[Federal Register: August 16, 2004 (Volume 69, Number 157)]
[Proposed Rules]
[Page 50447-50973]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16au04-32]
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Part II
Book 2 of 2 Pages 50447-50994
Department of Health and Human Services
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Centers for Medicare and Medicaid Services
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42 CFR Parts 410, 411, and 419
Medicare Program; Proposed Changes to the Hospital Outpatient
Prospective Payment System and Calendar Year 2005 Payment Rates;
Proposed Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 410, 411, and 419
[CMS-1427-P]
RIN 0938-AM75
Medicare Program; Proposed Changes to the Hospital Outpatient
Prospective Payment System and Calendar Year 2005 Payment Rates
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would revise the Medicare hospital
outpatient prospective payment system to implement applicable statutory
requirements and changes arising from our continuing experience with
this system and to implement certain related provisions of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003. In
addition, the proposed rule describes proposed changes to the amounts
and factors used to determine the payment rates for Medicare hospital
outpatient services paid under the prospective payment system. These
changes would be applicable to services furnished on or after January
1, 2005.
DATES: To be ensured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on October 8, 2004.
ADDRESSES: In commenting, please refer to file code CMS-1427-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of three ways (no duplicates,
please):
1. Electronically:
You may submit electronic comments to http://www.cms.hhs.gov/regulations/ecomments
(attachments should be in Microsoft Word,
WordPerfect, or Excel; however, we prefer Microsoft Word). You can
assist us by referencing the ``specific identifier'' that precedes the
section on which you choose to comment.
2. By Mail:
You may mail written comments (one original and two copies) to the
following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1427-P, P.O.
Box 8010, Baltimore, MD 21244-8018.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By hand or courier:
If you prefer, you may deliver (by hand or courier) your written
comments (one original and two copies) before the close of the comment
period to one of the following addresses. If you intend to deliver your
comments to the Baltimore address, please call telephone number (410)
786-7195 in advance to schedule your arrival with one of our staff
members.
Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or 7500 Security Boulevard, Baltimore, MD 21244-
1850.
(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 proof of filing by
stamping in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
CMS-1427-P and the specific ``issue identifier'' that precedes the
section on which you choose to comment.
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. After the close of the
comment period, CMS posts all electronic comments received before the
close of the comment period on its public web site. Written comments
received timely will be available for public inspection as they are
received, generally beginning approximately 4 weeks after publication
of a document, at the headquarters of the Centers for Medicare &
Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244, Monday
through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an
appointment to view public comments, phone (410) 786-7195.
Submission of comments on paperwork requirements. For comments that
relate to information collection requirements, mail a copy of comments
to the following addresses:
Centers for Medicare & Medicaid Services, Office of Strategic
Operations and Regulatory Affairs, Security and Standards Group, Office
of Regulations Development and Issuances, Room C4-24-02, 7500 Security
Boulevard, Baltimore, MD 21244-1850, Attn: John Burke, CMS-1427-P; and
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 3001, New Executive Office Building, Washington, DC 20503,
Christopher Martin, CMS Desk Officer.
Comments submitted to OMB may also be emailed to the following
address: Christopher_Martin@omb.eop.gov, or faxed to OMB at (202) 395-
6974.
FOR FURTHER INFORMATION CONTACT: Dana Burley, (410) 786-0378,
Outpatient prospective payment issues and Suzanne Asplen, (410) 786-
4558, Partial hospitalization and community mental health center
issues.
SUPPLEMENTARY INFORMATION: Copies: To order copies of the Federal
Register containing this document, send your request to: New Orders,
Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-
7954. Specify the date of the issue requested and enclose a check or
money order payable to the Superintendent of Documents, or enclose your
Visa or Master Card number and expiration date. Credit card orders can
also be placed by calling the order desk at (202) 512-1800 (or toll-
free at 1-888-293-6498) or by faxing to (202) 512-2250. The cost for
each copy is $10. As an alternative, you can view and photocopy the
Federal Register document at most libraries designated as Federal
Depository Libraries and at many other public and academic libraries
throughout the country that receive the Federal Register.
This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. The web site address is: http://www.gpoaccess.gov/fr/index.html
.
To assist readers in referencing sections contained in this
document, we are providing the following table of contents.
Outline of Contents
I. Background
A. Legislative and Regulatory Authority for the Outpatient
Prospective Payment System
B. Excluded OPPS Services and Hospitals
C. Prior Rulemaking
D. APC Advisory Panel
1. Authority for the APC Panel
2. Establishment of the APC Panel
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3. APC Panel Meetings and Organizational Structure
E. Provisions of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003
F. Summary of Major Content of This Proposed Rule
II. Proposed Changes Related to Ambulatory Payment Classifications
(APCs)
A. Proposed APC Changes: General
B. APC Panel Review and Recommendations
1. APC 0018: Biopsy of Skin/Puncture of Lesion
2. Level I and II Arthroscopy
3. Angiography and Venography Except Extremity
C. Limits on Variations Within APCs: Proposed Application of the 2
Times Rule
1. Cardiac and Ambulatory Blood Pressure Monitoring
2. Electrocardiograms
3. Excision/Biopsy
4. Posterior Segment Eye Procedures
5. Laparoscopy
6. Anal/Rectal Procedures
7. Nerve Injections
8. Anterior Segment Eye Procedures
9. Pathology
10. Immunizations
11. Pulmonary Tests
12. Clinic Visits
D. Proposed Exceptions to the 2 Times Rule
E. Coding for Stereostatic Radiosurgery Services
1. Background
2. Proposal for CY 2005
F. Proposed Movement of Procedures From New Technology APCs to
Clinically Appropriate APCs
1. Background
2. APC Panel Review and Recommendation
3. Proposal for CY 2005
G. Proposed Changes to Inpatient List
H. Proposed Assignment of ``Unlisted'' HCPCS Codes
1. Background
2. Proposal for CY 2005
I. Proposed Addition of New Procedure Codes
J. Proposed OPPS Changes: Provisions of MMA (Pub. L. 108-173)
1. Payment for Initial Preventive Physical Examinations (Section
611 of Pub. L. 108-173)
a. Background
b. Proposed Amendments to Regulations
c. Proposed Assignment of New HCPCS Code for Payment of Initial
Preventive Physical Examinations
d. Handling of Comments Received in Response to This Proposal
2. Payment for Certain Mammography Services (Section 614 of Pub.
L. 108-173)
III. Proposed Recalibration of APC Weights for CY 2005
A. Database Construction
1. Proposed Treatment of Multiple Procedure Claims
2. Proposed Use of Single Procedure Claims
B. Proposed Calculation of Median Costs for CY 2005
C. Proposed Adjustment of Median Costs for CY 2005
1. Device-Dependent APCs
2. Proposed Treatment of Specified APCs
a. APC 0315, Level II Implantation of Neurostimulator
b. APC 0651, Complex Interstitial Radiation Application
c. APC 0659, Hyperbaric Oxygen Therapy
3. Proposed Required Use of ``C'' Codes for Devices
4. Submission of External Data
D. Proposed Calculation of Scaled OPPS Payment Weights
IV. Proposed Payment Changes for Devices
A. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain
Devices
2. Proposal for CY 2005
B. Provisions for Reducing Transitional Pass-Through Payments To
Offset Costs Packaged Into APC Groups
1. Background
2. Proposal for CY 2005
V. Transitional Pass-Through Payment for Additional Costs of Drugs and
Biologicals
A. New Drugs, Biologicals, and Radiopharmaceuticals With Pass-
Through Status
1. Background
2. Expiration in CY 2004 of Pass-Through Status for Drugs and
Biologicals
3. Drugs and Biologicals With Pass-Through Status in CY 2005
B. Drugs, Biologicals, and Radiopharmaceuticals Without Pass-Through
Status
1. Background
2. Proposed Criteria for Packaging Payment for Drugs,
Biologicals, and Radiopharmaceuticals
3. Proposed Payment for Drugs, Biologicals, and
Radiopharmaceuticals Without Pass-Through Status That Are Not
Packaged
a. Payment for Specified Covered Outpatient Drugs
b. Proposal to Treat Three Sunsetting Pass-Through Drugs as
Specified Covered Outpatient Drugs
c. Proposed CY 2005 Payment for New Drugs and Biologicals With
HCPCS Codes and Without Pass-Through Application and Reference AWP
d. Proposed Payment for Separately Payable Nonpass-Through Drugs
and Biologicals
e. Proposed CY 2005 Change in Payment Status for HCPCS Code
J7308
C. Proposed Coding and Billing for Specified Outpatient Drugs
D. Proposed Payment for New Drugs, Biologicals, and
Radiopharmaceuticals Before HCPCS Codes Are Assigned
1. Background
2. Provisions of Pub. L. 108-173
E. Proposed Payment for Vaccines
F. Proposed Changes in Payment for Single Indication Orphan Drugs
G. Proposal To Change Payment Policy for Radiopharmaceuticals
H. Proposed Coding and Payment for Drug Administration
I. Proposed Payment for Blood and Blood Products
VI. Estimated Transitional Pass-Through Spending in CY 2005 for Drugs,
Biologicals, and Devices
A. Basis for Pro Rata Reduction
B. Proposed Estimate of Pass-Through Spending for CY 2005
VII. Other Policy Decisions and Proposed Policy Changes
A. Statewide Average Default Cost-to-Charge Ratios
B. Transitional Corridor Payments: Technical Change
C. Status Indicators and Comment Indicators Assigned in Outpatient
Code Editor (OCE)
1. Payment Status Indicators
2. Comment Indicators
D. Observation Services
E. Procedures That Will Be Paid Only as Inpatient Procedures
F. Hospital Coding for Evaluation and Management Services
1. Background
2. Proposal for Evaluation and Management Guidelines
G. Brachytherapy Payment Issues
H. Payment for APC 0375, Ancillary Outpatient Services When Patient
Expires
VIII. Proposed Conversion Factor Update for CY 2005
IX. Proposed Wage Index Changes for CY 2005
X. Determination of Proposed Payment Rates and Outlier Payments for CY
2005
A. Calculation of the Proposed National Unadjusted Medicare Payment
B. Proposed Hospital Outpatient Outlier Payments
C. Proposed Payment for Partial Hospitalization
1. Background
2. Proposed PHP APC Update for CY 2005
3. Separate Threshold for Outlier Payments to CMHCs
XI. Proposed Beneficiary Copayments for CY 2005
A. Background
B. Proposed Copayment for CY 2005
XII. MedPAC Recommendations
XIII. Addenda Files Available to the Public Via Internet
Addendum C--Healthcare Common Procedure Coding System (HCPCS) Codes
by Ambulatory Payment Classification (APC)
XIV. Collection of Information Requirements
XV. Response to Public Comments
XVI. Regulatory Impact Analysis
A. OPPS: General
B. Impact of Proposed Changes in This Proposed Rule
C. Alternatives Considered
D. Limitations of Our Analysis
E. Estimated Impacts of This Proposed Rule on Hospitals
F. Projected Distribution of Outlier Payment
G. Estimated Impacts of This Proposed Rule on Beneficiaries
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XVII. Regulation Text
Addenda
Addendum A--List of Ambulatory Payment Classification (APCs) With
Status Indicators, Relative Weights, Payment Rates, and Copayment
Amounts for CY 2005
Addendum B--Payment Status by HCPCS Code and Related Information--CY
2005
Addendum C--Healthcare Common Procedure Coding System (HCPCS) Codes
by Ambulatory Payment Classification (APC) (Available only on CMS
Website via Internet. See section XIII. of the preamble of this
proposed rule.)
