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					                                                                                           Monday,
                                                                                           April 5, 2004




                                                                                           Part VI

                                                                                           Department of
                                                                                           Health and Human
                                                                                           Services
                                                                                           Announcement of Availability of Funds
                                                                                           for Family Planning Male Training Grant;
                                                                                           Notice




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     17882                           Federal Register / Vol. 69, No. 65 / Monday, April 5, 2004 / Notices

     DEPARTMENT OF HEALTH AND                                Background                                             and expectations that men and women
     HUMAN SERVICES                                             The family planning program,                        have toward health care. Even when
                                                             authorized by section 1001 of Title X is               men visit a health care provider, they
     Announcement of Availability of Funds                                                                          are more reluctant than women to bring
                                                             required to provide family planning
     for Family Planning Male Training                                                                              problems of a reproductive or sexual
                                                             services, including information,
     Grant                                                                                                          nature to their clinician’s attention.
                                                             education, and counseling, to all
     AGENCY: Department of Health and                        persons desiring such services. Over the               Many clinical settings are not ‘‘male-
     Human Services, Office of the Secretary.                past 30 years, males have comprised                    friendly.’’ Involving men in their own
                                                             only two to four percent of clients                    care requires a different approach from
     ACTION: Notice.
                                                                                                                    that which has been successful with
                                                             served by the Title X family planning
     SUMMARY: The Office of Family Planning                                                                         women.
                                                             clinical service delivery system
     (OFP) of the Office of Population Affairs                                                                         Male reproductive health is an
                                                             annually.                                              emerging field. Current and future
     (OPA) announces the availability of                        Since the mid-1990s, the Office of
     funds for one grant to establish a                                                                             research will add significantly to the
                                                             Family Planning (OFP) in the Office of
     training project that focuses on family                                                                        body of knowledge related to serving
                                                             Population Affairs (OPA) has focused
     planning and reproductive health                                                                               males. Emerging research related to
                                                             efforts on enhancing services available                male reproductive health should
     information, education, and clinical                    to males. The recent interest in
     services targeting males. The successful                                                                       provide evidence-based information that
                                                             encouraging male involvement in family                 will enable providers to develop
     applicant will provide training that will               planning and reproductive health is
     enhance and support quality services for                                                                       effective male reproductive health
                                                             driven by the current epidemic of                      educational and clinical service
     males served in Title X family planning                 sexually transmitted diseases (STDs),
     services projects throughout the United                                                                        programs. This emerging body of
                                                             including HIV/AIDS, and high rates of                  knowledge should also provide the basis
     States.                                                 unintended pregnancies, as well as by
        CFDA Number: 93.260.                                                                                        for training content and approach. The
                                                             shifts in public health policies. Fighting             grantee funded under this
     DATES: To receive consideration,                        the fatherless epidemic, promoting
     applications must be received by the                                                                           announcement must be able to
                                                             responsible fatherhood, and supporting                 incorporate current, evidence-based
     Office of Public Health and Science                     healthy marriages are major public
     (OPHS) Grants Management Office no                                                                             information as it becomes available in
                                                             health concerns. Similarly, recognition                all phases of training design, delivery,
     later than June 4, 2004 and within the                  of the health, education, and
     time frames specified in this                                                                                  and evaluation.
                                                             psychosocial consequences of early
     announcement for electronically                         sexual activity has led to an increased                Purpose of the Grant
     submitted, mailed, and/or hand-carried                  focus on extra-marital abstinence.                        The purpose of the training program
     applications.                                           Involving males in family planning and
        Executive Order 132372 comment due                                                                          to be funded under this announcement
                                                             reproductive health issues is one way to               is to ensure that personnel working in
     date: June 4, 2004.
                                                             encourage and support positive health                  Title X family planning services projects
     ADDRESSES: Mailed applications must be                  outcomes and healthy families.                         have the knowledge, skills, and abilities
     submitted to Ms. Karen Campbell,                           Males have sexual and reproductive                  necessary to effectively provide family
     Director, Grants Management Office,                     health needs across the life span.                     planning and reproductive health
     Office of Public Health and Science,                    Accurate information regarding the                     information, education, and clinical
     Department of Health and Human                          physical and emotional changes that                    services targeting males. The successful
     Services, 1101 Wootton Parkway, Suite                   occur during adolescence and young                     applicant will use evidence-based
     550, Rockville, MD 20852.                               adulthood should be available.                         information and approaches in all
     FOR FURTHER INFORMATION CONTACT:                        Programs serving young males should                    aspects of training. The Male training
     Questions regarding program                             also provide information and education                 grantee will be required to maintain
     requirements may be directed to Susan                   that supports avoiding health risks such               knowledge of the most current research
     B. Moskosky, Director, Office of Family                 as smoking, substance abuse, and                       regarding male family planning and
     Planning, OPA, (301) 594–4008.                          premature sexual activity. Delaying                    reproductive health issues, and will act
     Questions regarding administrative or                   sexual debut until after adolescence,                  as a resource on male reproductive
     budgetary requirements may be directed                  and preferably until marriage, should be               health issues to other entities involved
     to Karen Campbell, Director, OPHS                       encouraged. For sexually active young                  in family planning service delivery.
     Grants Management Office, (301) 594–                    males, information and appropriate
     0758.                                                   clinical services and referrals should be              Program Statutes and Regulations
     SUPPLEMENTARY INFORMATION:                              available to address health concerns                      Title X of the PHS Act, 42 U.S.C. 300,
                                                             such as STDs, HIV/AIDS, unintended                     et.seq., authorizes grants for projects to
     I. Funding Opportunity Description                      pregnancy, and the emotional stress of                 provide family planning services to
        This announcement seeks proposals                    interpersonal and intimate                             persons from low-income families and
     from public and nonprofit private                       relationships.                                         others. Section 1001 of the Act, as
     entities to establish and operate a                        Among middle-aged and older males,                  amended authorizes grants ‘‘to assist in
     training project with a specific focus on               health concerns around sexual and                      the establishment and operation of
     family planning and reproductive health                 reproductive health continue, though                   voluntary family planning projects
     information, education, and clinical                    the concerns may include additional                    which shall offer a broad range of
     services targeting males. The grantee                   issues beyond those of younger males.                  acceptable and effective family planning
     will be required to provide training that               Examples include general health issues,                methods and services (including natural
     will enhance and support quality                        such as hypertension or diabetes, which                family planning methods, infertility
     information, education, communication,                  may impact reproductive health.                        services, and services for adolescents).’’
     and clinical services for males served in                  The family planning and reproductive                Section 1003 of the Act, as amended,
     Title X-funded agencies throughout the                  health issues facing males are                         authorizes the Secretary of Health and
     United States.                                          complicated by the different attitudes                 Human Services to award grants to


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                                     Federal Register / Vol. 69, No. 65 / Monday, April 5, 2004 / Notices                                             17883

     entities to provide training for personnel                 2. Cost Sharing or Matching: A match                Dun and Bradstreet Universal
     to carry out family planning service                    of non-Federal funds is not required.                  Numbering System (DUNS)
     programs. Section 1008 of the Act, as                      3. Other: Applicant organizations
                                                                                                                      A Dun and Bradstreet Universal
     amended, stipulates that ‘‘none of the                  must demonstrate significant experience
                                                                                                                    Numbering System (DUNS) number is
     funds appropriated under this title shall               in the design, development,
                                                                                                                    required for all applications for Federal
     be used in programs where abortion is                   implementation, successful completion,
                                                                                                                    assistance. Organizations should verify
     a method of family planning.’’                          and evaluation of training activities. In
                                                                                                                    that they have a DUNS number or take
        The regulations set out at 42 CFR part               addition, the successful applicant must
                                                                                                                    the steps needed to obtain one.
     59, subpart C, govern grants to provide                 demonstrate skill and experience in
     training for family planning service                    providing training to diverse,                         Instructions for obtaining a DUNS
     personnel. Prospective applicants                       community-based entities. The                          number are included in the application
     should refer to the regulations in their                successful applicant will provide                      package, and may be downloaded from
     entirety. Training provided must be in                  evidence of familiarity with male family               the OPA Web site.
     accordance with the requirements                        planning and reproductive health                       Program Requirements/Application
     regarding the provision of family                       issues, and the ability to translate                   Content
     planning services under Title X. These                  evidence-based information into
                                                                                                                       The male training grantee will be
     requirements can be found in the Title                  training activities.
                                                                Awards will be made only to those                   responsible for maintaining current,
     X statute and the implementing
                                                             organizations or agencies which have                   evidence-based information regarding
     regulations which govern project grants
     for family planning services (42 CFR                    met all applicable requirements and                    male issues and family planning and
     part 59, subpart A). Copies of the Title                which demonstrate the capability or                    reproductive health information,
     X statute, regulations and ‘‘Program                    providing the proposed services.                       education, and clinical services for
     Guidelines for Project Grants for Family                                                                       males, and for making this information
                                                             IV. Application and Submission                         available to Title X providers. The
     Planning Services’’ (January 2001) can                  Information
     be obtained by contacting the OPHS                                                                             application should demonstrate
     Grants Management Office or may be                         1. Address to Request Application                   knowledge of evidence-based learning
     downloaded from the OPA Web site at                     Package: Application kits may be                       theory and adult learning behavior, and
     http://opa.osophs.dhhs.gov.                             requested from, and applications                       should describe how this relates to
        A copy of the legislation and                        submitted to: OPHS Grants Management                   proposed activities. The application
     regulations governing this program will                 Office, 1001 Wootton Parkway, Suite                    should also demonstrate the applicant’s
     be included as part of the application kit              550, Rockville, MD 20852, (301) 594–                   expertise and ability to develop,
     package. Applicants should use the                      0758. Application kits are also available              implement, manage, and evaluate
     legislation, regulations, and other                     online through the OPA Web site at                     training in the areas of information,
     information included in this                            http://opa.osophs.dhhs.gov, may be                     education, and communication;
     announcement to guide them in                           requested by fax at (301) 594–9399, or                 program management; and clinical
     developing their applications.                          may be obtained through the electronic                 services related to male family planning
                                                             grants management system, e-Grants.                    and reproductive health. The design of
     II. Award Information                                   (Instructions for use of the e-Grants                  the male training program, including all
        OPA intends to make available                        system can be found on the OPA Web                     curricula and materials, must be
     approximately $400,000–$500,000 per                     site or requested from the OPHS Grants                 consistent with Title X statute and
     year to support one male training                       Management Office).                                    regulations.
     grantee. The grant will be funded in                       2. Content and Form of Application
                                                                                                                    Legislative Mandates
     annual increments (budget periods) and                  Submission: Applications must be
     may be approved for a project period of                 submitted on the Form OPHS–1                              The following legislative mandates
     up to five years. Indirect costs may not                (Revised 06/01) and in the manner                      have been part of the Title X
     exceed eight percent of the annual                      prescribed in the application kit.                     appropriations for each of the last
     award. Funding for all budget periods                   Applications are limited to 50 double-                 several years. In developing a proposal,
     beyond the first year of the grant is                   spaced pages, not including appendices                 each applicant should describe how the
     contingent upon the availability of                     and required forms, using an easily                    proposed project will address each of
     funds, satisfactory progress on the                     readable, 12 point font. All pages,                    these legislative mandates in training
     project, and adequate stewardship of                    charts, figures, and tables should be                  related to male family planning and
     Federal funds.                                          numbered. Appendices may provide                       reproductive health.
                                                             curriculum vitae, organizational                          • None of the funds appropriated in
     III. Eligibility Information                            structure, examples of organizational                  this Act may be made available to any
        1. Eligible Applicants: Any public or                capabilities, or other supplemental                    entity under Title X of the Public Health
     nonprofit private entity located in a                   information that supports the                          Service Act unless the applicant for the
     State (which includes one of the 50                     application. All information that is                   award certifies to the Secretary that it
     United States, the District of Columbia,                critical to the proposed project should                encourages family participation in the
     Commonwealth of Puerto Rico, U.S.                       be included in the body of the                         decision of minors to seek family
     Virgin Islands, Commonwealth of the                     application. Appendices are for                        planning services and that it provides
     Northern Mariana Islands, American                      supportive information only and should                 counseling to minors on how to resist
     Samoa, Guam, Republic of Palau,                         be clearly labeled.                                    attempts to coerce minors into engaging
     Federal States of Micronesia, and the                      Applications must include a one-page                in sexual activities; and
     Republic of the Marshall Islands) is                    abstract of the proposed project. The                     • Not withstanding any other
     eligible to apply for a grant under this                abstract will be used to provide                       provision of law, no provider of services
     announcement. Faith-based                               reviewers with an overview of the                      under Title X of the Public Health
     organizations are eligible to apply for                 application, and will form the basis for               Service Act shall be exempt from any
     this Title X family planning male                       the application summary in grants                      State law requiring notification or the
     training grant.                                         management documents.                                  reporting of child abuse, child


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     17884                           Federal Register / Vol. 69, No. 65 / Monday, April 5, 2004 / Notices

     molestation, sexual abuse, rape, or                     program, as well as individual                            • Identify and/or develop evidence-
     incest.                                                 components and training events.                        based training resources regarding
                                                                                                                    family planning and reproductive health
     Scope of the Project                                    Training Events
                                                                                                                    issues for males. These materials must
        The family planning male training                       The grantee is expected to consult                  be made available at cost to other Title
     grant is intended to serve a national                   with the OFP project officer and receive               X projects upon request.
     network of providers. In order to                       prior approval for each of the following                  • In consultation with OFP project
     maximize the impact of the grant on a                   training events prior to implementation:               officer, adapt and/or refine male health
     national level, it is expected that the                    • Provide support for one male family               educational resources for use in training
     successful applicant will work closely                  planning training meeting per year. This               personnel working in Title X family
     with the OFP Central and Regional                       includes meeting costs (meeting                        planning services projects.
     Offices and the ten Title X Regional                    planning, dissemination of meeting                        • Describe a strategy for assuring that
     Training Centers (RTCs). Proposed                       information, registration of participants,             all training resources developed or
     activities should focus on:                             hotel/meeting space rental, meeting                    utilized by the grantee are reviewed by
        (1) Conducting training events that                  materials, etc) for approximately 150                  the OFP project officer prior to
     focus on family planning and                            attendees.                                             dissemination.
     reproductive health information,                           • Provide for at least one one-week                    The grantee will be responsible for all
     education, and clinical services                                                                               costs associated with training program
                                                             on-site training activity each year for up
     targeting males, and that will enhance                                                                         administration and management, and
                                                             to 40 persons each, including meeting
     and support quality family planning and                                                                        for training costs directly associated
                                                             costs (meeting planning, hotel/meeting
     reproductive health services for males;                                                                        with any on-site portion of Title X-
        (2) developing strategies to translate               space rental, meeting materials, etc.)
                                                             lodging, and per diem (excluding travel)               sponsored trainee preparation (e.g.,
     research on male health education and                                                                          educational materials, classroom and
     service delivery (especially related to                 for participants.
                                                                • Each year, provide support for                    training sites, etc.) as described above.
     family planning and reproductive                                                                               The grantee will also be required to
     health) into effective educational and                  speaker participation in Title X-
                                                             sponsored training events with the                     work closely with the OFP project
     clinical practice through training;                                                                            officer to accomplish the purposes of
        (3) developing and disseminating                     approval of the OFP project officer.
                                                             (This includes travel, lodging, and per                this grant. The successful application
     training materials and resources related                                                                       will describe a strategy for maintaining
     to male family planning and                             diem and consultant fees for up to 10
                                                             speakers per year at a total cost not the              budget flexibility in order to
     reproductive health;                                                                                           accommodate unanticipated or
        (4) supporting appropriate speakers at               exceed $2,000 per speaker.)
                                                                • In consultation with and prior                    emerging training needs. The successful
     Title X-approved training events for
                                                             approval of the OFP project officer,                   applicant will be required to participate
     personnel; and
        (5) building the capacity of the RTCs                convene up to three expert panels per                  in at least two meetings per year with
     to provide male-focused training for                    year around specific male family                       the OFP project officer and other OPA
     personnel working in Title X service                    planning and reproductive health topic                 staff at the OPA Office in Rockville,
     projects.                                               areas. Responsibilities include meeting                Maryland, or at an alternate location as
        The proposed project must include all                costs (meeting planning, hotel/meeting                 specified. In addition, the grantee
     of the activities in each of the program                space rental, meeting materials, etc.)                 should be prepared to participate in at
     components that follows: (1) program                    lodging, per diem, and travel-related                  least one conference call per month
     planning and management; (2) training                   expenses for non-Federal participants.                 with the OFP project officer and others
     events; and (3) maintaining, adapting,                  Each panel will include up to 15                       as necessary.
     and disseminating information. The                      participants, not including any Federal                   In responding to this announcement,
     application should fully describe how                   staff.                                                 applicants should familiarize
                                                                                                                    themselves with:
     each of these should be addressed.                         • Assist Title X Regional Training                     • Title X Priorities, Legislative
     Program Planning and Management                         Centers in developing content around                   Mandates, and Key Issues;
                                                             male issues for Regional training events.                 • Department of Health and Human
       • Conduct a periodic assessment (at
     least every two years) of the training                  Maintaining, Adapting, and                             Services Departmental Priorities;
     needs of Title X providers regarding                    Disseminating Information                                 • Healthy People 2010—Chapter 9,
     male family planning and reproductive                                                                          ‘‘Family Planning;’’ Chapter 11, ‘‘Health
                                                                The successful applicant will describe              Communications;’’ Chapter 13,
     health issues.                                          a strategy for assuring the availability of
       • Incorporate legislative mandates                                                                           ‘‘Sexually Transmitted Disease; ‘‘
                                                             the most current research findings                     Chapter 25, ‘‘HIV;’
     into training activities as they relate to              related to male family planning and
     family planning and reproductive health                                                                           • The document ‘‘Community-Based
                                                             reproductive health information,                       Sexual and Reproductive Health
     information, education, and clinical                    education, and clinical service delivery.
     services for males.                                                                                            Promotion;’’ and
                                                             In addition, the successful applicant                     • ‘‘Education Programs for Males:
       • Maintain data and provide OPA                       will describe a system for making this
     with an annual progress report on all                                                                          Components that Work.’’
                                                             information readily accessible and                        Copies of these documents are
     activities supported with grant funds,                  easily retrievable for Title X service
     which includes, at a minimum:                                                                                  included in the application kit for this
                                                             grantees and personnel. At a minimum,                  announcement.
       a. Title of event
                                                             this will include how the applicant will                  3. Submission Dates and Times: The
       b. Location
       c. Content                                            achieve the following:                                 OFP provides multiple mechanisms for
       d. Presenter (as applicable)                             • Maintain a system for ongoing                     submission of applications.
       e. Number of participants                             retrieval and dissemination of current,                   Electronic Submission: The OFP
       f. Agencies sponsoring participants                   evidence-based information and                         encourages electronic submission of
       • Provide for an ongoing evaluation                   research findings related to male family               grant applications using the OPHS e-
     plan that assesses the total training                   planning and reproductive health.                      Grants system. Instructions for use of


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                                     Federal Register / Vol. 69, No. 65 / Monday, April 5, 2004 / Notices                                               17885

     this system are available on the OPA                    ‘‘Intergovernmental Review of Federal                  project that have a male-services
     Web site, http://opa.osophs.dhhs.gov, or                Programs,’’ as implemented by CFR part                 component. (Total 25 points);
     may be requested from the OPHS Grants                   100, ‘‘Intergovernmental Review of                       Criterion 3: The competence of the
     Management Office at (301) 594–0758.                    Department of Health and Human                         project staff in relation to the services to
       The body of the application and                       Services Programs and Activities.’’ As                 be provided, including the applicant’s
     required forms can be submitted using                   soon as possible, the applicant should                 history of male-focused training,
     the e-Grants system. In addition to                     discuss the project with the State Single              research, and/or services to males and
     electronically submitted materials,                     Point of Contact (SPOC) for the State in               the ability to document relevant
     applicants are required to provide a                    which the applicant is located. The                    previous experience and formal linkages
     hard copy of the application face page                  application kit contains the currently                 with public and private entities that
     (Standard Form 424 [Revised 07/03])                     available listing of the SPOCs that have               have a specific focus on males. (25
     with the original signature of an                       elected to be informed of the submission               points);
     individual authorized to act for the                    of applications. For those States not                    Criterion 4: The administrative and
     applicant agency or organization and to                 represented on the listing, further                    management capability and competence
     assume for the organization the                         inquiries should be made by the                        of the applicant. (10 points);
     obligations imposed by the terms and                    applicant regarding the submission to                    Criterion 5: The extent to which the
     conditions of the grant award. The                      the relevant SPOC. The SPOC should                     proposed training program will increase
     application is not considered complete                  forward any comments to the OPHS                       the ability of family planning services
     until both the electronic application and               Grants Management Office, 1101                         projects to deliver services primarily to
     the hard copy face page with original                   Wootton Parkway, Suite 550, Rockville,                 males with a high percentage of unmet
     signature are received. Both must be                    Maryland 20852. The SPOC has 60 days                   need for family planning services. (10
     received on or before the due date listed               from the closing date of this                          points); and
     in the DATES section of this                            announcement to submit any comments.                     Criterion 6: The capacity of the
     announcement.                                           For further information, contact the                   applicant to make rapid and effective
                                                             OPHS Grants Management Office at                       use of the training grant, as evidenced
     Hard Copy Applications
                                                             (301) 594–0758.                                        by the applicant’s ability to implement
       Applications submitted in hard copy                      5. Funding Restrictions: The                        the training program within 120 days of
     must include an original and two copies                 allowability, allocability, reasonableness             receiving the grant. (5 points).
     of the application. The original                        and necessity of direct and indirect                     2. Review and Selection: Eligible
     application must be signed by an                        costs that may be charged to OPHS                      competing grant applications will be
     individual authorized to act for the                    grants are outlined in the following                   reviewed by a multi-disciplinary panel
     applicant agency or organization and to                 documents: OMB Circular A–21                           of independent reviewers. Final award
     assume for the organization the                         (Institutions of Higher Education); OMB                decisions will be made by the Deputy
     obligations imposed by the terms and                    Circular A–87 (State and Local                         Assistant Secretary for Population
     conditions of the grant award.                          Governments); OMB Circular A–122                       Affairs (DASPA). In making these
       Mailed applications will be                                                                                  decisions, the DASPA will fund one
                                                             (Nonprofit Organizations); and 45 CFR
     considered as meeting the deadline if                                                                          project which will, in her judgement,
                                                             part 74, appendix E (Hospitals). Copies
     they are received by the OPHS Office of                                                                        best promote the purposes of sections
                                                             of the Office of Management and Budget
     Grants Management on or before the                                                                             1001 and 1003 of the Act, within the
                                                             (OMB) Circulars are available on the
     deadline listed in the DATES section of                                                                        limits of funds available for such a
                                                             Internet at http://www.whitehouse.gov/
     this announcement. The application due                                                                         project, and she will take into
                                                             omb/grants/grants_circulars.html.
     date requirement specified in the                          6. Other Submission Requirements:                   consideration:
     announcement supercedes the                             See Section IV.3.                                        (1) Recommendations of the review
     instructions in the OPHS–1.                                                                                    panel;
     Applications which do not meet the                      V. Application Review Information                        (2) reviews for programmatic and
     deadline will be returned to the                           1. Criteria: Eligible competing grant               grants management compliance;
     applicant unread.                                       applications will be assessed according                  (3) the reasonableness of the
       Hand-delivered applications must be                   to the following criteria:                             estimated cost to the government
     received by the OPHS Grants                                Criterion 1: The degree to which the                considering the available funding and
     Management Office no later than 4:30                    project plan adequately provides for the               anticipated results; and
     p.m. Eastern Standard time on the                       requirements set forth in 42 CFR 59.205;                 (4) the likelihood that the proposed
     application due date. Applications                      (25 points)                                            project will result in the benefits
     delivered to the OPHS Grants                               Criterion 2: The extent to which the                expected.
     Management Office after the deadline                    proposed male training program
     described above will not be accepted for                                                                       VI. Award Administration Information
                                                             promises to fulfill the family planning
     review. Applications sent via facsimile                 services delivery needs of the area to be                1. Award Notices: The official
     or by electronic mail outside the e-                    served, as evidenced by the applicant’s                document notifying an applicant that a
     Grants system will not be accepted for                  ability to address:                                    project application has been approved
     review. Applications which do not                          a. Requirements set out under                       for funding is the Notice of Grant
     conform to the requirements of this                     ‘‘Program Requirements/Application                     Award, signed by the Director of the
     program announcement or which do not                    Content’’ of ths announcement;                         OPHS Grants Management Office,
     meet the applicable parts of 42 CFR part                   b. Development of a capability within               which specifies to the grantee the
     59, subpart C, will not be accepted for                 family planning services projects with a               amount of money awarded, the
     review, and will be returned to the                     male-services component to provide                     purposes of the grant, the length of the
     applicant.                                              pre- and in-service training to their own              project period, and terms and
       4. Intergovernmental Review:                          staffs; and                                            conditions of the grant award. OPA does
     Applicants under this announcement                         c. Improvement of the family                        not release information about individual
     are subject to the requirements of                      planning/reproductive health skills of                 applications until final funding
     Executive Order 132372,                                 personnel in family planning services                  decisions have been made. When final


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     17886                           Federal Register / Vol. 69, No. 65 / Monday, April 5, 2004 / Notices

     decisions have been made, applicants                      The HHS Appropriations Act requires                     Evidence-based—relevant scientific
     will be notified by letter regarding the                that when issuing statements, press                    evidence that has undergone
     outcome of their application.                           releases, requests for proposals, bid                  comprehensive review and rigorous
        2. Administrative and National Policy                solicitations, and other documents                     analysis.
     Requirements: In accepting this award,                  describing projects or programs funded                    Family planning training—‘‘job-
     the grantee stipulates that the award and               in whole or in part with Federal money,                specific skill development, the purpose
     any activities thereunder are subject to                grantees shall clearly state the                       of which is to promote and improve the
     all provisions of 45 CFR parts 74 and 92,               percentage and dollar amount of the                    delivery of family planning services’’
     currently in effect or implemented                      total costs of the program or project
                                                                                                                    (42 CFR 59.202(e)).
     during the period of the grant.                         which will be financed with Federal
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t the use of these                   than elective. We proposed that the
     agreed that more current data would be                  codes has been confused with the use of                  Panel consider the creation of a new
     needed to make appropriate                              some codes associated with durable                       APC for the cardioversion procedures or
     recommendations about the actual                        medical equipment. For these reasons,                    reassignment of the procedures to
     merits and benefits of the various                      the Panel believed that the procedure                    another APC that would be more
     options. For these reasons, the Panel                   costs reflected in our data are skewed.                  appropriate in terms of clinical
     recommended the following:                              As a result, the Panel recommended that                  coherence and resource similarity.
        • Make no changes to APCs 0024 and                   we do the following:                                     Splitting APC 0094 into two distinct
     0027.                                                      • Make no changes to APC 0058.                        groups, one for resuscitation procedures
                                                                                                                      and the other for internal and external
        • Reevaluate these APCs with new                        • Provide appropriate education and
                                                                                                                      electrical cardioversion procedures,
     data when the Panel meets in 2002.                      guidance to hospitals regarding
                                                                                                                      would not result in a significant
        • The Panel, in preparation for the                  appropriate use and billing of codes in
                                                                                                                      difference in the APC payment rate for
     2002 meeting, will discuss with and                     APC 0058.
                                                                                                                      either of the new APCs.
     gather clinical and utilization                            • Resubmit APC 0058 to the Panel for                     The Panel considered whether it was
     information from their respective                       reevaluation when later data are                         clinically appropriate to combine
     hospitals regarding these procedures.                   available.                                               internal and external cardioversion
        We propose to accept the Panel’s                        We propose to accept the Panel’s                      procedures (CPT codes 92960 and
     recommendations. However, as shown                      recommendations except that we                           92961, respectively) in the same APC.
     in Table 3, we are proposing to make                    propose to move CPT code 29515 to                        The Panel also questioned the
     changes to these APCs based on the use                  APC 0059 due to the 2 times rule and                     conditions under which internal
     of new data and application of the 2                    the newer data we are using for this                     cardioversion procedures would be
     times rule.                                             proposed rule.                                           performed on an outpatient basis.


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                              Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                             44677

       The Panel recommended that the only                     Code                        Descriptor                   APC 0110: Transfusion
     action we should take is to move CPT                                                                               APC 0111: Blood Product Exchange
     code 92961, Cardioversion, elective,                     93732   ..   Analyze pacemaker system.
     electrical conversion of arrhythmia;                     93733   ..   Telephone analy, pacemaker.                  APC 0112: Extracorporeal
     internal (separate procedure), from APC                  93734   ..   Analyze pacemaker system.                    Photopheresis
     0094 to APC 0087, Cardiac                                93735   ..   Analyze pacemaker system.
                                                              93736   ..   Telephone analy, pacemaker.                     The procedures included in APC 0110
     Electrophysiology Recording/Mapping.                     93737   ..   Analyze cardio/defibrillator.                are those related only to the services
       We propose to accept the APC Panel                     93738   ..   Analyze cardio/defibrillator.                associated with performing the blood
     recommendation.                                          93741   ..   Analyze ht pace device sngl.                 transfusion and monitoring the patient
     APC 0102: Electronic Analysis of                         93742   ..   Analyze ht pace device single.               during the transfusion; the costs
                                                              93743   ..   Analyze ht pace device dual.                 associated with the blood products
     Pacemakers/Other Devices
                                                              93744   ..   Analyze ht pace device dual.                 themselves are not included in APC
        The neurologic procedures included                                                                              0110. We advised the Panel that we
     in APC 0102 (CPT codes 95970 through                       The presenter stated that reorganizing                  were not certain that cost data for blood
     95975), are significantly more complex                   APC 0102 as recommended would                             transfusions excluded the costs of the
     than the routine cardiac pacemaker                       establish groups that are more clinically                 blood products because the APC 0110
     programming codes also assigned to this                  and resource similar than the current                     median cost of $289 seemed excessive.
     APC. Because we believe these codes                      grouping. The presenter believes that                     We expressed concern about hospital
     are clinically different, we asked the                   APC 0102 as currently configured                          coding and billing practices for blood
     Panel to consider the following:                         violates the 2 times rule. The median                     products, blood processing, storage, and
        • Create a new APC for the neurologic                 costs for the 21 procedures currently                     transportation charges as represented in
     codes.                                                   included in APC 0102 vary from $19 to                     the 1996 data. We asked the Panel to
        • Move the neurologic codes to APC                    $145. Other presenters clarified clinical                 advise us on how to clarify hospital
     0215, Level I Nerve and Muscle Tests.                    aspects of the procedures, identified                     billing and coding practices for blood
        One presenter appearing before the                    which practitioners perform them, the                     transfusions; we also asked if the Panel
     Panel stated that APC 0102 involves                      time it takes to perform them, and how                    members believe that the median costs
     clinical functions related to four                       they are to be billed. Yet another                        for transfusion procedures include the
     different categories of devices; that is,                presenter speaking on behalf of a                         costs for blood products and, if so, how
     pacemakers, defibrillators, infusion                     specialty society noted that the society                  the procedures should be adjusted to
     pumps, and neurostimulators. The                         had previously commented on this APC                      eliminate these costs.
     presenter, who represented a device                      and requested that we remove CPT                             A presenter representing a device
     manufacturers’ association, contended                    codes 93737 and 93738 from APC 0102.                      manufacturers’ association noted that
     that these four categories of devices                      The Panel noted that because most of                    these issues were examined extensively
     differ clinically. The presenter also                    the codes are new, having been                            by several specialty societies that sent
     stated that patients receiving these                     established since 1996 (the base year of                  considerable data to us on the actual
     devices are clinically different and are                 data available to the Panel), these newer                 cost of the transfusion procedures before
     even treated by different hospital                       procedures could not have been                            publication of the April 7, 2000 final
     departments. The presenter                               included in the data file used to create                  rule (65 FR 18434). The presenter stated
     recommended the following:                               the current APC payment rates. In the                     that the median costs for transfusion
        • Split APC 0102 into two APCs: One                   absence of frequency and median cost                      procedures that we used in calculating
     APC for electronic analysis of                           data for many of these procedures, the                    the final payment rate for APC 0110 was
     pacemakers and other cardiac devices                     Panel was concerned about reorganizing                    somewhat lower than the costs
     and a separate APC for electronic                        the codes in this APC. Nonetheless, the                   submitted by the specialty societies. The
     analysis of infusion pumps and                           Panel recommended the following                           presenter believes that our experience
     neurostimulators.                                        reorganization of APC 0102 to better                      under the APC system is too limited for
        • The APC created for electronic                      reflect clinical coherence:                               us to make a judgment concerning the
     analysis of infusion pumps and                             • APC 0102 be split into four new                       validity of the median costs. The
     neurostimulators would include the                       APCs: One APC for analysis and                            presenter also believes that the payment
     following CPT codes:                                     programming of infusion pumps and                         rate for APC 0110 should have been
                                                              CSF shunts; a second for analysis and                     adjusted to include costs for blood
       Code                     Descriptor                    programming of neurostimulators; a                        safety tests, such as the hepatitis and
                                                              third for analysis and programming of                     HIV look-back tests mandated by the
     62367    ..   Analyze spine infusion pump.
     62368    ..   Analyze spine infusion pump.               pacemakers and internal loop recorders;                   FDA over the past several years, because
     95970    ..   Analyze neurostim, no prog.                and a fourth for analysis and                             these costs were not included in the
     95971    ..   Analyze neurostim, simple.                 programming of cardioverter-                              1996 data used to construct the APC
     95972    ..   Analyze neurostim, complex.                defibrillators.                                           rates. The presenter stated that these
     95973    ..   Analyze neurostim, complex.                  We propose to accept the Panel’s                        tests are expensive and that they
     95974    ..   Cranial neurostim, complex.                recommendations and propose to create                     increase the hospitals’ costs to provide
     95975    ..   Cranial neurostim, complex.                four new APCs as follows:                                 the blood. However, it was unclear
                                                              APC 0689: Electronic Analysis of                          whether these tests are separately
       • The APC created for electronic
                                                                   Cardioverter-Defibrillator                           billable under the lab fee schedule.
     analysis of pacemakers and other
                                                              APC 0690: Electronic Analysis of                             In addition, the presenter explained
     cardiac devices would include the
                                                                   Pacemakers and Other Cardiac                         that blood centers do not charge
     following CPT codes:
                                                                   Devices                                              hospitals for blood because it is
       Code                     Descriptor                    APC 0691: Electronic Analysis of                          voluntarily donated, not manufactured.
                                                                   Programmable Shunts/Pumps                            The presenter stated that blood centers
     93727 ..      Analyze ilr system.                        APC 0692: Electronic Analysis of                          charge hospitals what it costs them to
     93731 ..      Analyze pacemaker system.                       Neurostimulator Pulse Generators.                    provide the blood and that hospitals bill


