 0418............ T............... Insertion of Left

87.32

Ventricular Pacing

Elect.. 0654............ T............... Insertion/Replacement

77.35 of a Permanent Dual

Chamber Pacemaker. 0655............ T............... Insertion/Replacement/

76.59

Conversion of a

Permanent Dual Chamber

Pacemaker. 0680............ S............... Insertion of Patient

76.40

Activated Event

Recorders. 0681............ T............... Knee Arthroplasty......

73.37

If the device code (i.e., one of the codes in Table 3 above) is assigned to one of the APCs listed in Table 4 above, the unadjusted payment rate for the procedure APC will be reduced by an amount equal to the percent in Table 4 times the unadjusted payment rate. The actual adjustments can be viewed on the following CMS Web site: http:// www.cms.hhs.gov/HospitalOutpatientPPS/

In cases in which the device is being replaced without cost, the hospital will report a token device charge. However, if the device is being inserted as an upgrade, the hospital will report the difference between its usual charge for the device being replaced and the credit for the replacement device. Multiple procedure reductions would also continue to apply even after the APC payment adjustment to remove payment for the device cost, because there would still be the expected efficiencies in performing the procedure if it was provided in the same operative session as another surgical procedure. Similarly, if the procedure was interrupted before administration of anesthesia (i.e., there was a modifier 52 or 73 on the same line as the procedure), a 50 percent reduction would be taken from the adjusted amount.

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Coding and Payment of Emergency Department Visits. The following five Type B emergency department G-codes have been established for emergency departments meeting the definition of a dedicated emergency department (DED) under the Emergency Medical

Treatment and Labor Act (EMTALA) regulations in 42 CFR 489.24, but which are not Type A emergency departments (i.e., they may meet the DED definition but are not available 24 hours a day, 7 days a week).

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Table 5.--CY 2007 Final HCPCS Codes To Be Used To Report Emergency Department Visits Provided in Type B

Emergency Departments

HCPCS code

Short descriptor

Long descriptor

G0380................................ Level 1 hosp. type B

Level 1 hospital emergency department visit visit.