Addendum D1--Payment Status Indicators for Hospital Outpatient
Prospective Payment System
Addendum D2--Comment Indicators
Addendum E--CPT Codes That Will Be Paid Only as Inpatient Procedures
Addendum H--Wage Index for Urban Areas
Addendum I--Wage Index for Rural Areas
Addendum J--Wage Index for Hospitals That Are Reclassified
Addendum K--Wage Index Adjustment for Commuting Hospital Employees
Addendum L--Pre-Reclassified Wage Index for Urban Areas
Addendum M--Pre-Reclassified Wage Index for Rural Areas
Addendum N--Hospital Reclassifications and Redesignations by
Individual Hospital Under Section 508 of Pub.L. 108-173
Alphabetical List of Acronyms Appearing in the Proposed Rule
ACEP American College of Emergency Physicians
AHA American Hospital Association
AHIMA American Health Information Management Association
AMA American Medical Association
APC Ambulatory payment classification
ASP Average sales price
ASC Ambulatory surgical center
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection
Act of 2000, Pub. L. 106-554
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999, Pub. L. 106-113
CAH Critical access hospital
CCR (Cost center specific) cost-to-charge ratio
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services (formerly known as the
Health Care Financing Administration)
CORF Comprehensive Outpatient Rehabilitation Facility
CPT [Physicians'] Current Procedural Terminology, Fourth Edition, 2004,
copyrighted by the American Medical Association
CRNA Certified Registered Nurse Anesthetist
CY Calendar year
DMEPOS Durable medical equipment, prosthetics, orthotics, and supplies
DMERC Durable Medical Equipment Regional Carrier
DRG Diagnosis-related group
DSH Disproportionate share hospital
EACH Essential Access Community Hospital
E/M Evaluation and management
EPO Erythropoietin
ESRD End-stage renal disease
FACA Federal Advisory Committee Act, Pub. L. 92-463
FDA Food and Drug Administration
FI Fiscal intermediary
FSS Federal Supply Schedule
FY Federal fiscal year
HCPCS Healthcare Common Procedure Coding System
HCRIS Hospital Cost Report Information System
HHA Home health agency
HIPAA Health Insurance Portability and Accountability Act of 1996, Pub.
L. 104-191
ICD-9-CM International Classification of Diseases, Ninth Edition,
Clinical Modification
IME Indirect medical education
IPPS (Hospital) inpatient prospective payment system
IVIG Intravenous immune globulin
LTC Long-term care
MedPAC Medicare Payment Advisory Commission
MDH Medicare dependent hospital
MMA Medicare Prescription Drug, Improvement, and Modernization Act of
2003, Pub. L. 108-173
MSA Metropolitan Statistical Area
NCD National Coverage Determination
OCE Outpatient code editor
OMB Office of Management and Budget
OPD (Hospital) outpatient department
OPPS (Hospital) outpatient prospective payment system
PET Positron Emission Tomography
PHP Partial hospitalization program
PM Program memorandum
PPI Producer Price Index
PPS Prospective payment system
PPV Pneumococcal pneumonia (virus)
PRA Paperwork Reduction Act
QIO Quality Improvement Organization
RFA Regulatory Flexibility Act
RRC Rural referral center
SBA Small Business Administration
SCH Sole community hospital
SDP Single drug pricer
SI Status indicator
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-248
TOPS Transitional outpatient payments
USPDI United States Pharmacopoeia Drug Information
I. Background
A. Legislative and Regulatory Authority for the Outpatient Prospective
Payment System
When the Medicare statute was originally 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 cost-based payment
methodology with a prospective payment system (PPS). The Balanced
Budget Act of 1997 (BBA) (Pub. L. 105-33), enacted on August 5, 1997,
added section 1833(t) to the Social Security Act (the Act) authorizing
implementation of a PPS for hospital outpatient services. The Balanced
Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), enacted on
November 29, 1999, made major changes that affected the hospital
outpatient PPS (OPPS). The Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554),
enacted on December 21, 2000, made further changes in the OPPS. Section
1833(t) of the Act was also recently amended by the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L.
108-173, enacted on December 8, 2003 (these amendments are discussed
later under section I.E. of this proposed rule). The OPPS was first
implemented for services furnished on or after August 1, 2000.
Implementing regulations for the OPPS are located at 42 CFR part 419.
Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the ambulatory payment
classification (APC) group to which the service is assigned. We use
Healthcare Common Procedure Coding System (HCPCS) codes (which include
certain Current Procedural Terminology (CPT) codes) and descriptors to
identify and group the services within each APC. The OPPS includes
payment for most hospital outpatient services, except those identified
in section I.B. of this proposed rule and certain inpatient services
covered under Medicare Part B for beneficiaries who are entitled to
Part B benefits but who have exhausted them or otherwise are not
entitled to them. In addition, the OPPS applies to partial
hospitalization services furnished by community mental health centers
(CMHCs).
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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 inpatient hospital wage index value for the locality in which the
hospital or CMHC is located.
All services and items within an APC 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, services and items within an APC group cannot be considered
comparable with respect to the use of resources if the highest median
(or mean cost, if elected by the Secretary) for an item or service in
the APC is more than 2 times greater than the lowest median cost for an
item or service with the same APC (referred to as the ``2 times
rule''). In implementing this provision, we use the median cost of the
item or service assigned to an APC.
Special payments under the OPPS may be made for new technology
items and services in one of two ways. Section 1833(t)(6) of the Act
provides for temporary additional payments or ``transitional pass-
through payments'' for certain drugs, biological agents, brachytherapy
devices used for the treatment of cancer, and categories of medical
devices for at least 2 but not more than 3 years. For new technology
services that are not eligible for pass-through payments and for which
we lack sufficient data to appropriately assign them to a clinical APC,
we have established special APC groups based on costs, which we refer
to as APC cost bands. These cost bands allow us to price these new
procedures more appropriately and consistently. Like the pass-through
payments, these special payments for new technology services are also
temporary; that is, we retain a service within a new technology APC
group until we acquire adequate data to assign it to a clinically
appropriate APC.
B. 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 excluded payment for
ambulance, physical and occupational therapy, and speech-language
pathology services, for which payment is made under a fee schedule. The
Secretary exercised the broad authority granted under the statute to
exclude from the OPPS those services that are already 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;
laboratory services paid under the clinical diagnostic laboratory fee
schedule; services for beneficiaries with end-stage renal disease
(ESRD) that are paid under the ESRD composite rate; and services and
procedures that require an inpatient stay that are paid under the
hospital inpatient prospective payment system (IPPS). We set forth the
services that are excluded from payment under the OPPS in Sec. 419.22
of the regulations.
Under Sec. 419.20 of the regulations, we specify the types of
hospitals and entities that are excluded from payment under the OPPS.
These excluded entities include Maryland hospitals, but only for
services that are paid under a cost containment waiver in accordance
with section 1814(b)(3) of the Act; critical access hospitals (CAHs);
hospitals located outside of the 50 States, the District of Columbia,
and Puerto Rico; and Indian Health Service hospitals.
C. Prior Rulemaking
On April 7, 2000, we published in the Federal Register a final rule
with comment period (65 FR 18434) to implement a prospective payment
system for hospital outpatient services. The hospital OPPS was first
implemented for services furnished on or after August 1, 2000. Section
1833(t)(9) of the Act requires the Secretary to review certain
components of the OPPS not less often than annually and to revise the
groups, relative payment weights, and other adjustments to take into
account changes in medical practice, changes in technology, and the
addition of new services, new cost data, and other relevant information
and factors. Since implementing the OPPS, we have published final rules
in the Federal Register annually to implement statutory requirements
and changes arising from our experience with this system. For a full
discussion of the changes to the OPPS, we refer readers to these
Federal Register final rules.\1\
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\1\ Interim final rule with comment period, August 3, 2000 (65
FR 47670); interim final rule with comment period, November 13, 2000
(65 FR 67798); final rule and interim final rule with comment
period, November 2, 2001 (66 FR 55850 and 55857); final rule,
November 30, 2001 (66 FR 59856); final rule, December 31, 2001 (66
FR 67494); final rule, March 1, 2002 (67 FR 9556); final rule,
November 1, 2002 (67 FR 66718); interim final rule with comment
period, November 7, 2003 (68 FR 63398); and interim final rule with
comment period, January 6, 2004 (69 FR 820).
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On November 7, 2003, we published a final rule with comment period
in the Federal Register (68 FR 63398) that revised the OPPS to update
the payment weights and conversion factor for services payable under
the calendar year (CY) 2004 OPPS on the basis of claims data from April
1, 2002 through December 31, 2002. Subsequent to publishing the
November 7, 2003 final rule with comment period, we published a
correction of the final rule with comment period on December 31, 2003
(68 FR 75442). That document corrected technical errors in the November
7, 2003 rule and included responses to a number of public comments that
were inadvertently omitted from that rule.
On January 6, 2004, we published in the Federal Register an interim
final rule with comment period (69 FR 820) that implemented provisions
of Pub. L. 108-173 that affected payments made under the OPPS,
effective January 1, 2004. We will finalize this interim final rule and
address public comments associated with that rule when we finalize this
proposed rule.
D. APC Advisory Panel
1. Authority of the APC Panel
Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of
the BBRA of 1999, requires that we consult with an outside panel of
experts to review the clinical integrity of the payment groups and
weights under the OPPS. The Advisory Panel on APC Groups (the APC
Panel), discussed under section I.D.2. of this preamble, fulfills this
requirement. The Act further specifies that the Panel will act in an
advisory capacity. This expert panel, which is to be composed of 15
representatives of providers subject to the OPPS (currently employed
full-time, not consultants, in their respective areas of expertise),
reviews and advises us about the clinical integrity of the APC groups
and their weights. The APC Panel is not restricted to using our data
and may use data collected or developed by organizations outside the
Department in conducting its review.
2. Establishment of the APC Panel
On November 21, 2000, the Secretary signed the charter establishing
the Advisory Panel on APC Groups. The APC Panel is technical in nature
and is governed by the provisions of the Federal Advisory Committee Act
(FACA), as amended (Pub. L. 92-463). On November 1, 2002, the Secretary
[[Page 50452]]
renewed the charter. The renewed charter indicates that the APC Panel
continues to be technical in nature, is governed by the provisions of
the FACA, may convene up to three meetings per year, and is chaired by
a Federal official.
Originally, in establishing the APC Panel, we solicited members in
a notice published in the Federal Register on December 5, 2000 (65 FR
75943). We received applications from more than 115 individuals
nominating either colleagues or themselves. After carefully reviewing
the applications, we chose 15 highly qualified individuals to serve on
the APC Panel. Because of the loss of four APC Panel members due to the
expiration of terms of office on March 31, 2004, we published a Federal
Register notice on January 23, 2004 (69 FR 3370) that solicited
nominations for APC Panel membership. From the 24 nominations that we
received, we chose four new members. The entire APC Panel membership is
identified on the CMS website at http://www.cms.hhs.gov/faca/apc/apcmem.asp.
3. APC Panel Meetings and Organizational Structure
The APC Panel first met on February 27, February 28, and March 1,
2001. Since that initial meeting, the APC Panel has held four
subsequent meetings, with the last meeting taking place on February 18,
19, and 20, 2004. Prior to each of these biennial meetings, we
published a notice in the Federal Register to announce each meeting
and, when necessary, to solicit nominations for APC Panel membership.
For a more detailed discussion about these announcements, refer to the
following Federal Register notices: December 5, 2000 (65 FR 75943),
December 14, 2001 (66 FR 64838), December 27, 2002 (67 FR 79107), July
25, 2003 (68 FR 44089), and December 24, 2003 (68 FR 74621).
During these meetings, the APC Panel established its operational
structure which, in part, includes the use of three subcommittees to
facilitate its required APC review process. Currently, the three
subcommittees are the Data Subcommittee, the Observation Subcommittee,
and the Packaging Subcommittee. The Data Subcommittee is responsible
for studying the data issues confronting the APC Panel and for
recommending viable options for resolving them. This subcommittee was
initially established on April 23, 2001, as the Research Subcommittee
and reestablished as the Data Subcommittee on April 13, 2004. The
Observation Subcommittee (established on June 24, 2003, and
reestablished with new members on March 8, 2004) reviews and makes
recommendations to the APC Panel on all issues pertaining to
observation services paid under the OPPS, such as coding and
operational issues. The Packaging Subcommittee, which was established
on March 8, 2004, studies and makes recommendations on issues
pertaining to services that are not separately payable under the OPPS
but are bundled or packaged into the APC payment. Each of these
subcommittees was established by a majority vote of the APC Panel
during a scheduled annual or biennial APC Panel meeting. All
subcommittee recommendations are discussed and voted upon by the full
APC Panel.
For a detailed discussion of the APC Panel meetings, refer to the
hospital OPPS final rules cited in section I.C. of this preamble. A
full discussion of the APC Panel's February 2004 meeting and the
resulting recommendations is included in sections II., III., IV., V.,
and VI. of this preamble.
E. Provisions of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003
On December 8, 2003, the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA), Pub. L. 108-173, was enacted. Pub.
L. 108-173 made changes to the Act relating to the Medicare OPPS. In a
January 6, 2004 interim final rule with comment period, we implemented
provisions of Pub. L. 108-173 relating to the OPPS that were effective
for CY 2004. In this proposed rule, we are proposing to implement the
following sections of Pub. L. 108-173 that are effective for CY 2005:
Section 611, which provides for Medicare coverage of an
initial preventive physical examination under Part B, subject to the
applicable deductible and coinsurance, as an outpatient department
(OPD) service payable under the OPPS. The provisions of section 611
apply to services furnished on or after January 1, 2005, but only for
individuals whose coverage period under Medicare Part B begins on or
after that date.