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     44678                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     acquisition and processing charges                         • Take no action on APC 0110.                         reservoir, were excluded from the OPPS
     rather than charges for the blood itself.                  • Move CPT code 36521 from APC                        it was impossible for hospitals to be
     Based on the information provided, the                  0111 to APC 0112 to achieve clinical                     paid when performing these services.
     presenter urged the Panel not to revise                 coherence and resource similarity with                   After lengthy discussion, the Panel
     APC 0110 until more data become                         photopheresis procedures included in                     recommended that refilling and
     available.                                              APC 0112. However, the Panel                             maintenance of pumps and reservoirs be
        For APC 0111, another representative                 cautioned that the payment for APC                       assigned to an APC.
     of a specialty society recommended that                 0112 captured the cost of the entire                        The Panel also discussed the current
     CPT code 36521, Therapeutic apheresis;                  procedure including the cost of the                      HCPCS Q codes for chemotherapy
     with extracorporeal affinity column                     adsorption column. For this reason, any                  administration and concluded that these
     absorption and plasma reinfusion, be                    additional payment for the adsorption                    codes should continue to be recognized
     moved from APC 0111 to APC 0112.                        column through the transitional pass-                    in the OPPS. In addition, the Panel
     The presenter stated that CPT code                      through payment mechanism would be                       discussed whether a new Q code should
     36521 is more similar clinically and in                 a duplicate payment. Therefore, the                      be developed for extended
     resource use to 36522, Photopheresis,                   panel asked that CMS address this                        chemotherapy infusions.
     extracorporeal which is in APC 0112.                    problem when considering their                              In summary, the Panel recommended
     The presenter stated that a major                       recommendation.                                          the following:
     difference between the procedure                           We propose to accept the Panel’s                         • Hospitals be allowed to bill for
     represented by CPT codes 36521 and                      recommendations. We note that                            patient education under the appropriate
     36520, Therapeutic Apheresis; plasma                    effective April 1, 2001, the Prosorba                    clinic codes.
     and/or cell exchange, which is also                     column is no longer eligible for a                          • CPT codes 96520 and 96530 be
     assigned to APC 0111, and the other                     transitional pass-through payment (see                   assigned to a new APC.
     procedures codes assigned to APC 0111,                  PMA–01–40 issued on March 27, 2001).                        • The current HCPCS Level II Q codes
     is that hospitals can bill separately for                                                                        for chemotherapy administration should
     blood products such as the plasma or                    APC 0116: Chemotherapy                                   continue to be used.
     albumin used in performing plasma                       Administration by Other Technique                           • There is no need to develop a new
     exchange procedures. The presenter                      Except Infusion                                          HCPCS code for ‘‘extended
     described CPT code 36521 as a ‘‘self-                   APC 0117: Chemotherapy                                   chemotherapy infusions.’’
     contained’’ procedure not requiring the                 Administration by Infusion Only                             • CMS should consider developing a
     use of albumin or plasma, because the                                                                            new HCPCS code for flushing of ports
                                                             APC 0118: Chemotherapy
     patient’s own blood is processed                                                                                 and reservoirs.
                                                             Administration by Both Infusion and                         We propose to accept all the Panel
     through a machine and returned to the                   Other Technique
     patient. The presenter stated that the                                                                           recommendations except for the
     materials and equipment used to                           We had received several comments                       recommendation regarding flushing of
     perform this procedure make it much                     requesting that oral delivery of                         ports and reservoirs. Flushing is
     more costly than the other procedures                   chemotherapy and delivery of                             performed in conjunction with either a
     assigned to APC 0111. The presenter,                    chemotherapy by infusion pumps and                       chemotherapy administration service or
     citing cost data from two medical                       reservoirs be recognized for payment                     an outpatient clinic visit. In the first
     centers where CPT code 36521 is                         under the OPPS. We asked the Panel to                    case, flushing is part of the
     frequently performed, stated that the                   examine this issue.                                      chemotherapy administration and its
     total cost of the procedure, including                    With regard to oral administration of                  costs are adequately captured in the
     the cost of the adsorption column, is                   chemotherapy, the Panel heard several                    costs of the chemotherapy
     approximately $2000. At this time, the                  presenters discuss the need for                          administration code. In the second case,
     commenter noted, only one of the                        extensive beneficiary education prior to                 we believe that the costs of flushing are
     adsorption columns (Prosorba) used for                  administration of oral anticancer agents.                adequately captured in the costs of the
     this procedure is eligible for transitional             The Panel agreed that the beneficiaries                  clinic visit and need not be paid
     pass-through payments, which means                      actually self-administer the drug and                    separately. We are proposing to create a
     that payments for this procedure, which                 that beneficiary education was                           new APC 0125, Refilling of Infusion
     are based upon the APC payment alone,                   appropriately billed as a clinic visit. The              Pump.
     are too low when one of the other                       Panel stated that this would be true
                                                             whether the education involved cancer                    APC 0123: Bone Marrow Harvesting
     columns is used and no additional pass-
                                                             chemotherapy, diabetes management, or                    and Bone Marrow/Stem Cell Transplant
     through payment is made. It was stated
     that the cost of many of the adsorption                 congestive heart failure management.                       In APC 0123, the 1996 median cost for
     columns is over $1000 per column. The                   Therefore, the Panel recommended that                    CPT code 38230, Bone marrow
     presenter concluded that moving CPT                     no new codes be created to specifically                  harvesting for transplantation, was only
     code 36521 from APC 0111 to APC 0112                    recognize oral administration of                         $15. We believe that this cost is lower
     would comply with the statutory                         chemotherapy.                                            than the actual cost of the procedure.
     requirements for clinical coherence and                   With regard to recognizing                             Further, we do not have sufficient data
     resource similarity among procedures in                 chemotherapy administration through                      to determine how often bone marrow
     the same APC.                                           infusion pumps and ports, the Panel                      and stem cell transplant procedures are
        The Panel discussed various                          heard several presentations that this is                 performed on an outpatient basis. For
     adsorption devices used in performing                   becoming a common method of                              these reasons, we requested the Panel’s
     CPT code 36521, their eligibility for                   administering not only cancer                            advice in clarifying the resources used
     transitional pass-through payments, as                  chemotherapy but also for administering                  in performing the procedures assigned
     well as the clinical and resource use                   other types of pharmaceuticals. It was                   to APC 0123, and the extent to which
     difference between CPT codes 36520                      pointed out that because CPT codes                       these procedures are performed on an
     and 36551. After considerable                           96520, Refilling and maintenance of                      outpatient basis.
     discussion, the Panel recommended the                   portable pump, and 96530, Refilling and                    The Panel noted that these transplant
     following:                                              maintenance of implantable pump or                       and stem cell harvesting procedures are


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                             Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                            44679

     being increasingly performed on an                      disparity could provide incentives to                    data, if we created two APCs for ERCP
     outpatient basis. One presenter                         use inappropriate procedures. Because                    procedures, the APC payment rate for
     representing a specialty society stated                 of these concerns, we asked the Panel’s                  therapeutic ERCPs would be lower than
     that 95 percent of these procedures are                 advice in determining whether one of                     that for diagnostic ERCPs
     performed in the hospital outpatient                    the following actions should be taken:                   (approximately $526 and $535,
     setting. The presenter shared cost data                    • Divide the codes in APC 0142 into                   respectively). Therefore, we requested
     from the bone marrow transplant unit of                 separate APCs representing ileoscopy                     the Panel’s advice to help us determine
     an academic medical center that showed                  and small intestine procedures.                          whether to create separate APCs for
     the cost to harvest bone marrow to be                      • Combine diagnostic anoscopy and                     diagnostic and therapeutic ERCP
     about $1,800. The presenter observed                    Level I sigmoidoscopy.                                   procedures.
     that this cost is significantly higher than                • Merge APCs 0143, 0145, and 0147                        A presenter speaking on behalf of a
     the APC payment rate of about $205 for                  into one APC.                                            specialty society made the following
     APC 0123. Another presenter                                We also asked the Panel whether the                   points:
     representing a group of hospitals stated                costs associated with codes in APC 0145                     • ERCP is the most complex
     that the supply costs alone for bone                    appeared to be valid.                                    endoscopy procedure to perform and is
     marrow harvesting are more than the                        During the Panel discussion, it was                   usually performed by
     current APC payment for the procedure.                  noted that the data distributed to the                   gastroenterologists.
     The presenter suggested that miscoding                  Panel for these APCs indicated that                         • ERCP is usually performed at large
     may have contributed to the low $15                     most of the procedures are billed as                     hospitals.
     median cost reflected in our database.                  single procedures only 50 percent of the                    • The most complex ERCP
     After discussion, the Panel                             time. This raised questions as to                        procedures are usually performed in
     recommended the following:                              whether the data include procedures                      teaching hospitals.
        • Make no changes in the procedures                  such as flexible sigmoidoscopies that                       • Current payments for ERCP are
     assigned to APC 0123 in the absence of                  were miscoded as rigid                                   lower than the costs to perform the
     sufficient data to support such                         sigmoidoscopies, colonoscopies, and                      procedure (based on cost and frequency
     modifications.                                          anoscopies. In examining the data, the                   data gathered from several teaching
        • The two presenters on this APC                     Panel considered what impact this                        hospitals).
     issue submit cost data for the Panel to                 miscoding would have on the cost data,                      • Single claims should not be used to
     use in reevaluating this issue at its 2002              and discussed the clinical approaches                    calculate an APC payment rate for ERCP
     meeting.                                                used to perform some of the procedures,                  services because a single ERCP
        We note that our analysis of the more                what type of practitioners perform them,                 procedure usually consists of several
     recent claims data we are using to                      and other procedures and supplies that                   components, each with its own CPT
     reclassify and recalibrate the APCs in                  would be billed with them. As a result                   code (e.g., sphincterotomy and stent
     this proposed rule reveals a significant                of this discussion, the Panel concluded                  placement). Therefore, an ERCP billed
     increase in costs for this APC resulting                that the data anomalies were probably                    as a single CPT code would represent
     in a proposed payment rate that is                      attributable to miscoding because                        aberrant billing and would not
     double the current rate. However, very                  hospitals have not received sufficient                   accurately reflect the costs of an ERCP.
     few procedures (fewer than 20) were                     guidance and information on                                 The OPPS data distributed to the
     billed on an outpatient basis. We will                  appropriately coding procedures                          Panel verified that the vast majority of
     have the Panel review this APC again at                 included in these APCs. The Panel also                   the ERCP procedures are performed as
     their next meeting.                                     agreed that it would need more current                   multiple procedures. The Panel agreed
                                                             data before it could consider                            that the use of single claims data could
     APC 0142: Small Intestine Endoscopy                     reconfiguring these APCs. Therefore, the                 possibly skew the APC payment rate for
     APC 0143: Lower GI Endoscopy                            Panel recommended that we do the                         ERCP services.
                                                             following:                                                  The Panel recommended that we do
     APC 0145: Therapeutic Anoscopy                             • Make no changes to APCs 0142,                       the following:
     APC 0147: Level II Sigmoidoscopy                        0143, 0145, and 0147.                                       • Do not reconfigure the ERCP
                                                                • Provide information and guidance                    procedures in APC 0151.
     APC 0148: Level I Anal/Rectal                                                                                       • Resubmit this issue to the Panel for
                                                             to better assist hospitals in
     Procedures                                                                                                       review when more recent data are
                                                             understanding how to bill appropriately
     APC 0149: Level II Anal/Rectal                          for services included in APCs 0142,                      available.
     Procedures                                              0143, 0145, and 0147.                                       • Explore the feasibility of using
     APC 0150: Level III Anal/Rectal                            • Resubmit these APCs to the Panel                    multiple claims rather than single
                                                             for review when newer data are                           claims to calculate appropriate APC
     Procedures                                                                                                       payment rates for ERCP procedures.
                                                             available.
       We presented these seven APCs to the                     We propose to accept the Panel’s                         We propose to accept the Panel’s
     Panel because of the inconsistencies in                 recommendations.                                         recommendations. We are currently
     the median costs for some procedures                                                                             reviewing the potential for using
     included in APCs 0142, 0143, 0145, and                  APC 0151: Endoscopic Retrograde                          multiple claims data for determining
     0147. We advised the Panel that our cost                Cholangio-Pancreatography (ERCP)                         payment rates for ERCP procedures. As
     data do not show a progression of                          We advised the Panel that we have                     a first step in the process, in this
     median costs proportional to increases                  received comments that indicate that it                  proposed rule, we have determined a
     in clinical complexity as we would                      is inappropriate to assign both                          payment rate for ERCP procedures based
     expect. For example, the data indicate                  diagnostic and therapeutic ERCP                          on both single claims for ERCP
     that a therapeutic anoscopy assigned to                 procedures to the same APC. The                          procedures and, because ERCP
     APC 0145 costs more than twice as                       commenters allege that virtually every                   procedures are typically done under
     much as a flexible or rigid                             hospital performs diagnostic ERCPs but                   radiologic guidance, on claims that
     sigmoidoscopy assigned to APC 0147.                     only teaching hospitals perform                          included both an ERCP procedure and
     We stated our concern that cost                         therapeutic ERCPs. Based on our current                  a radiologic supervision or guidance


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     44680                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     procedure in this APC. Using these                      procedure that requires the urologist to                 52353 and the resources used (e.g.,
     additional claims has resulted in                       insert different instruments through a                   anesthesia and operating room costs) are
     significantly increasing the number of                  cystoscope and a uretheroscope to                        much more similar to other procedures
     claims used to determine the payment                    access stones in the upper urinary tract                 in APC 0163 than to those for code
     rate for this APC and in a much higher                  (the ureter and kidney).                                 50590. Additionally, the median cost for
     proposed payment rate (about $825).                        The presenter also compared the cost                  code 50590, which is $700 higher than
                                                             of performing CPT code 52353 with that                   that of code 52353, is dependent on the
     APC 0160: Level I Cystourethroscopy                     for CPT code 52352, which involves the                   widely variable arrangements hospitals
     and other Genitourinary Procedures                      mechanical removal of stones. The                        make for use of the extracorporeal
     APC 0161: Level II Cystourethroscopy                    presenter asked the Panel to consider                    lithotriptor. Therefore, we believe that
     and other Genitourinary Procedures                      the following two options to resolve this                placing code 52353 in APC 0163
     APC 0162: Level III Cystourethroscopy                   issue:                                                   maintains its clinical coherence and
                                                                • Reassign CPT code 52353 to APC                      similar use of resources.
     and other Genitourinary Procedures
                                                             0169, Lithotripsy. The presenter
     APC 0163: Level IV Cystourethroscopy                    believes that this would be the most                     APC 0191: Level I Female Reproductive
     and other Genitourinary Procedures                      appropriate assignment clinically and                    Procedures
     APC 0169: Lithotripsy                                   from a cost perspective because both                     APC 0192: Level II Female
                                                             involve lithotripsy and require                          Reproductive Procedures
        We advised the Panel that we had                     expensive capital equipment, fibers, and
     received a number of comments that                      probes. Also, other payers using a                       APC 0193: Level III Female
     advocated moving CPT code 52337,                        similar procedure grouping system,                       Reproductive Procedures
     Cystoscopy, with ureteroscopy and/or                    ambulatory procedure groups (APGs),                      APC 0194: Level IV Female
     pyeloscopy; with lithotripsy (ureteral                  have grouped these procedures together.                  Reproductive Procedures
     catheterization is included), from APC                     • Restore CPT code 52353 to its
     0162 to APC 0163. (We note that CPT                     original APC assignment, APC 0163.                       APC 0195: Level V Female
     code 52337 was deleted for 2001 and                        In addition, the presenter expressed                  Reproductive Procedures
     replaced with an identical CPT code,                    concern that the large number of                            This group of APCs was presented to
     52353. We will use the new code in the                  procedures assigned to APC 0162 makes                    the Panel because APC 0195 violates the
     following discussion.) Because of these                 it difficult to achieve clinical                         2 times rule. To facilitate the Panel’s
     comments, we sought the Panel’s advice                  homogeneity within the APC. The                          review of this issue, we distributed cost
     in examining the clinical and resource                  presenter asked that we work with
                                                                                                                      data on all the female reproductive
     distinctions between CPT code 52353                     appropriate groups to reconfigure APC
                                                                                                                      procedures assigned to these five APCs.
     and other procedures assigned to APC                    0162 because, as constituted, it appears
                                                                                                                      These data showed that the median
     0162. Other information shared with the                 to violate the 2 times rule.
                                                                The Panel had a lengthy discussion                    costs for procedures assigned to APC
     Panel noted that most of the procedures
                                                             regarding whether to move CPT code                       0195 ranged from a low of $365 to a
     included in APC 0162 are complicated
                                                             52353 to APC 0163 or to APC 0169. The                    high of $1,817. The CPT code 57288,
     cystourethroscopies while those
                                                             Panel considered the resources used for                  Sling operation for stress incontinence
     assigned to APC 0163 are largely
                                                             procedures in APCs 0163 and 0169 and                     (e.g., fascia or synthetic), which is
     prostate procedures.
        One presenter representing a device                  noted that the lithotriptor used for code                assigned to APC 0195, has the highest
     manufacturer discussed the merits of                    50590 may be purchased or leased and                     median cost of the procedures in this
     reassigning CPT code 52353 to either                    that lease rates for lithotriptors have                  group. We discussed with the Panel two
     APC 0163 or 0169 (APC 0169 contains                     frequently been inflated. Furthermore, it                clinical options for rearranging the
     a single CPT code, 50590, Lithotripsy,                  noted that much of the equipment and                     procedures assigned to APC 0195 to
     extracorporeal shock wave (ESWL)). The                  resource use required for code 52353 is                  comply with the 2 times rule. The first
     presenter was concerned that our                        similar to the resource use of other                     option would split APC 0195 into two
     decision to assign the                                  procedures in APC 0163. In spite of                      separate APCs by separating vaginal
     cystourethroscopic procedure to APC                     these considerations, the Panel voted                    procedures from abdominal procedures.
     0162 rather to APC 0163 was not                         eight to seven to recommend moving                       The second option would split APC
     explained in our April 7, 2000 final                    CPT code 52353 from APC 0162 to APC                      0195 into three distinct APCs by
     rule.                                                   0169 because both codes 52353 and                        retaining the separate APCs for
        Furthermore, the presenter noted that                50590 are lithotripsy procedures.                        abdominal and vaginal procedures and
     this decision resulted in a 40 percent                     We reviewed the panel discussion                      further distinguishing vaginal
     decline in payment for the procedure                    very carefully and noted the close vote.                 procedures based on whether they are
     which will make it difficult for hospitals              After careful consideration, we propose                  simple or complex.
     to provide this service because the                     to disagree with the Panel’s                                The Panel discussed the rapid
     capital equipment, probes, and fibers                   recommendation and move code 52353                       increase in the rate at which CPT code
     required to perform the procedure are                   to APC 0163. The 1999–2000 cost data,                    57288 is performed on an outpatient
     expensive. Moreover, the probes and                     which contains over 400 single claims                    basis. The Panel stated that this
     fibers are ineligible for transitional pass-            for code 52353 and over 6,000 single                     procedure is becoming more routine and
     through payments because they are not                   claims for code 50590, show that the                     replacing many of the older, more
     single-use items. At the Panel’s request,               median cost for code 52353 is much                       complex urinary dysfunctional
     the presenter discussed the clinical                    more similar to the median cost of other                 procedures. Questions were raised about
     differences between CPT codes 52353                     procedures in APC 0163 than it is to the                 the frequency with which this
     and 50590. The presenter stated that                    median cost of APC 0169. Although                        procedure is performed alone as
     code 50590 is a noninvasive procedure                   both codes involve lithotripsy, the type                 opposed to being performed as one of
     that involves breaking up kidney stones                 of equipment used in the two                             several procedures. The Panel was
     using shock waves produced outside the                  procedures is very different. Clinically,                advised that the sling material and the
     patient while code 52353 is an invasive                 the surgical approach used for code                      relevant anchors used in performing


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     CPT code 57288 are eligible for                             highlighted the wide variation in                        recommendations and those for APC
     transitional pass-through payments.                         techniques and devices used to perform                   0195 are as follows:
        One presenter, speaking on behalf of                     it. Because of these factors, the presenter                 • Move CPT codes 56350,
     a device manufacturer, supported our                        believes that the procedure is underpaid                 Hysteroscopy, diagnostic, and 58555,
     proposal to divide APC 0195 into                            and that the 1996 cost data may not                      Hysteroscopy, diagnostic/separate
     different clinical groupings. The                           fully reflect the actual costs associated                procedure, from APC 0191 to APC 0194
     presenter’s testimony was limited to a                      with performing CPT code 57288.                          (In 2001, CPT code 56350 was replaced
     discussion of CPT code 57288. The                              The Panel also closely reviewed the                   with CPT code 58555.)
     presenter concurred with the Panel’s                        other four APCs for female reproductive                     • Divide APC 0195 into two APCs to
     assessment of the current utilization                       procedures to ensure each was clinically                 distinguish vaginal procedures from
     trends for CPT code 57288, emphasized                       homogeneous. As a result of this review,                 abdominal procedures.
     the high costs associated with                              the Panel recommended a number of                           • Retain the following vaginal
     performing this procedure, and                              changes for these APCs. These                            procedures in APC 0195:

        CPT code                                                                                Descriptor

     57555   ................   Excision of cervical stump, vaginal approach: with anterior and/or posterior repair.
     58800   ................   Drainage of ovarian cyst(s), unilateral or bilateral, (separate procedure); vaginal approach.
     58820   ................   Drainage of ovarian abscess; vaginal approach, open.
     57310   ................   Closure of urethrovaginal fistula.
     57320   ................   Closure of vesicovaginal fistula; vaginal approach.
     57530   ................   Trachelectomy (cervicectomy), amputation of cervix (separate procedure).
     57291   ................   Construction of artificial vagina; without graft.
     57220   ................   Plastic operation on urethral sphincter, vaginal approach (e.g., Kelly urethral plication).
     57550   ................   Excision of cervical stump, vaginal approach.
     57556   ................   Excision of cervical stump, vaginal approach; with repair of enterocele.
     57289   ................   Pereyra procedure, including anterior colporrhaphy.
     57300   ................   Closure of rectovaginal fistula; vaginal or transanal approach.
     57284   ................   Paravaginal defect repair (including repair of cystocele, stress urinary incontinence, and/or incomplete vaginal prolapse).
     57265   ................   Combined anteroposterior colporrhaphy; with enterocele repair.
     57268   ................   Repair of enterocele vaginal approach (separate procedure).
     56625   ................   Vulvectomy simple; complete.
     58145   ................   Myomectomy excision of fibroid tumor of uterus, single or multiple (separate procedure); vaginal approach.
     57260   ................   Combined anteroposterior colporrhaphy.
     57240   ................   Anterior colporrhaphy, repair of cystocele with or without repair of urethrocele.
     57250   ................   Posterior colporrhaphy, repair of rectocele with or without perineorrhaphy.
     56620   ................   Vulvectomy simple; partial.
     57522   ................   Conization of cervix, with or without fulguration, with or without dilation and curettage, with or without repair; loop electrode
                                  excision.

         • Include the following abdominal procedures in a new APC titled ‘‘Level VI Female Reproductive Procedures.’’

        CPT code                                                                                Descriptor

     58920   ................   Wedge resection or bisection of ovary, unilateral or bilateral.
     58900   ................   Biopsy of ovary, unilateral or bilateral (separate procedure).
     58925   ................   Ovarian cystectomy, unilateral or bilateral.
     57288   ................   Sling operation for stress incontinence (e.g., fascia or synthetic).
     57287   ................   Removal or revision of sling for stress incontinence (e.g., fascia or synthetic).



       • Move CPT code 57107 from APC                            APC 0210: Spinal Tap                                     or branch. The new code was created to
     0194 to APC 0195, Level V Female                            APC 0211: Level I Nervous System                         distinguish chemodenervation of limb
     Reproductive Procedures.                                    Injections                                               and trunk muscles from other
       • Move CPT code 57109,                                                                                             chemodenervation procedures. The
     Vaginectomy with removal of                                 APC 0212: Level II Nervous System                        presenter claimed that this code is
     paravaginal tissue (radical vaginectomy)                    Injections                                               similar both clinically and in terms of
     with bilateral total pelvic                                   The Panel heard testimony from two                     resource use to the other
     lympadenectomy and para-oortic lymph                        presenters regarding the merits of                       chemodenervation procedures assigned
     node sampling (biopsy), from APC 0194                       modifying these three APCs. The first                    to APC 0211, so it should be assigned
     to the new APC, Level VI Female                             presenter, speaking on behalf of a                       to that APC instead of APC 0971, New
     Reproductive Procedures.                                    manufacturer, discussed CPT code                         Technology—Level II, where it is
       We propose to accept all of these                         64614, Chemodenervation of muscles;                      currently assigned.
     Panel recommendations. These APCs                           extremities and/or trunk muscles (e.g.,                    The second presenter, representing a
     would be reconfigured and renumbered                        for dystonia, cerebral palsy, multiple                   specialty society, proposed regrouping
     as APCs 0188 to 0194. We are also                           sclerosis). The presenter advised the                    the procedures assigned to APCs 0210,
     proposing to add new APCs for Level                         Panel that although this is a new code                   0211, and 0212 based on similar levels
     VII and Level VIII Female Reproductive                      for 2001, the procedure is well                          of complexity and median costs. The
     Procedures (APCs 0195 and 0202,                             established and formerly coded using                     presenter’s proposal also included
     respectively) based on the 1999–2000                        CPT code 64640, Destruction by                           reassignment to these APCs of
     claims data and the 2 times rule.                           neurolytic agent; other peripheral nerve                 interventional pain procedures


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     currently assigned to APCs 040,                                                                                 Reassigned       previously implanted for intrathecal or
                                                                                    CPT code
     Arthrocenteris and Ligament/Tendon                                                                               from APC        epidural infusion, from APC 0105 to
     Injection, 0105, Revision/Removal of                                                                                             Level IV Nerve Injections because they
     Pacemakers, AICD, or Vascular Device,                            64483–64484 ..........................         0211             were neither clinically similar nor
     and 0971. The presenter contended that                           64510 ......................................   0211             similar in resource use to the other
                                                                      64520 ......................................   0211
     it was essential to reconfigure these                            64530 ......................................   0211
                                                                                                                                      codes assigned to this proposed APC.
     APCs because of disparity in resource                            64630 ......................................   0211
                                                                                                                                        • The Panel opposed the creation of
     use among procedures currently                                   64640 ......................................   0211             Level V Nerve Tests as it included only
     assigned to the same APC. The presenter                                                                                          one code and recommended that CPT
     also claimed that many of these                                    • Level IV Nerve Injections (to                               code 62287 remain in APC 220.
     procedures are being underpaid in their                          include High Complexity Lysis of                                  We propose to accept the Panel’s
     current APC and, for that reason, a                              Adhesions, Neurolytic Procedures,                               recommendations for these services. We
     number of hospitals have chosen not to                           Removal of Implantable Pumps and                                propose to create new APCs 0203, 0204,
     perform them in the outpatient setting.                          Stimulators):                                                   0206, and 0207 to accommodate these
     The presenter proposed establishing the                                                                                          proposed changes.
     following five levels of interventional                                       CPT code                          Reassigned       APC 0215: Level I Nerve and Muscle
     pain procedures by regrouping the                                                                                from APC
                                                                                                                                      Tests
     procedures into new APCs as stated
                                                                      62263 ....................................            0212      APC 0216: Level II Nerve and Muscle
     below:                                                           64600 ....................................            0211
        • Level I Nerve Injections (to include                                                                                        Tests
                                                                      64605 ....................................            0211
     Trigger Point, Joint, Other Injections,                          64610 ....................................   APC 0217: Level III Nerve and Muscle
                                                                                                                            0211
     and Lower Complexity Nerve Blocks):                              64620 ....................................   Tests    0211
                                                                      64622–64623 ........................                  0211
                                                                                                                      We advised the Panel that we had
                                                    Reassigned        64626–64627 ........................                  0211
                  CPT code                                                                                         received a comment contending that
                                                     from APC         64680 ....................................            0211
                                                                      62355 ....................................   assignment of CPT code 95863, Needle
                                                                                                                            0105
     20550 ....................................               040     62365 ....................................   electromyography, three extremities
                                                                                                                            0105
     20600 ....................................               040                                                  with or without related paraspinal areas,
     20605 ....................................               040        • Level V Nerve Injections (to include to APC 0216 created an inappropriate
     20610 ....................................               040                                                  incentive to perform tests on three
     64612 ....................................              0211
                                                                      Highest Complexity Disk and Spinal
     64613 ....................................              0211     Endoscopies): CPT code 62287,                extremities rather than two or four
     64614 ....................................              0971     Aspiration or decompression procedure, extremities. The payment of about $144
     64400–64418 ........................                    0211     percutaneous, of nucleus pulposus of         for APC 0216 is greater than the
     64425 ....................................              0211     invertebral disk, any method, single or      payment of about $58 for the same tests
     64430 ....................................              0211     multiple levels, lumbar (e.g., manual or     when performed on one, two, or four
     64435 ....................................              0211     automated percutaneous diskectomy,           extremities. This is due to the fact that
     64445 ....................................              0211     percutaneous laser diskectomy),              CPT codes 95860, 95861, and 95864,
     64450 ....................................              0211     reassigned from APC 0220, Level I            Needle electromyography, one, two, and
     64505 ....................................              0211                                                  four extremities with or without related
     64508 ....................................              0211
                                                                      Nerve Procedures.
                                                                         The Panel recommended                     paraspinal areas, respectively, are
       • Level II Nerve Injections (to include                        reassignment of CPT code 64614 from          assigned to APC 0215. We distributed
     Moderate Complexity Nerve Blocks and                             APC 0971 to APC 0211.                        data to the Panel that showed a median
                                                                         Concerning the suggested regrouping       cost of about $141 for CPT code 95863,
     Epidurals):
                                                                      of interventional pain procedures, the       which is more than 3 times that of the
                                                    Reassigned        Panel agreed that the recommended            median cost of $41 for CPT code 95864.
                  CPT code                                            division of these procedures by clinical     We asked the Panel to consider the
                                                     from APC
                                                                      complexity would reflect resource use        reassignment of CPT code 95863 from
     27096 ....................................              0210     and was a reasonable approach to take.       APC 0216 to APC 0215 and advised the
     62270 ....................................              0210     It was pointed out to the Panel that the     Panel that, based on cost data available
     62272 ....................................              0210     costs for CPT codes 62290, Injection         at the time of our meeting, this change
     62273 ....................................              0212     procedure for diskography, each level;
     62310–62319 ........................                    0212
                                                                                                                   could potentially reduce the payment
                                                                      lumbar, and 62291, Injection procedure       for APC 0216. It was also noted that this
       Level III Nerve Injections (to include                         for diskography, each level; cervical or     change could result in a payment
     Moderately High Complexity Epidurals,                            thoracic, were packaged into the             increase for APC 0215.
     Facet Blocks, and Disk Injections):                              procedures with which they were billed.         The Panel reviewed the cost data for
                                                                      Therefore, the Panel concurred with the APCs 0215 and 0216 and noted that the
                                                    Reassigned        regrouping of procedures to establish        median costs for both CPT codes 95863
                   CPT code                                           Levels I, II, III, and IV with the following and 95864 appeared aberrant. Based on
                                                     from APC
                                                                      exceptions:                                  the information presented, the Panel
     62280–62282 ..........................         0212                 • The Panel recommended that CPT          recommended that we move CPT code
     62290 ......................................   Currently         codes 62290 and 62291 not be included 95863 from APC 0216 to APC 0215.
                                                      Packaged.       in Level III because they are packaged          We propose to accept the Panel’s
     62291 ......................................   Currently
                                                                      injections and should not be                 recommendation with one exception.
                                                      Packaged.
     64420–64421 ..........................         0211              unpackaged and paid separately.              We are proposing to revise these APCs
     64470 ......................................   0211                 • The Panel opposed moving CPT            based on the 1999–2000 cost data and
     64472 ......................................   0211              codes 62355, Removal of previously           the 2 times rule, and CPT code 95863
     64475–64476 ..........................         0211              implanted intrathecal or epidural            would be assigned to a reconfigured
     64479 ......................................   0211              catheter, and 62365, Removal of              APC for Level II Nerve and Muscle Tests
     64480 ......................................   0211              subcutaneous reservoir or pump,              (APC 0218).


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     APC 0237: Level III Posterior Segment                   Panel that this APC be split by surgical                 radiologic supervision and
     Eye Procedures                                          site (e.g., nasal and oral). After                       interpretation, to a new APC 0187,
        We advised the Panel that procedures                 reviewing cost data, the Panel agreed                    Placement/Reposition Miscellaneous
     assigned to APC 0237 are high volume                    that the APC should be split but that                    Catheters, because its costs were
     procedures and rank among the top                       current data were insufficient to                        significantly higher than the costs of the
     outpatient procedures billed under                      determine how that split should be                       procedures remaining in APC 0264.
     Medicare. We have received a number                     made. Therefore, the Panel asked that
                                                             this APC, along with more recent cost                    APC 0269: Echocardiogram except
     of comments disagreeing with the                                                                                 Transesophageal
                                                             data, be placed on the agenda at the next
     assignment of CPT code 67027,
                                                             meeting.                                                 APC 0270: Transesophageal
     Implantation of intravitreal drug
                                                                We agree that this APC should be                      Echocardiogram
     delivery system (e.g., ganciclovoir                     reviewed by the Panel at its next
     implant), which includes concomitant                                                                               We asked the Panel to consider
                                                             meeting. However, our review of the
     removal of vitreous, to APC 0237. This                                                                           splitting these APCs based on whether
                                                             more recent cost data indicates that
     procedure was added to the CPT coding                                                                            or not 2D imaging is employed. After
                                                             significant violations of the 2 times rule
     system after 1996 and, therefore, was                                                                            review of the data, the Panel
                                                             still exist. In order to correct this
     not included in the 1996 data. We                                                                                recommended that we leave these APCs
                                                             problem, but keep the APC as intact as
     advised the Panel that ganciclovoir, the                                                                         intact.
                                                             possible, we propose to move CPT codes
     drug implanted during this procedure,                                                                              We propose to leave APC 0270 intact
                                                             30300, Remove foreign body, intranasal;
     is paid separately as a transitional pass-              office type procedure, 40804, Removal                    except for the addition of two new
     through item. Because the drug is paid                  of embedded foreign body, vestiblue of                   codes for transesophageal
     separately, it should not be included in                mouth; simple, and 42809, Removal of                     echocardiography. We also propose to
     determining whether the resources                       foreign body from pharynx, to APC                        split APC 0269 into two APCs, APC
     associated with the surgical procedure                  0340, Minor Ancillary Procedures. This                   0269, Level I Echocardiogram Except
     are similar to the resources required to                APC consists of procedures such as                       Transesophageal and APC 0697, Level II
     perform the other procedures assigned                   removal of earwax that require similar                   Echocardiogram Except
     to APC 0237. We advised the Panel that,                 resources.                                               Transesophageal. One APC (0697)
     of the procedures assigned to APC 0237,                                                                          would include comprehensive
     we believe that CPT code 67027 is                       APC 0264: Level II Miscellaneous                         echocardiograms and the other APC
     related to codes 65260, 65265, and                      Radiology Procedures                                     (0269) would include limited/follow-up
     67005, all of which involve removal of                     We asked the panel to review this                     echocardiograms and doppler add-on
     foreign bodies and vitreous from the                    APC because it violated the 2 times rule                 procedures.
     eye. To ensure that CPT code 67027 is                   and consisted of a wide variety of                       APC 0274: Myelography
     assigned to the appropriate APC, we                     unrelated procedures. Specifically, we
     asked the Panel to consider creation of                 believe that the costs associated with                      We advised the Panel that APC 0274
     a new APC, Level IV Posterior Segment                   CPT codes 74740,                                         is clinically homogeneous but that it
     Eye Procedures, for CPT codes 65260,                    Hysterosalpingography, radiological                      violates the 2 times rule. Procedures
     65265, 67005, and 67027. Based on the                   supervision and interpretation, and                      assigned to this APC include
     APC rates effective January 1, 2001, the                76102, Radiologic examination,                           radiological supervision and
     suggested change could lower the APC                    complex motion (e.g., hypercycloidal)                    interpretation of diagnostic studies of
     rate for the four procedures by $400.                   body section (e.g., mastoid                              central nervous system structures (e.g.,
        The Panel reviewed the data and did                  polytomography), other than with                         spinal cord and spinal nerves)
     not believe it was sufficient to support                urography; bilateral, were aberrant and                  performed after injection of contrast
     the creation of a new APC for these four                that we would significantly underpay                     material. We shared data with the Panel
     procedures. Therefore, the Panel                        these procedures if we moved them into                   that showed the median costs for the
     recommended that APC 0237 remain                        a lower paying APC. We also asked the                    procedures assigned to this APC ranged
     intact and that more recent claims data                 Panel to determine whether this APC                      from a low of about $109 to a high of
     be analyzed to determine whether CPT                    and APC 0263, Level I Miscellaneous                      about $295. We asked the Panel’s
     code 67027 is similar to the other                      Radiology Procedures, should be                          recommendation for reconfiguring APC
     procedures assigned to APC 0237.                        reconfigured by body system. After                       0274 to comply with the 2 times rule.
        Based on the 1999–2000 claims data,                  considerable discussion, the Panel                          We informed the Panel members that
     we have determined that the resources                   agreed that the procedures in these                      we packaged the costs associated with
     used for code 67027 are similar to other                APCs were not clinically homogeneous;                    radiologic injection codes into the
     procedures in APC 0237. However, we                     however, it recommended that we leave                    radiological supervision and
     will present APCs 0235, 0236, and 0237                  these APCs intact because the data do                    interpretation codes with which they
     to the Panel at their next meeting to                   not support any more coherent                            were reported. The reason for doing this
     determine whether any further changes                   reorganization. The Panel requested that                 is that hospitals incur expenses for
     should be made. We are proposing to                     this APC be placed on the agenda for the                 providing both services and they
     make various other changes to these                     2002 meeting.                                            typically perform both an injection and
     APCs based on the new data and the 2                       We agree with the Panel with the                      a supervision and interpretation
     times rule.                                             following revisions. First, BIPA requires                procedure on the same patient.
                                                             us to assign procedures requiring                        Therefore, since neither an injection
     APC 0251: Level I ENT Procedures                        contrast into different APCs from                        code nor a supervision and
       This APC violates the 2 times rule                    procedures not requiring contrast. This                  interpretation code should be billed
     because it consists of a wide variety of                required changes to a number of                          alone, it would not be appropriate for us
     minor ENT procedures, many of which                     radiologic APCs including APCs 0263                      to use single claims data to determine
     are low volume services or codes for                    and 0264. In addition, in this proposed                  the costs of performing these
     nonspecific procedures. In order to                     rule, we would move CPT code 75940,                      procedures. However, we are using
     correct this problem, we proposed to the                Percutaneous Placement of IVC filter,                    single claims data in order to accurately