Section 614, which provides that screening mammography and
diagnostic mammography services are excluded from payment under the
OPPS. This amendment applies to screening mammography services
furnished on or after the date of enactment of Pub. L. 108-173 (that
is, December 8, 2003), and in the case of diagnostic mammography, to
services furnished on or after January 1, 2005.
Section 621(a)(1), which requires special classification
of certain separately paid radiopharmaceutical agents and drugs or
biologicals, and specifies the pass-through payment percentages,
effective for services furnished on or after January 1, 2005, for the
three categories of ``specified covered OPD drugs'' defined in the
statute: sole source drug; innovator multiple source drug; and
noninnovator multiple source drug. In addition, payment for these drugs
for CYs 2004 and 2005 does not have to be made in a budget neutral
manner.
Section 621(a)(2), which specifies the reduced threshold
for the establishment of separate APCs with respect to drugs or
biologicals from $150 to $50 per administration for drugs and
biologicals furnished in CYs 2005 and 2006.
Section 621(a)(3), which excludes separate drug APCs from
outlier payments. Specifically, no additional payment will be made in
the case of APC groups established separately for drugs and
biologicals.
Section 621(b), which requires that all devices of
brachytherapy consisting of a seed or seeds (or radioactive source)
furnished on or after January 1, 2004, and before January 1, 2007, be
paid based on the hospital's charges for each device, adjusted to cost.
This provision also requires that these brachytherapy services be
excluded from outlier payments.
F. Summary of Major Content of This Proposed Rule
In this proposed rule, we are setting forth proposed changes to the
Medicare hospital OPPS. These changes would be effective for services
furnished on or after January 1, 2005. The following is a summary of
the major changes that we are proposing to make:
1. Proposed Changes to the APCs Groups
As required by section 1833(t)(9)(A) of the Act, we are proposing
the annual update of the APC groups and the relative payment weights.
This section also requires that we consult with an outside panel of
experts, the Advisory Panel on APC Groups, to review the clinical
integrity of the groups and weights under the OPPS. Based on analyses
of Medicare claims data and recommendations of the APC Panel, we are
proposing to establish a number of new APCs and to make changes to the
assignment of HCPCS codes under a number of existing APCs. Our proposed
APC changes for CY 2005 are set forth in section II. of this preamble.
We also discuss the application of the 2 times rule and proposed
exceptions to it; coding for stereotactic radiosurgery services; the
proposed movement of
[[Page 50453]]
procedures from the new technology APCs; the proposed changes to the
list of procedures that will be paid as inpatient services; and the
proposed additions of new procedure codes to the APCs.
2. Recalibrations of APC Relative Payment Weights
In section III. of this preamble, we discuss the methodology used
to recalibrate the proposed APC relative payment weights and set forth
the proposed recalibration of the relative weights for CY 2005.
3. Proposed Payment Changes for Devices
In section IV. of this preamble, we discuss proposed changes to the
pass-through payment for devices and the methodology used to reduce
transitional pass-through payments to offset costs packaged into APC
groups.
4. Proposed Payment Changes for Drugs, Biologicals, Radiopharmaceutical
Agents, and Blood and Blood Products
In section V. of this preamble, we discuss our proposed payment
changes for drugs, biologicals, radiopharmaceutical agents, and blood
and blood products.
5. Pro Rata Reduction for Transitional Pass-Through Drugs, Biologicals,
and Devices
In section VI. of this preamble, we discuss the proposed
methodology for measuring whether there should be an estimated pro rata
reduction for transitional pass-through drugs, biologicals, and devices
for CY 2005.
6. Other Policy Decisions and Proposed Policy Changes
In section VII. of this preamble, we present our proposals for CY
2005 regarding the following:
Update of statewide default cost-to-charge ratios.
A conforming change to the regulation relating to the use
of the first available cost reporting period ending after 1996 and
before 2001 for determining a provider's payment-to-cost ratio to
calculate transitional corridor payments for hospitals paid under the
OPPS that did not have a 1996 cost report.
Proposed changes in the status indicators and comment
indicators assigned to APCs for CY 2005.
Proposed elimination of the diagnostic tests criteria as a
requirement for hospitals to qualify for separate payment of
observation services under APC 0339 (Observation) and changes to the
guidelines to hospitals for counting patients time spent in observation
care.
Proposed payment under the OPPS for certain procedures
currently assigned to the inpatient list.
Proposed strategy for giving the public notice of new
implementation guidelines for new evaluation and management codes.
Proposed addition of three new HCPCS codes and descriptors
for brachytherapy sources that would be paid separately, pursuant to
Pub. L. 108-173.
Proposed modification of the HCPCS code descriptors for
brachytherapy source descriptors for which units of payment are not
already delineated.
Proposed payment for services furnished emergently to an
outpatient who dies before admission to a hospital as an inpatient.
7. Proposed Conversion Factor Update for CY 2005
As required by section 1833(5)(3)(C)(ii) of the Act, under section
VIII. of this preamble, we are proposing to update the conversion
factor used to determine payment rates under the OPPS for CY 2005.
8. Proposed Wage Index Changes for CY 2005
In section IX. of this preamble, we discuss the proposed retention
of our current policy to apply the IPPS wage indices to wage adjust the
APC median costs in determining the OPPS payment rate and the copayment
standardized amount. These indices reflect proposed major changes for
CY 2005 relating to hospital labor market areas as a result of OMB
revised definitions of geographical statistical areas; hospital
reclassifications and redesignations, including the one-time
reclassifications under section 508 of Pub. L. 108-173; and the wage
index adjustment based on commuting patterns of hospital employees
under section 505 of Pub. L. 108-173.
9. Determination of Payment Rates and Outlier Payments for CY 2005
In section X. of this preamble, we discuss how APC payment rates
are calculated and how the payment rates are adjusted to reflect
geographic differences in labor-related costs. This section also
discusses proposed changes in the way we calculate outlier payments for
CY 2005.
10. MedPAC Recommendations
Under section 1805(b) of the Act, the Medicare Payment Advisory
Committee (MedPAC) is required to submit a report to Congress, no later
than March 1 of each year, that reviews and makes recommendations on
Medicare payment policies. This annual report makes recommendations
concerning the hospital outpatient prospective payment system. In
section XII. of this preamble, we discuss the MedPAC recommendations.
For further information relating specifically to the MedPAC March 1,
2004 report or to obtain a copy of the report, visit MedPAC's Web site
at: http://www.medpac.gov.
11. Regulatory Impact Analysis
In section XV. of this preamble, we set forth our analysis of the
impact that the proposed changes contained in this proposed rule would
have on affected hospitals and CMHCs.
II. Proposed Changes Related to Ambulatory Payment Classifications
(APCs)
[If you choose to comment on issues in this section, please
indicate the caption ``APC Groups'' at the beginning of your comment.]
Section 1833(t)(2)(A) of the Act requires the Secretary to develop
a classification system for covered hospital outpatient services.
Section 1833(t)(2)(B) provides that this classification system may be
composed of groups of services, so that services 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 the Ambulatory Payment
Classifications Groups or APCs, as set forth in Sec. 419.31 of the
regulations. We use Healthcare Common Procedure Coding System (HCPCS)
codes and descriptors 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. (However, new technology APCs
that are temporary groups for certain approved services are structured
based on cost rather clinically homogeneity.) Using this classification
system, we have established distinct groups of surgical, diagnostic,
and partial hospitalization services, and medical visits. Because of
the transitional pass-through provisions, we also have developed
separate APC groups for certain medical devices, drugs, biologicals,
radiopharmaceuticals, and devices of brachytherapy.
We have packaged into each procedure or service within an APC the
cost associated with those items or services that are directly related
and integral to performing a procedure or furnishing a service.
Therefore, we would not make separate payment for
[[Page 50454]]
packaged items or services. For example, packaged items and services
include: use of an operating, treatment, or procedure room; use of a
recovery room; use of an observation bed; anesthesia; medical/surgical
supplies; pharmaceuticals (other than those for which additional
payment may be allowed under the transitional pass-through provisions
discussed in section V. of this preamble); and incidental services such
as venipuncture. Our packaging methodology is discussed in section
IV.B.3. of this proposed rule.
A. Proposed APC Changes: General
Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the APC group to which the
service is assigned. Each APC weight represents the median hospital
cost of the services included in that APC relative to the median
hospital cost of the services included in APC 601, Mid-Level Clinic
visits. The APC weights are scaled to APC 601 because a mid-level
clinic visit is one of the most frequently performed services in the
outpatient setting.
Section 1833(t)(9)(A) of the Act requires the Secretary to review
the components of the OPPS not less than annually and to revise the
groups and relative payment weights and make other adjustments to take
into account changes in medical practice, changes in technology, and
the addition of new services, new cost data, and other relevant
information and factors. Section 1833(t)(9)(A) of the Act, as amended
by section 201(h) of the BBRA of 1999, also requires the Secretary,
beginning in CY 2001, to consult with an outside panel of experts to
review the APC groups and the relative payment weights.
Finally, section 1833(t)(2) of the Act provides that, subject to
certain exceptions, the items and services within an APC group cannot
be considered comparable with respect to the use of resources if the
highest median (or mean cost, if elected by the Secretary) for an item
or service in the group is more than 2 times greater than the lowest
median cost for an item or service within the same group (referred to
as the ``2 times rule''). We use the median cost of the item or service
in implementing this provision. The statute authorizes the Secretary to
make exceptions to the 2 times rule in unusual cases, such as low
volume items and services.
Section 419.31 of the regulations sets forth the requirements for
the APC system and determination of the payment weights. In this
section, we discuss the changes that we are proposing to the APC
groups; the APC Panel's review and recommendations and our proposals in
response to those recommendations; the application of the 2 times rule
and proposed exceptions to it; coding for stereotactic radiosurgery
services; the proposed movement of procedures from the new technology
APCs; the proposed changes to the inpatient list; and the proposed
additions of new procedures codes to the APCs.
B. APC Panel Review and Recommendations
As stated above, the APC Panel met on February 18, 19, and 20,
2004, to discuss the revised APCs for the CY 2005 OPPS. In preparation
for that meeting, we published a notice in the Federal Register on
December 24, 2004 (68 FR 74621), to announce the location, date, and
time of the meeting; the agenda items; and the fact that the meeting
was open to the public. In that notice, we solicited public comment
specifically on the items included on the agenda for that meeting. We
also provided information about the APC Panel meeting on the CMS
website: http://www.cms.hhs.gov/faca/apc/panel.
Oral presentations and written comments submitted for the February
2004 APC Panel meeting met, at a minimum, the adopted guidelines for
presentations set forth in the Federal Register document (68 FR 74621).
Below is a summary of the APC issues discussed by the APC Panel, its
recommendations, and our proposals with respect to those
recommendations. The discussion in this section is limited to proposed
APC changes regarding APCs other than those that violate the 2 times
rule and those that represent drugs, biologicals, and transitional
pass-through devices, or those that are new technology APCs. The
specific APC Panel review and recommendations applicable to those APCs
are discussed in sections II.C., IV., III., and II.F., respectively, of
the preamble to this proposed rule. In conducting its APC review, the
APC Panel heard testimony and received evidence in support of the
testimonies from a number of interested parties. The APC Panel also
used hospital outpatient claims data for the period January 1, 2003,
through September 30, 2003, that provided, at a minimum, median costs
for the APC structure in place in CY 2004 and that was based on cost-
to-charge ratios used for setting the CY 2004 payment rates. The data
set presented to the APC Panel represented 9 months of the CY 2003 data
that we are proposing to use to recalibrate the APC relative weights
and to calculate the proposed APC payment rates for CY 2005. For this
discussion, we are using the APC titles as published in our November 7,
2003 final rule with comment period, which were the APC titles that
existed when the APC Panel met in February 2004. Because we are
proposing to retitle some of the APCs, the titles used in this
discussion may not be the same as those listed in Addendum A to this
proposed rule.
1. APC 0018: Biopsy of Skin/Puncture of Lesion
One presenter requested that the APC Panel recommend moving CPT
tracking codes 0046T (Catheter lavage, mammary duct(s)) and 0047T (Each
additional duct) from APC 0018 and placing them in an APC that more
accurately reflects each of the procedures. The APC Panel recommended
that we reassign CPT codes 0046T and 0047T to APC 0021, Level III
Excision/Biopsy.
We are proposing to accept the APC Panel's recommendation.
2. Level I and II Arthroscopy
APC 0041: Level I Arthroscopy
APC 0042: Level II Arthroscopy
We testified before the APC Panel regarding a comment that we
received in 2003 requesting that we reassign CPT code 29827
(Arthroscopy, shoulder with rotator cuff repair) from APC 0041 to APC
0042, based on its similarity to CPT 29826 (Arthroscopy, shoulder
decompression of subacromial space with partial acromioplasty without
coracoacromial release). Our clinical staff considered the request and
determined that APCs 0041 and 0042 should be reconfigured to improve
clinical homogeneity. An APC Panel presenter provided evidence to
support moving CPT code 29827 to an APC that would more accurately
recognize the complexity of that procedure. We requested the APC
Panel's recommendation regarding a total revision of these two APCs.
The APC Panel recommended that we reevaluate the codes in APCs 0041
and 0042 and propose restructuring that would improve the clinical
homogeneity in the two APCs.
We are proposing to accept the APC Panel's recommendation and to
revise APCs 0041 and 0042 as shown in Tables 1 and 2 below.
BILLING CODE 4120-01-P
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3. Angiography and Venography Except Extremity
APC 0279: Level II Angiography and Venography Except Extremity
APC 0280: Level III Angiography and Venography Except Extremity
APC 0668: Level I Angiography and Venography Except Extremity
As requested by the APC Panel, we presented our proposal for
reconfiguring APCs 0279, 0280, and 0668 that reflected changes based on
prior input with outside clinical experts. The APC Panel had previously
reviewed these APCs during its January 2003 meeting and had recommended
that we not restructure these three APCs until we received input from
clinical experts in the field. When we updated the APC groups in CY
2003, we accepted the APC Panel's recommendation and made no changes to
APCs 0279, 0280, and 0668.
A review of these APCs was prompted by a commenter who requested
that we move CPT code 75978 (Repair venous blockage) from APC 0668 to
APC 0280 and that we move CPT code 75774 (Artery x-ray, each vessel)
from APC 0668 to APC 0279. The commenter submitted evidence in support
of these requests and testified before the APC Panel regarding the
common use of CPT code 75978 for treating dialysis patients and the
often required multiple intraoperative attempts to succeed with this
procedure for such patients.
After receiving input from the clinical experts, we determined that
these three APCs should be revised to improve their clinical
homogeneity. We presented our proposed restructuring of APCs 0279,
0280, and 0668 to the APC Panel. The APC Panel concurred with our
proposal.
In addition, subsequent to the APC Panel meeting, we discovered
several procedures in these APCs that were more appropriately placed in
another APC in order to remedy any 2 times rule violations. Tables 3,
4, and 5 reflect those additional APC reassignments as well as those we
presented to the APC Panel in February 2004.
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C. Limits on Variations Within APCs: Proposed Application of the 2
Times Rule
Section 1833(t)(2) of the Act provides that the items and services
within an APC group cannot be considered comparable with respect to the
use of resources if the median of the highest cost item or service
within an APC group is more than 2 times greater than the median of the
lowest cost item or service within that same group. However, the
statute authorizes the Secretary 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. No exception may be made 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. We implemented
this statutory provision in Sec. 419.31 of the regulations. Under this
regulation, we elected to use the highest median cost and lowest median
cost to determine comparability.
During the APC Panel's February 2004 meeting, we presented data and
information concerning a number of APCs that violate the 2 times rule
and asked the APC Panel for its recommendation. We discuss below the
APC Panel's recommendations specific to each of these APCs and our
proposals in response to the APC Panel's recommendations.
1. Cardiac and Ambulatory Blood Pressure Monitoring
APC 0097: Cardiac and Ambulatory Blood Pressure Monitoring
We expressed concern to the APC Panel that APC 0097 appears to
violate the 2 times rule. We sought the APC Panel's recommendation on
revising the APC to address the violation. Based on clinical
homogeneity considerations, the APC Panel recommended that we not
restructure APC 0097 for CY 2005.
We are proposing to accept the APC Panel's recommendation that we
make no changes to APC 0097 for CY 2005.
2. Electrocardiograms
APC 0099: Electrocardiograms
We expressed concern to the APC Panel that APC 0099 appears to
violate the 2 times rule. We asked the APC Panel to recommend options
for resolving this violation. Based on clinical homogeneity
considerations, the APC Panel recommended that we not alter the
structure of APC 0099 for CY 2005.
We are proposing to accept the APC Panel's recommendation that we
make no changes to APC 0099 for CY 2005.
3. Excision/Biopsy
APC 0019: Level I Excision/Biopsy
APC 0020: Level II Excision/Biopsy
APC 0021: Level III Excision/Biopsy
We expressed concern to the APC Panel that APC 0019 appears to
violate the 2 times rule. We advised the APC Panel that this violation
was not evident in CY 2004 because the CY 2002 median cost data used in
calculating the CY 2004 APC updates supported moving CPT codes 11404
(Removal of skin lesion) and 11623 (Removal of skin lesion) from APC
0020 and APC 0021. However, based on the CY 2003 data reviewed by the
APC Panel, APC 0019 would violate the 2 times rule. Therefore, we asked
the APC Panel to recommend an approach to resolve the violation. We
asked the APC Panel if we should leave this APC as is; divide APC 0019
into two separate APCs; or move some codes in APC 0019 to higher level
[[Page 50459]]
excision/biopsy APCs. In making its recommendation, the APC Panel noted
that the 2 times violation in APC 0019 was minor, and recommended that
we not modify APC 0019.
We are proposing to accept the APC Panel's recommendation to not
make any modifications to APC 0019 for CY 2005.
4. Posterior Segment Eye Procedures
APC 0235: Level I Posterior Segment Eye Procedures
We expressed concern to the APC Panel that APC 0235 appears to
violate the 2 times rule. At the August 2003 APC Panel meeting, the APC
Panel recommended that we monitor the data for APC 0235 for review at
its February 2004 meeting. In order to address the apparent violation,
we asked the APC Panel to consider moving a few CPT codes from APC 0235
into a higher level posterior segment eye procedure APC. The APC Panel
noted that the 2 times violation in APC 0235 was minor, and recommended
that we not change APC 0235.
We are proposing to accept the APC Panel's recommendation that we
make no changes to the structure of APC 0235 for CY 2005.
5. Laparoscopy
APC 0130: Level I Laparoscopy
APC 0131: Level II Laparoscopy
We expressed concern to the APC Panel that APC 0130 appears to
violate the 2 times rule. We suggested moving CPT code 44970
(Laparoscopy, appendectomy) from APC 0130 to APC 0131. The APC Panel
recommended that we make this change.
We are proposing to accept the APC Panel's recommendation to move
CPT code 44970 from APC 0130 to APC 0131.
6. Anal/Rectal Procedures
APC 0148: Level I Anal/Rectal Procedure
APC 0155: Level II Anal/Rectal Procedure
APC 0149: Level III Anal/Rectal Procedure
APC 0150: Level IV Anal/Rectal Procedure
We expressed concern to the APC Panel that APC 0148 appears to
violate the 2 times rule. We suggested moving CPT code 46020 (Placement
of seton) from APC 0148 to a higher level anal/rectal procedure APC.
The APC Panel reviewed the four anal/rectal APCs (APC 0148, 0149, 0150,
and 0155) and recommended moving CPT codes 46020 and 46706 (Repair of
anal fistula with glue) from APC 0148 to APC 0150. The APC Panel also
recommended moving CPT codes 45005 (Drainage of rectal abscess) and
45020 (Drainage of rectal abscess) from APC 0148 to APC 0155.
We are proposing to accept the APC Panel's recommendations specific
to APC 0148. Our proposed movement of CPT codes from APC 0148 to APCs
0150 and 0155 is shown in the Table 6 below.
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7. Nerve Injections
APC 0204: Level I Nerve Injections
APC 0206: Level II Nerve Injections
APC 0207: Level III Nerve Injections
APC 0203: Level IV Nerve Injections
We again expressed concern to the APC Panel that APC 0203 and APC
0207 appear to violate the 2 times rule. We previously discussed this
issue at the APC Panel's CY 2003 meeting. During the CY 2003 meeting,
the APC Panel recommended that we gather additional data on procedures
assigned to APC 0203 and APC 0207 before proposing to reconfigure them
to attempt to eliminate the 2 times rule violation. The APC Panel
believed then that the structure of these two APCs as proposed in the
August 2003 OPPS proposed rule were more clinically cohesive than those
set forth in the November 2002 OPPS final rule. During the February
2004 meeting, we presented other information for the APC Panel to
review in making its recommendation.
After careful consideration of the new data, the APC Panel
recommended moving CPTs 64420 (Nerve block injection, intercostal
nerve), 64630 (Injection treatment of nerve), 64640 (Injection
treatment of nerve), and 62280 (Treatment of a spinal cord lesion) from
APC 0207 to APC 0206. The APC Panel also recommended moving CPT code
62282 (Treatment of a spinal canal lesion) from APC 0207 to APC 0203.
After reviewing more recent, complete calendar year data, we are
proposing to accept some of the APC Panel's recommendation
(specifically, move CPTs 64630 and 64640 from APC 0207 to APC 0206),
and to make some other changes that we believe are appropriate to
improve the nerve injection APC's clinical and resource homogeneity.
Our proposed nerve injection APC assignments are shown in Tables 7, 8,
and 9 below.
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8. Anterior Segment Eye Procedures
APC 0232: Level I Anterior Segment Eye Procedures
APC 0233: Level II Anterior Segment Eye Procedures
We expressed concern to the APC Panel that APC 0233 appears to
violate the 2 times rule. We suggested moving CPT codes 65286 (Repair
of eye wound), 66030 (Injection treatment of eye), and 66625 (Removal
of iris) from APC 0233 to APC 0232. The APC Panel agreed and
recommended that we move CPT codes 65286, 66030, and 66625 from APC
0233 to APC 0232.
We are proposing to accept the APC Panel's recommendation and to
reassign these three codes as shown in Table 10.
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9. Pathology
APC 0343: Level II Pathology
APC 0344: Level III Pathology
We expressed concern to the APC Panel that APC 0343 appears to
violate the 2 times rule. We suggested moving CPT code 88346
(Immunoflourescent study) from APC 0343 to APC 0344. The APC Panel
concurred with our proposal.
We are proposing to accept the APC Panel's recommendation and to
move CPT code 88346 from APC 0343 to APC 0344.
10. Immunizations
APC 0355: Level III Immunizations (proposed for CY 2005: Level I
Immunizations)
APC 0356: Level IV Immunizations (proposed for CY 2005: Level II
Immunizations)
We expressed concern to the APC Panel that APCs 0355 and 0356
appear to violate the 2 times rule. In order to eliminate this
violation, we suggested moving CPT 90636 (Hepatitis A/Hepatitis B
vaccine, adult dose, intramuscular use) from APC 0355 to APC 0356. We
also suggested moving CPT codes 90375 (Rabies immune globulin,
intramuscular or subcutaneous), 90740 (Hepatitis B vaccine, dialysis or
immunosuppressed patient, intramuscular), 90723 (Diphtheria-pertussis-
tetanus, Hepatitis B, Polio vaccine, intramuscular), and 90693 (Typhoid
vaccine, AKD, subcutaneous) from APC 0356 to APC 0355.
The APC Panel recommended moving CPT 90636 from APC 0355 to APC
0356 and CPT codes 90740, 90723, and 90693 from APC 0356 to APC 0355.
The APC Panel delayed making a recommendation on CPT 90375 and
requested that we collect additional cost data on this procedure for
discussion at the next scheduled APC Panel meeting.
We are proposing to accept the APC Panel's recommended changes to
move CPT code 90740 from APC 0356 to 0355, and to move CPT code 90636
from 0355 to 0356. However, based on our review of more recent claims
data than were available to the APC Panel, we determined that the
medians for CPT
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codes 90693 and 90375 are below the $50 drug packaging threshold.
Therefore, we are also proposing to package both CPT codes 90693 and
90375. We are proposing to change CPT code 90723 to status indicator
``e'' because it is not payable by Medicare.
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11. Pulmonary Tests
APC 0367: Level I Pulmonary Tests
APC 0368: Level II Pulmonary Tests
APC 0369: Level III Pulmonary Tests
We expressed concern to the APC Panel that APC 0369 appears to
violate the 2 times rule. We suggested moving CPT code 94015 (Patient
recorded spirometry) from APC 0369 to APC 0367. The APC Panel concurred
with our proposal.
We are proposing to accept the APC Panel's recommendation and to
move CPT code 94015 from APC 0369 to APC 0367.