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     determine the costs of performing                       supervision and interpretation. We                       more accurately reflects the clinical use
     procedures. Therefore, in order to                      believe that, for these procedures, these                of these services and the resources
     accurately determine the costs of a                     cost data are aberrant. This code is                     required to perform them. Our
     complete radiologic procedure, we had                   clinically similar to the other codes in                 understanding of these services, based
     to package the costs of the injection                   APC 0279 and moving code 75660 to an                     on review of the comments, the
     component into the cost of the                          APC with a lower weight could be an                      testimony before the Panel, the Panel
     supervision and interpretation                          inappropriate APC assignment.                            discussion and recommendations, and
     component with which it was billed.                     Therefore, we believe that an exception                  meetings with knowledgeable
     The Panel believed that, in 1996,                       to the 2 times rule is warranted.                        stakeholders, is described below.
     hospitals generally did not bill the                                                                                Recent developments in the field of
                                                             APC 0300: Level I Radiation Therapy                      radiation oncology include the ability to
     injection code when performing
     myelography. Furthermore, in 1996,                      APC 0302: Level III Radiation Therapy                    deliver high doses of radiation to
     some hospitals kept patients overnight                                                                           abnormal tissues (e.g., tumors) while
                                                                We presented this APC to the Panel
     after a myelogram. More recently,                                                                                minimizing delivery of radiation to
                                                             because we received comments that the
     postmyelogram recovery time has                                                                                  adjacent normal tissues. Collectively,
                                                             assignment of CPT code 61793,
     decreased to about 6 hours. For these                                                                            these procedures are called stereotactic
                                                             Stereotactic radiosurgery (particle beam,
     reasons, the Panel believed that the                                                                             radiosurgery and IMRT.
                                                             gamma ray, or linear accelerator), one or                   Clinically, there are essentially two
     median costs of $109 and $174 probably                  more sessions, to APC 0302 would
     do not represent the actual resources                                                                            services required to deliver stereotactic
                                                             result in inappropriate payment of this                  radiosurgery and IMRT. First, there is
     used for CPT codes 70010,                               service. Many commenters wrote that
     Myelography, posterior fossa,                                                                                    ‘‘treatment planning,’’ which includes
                                                             stereotactic radiosurgery and intensity                  such activities as determining the
     radiological supervision and                            modulated radiation therapy (IMRT)
     interpretation, and 70015,                                                                                       location of all normal and abnormal
                                                             required significantly more staff time,                  tissues, determining the amount of
     Cisternography, positive contrast,                      treatment time, and resources than other
     radiological supervision and                                                                                     radiation to be delivered to the
                                                             types of radiation therapy. Other                        abnormal tissue, determining the dose
     interpretation. Therefore, the Panel                    commenters disagreed with our
     recommended the following:                                                                                       tolerances of normal tissues, and
                                                             decision, effective January 1, 2001, to                  determining how to deliver the required
        • Make no changes to APC 0274.                       discontinue recognizing CPT code
        • Review new cost data to determine                                                                           dose to abnormal tissue while delivering
                                                             61793, and to create two HCPCS level 2                   a dose to adjacent normal tissues within
     whether payment would increase for                      codes, G0173, Stereotactic radiosurgery,
     APC 0274.                                                                                                        their range of tolerance. These activities
                                                             complete course of therapy in one                        include the ability to manufacture
        We propose to accept the Panel’s                     session, and G0174 Intensity modulated
     recommendations.                                                                                                 various treatment devices for protection
                                                             radiation therapy (IMRT) plan, per                       of normal tissue as well as the ability to
     APC 0279: Level I Diagnostic                            session, to report both stereotactic                     ensure that the plan will deliver the
     Angiography and Venography                              radiosurgery and IMRT.                                   intended doses to normal and abnormal
                                                                We reported to the Panel that the APC                 tissue by simulating the treatment.
     APC 0280: Level II Diagnostic                           assignment of these G codes and their
     Angiography and Venography                                                                                       Second, there is ‘‘treatment delivery,’’
                                                             payment rate was based on our                            which is the actual delivery of radiation
        We presented these codes to the Panel                understanding that stereotactic                          to the patient in accordance with the
     for several reasons. APC 0279 fails the                 radiosurgery was generally performed                     treatment plan. Treatment delivery
     2 times rule, there are numerous codes                  on an inpatient basis and delivered a                    includes such activities as adjusting the
     in these APCs with no cost data, there                  complete course of treatment in a single                 collimator (a device that filters the
     are numerous ‘‘add on’’ codes in these                  session, while IMRT was performed on                     radiation beams), doing setup and
     APCs, and many of these procedures                      an outpatient basis and required several                 verification images, treating one or more
     were performed infrequently in the                      sessions to deliver a complete course of                 areas, and performing quality control.
     outpatient setting in 1996.                             treatment. We also explained to the                         Treatment planning requires
        The Panel reviewed the clinical                      Panel that it was our understanding that                 specialized equipment including a
     coherence of both APCs as well as the                   multiple CPT codes were billed for each                  duplicate of the actual equipment used
     resources required to perform all these                 session of stereotactic radiosurgery and                 to deliver the treatment, the ability to
     procedures. The Panel believed that it                  IMRT. Therefore, we believed that the                    perform a CT scan, various disposable
     would be unusual for many of these                      payment for APC 0302 was only a                          supplies, and involvement of various
     procedures to be performed separately                   fraction of the total payment a hospital                 staff such as the physician, the
     and that we would need to look at                       received for performing stereotactic                     physicist, the dosimetrist, and the
     multiple claims to get accurate data. The               radiosurgery or IMRT on an outpatient                    radiation technologist. Treatment
     Panel recommended the following:                        basis.                                                   delivery requires specialized equipment
        • Create a new APC (APC 0287,                           Radiosurgery equipment                                to deliver the treatment and the
     Complex Venography) with the                            manufacturers, physician groups, and                     involvement of the radiation
     following CPT codes: 75831, 75840,                      patient advocacy groups have both                        technologist. The physician and
     75842, 75860, 75870, 75872, and 75880.                  submitted comments to us and provided                    physicist provide general oversight of
        • Move CPT codes 75960, 75961,                       testimony to the APC Panel on these                      this process.
     75964, 75968, 75970, 75978, 75992, and                  issues. These comments have convinced                       Although there are several types of
     75995 from APC 0279 to APC 0280.                        us that we did not clearly understand                    equipment, produced by several
        We propose to accept the Panel’s                     either the relationship of IMRT to                       manufacturers, used to accomplish this
     recommendations. We note that, as                       stereotactic radiosurgery or the various                 treatment, it is the consensus of the
     proposed, APC 0279 violates the 2 times                 types of equipment used to perform                       commenters and the Panel that the most
     rule because of the low cost data for                   these services.                                          useful way to categorize stereotactic
     CPT code 75660, Angiography, external                      We are proposing to set forth a                       radiosurgery and IMRT is by the source
     carotid, unilateral selective, radiological             proposed new coding structure that                       of radiation used for the treatment and


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                             Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                             44685

     not by the type of equipment used. One                  treated, payment would reflect a                         APC 0311: Radiation Physics Services
     reason for this is that the clinical                    weighted average.                                        APC 0312: Radio Element Application
     indications for stereotactic radiosurgery                  It is our understanding that single-
     and IMRT overlap. Therefore, a single                                                                            APC 0313: Brachytherapy
                                                             source photon stereotactic radiosurgery
     disease process can be treated by either                (or LINAC) planning and delivery are                        We presented APC 0311 to the Panel
     modality but the cost of treatment varies               similar to IMRT planning and delivery                    because we believed our cost data for
     by source of radiation used for the                     in terms of clinical use and resource                    CPT codes 77336, Continuing medical
     treatment. Second, while both                           requirements. Therefore, we propose to                   physics consultation, including
     stereotactic radiosurgery and IMRT can                  require coding for single-source photon                  assessment of treatment parameters,
     deliver a complete course of treatment                  stereotactic radiosurgery under HCPCS                    quality assurance of dose delivery, and
     in either one or multiple sessions, the                 codes G0174 and G0178.                                   review of patient treatment
     cost of treatment delivery per session is                                                                        documentation in support of the
     relatively fixed, and is closely related to                Further, we are aware that the AMA
                                                             is establishing codes for IMRT planning                  radiation oncologist, reported per week
     the source of radiation used for the                                                                             of therapy; 77370, Special medical
     treatment. Therefore, we believe that                   and treatment delivery for 2002 and we
                                                             propose to retire G0174 and G0178                        radiation physics consultation; and
     appropriate APC assignment and                                                                                   77399, Unlisted procedure, medical
     payment can be made by creating a                       (with the usual 90-day phase out) and
                                                             recognize the applicable CPT codes                       radiation physics, dosimetry, and
     small number of HCPCS codes to                                                                                   treatment devices, and special services,
     describe these services. The proposed                   when they are established in January
                                                             2002.                                                    were inaccurate. We were concerned
     codes are as follows:                                                                                            that these procedures, particularly code
        • GXXX1 Multi-source photon                             We believe that all activities required               77370, were not being paid
     stereotactic radiosurgery (Cobalt 60                    to perform stereotactic radiosurgery and                 appropriately in APC 0311.
     multi-source converging beams) plan,                    IMRT are included in the codes                              Presenters pointed out that, as with
     including dose volume histograms for                    described above. In order to avoid                       all radiation oncology services, the
     target and critical structure tolerances,               confusion and to optimize tracking of                    usual practice is to bill multiple CPT
     plan optimization performed for highly                  these services in terms of both                          codes on the same date of service.
     conformal distributions, plan positional                utilization and cost, we propose to                      Therefore, single claims were likely to
     accuracy and dose verification, all                     discontinue the use of any other                         be inaccurate bills and did not represent
     lesions treated, per course of treatment.               radiation therapy codes for activities                   the true costs of the procedure. For this
        • GXXX2 Multi-source photon                          involved with planning and delivery of                   reason, presenters believe that using
     stereotactic radiosurgery, delivery                     stereotactic radiosurgery and IMRT for                   single claims to set payment rates for
     including collimator changes and                        purposes of hospital billing in OPPS.                    radiation oncology procedures was
     custom plugging, complete course of                     Thus, we would continue to not                           inappropriate and that we needed to
     treatment, per lesion.                                  recognize CPT code 61793 for hospital                    develop a methodology that allowed the
        • G0174 Intensity modulated                          billing purposes.                                        use of multiple claims data to set
     radiation therapy (IMRT) delivery to one                   We believe the coding requirements                    payment rates for these services.
     or more treatment areas, multiple couch                 set forth above not only simplify the                       With regard to radiation physics
     angles/fields/arcs custom collimated                    reporting process for hospitals, but                     consultation, presenters stated that the
     pencil-beams with treatment setup and                   appropriately recognize the clinical                     staff costs associated with CPT code
     verification images, complete course of                 practice and resource requirements for                   77370 were significantly greater than
     therapy requiring more than one                         stereotactic radiosurgery and IMRT.                      the costs of CPT codes 77336 and 77399.
     session, per session.                                                                                            Therefore, they recommended that CPT
                                                                We seek comments on our proposal,
        • G0178 Intensity modulated                          including the code titles, descriptors,                  codes 77336 and 77399 be moved from
     radiation therapy (IMRT) plan,                          and coding requirements discussed                        APC 0311 to APC 0304, Level I
     including dose volume histograms for                    above. We also request information                       Therapeutic Radiation Treatment
     target and critical structure partial                   regarding appropriate APC assignment                     Preparation, and CPT code 77370 be
     tolerances, inverse plan optimization                   and payment rates to inform our                          moved from APC 0311 to APC 0305,
     performed for highly conformal                          decision-making. In particular, we                       Level II Therapeutic Radiation
     distributions, plan positional accuracy                 would like information regarding the                     Treatment Preparation. The Panel
     and dose verification, per course of                    costs of treatment delivery including                    agreed with this recommendation and
     treatment.                                              any differences between the cost of a                    we propose to accept the Panel’s
        We propose that HCPCS codes                          complete treatment in single versus                      recommendation. We also agree that we
     GXXX1, G0174, and G0178 have status                     multiple sessions.                                       should review the use of single claims
     indicators of S, while GXXX2 have a                                                                              to set payment rates for radiation
     status indicator of T. We believe these                    We also note that several commenters                  oncology services. We plan to present
     are the correct status indicators because               requested placement of the stereotactic                  this issue again at the 2002 Panel
     G0178 has a ‘‘per session’’ designation,                delivery codes in surgical APCs and we                   meeting.
     while GXXX2 has a ‘‘per lesion’’                        request clarification and support for                       We presented APCs 0312 and 0313 to
     designation. Furthermore, it is our                     these comments within the context of                     the Panel because commenters were
     understanding that GXXX1 would not                      our coding proposal. Specifically, we                    concerned that the payment rates were
     be billed on a ‘‘per lesion’’ basis as the              are concerned that appropriate payment                   too low for the procedures assigned to
     planning process would take into                        be made for GXXX2, which has a ‘‘per                     the APCs and that there were
     account all lesions being treated and it                lesion’’ descriptor.                                     insufficient data to set payment rates for
     would be extremely difficult to                            We believe that while the APC Panel                   these APCs. The Panel agreed that the
     determine resource utilization for                      did not make any specific                                issue regarding the use of single claim
     planning on a ‘‘per lesion’’ basis.                     recommendations regarding these codes,                   data affected the payment rates for these
     Because the costs of performing GXXX1                   the concerns expressed by the Panel are                  services. However, there were
     will vary based on the number of lesions                addressed by our proposal.                               insufficient data for the Panel to make


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     44686                           Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     any recommendations regarding these                          Inpatient Procedure List                                  2. APCs for Contrast Enhanced
     APCs. The Panel did request to look at                         See the discussion of the inpatient                     Diagnostic Procedures
     the issue of radiation oncology at its                       procedures list in section II.C.5 of this
     2002 meeting.                                                                                                             Section 430 of the BIPA amended
                                                                  preamble for a summary of the Panel
       Therefore, we are proposing to make                                                                                  section 1833(t)(2) of the Act to require
                                                                  discussion and recommendations and
     no changes to APCs 0312 and 0313 but                                                                                   the Secretary to create additional APC
                                                                  our proposal.
     will address radiation oncology issues at                                                                              groups to classify procedures that utilize
     the Panel’s 2002 meeting. We note that                       B. Additional APC Changes Resulting                       contrast agents separately from those
     our updated claims data show very few                        from BIPA Provisions                                      that do not, effective for items and
     single claims for procedures in these                        1. Coverage of Glaucoma Screening                         services furnished on or after July 1,
     APCs. However, moving any of these                                                                                     2001. On June 1, 2001, we issued a
     procedures into other radiation                                 Section 102 of the BIPA amended                        Program Memorandum, Transmittal A–
     oncology APCs would lower their                              section 1861(s)(2) of the Act to provide                  01–73, in which we made numerous
     payment rates.                                               payment for glaucoma screening for                        coding and grouping changes to
                                                                  eligible Medicare beneficiaries,                          implement this provision. (This
     APC 0371: Allergy Injections                                 specifically, those with diabetes
                                                                                                                            transmittal can be found at
        We presented this APC to the Panel                        mellitus or a family history of glaucoma,
                                                                                                                            www.hcfa.gov/pubforms/transmit/
     because it violates the 2 times rule. The                    and certain other individuals found to
                                                                                                                            AO173.pdf) We removed the
     median costs for CPT codes 95115,                            be at high risk for glaucoma as specified
                                                                  by our rulemaking. The implementation                     radiological procedures whose
     Professional Services for allergen
                                                                  of this provision is discussed in detail                  descriptors included either ‘‘without
     immunotherapy not including provision
     of allergenic extracts; single injection,                    in a separate proposed rule concerning                    contrast material’’ or ‘‘without contrast
     and 95117, Professional Services for                         the revisions in the physician payment                    material followed by contrast material’’
     allergen immunotherapy not including                         policy for CY 2002.                                       from APC groups 0282, Level I,
     provision of allergenic extracts; two or                        In order to implement section 102 of                   Computerized Axial Tomography; APC
     more injections, were lower than the                         BIPA, we have established two new                         0283, Level II, Computerized Axial
     median costs for the other services in                       HCPCS codes for glaucoma screening:                       Tomography; and APC 0284, Magnetic
     this APC.                                                       G0117—Glaucoma screening for high                      Resonance Imaging. As a result, APCs
        The Panel agreed that because codes                       risk patients furnished by an                             0283 and 0284 now include only
     95115 and 95117 included                                     ophthalmologist or optometrist.                           imaging procedures that are performed
     administration of an injection only, the                        G0118—Glaucoma screening for high                      with contrast materials. Additionally,
     resource utilization for these services                      risk patients furnished under the direct                  reconfigured APC 0282 no longer
     was lower than for the other services.                       supervision of an ophthalmologist or                      includes radiological procedures that
     The other services involve preparation                       optometrist.                                              use contrast agents.
     of antigen and require more staff time                          We are proposing to assign the
                                                                  glaucoma screening codes to APC 0230,                        Effective for items or services
     and hospital resources to perform.                                                                                     furnished on or after July 1, 2001, we
        In order to create clinical and                           Level I Eye Tests. We further propose to
                                                                  instruct our fiscal intermediaries to                     created six new APC groups for the
     resource homogeneity, the Panel
                                                                  make payment for glaucoma screening                       procedures removed from APCs 0282,
     recommended that we create a new APC
                                                                  only if it is the sole ophthalmologic                     0283, and 0284, as shown below.
     for codes 95115 and 95117 and that we
     leave the other services in APC 0371.                        service for which the hospital submits a                  (Effective October 1, 2001, we will
     We propose to accept the Panel                               bill for a visit. That is, the services                   eliminate APC 0338. Refer to
     recommendation and create a new APC                          included in glaucoma screening (a                         Transmittal A–01–73 for a detailed
     0353, Level II Allergy Injections, and                       dilated eye examination with an                           description of this change.) For services
     revise the title of APC 0371 to Level I                      intraocular pressure measurement and                      furnished on or after July 1, 2001 and
     Allergy Injections.                                          direct opthalmoscopy or slit-lamp                         before January 1, 2002, the payment
                                                                  biomicroscopy) would generally be                         rates for the new imaging APCs are the
     Observation Services                                         performed during the delivery of                          same as those associated with the APCs
       See the discussion on observation                          another opthalmologic service that is                     from which the procedures were moved.
     services in section II.C.4 of this                           furnished on the same day. If the                         In this proposed rule, the weights for
     preamble for a summary of the Panel                          beneficiary receives only a screening                     the new APCs are recalibrated based on
     discussion and recommendations and                           service, however, we would pay for it                     the data we are using to set the weights
     our proposal.                                                under APC 0230.                                           for 2002.

       TABLE 1.—APC GROUPS RECONFIGURED TO SEPARATE IMAGING PROCEDURES THAT USE CONTRAST MATERIAL FROM
                               PROCEDURES THAT DO NOT USE CONTRAST MATERIAL
            APC                      SI                                                                    APC title

     0282   ..................   S         Miscellaneous Computerized Axial Tomography.
     0283   ..................   S         Computerized Axial Tomography with Contrast.
     0284   ..................   S         Magnetic Resonance Imaging and Angiography with Contrast.
     0332   ..................   S         Computerized Axial Tomography w/o Contrast.
     0333   ..................   S         CT Angio and Computerized Axial Tomography w/o Contrast followed by with Contrast.
     0335   ..................   S         Magnetic Resonance Imaging, Temporomandibular Joint.
     0336   ..................   S         Magnetic Resonance Angiography and Imaging without Contrast.
     0337   ..................   S         Magnetic Resonance Imaging and Angiography w/o Contrast followed by with Contrast.
     0338   ..................   S         Magnetic Resonance Angiography, Chest and Abdomen with or w/o Contrast.

         The HCPCS codes that are reassigned to the new imaging APCs in this proposed rule are as follows:


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                                Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                  44687

             APC                 HCPCS                SI                                                    Short descriptor

     0282 ..................           76370      S           CAT scan for therapy guide.
                                       76375      S           3d/holograph reconstr add-on.
                                       76380      S           CAT scan for follow-up study.
                                       G0131      S           Ct scan, bone density study.
                                       G0132      S           Ct scan, bone density study.
     0283 ..................           70460      S           Ct head/brain w/dye.
                                       70481      S           Ct orbit/ear/fossa w/dye.
                                       70487      S           Ct maxillofacial w/dye.
                                       70491      S           Ct soft tissue neck w/dye.
                                       71260      S           Ct thorax w/dye.
                                       72126      S           Ct neck spine w/dye.
                                       72129      S           Ct chest spine w/dye.
                                       72132      S           Ct lumbar spine w/dye.
                                       72193      S           Ct pelvis w/dye.
                                       73201      S           Ct upper extremity w/dye.
                                       73701      S           Ct lower extremity w/dye.
                                       74160      S           Ct abdomen w/dye.
                                       76355      S           CAT scan for localization.
                                       76360      S           CAT scan for needle biopsy.
     0284 ..................           70542      S           MRI orbit/face/neck w/dye.
                                       70545      S           Mr angiography head w/dye.
                                       70548      S           Mr angiography neck w/dye.
                                       70552      S           MRI brain w/dye.
                                       71551      S           MRI chest w/dye.
                                       72142      S           MRI neck spine w/dye.
                                       72147      S           MRI chest spine w/dye.
                                       72149      S           MRI lumbar spine w/dye.
                                       72196      S           MRI pelvis w/dye.
                                       73219      S           MRI upper extremity w/dye.
                                       73222      S           MRI joint upr extrem w/dye.
                                       73719      S           MRI lower extremity w/dye.
                                       73722      S           MRI joint of lwr extr w/dye.
                                       74182      S           MRI abdomen w/dye.
                                       75553      S           Heart MRI for morph w/dye.
                                       C8900      S           MRA w/cont, abd.
                                       C8903      S           MRI w/cont, breast, uni.
                                       C8906      S           MRI w/cont, breast, bi.
                                       C8909      S           MRA w/cont, chest.
                                       C8912      S           MRA w/cont, lwr ext.
     0332 ..................           70450      S           CAT scan of head or brain.
                                       70480      S           Ct orbit/ear/fossa w/o dye.
                                       70486      S           Ct maxillofacial w/o dye.
                                       70490      S           Ct soft tissue neck w/o dye.
                                       71250      S           Ct thorax w/o dye.
                                       72125      S           Ct neck spine w/o dye.
                                       72128      S           Ct chest spine w/o dye.
                                       72131      S           Ct lumbar spine w/o dye.
                                       72192      S           Ct pelvis w/o dye.
                                       73200      S           Ct upper extremity w/o dye.
                                       73700      S           Ct lower extremity w/o dye.
                                       74150      S           Ct abdomen w/o dye.
     0333 ..................           70470      S           Ct head/brain w/o&w dye.
                                       70482      S           Ct orbit/ear/fossa w/o&w dye.
                                       70488      S           Ct maxillofacial w/o&w dye.
                                       70492      S           Ct sft tsue nck w/o & w/dye.
                                       70496      S           Ct angiography, head.
                                       70498      S           Ct angiography, neck.
                                       71270      S           Ct thorax w/o&w dye.
                                       71275      S           Ct angiography, chest.
                                       72127      S           Ct neck spine w/o&w dye.
                                       72130      S           Ct chest spine w/o&w dye.
                                       72133      S           Ct lumbar spine w/o&w dye.
                                       72191      S           Ct angiograph pelv w/o&w dye.
                                       72194      S           Ct pelvis w/o&w dye.
                                       73202      S           Ct uppr extremity w/o&w dye.
                                       73206      S           Ct angio upr extrm w/o&w dye.
                                       73702      S           Ct lwr extremity w/o&w dye.
                                       73706      S           Ct angio lwr extr w/o&w dye.
                                       74170      S           Ct abdomen w/o&w dye.
                                       74175      S           Ct angio abdom w/o&w dye.
                                       75635      S           Ct angio abdominal arteries.
     0335 ..................           70336      S           Magnetic image, jaw joint.
                                       75554      S           Cardiac mri/function.
                                       75555      S           Cardiac mri/limited study.



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     44688                      Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

             APC                 HCPCS                SI                                                    Short descriptor

                                       76390      S           Mr spectroscopy.
                                       76400      S           Magnetic image, bone marrow.
     0336 ..................           70540      S           MRI orbit/face/neck w/o dye.
                                       70544      S           Mr angiography head w/o dye.
                                       70547      S           Mr angiography neck w/o dye.
                                       70551      S           MRI brain w/o dye.
                                       71550      S           MRI chest w/o dye.
                                       72141      S           MRI neck spine w/o dye.
                                       72146      S           MRI chest spine w/o dye.
                                       72148      S           MRI lumbar spine w/o dye.
                                       72195      S           MRI pelvis w/o dye.
                                       73218      S           MRI upper extremity w/o dye.
                                       73221      S           MRI joint upr extrem w/o dye.
                                       73718      S           MRI lower extremity w/o dye.
                                       73721      S           MRI joint of lwr extre w/o dye.
                                       74181      S           MRI abdomen w/o dye.
                                       75552      S           Heart MRI for morph w/o dye.
                                       C8901      S           MRA w/o cont, abd.
                                       C8904      S           MRI w/o cont, breast, uni.
                                       C8910      S           MRA w/o cont, chest.
                                       C8913      S           MRA w/o cont, lwr ext.
     0337 ..................           70543      S           MRI orbt/fac/nck w/o&w dye.
                                       70546      S           Mr angiograph head w/o&w dye.
                                       70549      S           Mr angiograph neck w/o&w dye.
                                       70553      S           MRI brain w/o&w dye.
                                       71552      S           MRI chest w/o&w dye.
                                       72156      S           MRI neck spine w/o&w dye.
                                       72157      S           MRI chest spine w/o&w dye.
                                       72158      S           MRI lumbar spine w/o&w dye.
                                       72197      S           MRI pelvis w/o&w dye.
                                       73220      S           MRI uppr extremity w/o&w dye.
                                       73223      S           MRI joint upr extr w/o&w dye.
                                       73720      S           MRI lwr extremity w/o&w dye.
                                       73723      S           MRI joint lwr extr w/o&w dye.
                                       74183      S           MRI abdomen w/o&w dye.
                                       C8902      S           MRA w/o fol w/cont, abd.
                                       C8905      S           MRI w/o fol w/cont, brst, uni.
                                       C8908      S           MRI w/o fol w/cont, breast, bi.
                                       C8911      S           MRA w/o fol w/cont, chest.
                                       C8914      S           MRA w/o fol w/cont, lwr ext.



       Refer to Addendum A or Addendum                          medical and surgical supplies, drugs,                      We have continued to review and
     B for the updated weights, payment                         and observation. The complete list of                    revise the list of revenue codes to be
     rates, national unadjusted copayment,                      the revenue centers by type of APC                       included in the database and we are
     and minimum unadjusted copayment                           group was printed in the April 7, 2000                   proposing several changes to the list of
     that we are proposing for all of the                       rule (65 FR 18484).                                      revenue codes that are packaged with
     procedures listed above.                                      In the November 13, 2000 interim                      the costs used to calculate the proposed
                                                                final rule, we made some changes to the                  APC rates. Some of these changes reflect
     C. Other Changes Affecting the APCs                        list of revenue codes to reflect the                     the addition of revenue codes and
     1. Changes in Revenue Code Packaging                       charges associated with implantable                      others are a further refinement of our
                                                                devices (65 FR 67806 and 67825). As we                   methodology. The following are the
       In the April 7, 2000 final rule, we                      stated in that rule, charges included in                 specific changes we are proposing to
     described how, in calculating the per                      revenue codes 274 (prosthetic/orthotic                   make:
     procedure and per visit costs to                           devices), 275 (pacemaker), and 278                         • Package additional revenue centers
     determine the median cost of an APC                        (other implants) were not included in                    that may be used to bill for implantable
     (and therefore its relative weight), we                    the initial APC payment rates because,                   devices (including durable medical
     used the charges billed using the                          before enactment of BBRA, we were                        equipment (DME) and brachytherapy
     revenue codes that contained items that                    proposing to pay these devices outside                   seeds) with surgical procedures. These
     were integral to performing the                            of the OPPS, and, after the enactment of                 additional centers are revenue codes
     procedure or visit (65 FR 18483). For                      the BBRA, it was not feasible to revise                  280 (oncology), 289 (other oncology),
     example, in calculating the cost of a                      our database to include these revenue                    290 (DME), and 624 (investigational
     surgical procedure, we included charges                    codes in developing the April 7, 2000                    devices).
     for revenue codes such as operating                        final rule. As discussed in the                            • Package revenue codes 280, 289,
     room, treatment rooms, recovery,                           November 13, 2000 interim final rule,                    and 624 with other diagnostic and
     observation, medical and surgical                          we were later able to incorporate these                  radiology services.
     supplies, pharmacy, anesthesia, casts                      revenue codes in our database, and                         • Package the revenue codes for
     and splints, and donor tissue, bone, and                   effective January 1, 2001, we updated                    medical social services, 560 (medical
     organ. For medical visit costs, we                         the APC payment rates to reflect                         social services) and 569 (other medical
     included charges for items such as                         inclusion of this information.                           social services). These services are not


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                             Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                         44689

     paid separately in the hospital                         263    IV THERAPY/DRUG SUPPLY/                        710      RECOVERY ROOM
     outpatient setting but often constitute                       DELIVERY                                        719      OTHER RECOVERY ROOM
     discharge-planning services if provided                 264    IV THERAPY/SUPPLIES                            762      OBSERVATION ROOM
     with an outpatient service.                             269    OTHER IV THERAPY
                                                             270    M&S SUPPLIES                                   Radiology
        • Package revenue code 637 (self-                    271    NONSTERILE SUPPLIES                            255 PHARMACY INCIDENT TO
     administered drug (insulin administered                 272    STERILE SUPPLIES                                   RADIOLOGY
     in an emergency diabetic coma)) with                    274    PROSTHETIC/ORTHOTIC DEVICES                    280 ONCOLOGY
     medical visits. Although this is a self-                275    PACEMAKER DRUG                                 289 OTHER ONCOLOGY
     administrable drug, it is covered when                  276    INTRAOCULAR LENS SOURCE DRUG                   371 ANESTHESIA INCIDENT TO
     administered as described.                              278    OTHER IMPLANTS                                     RADIOLOGY
        • Remove revenue code 723                            279    OTHER M&S SUPPLIES                             560 MEDICAL SOCIAL SERVICES
                                                             280    ONCOLOGY                                       710 RECOVERY ROOM
     (circumcision) from the list of packaged
                                                             289    OTHER ONCOLOGY                                 719 OTHER RECOVERY ROOM
     revenue codes because circumcision is a                                                                       569 OTHER MEDICAL SOCIAL SERVICES
                                                             290    DURABLE MEDICAL EQUIPMENT
     payable procedure under OPPS and                        370    ANESTHESIA                                     621 SUPPLIES INCIDENT TO RADIOLOGY
     should not be packaged.                                 379    OTHER ANESTHESIA                               624 INVESTIGATIONAL DEVICE (IDE)
        • Package revenue code 942                           390    BLOOD STORAGE AND PROCESSING                   762 OBSERVATION ROOM
     (education/training) with medical visits                399    OTHER BLOOD STORAGE AND
                                                                                                                   All Other APC Groups
     and the category of ‘‘All Other APC                           PROCESSING
     Groups.’’ Patient training and education                560    MEDICAL SOCIAL SERVICES                        250 PHARMACY
                                                             569    OTHER MEDICAL SOCIAL SERVICES                  251 GENERIC
     are generally not paid as a separate                                                                          252 NONGENERIC
     service under Medicare, but may be                      624    INVESTIGATIONAL DEVICE (IDE)
                                                             630    DRUGS REQUIRING SPECIFIC                       257 NONPRESCRIPTION DRUGS
     included as part of an otherwise payable                      IDENTIFICATION, GENERAL CLASS                   258 IV SOLUTIONS
     service such as a medical visit. We                     631    SINGLE SOURCE                                  259 OTHER PHARMACY
     believe that training and education                     632    MULTIPLE                                       260 IV THERAPY, GENERAL CLASS
     services generally occur as part of a                   633    RESTRICTIVE PRESCRIPTION                       262 IV THERAPY PHARMACY SERVICES
     medical visit or psychiatric service.                   700    CAST ROOM                                      263 IV THERAPY/DRUG/SUPPLY/
        • Remove the revenue codes in the                    709    OTHER CAST ROOM                                    DELIVERY
     range of 890 through 899 (donor bank),                  710    RECOVERY ROOM                                  264 IV THERAPY SUPPLIES
                                                             719    OTHER RECOVERY ROOM                            269 OTHER IV THERAPY
     as these are no longer valid revenue                                                                          270 M&S SUPPLIES
     codes.                                                  720    LABOR ROOM
                                                             721    LABOR                                          271 NONSTERILE SUPPLIES
     2. Special Revenue Code Packaging for                   762    OBSERVATION ROOM                               272 STERILE SUPPLIES
     Specific Types of Procedures                            810    ORGAN AQUISITION                               279 OTHER M&S SUPPLIES
                                                             819    OTHER ORGAN ACQUISITION                        560 MEDICAL SOCIAL SERVICES
       We are proposing that the same                                                                              569 OTHER MEDICAL SOCIAL SERVICES
     packaging used for surgical procedures                  Medical Visit                                         630 DRUG REQUIRING SPECIFIC
     be used for corneal tissue implant                      250 PHARMACY                                              IDENTIFICATION, GENERAL CLASS
     procedures in APC 0244, Corneal                         251 GENERIC                                           631 SINGLE SOURCE DRUG
     Transplant, except that organ                           252 NONGENERIC                                        632 MULTIPLE SOURCE DRUG
                                                             257 NONPRESCRIPTION DRUGS                             633 RESTRICTIVE PRESCRIPTION
     acquisition revenue codes and the                                                                             762 OBSERVATION ROOM
                                                             258 IV SOLUTIONS
     revenue codes used to bill implantable                  259 OTHER PHARMACY                                    942 EDUCATION/TRAINING
     devices are not packaged with corneal                   270 M&S SUPPLIES
     implants.                                               271 NONSTERILE SUPPLIES                               3. Limit on Variation of Costs of
       There are certain other diagnostic                    272 STERILE SUPPLIES                                  Services Classified Within a Group
     procedures with CPT codes that are                      279 OTHER M&S SUPPLIES                                  Section 1833(t)(2) of the Act provides
     similar to surgical procedures. The cost                560 MEDICAL SOCIAL SERVICES                           that the items and services within an
     of these procedures (HCPCS codes                        569 OTHER MEDICAL SOCIAL SERVICES                     APC group cannot be considered
     92980–92996, 93501–93505, and 93510–                    630 DRUGS REQUIRING SPECIFIC
                                                                IDENTIFICATION, GENERAL CLASS
                                                                                                                   comparable with respect to the use of
     93536) reflects both the revenue code                                                                         resources if the highest cost item or
                                                             631 SINGLE SOURCE DRUG
     packaging for ambulatory surgical center                632 MULTIPLE SOURCE DRUG                              service within a group is more than 2
     (ASC) and other surgery, as well as the                 633 RESTRICTIVE PRESCRIPTION                          times greater than the lowest cost item
     revenue code packaging for other                        637 SELF-ADMINISTERED DRUG                            or service within the same group, but
     diagnostic services.                                       (INSULIN ADMIN. IN EMERGENCY                       the Secretary may make exceptions to
       A complete listing of the revenue                        DIABETIC COMA)                                     this limit on the variation of costs
     codes that we are proposing in this rule                700 CAST ROOM                                         within each group in unusual cases
     and that we used for purposes of                        709 OTHER CAST ROOM                                   such as low volume items and services.
     calculating median costs of services are                762 OBSERVATION ROOM
                                                             942 EDUCATION/TRAINING
                                                                                                                   No exception may be made, however, in
     shown below in Table 2.                                                                                       the case of a drug or biological that has
     Table 2.—Packaged Services by Revenue                   Other Diagnostic                                      been designated as an orphan drug
     Code                                                    254 PHARMACY INCIDENT TO OTHER                        under section 526 of the Federal Food,
                                                                 DIAGNOSTIC                                        Drug, and Cosmetic Act.
     Surgery                                                 280 ONCOLOGY                                            Based on the proposed APC changes
     250 PHARMACY                                            289 OTHER ONCOLOGY                                    discussed above in this section of this
     251 GENERIC                                             372 ANESTHESIA INCIDENT TO OTHER                      preamble and the use of more current
     252 NONGENERIC                                              DIAGNOSTIC
     257 NONPRESCRIPTION DRUGS                               560 MEDICAL SOCIAL SERVICES
                                                                                                                   data to calculate the median cost of
     258 IV SOLUTIONS                                        569 OTHER MEDICAL SOCIAL SERVICES                     procedures classified to APCs, we
     259 OTHER PHARMACY                                      622 SUPPLIES INCIDENT TO OTHER                        reviewed all the APCs to determine
     260 IV THERAPY, GENERAL CLASS                               DIAGNOSTIC                                        which of them would not meet the 2
     262 IV THERAPY/PHARMACY SERVICES                        624 INVESTIGATIONAL DEVICE (IDE)                      times limit. We use the following