In addition, during our analysis of more recent claims data
following the APC Panel meeting, we noted that APC 0367 violated the 2
times rules. Therefore, we are proposing to reassign CPT codes 94375,
94750, 94450, 94014, 94690, and 93740 to APC 0368.
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12. Clinic Visits
APC 0600: Low Level Clinic Visits
We expressed concern to the APC Panel that APC 0600 appears to
violate the 2 times rule. We suggested moving HCPS code G0264
(Assessment other than CHF, chest pain, asthma) to a higher level
clinic visit. The APC Panel recommended that we not make any changes to
APC 0600.
We are proposing to accept this recommendation and not make any
changes to APC 0600 for CY 2005.
D. Proposed Exceptions to the 2 Times Rule
[If you choose to comment on issues in this section please indicate the
caption ``2 Times Rule'' at the beginning of your comment.]
As discussed earlier, the Secretary is authorized to make
exceptions to the 2 times limit on the variation of costs within each
APC group in unusual cases such as low volume items and services.
Taking into account the APC changes that we are proposing for CY
2005 based on the APC Panel recommendations discussed in section II.C.
of this preamble and the use of CY 2003 claims data to calculate the
median cost of procedures classified in the APCs, we reviewed all the
APCs to determine which of them would not meet the 2
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times limit. We used the following criteria when deciding whether to
propose exceptions to the 2 times rule for affected APCs:
Resource homogeneity
Clinical homogeneity
Hospital concentration
Frequency of service (volume)
Opportunity for upcoding and code fragments.
For a detailed discussion of these criteria, refer to the April 7,
2000 OPPS final rule with comment period (65 FR 18457).
Table 13 contains the APCs that we are proposing to exempt from the
2 times rule based on the criteria cited above. In cases in which a
recommendation of the APC Panel appeared to result in or allow a
violation of the 2 times rule, we generally accepted the APC Panel's
recommendation because these recommendations were based on explicit
consideration of resource use, clinical homogeneity, hospital
specialization, and the quality of the data used to determine the APC
payment rates that we are proposing for CY 2005. The median cost for
hospital outpatient services for these and all other APCs can be found
at web site: http//http://www.cms.hhs.gov.
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E. Coding for Stereotactic Radiosurgery Services
[If you choose to comment on issues in this section please indicate the
caption ``Stereotactic Radiosurgery'' at the beginning of your
comment.]
1. Background
In the November 7, 2003 final rule with comment period (68 FR
63403), we discussed the APC Panel's consideration
[[Page 50465]]
of HCPCS codes G0242 (Cobalt 60-based stereotactic radiosurgery plan)
and G0243 (Cobalt 60-based stereotactic radiosurgery delivery). At its
August 22, 2003 meeting, the APC Panel discussed combining the coding
for these procedures under one code, with the payment for the new code
derived by adding the payment for HCPCS codes G0242 and G0243 together.
The APC Panel recommended that we solicit additional input from
professional societies representing neurosurgeons, radiation
oncologists, and other experts in the field before recommending changes
to the coding configuration for Cobalt 60-based stereotactic
radiosurgery planning and delivery.
In a correction to the November 7, 2003 final rule with comment
period, issued on December 31, 2003 (68 FR 75442), we considered a
commenter's request to combine HCPCS codes G0242 and G0243 into a
single procedure code in order to accurately capture the costs of this
treatment in a single procedure claim because the majority of patients
receive the planning and delivery of this treatment on the same day. We
responded to the commenter's request by explaining that several other
commenters stated that HCPCS code G0242 was being misused to code for
the planning phase of linear accelerator-based stereotactic
radiosurgery planning. Because the claims data for HCPCS code G0242
represent costs for linear accelerator-based stereotactic radiosurgery
planning (due to misuse of the code), in addition to Cobalt 60-based
stereotactic radiosurgery planning, we were uncertain as to how to
combine these data with HCPCS code G0243 to determine an accurate
payment rate for a combined code for planning and delivery of Cobalt
60-based stereotactic radiosurgery.
In consideration of the misuse of HCPCS code G0242 and the
potential for causing greater confusion by combining codes G0242 and
G0243, we created a planning code for linear accelerator-based
stereotactic radiosurgery (G0338) to distinguish this procedure from
Cobalt 60-based stereotactic radiosurgery planning. We maintained both
HCPCS codes G0242 and G0243 for the planning and delivery of Cobalt 60-
based stereotactic radiosurgery treatment, consistent with the use of
two G codes for planning (G0338) and delivery (G0173, G0251, G0339,
G0340, as applicable) of each type of linear accelerator-based
treatment. We indicated that we intend to maintain these new codes in
their current new technology APCs until the payment rates could be set
using medians from this expanded set of codes. We also stated that we
would solicit input from the APC Panel at its February 2004 meeting.
During the February 2004 APC Panel meeting, several presenters
discussed with the APC Panel their rationale for requesting that HCPCS
codes G0242 and G0243 be combined into a single procedure code. One
presenter explained that the request to combine the codes was made
because certain fiscal intermediaries were rejecting claims in which
HCPCS codes G0242 and G0243 were reported with a surgery revenue code.
Although we have not issued any national instructions to fiscal
intermediaries to deny claims for these services if they are billed
with a surgery revenue code, the presenter stated that we may have
indirectly led some fiscal intermediaries to believe that Cobalt 60-
based stereotactic radiosurgery should be reported with a radiation
therapy revenue center because the procedure is separated into a
planning code and a delivery code, which reflect the coding pattern of
a radiation therapy procedure rather than a single code for a surgical
procedure. The presenter stated that because of the way that CMS has
coded this procedure, some fiscal intermediaries have established local
edits to deny claims in which HCPCS codes G0242 and G0243 are reported
on a claim with a surgery revenue code.
The APC Panel recommended that CMS work with the presenters to
determine if any fiscal intermediaries have established local edits to
reject claims in which HCPCS codes G0242 and G0243 are reported on a
claim, and to determine specific reasons for any such local edits. The
APC Panel also recommended that CMS take necessary action to ensure
that any such claims are not being denied payment due to local edits.
The APC Panel did not agree that the solution to ensuring payment was
to combine HCPCS codes G0242 and G0243 into a single code, but rather
recommended that CMS educate fiscal intermediaries as to the
appropriate procedures for submittal of these claims for Medicare
payment.
In response to the concern expressed by several presenters that
certain fiscal intermediaries were rejecting claims in which HCPCS
codes G0242 and G0243 were reported with a surgery revenue code, we
have worked together with these presenters to identify specific fiscal
intermediaries who may be rejecting these claims. However, to date, we
have been unable to identify any fiscal intermediaries who have
established local edits that would reject claims in which HCPCS codes
G0242 and G0243 are reported with a surgery revenue code. If a provider
should experience a rejection of such claims in which HCPCS codes G0242
and G0243 are reported on a claim with a surgery revenue code, they
should contact their fiscal intermediary to determine the specific
reason for the claim rejection.
2. Proposal for CY 2005
For CY 2005, we are proposing to accept the APC Panel's
recommendation to work with the presenters to ensure that claims in
which HCPCS codes G0242 and G0243 are reported are not being unjustly
denied payment due to local edits established by fiscal intermediaries.
In the meantime, for CY 2005, we are proposing to maintain HCPCS code
G0242 in new technology APC 1516 at a payment rate of $1,450, and HCPCS
code G0243 in new technology APC 1528 at a payment rate of $5,250.
These payment rates are the same as those established for CY 2004.
F. Proposed Movement of Procedures From New Technology APCs to
Clinically Appropriate APCs
[If you choose to comment on issues in this section, please indicate
the caption ``New Technology APCs'' at the beginning of your comment.]
1. Background
In the November 30, 2001 final rule (66 FR 59903), we made final
our proposal to change the period of time during which a service may be
paid under a new technology APC. The April 7, 2000 final rule initially
established the timeframe that new technology APCs would be in effect
(65 FR 18457). Beginning in CY 2002, we have retained services within
new technology APC groups until we have acquired adequate data that
allow us to assign the service to a clinically appropriate APC. This
policy allows us to move a service from a new technology APC in less
than 2 years if sufficient data are available, and it also allows us to
retain a service in a new technology APC for more than 3 years if
sufficient data upon which to base a decision for reassignment have not
been collected.
In the November 7, 2003 final rule with comment period we
implemented a comprehensive restructuring of the new technology APCs to
make the payment levels more consistent (68 FR 63416). We established
payment levels in $50, $100, and $500 intervals and expanded the number
of new technology payment levels.
2. APC Panel Review and Recommendation
During the APC Panel's February 2004 meeting, the APC Panel heard
testimony from several interested parties who
[[Page 50466]]
requested specific modifications to the APCs for radiation oncology
APC. They asked the APC Panel to make several recommendations: (1) That
we move CPT code 77418 (Intensity-modulated radiation therapy) from APC
0412 back into a new technology APC; (2) that we dampen, or limit, any
possible payment reductions to APC 0301 (Level II Radiation Therapy);
(3) that we accept more external data to evaluate costs; and (4) that
we identify more claims that are useful for ratesetting.
In response to the testimony presented, the APC Panel recommended
that we reassign CPT code 77418 to the new technology APC 1510 for CY
2005 and that we explain to providers any steps we take to limit
payment reductions to APC 0301 so that they can better plan for future
years during which we may decide not to apply a dampening, or payment
reduction limitation, to the rates for APC 0301.
We are not proposing to accept the APC Panel's recommendations
because we believe that we have ample claims data for use in
determining an appropriate APC payment rate for CPT code 77418.
Moreover, we believe that the development of median cost for CPT code
77418 based on those data would be representative of hospital bills.
We have over 255,000 claims for this service, and over 95 percent
were single claims that we could use for ratesetting. Moreover, the APC
medians have been stable for the last 2 years of data. As indicated by
our claims data, returning code 77418 to new technology APC 1510 would
result in a payment for the service that is significantly higher than
the resources utilized to provide it.
3. Proposal for CY 2005
There are 24 procedures currently assigned to new technology APCs
for which we have data adequate to support assignment into clinical
APCs. We are proposing to reassign these procedures to clinically
appropriate APCs. We are proposing to assign 24 of the procedures to
clinically appropriate APCs using CY 2003 claims data to set medians on
which payments would be based. These APCs and the proposed assignments
are displayed below in Table 14.
Based upon our review of the latest claims data available, we are
proposing to move the procedures listed in Table 14 from their current
new technology APCs to the APCs listed, as we have adequate data on
these procedures to enable us to make the necessary APC assignment.
BILLING CODE 4120-01-P
[[Page 50467]]
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We believe the payment rates in Table 14 for several of the
procedures that we are proposing to move out of new technology APCs and
into clinical APCs require further explanation for a fuller
understanding.
For CPT code 96567, (Photodynamic therapy of the skin), the impact
of the estimated payment decrease between CY 2004 and CY 2005 is
actually low as the CY 2004 payment included the topically applied drug
required to perform this procedure and the CY 2005 estimated payment
does not. We now are proposing to pay separately for the drug billed
under code J7308 in CY 2005. We have adequate claims data on which to
base payment for that procedure in a clinically appropriate APC.
Payment based on those data in addition to removal of the drug for
separate payment resulted in a lower median for the APC.
In the case of CPT code 33224, (Insertion of a left ventricular
pacing lead and connection), based on a comparison of payment rates for
CY 2004 and the estimated rate for CY 2005, it appears that there is a
large increase in payment that results from reassigning the code from
its new technology APC to a clinical APC. The difference is due to the
fact that the estimated CY 2005 APC payment includes the cost of the
left ventricular lead that was not included in the CY 2004 new
technology APC payment. That left ventricular lead was paid as a pass-
through device under code C1900 in CY 2004, but is no longer eligible
for pass-through payments in CY 2005, and, as such, is now included in
the APC for the procedure.
Similarly, the CY 2005 estimated payment for CPT code 33225, (Left
ventricular pacing lead add-on), includes the cost of the ventricular
lead. However, for 33225, the data are still somewhat unstable.
Therefore, we are proposing to maintain that procedure in a new
technology APC, but at a higher payment level, reflecting the
additional cost of the lead.
We note that a number of positron emission tomography (PET) scans
currently are classified into New Technology APC 1516. We recognize
that PET is an important technology in many instances and want to
ensure that the technology remains available to Medicare beneficiaries
when medically necessary. We believe that we have sufficient data to
assign PET scans to a clinically appropriate APC. We have been told,
however, that if the effect of doing so is to reduce payment for the
procedure, it may hinder access to this technology. Therefore, we are
considering three options as the proposed payment for these procedures
in CY 2005, based on our review of the 2003 claims data for the PET
procedures, and we specifically invite comments on each of these
options.
Option 1: Continue in CY 2005 the current assignment of the scans
to New Technology APC 1516 prior to assigning to a clinical APC.
Option 2: Assign the PET scans to a clinically appropriate APC
priced according to the median cost of the scans based on CY 2003
claims data. Under this option, we would assign PET scans to APC 0420,
PET imaging.
Option 3: Transition assignment to a clinical APC in CY 2006 by
setting payment in CY 2005 based on a 50-50 blend of the median cost
and the CY 2004 New Technology. We would assign the scans to New
Technology APC 1513 for a blended transition payment. The rates for
these options are in addendum B.
G. Proposed Changes to the Inpatient List
[If you choose to comment on issues in this section, please indicate
the caption ``Inpatient List'' at the beginning of your comment.]
We advised the APC Panel of a request that we had received to move
four codes for percutaneous abscess drainage 44901(Drain append.
abscess, percutaneous), 49021 (Drain abdominal abscess), 49041 (Drain
percutaneous abdominal abscess), 49061(Drain, percutaneous, retroper.
abscess)) from the inpatient list and to assign them to appropriate
APCs. The APC Panel also recommended that we evaluate other codes on
the inpatient list for possible APC assignment and that we consider
eliminating the inpatient list.
We are proposing to remove the four above-cited codes and assign
them to clinically appropriate APCs, as recommended by the APC Panel.
We are proposing to assign code 44901 to APC 0037, code 49021 to APC
0037; code 49041 to APC 0037; and code 49061 to APC 0037. We discuss in
section VII.E. of this preamble our response to the APC Panel's
recommendation that we either abolish the inpatient list or evaluate it
for any appropriate changes.
H. Proposed Assignment of ``Unlisted'' HCPCS Codes
[If you choose to comment on issues in this section, please indicate
the caption
[[Page 50469]]
``Unlisted HCPCS Codes'' at the beginning of your comment.]
1. Background
Some HCPCS codes are used to report services that do not have
descriptors that define the exact service furnished. They are commonly
called ``unlisted'' codes. The code descriptors often contain phrases
such as: ``unlisted procedure'', ``not otherwise classified,'' or ``not
otherwise specified.'' The unlisted codes typically fall within a
clinical or procedural category, but they lack the specificity needed
to describe the resources used in the service. For example, CPT code
17999 is defined as, ``Unlisted procedure, skin, mucous membrane and
subcutaneous tissue.'' The unlisted codes provide a way for providers
to report services for which there is no HCPCS code that specifically
describes the service furnished. However, the lack of specificity in
describing the service prevents us from assigning the code to an APC
based on clinical homogeneity and median cost.
In most cases, the unlisted codes are assigned to the lowest level,
clinically appropriate APC under the Medicare OPPS. This creates an
incentive for providers to select the appropriate, specific HCPCS code
to describe the service where one is available. In addition, if there
is no HCPCS code that accurately describes the service, placing the
unlisted code in the lowest level APC provides an incentive for
interested parties to secure a code through the AMA's CPT process that
will describe the service. Once a code that accurately describes the
service is created, we can collect data on the service and place it in
the correct APC based on the clinical nature of the service and its
median cost.
We do not use the median cost for the unlisted codes in the
establishment of the weight for the APC to which the code is assigned
because, by definition of the code, we do not know what service or
combination of services is reflected in the claims billed using the
unlisted code.
Our review of HCPCS code assignments to APCs has revealed that
there are a number of unlisted codes that are not assigned to the
lowest level APC.
2. Proposal for CY 2005
We are proposing to reassign these unlisted codes for CY 2005 OPPS
to the lowest level APC in the clinical grouping in which the unlisted
code is located. The list of those codes, the current APC assignment,
and the assignment we propose for CY 2005 OPPS are displayed in Table
15.
We continue to believe that assigning unlisted codes to the lowest
level of the APC for the clinical or procedural grouping into which the
code falls creates an appropriate incentive for providers to pursue
assignment of new codes where they are needed. Moreover, payment at the
lowest level of APC for the clinical or procedural grouping allows for
some payment for the services furnished and also ensures that we do not
pay inappropriately for services that are unspecified.
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[[Page 50470]]
I. Proposed Addition of New Procedure Codes
During the first two quarters of CY 2004, we created 85 HCPCS codes
that were not addressed in the November 7, 2003 final rule that updated
the CY 2004 OPPS. We have designated the payment status of those codes,
which are shown in Table 16 below, and added them to the April and July
updates of the 2004 OPPS (Transmittals 3144, 3154, 3322, and 3324).
Thirty of the new codes were created to enable providers to bill for
brand name drugs and to receive payments at a rate that differs from
that for generic equivalents, as mandated in new section
1833(t)(14)(A)(i) of the Act as added by Pub. L. 108-173. In this
proposed rule, we are soliciting comment on the APC assignment of these
services. Further, consistent with our annual APC updating policy, we
are proposing to assign the new HCPCS codes for CY 2005 to the
appropriate APCs and would incorporate them into our final rule for CY
2005.
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[[Page 50471]]
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[[Page 50472]]
J. Proposed OPPS Changes: Provisions of MMA (Pub. L. 108-173)
1. Payment for Initial Preventive Physical Examinations (Section 611 of
Pub. L. 108-173)
[If you choose to comment on issues in this section, please indicate
the caption ``Physical Examinations'' at the beginning of your
comment.]
a. Background
Section 611 of Pub. 108-173 provides for coverage under Medicare
Part B of an initial preventive physical examination for new
beneficiaries, effective for services furnished on or after January 1,
2005. This provision applies to beneficiaries whose coverage period
under Medicare Part B begins on or after January 1, 2005, and only for
an initial preventive physical examination performed within 6 months of
the beneficiary's initial coverage date.
Current Medicare coverage policy does not allow for payment for
routine physical examinations (or checkups) that are furnished to
beneficiaries. Before the enactment of Pub. L. 108-173, all preventive
physical examinations had been excluded from coverage based on section
1862(a)(7) of the Act, which states that routine physical checkups are
excluded services. This exclusion is specified in regulations under
Sec. 411.15(a). In addition, preventive physical examinations had been
excluded from coverage based on section 1862(a)(1)(A) of the Act. This
section of the Act provides that items and services must be reasonable
and necessary for the diagnosis or treatment of illness or injury or to
improve the functioning of a malformed body member (as implemented in
regulations under Sec. 411.15(k)).
Coverage of initial preventive physical examinations is provided
only under Medicare Part B. As provided in the statute, this new
coverage allows payment for one initial preventive physical examination
within the first 6 months after the beneficiary's first Part B coverage
begins, although that coverage period may not begin before January 1,
2005. We also note that Pub. L. 108-173 did not make any provision for
the waiver of the Medicare coinsurance and Part B deductible for the
initial preventive physical examination. Payment for this service would
be applied to the required Medicare Part B deductible, which is $110
for CY 2005, if the deductible has not been met, and the usual
coinsurance provisions would apply.
b. Proposed Amendments to Regulations
We are proposing to amend our regulations to add a new Sec. 410.16
that would provide for coverage of initial preventive physical
examinations in various settings, including the hospital outpatient
department, as specified in the statute, and specify the condition for
coverage and limitation on coverage. In addition, we are proposing to
conform our regulations on exclusions from coverage under Sec.
411.15(a)(1) and Sec. 411.15(k) to the provisions of section 611 of
Pub. L. 108-173. Specifically, we are proposing to specify an exception
to the list of examples of routine physical checkups that are excluded
from coverage under Sec. 411.15(a) and to add a new exclusion under
Sec. 411.15(k)(11).
We are proposing to amend Sec. 419.21 of the OPPS regulations to
add a new paragraph (e) to specify payment for an initial preventive
physical examination as a Medicare Part B covered service under the
OPPS if the examination is furnished within the first 6 months of the
beneficiary's first Medicare Part B coverage.
We note that the initial preventive physical examination is also
addressed in detail in our proposed rule to update the Medicare
Physician's Fee Schedule for CY 2005. However, because we believe the
same elements of the initial physical examination furnished in a
physician's office would also apply when the examination is performed
in a hospital outpatient clinic, we are proposing to revise the
applicable regulations to reflect this requirement.
Section of 611(b) of Pub. L. 1089-173 define an ``initial
preventive physical examination'' to mean physicians'' services
consisting of--
(1) A physical examination (including measurement of height,
weight, blood pressure, and an electrocardiogram, but excluding
clinical laboratory tests) with the goal of health promotion and
disease detection; and
(2) Education, counseling, and referral with respect to screening
and other preventive coverage benefits separately authorized under
Medicare Part B, excluding clinical lab tests.
Specifically, section 611(b) of Pub. L. 108-173 provides that the
education, counseling, and referral services with respect to the
screening and other preventive services authorized under Medicare Part
B include the following:
(1) Pneumococcal, influenza, and hepatitis B vaccine and their
administration;
(2) Screening mammography;
(3) Screening pap smear and screening pap smear and screening
pelvic examination;
(4) Prostate cancer screening tests;
(5) Colorectal cancer screening tests;
(6) Diabetes outpatient self-management training services;
(7) Bone mass measurements;
(8) Screening for glaucoma;
(9) Medical nutrition therapy services for individuals with
diabetes and renal disease;
(10) Cardiovascular screening blood tests; and
(11) Diabetes screening tests.
Section 611(d)(2) of Pub. L 108-173 amended section
1861(s)(2)(K)(i) and (ii) of the Act to specify the services identified
as physicians' services and referred to in the definition of initial
preventive physical examination include services furnished by a
physician assistant, a nurse practitioner, or a clinical nurse
specialist. We refer to these professionals as ``qualified nonphysician
practitioners.''
Based on the language of the statute, our review of the medical
literature, current clinical practice guidelines, and United States
Preventive Services Task Force recommendations, we are proposing (under
proposed new Sec. 410.16(a), Definitions) to interpret the term
``initial preventive physical examination'' for purposes of this new
benefit to include all of the following services furnished by a doctor
of medicine or osteopathy or a qualified nonphysician practitioner:
(1) Review of the individual's comprehensive medical and social
history. We are proposing to define ``medical history'' to include, as
a minimum, past medical and surgical history, including experience with
illnesses, hospital stays, operations, allergies, injuries, and
treatments; current medications and supplements, including calcium and
vitamins; and family history, including a review of medical events in
the patient's family, including diseases that may be hereditary or
place the individual at risk. We are proposing to define ``social
history'' to include, at a minimum, history of alcohol, tobacco, and
illicit drug use; work and travel history; diet; social activities; and
physical activities.
(2) Review of the individual's potential (risk factors) for
depression (including past experiences with depression or other mood
disorders) based on the use of an appropriate screening instrument that
the physician or other qualified nonphysician practitioner may select
from various available standardized screening tests for this purpose,
unless the appropriate screening instrument is defined through the
national coverage determination (NCD) process.
[[Page 50473]]
(3) Review of the individual's functional ability and level of
safety (that is, at a minimum, a review of the following areas: hearing
impairment, activities of daily living, falls risk, and home safety),
based on the use of an appropriate screening instrument, which the
physician or other qualified nonphysician practitioner may select from
various available standardized screening tests for this purpose, unless
the appropriate screening instrument is further defined through the NCD
process.
(4) An examination to include measurement of the individual's
height, weight, blood pressure, a visual acuity screen, and other
factors as deemed appropriate, based on the individual's comprehensive
medical and social history and current clinical standards.
(5) Performance of an electrocardiogram and interpretation.
(6) Education, counseling, and referral, as deemed appropriate,
based on the results of elements (1) through (5) of the proposed
definition of the initial preventive physical examination.
(7) Education, counseling, and referral, including a written plan
for obtaining the appropriate screening and other preventive services,
which are also covered as separate Medicare Part B benefits; that is,
pnuemococcal, influenza, and hepatitis B vaccines and their
administration, screening mammography, screening pap smear and
screening pelvic exams, prostate cancer screening tests, diabetes
outpatient self-management training services, bone mass measurements,
screening for glaucoma, medical nutrition therapy services,
cardiovascular screening blood tests, and diabetes screening tests.
In view of the possibility that it may be appropriate to include
other (or revised) elements in the definition of the term ``initial
preventive physical examination,'' we are requesting public comments on
this issue. For example, we have chosen not to define the term
``appropriate screening instrument'' for screening individuals for
depression, alcohol, tobacco and illicit drug use, functional ability,
and level of safety because we anticipate that the examining physician
or qualified nonphysician practitioner would want to use the test of
his or her choice, based on current clinical practice guidelines. We
believe that any standardized screening test for depression, substance
abuse, functional ability, and level of safety recognized by the
American Academy of Family Physicians, the American College of
Physicians-American Society of Internal Medical, the American College
of Preventive Medicine, the American Geriatrics Society, the American
Psychiatric Association, and the United States Preventive Services Task
Force would be acceptable for purposes of meeting the ``appropriate
screening instrument'' provision.