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     44690                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     criteria when deciding whether to make                  0373     Neuropsychological Testing                       Medicare revised its manuals in
     exceptions to the 2 times rule for                      0602     High Level Clinic Visits                         November 1996, limiting covered
     affected APCs:                                          0694     Level III Excision/Biopsy                        observation services to no more than 48
        • Resource homogeneity.                              0697     Level II Transesophageal Procedures
                                                                                                                       hours (section 456 of the Hospital
        • Clinical homogeneity.                                                                                        Manual and section 3663 of the
        • Hospital concentration.                            4. Observation Services
                                                                                                                       Intermediary Manual).
        • Frequency of service (volume).                        Observation services have a long                          The costs for all observation services
        • Opportunity for upcoding and code                  intertwined clinical and payment                          provided in the outpatient setting, even
     fragmentation.                                          history. For many years, beneficiaries                    those provided in excess of 48 hours,
        For a detailed discussion of these                   have been placed in ‘‘observation                         were included in the initial APC
     criteria, refer to the April 7, 2000 final              status’’ in order to receive treatment or                 payment rates. Currently, observation
     rule (65 FR 18457).                                     be monitored before making a decision                     services are not paid separately, that is,
        The following list contains APCs that                concerning their next placement (that is,                 they are not assigned to a separate APC.
     we propose to except from the 2 times                   admit to the hospital or discharge to                     Instead, costs for observation services
     rule based on the criteria cited above. In              home). This occurs most frequently after                  are packaged into payments for services
     cases in which compliance with the 2                    surgery or a visit to the emergency                       with which the observation was billed
     times rule appeared to conflict with a                  department. Typically, beneficiaries                      in 1996. Observation was most
     recommendation of the APC Advisory                      placed in observation have failed to                      frequently billed with emergency
     Panel, we generally accepted the Panel                  respond to initial emergency                              department visits, clinic visits, and
     recommendation. This was because                        department treatment for their condition                  surgical procedures. The payments for
     Panel recommendations were based on                     (for example, exacerbation of asthma),                    all APCs include the costs of
     explicit consideration of resource use,                 have symptoms placing them at                             observation to the extent that it was
     clinical homogeneity, hospital                          significant risk for mortality (for                       billed in 1996. In the 1996 data, we
     specialization, and the quality of the                  example, chest pains with the                             identified and packaged a total of $392
     data used to determine payment rates.                   possibility of myocardial infarction), or                 million from revenue codes 760, 761,
     0001 Photochemotherapy                                  have received anesthesia for a surgical                   762, and 769, which represented
     0041 Arthroscopy                                        procedure and need to be monitored                        observation services.
     0044 Closed Treatment Fracture/                         postoperatively. Clinically, most                            In the April 7, 2000 final rule (65 FR
         Dislocation Except Finger/Toe/Trunk                 beneficiaries do not require more than                    18448), we responded to numerous
     0047 Arthroplasty without Prosthesis                    24 hours of observation before a                          comments concerning observation
     0058 Level I Strapping and Cast                         decision concerning admission or                          services. Even though commenters
         Application                                         discharge can be made. Therefore, it is                   acknowledged that being paid
     0077 Level I Pulmonary Treatment                        rare that it is clinically justifiable to                 separately for observation services
     0093 Vascular Repair/Fistula Construction               keep a patient in observation for more                    following a surgical procedure was
     0096 Noninvasive Vascular Studies
     0097 Cardiac Monitoring for 30 days
                                                             than 24 to 48 hours. The location where                   unnecessary, many commenters
     0115 Cannula/Access Device Procedures                   observation services are provided is                      requested that we pay separately for
     0121 Level I Tube Changes and                           facility-specific, and sometimes                          observation services following
         Repositioning                                       individual-specific. It is not uncommon                   emergency department visits. Among
     0140 Esophageal Dilation without                        for beneficiaries to be observed in the                   those commenters requesting separate
         Endoscopy                                           emergency department, in a designated                     payment for observation, some
     0147 Level II Sigmoidoscopy                             unit near the emergency department, or                    requested separate payment for specific
     0164 Level I Urinary and Anal Procedures                in an intensive care or other unit in the                 medical conditions, and others
     0165 Level II Urinary and Anal Procedures               facility.                                                 requested payment for all medical
     0182 Insertion of Penile Prosthesis                        After implementation of the Medicare                   conditions. Some commenters provided
     0198 Pregnancy and Neonatal Care                        hospital inpatient PPS in 1983, peer
         Procedures                                                                                                    articles and books containing clinical
     0203 Level V Nerve Injections
                                                             review organizations (PROs) began to                      research on the value and cost
     0204 Level VI Nerve Injections                          review inpatient admissions to                            effectiveness of observation for certain
     0207 Level IV Nerve Injections                          determine whether the admission and                       patients. Although we did not decide to
     0213 Extended EEG Studies and Sleep                     the length of stay were appropriate.                      create a separate APC for observation
         Studies                                             Because ‘‘observation care’’ is                           services, we did include this topic in
     0215 Level I Nerve and Muscle Tests                     considered to be an outpatient service,                   the agenda for our APC Panel, which
     0231 Level II Eye Tests                                 facilities began using ‘‘observation’’ as                 met from February 27 to March 1, 2001.
     0238 Level I Repair and Plastic Eye                     an administrative mechanism to care for                   While individual Panel members agreed
         Procedures                                          beneficiaries who, if admitted as                         that use of observation services had
     0251 Level I ENT Procedures
                                                             inpatients, might have their admission                    been abused in the past by hospitals
     0260 Level I Plain Film Except Teeth
     0265 Level I Diagnostic Ultrasound Except               questioned by the PRO. Moreover,                          seeking to maximize payment, the Panel
         Vascular                                            before the implementation of the OPPS,                    also agreed that observation services
     0279 Level I Angiography and Venography                 the payment for observation care was on                   following clinic and emergency room
         except Extremity                                    a reasonable cost basis, which                            visits should be paid separately. In
     0285 Positron Emission Tomography (PET)                 frequently gave hospitals a financial                     addition, the Panel believed that
     0305 Level II Therapeutic Radiation                     incentive to keep beneficiaries in                        observation following surgery should be
         Preparation                                         ‘‘observation status’’ even though they                   packaged into the payment for the
     0322 Brief Individual Psychotherapy                     were clinically being treated as                          surgical procedure. The Panel did not
     0345 Level I Transfusion Lab Procedures                 inpatients. Occasionally, beneficiaries                   dispute that the vast majority of patients
     0349 Miscellaneous Lab Procedures
     0354 Administration of Influenza/
                                                             were kept in observation for days and                     are admitted to the hospital or
         Pneumonia Vaccine                                   weeks resulting in both excessive                         discharged home from observation in
     0356 Level II Immunizations                             payments from the Medicare program                        less than 24 hours, and Panel members
     0363 Otorhinolaryngologic Function Tests                and excessive copayments from the                         judged that a rule limiting separate
     0364 Level I Audiometry                                 beneficiary. In response to this practice,                payment to 24 hours of observation


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                             Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                             44691

     would be reasonable. The Panel also                     inpatient admissions. For example, the                      • The hospital furnishes certain other
     noted that because Medicare currently                   use of observation for selected patients                 diagnostic services along with
     allows hospitals to report observation                  with asthma and congestive heart failure                 observation services to ensure that
     services up to 48 hours, hospital staff                 can reduce the rate of return emergency                  separate payment is made only for those
     and coders would have to be educated                    visits and subsequent admission. The                     beneficiaries truly requiring observation
     were we to change the current standard.                 literature clearly shows that for these                  care. We believe that these tests are
        Since the Panel meeting, we have                     patients, observation care requires                      typically performed on beneficiaries
     reviewed all comments we have                           prolonged physiologic monitoring and                     requiring observation care for the three
     received on this issue. In determining                  intensive treatment to result in the                     specified conditions and they are
     whether we should pay separately for                    beneficial outcomes.                                     medically necessary to determine
     observation services, our primary                          After careful consideration, we are                   whether a beneficiary will benefit from
     concern is to ensure that Medicare                      proposing—                                               being admitted to observation care and
     beneficiaries have access to medically                     • To continue to package observation                  the appropriate disposition of a patient
     necessary observation care. We also                     services into surgical procedures; and                   in observation care. The diagnostic tests
     want to ensure that payment be made                        • To create a single APC, APC 0339,                   are as follows:
     only for beneficiaries actually receiving               Observation, to make separate payment                       • For chest pain, at least two sets of
     observation care, and that payment be                   for observation services for three                       cardiac enzymes and two sequential
     restricted to clinically appropriate                    medical conditions, chest pain, asthma,                  electrocardiograms.
     observation care. We paid particular                    and congestive heart failure, when                          • For asthma, a peak expiratory flow
     attention to the Qualcare criteria                      certain criteria (as described below) are                rate (PEFR) (CPT code 94010) and
     (severity of illness and intensity of                   met.                                                     nebulizer treatments.
     service criteria used by some insurance                    We are further proposing to instruct                     • For congestive heart failure, a chest
     plans to determine whether it is                        hospitals that payment under APC 0339                    x-ray, an electrocardiogram, and pulse
     appropriate for a patient to receive                    for observation services would be                        oximetry.
     observation care) for observation                       subject to the following billing                            We are proposing to make payment
     services and to those comments                          requirements and conditions:                             for APC 0339 only if the tests described
     providing medical evidence on the                          • An emergency department visit                       above are billed on the same claim as
     value and cost effectiveness of                         (APC 0610, 0611, or 0612) or a clinic                    the observation service.
     observation care. We also carefully                     visit (APC 0600, 0601, or 0602) is billed                   (We are not proposing to require
     considered logistical and administrative                in conjunction with each bill for                        telemetry and other ongoing monitoring
     issues related to delivering observation                observation services.                                    services as criteria to make separate
     care such as whether payment for                           • Observation care is billed hourly for               payment for observation services.
     emergency services should be bundled                    a minimum of 8 hours up to a maximum                     Although these services are often
     into observation services, the potential                of 48 hours. We would not pay                            medically necessary to ensure prompt
     for overuse of the services, and the need               separately for any hours a beneficiary                   diagnosis of cardiac arrhythmias and
     for treatment guidelines. We also                       spends in observation over 24 hours, but                 other disorders, we do not believe they
     considered how to most appropriately                    all costs beyond 24 hours would be                       are necessary to support separate
     define the starting time, discharge time,               packaged into the APC payment for                        payment for observation services.)
     and minimum length of stay for                          observation services.                                       We propose to require that, in order
     observation care.                                          • Observation time begins at the clock                to receive payment for APC 0339, the
        Finally, in considering whether to                   time appearing on the nurse’s                            hospital must include one of the ICD–
     make a separate payment for                             observation admission note. (We note                     9–CM diagnosis codes listed below in
     observation care, we had to balance the                 that this coincides with the initiation of               the diagnosis field of the bill. We
     issues of access, medical necessity,                    observation care or with the time of the                 propose the following diagnosis codes
     potential for abuse, and need to ensure                 patient’s arrival in the observation unit.)              to indicate a symptom or condition that
     appropriate payment. As a threshold                        • Observation time ends at the clock                  would require observation:
     requirement for candidate medical                       time documented in the physician’s
                                                             discharge orders, or, in the absence of                  For Chest Pain
     conditions, we sought published criteria
     regarding the following:                                such a documented time, the clock time                   411.1 Intermediate coronary syndrome
        • Risk stratification of patients to                 when the nurse or other appropriate                      411.81 Coronary occlusion without
     determine which patient sub-                            person signs off on the physician’s                          myocardial infarction
                                                             discharge order. (This time coincides                    411.0 Postmyocardial infarction
     populations benefit from observation
                                                             with the end of the patient’s period of                      syndrome
     care.                                                                                                            411.89 Other acute ischemic heart
        • Which patients should be admitted                  monitoring or treatment in observation.)
     to observation.                                            • The beneficiary is under the care of                    disease
                                                             a physician during the period of                         413.0 Angina decubitus
        • Which patients should be                                                                                    413.1 Prinzmetal angina
     discharged home from observation.                       observation, as documented in the
                                                                                                                      413.9 Other and unspecified angina
        • When patients should be admitted                   medical record by admission, discharge,
                                                                                                                          pectoris
     to the hospital from observation.                       and other appropriate progress notes,
                                                                                                                      786.05 Shortness of breath
        • Patient management.                                timed, written, and signed by the                        786.50 Chest pain, unspecified
        We found that these criteria were met                physician.                                               786.51 Precordial pain
     for chest pain, asthma, and congestive                     • The medical record includes                         786.52 Painful respiration
     heart failure.                                          documentation that the physician used                    786.59 Other chest pain
        The fulfillment of these criteria                    risk stratification criteria to determine
     ensured that, for these conditions,                     that the beneficiary would benefit from                  For Asthma
     observation care avoided significant                    observation care. (These criteria may be                 493.01 Extrinsic asthma with status
     morbidity and mortality from                            either published generally accepted                          asthmaticus
     inappropriate discharge to home while                   medical standards or established                         493.02 Extrinsic asthma with acute
     at the same time avoiding unnecessary                   hospital-specific standards.)                                exacerbation


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     493.11 Intrinsic asthma with status                     provide only in the inpatient setting and                   • Most outpatient departments are
         asthmaticus                                         that, therefore, should be payable only                  equipped to provide the services to the
     493.12 Intrinsic asthma with acute                      when provided in that setting.                           Medicare population.
         exacerbation                                           Section 1833(t)(1)(B)(i) of the Social                   • The simplest procedure described
     493.21 Chronic obstructive asthma                       Security Act gave the Secretary broad                    by the code may be performed in most
         with status asthmaticus                             authority to determine the services to be                outpatient departments.
     493.22 Chronic obstructive asthma                       covered and paid for under the OPPS.                        • The procedure is related to codes
         with acute exacerbation                             In the September 8, 1998 OPPS                            we have already moved off the inpatient
     493.91 Asthma, unspecified with                         proposed rule, we defined a set of                       list (for example, the radiologic part of
         status asthmaticus                                  services that are typically provided only                an interventional cardiology procedure).
     493.92 Asthma, unspecified with acute                   in an inpatient setting and, hence,                         We would continue to update the list
         exacerbation                                        would not be paid by Medicare under                      in response to comments as often as
     For Congestive Heart Failure                            the OPPS. This set of services is referred               quarterly through program memoranda
                                                             to as the ‘‘inpatient list.’’                            to reflect current advances in medical
     428.0 Congestive heart failure                             We received numerous comments on
     428.1 Left heart failure                                                                                         practice. We believe that the current list
                                                             the inpatient list. In the April 7, 2000                 addresses the concerns of previous
     428.9 Heart failure, unspecified                        final rule, we revised the proposed list
        We used the following process to                                                                              commenters and reflects a general
                                                             by removing a number of services and
     identify the appropriate median cost for                                                                         consensus about those services that
                                                             we discussed in greater detail the
     APC 0339. First, we identified in the                                                                            hospitals and physicians agree are not
                                                             criteria we will use to define which
     1999–2000 claims data all hospital                                                                               routinely performed in the outpatient
                                                             services will be included on the
     outpatient claims for observation using                                                                          setting. Therefore, at this time, we are
                                                             inpatient list (65 FR 18455). These are
     revenue codes 760, 761, 762, and 769.                                                                            proposing no further changes to the
                                                             services that require inpatient care
     We then selected the subset of these                                                                             inpatient list, which is set forth in
                                                             because of the invasive nature of the
     claims that were billed for patients with                                                                        Addendum E to this proposed rule.
                                                             procedure, the need for at least 24 hours
     chest pain, asthma, and congestive heart                of postoperative recovery time or                        6. Additional New Technology APC
     failure. Because no standard method for                 monitoring before the patient can be                     Groups
     coding these claims was in place in                     safely discharged, or the underlying
     1996, we identified all diagnosis codes                                                                             In the April 7, 2000 final rule, we
                                                             physical condition of the patient.
     that could reasonably have been used to                    After publication of the April 7 final                created 15 new technology APC groups
     classify beneficiaries as having chest                  rule, we received information from a                     to pay for new technologies that do not
     pain, asthma, and congestive heart                      number of groups demonstrating that                      meet the statutory requirements for
     failure. We then verified that these                    certain services are routinely provided                  transitional pass-through payments and
     beneficiaries received appropriate                      safely in the outpatient setting. As a                   for which we have little or no data upon
     observation care for chest pain, asthma,                result, in the November 13, 2000 interim                 which to base assignment to an
     or congestive heart failure by identifying              final rule, we removed 44 procedures                     appropriate APC. APC groups 0970
     the claims in which one or more of the                  from the list (65 FR 67826). In that rule,               through 0984 are the current new
     tests identified above were performed.                  we also stated that we would update the                  technology APCs. We currently assign
     The median costs of these claims were                   list at least quarterly to reflect advances              services to a new technology APC for 2
     used to establish the median costs of                   in medical practice that permit                          to 3 years based solely on costs, without
     APC 0339.                                               procedures to be routinely performed in                  regard to clinical factors. This method of
        We appreciate that there are other                   the outpatient setting. And, on June 1,                  paying for new technologies allows us
     medical conditions for which selected                   2001, we issued Program Memorandum                       to gather data on their use for
     beneficiaries may benefit from                          A–01–73 in which we moved an                             subsequent assignment to a clinically-
     observation care and we are interested                  additional 23 procedures from the                        based APC. Payment rates for the new
     in comments on whether we should                        inpatient list.                                          technology APCs are based on the
     make separate payment for observation                      At its February 2001 meeting, the APC                 midpoint of ranges of possible costs.
     care for other conditions. We will                      Advisory Panel discussed the existence                      After evaluating the costs of services
     consider medical research submitted to                  of the inpatient list. The Advisory Panel                in the new technology APCs, we are
     support the benefits of observation                     generally favored its elimination. In this               proposing that APC 0982, which covers
     services for these conditions. This                     instance, we disagree with the position                  a range of costs from $2500 to $3500, be
     information will assist us in                           taken by the Panel. Rather, we propose                   split into two APCs, as follows: APC
     determining whether these other                         to continue the current policy of                        0982, which would encompass services
     conditions meet the criteria we used to                 reviewing the HCPCS codes on the                         whose costs fall between $2500 and
     select the three conditions we have                     inpatient list and eliminating                           $3000, and APC 0983, which would
     proposed to include in APC 0339.                        procedures from the list if they can be                  encompass those services whose costs
                                                             appropriately performed on the                           fall between $3000 and $3500. APC
     5. List of Procedures That Will Be Paid                 Medicare population in the outpatient                    0984 would then encompass services
     Only as Inpatient Procedures                            setting. Our medical and policy staff,                   whose costs fall between $3500 and
        Before implementation of the OPPS,                   supplemented as appropriate by the                       $5000 and we would create a new APC,
     Medicare paid reasonable costs for                      APC Advisory Panel, would review                         0985, for services whose costs fall
     services provided in the outpatient                     comments submitted by the public and                     between $5000 and $6000. We believe
     department. The claims submitted were                   consider advances in medical practice                    that subdividing the current range of
     subject to medical review by the fiscal                 in making decisions to remove codes                      costs within APC 0982 would allow us
     intermediaries to determine the                         from the list. We would continue to use                  to pay more accurately for the services
     appropriateness of providing certain                    the following criteria, which we                         in that cost range.
     services in the outpatient setting. We                  discussed in the April 7, 2000 final rule,                  In section VI.G of this preamble, we
     did not specify in regulations those                    when deciding to remove codes from                       describe several modifications and
     services that were appropriate to                       the list:                                                refinements to the criteria and process


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                                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                                                          44693

     for assigning services to new technology                                 Table 3 below, lists all of the APC
     APCs that we are proposing in this rule.                               groups that we are proposing to change
                                                                            for 2002.

                                                       TABLE 3.—APC GROUPS PROPOSED TO BE CHANGED IN 2002
         APC                                                                 Title                                                               SI            APC panel         2 times   Other

     0002   .........   Fine needle Biopsy/Aspiration ...........................................................................            T                               X
     0004   .........   Level I Needle Biopsy/Aspiration Except Bone Marrow ...................................                              T                               X
     0006   .........   Level I Incision & Drainage ...............................................................................          T                               X
     0007   .........   Level II Incision & Drainage ..............................................................................          T                               X
     0008   .........   Level III Incision & Drainage .............................................................................          T                               X
     0012   .........   Level I Debridement & Destruction ...................................................................                T                               X
     0013   .........   Level II Debridement & Destruction ..................................................................                T                               X
     0014   .........   Level III Debridement and Destruction .............................................................                  T                               X
     0015   .........   Level IV Debridement & Destruction .................................................................                 T                               X
     0016   .........   Level V Debridement & Destruction ..................................................................                 T                 X             X
     0017   .........   Level VI Debridement & Destruction .................................................................                 T                 X             X
     0018   .........   Biopsy of Skin/Puncture of Lesion ....................................................................               T                               X
     0019   .........   Level I Excision/Biopsy .....................................................................................        T                               X
     0020   .........   Level II Excision/Biopsy ....................................................................................        T                               X
     0021   .........   Level IV Excision/Biopsy ...................................................................................         T                               X
     0022   .........   Level V Excision/Biopsy ....................................................................................         T                               X
     0026   .........   Level III Skin Repair ..........................................................................................     T                               X
     0027   .........   Level IV Skin Repair .........................................................................................       T                               X
     0029   .........   Level II Incision/Excision Breast .......................................................................            T                               X
     0030   .........   Level I Breast Reconstruction ...........................................................................            T                               X
     0032   .........   Insertion of Central Venous/Arterial Catheter ...................................................                    T                               X
     0035   .........   Placement of Arterial/Central Venous Catheter ................................................                       T                               X
     0043   .........   Closed Treatment Fracture Finger/Toe/Trunk ..................................................                        T                               X
     0044   .........   Closed Treatment Fracture/Dislocation except Finger/Toe/Trunk ....................                                   T                               X
     0045   .........   Bone/Joint Manipulation Under Anesthesia ......................................................                      T                               X
     0049   .........   Level I Musculoskeletal Procedures Except Hand and Foot ............................                                 T                               X
     0050   .........   Level II Musculoskeletal Procedures Except Hand and Foot ...........................                                 T                               X
     0058   .........   Level I Strapping and Cast Application .............................................................                 S                               X
     0059   .........   Level II Strapping and Cast Application ............................................................                 S                               X
     0068   .........   CPAP Initiation ..................................................................................................   S                 X
     0069   .........   Thoracoscopy ....................................................................................................    T                               X
     0074   .........   Level IV Endoscopy Upper Airway ...................................................................                  T                               X
     0075   .........   Level V Endoscopy Upper Airway ....................................................................                  T                               X
     0076   .........   Endoscopy Lower Airway ..................................................................................            T                               X
     0079   .........   Ventilation Initiation and Management ..............................................................                 S                 X
     0082   .........   Coronary Atherectomy ......................................................................................          T                               X
     0083   .........   Coronary Angioplasty ........................................................................................        T                               X
     0087   .........   Cardiac Electrophysiologic Recording/Mapping ................................................                        S                 X
     0088   .........   Thrombectomy ...................................................................................................     T                               X
     0093   .........   Vascular Repair/Fistula Construction ................................................................                T                               X
     0094   .........   Resuscitation and Cardioversion ......................................................................               S                 X
     0097   .........   Cardiac Monitoring for 30 days .........................................................................             T                               X
     0102   .........   Electronic Analysis of Pacemakers/other Devices ............................................                         S                 X
     0105   .........   Revision/Removal of Pacemakers, AICD, or Vascular Device .........................                                   T                 X
     0111   .........   Blood Product Exchange ...................................................................................           S                 X
     0112   .........   Apheresis, Photopheresis, and Plasmapheresis ..............................................                          S                 X
     0115   .........   Cannula/Access Device Procedures .................................................................                   T                               X
     0125   .........   Refilling of Infusion Pump .................................................................................         T                 X
     0130   .........   Level I Laparoscopy ..........................................................................................       T                               X
     0131   .........   Level II Laparoscopy .........................................................................................       T                               X
     0148   .........   Level I Anal/Rectal Procedure ..........................................................................             T                               X
     0149   .........   Level III Anal/Rectal Procedure ........................................................................             T                               X
     0150   .........   Level IV Anal/Rectal Procedure ........................................................................              T                               X
     0155   .........   Level II Anal/Rectal Procedure .........................................................................             T                               X
     0156   .........   Level II Urinary and Anal Procedures ...............................................................                 T                               X
     0160   .........   Level I Cystourethroscopy and other Genitourinary Procedures ......................                                  T                               X
     0161   .........   Level II Cystourethroscopy and other Genitourinary Procedures .....................                                  T                               X
     0162   .........   Level III Cystourethroscopy and other Genitourinary Procedures ....................                                  T                               X
     0163   .........   Level IV Cystourethroscopy and other Genitourinary Procedures ...................                                    T                               X
     0164   .........   Level I Urinary and Anal Procedures ................................................................                 T                               X
     0165   .........   Level III Urinary and Anal Procedures ..............................................................                 T                               X
     0188   .........   Level II Female Reproductive Proc ...................................................................                T                 X             X
     0189   .........   Level III Female Reproductive Proc ..................................................................                T                 X             X
     0191   .........   Level I Female Reproductive Proc ....................................................................                T                 X             X
     0192   .........   Level IV Female Reproductive Proc .................................................................                  T                 X             X
     0193   .........   Level V Female Reproductive Proc ..................................................................                  T                 X             X
     0194   .........   Level VI Female Reproductive Proc .................................................................                  T                 X             X
     0195   .........   Level VII Female Reproductive Proc ................................................................                  T                 X             X



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     44694                          Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

                                           TABLE 3.—APC GROUPS PROPOSED TO BE CHANGED IN 2002—Continued
         APC                                                                  Title                                                               SI            APC panel         2 times       Other

     0196   .........   Dilation and Curettage ......................................................................................         T                               X
     0203   .........   Level V Nerve Injections ...................................................................................          T                 X
     0204   .........   Level VI Nerve Injections ..................................................................................          T                 X
     0206   .........   Level III Nerve Injections ...................................................................................        T                 X
     0207   .........   Level IV Nerve Injections ..................................................................................          T                 X
     0208   .........   Laminotomies and Laminectomies ....................................................................                   T                 X
     0209   .........   Level II Extended EEG Studies and Sleep Studies ..........................................                            S                               X
     0212   .........   Level II Nervous System Injections ...................................................................                T                 X
     0213   .........   Level I Extended EEG Studies and Sleep Studies ...........................................                            S                               X
     0215   .........   Level I Nerve and Muscle Tests .......................................................................                S                 X             X
     0216   .........   Level III Nerve and Muscle Tests .....................................................................                S                 X             X
     0217   .........   Level III Nerve and Muscle Tests .....................................................................                S                               X
     0218   .........   Level II Nerve and Muscle Tests ......................................................................                S                               X
     0230   .........   Level I Eye Tests & Treatments .......................................................................                S                               X             X
     0231   .........   Level III Eye Tests & Treatments .....................................................................                S                               X
     0232   .........   Level I Anterior Segment Eye ...........................................................................              S                               X
     0233   .........   Level II Anterior Segment Eye ..........................................................................              T                               X
     0234   .........   Level III Anterior Segment Eye Procedures .....................................................                       T                               X
     0235   .........   Level I Posterior Segment Eye Procedures ......................................................                       T                               X
     0236   .........   Level II Posterior Segment Eye Procedures .....................................................                       T                               X
     0237   .........   Level III Posterior Segment Eye Procedures ....................................................                       T                               X
     0238   .........   Level I Repair and Plastic Eye Procedures ......................................................                      T                               X
     0239   .........   Level II Repair and Plastic Eye Procedures .....................................................                      T                               X
     0245   .........   Level I Cataract Procedures without IOL Insert ................................................                       T                               X
     0249   .........   Level II Cataract Procedures without IOL Insert ...............................................                       T                               X
     0251   .........   Level I ENT Procedures ....................................................................................           T                               X
     0252   .........   Level II ENT Procedures ...................................................................................           T                               X
     0253   .........   Level III ENT Procedures ..................................................................................           T                               X
     0254   .........   Level IV ENT Procedures .................................................................................             T                               X
     0256   .........   Level V ENT Procedures ..................................................................................             T                               X
     0259   .........   Level VI ENT Procedures .................................................................................             T                               X
     0260   .........   Level I Plain Film Except Teeth ........................................................................              X                               X
     0261   .........   Level II Plain Film Except Teeth Including Bone Density Measurement .........                                         X                               X
     0263   .........   Level I Miscellaneous Radiology Procedures ...................................................                        X                               X
     0264   .........   Level II Miscellaneous Radiology Procedures ..................................................                        X                               X
     0265   .........   Level I Diagnostic Ultrasound Except Vascular ................................................                        X                               X
     0266   .........   Level II Diagnostic Ultrasound Except Vascular ...............................................                        S                               X
     0269   .........   Level I Echocardiogram Except Transesophageal ...........................................                             S                               X
     0271   .........   Mammography ...................................................................................................       S                                             X
     0272   .........   Level I Fluoroscopy ...........................................................................................       X                               X
     0279   .........   Level I Angiography and Venography except Extremity ...................................                               S                 X
     0280   .........   Level II Angiography and Venography ..............................................................                    S                 X
     0282   .........   Miscellaneous Computerized Axial Tomography ..............................................                            S                               X             X
     0283   .........   Computerized Axial Tomography with Contrast ...............................................                           S                                             X
     0284   .........   Magnetic Resonance Imaging and Angiography with Contrast ........................                                     S                                             X
     0287   .........   Complex Venography ........................................................................................           S                 X
     0288   .........   CT, Bone Density ..............................................................................................       S                               X
     0289   .........   Needle Localization for Breast Biopsy ..............................................................                  X                 X
     0291   .........   Level I Diagnostic Nuclear Medicine Excluding Myocardial Scans ..................                                     S                               X
     0292   .........   Level II Diagnostic Nuclear Medicine Excluding Myocardial Scans .................                                     S                               X
     0300   .........   Level I Radiation Therapy .................................................................................           S                               X
     0301   .........   Level II Radiation Therapy ................................................................................           S                               X
     0302   .........   Level III Radiation Therapy ...............................................................................           S                               X
     0304   .........   Level I Therapeutic Radiation Treatment Preparation ......................................                            X                 X
     0305   .........   Level II Therapeutic Radiation Treatment Preparation .....................................                            X                 X
     0312   .........   Radioelement Applications ................................................................................            S                 X
     0332   .........   Computerized Axial Tomography w/o Contrast ................................................                           S                               X             X
     0333   .........   CT Angio and Computerized Axial Tomography w/o Contrast followed by                                                   S                               X             X
                          with Contrast.
     0335 .........     Magnetic Resonance Imaging, Temporomandular Joint ..................................                                  S                                             X
     0336 .........     Magnetic Resonance Angiography and Imaging without Contrast ...................                                       S                               X             X
     0337 .........     Magnetic Resonance Imaging and Angiography w/o Contrast followed by                                                   S                                             X
                          with Contrast.
     0338   .........   Magnetic Resonance Angiography, Chest and Abdomen with or w/o Contrast                                                S                                             X
     0339   .........   Observation .......................................................................................................   X                 X
     0340   .........   Minor Ancillary Procedures ...............................................................................            X                               X
     0345   .........   Level I Transfusion Laboratory Procedures ......................................................                      X                               X
     0346   .........   Level II Transfusion Laboratory Procedures .....................................................                      X                               X
     0347   .........   Level III Transfusion Laboratory Procedures ....................................................                      X                               X
     0352   .........   Level II Injections ..............................................................................................    X                               X
     0353   .........   Level II Allergy Injections ..................................................................................        X                 X
     0355   .........   Level I Immunizations .......................................................................................         K                               X



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                                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                                                              44695

                                           TABLE 3.—APC GROUPS PROPOSED TO BE CHANGED IN 2002—Continued
         APC                                                                 Title                                                               SI            APC panel         2 times       Other

     0356   .........   Level II Immunizations ......................................................................................        K                               X
     0359   .........   Level I Injections ...............................................................................................   K                               X
     0360   .........   Level I Alimentary Tests ....................................................................................        X                               X
     0361   .........   Level II Alimentary Tests ...................................................................................        X                               X
     0364   .........   Level I Audiometry ............................................................................................      X                               X
     0365   .........   Level II Audiometry ...........................................................................................      X                               X
     0367   .........   Level I Pulmonary Test .....................................................................................         X                               X
     0368   .........   Level II Pulmonary Tests ..................................................................................          X                               X
     0369   .........   Level III Pulmonary Tests .................................................................................          X                               X
     0371   .........   Level I Allergy Injections ...................................................................................       X                 X
     0689   .........   Electronic Analysis of Cardioverter-Defibrillators ..............................................                    S                 X
     0690   .........   Electronic Analysis of Pacemakers and other Cardiac Devices .......................                                  S                 X
     0691   .........   Electronic Analysis of Programmable Shunts/Pumps .......................................                             S                 X
     0692   .........   Electronic Analysis of Neurostimulator Pulse Generators ................................                             S                 X
     0693   .........   Level II Breast Reconstruction ..........................................................................            T                               X
     0694   .........   Level III Excision/Biopsy ...................................................................................        T                               X
     0695   .........   Level VII Debridement & Destruction ................................................................                 T                               X
     0696   .........   Repair/Replacement of Cardioverter-Defibrillators ...........................................                        T                 X
     0697   .........   Level II Echocardiogram Except Transesophageal ..........................................                            S                               X
     0698   .........   Level II Eye Tests & Treatments ......................................................................               S                               X
     0699   .........   Level IV Eye Tests & Treatment .......................................................................               T                               X
     0982   .........   New Technology—Level XII ($2500–3000) ......................................................                         T                                             X
     0983   .........   New Technology—Level XIV ($3000–3500) .....................................................                          T                                             X
     0984   .........   New Technology—Level XV ($3500–5000) ......................................................                          T                                             X
     0985   .........   New Technology—Level XVI ($5000–6000) .....................................................                          T                                             X



     D. Recalibration of APC Weights for CY                                 represented in our claims data. The APC                                 • We excluded from our data
     2002                                                                   relative weights would continue to be                                approximately 1.8 million claims from
                                                                            based on the median hospital costs for                               the hospitals that we removed or
        Section 1833(t)(9)(A) of the Act
                                                                            services in the APC groups.                                          trimmed from the hospital CCR data.
     requires that the Secretary review and                                    The methodology we followed to                                       • We matched revenue centers from
     revise the relative payment weights for                                calculate the APC relative weights                                   the remaining universe of
     APCs at least annually beginning in                                    proposed for CY 2002 is as follows:                                  approximately 80.8 million claims to
     2001 for application in 2002. In the                                      • We excluded from the data                                       CCRs of 5,653 hospitals.
     April 7, 2000 final rule (65 FR 18482),                                approximately 15.4 million claims for                                   • We separated the 80.8 million
     we explained in detail how we                                          those bill and claim types that would                                claims that we had matched with a cost
     calculated the relative payment weights                                not be paid under the OPPS (for                                      report into two distinct groups: single-
     that were implemented on August 1,                                     example, bill type 72X for dialysis                                  procedure claims and multiple-
     2000 for each APC group. Except for                                    services for patients with ESRD).                                    procedure claims. Single-procedure
     some reweighting due to APC changes,                                      • Using the most recent available cost                            claims were those that included only
     these relative weights continued to be in                              report from each hospital, we converted                              one HCPCS code (other than laboratory
     effect for 2001. (See the November 13,                                 billed charges to costs and aggregated                               and incidentals such as packaged drugs
     2000 interim final rule (65 FR 67824–                                  them to the procedure or visit level first                           and venipuncture) that could be
     67827).)                                                               by identifying the cost-to-charge ratio                              grouped to an APC. Multiple-procedure
        To recalibrate the relative APC                                     specific to each hospital’s cost centers                             claims included more than one HCPCS
     weights for services furnished on or                                   (‘‘cost center specific cost-to-charge                               code that could be mapped to an APC.
     after January 1, 2002 and before January                               ratios’’ or CCRs) and then by matching                               There were approximately 36.4 million
     1, 2003, we are proposing to use the                                   the CCRs to revenue centers used on the                              single-procedure claims and 44.4
     same basic methodology that we                                         hospital’s 1999–2000 outpatient bills.                               million multiple-procedure claims.
     described in the April 7, 2000 final rule                              The CCRs included operating and                                         • To calculate median costs for
     to recalibrate the relative weights for                                capital costs but excluded costs paid on                             services within an APC, we used only
     2002. That is, we would recalibrate the                                a reasonable cost basis that are                                     single-procedure bills. We did not use
     weights based on claims and cost report                                described elsewhere of this preamble.                                multiple-procedure claims because we
     data for outpatient services. We propose                                  • We eliminated from the hospital                                 are not able to specifically allocate
     to use the most recent available data to                               CCR data 283 hospitals that we                                       charges or costs for packaged items and
     construct the database for calculating                                 identified as having reported charges on                             services such as anesthesia, recovery
     APC group weights. For the purpose of                                  their cost reports that were not actual                              room, drugs, or supplies to a particular
     recalibrating APC relative weights for                                 charges (for example, they make                                      procedure when more than one
     2002, the most recent available claims                                 uniform charges for all services).                                   significant procedure or medical visit is
     data are the approximately 98 million                                     • We calculated the geometric mean                                billed on a claim. Use of the single-
     final action claims for hospital                                       of the total operating CCRs of hospitals                             procedure bills minimizes the risk of
     outpatient department services                                         remaining in the CCR data. We removed                                improperly assigning costs to the wrong
     furnished on or after July 1, 1999 and                                 from the CCR data 67 hospitals whose                                 procedure or visit.
     before July 1, 2000. We matched these                                  total operating CCR exceeded the                                        • For each single-procedure claim, we
     claims to the most recent cost report                                  geometric mean by more than 3                                        calculated a cost for every billed line
     filed by the individual hospitals                                      standard deviations.                                                 item charge by multiplying each