To facilitate our future consideration of defining more
specifically the type or types of appropriate screening instruments for
depression, substance abuse, functional ability, or level of safety, we
are proposing to include provisions in paragraphs (2) and (3) under the
proposed definition of initial preventive physical examination that
would allow us to do this through the NCD process. This proposed
approach would allow us to conduct a more timely assessment of new
types of screening tests than would be possible under the standard
rulemaking process. We intend to use the NCD process, if necessary, for
evaluating appropriate new screening tests for depression; alcohol,
tobacco and illicit drug use; functional ability; or level of safety.
This NCD process includes an opportunity for public comment in order to
evaluate the medical and scientific issues related to the coverage of
the new tests that may be brought to our attention in the future.
c. Proposed Assignment of New HCPCS Code for Payment of Initial
Preventive Physical Examinations
There is no current CPT code that contains the specific elements
included in the initial preventive physical examination. Therefore, we
are proposing to establish the following new HCPCS code, GXXXX, Initial
preventive physical examination, to be used to bill for the new service
under both the Medicare physician fee schedule and the OPPS. As
required by the statute, this code includes an electrocardiogram, but
does not include the other previously mentioned preventive services
that are currently separately covered and paid under the Medicare Part
B screening benefits. When these other preventive services are
performed, they should be identified using the existing appropriate
codes.
For payment under the physician fee schedule, relative value units
are being proposed for new HCPCS code GXXXX based on equivalent
resources and work intensity to those contained in CPT E/M code 99203
(new patient, office or other outpatient visit) and CPT 93000
(electrocardiogram, complete). The ``technical component'' is the
portion of the physician fee schedule that is most comparable to what
Medicare pays under the OPPS, the costs other than the physician
professional services that are billed and paid for separately under the
fee schedule, not OPPS. The estimated technical component of the
physician fee schedule is between $50 and $100.
Given our lack of cost data to guide assignment of the new benefit
into a clinically appropriate APC, we are proposing to assign GXXXX to
the new technology APC 1539 that has a payment level of $50 to $100.
Temporary assignment to a new technology APC allows us to pay for the
new benefit provided in the OPD while we accrue claims data and
experience on which to base a clinically relevant APC assignment.
d. Handling of Comments Received in Response to This Proposal
We will respond to all comments regarding the proposed elements
required for the initial preventive physical examination, whether the
examination is performed in a physician's office or clinic or in a
hospital clinic, in the final rule implementing the Medicare Physician
Fee Schedule for CY 2005. We will respond to comments regarding payment
for the examination under the OPPS in the subsequent final rule
implementing the OPPS payment rates for CY 2005.
2. Payment for Certain Mammography Services (Section 614 of Pub. L.
108-173)
[If you choose to comment on issues in this section, please indicate
the caption ``Mammography'' at the beginning of your comment.]
Section 614 of Pub. L. 108-173 amended section 1833(t)(1)(B)(iv) of
the Act to provide that screening mammography and diagnostic
mammography services are excluded from payment under the OPPS. This
amendment applies to screening mammography services furnished on or
after December 8, 2003 (the date of the enactment of Pub. L. 108-173),
and in the case of diagnostic mammography, to services furnished on or
after January 1, 2005. As a result of this amendment, both screening
mammography and diagnostic mammography will be paid under the physician
fee schedule.
We are proposing to amend Sec. 419.22 of the regulations by adding
a new paragraph(s) to specify that both screening mammography and
diagnostic mammography will be excluded from payment under the OPPS, in
accordance with section 614 of Pub. L. 108-173.
III. Proposed Recalibration of APC Relative Weights for CY 2005
[If you choose to comment on issues in this section, please include the
caption
[[Page 50474]]
``APC Relative Weights'' at the beginning of your comment.]
A. Database Construction
Section 1833(t)(9)(A) of the Act requires that the Secretary review
and revise the relative payment weights for APCs at least annually,
beginning in CY 2001 for application in CY 2002. In the April 7, 2000
final rule (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. Except for some reweighting due to APC changes, these
relative weights continued to be in effect for CY 2001. (See the
November 13, 2000 interim final rule (65 FR 67824 through 67827).)
To recalibrate the relative APC weights for services furnished on
or after January 1, 2005, and before January 1, 2006, we are proposing
to use the same basic methodology that we described in the April 7,
2000 final rule. That is, we would recalibrate the weights based on
claims and cost report data for outpatient services. We are proposing
to use the most recent available data to construct the database for
calculating APC group weights. For the purpose of recalibrating APC
relative weights for CY 2005, the most recent available claims data are
the approximately 119 million final action claims for hospital OPD
services furnished on or after January 1, 2003, and before January 1,
2004.
Of the 119 million final action claims for OPPS services, 96.7
million claims were of the type of bill potentially appropriate for use
in setting rates for OPPS services (but did not necessarily contain
services payable under OPPS). Of the 96.7 million claims, we were able
to use 48.5 million whole claims (from which we created 75 million
single procedure claim records) to set OPPS proposed for CY 2005
weights.
The proposed weights and payments in Addenda A and B to this
proposed rule were calculated using claims from this period that had
been processed before January 1, 2004. We selected claims for services
paid under the OPPS and matched these claims to the most recent cost
report filed by the individual hospitals represented in our claims
data. We are proposing that the APC relative weights for CY 2005 under
the OPPS would continue to be based on the median hospital costs for
services in the APC groups. For the final rule, we are proposing to
base median costs on claims for services furnished in CY 2003 and
processed before June 30, 2004.
1. Proposed Treatment of Multiple Procedure Claims
For CY 2005, we are proposing to continue to use single procedure
claims to set the medians on which the weights would be based. We have
received many requests that we ensure that the data from claims that
contain charges for multiple procedures are included in the data from
which we calculate the CY 2005 relative payment weights. Requesters
believe that relying solely on single procedure claims to recalibrate
APC weights fails to take into account data for many frequently
performed procedures, particularly those commonly performed in
combination with other procedures. They believe that, by depending upon
single procedure claims, we base payment weights on the least costly
services, thereby introducing downward bias to the medians on which the
weights are based.
We agree that, optimally, it is desirable to use the data from as
many claims as possible to recalibrate the relative payment weights,
including those with multiple procedures. As discussed in the
explanation of single procedure claims below, we have used the date of
service on the claims and a list of codes to be bypassed to create
``pseudo'' single claims from multiple procedure claims. We refer to
these newly created single procedure claims as ``pseudo'' singles
because they were submitted by providers as multiple procedure claims.
2. Proposed Use of Single Procedure Claims
We use single procedure claims to set the median costs for APCs
because we are, so far, unable to ensure that packaged costs can be
correctly allocated across multiple procedures performed on the same
date of service. However, bypassing specified codes that we believe do
not have significant packaged costs enables use of more data from
multiple procedure claims. For CY 2003, we created ``pseudo'' single
claims by bypassing HCPCS codes 93005 (Electrocardiogram, tracing),
71010 (Chest x-ray), and 71020 (Chest x-ray) on a submitted claim.
However, we did not use claims data for the bypassed codes in the
creation of the median costs for the APCs to which these three codes
were assigned because the level of packaging that would have remained
on the claim after we selected the bypass code was not apparent and
therefore, it was difficult to determine if the medians for these codes
would be correct.
For CY 2004, we created ``pseudo'' single claims by bypassing these
three codes and also by bypassing an additional 269 HCPCS codes in
APCs. These codes were selected by CMS based on a clinical review of
the services and because it was presumed that these codes had only very
limited packaging and could appropriately be bypassed for the purpose
of creating ``pseudo'' single claims. The APCs to which these codes
were assigned were varied and included mammography, cardiac
rehabilitation, and level I plain film x-rays. To derive more
``pseudo'' single claims, we also broke claims apart where there were
dates of service for revenue code charges on that claim that could be
matched to a single procedure code on the claim on the same date.
As in CY 2003, we did not include the claims data for the bypassed
codes in the creation of the APCs to which the 269 codes were assigned
because, again, we had not established that such an approach was
appropriate and would aid in accurately estimating the median cost for
that APC. For CY 2004, from about 16.3 million otherwise unusable
claims, we were able to use about 9.5 million multiple procedure claims
to create about 27 million ``pseudo'' single claims. For CY 2005, from
about 21 million otherwise unusable claims, we were able to use about
18 million multiple procedure claims to create about 45.5 million
``pseudo'' single claims.
For CY 2005, we are proposing to continue using date of service
matching as a tool for creation of ``pseudo'' single claims and also to
take a more empirical approach to creating the list of codes that we
would bypass to create ``pseudo'' single claims. The process we are
proposing for CY 2005 OPPS results in our being able to use some part
of 93 percent of the total claims eligible for use in OPPS ratesetting
and modeling. In CY 2004, we were able to use some part of the data
from 82 percent of eligible claims. This process enabled us to use 75
million single bills for ratesetting: 45.5 million ``pseudo'' singles
and 30.5 million ``natural'' single bills.
We are proposing to bypass the 383 codes identified in Table 17 to
create new single claims and to use the line-item costs associated with
the bypass codes on these claims in the creation of the median costs
for the APCs into which they are assigned. Of the codes on this list,
only 123 (32 percent) were used for bypass in CY 2004.
We developed the proposed bypass list using four criteria:
[[Page 50475]]
a. We developed the following empirical standards by reviewing the
frequency and magnitude of packaging in the single claims for payable
codes other than drugs and biologicals. We assumed that the
representation of packaging on the single claims for any given code is
comparable to packaging for that code in the multiple claims.
There were 100 or more single claims for the code. This
ensured that observed outcomes were sufficiently representative of
packaging that might occur in the multiple claims.
Five percent or fewer of the single claims for the code
had packaged costs on that single claim for the code. This criterion
results in limiting the amount of packaging being redistributed to the
payable procedure remaining on the claim after the bypass code is
removed and ensures that the costs associated with the bypass code
represent the cost of the bypassed service. For the remaining payable
codes, the average percentage of single claims with any packaged costs
was 70 percent, and the chosen threshold of 5 percent fell at roughly
the 15th percentile.
The median cost of packaging observed in the single claim
was equal to or less than $50. This limits the amount of error in
redistributed costs.
The code is not a code for an unlisted service.
b. We examined APCs relying on a low volume of single claims, and
it became apparent that several radiological supervision and
interpretation codes were commonly billed with the procedural codes in
the APCs. We then reviewed all radiological supervision and
interpretation codes to assess their viability as bypass codes. For the
codes included on the list in Table 17, we determined that, generally,
the packaging on claims, including these radiological supervision and
interpretation codes, should be associated with the procedure
performed.
c. We examined radiation planning and related codes provided by a
professional organization. In the organization's opinion, the codes
could safely be bypassed and used without packaging to set medians for
the APCs into which these codes are assigned. Many of the codes the
organization recommended met our criterion under item a., and the
remaining codes were close. Therefore, after reviewing such codes, we
are proposing to adopt as bypass codes all radiation planning and
related codes as provided by the organization.
d. We included HCPCS codes 93005 and 71010. These codes have been
bypassed for the past 3 years and generate a significant amount of new
single claims because they are very commonly done on the same date of
surgery. They have low median packaged costs and a low percentage of
single claims with any packaged costs, 6 percent and 18 percent,
respectively.
We invite public comment on the ``pseudo'' single process,
including the bypass list and the criteria.
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However, we note several inherent features of multiple bill claims
that prevented us from the further creation of ``pseudo'' singles. We
discussed these obstacles in detail in the August 9, 2002 proposed rule
(67 FR 52092, 52108 through 52111) and the November 1, 2001 final rule
(66 FR 66718 and 66743 through 66746).
Notwithstanding the obstacles in creating additional ``pseudo''
single claims, we have received a number of suggestions from outside
sources providing options to this approach. Some of the suggestions
involved complex methodologies driven by lengthy tables of codes and
complex logic that focused on creating ``pseudo'' singles by packaging
specific packaged HCPCS codes with specific payable HCPCS codes. While
we appreciate the time and attention spent by various parties
interested in this issue, our review of the suggestions and our
empirical analysis of the most specific and detailed recommendation
using the data used to develop the APC relative weights for the APC
Panel's February 2004 meeting indicated that code-specific packaging
would add a significant amount of time and complexity to the
ratesetting process and would require involved annual maintenance to
accurately update the code sets used in the suggested methodology each
year. Moreover, we would experience only a modest increase in
``pseudo'' single claims.