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     44696                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     revenue center charge by the                            the proposed APC changes described                       coinsurance amounts that we will
     appropriate hospital-specific CCR. If the               elsewhere in this preamble.                              publish in the final rule implementing
     appropriate cost center did not exist for                 • We calculated the median cost,                       the OPPS for calendar year (CY) 2002.
     a given hospital, we crosswalked the                    weighted by procedure volume, for each
                                                             APC.                                                     IV. Copayment Changes
     revenue center to a secondary cost
     center when possible, or to the                           • Using the weighted median APC                           We note that in section 1833(t) of the
     hospital’s overall cost-to-charge ratio for             costs, we calculated the relative                        Act, the terms ‘‘copayment’’ and
     outpatient department services. We                      payment weights for each APC. We                         ‘‘coinsurance’’ appear to be used
     excluded from this calculation all                      scaled all the relative payment weights                  interchangeably. To be consistent with
     charges associated with HCPCS codes                     to APC 0601, Mid-level clinic visit,                     CMS usage, we make a distinction
     previously defined as not paid under                    because it is one of the most frequently                 between the two terms throughout this
     the OPPS (for example, laboratory,                      performed services in the hospital                       preamble. We propose to make
     ambulance, and therapy services).                       outpatient setting. This approach is                     conforming changes to part 419 of the
        • To calculate the per-service costs,                consistent with that used in developing                  regulations to reflect the following
     we used the charges shown in the                        relative value units for the Medicare                    usage:
     revenue centers that contained items                    physician fee schedule. We assigned                         • ‘‘Coinsurance’’ means the percent of
     integral to performing the service. These               APC 0601 a relative payment weight of                    the Medicare-approved amount that
     included those items that we previously                 1.00 and divided the median cost for                     beneficiaries pay for a service furnished
     discussed as being subject to our                       each APC by the median cost for APC                      in the hospital outpatient department
     proposed packaging provision. For                       0601, to derive the relative payment                     (after they meet the Part B deductible).
     instance, in calculating the surgical                   weight for each APC. The median cost                        • ‘‘Copayment’’ means the set dollar
     procedure cost, we included charges for                 for APC 0601 is $54.00.                                  amount that beneficiaries pay under the
                                                               Section 1833(t)(9)(B) of the Act                       OPPS. For example, if the payment rate
     the operating room, treatment rooms,
                                                             requires that APC reclassification and                   for an APC is $200 and the beneficiary
     recovery, observation, medical and
                                                             recalibration changes and wage index                     is responsible for paying $50, the
     surgical supplies, pharmacy, anesthesia,
                                                             changes be made in a manner that                         copayment is $50 and the coinsurance
     casts and splints, and donor tissue,
                                                             assures that aggregate payments under                    is 25 percent.
     bone, and organ. For medical visit cost
                                                             the OPPS for 2002 are neither greater
     estimates, we included charges for items                                                                         A. BIPA 2000 Coinsurance Limit
                                                             than nor less than the aggregate
     such as medical and surgical supplies,
                                                             payments that would have been made                          As discussed in section I.C of this
     drugs, and observation in those                         without the changes. To comply with                      preamble, certain provisions of BIPA
     instances where it is still packaged. See               this requirement concerning the APC                      2000 affect beneficiary copayment
     sections II.C.1 and II.C.2 of this                      changes, we compared aggregate                           amounts under the OPPS. Section 111 of
     preamble for a discussion and complete                  payments using the CY 2001 relative                      the BIPA added section 1833(t)(8)(C)(ii)
     listing of the revenue centers that we are              weights to aggregate payments using the                  of the Act, to accelerate the reduction of
     proposing to use to calculate per-service               CY 2002 proposed weights. Based on                       beneficiary copayment amounts,
     costs.                                                  this comparison, we are proposing to                     providing that, for services furnished on
        • We standardized costs for                          make an adjustment of 1.022 to the                       or after April 1, 2001 and before January
     geographic wage variation by dividing                   weights. The weights that we are                         1, 2002, the national unadjusted
     the labor-related portion of the                        proposing for 2002, which incorporate                    coinsurance for an APC cannot exceed
     operating and capital costs for each                    the recalibration adjustments explained                  57 percent of the APC payment rate. The
     billed item by the current FY 2001                      in this section, are listed in Addendum                  statute provides for further reductions
     hospital inpatient prospective payment                  A and Addendum B.                                        in future years so that the national
     system wage index published in the                                                                               unadjusted coinsurance for an APC
     Federal Register on August 1, 2000 (65                  III. Wage Index Changes
                                                                                                                      cannot exceed 55 percent in 2002 and
     FR 47054). We used 60 percent to                           Under section 1833(t)(2)(D) of the Act,               2003, 50 percent in 2004, 45 percent in
     represent our estimate of that portion of               we are required to determine a wage                      2005, and 40 percent in 2006 and
     costs attributable, on average, to labor.               adjustment factor to adjust for                          thereafter.
     A more detailed discussion of wage                      geographic wage differences, in a budget                    We implemented the reduction in
     index adjustments is found in section III               neutral manner, that portion of the                      beneficiary copayments for 2001
     of this preamble.                                       OPPS payment rate and copayment                          effective April 1, 2001 through changes
        • We summed the standardized labor-                  amount that is attributable to labor and                 to the OPPS PRICER software used to
     related cost and the nonlabor-related                   labor-related costs.                                     calculate OPPS payments to hospitals
     cost component for each billed item to                     We used the proposed Federal fiscal                   from the Medicare Program and
     derive the total standardized cost for                  year (FY) 2002 hospital inpatient PPS                    beneficiary copayments.
     each procedure or medical visit.                        wage index to make wage adjustments                         We would revise § 419.41 to conform
        • We removed extremely unusual                       in determining the proposed payment                      the regulations text to this provision.
     costs that appeared to be errors in the                 rates set forth in this proposed rule. The
     data using a trimming methodology                       proposed FY 2002 hospital inpatient                      B. Impact of BIPA 2000 Payment Rate
     analogous to what we use in calculating                 wage index published in the May 4,                       Increase on Coinsurance
     the DRG weights for the hospital                        2001 Federal Register (66 FR 22821) is                     Under the statute as enacted by BBA
     inpatient PPS. That is, we eliminated                   reprinted in this proposed rule as                       1997, APC payment rates for 2001 were
     any bills with costs outside of 3                       Addendum H, Wage Index for Urban                         to be based on the payment rates for
     standard deviations from the geometric                  Areas; Addendum I, Wage Index for                        2000 increased by the inpatient hospital
     mean.                                                   Rural Areas; and Addendum J, Wage                        market basket percentage increase
        • After trimming the procedure and                   Index for Hospitals That Are                             minus 1 percentage point; however,
     visit level costs, we mapped each                       Reclassified. We propose to use the final                section 401 of the BIPA 2000 increased
     procedure or visit cost to its assigned                 FY 2002 hospital inpatient wage index                    APC payment rates for 2001 to reflect an
     APC, including, to the extent possible,                 to calculate the payment rates and                       update based on the full market basket


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                             Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                              44697

     percentage increase. The Congress                       another. In this section, we are                         new copayment amount would be 50
     intended for the increased payment to                   proposing the method we intend to                        percent of $80 or $40.
     be in effect for the entire calendar year               apply in determining copayments for                         3. If recalibrating the relative payment
     2001; however, to provide us sufficient                 new APCs (that is, those created after                   weights results in an APC having an
     time to make the change, the Congress                   2001) and for APCs that are revised                      increase in its payment rate for a
     adopted a special payment rule for                      because of recalibration and                             subsequent year, the unadjusted
     2001. Under section 401(c) of the BIPA,                 reclassification.                                        copayment amount would be calculated
     the payment rates in effect for services                   In developing a proposed approach to                  so that the copayment dollar amount for
     furnished on or after January 1, 2001                   be used in determining copayments for                    the APC remains the same as it was
     and before April 1, 2001 are the rates as               new or revised APCs, we took into                        before the payment rate increase. That
     determined under the statute prior to                   account the following:                                   is, the unadjusted copayment amount
     the enactment of BIPA. For services                        • One of the Congress’s goals in                      would not change. For example, assume
     furnished on or after April 1, 2001 and                 authorizing an OPPS is to reduce                         the APC had a payment rate of $100 and
     before January 1, 2002 the payment rates                beneficiary copayment liability until the                an unadjusted copayment amount of
     reflect the full market basket update and               copayment for every hospital outpatient                  $60 (a coinsurance percentage of 60
     are further increased by 0.32 percent to                service equals 20 percent of the                         percent). If the new payment rate for the
     account for the timing delay in                         prospectively determined payment rate                    APC is increased to $150, the
     implementing the full market basket                     for that service. Therefore, when given                  unadjusted copayment amount would
     update for 2001. The 0.32 percent                       two possible copayment amounts or                        remain at $60 (a coinsurance percentage
     increase is a temporary increase that                   coinsurance percentages for a service as                 of 40 percent).
     applies only to the period April 1                      the result of an APC change, we should                      4. If a newly created APC group
     through December 31, 2001 and is not                    opt for the lower value.                                 consists of services from two or more
     considered in updating the OPPS                            • In general, we should use the                       existing APCs, the unadjusted
     conversion factor for 2002. The increase                coinsurance percentage (that is, the                     copayment amount would be calculated
     in APC payment rates for 2001 was                       percentage of the total payment rate                     based on the lowest coinsurance
     implemented effective April 1, 2001                     represented by the copayment amount)                     percentage of the contributing APCs. For
     through changes to the OPPS PRICER                      as the factor for comparison of the old                  example, a new APC is created by
     software. We would revise § 419.32 to                   versus the new copayment amount                          moving some or all of the services from
     conform to the statute.                                 rather than a copayment dollar amount.                   two existing APCs into the new APC.
       The section 401 increase to the APC
                                                                • Notwithstanding any changes, the                    Assume that one contributing APC had
     payment rates affected beneficiary
                                                             coinsurance for an APC cannot be lower                   a payment rate of $100 and an
     copayments in several ways. In cases for
                                                             than 20 percent of the payment rate for                  unadjusted copayment amount of $40,
     which the beneficiary coinsurance was
                                                             an APC group.                                            coinsurance percentage of 40 percent.
     already based on 20 percent of the APC
                                                                • Notwithstanding any changes, the                    Assume the other contributing APC had
     payment rate, the increase in the APC
     payment rate caused a corresponding                     coinsurance for an APC cannot exceed                     a payment rate of $150 and an
     increase in the copayment for the APC.                  55 percent of the payment rate for an                    unadjusted copayment amount of $75, a
     For all other APCs, the copayment                       APC in 2002 or the applicable                            coinsurance percentage of 50 percent. If
     amount remained at the same level. In                   copayment limits under section                           the new APC had a payment rate of
     addition, because the minimum                           1833(t)(8)(C)(ii) of the Act in subsequent               $130, the unadjusted copayment
     copayment amount for an APC, which is                   years.                                                   amount for the new APC would be
     the lowest amount a provider may elect                     The following describes how we                        based on a coinsurance percentage of
     to charge, if it chooses to reduce                      propose to determine copayment                           40. The unadjusted copayment amount
     copayments for an APC, is based on 20                   amounts for new and revised APCs for                     for the new APC would be 40 percent
     percent of the APC amount, the increase                 2002 and subsequent years:                               of $130, or $52.
     to an APC payment rate under section                       1. If a newly created APC group                          5. If an APC payment rate is increased
     401 of BIPA, resulted in an increase to                 consists of services that were not                       due to a conversion factor update, the
     the minimum copayment amount for                        included in the 1996 data base or whose                  unadjusted copayment amount for the
     each APC.                                               charges were not separately calculated                   APC would not change.
                                                             in that data base (that is, the services
     C. Coinsurance and Copayment                                                                                     V. Outlier Policy Changes
                                                             were excluded or packaged) the
     Changes Resulting From Change in an                     unadjusted copayment amount would                          For OPPS services furnished before
     APC Group                                               be 20 percent of the APC payment rate.                   January 1, 2002, section 1833(t)(5)(D) of
       National unadjusted copayment                            2. If recalibrating the relative payment              the Act explicitly authorizes the
     amounts for the original APCs that went                 weights results in an APC having a                       Secretary to apply the outlier payment
     into effect on August 1, 2000 were, by                  decrease in its payment rate for a                       provision based upon all of the OPPS
     statute, based on 20 percent of the                     subsequent year, the unadjusted                          services on a bill. We exercised that
     national median charge billed for                       copayment amount will be calculated so                   authority and, since the beginning of the
     services in the APC group during                        that the coinsurance percentage for the                  OPPS on August 1, 2000, we have
     calendar year 1996, trended forward to                  APC remains the same that it was before                  calculated outlier payments in the
     1999, but could be no lower than 20                     the payment rate decrease. For example,                  aggregate for all OPPS services that
     percent of the APC payment rate.                        assume the APC had a payment rate of                     appear on a bill. Under this proposed
     Although the BBA 1997 specified how                     $100 and an unadjusted copayment                         rule, beginning January 1, 2002, we will
     copayments were to be determined                        amount of $50, resulting in a                            calculate outlier payments based on
     initially, the statute does not specify                 coinsurance percentage of 50 percent. If                 each individual OPPS service. We
     how copayments are to be determined                     the new payment rate for the APC is                      propose to revise the aggregate method
     in the future as the APC groups are                     lowered to $80, the copayment amount                     that we are currently using to calculate
     recalibrated or as individual services are              is calculated using the prior coinsurance                outlier payments and begin to determine
     reclassified from one APC group to                      percentage of 50 percent; therefore, the                 outliers on a service-by-service basis for


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     44698                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     OPPS services furnished on or after                     among the OPPS services based on the                     to-charge ratio to convert billed charges
     January 1, 2002.                                        ratio of the APC payment rate for an                     to costs for calculating outlier payments.
        One difficulty we face with                          individual OPPS service to the total                        As explained in the April 7, 2000
     calculating outliers based on individual                APC payment rates for all services on                    final rule (65 FR 18498), we set a target
     services is how to treat the charges for                the bill. Thus, if a service resulted in an              for outlier payments at 2.0 percent of
     packaged services (for example, drugs,                  APC rate of $200 and the total APC                       total payments. We also explained, for
     supplies, anesthesia, and equipment)                    payment rates for all services on the bill               purposes of simulating payments to
     when more than one OPPS service                         were $2,000, that individual APC would                   calculate outlier thresholds, that we set
     appears on a bill. These packaged                       be allocated 10 percent of the packaged                  the parameters for determining outlier
     services do not in themselves generate                  charges appearing on the bill.                           payments as if the target were 2.5
     an APC payment but their charges must                     We prefer using one of the approaches                  percent. We believed that it would be
     be taken into account to determine the                  that would allocate packaged charges                     likely that using simulation 1996 claims
     cost of a service such as a surgical or                 among the APCs on a bill to avoid                        data would overstate the percentage of
     diagnostic procedure or medical visit                   disruptive billing changes. Of the two                   payments that would be made. Based on
     that does generate an APC payment.                      ways to allocate charges for packaged                    the simulations, we set a threshold for
     When more than one HCPCS code that                      services, we are proposing that charges                  outlier payments at 2.5 times the claim
     will result in an APC payment appears                   be allocated to each OPPS service based                  cost and a payment percent of 75
     on a bill, it is currently impossible to                on the percent the APC payment rate for                  percent of the cost above the threshold
     determine which packaged service is                     that service bears to the total APC rates                for both 2000 and 2001.
     associated with an individual OPPS                      for all OPPS services on the bill. We                       In setting the 2002 outlier threshold
     payable service. For example, when                      believe that this allocation method is                   and payment percentage, we account for
     multiple surgical procedures are                        somewhat more precise than simply                        the charge to service level rather than
     performed on the same day, we cannot                    dividing evenly the total packaged                       claim level outlier calculation. In this
     determine how much of the operating                     charges by the number of APCs on the                     proposed rule, we would again set the
     room, drug, supply, anesthesia, or                      bill.                                                    target for outlier payment at 2.0 percent.
     recovery room charge is attributable to                   We also propose to convert charges to                  However, because we believe that the
     each procedure. Similarly, if a medical                 costs for calculating outlier payments by                claims data we are using to set the 2002
     visit and a surgical procedure occur on                 continuing to apply a single overall                     proposed payment rates reflect much
     the same day, we cannot accurately                      hospital-specific cost-to-charge ratio                   better coding of services than did the
     determine how much of the charge for                    instead of applying hospital-specific                    1996 data, we would set these
     any drug, supply, or other packaged                     departmental cost-to-charge ratios.                      parameters to reach a target of 2.0
     service that appears on the bill is                     There is no universal crosswalk of                       percent (rather than 2.5 percent). Based
     attributable to each individual OPPS                    revenue codes to cost report cost centers                on our simulations, the proposed
     service.                                                that is used by all hospitals. Although                  threshold for 2002 is 3 times the service
        One solution would be to require                     departmental cost-to-charge ratios are                   costs and the proposed payment
     hospitals to submit separate bills for                  more precise for purposes of                             percentage for costs above that
     each OPPS service so that we can be                     determining costs of specific services,                  threshold is set at 50 percent.
     certain that the correct packaged                       hospitals have considerable discretion
     services attributable to the individual                 in assigning charges billed under                        VI. Other Policy Decisions and
     OPPS service will be taken into account                 specific revenue codes to specific                       Proposed Changes
     in determining an outlier payment for                   departments on their cost reports.                       A. Change in Services Covered Within
     that service. We believe, however, such                 Therefore, we do not have a way of                       the Scope of the OPPS
     a requirement would be excessively                      defining, in a uniform manner that is
     burdensome to hospitals and would                       accurate for all hospitals, which                           Section 1833(t)(1)(B) of the Act
     greatly increase fiscal intermediary                    department cost-to-charge ratio to apply                 defines the term ‘‘covered OPD
     workloads. In addition, billing of                      to a revenue code billed by a hospital.                  services’’ that are to be paid under the
     individual services for the same day on                 We considered establishing a basic                       OPPS. ‘‘Covered OPD services’’ are
     separate bills would prohibit us from                   crosswalk that we would apply                            ‘‘hospital outpatient services designated
     applying the correct coding edits.                      uniformly to every hospital, but this                    by the Secretary’’ and include
     Finally, we believe that the limit on                   could result in a distorted or inaccurate                ‘‘inpatient hospital services designated
     outlier payments (up to 2.5 percent of                  model of how some hospitals actually                     by the Secretary that are covered under
     the total OPPS payments in each year                    assign charges. Given the appropriate                    this part and furnished to a hospital
     before 2004 and up to 3 percent for                     resources, we could gather data from                     inpatient who (i) is entitled to benefits
     subsequent years) does not justify the                  hospitals upon which to base a                           under part A but has exhausted benefits
     burden that would result from requiring                 crosswalk specific to every hospital paid                for inpatient hospital services during a
     separate bills for each OPPS service.                   under the OPPS. But collecting these                     spell of illness, or (ii) is not so entitled’’
        Another approach we considered is to                 data would impose significant burden                     (that is, ‘‘Part B-only’’ services). ‘‘Part B-
     allocate the charges for any packaged                   and administrative costs on hospitals                    only’’ services are certain ancillary
     service among the individual OPPS                       and on our contractors. Given that                       services furnished to inpatients for
     services that appear on the bill. We                    outliers represent only 2 to 3 percent of                which the hospital receives payment
     considered two possible ways to do this.                total OPPS expenditures, we believe                      under Medicare Part B. Section 3110 of
     First, we could divide the packaged                     that the increased accuracy in                           the Medicare Intermediary Manual and
     charges equally among the OPPS                          calculating outlier payments that we                     section 2255C of the Medicare Carriers
     services so that if there were three                    could gain would not be sufficient to                    Manual specify these services as
     services that generated APC payments,                   justify the significant additional                       diagnostic tests; X-ray and radioactive
     one third of the charges for the packaged               administrative burden and cost that                      isotope therapy; surgical dressings,
     services would be assigned to each                      would be required. For this reason, we                   splints and casts; prosthetic devices;
     OPPS service. We also considered                        are proposing to continue to apply a                     and limb braces and trusses and
     dividing the total packaged charges                     single hospital-specific outpatient cost-                artificial limbs and eyes.


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        In the April 7, 2000 final rule, we                     We do not know at this time, and are                  C. Conforming Changes: Additional
     included inpatient ‘‘Part B-only’’                      not sure it would be possible to                         Payments on a Reasonable Cost Basis
     services within the definition of services              ascertain, the potential number of                          Hospitals subject to the OPPS are paid
     payable under the OPPS (68 FR 18543).                   hospitals that would be affected by this                 for certain items and services that are
     We have subsequently been approached                    regulatory change. However, we expect                    outside the scope of the OPPS on a
     by representatives of some hospitals that               the financial impact on the program to                   reasonable cost or other basis. Payments
     do not have outpatient departments and                  be small, because this revised rule                      for the following services are made on
     that, therefore, do no billing for Part B               would apply only to the relatively few                   a reasonable cost basis or otherwise
     services except for a relatively few ‘‘Part             hospitals that are billing for the very                  applicable methodology:
     B-only’’ services that they furnish to
                                                             limited range of Part B-only services for                   a. The direct costs of medical
     their inpatients. That is, the only bills
                                                             a small number of beneficiaries.                         education as described in § 413.86.
     these hospitals would ever submit for
                                                                                                                         b. The costs of nursing and allied
     Part B payment are for the ancillary                    B. Categories of Hospitals Subject to and                health programs as described in
     services designated as ‘‘Part B-only’’                  Excluded From the OPPS                                   § 413.85.
     services. These hospitals are concerned
                                                                In § 419.20(b) of the regulations,                       c. The costs associated with interns
     about the administrative burden and
                                                             certain hospitals in Maryland that                       and residents not in approved teaching
     prohibitive costs they would incur if
                                                                                                                      programs as described in § 415.202.
     they were to change their billing                       qualify under section 1814(b)(3) of the
                                                                                                                         d. The costs of teaching physicians
     systems to accommodate OPPS                             Act for payment under the State’s
                                                                                                                      attributable to Part B services for
     requirements solely to receive payment                  payment system are excluded from the
     for ‘‘Part B-only’’ services.                                                                                    hospitals that elect cost-based payment
                                                             OPPS. Critical access hospitals (CAHs)                   for teaching physicians under § 415.160.
        We recognize that there are certain                  that are paid under a reasonable cost-
     hospitals that do not have outpatient                                                                               e. The costs of anesthesia services
                                                             based system as required under section                   furnished to hospital outpatients by
     departments and that do not provide                     1834(g) of the Act are also excluded. In
     outpatient department services but that                                                                          qualified nonphysician anesthetists
                                                             addition, we stated in the April 7, 2000                 (certified registered nurse anesthetists
     do provide inpatient services to
                                                             final rule that the outpatient services                  and anesthesiologists’ assistants)
     Medicare beneficiaries. The only
                                                             provided by the hospitals of the Indian                  employed by the hospital or obtained
     services these hospitals bill under OPPS
     are services furnished to inpatients.                   Health Services (IHS) will continue to                   under arrangements, for hospitals that
     That is, these are special billings under               be paid under separately established                     meet the requirements under
     the Part B-only benefit for limited                     rates. We also noted that we intended to                 § 412.113(c).
     ancillary services provided to                          consult with the IHS and develop a plan                     f. Bad debts for uncollectible
     beneficiaries who are admitted to the                   to transition these hospitals into OPPS.                 deductible and coinsurance amounts as
     hospital as inpatients and who are not                  With these exceptions, the OPPS applies                  described in § 413.80(b).
     receiving services on an outpatient                     to all other hospitals that participate in                  g. Organ acquisition costs paid under
     basis. We further acknowledge that the                  the Medicare program.                                    Part B. Interim payments for these
     expense of converting their billing                                                                              services are made on a biweekly basis
                                                                It has been brought to our attention
     systems to accommodate the OPPS is                                                                               and final payments are determined at
                                                             that under the statute, hospitals located
     disproportionate to the Part B revenues                                                                          cost report settlement.
                                                             in Guam, Saipan, American Samoa, and                        We would revise § 419.2(c) to make
     that these hospitals receive. Therefore,                the Virgin Islands are excluded from the
     we are proposing to revise § 419.22 by                                                                           conforming changes that reflect the
                                                             hospital inpatient PPS. These hospitals                  exclusion of these costs from the OPPS
     adding subparagraph (r) to exclude from
                                                             currently lack a charge structure for                    rates.
     payment under the OPPS Part B-only
     services that are furnished to inpatients               billing and, in some cases, are not
                                                             equipped to prepare a cost report. They                  D. Hospital Coding for Evaluation and
     of hospitals that do no other billing for                                                                        Management (E/M) Services
     hospital outpatient services under Part                 furnish very few services that would be
     B.                                                      subject to the OPPS. In addition, we                        In the April 7, 2000 final rule, we
        Under this proposed revision of the                  believe that because of their distant                    emphasized the importance of each
     regulations, hospitals with outpatient                  locations, they incur costs that might                   facility accurately assessing the
     departments would continue to bill                      not be adequately recognized by a PPS.                   intensity, resource use, and charges for
     under the OPPS for Part B-only services                 Prior to implementation of the OPPS,                     evaluation and management (E/M)
     that they furnish to their inpatients.                  each of the hospitals in Guam,                           services, in order to ensure proper
     However, a hospital that does not have                  American Samoa, Saipan, and the                          reporting of the service provided. We
     an outpatient department would be                       Virgin Islands had its own unique                        stated that ‘‘the billing information that
     unable to bill under the OPPS for any                   Medicare payment methodology for the                     the hospitals report during the first
     Part B-only service the hospital                        outpatient services they furnish. In light               years of implementation of the hospital
     furnished to its inpatients because those               of these factors, we are proposing to                    outpatient PPS will be vitally important
     services would not fall within the scope                revise § 419.20 of the regulations by                    to our revision of weights and other
     of covered OPD services. If a hospital                                                                           adjustments that affect payment in
                                                             adding paragraph (b)(3) to exclude these
     with no outpatient department is                                                                                 future years.’’ (65 FR 18451)
                                                             hospitals from OPPS consistent with
     currently billing under the OPPS, the                                                                               We went on to state, ‘‘We realize that
                                                             their treatment under inpatient PPS. In
     hospital would have to revert to its                                                                             while these HCPCS codes appropriately
                                                             addition, we would revise that section                   represent different levels of physician
     previous payment methodology for
     services furnished on or after January 1,               to include the hospitals of the IHS so                   effort, they do not adequately describe
     2002. That methodology would be an                      that it is clear that they are excluded                  nonphysician resources. However,
     all-inclusive rate for hospitals paid that              until we develop a plan to include                       * * * the same concept can be applied
     way prior to the implementation of                      them. We would note that it may also                     to each code in terms of the differences
     OPPS and reasonable cost for other                      be possible to include the hospitals in                  in resource utilization. Therefore, each
     hospitals.                                              the territories in the OPPS in the future.               facility should develop a system for


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     44700                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     mapping the provided services or                        1. Packaged Payment                                   determine the cost that was packaged
     combination of services furnished to the                   As we explain in the April 7, 2000                 for the drug or biological within its
     different levels of effort represented by               final rule, we generally package the cost             related APC. In order to determine this
     the codes * * *. We will hold each                      of drugs, biologicals, and                            amount, we used the following
     facility accountable for following its                  pharmaceuticals into the APC payment                  methodology, which we also explain in
     own system for assigning the different                  rate for the primary procedure or                     the April 7 final rule.
     levels of HCPCS codes. As long as the                                                                           When we implemented the OPPS on
                                                             treatment with which the drugs are
     services furnished are documented and                                                                         August 1, 2000, costs for drugs and
                                                             usually furnished (65 FR 18450). No
     medically necessary and the facility is                                                                       biologicals eligible for transitional pass-
                                                             separate payment is made under the
     following its own system, which                                                                               through payment were, to the extent
                                                             OPPS for drugs, biologicals, and                      possible, not included in the payment
     reasonably relates the intensity of                     pharmaceuticals whose costs are
     hospital resources to the different levels                                                                    rates for the APC groups into which
                                                             packaged into the APCs with which                     they had been packaged prior to
     of HCPCS codes, we will assume that it                  they are associated.
     is in compliance with these reporting                                                                         enactment of the BBRA 1999. That is, to
     requirements as they relate to the clinic/              2. Transitional Pass-Through Payments                 the extent feasible, we removed from the
     emergency department visit code                         for Eligible Drugs and Biologicals                    APC groups into which they were
     reported on the bill. Therefore, we                                                                           packaged, the costs of as many of the
                                                                As we explain in the April 7, 2000
     would not expect to see a high degree                                                                         pass-through eligible drugs and
                                                             final rule and in section VII of this
     of correlation between the code reported                                                                      biologicals as we could identify in the
                                                             preamble, the BBRA 1999 provided for
     by the physician and that reported by                                                                         1996 claims data. Then, we assigned
                                                             special transitional pass-through
     the facility * * *. We will work with                                                                         each drug and biological eligible for a
                                                             payments for a period of 2 to 3 years for
     the American Hospital Association and                                                                         pass-through payment to its own,
                                                             the following drugs and biologicals:                  separate APC group, the total payment
     the American Medical Association to                        • Current orphan drugs, as designated
     propose the establishment of                                                                                  rate for which was set at 95 percent of
                                                             under section 526 of the Federal Food,                the applicable AWP.
     appropriate facility-based patient visit                Drug, and Cosmetic Act;
     codes * * *.’’                                                                                                  Next, in order to establish the
                                                                • Current drugs and biologic agents                applicable beneficiary copayment
        We understand that facilities have                   used for treatment of cancer;                         amount and pass-through payment
     developed several different systems for                    • Current radiopharmaceutical drugs                amount, we had to determine the cost of
     determining resource consumption to                     and biological products; and                          the pass-through eligible drug or
     assign proper E/M codes. Some of these                     • New drugs and biologic agents in                 biological that would have been
     systems are based on clinical                           instances where the item was not being                included in the payment rate for its
     (‘‘condition’’) criteria, and others are                paid for as a hospital outpatient service             associated APC had the drug or
     based on weighted scoring criteria. We                  as of December 31, 1996, and where the                biological been packaged. We used
     continue to believe that proper facility                cost of the item is ‘‘not insignificant’’ in          hospital acquisition costs as a proxy for
     coding of E/M services is critical for                  relation to the hospital outpatient PPS               the amount that would have been
     assuring appropriate payments. In order                 payment amount.                                       packaged, based on data taken from an
     to achieve this, we are interested in                      In this context, ‘‘current’’ refers to             external survey of hospital drug costs.
     developing and implementing a                           those items for which hospital                        (See the April 7, 2000 final rule (65 FR
     standardized coding process for facility                outpatient payment was being made on                  18481)).
     reporting of E/M services. This process                 August 1, 2000, the date on which the                   We imputed the acquisition cost for
     could include the use of current HCPCS                  OPPS was implemented. A ‘‘new’’ drug                  the various drugs and biologicals in
     codes or the establishment of new                       or biological is a product that was not               pass-through APCs by multiplying their
     HCPCS codes in conjunction with                         paid as a hospital outpatient service                 applicable AWP by one of the following
     guidelines for facility coding.                         prior to January 1, 1997 and for which                ratios. The following ratios are based on
        At this time, we are soliciting                      the cost is not insignificant in relation             the survey data, and they represent, on
     comments from hospitals and other                       to the payment for the APC to which it                average, hospital drug acquisition cost
     interested parties on this issue. We will               is assigned.                                          relative to AWP:
     submit these comments to the APC                           Section 1833(t)(6)(D)(i) of the Act sets             • For drugs with one manufacturer
     Advisory Panel and ask for the Panel’s                  the payment rate for pass-through                     (sole-source), the ratio of acquisition
     recommendations regarding the                           eligible drugs as the amount determined               cost to AWP equals 0.68.
     development and implementation of a                     under section 1842(o) of the Act, that is,              • For drugs with more than one
     facility coding process for E/M services.               95 percent of the applicable average                  manufacturer (multi-source), the ratio of
     In order to ensure consideration by the                 wholesale price (AWP). Section                        acquisition cost to AWP equals 0.61.
     Panel, comments must be received by                     1833(t)(6)(D)(i) of the Act also sets the               • For drugs with more than one
     November 1, 2001. Send comments                         amount of additional payment for pass-                manufacturer and with generic
     regarding facility coding of E/M services               through-eligible drugs and biologicals                competitors, the ratio of acquisition cost
     to: OPPS–E/M coding, Centers for                        (the pass-through payment amount).                    to AWP equals 0.43.
     Medicare & Medicaid Services, Mailstop                  The pass-through payment amount is                      In accordance with section 1833(t)(7)
     C4–05–17, 7500 Security Boulevard,                      the difference between 95 percent of the              of the Act, we base beneficiary
     Baltimore, Maryland 21244–1850. CMS                     applicable AWP and the portion of the                 copayment amounts for pass-through
     will review both the public comments                    otherwise applicable fee schedule                     drugs only on that portion of the drug’s
     and the recommendations from the                        amount (that is, the APC payment rate)                cost that would have been included in
     Panel and propose a coding process in                   that the Secretary determines is                      the payment amount for an associated
     the proposed rule for 2003.                             associated with the drug or biological.               APC had the drug been packaged.
                                                             Therefore, as we explain in the April 7               Therefore, having determined the
     E. Annual Drug Pricing Update
                                                             final rule (65 FR 18481), in order to                 hospital acquisition cost of the drug
       Under the OPPS, we pay for drugs                      determine the correct pass-through                    based on the ratios described above, we
     and biologicals in one of three ways.                   payment amount, we first had to                       multiply the acquisition cost by 20


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                             Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                         44701

     percent to calculate the beneficiary                    3. Separate APCs for Drugs Not Eligible               drugs each July 1, the quarter following
     copayment for the pass-through drug or                  for Transitional Pass-Through Payment                 the annual publication, and we did use
     biological APCs. Finally, to calculate the                 There are some drugs and biologicals               the April 2001 version of the Red Book
     actual pass-through payment amount,                     for which we did not have adequate cost               to update the APC rates for drugs
     we subtract from the applicable 95                      data yet that are not eligible for                    eligible for pass-through payments. The
     percent of AWP the hospital acquisition                 transitional pass-through payments.                   pass-through payment rates for drugs
     cost less the beneficiary copayment                     Beginning with the April 7, 2000 final                and biologicals updated for 2001 went
     amount.                                                 rule, we created separate APCs for these              into effect July 1, 2001 (Program
        To illustrate this payment                                                                                 Memorandum A–01–73, issued on June
                                                             drugs and biologicals. For example, we
     methodology, consider a current sole                                                                          1, 2001).
                                                             did not package into the emergency
     source drug with an average wholesale
                                                             room visit APCs the various drugs                        We found that doing an update for all
     price (AWP) of $100 per dose. Under
                                                             classified as tissue plasminogen                      the pass-through drugs and biologicals
     section 1842(o) of the Act, the total
                                                             activators (tPAs) and other thrombolytic              at mid-year was disruptive to both our
     allowed payment for the drug is $95,
                                                             agents, which are used to treat patients              computer systems and pricing software.
     that is, 95 percent of AWP. We impute
                                                             with myocardial infarctions. Rather, we               Because it is now our understanding
     the cost of the drug based on survey
                                                             created individual APC groups for these               that even though the April publication
     data, which indicate hospital
                                                             drugs to allow separate payment so as                 is the annual printed version of the Red
     acquisition costs for this type of drug on
                                                             not to discourage their use where                     Book, there are quarterly updates
     average to be 68 percent of its AWP (or
     $68). In the absence of the pass-through                appropriate.                                          available that we can use to update the
     provisions, this cost would be packaged                    We based the payment rate for these                AWPs. In fact, we have found that since
     into the APC payment for the procedure                  APCs on median hospital acquisition                   the implementation of the pass-through
     or service with which the drug or                       costs. To determine the hospital                      payments in OPPS, many manufacturers
     biological is furnished. Therefore, we                  acquisition cost for the drugs, we                    have availed themselves of the Red
     define the beneficiary coinsurance as 20                imputed a cost using the same ratios of               Book quarterly update system to make
     percent of the imputed cost of $68,                     drug acquisition cost to AWP that we                  frequent and large increases to their
     resulting in a copayment amount                         discuss in section VI.E.2. in connection              AWPs. Therefore, we do not believe it
     $13.60. The pass-through payment                        with calculating acquisition costs for                is necessary to wait until publication of
     amount is $27 (the difference between                   transitional pass-through drug                        the annual Red Book to do an update to
     95 percent of AWP ($95) and the portion                 payments. That is, we multiplied the                  the pass-through rates for drugs and
     of the APC payment that is based on the                 AWP for the drug by the applicable ratio              biologicals to reflect the most recent
     cost of the drug ($68)). The total                      (sole or multi-source drug) based on                  AWPs.
     Medicare program payment in this                        data collected in an external survey of                  Thus, we are proposing to update the
     example equals $81.40 (cost of the drug                 hospital drug acquisition costs.                      APC rates for drugs that are eligible for
     in the APC ($68) less beneficiary copay                    We set beneficiary co-payment                      pass-through payments in 2002 using
     ($13.60) plus pass-through payment                      amounts for these drug APCs at 20                     the July 2001 or October 2001 version of
     ($27)).                                                 percent of the imputed acquisition cost.              Red Book (depending upon which is
        In this proposed rule, we are                        We use status indicator ‘‘K’’ to denote               available when we develop the final
     clarifying that, for purposes of                        the APCs for drugs, biologicals, and                  rule). The updated rates effective
     calculating transitional pass-through                   pharmaceuticals that are paid separately              January 1, 2002 would remain in effect
     payment amounts, we make no                             from and in addition to the procedure                 until we implement the next annual
     distinction between new and current                     or treatment with which they are                      update in 2003, when we would again
     drugs and biologicals. Rather, we                       associated yet are not eligible for                   update the AWPs based on the latest
     assume that drugs and biologicals                       transitional pass-through payment.                    quarterly version of the Red Book. This
     defined as ‘‘new’’ under section                        Refer to Addendum A to identify these                 would place the update of pass-through
     1833(t)(6)(A)(iv)(I) of the Act, that is, for           APCs.                                                 drug prices on the same calendar year
     which payment was not being made as                     4. Annual Drug Pricing Update                         schedule as the other annual OPPS
     of December 31, 1996, nonetheless                                                                             updates.
     replace or are alternatives to drugs,                      a. Drugs Eligible for Pass-Through
                                                             Payments. We used the AWPs reported                      b. Drugs in Separate APCs Not
     biologicals, or therapies whose costs
                                                             in the Drug Topics Red Book to                        Eligible for Pass-Through Payments. We
     would have been reflected in our 1996
                                                             determine the payment rates for the                   used the conversion factor published in
     claims data and, thus, have been
     packaged into an associated APC.                        pass-through drugs and biologicals. In                the November 13, 2000 final rule (65 FR
     Therefore, we assume that our imputed                   the November 13, 2000 interim final                   67827) to update, effective January 1,
     acquisition cost, based on the external                 rule (65 FR 67809), in response to a                  2001, the APC rates for the drugs that
     survey data, represents that portion of                 comment that we update the AWPs for                   are not eligible for pass-through
     the APC payment attributable to new as                  pass-through drugs on a quarterly basis,              payments that are in separate APCs. We
     well as current drugs and biologicals.                  we stated that, due to the complexity of              also made payment adjustments to these
     For that reason, we are discontinuing                   the new payment system, we would be                   APC groups effective April 1, 2001, as
     use of the payment status indicator ‘‘J’’               able to update the rates only on an                   required by section 401(c) of the BIPA,
     that we introduced in the November 13,                  annual basis. We also noted that the                  which sets forth a special payment rule
     2000 final rule to designate a ‘‘new’’                  new rates would be effective for the                  that had the effect of providing a full
     drug/biological pass-through. Instead,                  quarter following the publication of the              market basket update in 2001.
     we would assign payment status                          updated AWP values in the Red Book.                      For 2002, we propose to recalibrate
     indicator ‘‘G’’ to both current and new                 It was our understanding that, although               the weights for the APCs for drugs that
     drugs that are eligible for pass-through                there are quarterly updates to the AWPs               are not pass-through items and make the
     payment under the OPPS. (Addendum                       in the Red Book, the annual update is                 other adjustments applicable to the APC
     D lists the definition of the OPPS                      published in April of each year. It was               groups that we discuss in sections III,
     payment status indicators.)                             our intention to update the AWPs for                  IV, and VIII of this proposed rule.


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     44702                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     F. Definition of Single-Use Devices                     claims submitted for pass-through                        Act as a current orphan drug, as a
        Our definition of a device eligible for              payments for reprocessed single-use                      current cancer therapy drug or
     pass-through payment includes a                         devices would reflect the lower cost of                  biological or brachytherapy, as a current
     criterion whereby eligible devices are                  these devices.                                           radiopharmaceutical drug or biological
     used for one patient only and are single                                                                         product, or as a new medical device,
                                                             G. Criteria for New Technology APCs                      drug, or biological.
     use (65 FR 47674, August 3, 2000). In
                                                             1. Background                                              • The item or service has a HCPCS
     the November 13, 2000 interim final
                                                                                                                      code.
     rule, we stated, in response to a                          In the April 7, 2000 final rule (68 FR                  • The item or service falls within the
     comment, that additional pass-through                   18477), we created a set of new                          scope of Medicare benefits under
     payments would not be made for                          technology APCs to pay for certain new                   section 1832(a) of the Act.
     devices that are reprocessed or reused                  technology services under the OPPS.                        • The item or service is determined to
     because they are not single-use items.                  These APCs are intended to pay for new                   be reasonable and necessary in
     We further indicated that hospitals                     technology services that were not                        accordance with section 1862(a)(1)(A) of
     submitting pass-through claims for these                addressed by the transitional pass-                      the Act.
     devices might be considered to be                       through provisions of the BBRA 1999.
     engaging in fraudulent billing practices                We indicated that the new technology                     2. Proposed Modifications to the Criteria
     (65 FR 67822).                                          APCs would be defined on the basis of                    and Process for Assigning Services to
        Since publishing our November 13,                    costs and not the clinical characteristics               New Technology APCs
     2000 rule, much has come to our                         of a service.                                               Based on the experience we have
     attention regarding reprocessed single-                    We initially established groups 0970                  gained and data we have collected since
     use devices. Reprocessors and                           through 0984 as the new technology                       publication of the April 7, 2000 final
     professional associations using                         APCs with costs ranging from less than                   rule, we are proposing to revise—(a) the
     reprocessed devices commented that,                     $50 to $6,000. The payment rate for                      definition of what is appropriately paid
     under certain circumstances, the FDA                    each of these APCs is based on the                       for under the new technology APCs; (b)
     considers reprocessed devices to be                     midpoint of a range of costs. For                        the criteria for determining whether a
     single-use devices. The FDA                             example, the payment for new                             service may be paid under the new
     corroborated that it considers previously               technology APC 0974, which includes                      technology APCs; (c) the information
     used single-use devices that have been                  services that cost from $300 to $500, is                 that we will require to determine
     appropriately reprocessed to be                         set at $400.                                             eligibility for assignment to a new
     considered to be a single-use device.                      The new technology APCs that were                     technology APC; and (d) the length of
     The reprocessing industry also                          implemented on August 1, 2000 were                       time we will pay for a service in a new
     indicated that reprocessed single use                   populated with 11 new technology                         technology APC.
     devices are of much lower cost to                       services. We state in the April 7, 2000                     a. Services Paid Under New
     hospitals than original equipment                       rule that we will pay for an item or                     Technology APCs. We propose to limit
     manufactured single-use devices.                        service under a new technology APC for                   eligibility for placement in new
        We have learned that the FDA                         at least 2 years but no more than 3 years,               technology APCs to complete services or
     published guidance for the reprocessing                 consistent with the term of transitional                 procedures. That is, the following are
     of single-use devices (FDA’s                            pass-through payments. After that                        not eligible for placement in a new
     ‘‘Enforcement Priorities for Single-Use                 period of time, during the annual APC                    technology APC: items, materials,
     Devices Reprocessed by Third Parties                    update cycle, we stated that we will                     supplies, apparatuses, instruments,
     and Hospitals,’’ issued August 14,                      move the item or service into the                        implements, or equipment that are used
     2000). This document presents a                         existing APC structure based on its                      to accomplish a more comprehensive
     phased-in regulatory scheme for                         clinical attributes and, based on claims                 service or procedure.
     reprocessed devices. As such, we are                    data, its resource costs. For a new                         We would continue to exclude
     proposing to follow FDA’s guidance on                   technology APC, the beneficiary                          devices or any drug, biologic,
     reprocessed single-use device. We                       coinsurance is 20 percent of the APC                     radiopharmaceutical, product, or
     would consider reprocessed single-use                   payment rate.                                            commodity for which payment could be
     devices that are otherwise eligible for                    In the April 7, 2000 rule, we specified               made under the transitional pass-
     pass-through payment as part of a                       an application process and the                           through provisions. We believe that the
     category of devices to be eligible for that             information that must be supplied for us                 new technology APCs should be
     payment if they meet FDA’s most recent                  to consider a request for payment under                  reserved for only those comprehensive
     regulatory criteria on single-use devices.              the new technology APCs (65 FR                           services or procedures that are truly
     Also, reprocessed devices must meet                     18478). We also described the five                       new. Individual components of a service
     any FDA guidance or other regulatory                    criteria we would use to determine                       or procedure that do not meet the
     requirements in the future regarding                    whether a service is eligible for                        transitional pass-through payment
     single use. Reprocessed devices                         assignment to a new technology APC                       criteria should be incorporated into a
     adhering to these guidelines would be                   group. These criteria, which we are                      current APC and as hospitals begin to
     considered as having met our criterion                  currently using, are as follows:                         use the new items, supplies, or
     of approval or clearance by the FDA. We                    • The item or service is one that                     equipment the costs will become
     have met with and will continue to meet                 could not have been billed to the                        incorporated into the weight of the APC.
     and coordinate with the FDA                             Medicare program in 1996 or, if it was                   To the extent possible, we believe that
     concerning that Federal agency’s                        available in 1996, the costs of the                      hospitals should be making the decision
     definition and regulation of single-use                 service could not have been adequately                   on what items, supplies, and equipment
     devices.                                                represented in 1996 data.                                on the basis of efficiency and
        Parties advise us that reprocessed                      • The item or service does not qualify                appropriate treatment of the patient.
     devices reduce the costs to hospitals                   for an additional payment under the                      However, we believe it is appropriate to
     substantially. Therefore, we would                      transitional pass-through payments                       incorporate truly new services and
     expect that the hospital charges on                     provided for by section 1833(t)(6) of the                procedures that replace much less


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                             Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                             44703

     expensive services or procedures into a                 parties must submit to have a service or                 addition to the code for the service
     new technology APC to afford access to                  procedure considered for assignment to                   under consideration for new technology
     our beneficiaries.                                      a new technology APC. Based on our                       status, would represent unbundling.
        Furthermore, we wish to clarify that                 experience over the past year in                            • A list of all CPT and HCPCS Level
     we do not consider that merely being a                  reviewing new technology APC
     different approach to an existing                                                                                II codes that would typically be reported
                                                             applications, we believe that the criteria
     treatment or procedure qualifies a                                                                               in addition to the service.
                                                             would better assist us in determining
     service for assignment to a new                         eligibility for these APCs than do the                      • A proposal for a new HCPCS code,
     technology APC. As new approaches to                    current criteria. Specifically, to be                    including a descriptor and rationale for
     existing procedures and services are                    considered, we propose to require that                   why the descriptor is appropriate. The
     adopted and performed, we expect the                    requests include the following                           proposal should include the reason why
     costs associated with these variations                  information:                                             the service does not have a CPT or
     and improvements to be reflected in the                    • The name by which the service is                    HCPCS Level II code, and why the CPT
     claims data that we use to annually                     most commonly known. We currently                        or HCPCS Level II code or codes
     update the APC relative weights.                        require only the trade/brand name.                       currently used to describe the service
        b. Criteria for Assignment to New                       • A clinical vignette, including                      are inadequate.
     Technology APC. In light of the                         patient diagnoses that the service is
     experience we have gained over the past                 intended to treat, the typical patient,                     • An itemized list of the costs
     year in reviewing requests for new                      and a description of what resources are                  incurred by a hospital to furnish the
     technology and transitional pass-                       used to furnish the service by both the                  new technology service, including labor,
     through status, developing criteria to                  facility and the physician. For example,                 equipment, supplies, overhead, etc.
     define new medical services and                         for a surgical procedure this would                      (This criterion is unchanged.)
     technologies under the inpatient PPS,                   include staff, operating room, and                          • The name, address, and telephone
     and determining categories of new                       recovery room services as well as                        number of the party making the request.
     devices under the transitional pass-                    equipment, supplies, and devices, etc.                   (This criterion is unchanged.)
     through provisions, we are proposing                    This criterion would replace the
     that the following criteria be used to                  criterion that requires a detailed                          • Other information as CMS may
     determine whether a service be assigned                 description of the clinical application of               require to evaluate specific requests.
     to a new technology APC. These                          the service. We believe we need a fuller                 (This criterion is unchanged.)
     modifications are based on changes in                   description to help us understand how                       d. Length of Time in a New
     data (we are no longer using 1996 data                  the service is furnished in hospitals.                   Technology APC. We are also proposing
     to set payment rates) and our continuing                   • A list of any drugs or devices used                 to change the period of time during
     experience with the system of assigning                 as part of the service that require                      which a service may be paid under a
     new technology APCs.                                    approval from the Food and Drug                          new technology APC. Although section
        • The service is one that could not                  Administration (FDA) and information                     1833(t)(6)(B) of the Act, as amended by
     have been adequately represented in the                 to document receipt of FDA approval/                     section 201 of BBRA 1999, sets a 2 to
     claims data being used for the most                     clearances and the date obtained. This                   3 year period of payment for transitional
     current annual payment update.                          would be a refinement of the current                     pass-through payments, this
     (Current criterion based on 1996 data.)                 requirement for demonstrating FDA
                                                                                                                      requirement does not extend to new
        • The service does not qualify for an                approval.
                                                                • A description of where the service                  technology APCs. In the April 7, 2000
     additional payment under the
                                                             is currently being performed (by                         final rule we stated our intention to
     transitional pass-through provisions.
     (This criterion is unchanged.)                          location) and the approximate number                     adopt the same period of payment for
        • The service cannot reasonably be                   of patients receiving the service in each                new technology APCs for consistency.
     placed in an existing APC group that is                 location. This criterion and the one that                However, the experience we have
     appropriate in terms of clinical                        follows would help inform our analysis                   gained during the first year of the OPPS
     characteristics and resource costs. We                  by providing us with medical contacts.                   has led us to the conclusion that a more
     believe it is unnecessary to assign a new                  • An estimate of the number of                        flexible payment period would be
     service to a new technology APC if it                   physicians who are furnishing the                        preferable. Therefore, we are proposing
     may be appropriately placed in a                        service nationally and the specialties                   to modify the time frame that we
     current APC.                                            they represent.                                          established for new technology APCs in
        • The service falls within the scope of                 • Information about the clinical use                  the April 7, 2000 final rule and to retain
     Medicare benefits under section 1832(a)                 and efficacy of the service such as peer-                a service within a new technology APC
     of the Act. (This criterion is unchanged.)              reviewed articles. Again, this criterion                 group until we have acquired adequate
        • The service is determined to be                    would assist us in our clinical review of                data that allow us to assign the service
     reasonable and necessary in accordance                  the procedure.                                           to a clinically appropriate APC. This
     with section 1862(a)(1)(A) of the Act.                     • The CPT or HCPCS Level II code(s)                   would allow us to move a service from
     (This criterion is unchanged.)                          that are currently being used to report                  a new technology APC in less than 2
        We would delete the criterion that the               the service and an explanation of why                    years if the data were available and
     service must have a HCPCS code. In the                  use of these HCPCS codes is inadequate                   would also allow us to retain a service
     absence of an appropriate HCPCS code,                   to report the service under the OPPS.                    in a new technology APC for more than
     we would consider creating a HCPCS                      This criterion and the three that follow
                                                                                                                      3 years if these data were not available.
     code that describes the procedure or                    are refinements of the current HCPCS
     service. These HCPCS codes would be                     requirement.                                                We invite comment on the changes to
     solely for hospitals to use when billing                   • A list of the CPT or HCPCS Level                    the definition, criteria, application
     under the OPPS.                                         II codes for all items and procedures                    process, and timeframe that we are
        c. Revision of Application for New                   that are an integral part of the service.                proposing for services and procedures
     Technology Status. We also propose to                   This list should include codes for all                   that may qualify for assignment to a new
     change the information that interested                  procedures and services that, if coded in                technology APC under the OPPS.


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     44704                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     VII. Transitional Pass-Through                          comment period, which will be                            we are reviewing our data and
     Payment Issues                                          published at a later date.                               methodology to identify any flaws or
                                                               Transitional pass-through categories                   weaknesses in them and to determine
     A. Background                                           are for devices only; they do not apply                  whether a significant reduction would
        Section 1833(t)(6) of the Act provides               to drugs or biologicals. The regulations                 actually be required under the statute.
     for temporary additional payments or                    governing transitional pass-through                      We are also considering the
     ‘‘transitional pass-through payments’’                  payments for eligible drugs and                          appropriateness of a number of possible
     for certain innovative medical devices,                 biologicals remain unchanged. The                        alternative approaches to different
     drugs, and biologicals. As originally                   process to apply for transitional pass-                  technical aspects of estimating
     enacted by the BBRA, this provision                     through payment for eligible drugs and                   payments that would have the effect of
     required the Secretary to make                          biological agents, including                             minimizing the amount of any potential
     additional payments to hospitals for                    radiopharmaceuticals, can be found in                    reduction in these payments. Below is a
     current orphan drugs, as designated                     the April 7, 2000 Federal Register (65                   discussion of the methodology that we
     under section 526 of the Federal Food,                  FR 18481) and on the CMS web site at                     contemplate employing in developing
     Drug, and Cosmetic Act; current drugs,                  http://www.hcfa.gov/medlearn/                            our estimate.
     biologic agents, and brachytherapy                      appdead.htm. If we revise the                               We are considering a number of
     devices used for the treatment of cancer;               application instructions in any way, we                  possible approaches to different
     and current radiopharmaceutical drugs                   will post the revisions on our web site                  technical aspects of estimating
     and biological products. Transitional                   and submit the changes for the Office of                 payments. As is always the case in
     pass-through payments are also required                 Management and Budget (OMB) review                       making these types of estimates, it is
     for new medical devices, drugs, and                     under the Paperwork Reduction Act.                       necessary to make a number of
     biologic agents that were not being paid                                                                         assumptions in interpreting the data.
     for as a hospital outpatient service as of              B. Discussion of Pro Rata Reduction
                                                                                                                      We are tentatively contemplating using
     December 31, 1996 and whose cost is                        Section 1833(t)(6)(E) of the Act limits               the following assumptions and
     ‘‘not insignificant’’ in relation to the                the total projected amount of                            techniques in developing our
     OPPS payment for the procedures or                      transitional pass-through payments for a                 methodology:
     services associated with the new device,                given year to an ‘‘applicable percentage’’
     drug, or biological. Under the statute,                 of projected total payments under the                    1. Data and Methodology
     transitional pass-through payments are                  hospital OPPS. For a year before 2004,                      We plan to base the estimate of 2002
     to be made for at least 2 years but not                 the applicable percentage is 2.5 percent;                pass-through expenditures on the claims
     more than 3 years.                                      for 2004 and subsequent years, the                       we would use to set payment rates for
        Section 402 of BIPA, which was                       applicable percentage is specified by the                2002, 2001 pass-through amounts for
     enacted on December 21, 2000, made                      Secretary up to 2.0 percent. If the                      drugs and radiopharmaceuticals, and
     several changes to section 1833(t)(6) of                Secretary estimates before the beginning                 device cost and use data from pass-
     the Act. First, section 1833(t)(6)(B)(i) of             of the calendar year that the total                      through applications submitted by
     the Act, as amended, requires us to                     amount of pass-through payments in                       manufacturers, hospitals, specialty
     establish by April 1, 2001, initial                     that year would exceed the applicable                    societies, and other entities. Projections
     categories to be used for purposes of                   percentage, section 1833(t)(6)(E)(iii) of                to CY 2002 would employ price,
     determining which medical devices are                   the Act requires a (prospective) uniform                 volume, and service-mix inflators
     eligible for transitional pass-through                  reduction in the amount of each of the                   consistent with our baseline for OPPS
     payments. We fulfilled this requirement                 transitional pass-through payments                       spending. Estimates for drugs,
     through the issuance on March 22, 2001                  made in that year to ensure that the                     radiopharmaceuticals, and devices
     of two Program Memoranda,                               limit is not exceeded.                                   would be made separately and
     Transmittals A–01–40 and A–01–41.                          In order to prepare for making an                     combined for the final projection of
     These Program Memoranda can be                          estimate, we have constructed an                         pass-through spending.
     found on the CMS homepage at                            extensive database that includes
     www.hcfa.gov/pubforms/transmit/                         outpatient claims data submitted by                      2. Drugs and Biologicals
     A0140.pdf and www.hcfa.gov/pubforms/                    hospitals for services furnished on or                      We would identify those drugs
     transmit/A0141.pdf, respectively. We                    after July 1, 1999 and before July 1,                    eligible for pass-through status that have
     note that section 1833(t)(6)(B)(i)(II) of               2000. We are also collecting device cost                 been separately billed to the Medicare
     the Act explicitly authorizes the                       and utilization data that were provided                  program on the claims that we intend to
     Secretary to establish initial categories               by manufacturers. We are extracting                      employ for the estimate. We would
     by program memorandum.                                  device cost and utilization data from                    multiply the frequency of use for each
        Transmittal A–01–41 includes a list of               applications for pass-through status                     of these drugs (that is, the number of
     the initial device categories and a                     submitted by manufacturers, hospitals,                   line items multiplied by the number of
     crosswalk of all the item-specific C-                   specialty societies, and other entities. In              units billed as shown in the claims data)
     codes for individual devices that were                  their applications for pass-through                      by its 2001 pass-through payment
     approved for transitional pass-through                  status, manufacturers have supplied                      amount. If any drugs are not reflected in
     payments as of January 20, 2001 to the                  information on the expected cost to                      the claims data, we would make an
     initial category code by which the                      hospitals of devices and the procedures                  appropriate adjustment. Such an
     device is to be billed beginning April 1,               with which the devices are commonly                      adjustment might take into account the
     2001.                                                   used.                                                    extent to which the non-coded items are
        Section 1833(t)(6)(B)(ii) of the Act                    The information that we have                          classified as orphan drugs and therefore
     also requires us to establish, through                  collected thus far suggests that a                       would likely be used infrequently.
     rulemaking, criteria that will be used to               significant pro rata reduction could be
     create additional categories, other than                required for 2002 in order to meet the                   3. Radiopharmaceutical Drugs and
     those established initially. The criteria               statutory limit on the amount of the                     Biological Products
     for new categories are the subject of a                 pass-through payments. Given the                            Similar to the drug estimate, we
     separate interim final rule with                        potential magnitude of the reductions,                   would identify those


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                                 Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                                                              44705

     radiopharmaceuticals eligible for pass-                            deductions for pacemakers and                                         enactment of the BBRA 1999, we had
     through status that were separately                                neurostimulators but not other devices                                proposed to pay for implantable devices
     billed to Medicare in the claims data                              because it was not feasible to make the                               outside of the OPPS and after the
     file. We would estimate expenditures                               deductions for the other devices at that                              enactment of the BBRA, it was not
     for these radiopharmaceuticals directly                            time. As also explained in section III.C.,                            feasible to revise our database to include
     as described above. For                                            we are proposing to make these                                        these revenue codes in developing the
     radiopharmaceutical drugs, we would                                subtractions for most other devices                                   April 7, 2000 final rule. We were able
     multiply the frequency of use for each                             beginning in 2002. For the purpose of                                 to make the necessary revisions and
     item by the 2001 pass-through amount.                              doing this estimation, we would deduct                                adjustments in time for implementation
     We would estimate expenditures for the                             these amounts from each device package                                on January 1, 2001. When we packaged
     remaining items by using the frequency                             before multiplying that cost by the                                   costs from these revenue codes to
     counts for all nuclear medicine                                    procedure frequencies. In total, we                                   recalculate APC rates for 2001, to
     procedures not billed with one of these                            project the deductions to be $450                                     comply with the BBRA 1999
     radiopharmaceuticals.                                              million. (See section III.C. for a                                    requirement, the median costs for a
     4. Medical Devices                                                 discussion of how we calculated the                                   handful of procedures related to
                                                                        deductions.)                                                          pacemakers and neurostimulators
        We would estimate the transitional                                                                                                    significantly increased. Therefore, we
     pass-through payments attributable to                              5. Projecting to 2002
                                                                                                                                              restructured the affected APCs to
     devices by linking the frequencies for all                           After making the three estimates as                                 account for these changes in procedure
     device-related procedures in the claims                            determined above, we plan to project                                  level median costs.
     data file with the cost and use data                               prices and quantities in the estimates to
     supplied by the manufacturers or other                                                                                                     Under section 1833(t)(6)(D)(ii) of the
                                                                        2002 using actuarial projections of
     entities as part of their applications for                                                                                               Act, as added by the BBRA 1999 and
                                                                        price, volume, and service increase
     pass-through status. We would match                                                                                                      redesignated by BIPA, the amount of
                                                                        consistent with the OPPS baseline. We
     each device eligible as of January 2001                                                                                                  additional payment for an eligible
                                                                        would add the three separate results for
     with the procedures with which it                                                                                                        device is the amount by which the
                                                                        drugs, radiopharmaceuticals, and
     would be used. We would then                                                                                                             hospital’s cost exceeds the portion of
                                                                        devices to determine an estimate of total
     calculate an average cost for each device                                                                                                the otherwise applicable APC payment
                                                                        pass-through spending.
     or device package associated with a                                                                                                      amount that the Secretary determines is
     procedure.                                                         A. Reducing Transitional Pass-Through                                 associated with the device. Thus,
        The statute requires that we calculate                          Payments to Offset Costs Packaged Into                                beginning January 1, 2001, for eligible
     transitional pass-through payments for                             APC Groups                                                            devices, we deducted from transitional
     devices by adjusting the hospital’s                                                                                                      pass-through payments the dollar
                                                                        1. Background
     charge for the device to cost and then                                                                                                   increase in the rates for the new APCs
     subtracting an amount that reflects the                              As discussed above in section II.C.1.                               for procedures associated with the
     device costs already included in the                               of this preamble, in the November 13,                                 devices. Effective April 1, 2001, we
     payment for the associated APC. As we                              2000 interim final rule (65 FR 67806                                  revised our policy to subtract the dollar
     explained in the April 7, 2000 final rule                          and 67825), we explained that we                                      amount from the otherwise applicable
     (65 FR 18481) we were not able to                                  originally excluded costs in revenue                                  pass-through payment for each category
     implement these subtractions at the                                codes 274 (Prosthetic/orthotic devices),                              of device. The dollar amount subtracted
     time of implementation of the system.                              275 (Pacemaker), and 278 (Other                                       in 2001 from transitional pass-through
     For 2001, as we explain in section III.C.                          implants) from the calculation of APC                                 payments for affected categories of
     of this preamble, we made these                                    payment rates because, before                                         devices is as follows:

          TABLE 4.—CY 2001 REDUCTIONS TO PASS-THROUGH PAYMENTS TO OFFSET DEVICE-RELATED COSTS PACKAGED IN
                                             ASSOCIATED APC GROUPS
                                                                                                                                                                                  Subtract from the
                                                                                                                                                                                  pass-through pay-
                                                           For item billed under HCPCS code. * * *                                                                                ment the following
                                                                                                                                                                                      amount:

     C1767   Generator, neurostimulator (implantable) ......................................................................................................................                 $643.73
     C1778   Lead, neurostimulator (implantable) ..............................................................................................................................               501.27
     C1785   Pacemaker, dual chamber, rate-responsive (implantable) ............................................................................................                            2,843.00
     C1786   Pacemaker, single chamber, rate-responsive (implantable) .........................................................................................                             2,843.00
     C1816   Receiver and/or transmitter, neurostimulator (implantable) ..........................................................................................                            537.83
     C2619   Pacemaker, dual chamber, non rate-responsive (implantable) .....................................................................................                               2,843.00
     C2620   Pacemaker, single chamber, non rate-responsive (implantable) ..................................................................................                                2,843.00



        The increase in certain APC rates for                           plus the device or devices did not                                    required by the statute. Since the
     device costs on January 1, 2001 was                                change.                                                               deductions to the pass-through
     offset by the simultaneous reduction of                               For 2002, in this proposed rule we are                             payments for costs included in APCs for
     the associated pass-through payments.                              estimating the portion of each APC rate                               2002 are included in the recalibration of
     Payments for the procedures in the                                 that could reasonably be attributed to                                the weights and the fixed pool of dollars
     affected APCs that did not include a                               the cost of associated devices that are                               for outpatient services, the total
     pass-through device increased for 2001                             eligible for pass-through payments. This                              payment for the procedure plus device
     and for procedures that did include                                amount will be deducted from the pass-                                or devices will be reduced rather than
     devices, total payment for the procedure                           through payments for those devices as                                 remain constant as they did in 2001.


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     2. Proposed Reductions for 2002                                         • We removed the costs in those                                       cost of the reduced cost bills for each
        First, we reviewed the APCs to                                    revenue codes to calculate a cost for the                                relevant APC. For this calculation of the
     determine which of them contained                                    bill net of device-related costs (reduced                                median, we allowed the full costs of
     services that are associated with a                                  cost). For example, the average bill cost                                bills for services in the APC that were
     category of devices eligible for a                                   (in 1999–2000 dollars) for insertion of a                                not associated with pass-through
     transitional pass-through payment. We                                cardiac pacemaker (CPT 33208) was                                        devices.
     then estimated the portion of the costs                              $5,733. The average cost associated with                                    • We calculated, for the APC, the
     in those APCs that could reasonably be                               revenue code 275 was $4,163, so the                                      percentage difference between the APC
     attributed to the cost of pass-through                               reduced cost for the procedure was                                       median of full cost or unreduced bills
     devices as follows:                                                  $1,570. We calculated the ratio of the                                   and the APC median where some or all
        • For each procedure associated with                              reduced cost ($1,570) to the full bill                                   of the bills had reduced costs. We
     a pass-through device or devices, we                                 costs ($5,733), and we applied that ratio                                applied this percent difference to the
     examined all single-service bills (that is,                          to the costs on any bills for CPT 33208                                  proposed APC payment rate in order to
     bills that include services payable only                             that did not use revenue code 275 to                                     calculate the share of that rate
     under one APC) to determine utilization                              establish reduced cost at the procedure                                  attributable to the device or devices
     patterns for specific revenue centers that                           code level across all claims.                                            associated with procedures in the APC.
     would reasonably be used for device-                                    • To determine the reduced cost at                                    In Table 5, we show the amount that we
     related charges in revenue codes 272                                 the APC level and that portion of the                                    propose to subtract from the pass-
     (sterile supplies), 275 (pacemakers), and                            APC payment rate associated with                                         through payment for an eligible device
     278 (other implants).                                                device costs, we calculated the median                                   that is billed with the related APCs.