Further, code-specific packaging does not appear to appreciably
increase the volume of single bills available for calculating medians
for those APCs that are currently derived from a small volume of total
claims. We believe that the observed modest improvements in the
``pseudo'' single claims volume from code-specific packaging can be
attributed to the number and variety of services billed on multiple
procedure claims, which often have complex HCPCS code combinations.
These complex claims cannot be reduced to single bills by packaging the
costs for a few procedures. In light of these findings, we are not
proposing to adopt any code-specific packaging proposals. However, we
would review and consider any other specific proposals that we received
as comments.
Other suggestions included recommendations that the costs in
packaged revenue codes and packaged HCPCS codes be allocated separately
to paid HCPCS codes based on the prior year's payment weights or
payment rates for the single procedures. Still other suggestions
recommended that we allocate the packaged costs in proportion to the
charges or to the costs for the major procedures based on the current
year's claims. We are concerned that using a prior year's median costs,
relative weights or payment rates as the basis to allocate current
year's packaged costs to current year costs for payable HCPCS codes may
not be appropriate. For example, if two procedures are performed and
one uses an expensive device, this methodology would split the costs of
the device between the service that uses the device and a service that
does not use the device, thus resulting in incorrect allocation of the
packaged costs. Therefore, we are not proposing to incorporate these
suggestions in our ratesetting methodology but we intend to examine
them more thoroughly.
We continue to seek strategies that would enable us to use more
multiple procedure claims and continue to explore whether there are
techniques that could result in medians that are more representative of
the relative cost of the services being furnished. However, at this
time, we are not proposing a methodology beyond use of dates of service
and the expanded bypass list. We solicit specific proposals provided in
comments on how multiple procedure claims can be better used in
calculating the relative payment weights.
B. Proposed Calculation of Median Costs for CY 2005
In this section of the preamble, we discuss the use of claims to
calculate the proposed OPPS payment rates for CY 2005. (See the
hospital outpatient prospective payment page on the CMS website on
which this proposed rule is posted for an accounting of claims used in
the development of the proposed rates: http://www.cms.hhs.gov/hopps.) The
accounting of claims used in the development of the proposed rule is
included under supplemental materials for this proposed rule. That
accounting provides additional detail regarding the number of claims
derived at each stage of the process. In addition, we note that below
we discuss the files of claims that comprise the data sets that are
available for purchase under a CMS data user contract. See
http://www.cms.hhs.gov/providers/hopps for information about purchasing the
following two OPPS data files: ``OPPS limited data set'' and ``OPPS
identifiable data set''.
We are proposing to use the following methodology to establish the
weights to be used to set payment rates for CY 2005:
We are proposing to use outpatient claims for full CY 2003 to set
the weights for CY 2005. To begin the calculation of the weights for
this proposed rule for CY 2005, we pulled all claims for outpatient
services furnished in CY 2003 from the national claims history file.
This is not the population of claims paid under the OPPS, but all
outpatient claims (for example, ambulatory surgical center (ASC) claims
reported on bill type 83, critical access hospital (CAH) claims, and
hospital claims for clinical laboratory services for persons who are
neither inpatients nor outpatients of the hospital).
We then excluded claims with condition code 04, 20, 21, 77. These
are claims that providers submitted to Medicare knowing that no payment
will be made. For example, providers submit claims with a condition
code 21 to elicit
[[Page 50487]]
an official denial notice from Medicare and document that a service is
not covered. We then excluded claims for services furnished in
Maryland, Guam, and the U.S. Virgin Islands because hospitals in those
geographic areas are not paid under the OPPS.
We divided the remaining claims into three groups shown below.
Groups 2 and 3 comprise the 96.7 million claims that contain hospital
bill types paid under the OPPS.
1. Claims that were not bill types 12X, 13X, 14X (hospital bill
types) or 76X (CMHC bill types). Other bill types, such as ASCs, bill
type 83, are not paid under the OPPS and, therefore, these claims were
not used to set OPPS payment.
2. Bill types 12X, 13X, or 14X (hospital bill types). These claims
are hospital outpatient claims.
3. Bill type 76X (CMHC). (These claims are later combined with any
claims in item 2 above with a condition code 41 to set the per diem
partial hospitalization rate determined through a separate process.)
In previous years, we have begun the CCR calculation process using
the most recent available cost reports for all hospitals irrespective
of whether any or all of the hospitals included actually filed hospital
outpatient claims for the data period. However, for this proposed rule,
we first limited the population of cost reports to only those for
hospitals that filed outpatient claims in CY 2003 before determining
whether the CCRs for such hospitals were valid. This initial limitation
changed the distribution of CCRs used during the trimming process
discussed below.
We then calculated the cost-to-charge ratios (CCRs) at a
departmental level and overall for each hospital for which we had
claims data. We did this using hospital specific data from the Hospital
Cost Report Information System (HCRIS). We used the most recent
available cost report data, in most cases, cost reports for CY 2001 or
CY 2002. We used the most recent available cost report, whether
submitted or settled. If the most recent available cost report was
submitted but not settled, we looked at the last settled cost report to
determine the ratio of submitted to settled cost and we then adjusted
the most recent available submitted but not settled cost report using
that ratio. We are proposing to use these same CCRs ratios for the
final rule.
We then flagged CAHs, which are not paid under the OPPS, and
hospitals with invalid CCRs. These included claims from hospitals
without a CCR, for hospitals paid an all-inclusive rate, for hospitals
with obviously erroneous CCRs (greater than 90 or less than .0001), and
for hospitals with CCRs that were identified as outliers (3 standard
deviations from the geometric mean after removing error CCRs). In
addition, we trimmed the CCRs at the departmental level by removing the
CCRs for each cost center as outliers if they exceeded 3
standard deviations of the geometric mean. We are proposing to use
these trimmed CCRs for the final rule. In prior years, we did not trim
CCRs at the departmental level. However, for CY 2005, we are proposing
to trim at the departmental CCR level to eliminate aberrant CCRs that,
if found in high volume hospitals, could skew the medians. We used a
four-tiered hierarchy of cost center CCRs to match a cost center to a
revenue code with the top tier being the most common cost center and
the last tier being the default CCR. If a hospital's departmental CCR
was deleted by trimming, we set the departmental CCR for that cost
center to ``missing,'' so that another departmental CCR in the revenue
center hierarchy could apply. If no other departmental CCR could apply
to the revenue code on the claim, we used the hospital's overall CCR
for the revenue code in question.
We then converted the charges on the claim by applying the CCR that
we believed was best suited to the revenue code indicated on the line
with the charge. See Table 18 for the allowed revenue codes. Revenue
codes not on this list are those not allowed under the OPPS because
their services cannot be paid under the OPPS (for example, inpatient
room and board charges) and, thus, charges with those revenue codes
were not packaged for creation of the OPPS median costs. If a hospital
did not have a CCR that was appropriate to the revenue code reported
for a line item charge (for example, a visit reported under the clinic
revenue code but the hospital did not have a clinic cost center), we
applied the hospital-specific overall CCR, except as discussed in
section V.H. of this proposed rule for calculation of costs for blood.
Thus, we applied CCRs as described above to claims with bill types
12X, 13X, or 14X, excluding all claims from CAHs and hospitals in
Maryland, Guam, or the U.S. Virgin Islands, and flagged hospitals with
invalid CCRs. We excluded claims from all hospitals for which CCRs were
flagged as invalid.
We identified claims with condition code 41 as partial
hospitalization services of CMHCs and removed them to another file.
These claims were combined with the 76X claims identified previously to
calculate the partial hospitalization per diem rate.
We then excluded claims without a HCPCS code. We also removed
claims for observation services to another file. We removed to another
file claims that contain nothing but flu and pneumococcal pneumonia
(virus) (``PPV'') vaccine. Influenza and PPV vaccines are paid at
reasonable cost and, therefore, these claims are not used to set OPPS
rates. We note that the two above mentioned separate files containing
partial hospitalization claims and the observation services claims are
included in the files that are available for purchase as discussed
above.
We next copied line item costs for drugs, blood, and devices (the
lines stay on the claim but are copied off onto another file) to a
separate file. No claims were deleted when we copied these lines onto
another file. These line-items are used to calculate the per unit
median for drugs, radiopharmaceuticals, and blood and blood products.
The line-item costs were also used to calculate the per administration
cost of drugs, radiopharmaceuticals, and biologicals (other than blood
and blood products) for purposes of determining whether the cost of the
item would be packaged or be paid separately. Section 1833(t)(16)(B) of
the Act, as added by section 621(a)(2) of Pub. L. 108-173, requires the
Secretary to lower to $50 the threshold for separate payment of drugs
and biologicals and the per administration cost derived using these
line-item cost data would be used to make that decision for CY 2005. As
discussed in our November 7, 2003 final rule with comment period (68 FR
63398), we had also applied a $50 threshold for the CY 2004 update to
the OPPS.
We then divided the remaining claims into five groups.
1. Single Major Claims: Claims with a single separately payable
procedure, all of which would be used in median setting.
2. Multiple Major Claims: Claims with more than one separately
payable procedure or multiple units for one payable procedure. As
discussed below, some of these can be used in median setting.
3. Single Minor Claims: Claims with a single HCPCS code that is not
separately payable. These claims may have a single packaged procedure
or a drug code.
4. Multiple Minor Claims: Claims with multiple HCPCS codes that are
not separately payable without examining dates of service. (For
example, pathology codes are packaged unless they appear on a single
bill by themselves. The multiple minor file has claims with multiple
occurrences of pathology codes, with packaged costs
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that cannot be appropriately allocated across the multiple pathology
codes. However, by matching dates of service for the code and the
reported costs through the ``pseudo'' single creation process discussed
earlier, a claim with multiple pathology codes may become several
``pseudo'' single claims with a unique pathology code and its
associated costs on each day. These ``pseudo'' singles for the
pathology codes would then be considered a separately payable code and
would be used like claims in the single major claim file.
5. Non-OPPS Claims: Claims that contain no services payable under
the OPPS are excluded from the files used for the OPPS. Non-OPPS claims
have codes paid under other fee schedules, for example, DME or clinical
laboratory.
We note that the claims listed in numbers 1 through 4 above are
included in the data files that can be purchased as described above.
We set aside the single minor claims and the non-OPPS claims
(numbers 3 and 5 above) because we did not use either in calculating
median cost.
We then examined the multiple major and multiple minor claims
(numbers 2 and 4 above) to determine if we could convert any of them to
single major claims using the process described previously. We first
grouped items on the claims by date of service. If each major procedure
on the claim had a different date of service and if the line items for
packaged HCPCS and packaged revenue codes had dates of service, we
broke the claim into multiple ``pseudo'' single claims based on the
date of service.
After those single claims were created, we used a list of ``bypass
codes'' to remove separately payable procedures that are thought to
contain limited costs or no packaged costs from a multiple procedure
bill. A discussion of the creation of the list of bypass codes used for
the creation of ``pseudo'' single claims is contained in section
III.A.2. of this preamble and the list of codes is provided in Table
17.
We excluded those claims that we were not able to convert to
singles even after applying both of the techniques for creation of
``pseudo'' singles. We then packaged the costs of packaged HCPCS (codes
with status indicator ``N'' on Addendum B to this proposed rule) and
packaged revenue codes (listed in Table 18) into the cost of the single
major procedure remaining on the claim.
After removing claims for hospitals with error CCRs, claims without
HCPCS codes, claims for immunizations not covered under the OPPS, and
claims for services not paid under the OPPS, 52.2 millions claims were
left. This subset of claims is roughly one-half of the 96.7 million
claims for bill types paid under the OPPS. Of these 52.2 million
claims, we were able to use some portion of 48.5 million (93 percent)
whole claims to create the 75 million single and ``pseudo'' single
claims for use in our CY 2005 median payment ratesetting.
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We also excluded claims that either had zero costs after summing
all costs on the claim or for which CMS lacked an appropriate provider
wage index. For the remaining claims, we then wage adjusted 60 percent
of the cost of the claim (which we determined to be the labor-related
portion), as has been our policy since initial implementation of
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the OPPS, to adjust for geographic variation in labor-related costs. We
made this adjustment by determining the wage index that applied to the
hospital that furnished the service and dividing the cost for the
separately paid HCPCS code furnished by the hospital by that wage
index. We used the pre-reclassified wage index proposed for IPPS
published in the hospital IPPS proposed rule on May 18, 2004 (69 FR
28196), and corrected in the IPPS correction notice published on June
25, 2004 (69 FR 35919). These wage indices are reprinted i