         TABLE 5.—PROPOSED REDUCTION TO PASS-THROUGH PAYMENT TO OFFSET DEVICE-RELATED COSTS PACKAGED IN
                                             ASSOCIATED APC GROUPS
                                                                                                                                                                                        Device-related
                                                                                                                                                                                        cost to be sub-
                                                                                                                                                                     Percent dif-        tracted from
             APC                                                                        Description                                                                   ferences           pass-through
                                                                                                                                                                                       payment for eligi-
                                                                                                                                                                                          ble device

     00032 ................    Insertion of Central Venous/Arterial Catheter ......................................................................                            20.11                 $73
     00080 ................    Diagnostic Cardiac Catheterization ......................................................................................                        9.99                 164
     00081 ................    Non-Coronary Angioplasty or Atherectomy .........................................................................                               27.06                 303
     00082 ................    Coronary Atherectomy .........................................................................................................                   6.95                 462
     00083 ................    Coronary Angioplasty ...........................................................................................................                19.85                 506
     00088 ................    Thrombectomy ......................................................................................................................             10.86                 161
     00089 ................    Insertion/Replacement of Permanent Pacemaker and Electrodes ......................................                                              72.69               3,052
     00090 ................    Insertion/Replacement of Pacemaker Pulse Generator ......................................................                                       77.13               2,877
     00104 ................    Transcatheter Placement of Intracoronary Stents ...............................................................                                 11.64                 422
     00106 ................    Insertion/Replacement/Repair of Pacemaker and/or Electrodes .........................................                                           79.55                 640
     00107 ................    Insertion of Cardioverter-Defibrillator ...................................................................................                     81.69               6,449
     0108 ..................   Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads ......................................                                         71.16               5,768
     0122 ..................   Level II Tube Changes and Repositioning ...........................................................................                             24.92                  72
     0151 ..................   Endoscopic Retrograde Cholangio-Pancreatography (ERCP) ............................................                                              7.35                  61
     0152 ..................   Percutaneous Biliary Endoscopic Procedures .....................................................................                                12.05                 107
     0154 ..................   Hernia/Hydrocele Procedures ..............................................................................................                       8.80                 108
     0182 ..................   Insertion of Penile Prosthesis ..............................................................................................                   57.22               2,500
     0185 ..................   Removal or Repair of Penile Prosthesis ..............................................................................                           56.82               1,652
     0202 ..................   Level VIII Female Reproductive Procedures .......................................................................                               25.02                 503
     0222 ..................   Implantation of Neurological Device ....................................................................................                        75.70               4,330
     0223 ..................   Implantation of Pain Management Device ...........................................................................                              79.51                 359
     0225 ..................   Implantation of Neurotransmitter Electrodes ........................................................................                            67.25               1,154
     0227 ..................   Implantation of Drug Infusion Device ...................................................................................                        80.23               3,871
     0229 ..................   Transcatheter Placement of Intravascular Shunts ...............................................................                                 35.46               1,083
     0246 ..................   Cataract Procedures with IOL Insert ....................................................................................                        12.87                 146



     VIII. Conversion Factor Update for CY                                one percentage point. Further, section                                   percentage increase minus 1 percentage
     2002                                                                 401 of the BIPA increased the                                            point.
                                                                          conversion factor for 2001 to reflect an                                   In accordance with section
       Section 1833(t)(3)(C)(ii) of the Act
                                                                          update equal to the full market basket                                   1833(t)(9)(B) of the Act, we further
     requires us to update the conversion
                                                                          percentage increase amount.                                              adjusted the proposed conversion factor
     factor used to determine payment rates
     under the OPPS on an annual basis.                                     The most recent forecast of the                                        for 2002 to ensure that the revisions we
     Section 1833(t)(3)(C)(iv) of the Act, as                             hospital market basket increase for FY                                   are proposing to update the wage index
     redesignated by section 401 of the BIPA,                             2002 is 3.3 percent. To set the proposed                                 are made on a budget-neutral basis. A
     provides that for 2002, the update is                                OPPS conversion factor for 2002, we                                      budget neutrality factor of 0.9924 was
     equal to the hospital inpatient market                               increased the 2001 conversion factor of                                  calculated for wage index changes by
     basket percentage increase applicable to                             $50.080, which reflects the BIPA                                         comparing total payments from our
     hospital discharges under section                                    provision of the full market basket                                      simulation model using the proposed
     1886(b)(3)(B)(iii) of the Act, reduced by                            update, by 2.3 percent, that is, the 3.3                                 FY 2002 hospital inpatient PPS wage


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     index values to those payments using                    required by section 401(c) of the BIPA,               for assignment to a new technology
     the current (FY 2001) wage index                        we made payment adjustments effective                 group in section VI.G. of this preamble.
     values.                                                 April 1, 2001 under a special payment                 When it is necessary, creation of new
       The increase factor of 2.3 percent for                rule that has had the effect of providing             technology APC groups involves
     2002 and the required wage index                        a full market basket update in 2001. We               establishment of new codes. New codes
     budget neutrality adjustment of 0.9924                  are, however, working with a contractor               are established through a well-ordered
     result in a proposed conversion factor                  to study the option of developing an                  process that operates on an annual
     for 2002 of $50.842.                                    outpatient-specific market basket and                 cycle. The cycle starts with submission
     IX. Summary of and Responses to                         would welcome comments and                            of information by interested parties no
     MedPac Recommendations                                  recommendations regarding appropriate                 later than April 1 of each year and ends
                                                             data sources. We will also study the                  with the announcement of new codes in
        The Medicare Payment Advisory                        feasibility of developing appropriate                 October. As we stated previously, in the
     Commission (MedPAC) offered several                     adjustments for factors that influence                absence of an appropriate HCPCS code,
     recommendations dealing with the                        the costs of efficiently providing                    we would consider creating a HCPCS
     OPPS in its March 2001 Report to                        hospital outpatient care, such as                     code that describes the procedure or
     Congress. Below we summarize each                       productivity increases and the
     recommendation and respond to it.                                                                             service. These codes would be solely for
                                                             introduction of new technologies, and                 hospitals to use when billing under the
        MedPAC Recommendation: MedPAC
                                                             the availability of appropriate sources of            OPPS.
     has offered two recommendations
                                                             data for calculating the factors.                        We have also provided a mechanism
     regarding the update to the conversion                     In the September 8, 1998 proposed
     factor in the OPPS. The first                                                                                 for moving these services from the new
                                                             rule on the OPPS, we proposed                         technology APCs to clinically related
     recommendation is that the Secretary                    employing a modified version of the
     should not use an expenditure target to                                                                       APCs as part of the annual update of the
                                                             physicians’ sustainable growth rate                   APC groups. As described in section VI
     update the conversion factor. The                       system (SGR) as an adjustment in the
     second recommendation is that                                                                                 of this preamble, a service is retained
                                                             update framework to control for excess                within a new technology APC group
     Congress should require an annual                       increases in the volume of covered
     update of the conversion factor in the                                                                        until we have acquired adequate data
                                                             outpatient services (63 FR 47586–                     that allow us to assign the service to an
     OPPS that is based on the relevant                      47587). In response to comments on this
     factors influencing the costs of                                                                              appropriate APC. We use the annual
                                                             proposal, we announced in the April 7,                APC update cycle to assign the service
     efficiently providing hospital outpatient               2000 final rule that we had decided to
     care, and not just the change in input                                                                        to an existing APC that is similar both
                                                             delay implementation of a volume                      clinically and in terms of resource costs.
     prices.                                                 control mechanism, and to continue to
        Response: Section 1833(t)(3)(C)(ii) of                                                                     If no such APC exists, we create a new
                                                             study the options with a contractor (65               APC for the service.
     the Act requires the Secretary to update
                                                             FR 18503). We will take MedPAC’s                         MedPAC Recommendation: MedPAC
     the conversion factor annually. Under
                                                             recommendation into consideration in                  recommends that pass-through
     section 1833(t)(3)(C)(iv) of the Act the
                                                             making a decision, and before                         payments for specific technologies
     update is equal to the hospital market
                                                             implementing volume control                           should be made in the OPPS only when
     basket percentage increase applicable
                                                             mechanism we will publish a proposed                  a technology is new or substantially
     under the hospital inpatient PPS, minus                 rule with an opportunity for public
     one percentage point for the years 2000                                                                       improved and adds substantially to the
                                                             comment.                                              cost of care in an APC. MedPAC
     and 2002. The Secretary has the                            MedPAC Recommendation: MedPAC
     authority under section 1833(t)(3)(C)(iv)                                                                     believes that the definition of ‘‘new’’
                                                             recommends that the Secretary should                  should not include items whose costs
     of the Act to substitute a market basket                develop formalized procedures in the
     that is specific to hospital outpatient                                                                       were included in the 1996 data used to
                                                             OPPS for expeditiously assigning codes,               set the OPPS payment rates.
     services. Finally, section 1833(t)(2)(F) of             updating relative weights, and
     the Act requires the Secretary to                                                                                Response: The statute requires that,
                                                             investigating the need for service                    under the OPPS, transitional pass-
     develop a method for controlling                        classification changes to recognize the
     unnecessary increases in the volume of                                                                        through payments are made for certain
                                                             costs of new and substantially improved               drugs, devices, and biologicals. The
     covered hospital outpatient services,                   technologies.
     and section 1833(t)(9)(C) of the Act                                                                          items designated by the statute to
                                                                Response: Beginning with the April 7,
     authorizes the Secretary to adjust the                                                                        receive these pass-through payments
                                                             2000 final rule implementing the OPPS,
     update to the conversion factor if the                                                                        include the following:
                                                             we have outlined a comprehensive                         • Current orphan drugs, as designated
     volume of services increased beyond the                 process to recognize the costs of new                 under section 526 of the Federal Food,
     amount established under section                        technology in the new system. One                     Drug, and Cosmetic Act.
     1833(t)(2)(F) of the Act.                               component of this process is the                         • Current drugs and biologicals used
        In the September 8, 1998 proposed                    provision for pass-through payments for               for the treatment of cancer, and
     rule on the OPPS, we indicated that we                  devices, drugs, and biologicals (see the              brachytherapy and temperature
     were considering the option of                          discussion in conjunction with the next               monitored cryoablation devices used for
     developing an outpatient-specific                       MedPAC recommendation). The other                     the treatment of cancer.
     market basket and invited comments on                   component is the creation of new APC                     • Current radiopharmaceutical drugs
     possible sources of data suitable for                   groups to accommodate payment for                     and biologicals.
     constructing one (63 FR 47579). We                      new technology services that are not                     • New drugs and biologicals in
     received no comments in response to                     eligible for transitional pass-through                instances in which the item was not
     this invitation, and we therefore                       payments. We assign new technology                    being paid as a hospital outpatient
     announced in the April 7, 2000 final                    services that cannot be appropriately                 service as of December 31, 1996, and
     rule that we would update the                           placed within existing APC groups to                  when the cost of the item is ‘‘not
     conversion factor by the hospital                       new technology APC groups, using costs                insignificant’’ in relation to the OPPS
     inpatient market basket increase, minus                 alone (rather than costs plus clinical                payment amount.
     one percentage point, for the years 2000,               coherence) as the basis for the                          • Effective April 1, 2001, categories of
     2001, and 2002 (65 FR 18502). As                        assignment. We describe revised criteria              Medical devices when the cost of the


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     category is not insignificant’’ in relation                Response: For most services that                   Since the beginning of the Medicare
     to the OPPS payment amount.                             Medicare covers, the program is                       program, some providers, which we
        We are publishing a separate interim                 responsible for 80 percent of the total               refer to as ‘‘main providers,’’ have
     final rule in which we lay out the                      payment amount, and beneficiaries pay                 functioned as a single entity while
     criteria for establishing categories of                 20 percent. However, under the cost-                  owning and operating multiple
     devices eligible for pass-through                       based payment system in place for                     departments, locations, and facilities.
     payments.                                               outpatient services before the OPPS,                  Having clear criteria for provider-based
        Section 1833(t)(6) of the Act provides               beneficiaries paid 20 percent of the                  status is important because this
     that once a category is established, a                  hospital’s charges for these services. As             designation can result in additional
     specific device may receive a pass-                     a result, coinsurance was often more                  Medicare payments for services
     through payment for 2 to 3 years if the                 than 20 percent of the total payment                  furnished at the provider-based facility,
     device is described by an existing                      amount for the services.                              and may also increase the coinsurance
     category, regardless of whether it was                     The BBA established a formula under                liability of Medicare for those services.
     being paid as a hospital outpatient                     the OPPS that was designed to reduce                     The regulations at § 413.65 define
     service as of December 31, 1996 or its                  coinsurance gradually to 20 percent of                provider-based status as ‘‘the
     cost meets the ‘‘not insignificant’’                    the total payment amount. Under this                  relationship between a main provider
     criterion. Thus, the statute allows for                 formula, a national copayment amount                  and a provider-based entity or a
     certain devices that do not meet                        was set for each service category, and                department of a provider, remote
     MedPAC’s recommended limitation on                      that amount is to remain frozen as                    location of a hospital, or satellite
     a ‘‘new’’ device to receive transitional                payment rates increase until the                      facility, that complies with the
     pass-through payments. However, no                      coinsurance percentage falls to 20                    provisions of this section.’’ Section
     categories are created on the basis of                  percent for all services. On average,                 413.65(b)(2) states that before a main
     devices that were paid for on or before                 beneficiaries have paid about 16 percent              provider may bill for services of a
     December 31, 1996. That is, while                       less in copayments for hospital                       facility as if the facility is provider-
     devices paid for on or before December                  outpatient services during 2000 under                 based, or before it includes costs of
     31, 1996 can be included in a category,                 the OPPS than they would have paid                    those services on its cost report, the
     we would establish a category only on                   under the previous system. However, it                facility must meet the criteria listed in
     the basis of devices that were not being                is true that the coinsurance remains                  the regulations at § 413.65(d). Among
     paid as hospital outpatient services as of              higher than 20 percent of the Medicare                these criteria are the requirements that
     December 31, 1996.                                      payment amount for many services.                     the main provider and the facility must
                                                                Subsequent legislation has placed                  have common licensure (when
        MedPAC Recommendation: MedPAC
                                                             caps on the coinsurance percentages to                appropriate), the facility must operate
     recommends that pass-through
                                                             speed up this process. Specifically,                  under the ownership and control of the
     payments for specific technologies in
                                                             section 111 of BIPA amended section                   main provider, and the facility must be
     the OPPS should be made on a budget-
                                                             1833(t)(8)(C)(ii) of the Act to reduce                located in the immediate vicinity of the
     neutral basis and that the costs of new
                                                             beneficiary coinsurance liability by                  main provider.
     or substantially improved technologies                                                                           The effective date of these regulations
     should be factored into the update of the               phasing in a cap on the coinsurance
                                                             percentage for each service. Starting on              was originally set at October 10, 2000,
     outpatient conversion factor.                                                                                 but was subsequently delayed and is
        Response: The statute requires that                  April 1, 2001, coinsurance for a single
                                                             service furnished in 2001 cannot exceed               now in effect for cost reporting periods
     the transitional pass-through payments                                                                        beginning on or after January 10, 2001.
     for drugs, devices, and biologicals be                  57 percent of the total payment amount
                                                                                                                   Program instructions on provider-based
     made on a budget neutral basis.                         for the service. The cap will be 55
                                                                                                                   status issued prior to that date, found in
     Estimated pass-through payments are                     percent in 2002 and 2003, and will be
                                                                                                                   Section 2446 of the Provider
     limited under the statute to 2.5 percent                reduced by 5 percentage points each
                                                                                                                   Reimbursement Manual—Part 1 (PRM–
     (and up to 2.0 percent for 2004 and                     year from 2004 to 2006 until
                                                                                                                   1), Section 2004 of the Medicare State
     thereafter) of estimated total program                  coinsurance is limited to 40 percent of
                                                                                                                   Operations Manual (SOM), and CMS
     payments for covered hospital                           the total payment for each service. The
                                                                                                                   Program Memorandum (PM) A–99–24,
     outpatient services. We adjust the                      underlying process for decreasing
                                                                                                                   will apply to any facility for periods
     conversion factor to account for the                    coinsurance will also continue during
                                                                                                                   before the new regulations become
     proportion of total program payments                    this period (see discussion in section
                                                                                                                   applicable to it. (Some of these
     for covered hospital outpatient services,               IV.A. of this preamble). However,
                                                                                                                   instructions will not be applied because
     up to the statutory limit, that we                      MedPAC projects that under current
                                                                                                                   they have been superseded by specific
     estimate will be made in pass-through                   law, it would take until 2029 to reach
                                                                                                                   legislation on provider-based status, as
     payments. As we have discussed in                       the goal of 20 percent coinsurance for
                                                                                                                   described in item C below).
     response to MedPAC’s recommendation                     all services.
     concerning an update framework for the                     We agree with MedPAC’s goal of                     B. Provider-Based Issues/Frequently
     OPPS conversion factor, we will study                   continuing the reduction in outpatient                Asked Questions
     the feasibility of including appropriate                coinsurance, and we would welcome                        Following publication of the April 7,
     adjustments for factors, including                      enactment of a practical measure to do                2000 final rule, we received many
     introduction of new technologies, that                  so.                                                   requests for clarification of policies on
     influence the costs of efficiently                      X. Provider-Based Issues                              specific issues related to provider-based
     providing hospital outpatient care                                                                            status. In response, we published a list
     within such a framework.                                A. Background and April 7, 2000                       of ‘‘Frequently Asked Questions’’ and
        MedPAC Recommendation: MedPAC                        Regulations                                           the answers to them on the CMS web
     recommends that the Congress should                       On April 7, 2000, we published a final              site at www.hcfa.gov/medlearn/
     continue the reduction in outpatient                    rule specifying the criteria that must be             provqa.htm. (This document can also be
     coinsurance to achieve a 20 percent                     met for a determination regarding                     obtained by contacting the CMS
     coinsurance rate by 2010.                               provider-based status (65 FR 18504).                  (Formerly, HCFA) Regional Office.)


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     These Qs and As did not revise the                      concerns with our policy on the                          3. Criteria for Temporary Treatment as
     regulatory criteria, but do provide                     applicability of EMTALA to provider-                     Provider-Based
     subregulatory guidance for their                        based facilities and organizations. We                      Finally, section 404(c) of BIPA also
     implementation.                                         intend to re-examine these regulations                   provides that a facility or organization
                                                             and, in particular, reconsider the                       that seeks a determination of provider-
     C. Benefits Improvement and Protection
     Act of 2000 (Pub. L. 106–554)                           appropriateness of applying EMTALA to                    based status on or after October 1, 2000
                                                             off-campus locations. At the same time,                  and before October 1, 2002 may not be
        On December 21 2000, the Benefits                    we want to assure that those                             treated as not having provider-based
     Improvement and Protection Act (BIPA)                   departments that Medicare pays as                        status for any period before a
     of 2000 (Pub. L. 106–554) was enacted.                  hospital-based departments are                           determination is made. Thus, recovery
     Section 404 of BIPA contains provisions                 appropriately integrated with the
     that significantly affect the provider-                                                                          for overpayments will not be made
                                                             hospital as a whole. We intend to                        retroactively for noncompliance with
     based regulations at § 413.65. Section                  publish a proposed rule to address these
     404 includes a grandfathering provision                                                                          the provider-based criteria once a
                                                             issues more fully.                                       request for a determination during that
     for facilities treated as provider-based
     on October 1, 2000; alternative criteria                2. Geographic Location Criteria                          time period has been made. For
     for meeting the geographic location                                                                              hospitals that do not qualify for
                                                                Section 404(b) of BIPA provides that                  grandfathering under section 404(a),
     requirement; and criteria for temporary                 those facilities or organizations that are
     treatment as provider-based.                                                                                     until a uniform application is available,
                                                             not included in the grandfathering                       a request for provider-based status
     1. Two-Year ‘‘Grandfathering’’                          provision at section 404(a) are deemed                   should be submitted to the appropriate
                                                             to comply with the ‘‘immediate                           CMS Regional Office (RO). At a
        Under section 404(a) of BIPA, any
     facilities or organizations that were                   vicinity’’ requirements of the new                       minimum, the request should include
     ‘‘treated’’ as provider-based in relation               regulations under § 413.65(d)(7) if they                 the identity of the main provider and
     to any hospital or CAH on October 1,                    are located not more than 35 miles from                  the facility or organization for which
     2000 will continue to be treated as such                the main campus of the hospital or                       provider-based status is being sought
     until October 1, 2002. For the purpose                  critical access hospital. Therefore, those               and supporting documentation to
     of this provision, we interpret ‘‘treated               facilities located within 35 miles of the                demonstrate compliance with the
     as provider-based’’ to include those                    main provider satisfy the immediate                      provider-based status criteria in effect at
     facilities with formal CMS                              vicinity requirement as an alternative to                the time the application is submitted.
     determinations, as well as those                        meeting the ‘‘75/75 test’’ under                         Once such a request has been submitted
     facilities without formal CMS                           § 413.65(d)(7).                                          on or after October 1, 2000, and before
     determinations that were being paid as                     In addition, BIPA provides that                       October 1, 2002, CMS will treat the
     provider-based as of October 1, 2000. As                certain facilities or organizations are                  facility or organization as being
     a result, existing provider-based                       deemed to comply with the                                provider-based from the date it began
     facilities and organizations may retain                 requirements for geographic proximity                    operating as provider-based (as long as
     that status without meeting the criteria                (either the ‘‘75/75 test’’ or the ‘‘35-mile              that date is on or after October 1, 2000)
     in the regulations under §§ 413.65(d),                  test’’) if they are owned and operated by                until the effective date of a CMS
     (e), (f), and (h) until October 1, 2002.                a main provider that is a hospital with                  determination that the facility or
     These provisions concern provider-                      a disproportionate share adjustment                      organization is not provider-based.
     based status requirements, joint                        percentage greater than 11.75 percent                       Facilities requesting a provider-based
     ventures, management contracts, and                     and is (1) owned or operated by a unit                   status determination on or after October
     services under arrangement. Thus, the                   of State or local government, (2) a public               1, 2002 will not be covered by the
     provider-based facilities and                           or private nonprofit corporation that is                 provision concerning temporary
     organizations affected under section                    formally granted governmental powers                     treatment as provider-based in section
     404(a) are not required to submit an                    by a unit of State or local government,                  404(c) of BIPA. Thus, as stated in
     application for or obtain a provider-                   or (3) a private hospital that has a                     § 413.65(n), CMS ROs will make
     based status determination in order to                  contract with a state or local                           provider-based status applicable as of
     continue receiving reimbursement as                     government that includes the operation                   the earliest date on which a request for
     provider-based during this period.                      of clinics of the hospital to assure access              determination has been made and all
        These provider-based facilities and                  in a well-defined service area to health                 requirements for provider-based status
     organizations will not be exempt from                   care services for low-income individuals                 in effect as of the date of the request are
     the Emergency Medical Treatment and                     who are not entitled to benefits under                   shown to have been met, not on the date
     Active Labor Act (EMTALA)                               Medicare or Medicaid.                                    of the formal CMS determination. If a
     requirements for provider-based                            These geographic location criteria are                facility or organization does not qualify
     facilities and organizations (revised                   permanent. While those facilities or                     for provider-based status and CMS
     § 489.24(b) and new § 489.24(i)) or from                organizations treated as provider-based                  learns that the provider has treated the
     the obligations of hospital outpatient                  on October 1, 2000 are covered by the                    facility or organization as provider-
     departments and hospital-based entities                 two-year grandfathering provision noted                  based without having obtained a
     in § 413.65(g), such as the requirement                 above, the geographic location criteria at               provider-based determination under
     that off-campus facilities provide                      section 404(b) of BIPA and the                           applicable regulations, CMS will review
     written notices to Medicare                             regulations at § 413.65(d)(7) will apply                 all payments and may seek recovery for
     beneficiaries of coinsurance liability.                 to facilities or organizations not treated               overpayments in accordance with the
     These requirements become effective for                 as provider-based as of that date,                       regulations at § 413.65(j), including
     hospitals on the first day of the                       effective with the hospital’s cost                       overpayments made for the period of
     hospital’s cost reporting period                        reporting period beginning on or after                   time between submission of the request
     beginning on or after January 10, 2001.                 January 10, 2001. Beginning October 1,                   or application for provider-based status
        We are aware that many hospitals and                 2002, these criteria will also apply to                  and the issuance of a formal CMS
     physicians continue to have significant                 the grandfathered facilities.                            determination.


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     44710                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     D. Proposed Changes to Provider-Based                      For costs of services furnished to free-              based determinations will not be made
     Regulations                                             standing entities, we would also clarify                 for them.
       To fully implement the provisions of                  in revised § 413.24(d)(7), that the costs
                                                                                                                      3. BIPA Provisions on Grandfathering
     section 404 of BIPA and to codify the                   that a provider incurs to furnish services
                                                                                                                      and Temporary Treatment as Provider-
     clarifications currently stated only in                 to free-standing entities with which it is
                                                                                                                      Based (§§ 413.65(b)(2) and (b)(5))
     the Q&As on provider-based status, as                   associated are not allowable costs of that
                                                             provider. Any costs of services                             Current regulations at § 413.65(b)(2)
     described above, we are proposing to                                                                             state that a main provider or a facility
     revise the regulations as follows.                      furnished to a free-standing entity must
                                                             be identified and eliminated from the                    must contact CMS (Formerly, HCFA)
     1. Clarification of Requirements for                    allowable costs of the servicing                         and the facility must be determined by
     Adequate Cost Data and Cost Finding                     provider, to prevent Medicare payment                    CMS (Formerly, HCFA) to be provider-
     (§ 413.24(d))                                           to that provider for those costs. This                   based before the main provider bills for
                                                             may be done by including the free-                       services of the facility as if the facility
        As part of the April 7, 2000, final rule
                                                             standing entity on the cost report as a                  were provider-based, or before it
     implementing the prospective payment
                                                             nonreimbursable cost center for the                      includes costs of those services on its
     system for hospital outpatient services                                                                          cost report. However, as explained
     to Medicare beneficiaries, under                        purpose of allocating overhead costs to
                                                             that entity. If this method would not                    earlier, sections 404(a) and (c) of BIPA
     § 413.24, Adequate Cost Data and Cost                                                                            require that certain facilities be
     Finding, we added a new paragraph                       result in an accurate allocation of costs
                                                             to the entity, the provider must develop                 grandfathered for a 2-year period, and
     (d)(6), entitled ‘‘Management                                                                                    that facilities applying between October
     Contracts.’’ Since publication of the                   detailed work papers showing how the
                                                             cost of services furnished by the                        1, 2000 and October 1, 2002 for
     final rule, we have received several                                                                             provider-based status with respect to a
     questions concerning the new                            provider to the entity were determined.
                                                             These costs are removed from the                         hospital be given provider-based status
     paragraph.                                                                                                       on a temporary basis, pending a
        In response to these questions, we are               applicable cost centers of the servicing
                                                             provider.                                                decision on their applications. To
     proposing changes in wording to clarify                                                                          implement these provisions, we propose
                                                                This revision is not a change in the
     the meaning of that paragraph. In                                                                                to revise the regulations in
                                                             policy, but instead is a clarification to
     addition, for further clarity, we are                                                                            § 413.65(b)(2) to state that if a facility
                                                             the policy set forth in the April 7, 2000
     revising the coding and title of that                   final rule.                                              was treated as provider-based in relation
     material. Under our proposal,                                                                                    to a hospital or CAH on October 1, 2000,
     § 413.24(d)(6)(i) would become                          2. Scope and Definitions (§ 413.65(a))                   it will continue to be considered
     § 413.24(d)(6) and § 413.24(d)(6)(ii)                      In Q/A 9 published on the CMS                         provider-based in relation to that
     would become § 413.24(d)(7). As                         (Formerly, HCFA) web site at                             hospital or CAH until October 1, 2002,
     revised, paragraph (d)(6) would address                 www.hcfa.gov/medlearn/provqa.htm,                        and the requirements, limitations, and
     the situation when the main provider in                 we identified specific types of facilities               exclusions specified in paragraphs (d),
     a provider-based complex purchases                      for which provider-based                                 (e), (f), and (h) of § 413.65 will not apply
     services for a provider-based entity or                 determinations would not be made,                        to that hospital or CAH with respect to
     for a department of the provider through                since their status would not affect either               that facility until October 1, 2002. We
     a contract for services (for example, a                 Medicare payment levels or beneficiary                   would further state that for purposes of
     management contract), directly                          liability. (This document may also be                    paragraph (b)(2), a facility will be
     assigning the costs to the provider-based               obtained by contacting the CMS                           considered to have been treated as
     entity or department and reporting the                  (Formerly, HCFA) Regional Office.) The                   provider-based on October 1, 2000, if on
     costs directly in the cost center for that              facilities identified in Q/A 9 are                       that date it either had a written
     entity or department. In any situation in               ambulatory Surgical Centers (ASCs),                      determination from CMS (Formerly,
     which costs are directly assigned to a                  comprehensive outpatient rehabilitation                  HCFA) that it was provider-based as of
     cost center, there is a risk of excess cost             facilities (CORFs); home health agencies                 that date, or was billing and being paid
     in that cost center resulting from the                  (HHAs); skilled nursing facilities                       as a provider-based department or entity
     directly assigned costs plus a share of                 (SNFs); hospices; inpatient                              of the hospital.
     overhead improperly allocated to the                    rehabilitation units that are excluded                      We would also propose to add a new
     cost center which duplicates the                        from the inpatient PPS for acute                         § 413.65(b)(2) to state that a facility for
     directly assigned costs. This duplication               hospital services; independent                           which a determination of provider-
     could result in improper Medicare                       diagnostic testing facilities and any                    based status in relation to a hospital or
     payment to the provider. Therefore,                     other facilities that furnish only clinical              CAH is requested on or after October 1,
     where a provider has purchased services                 diagnostic laboratory tests; facilities                  2000 and before October 1, 2002 will be
     for a provider-based entity or for a                    furnishing only physical, occupational                   treated as provider-based in relation to
     provider department, like general                       or speech therapy to ambulatory                          the hospital or CAH from the first date
     service costs of the provider (for                      patients, for as long as the $1500 annual                on or after October 1, 2000 on which the
     example, like costs in the administrative               cap on coverage of physical,                             facility was licensed (to the extent
     and general cost center) must be                        occupational, and speech therapy, as                     required by the State), staffed and
     separately identified to ensure that they               described in section 1833(g)(2) of the                   equipped to treat patients until the date
     are not improperly allocated to the                     Act, remains suspended by the action of                  on which CMS (Formerly, HCFA)
     entity or the department. If the like costs             subsequent legislation; and end-stage                    determines that the facility does not
     of the provider cannot be separately                    renal disease (ESRD) facilities.                         qualify for provider-based status.
     identified, the costs of the services                   Determinations for ESRD facilities are
     purchased through a contract for the                    made under § 413.174.                                    4. Reporting (§ 413.65(c)(1))
     provider-based entity or provider                          We propose to revise the regulations                     Current regulations at § 413.65(c) state
     department must be reclassified to the                  at § 413.65(a) to clarify that these                     that a main provider that creates or
     main provider and allocated among the                   facilities are not subject to the provider-              acquires a facility or organization for
     main provider’s benefiting cost centers.                based requirements and that provider-                    which it wishes to claim provider-based


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                             Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                             44711

     status, including any physician offices                   (C) Is a private hospital that has a                   any other reason unable to read a
     that a hospital wishes to operate as a                  contract with a State or local                           written notice and understand and act
     hospital outpatient department or clinic,               government that includes the operation                   on his or her own rights, the notice must
     must report its acquisition of the facility             of clinics located off the main campus                   be provided, prior to the delivery of
     or organization to CMS (Formerly,                       of the hospital to assure access in a                    services, to the beneficiary’s authorized
     HCFA) if the facility or organization is                well-defined service area to health care                 representative.
     located off the campus of the provider,                 services to low-income individuals who
                                                                                                                        We are proposing to amend
     or inclusion of the costs of the facility               are not entitled to benefits under
                                                                                                                      § 413.65(g)(7) to include this clarifying
     or organization in the provider’s cost                  Medicare (or medical assistance under a
                                                                                                                      language.
     report would increase the total costs on                Medicaid State plan); and
     the provider’s cost report by at least 5                  (D) Has a disproportionate share                       7. Clarification of Protocols for Off-
     percent, and must furnish all                           adjustment (as determined under                          Campus Departments (§ 489.24(i)(2)(ii))
     information needed for a determination                  § 412.106 of this chapter) greater than
     as to whether the facility or organization              11.75 percent or is described in                            Current regulations at § 489.24(i)
     meets the requirements in paragraph (d)                 § 412.106(c)(2) of this chapter                          specify the antipatient dumping
     of this section for provider-based status.              implementing section 1886(d)(5)(F)(i)(II)                obligations that hospitals have with
     Concern has been expressed that such                    of the Act.                                              respect to individuals who come to off-
     reporting would duplicate the                             • The facility meets the criteria                      campus hospital departments for the
     requirement for obtaining approval of a                 currently set forth in § 413.65(d)(7)(i) for             examination or treatment of a potential
     facility as provider-based before billing               service to the same patient population                   emergency medical conditions. These
     its services that way or including its                  as the main provider.                                    obligations are sometimes known as
     costs on the cost report of the main                    6. Notice to Beneficiaries of Coinsurance                EMTALA obligations, after the
     provider (current § 413.65(b)(2)). To                   Liability (§ 413.65(g)(7))                               Emergency Medical Treatment and
     prevent any unnecessary duplicate                                                                                Active Labor Act, which is the
     reporting, we propose to delete the                        Current regulations at § 413.65(g)(7)                 legislation that first imposed the
     current requirement from § 413.65(c)(1).                state that when a Medicare beneficiary                   obligations. Currently, hospitals are
     We would, however, retain the                           is treated in a hospital outpatient                      responsible for ensuring that personnel
     requirement that a main provider that                   department or hospital-based entity
                                                                                                                      at their off-campus departments are
     has had one or more facilities                          (other than an RHC) that is not located
                                                                                                                      trained and given appropriate protocols
     considered provider-based also report to                on the main provider’s campus, the
                                                                                                                      for the handling of emergency cases.
     CMS (Formerly, HCFA) any material                       hospital has a duty to provide written
                                                             notice to the beneficiary, prior to the                     In the case of off-campus departments
     change in the relationship between it
                                                             delivery of services, of the amount of                   not routinely staffed with physicians,
     and any provider-based facility, such as
                                                             the beneficiary’s potential financial                    RNs, or LPNs, the department’s
     a change in ownership of the facility or
                                                             liability (that is, of the fact that the                 personnel must be given protocols that
     entry into a new or different
                                                             beneficiary will incur a coinsurance                     direct them to contact emergency
     management contract that could affect
                                                             liability for an outpatient visit to the                 personnel at the main hospital campus
     the provider-based status of the facility.
                                                             hospital as well as for the physician                    before arranging an appropriate transfer
     5. Geographic Location Criteria                         service, and of the amount of that                       to a medical facility other than the main
     (§ 413.65(d)(7))                                        liability). The notice must be one that                  hospital.
        As explained earlier in C.2 of this                  the beneficiary can read and                                Some concern had been expressed
     section, section 404(b) of BIPA                         understand.                                              that taking the time needed to make
     mandates that facilities seeking                           Some concern had been expressed                       such contacts might inappropriately
     provider-based status be considered to                  that providing notice of a beneficiary’s                 delay the appropriate transfer of
     meet any geographic location criteria if                exact liability might be difficult in cases
                                                                                                                      emergency patients in cases where the
     they are located not more than 35 miles                 where the treating physician was in the
                                                                                                                      patient’s condition was deteriorating
     from the main campus of the hospital or                 process of diagnosing the patient’s
                                                                                                                      rapidly. In response to this concern we
     CAH to which they wish to be based, or                  condition and was unsure of exactly
                                                                                                                      clarified in the preamble to the interim
     meet other specific criteria relating to                what services might be required. In
                                                                                                                      final rule with comment period
     their ownership and operation. To                       response to this concern we clarified in
                                                                                                                      published on August 3, 2000 cited
     implement this provision, we propose to                 the preamble to an interim final rule
                                                                                                                      above (65 FR 47670) that in any case of
     revise § 413.65(d)(7) to state that facility            with comment period published on
                                                                                                                      the kind described in § 489.24(i)(2)(ii)
     will meet provider-based location                       August 3, 2000 (65 FR 47670) that if the
                                                                                                                      the contact with emergency personnel at
     criteria if it and the main provider are                exact type and extent of care needed is
                                                                                                                      the main hospital campus should be
     located on the same campus, or if one                   not known, the hospital may furnish a
                                                             written notice to the patient that                       made either concurrently with or after
     of the following three criteria are met:                                                                         the actions needed to arrange an
        • The facility or organization is                    explains the fact that the beneficiary
                                                             will incur a coinsurance liability to the                appropriate transfer, if doing otherwise
     located within a 35-mile radius of the                                                                           would significantly jeopardize the
     main campus of the hospital or CAH                      hospital that they would not incur if the
                                                             facility were not provider-based. The                    individual’s life or health. This does not
     that is the potential main provider;                                                                             relieve the off-campus department of the
        • The facility or organization is                    interim final rule preamble
                                                             § 413.65(g)(7)) further explained that the               responsibility for making the contact,
     owned and operated by a hospital or
                                                             hospital may furnish an estimate based                   but only clarifies that the contact may
     CAH that—
        (A) Is owned or operated by a unit of                on typical or average charges for visits                 be delayed in specific cases where doing
     State or local government;                              to the facility, while stating that the                  otherwise would endanger a patient
        (B) Is a public or nonprofit                         patient’s actual liability will depend                   subject to EMTALA protection.
     corporation that is formally granted                    upon the actual services furnished by                       We are proposing to amend
     governmental powers by a unit of State                  the hospital. If the beneficiary is                      § 489.24(i)(2)(ii) to include this
     or local government; or,                                unconscious, under great duress, or for                  clarifying language.


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     44712                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     8. Other Changes                                           • Calculate outlier payments on a                     • Delete the existing requirement in
        In addition to the changes cited                     service-by-service basis beginning in                 § 413.65(c)(1) in order to prevent
     above, we are proposing to make the                     2002. We also propose a methodology                   unnecessary duplicate reporting.
     following conforming and clarifying                     for allocating packaged services to                      • Specify in § 413.65(d)(7) that a
     changes:                                                individual APCs in determining costs of               facility will meet provider-based
        • We are correcting date references in               a service and we propose to use a                     geographic location criteria if it and the
     §§ 413.65(i)(1)(i) and (i)(2), in order to              hospital’s overall outpatient cost-to-                main provider are located on the same
     take into account the effective date of                 charge ratio to convert charges to costs.             campus, or if a facility meets one of the
                                                                • Change the threshold for outlier                 three criteria specified in this
     the current regulations.
                                                             payments to require costs to exceed 3                 paragraph.
        • We are substituting ‘‘CMS’’ for
                                                             times the APC payment amount, and                        • Clarify in § 413.65(g)(7) that the
     ‘‘HCFA’’ throughout the revised sections
                                                             pay 50 percent of any excess costs above              hospital may furnish an estimate based
     of part 413, to reflect the renaming of
                                                             the threshold as an outlier payment.                  on typical or average charges for visits
     the Health Care Financing                                  • Exclude hospitals located outside                to the facility, while stating that the
     Administration (HCFA) as the Centers                    the 50 states, the District of Columbia               patient’s actual liability will depend
     for Medicare & Medicaid Services                        and Puerto Rico from the OPPS.                        upon the actual services furnished by
     (CMS).                                                     • Exclude from payment under the                   the hospital.
     XI. Summary of Proposed Changes for                     OPPS certain services that are furnished                 • Correct date references in
     2002                                                    to inpatients of hospitals that do not                §§ 413.65(i)(1)(ii) and (i)(2), in order to
                                                             submit claims for outpatient services                 take into account the effective date of
     A. Changes Required by BIPA 2000                        under Medicare Part B.                                the current regulations.
       We are proposing the following                           • Exclude from the OPPS certain                       In part 419, we would—
     changes to the OPPS, to implement the                   items and services (for example, bad                     • Revise § 419.2 to clarify the costs
     provisions of BIPA 2000:                                debts, direct medical education and                   that are excluded from the OPPS rates.
       • Limit coinsurance to a specified                    certain certified registered nurse                       • Revise the reference to the effective
     percentage of APC payment amounts.                      anesthetists services) that are paid on a             date of the OPPS to August 1, 2000 in
       • Provide hold-harmless transitional                  cost basis.                                           § 419.20(a).
     corridor payments to children’s                            • Propose to update the payments for                  • Add new §§ 419.20(b)(3) and (b)(4)
     hospitals.                                              pass-through radiopharmaceuticals,                    to specify that a hospital located outside
       • Provide separate APCs for services                  drugs, and biologicals on a calendar                  one of the 50 States, the District of
     that use contrast agents and those that                 year basis to reflect increases in AWP.               Columbia, or Puerto Rico, or a hospital
     do not.                                                    • Allow reprocessed single use                     of the Indian Health Service is excluded
       • Pay for glaucoma screening as a                     devices to be considered eligible for                 from the hospital outpatient prospective
     covered service.                                        pass-through payments if the                          payment system.
       • Pay for certain new technology used                 reprocessing process for single use                      • Add a new § 419.22(r) to specify
     in screening and diagnostic                             devices meets the FDA’s most recent                   that services defined in § 419.21(b) that
     mammograms.                                             criteria.                                             are furnished to inpatients of hospitals
                                                                • Revise the criteria we will use to               that do not submit claims for
     B. Additional Changes                                   determine whether a procedure or                      outpatients services under Medicare
       We are proposing the following                        service is eligible to be assigned to a               Part B are not paid for under the
     additional changes to the OPPS:                         new technology APC.                                   hospital OPPS.
       • Add APCs, delete APCs, and                             • Revise the list of information that                 • Revise § 419.32 to reflect the
     modify the composition of services                      must be submitted to request                          revised update to the payment rates, as
     within some existing APCs.                              assignment of a service or procedure to               required by section 401 of BIPA.
       • Add an APC group that would                         a new technology APC.                                    • Replace the word ‘‘coinsurance’’
     provide payment for observation                            • Provide more flexibility in the                  each time it appears in §§ 419.40,
     services in limited circumstances to                    amount of time a service may be paid                  419.41, 419.42 and 419.43 with the
     patients having specific diagnoses.                     under a new technology APC.                           word ‘‘copayment.’’
       • Recalibrate the relative payment                    C. Technical Corrections                                 • Redesignate existing
     weights of the APCs.                                      We are proposing to make conforming                 § 419.41(c)(4)(ii) as paragraph (c)(4)(iv),
       • Update the conversion factor and                    changes to the regulations in 42 CFR                  and add paragraphs (c)(4)(ii) and
     wage index.                                             parts 413, 419 and 489.                               (c)(4)(iii) to include the provisions of
       • Revise the APC payment amounts                        In part 413 we would—                               section 1833(t)(8)(C)(ii) of the Act. This
     to reflect the APC reclassifications, the                 • Revise § 413.24(d)(6) and (d) (7) to              section would specify that, effective for
     recalibration of payment weights and                    clarify requirements for adequate cost                services furnished from April 1, 2001
     the other required updates and                          data and cost findings and clarify the                through December 31, 2001, the national
     adjustments.                                            meaning of the paragraph.                             unadjusted coinsurance rate for an APC
       • Make reductions in pass-through                       • Revise § 413.65(a)(1) to clarify the              cannot exceed 57 percent of the
     payments for specific drugs and                         specified types of facilities identified in           prospective rate for that APC and the
     categories of devices to account for the                this section that are not subject to the              national unadjusted coinsurance rate for
     drug and device costs that are included                 provider-based requirements and that                  an APC cannot exceed 55 percent in
     in the APC payment for associated                       provider-based determinations will not                calendar year 2004, 45 percent in
     procedures and services.                                be made for them.                                     calendar year 2005, and 40 percent in
       • Apply a standard procedure to                         • Revise the definition of ‘‘Provider-              calendar year 2006 and thereafter.
     calculate copayment amounts when                        based entity’’ in § 413.65(a)(2).                        • Revise § 419.70(d) to give children’s
     new APCs are created or when APC                          • Revise § 413.65(b) to implement the               hospitals the same permanent hold
     payment rates are increased or                          BIPA provisions on grandfathering and                 harmless protection as cancer hospitals
     decreased as a result of recalibrated                   temporary treatment of a facility as                  under the OPPS, as required by section
     weights.                                                provider-based.                                       405 of BIPA.


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                             Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                             44713

       • Revise § 489.24(i)(2)(ii) to clarify                to become effective by January 1, 2002                   compared to CY 2001 payments to be
     that, for the purposes of arranging an                  for hospital outpatient departments to                   approximately a $450 million increase.
     appropriate transfer of a patient from an               receive appropriate higher payments                      Therefore, this proposed rule is an
     off-campus department, staff at the off-                and to ensure that beneficiaries receive                 economically significant rule under
     campus department may delay                             the benefits of further reductions in                    Executive Order 12866, and a major rule
     contacting the emergency personnel at                   beneficiary copayments. Congress has                     under 5 U.S.C. 804(2).
     the main hospital campus in the specific                directed us to update payment rates                         The RFA requires agencies to
     cases where doing otherwise would                       annually, at the beginning of each                       determine whether a rule will have a
     endanger a patient.                                     calendar year. If the increased provider                 significant economic impact on a
                                                             payments and reduced beneficiary                         substantial number of small entities. For
     XII. Collection of Information                                                                                   purposes of the RFA, small entities
                                                             copayments do not become effective by
     Requirements                                                                                                     include small businesses, nonprofit
                                                             the statutory effective date of January 1,
        Under the Paperwork Reduction Act                    2002, enormous uncertainty and                           organizations and government agencies.
     of 1995, we are required to provide 60-                 administrative difficulties will result for              Most hospitals and most other providers
     day notice in the Federal Register and                  beneficiaries, providers, and                            and suppliers are small entities, either
     solicit public comment before a                         intermediaries. In addition, any delay in                by nonprofit status of by having
     collection of information requirement is                receiving increased provider payments                    revenues of $5 to $25 million or less
     submitted to the Office of Management                   or reduced beneficiary copayments will                   annually (see 65 FR 69432). For
     and Budget (OMB) for review and                         cause harm to providers and                              purposes of the RFA, all providers of
     approval. In order to fairly evaluate                   beneficiaries. Consequently, in order to                 hospital outpatient services are
     whether an information collection                       avoid imposing this uncertainty and                      considered small entities. Individuals
     should be approved by OMB, section                      harm on beneficiaries, providers, and                    and States are not included in the
     3506(c)(2)(A) of the Paperwork                          intermediaries and to meet the January                   definition of a small entity.
     Reduction Act of 1995 requires that we                  1, 2002 statutory effective date for the                    In addition, section 1102(b) of the Act
     solicit comment on the following issues:                update to the OPPS payment rates, we                     requires us to prepare a regulatory
        • The need for the information                       find we must shorten the comment                         impact analysis if a rule may have a
     collection and its usefulness in carrying               period to 40 days. For the reasons                       significant impact on the operations of
     out the proper functions of our agency.                 discussed above, we find there is good                   a substantial number of small rural
        • The accuracy of our estimate of the                cause to modify the 60-day comment                       hospitals. This analysis must conform to
     information collection burden.                          period. We further find that this                        the provisions of section 603 of the
        • The quality, utility, and clarity of               comment cycle will give parties                          RFA. With the exception of hospitals
     the information to be collected.                                                                                 located in certain New England
                                                             sufficient opportunity to comment
        • Recommendations to minimize the                    adequately on our proposed rule. In
                                                                                                                      counties, for purposes of section 1102(b)
     information collection burden on the                                                                             of the Act, we define a small rural
                                                             addition, we are immediately posting
     affected public, including automated                                                                             hospital as a hospital that is located
                                                             this proposed rule on our website at
     collection techniques.                                                                                           outside of a Metropolitan Statistical
                                                             http://www.hcfa.gov/regs/
        Sections 413.65 and 419.42 of this                                                                            Area (MSA) and has fewer than 100
                                                             cms1159p.htm pending publication in
     proposed regulation contain information                                                                          beds, or New England County
                                                             the Federal Register to ensure the
     collection requirements that are subject                                                                         Metropolitan Area (NECMA). Section
                                                             maximum possible opportunity for
     to review by OMB under the Paperwork                                                                             601(g) of the Social Security
                                                             public comment.
     Reduction Act of 1995. However,                                                                                  Amendments of 1983 (Pub. L. 98–21)
     §§ 413.65 and 419.42 have been                          XIV. Regulatory Impact Analysis                          designated hospitals in certain New
     approved by OMB under approval                                                                                   England counties as belonging to the
                                                             A. General
     number 0938–0798, with a current                                                                                 adjacent NECMA. Thus, for purposes of
     expiration date of August 31, 2003 and                     We have examined the impacts of this                  the OPPS, we classify these hospitals as
     OMB approval number 0938–0802, with                     proposed rule as required by Executive                   urban hospitals.
     a current expiration date of August 31,                 Order 12866 (September 1993,                                It is clear that the changes in this
     2001.                                                   Regulatory Planning and Review) and                      proposed rule would affect both a
                                                             the Regulatory Flexibility Act (RFA)                     substantial number of rural hospitals as
     XIII. Response to Public Comments                       (September 19, 1980 Public Law 96–                       well as other classes of hospitals, and
        Because of the large number of items                 354). Executive Order 12866 directs                      the effects on some may be significant.
     of correspondence we normally receive                   agencies to assess all costs and benefits                Therefore, the discussion below, in
     on a proposed rule, we are not able to                  of available regulatory alternatives and,                combination with the rest of this
     acknowledge or respond to them                          if regulation is necessary, to select                    proposed rule, constitutes a regulatory
     individually. However, in preparing the                 regulatory approaches that maximize                      impact analysis.
     final rule, we will consider all                        net benefits (including potential                           Section 202 of the Unfunded Mandate
     comments concerning the provisions of                   economic, environmental, public health                   Reform Act of 1995 (Pub. L. 104–4) also
     this proposed rule that we receive by                   and safety effects, distributive impacts,                requires that agencies assess anticipated
     the date and time specified in the DATES                and equity). A regulatory impact                         costs and benefits before issuing any
     section of this preamble and respond to                 analysis (RIA) must be prepared for                      rule that may result in an expenditure
     those comments in the preamble to that                  major rules with economically                            in any one year by State, local, or tribal
     rule.                                                   significant effects ($100 million or more                governments, in the aggregate, or by the
                                                             annually).                                               private sector, of $110 million. This
     Modification of 60-day Comment Period                      The statutory effects of the provisions               proposed rule would not mandate any
       The highly complex analysis                           that would be implemented by this                        requirements for State, local, or tribal
     surrounding the possibility of a                        proposed rule result in expenditures                     governments.
     significant pro rata reduction has caused               exceeding $100 million per year. We                         Executive Order 13132 establishes
     a delay in the publication of the                       estimate the total impact of these                       certain requirements that an agency
     proposed rule. It is essential for this rule            changes for CY 2002 payments                             must meet when it publishes a proposed


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     44714                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     rule (and subsequent final rule) that                   C. Limitations of Our Analysis                              The overall projected increase in
     imposes substantial direct costs on State                 The distributional impacts represent                   payments for urban hospitals is slightly
     and local governments, preempts State                   the projected effects of the proposed                    greater (2.4 percent) than the average
     law, or otherwise has Federalism                        policy changes, as well as statutory                     increase for all hospitals while the
     implications.                                           changes effective for 2002, on various                   increase for rural hospitals is somewhat
       We have examined this proposed rule                   hospital groups. We estimate the effects                 less than the average increase (1.9
     in accordance with Executive Order                      of individual policy changes by                          percent). Rural hospitals gain 1.2
     13132, Federalism, and have                             estimating payments per service while                    percent from the wage index change, but
     determined that it will not have any                    holding all other payment policies                       lose a combined 1.7 percent from the
     negative impact on the rights, roles, and               constant. We use the best data available                 APC changes and the change in method
     responsibilities of State, local or tribal              but do not attempt to predict behavioral                 of determining outlier payments.
     governments.                                            responses to our policy changes. In                         In both urban and rural areas,
     B. Changes in This Proposed Rule                        addition, we do not make adjustments                     hospitals that provide a higher volume
                                                             for future changes in variables such as                  of outpatient services are projected to
       We are proposing several changes to                   service volume, service mix, or number                   receive a larger increase in payments
     the OPPS that are required by the                       of encounters.                                           than lower volume hospitals. In rural
     statute. We are required under section                                                                           areas, hospitals with volumes of fewer
                                                             D. Estimated Impacts of This Proposed
     1833(t)(3)(C)(ii) of the Act to update                                                                           than 5000 services are projected to
                                                             Rule
     annually the conversion factor used to                                                                           experience a small decline in payments
     determine the APC payment rates. We                        Column 5 in Table 6 represents the
                                                                                                                      (¥0.1 percent). The less favorable
     are also required under section                         full impact on each hospital group of all
                                                             the changes for 2002. Columns 2                          impact for the low volume hospitals is
     1833(t)(8)(A) of the Act to revise, not                                                                          attributable to the APC changes and the
     less often than annually, the wage index                through 4 in the table reflect the
                                                             independent effects of the proposed                      change in outlier method. For example,
     and other adjustments. In addition, we                                                                           rural hospitals providing fewer than
     must review the clinical integrity of                   change in the wage index, the APC
                                                             reclassification and recalibration                       5000 services are projected to lose a
     payment groups and weights at least                                                                              combined 3 percent due to these
     annually. Accordingly, in this proposed                 changes and the change in outlier
                                                             method, respectively.                                    changes.
     rule, we are updating the conversion
     factor and the wage index adjustment                       In general, the wage index changes                       Urban hospitals in the Middle
     for hospital outpatient services                        favor rural hospitals, particularly the                  Atlantic region are projected to receive
     furnished beginning January 1, 2002.                    largest in bed size and volume. The only                 no increase in payments, and we
     We are also proposing revisions to the                  rural hospitals that would experience a                  estimate a decline of 0.1 percent for
     relative APC payment weights based on                   negative impact due to wage index                        rural hospitals in this region. Both the
     claims data from July 1, 1999 through                   changes are those in the Middle Atlantic                 urban and rural hospitals lose 2.4
     June 30, 2000. Finally, we are proposing                and Pacific Regions, a decrease of 0.3                   percent due to the wage index change
     to begin calculating outlier payments on                percent for each. Conversely, the urban                  and APC changes. The urban hospitals
     an APC-specific basis rather than the                   hospitals are generally negatively                       are affected more by the wage index
     current method of calculating outlier                   affected by these changes, with the                      change (¥1.7 percent), while rural
     payments for each claim.                                largest effect on those with 500 or more                 hospitals are affected more by the
                                                             beds (0.6 percent decrease) and those in                 recalibration (¥2.1 percent). Urban
       The projected aggregate impact of
                                                             the Middle Atlantic (1.7 percent                         hospitals in the East South Central
     updating the conversion factor is to                    decrease) and West South Central
     increase total payments to hospitals by                                                                          Region are projected to experience the
                                                             Regions (1.5 percent decrease).                          largest increase in payments (5.5
     2.3 percent. As described in the                           We estimate that the APC
     preamble, budget neutrality adjustments                                                                          percent).
                                                             reclassification and recalibration
     are made to the conversion factor and                   changes have generally an opposite                          Major teaching hospitals are projected
     the weights to assure that the revisions                impact from the wage index, causing                      to experience a smaller increase in
     in the wage index, APC groups, and                      increases for all urban hospitals except                 payments (1.3 percent) than the
     relative weights do not affect aggregate                those with under 200 beds and volumes                    aggregate for all hospitals due to
     payments. In addition, the                              of fewer than 21,000 services per year                   negative impacts of the wage index
     determination of the parameters for                     and those located in the New England                     (¥0.7 percent), recalibration (¥0.1
     outlier payments have been modified so                  (a 0.1 percent decrease), Middle Atlantic                percent), and outlier changes (¥0.2
     that projected outlier payments for 2002                (a 0.7 percent decrease), East North                     percent). Hospitals with less intensive
     are equivalent to the established policy                Central (a 0.55 percent decrease), and                   teaching programs are projected to
     target of 2.0 percent of total payments.                Puerto Rico (a 5.6 percent decrease)                     experience an overall increase (3.0
     Because we are not revising the target                  Regions.                                                 percent) that is larger than the average
     percentage, there is no estimated                          The change in outlier policy to an                    for all hospitals. This is attributable to
     aggregate impact from modifying the                     APC-specific payment has a slight                        the fact that there is no impact on this
     method of determining outlier                           negative effect on rural hospitals as a                  group for the wage index change and
     payments.                                               group (a 0.2 percent decrease), no effect                positive impacts for both the APC
       The impact of the wage, recalibration                 on urban hospitals as a group, and slight                changes (0.6 percent) and outlier
     and outlier changes do vary somewhat                    negative effects on all smaller hospitals                changes (0.1). There is little difference
     by hospital group. Estimates of these                   as well as those with lower volumes of                   in impact among hospitals with varying
     impacts are displayed on Table 6.                       services.                                                shares of low-income patients.




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                                      Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                                                  44715

                    TABLE 6.—IMPACT OF CHANGES FOR CY 2002 HOSPITAL OUTPATIENT PROSPECTIVE PAYMENT SYSTEM
                                                                    [Percent changes in total payments (program and beneficiary)]

                                                                                                    Number of           New wage           APC recalib.3     New outlier          All CY 2002
                                                                                                    hospitals 1          index 2                              policy 4             changes 5

                                                                                                        (1)                   (2)               (3)                  (4)              (5)

     ALL HOSPITALS .................................................................                          5,077                  0.0               0.0                  0.0              2.3
     NON–TEFRA HOSPITALS ..................................................                                   4,701                  0.0               0.0                  0.0              2.3
     URBAN HOSPS ...................................................................                          2,608                 ¥0.3               0.4                  0.0              2.4
     LARGE URBAN (GT 1 MILL.) .............................................                                   1,495                 ¥0.5               0.1                  0.0              1.9
     OTHER URBAN (LE 1 MILL.) .............................................                                   1,113                 ¥0.1               0.7                  0.1              3.1
     RURAL HOSPS ...................................................................                          2,093                  1.2              ¥1.5                 ¥0.2              1.9
     BEDS (URBAN):
         0–99 BEDS ...................................................................                         661                   0.0              ¥1.9                 ¥0.1              0.3
         100–199 BEDS .............................................................                            918                  ¥0.3              ¥0.4                  0.1              1.8
         200–299 BEDS .............................................................                            510                  ¥0.3               0.6                  0.0              2.6
         300–499 BEDS .............................................................                            374                  ¥0.3               1.1                  0.1              3.2
         500 + BEDS ..................................................................                         145                  ¥0.6               1.1                  0.0              2.7
     BEDS (RURAL):
         0—49 BEDS .................................................................                          1,249                  0.4              ¥2.4                 ¥0.6             ¥0.2
         50–99 BEDS .................................................................                           506                  0.7              ¥2.2                 ¥0.2              0.6
         100–149 BEDS .............................................................                             198                  1.6              ¥0.7                  0.0              3.2
         150–199 BEDS .............................................................                              74                  1.6              ¥1.0                 ¥0.1              2.8
         200 + BEDS ..................................................................                           66                  2.6              ¥0.2                  0.1              4.8
     VOLUME (URBAN):
         LT 5,000 ........................................................................                     363                  ¥0.5              ¥0.5                 ¥0.3              1.0
         5,000–10,999 ................................................................                         496                  ¥0.3              ¥1.1                  0.0              0.9
         11,000–20,999 ..............................................................                          605                  ¥0.4              ¥0.4                  0.1              1.7
         21,000–42,999 ..............................................................                          746                  ¥0.4               0.6                  0.1              2.6
         GT 42,999 .....................................................................                       398                  ¥0.2               0.6                  0.0              2.7
     VOLUME (RURAL):
         LT 5,000 ........................................................................                    1,000                  0.4              ¥2.0                 ¥1.0             ¥0.1
         5,000–10,999 ................................................................                          569                  0.5              ¥2.3                 ¥0.2              0.2
         11,000–20,999 ..............................................................                           322                  1.1              ¥1.7                 ¥0.1              1.6
         21,000–42,999 ..............................................................                           171                  1.7              ¥0.9                  0.0              3.0
         GT 42,999 .....................................................................                         31                  2.8              ¥0.3                  0.0              4.8
     REGION (URBAN):
         NEW ENGLAND ...........................................................                               136                   1.0              ¥0.1                 ¥0.2              3.0
         MIDDLE ATLANTIC ......................................................                                380                  ¥1.7              ¥0.7                  0.0              0.0
         SOUTH ATLANTIC .......................................................                                429                   0.4               1.3                  0.1              4.1
         EAST NORTH CENT ....................................................                                  444                  ¥0.4              ¥0.5                  0.1              1.5
         EAST SOUTH CENT ....................................................                                  154                   1.3               1.8                  0.1              5.5
         WEST NORTH CENT ...................................................                                   183                  ¥0.1               0.2                  0.1              2.5
         WEST SOUTH CENT ...................................................                                   323                  ¥1.5               1.6                  0.0              2.3
         MOUNTAIN ...................................................................                          129                   0.1               1.2                  0.0              3.6
         PACIFIC ........................................................................                      391                  ¥0.2               0.4                  0.0              2.5
         PUERTO RICO .............................................................                              39                   1.2              ¥5.6                 ¥0.2             ¥2.3
     REGION (RURAL):
         NEW ENGLAND ...........................................................                                51                   0.4              ¥2.3                 ¥0.4              0.0
         MIDDLE ATLANTIC ......................................................                                 72                  ¥0.3              ¥2.1                  0.1             ¥0.1
         SOUTH ATLANTIC .......................................................                                276                   1.8              ¥0.8                 ¥0.1              3.2
         EAST NORTH CENT ....................................................                                  275                   1.5              ¥2.5                 ¥0.1              1.2
         EAST SOUTH CENT ....................................................                                  250                   1.5              ¥0.9                 ¥0.1              2.8
         WEST NORTH CENT ...................................................                                   501                   1.3              ¥2.1                 ¥0.3              1.2
         WEST SOUTH CENT ...................................................                                   326                   1.4              ¥0.2                 ¥0.2              3.2
         MOUNTAIN ...................................................................                          200                   1.6              ¥1.1                 ¥0.5              2.4
         PACIFIC ........................................................................                      137                  ¥0.3              ¥1.2                 ¥0.2              0.6
         PUERTO RICO .............................................................                               5                   4.2              ¥3.1                 ¥0.3              3.0
     TEACHING STATUS:
         NON–TEACHING .........................................................                               3,594                  0.2              ¥0.4                  0.0              2.1
         MINOR ..........................................................................                       812                  0.0               0.6                  0.1              3.0
         MAJOR .........................................................................                        294                 ¥0.7              ¥0.1                 ¥0.2              1.3
     DSH PATIENT PERCENT:
         0 ....................................................................................                  27                  0.0              ¥1.1                 ¥0.7              0.7
         GT 0–0.10 .....................................................................                      1,298                 ¥0.1              ¥0.3                  0.0              2.0
         0.10–0.16 ......................................................................                     1,047                  0.2              ¥0.2                  0.1              2.3
         0.16–0.23 ......................................................................                       822                 ¥0.1               0.3                  0.0              2.5
         0.23–0.35 ......................................................................                       812                  0.1               0.2                  0.0              2.6
         GE 0.35 .........................................................................                      695                 ¥0.2               0.1                 ¥0.3              2.0
     URBAN IME/DSH:
         IME & DSH ...................................................................                        1,012                 ¥0.4               0.5                  0.0              2.4
         IME/NO DSH ................................................................                              4                 ¥0.1              ¥2.2                 ¥1.2             ¥1.0
         NO IME/DSH ................................................................                          1,578                 ¥0.2               0.2                  0.1              2.4
         NO IME/NO DSH ..........................................................                                14                  0.1               0.9                  0.7              4.0



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     44716                           Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

        TABLE 6.—IMPACT OF CHANGES FOR CY 2002 HOSPITAL OUTPATIENT PROSPECTIVE PAYMENT SYSTEM—Continued
                                                                  [Percent changes in total payments (program and beneficiary)]

                                                                                                  Number of           New wage           APC recalib.3        New outlier      All CY 2002
                                                                                                  hospitals 1          index 2                                 policy 4         changes 5

                                                                                                      (1)                   (2)               (3)                 (4)              (5)

     RURAL HOSP. TYPES:
         NO SPECIAL STATUS .................................................                                 797                   0.5              ¥2.0                ¥0.2              0.6
         RRC ..............................................................................                  171                   2.3              ¥0.5                 0.1              4.2
         SCH/EACH ...................................................................                        656                   0.7              ¥2.2                ¥0.4              0.5
         MDH ..............................................................................                  327                   0.2              ¥2.5                ¥0.5             ¥0.4
         SCH AND RRC .............................................................                            70                   2.1              ¥0.9                ¥0.1              3.4
     TYPE OF OWNERSHIP:
         VOLUNTARY ................................................................                         2,808                 ¥0.1              ¥0.1                 0.0              2.2
         PROPRIETARY ............................................................                             761                  0.0               0.9                 0.2              3.4
         GOVERNMENT ............................................................                            1,132                  0.4              ¥0.4                ¥0.2              2.1
     SPECIALTY HOSPITALS:
         EYE AND EAR .............................................................                            12                   0.1              ¥8.3                 0.6             ¥5.3
         TRAUMA .......................................................................                      154                  ¥0.2              ¥0.1                ¥0.1              1.9
         CANCER .......................................................................                       10                  ¥1.7               2.3                ¥1.6              1.2
     TEFRA HOSPITALS (NOT INCLUDED ON OTHER
       LINES):
         REHAB ..........................................................................                    164                  ¥1.8              10.0                ¥1.0              8.9
         PSYCH ..........................................................................                     88                  ¥1.4              ¥0.6                ¥3.5             ¥3.1
         LTC ...............................................................................                  83                  ¥0.7              ¥2.3                ¥0.2             ¥1.0
         CHILDREN ....................................................................                        41                  ¥0.6              ¥2.0                ¥2.2             ¥2.2
       1 Some data necessary to classify hospitals by category were missing; thus, the total number of hospitals in each category may not equal the
     national total.
       2 This column shows the impact of updating the wage index used to calculate payment using the proposed FY 2002 hospital inpatient wage
     index after geographic reclassification by the Medicare Geographic Classification Review Board. The hospital inpatient proposed rule for FY 2002
     was published in the Federal Register on May 4, 2001.
       3 This column shows the impact of recalibrating the APC weights based on 1999–2000 hospital claims data and of the reassignment of some
     HCPCs to APCs as discussed in this rule.
       4 This column shows the difference in calculating outliers on an APC-specific rather than bill basis.
       5 This column shows changes in total payment from CY 2001 to CY 2002. It incorporates all of the changes reflected in columns 2, 3, and 4. In
     addition, it shows the impact of the CY 2002 payment update. The sum of the columns may be different from the percentage changes shown
     here due to rounding.


       In accordance with the provisions of                                  PART 413—PRINCIPLES OF                                       cost. In some situations, the main
     Executive Order 12866, this proposed                                    REASONABLE COST                                              provider in a provider-based complex
     rule was reviewed by the Office of                                      REIMBURSEMENT; PAYMENT FOR                                   may purchase services for a provider-
     Management and Budget.                                                  END-STAGE RENAL DISEASE                                      based entity or for a department of the
                                                                             SERVICES; PROSPECTIVELY                                      provider through a contract for services
     List of Subjects                                                        DETERMINED PAYMENT RATES FOR                                 (for example, a management contract),
     42 CFR Part 413                                                         SKILLED NURSING FACILITIES                                   directly assigning the costs to the
                                                                                                                                          provider-based entity or department and
       Health facilities, Kidney diseases,                                     A. Part 413 is amended as set forth                        reporting the costs directly in the cost
     Medicare, Puerto Rico, Reporting and                                    below:                                                       center for that entity or department. In
                                                                               1. The authority citation for part 413
     recordkeeping requirements.                                                                                                          any situation in which costs are directly
                                                                             continues to read as follows:
                                                                                                                                          assigned to a cost center, there is a risk
     42 CFR Part 419                                                            Authority: Secs. 1102, 1812(d), 1814(b),                  of excess cost in that cost center
                                                                             1815, 1833(a), (i), and (n), 1871, 1881, 1883,               resulting from the directly assigned
       Hospitals, Medicare, Reporting and                                    and 1886 of the Social Security Act (42
     recordkeeping requirements.                                             U.S.C. 1302, 1395f(b), 1395g, 1395l, 1395l(a),
                                                                                                                                          costs plus a share of overhead
                                                                             (i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt,              improperly allocated to the cost center
     42 CFR Part 489                                                         and 1395ww).                                                 which duplicates the directly assigned
                                                                                                                                          costs. This duplication could result in
       Health facilities, Medicare, Reporting
                                                                             Subpart B—Accounting Records and                             improper Medicare payment to the
     and recordkeeping requirements.                                         Reports                                                      provider. Where a provider has
       For the reasons set forth in the                                                                                                   purchased services for a provider-based
                                                                               2. In § 413.24, the heading to
     preamble, the Centers for Medicare &                                                                                                 entity or for a provider department, like
                                                                             paragraph (d) is republished, paragraph
     Medicaid Services proposes to amend                                                                                                  general service costs of the provider (for
                                                                             (d)(6) is revised, and a new paragraph
     42 CFR chapter IV as follows:                                                                                                        example, like costs in the administrative
                                                                             (d)(7) is added, to read as follows:
                                                                                                                                          and general cost center) must be
                                                                             § 413.24          Adequate cost data and cost                separately identified to ensure that they
                                                                             finding.                                                     are not improperly allocated to the
                                                                             *     *     *    *    *                                      entity or the department. If the like costs
                                                                               (d) Cost finding methods. * * *                            of the main provider cannot be
                                                                               (6) Provider-based entities and                            separately identified, the costs of the
                                                                             departments: Preventing duplication of                       services purchased through a contract


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     must be reclassified to the main                        Subpart E—Payments to Providers                          services of a different type from those of
     provider and allocated among the main                                                                            the main provider under the name,
     provider’s benefiting cost centers.                        3. Section 413.65 is amended as                       ownership, and administrative and
        Example: A provider-based complex                    follows:                                                 financial control of the main provider,
     is composed of a hospital and a                            A. Revising paragraph (a)(1).                         in accordance with the provisions of
     hospital-based rural health clinic (RHC).                  B. Revising the definition of                         this section.
     The hospital furnishes the entirety of its              ‘‘Provider-based entity’’ in paragraph
                                                             (a)(2).                                                  *      *      *      *    *
     own administrative and general costs                                                                                (b) Provider-based determinations. (1)
     internally. The RHC, however, is                           C. Revising paragraph (b).
                                                                D. Revising paragraph (c).                            A facility or organization is not entitled
     managed by an independent contractor                                                                             to be treated as provider-based simply
     through a management contract. The                         E. Revising the introductory text to
                                                             paragraph (d).                                           because it or the main provider believe
     management contract provides a full                                                                              it is provider-based.
     array of administrative and general                        F. Revising paragraph (d)(7).
                                                                G. Revising paragraph (g)(7).                            (2) If a facility was treated as
     services, with the exception of patient                                                                          provider-based in relation to a hospital
     billing. The hospital directly assigns the                 H. Revising the introductory text to
                                                             paragraph (i)(1).                                        or CAH on October 1, 2000, it will
     costs of the RHC’s management contract                                                                           continue to be considered provider-
                                                                I. Revising paragraph (i)(1)(ii).
     to the RHC cost center (for example,                                                                             based in relation to that hospital or CAH
                                                                J. Revising paragraph (i)(2).
     Form HCFA 2552–96, Worksheet A,                                                                                  until October 1, 2002, and the
                                                                The revisions read as follows:
     Line 71). A full allocation of the                                                                               requirements, limitations, and
     hospital’s administrative and general                   § 413.65 Requirements for a determination                exclusions specified in paragraphs (d),
     costs to the RHC cost center would                      that a facility or an organization has                   (e), (f), and (h) of this section will not
     duplicate most of the RHC’s                             provider-based status.                                   apply to that hospital or CAH for that
     administrative and general costs.                          (a) Scope and definitions. (1) Scope.                 facility until October 1, 2002. For
     However, an allocation of the hospital’s                (i) This section applies to all facilities               purposes of this paragraph, a facility
     cost (included in hospital                              for which provider-based status is                       will be considered to have been treated
     administrative and general costs) of its                sought, including remote locations of                    as provider-based on October 1, 2000, if
     patient billing function to the RHC                     hospitals, as defined in paragraph (a)(2)                on that date it either had a written
     would be appropriate. Therefore, the                    of this section and satellite facilities as              determination from CMS that it was
     hospital must include the costs of the                  defined in § 412.22(h)(1) and                            provider-based as of that date, or was
     patient billing function in a separate                  § 412.25(e)(1) of this chapter, other than               billing and being paid as a provider-
     cost center to be allocated to the                      facilities described in paragraph                        based department or entity of the
     benefiting cost centers, including the                  (a)(1)(ii) of this section.                              hospital.
     RHC cost center. The remaining hospital                    (ii) This section does not apply to the                  (3) Except as specified in paragraphs
     administrative and general costs would                  following facilities:                                    (b)(2) and (b)(5) of this section, a main
     be allocated to all cost centers,                          (A) Ambulatory surgical centers                       provider or a facility must contact CMS,
     excluding the RHC cost center. If the                   (ASCs).                                                  and the facility must be determined by
     hospital is unable to isolate the costs of                 (B) Comprehensive outpatient                          CMS to be provider-based, before the
     the patient billing function, the costs of              rehabilitation facilities (CORFs).                       main provider bills for services of the
     the RHC’s management contract must be                      (C) Home health agencies (HHAs).                      facility as if the facility were provider-
     reclassified to the hospital                               (D) Skilled nursing facilities (SNFs).                based, or before it includes costs of
     administrative and general cost center to                  (E) Hospices.                                         those services on its cost report.
     be allocated among all cost centers, as                    (F) Inpatient rehabilitation units that                  (4) A facility that is not located on the
     appropriate.                                            are excluded from the inpatient PPS for                  campus of a hospital and that is used as
        (7) Costs of services furnished to free-             acute hospital services.                                 a site where physician services of the
     standing entities. The costs that a                        (G) Independent diagnostic testing                    kind ordinarily furnished in physician
     provider incurs to furnish services to                  facilities and any other facilities that                 offices are furnished is presumed to be
     free-standing entities with which it is                 furnish only clinical diagnostic                         a free-standing facility, unless it is
     associated are not allowable costs of that              laboratory tests.                                        determined by CMS to have provider-
     provider. Any costs of services                            (H) Facilities furnishing only                        based status.
     furnished to a free-standing entity must                physical, occupational, or speech                           (5) A facility for which a
     be identified and eliminated from the                   therapy to ambulatory patients, for as                   determination of provider-based status
     allowable costs of the servicing                        long as the $1,500 annual cap on                         in relation to a hospital or CAH is
     provider, to prevent Medicare payment                   coverage of physical, occupational, and                  requested on or after October 1, 2000
     to that provider for those costs. This                  speech therapy, as described in section                  and before October 1, 2002 will be
     may be done by including the free-                      1833(g)(2) of the Act, remains                           treated as provider-based in relation to
     standing entity on the cost report as a                 suspended by the action of subsequent                    the hospital or CAH from the first date
     nonreimbursable cost center for the                     legislation.                                             on or after October 1, 2000 on which the
     purpose of allocating overhead costs to                    (I) ESRD facilities (determinations for               facility was licensed (to the extent
     that entity. If this method would not                   ESRD facilities are made under                           required by the State), staffed and
     result in an accurate allocation of costs               § 413.174 of this chapter).                              equipped to treat patients until the date
     to the entity, the provider must develop                   (2) Definitions. * * *                                on which CMS determines that the
     detailed work papers showing how the                    *       *     *     *     *                              facility does not qualify for provider-
     cost of services furnished by the                          Provider-based entity means a                         based status.
     provider to the entity were determined.                 provider of health care services, or an                     (c) Reporting. A main provider that
     These costs are removed from the                        RHC as defined in § 405.2401(b) of this                  has had one or more facilities
     applicable cost centers of the servicing                chapter, that is either created by, or                   considered provider-based also must
     provider.                                               acquired by, a main provider for the                     report to CMS any material change in
     *      *    *      *     *                              purpose of furnishing health care                        the relationship between it and any


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     44718                   Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     provider-based facility, such as a change               75 percent of the patients of an RHC                     read a written notice and understand
     in ownership of the facility or entry into              seeking provider-based status received                   and act on his or her own rights, the
     a new or different management contract                  inpatient hospital services from the                     notice must be provided, before the
     that could affect the provider-based                    hospital that is the main provider); or                  delivery of services, to the beneficiary’s
     status of the facility.                                    (C) If the facility or organization is                authorized representative.
        (d) Requirements. An entity must                     unable to meet the criteria in paragraph                 *       *    *     *     *
     meet all of the following requirements                  (d)(7)(i)(A) or (d)(7)(i)(B) of this section                (i) Inappropriate treatment of a
     to be determined by CMS to have                         because it was not in operation during                   facility or organization as provider-
     provider-based status.                                  all of the 12-month period described in                  based. (1) Determination and review. If
     *       *    *      *     *                             the previous sentence, the facility or                   CMS learns that a provider has treated
        (7) Location in immediate vicinity.                  organization is located in a zip code                    a facility or organization as provider-
     The facility or organization and the                    area included among those that, during                   based and the provider had not obtained
     main provider are located on the same                   all of the 12-month period described in                  a determination of provider-based status
     campus, except when the requirements                    the previous sentence, accounted for at                  under this section, CMS will—
     in paragraphs (d)(7)(i), (d)(7)(ii), or                 least 75 percent of the patients served
                                                             by the main provider.                                    *       *    *     *     *
     (d)(7)(iii) of this section are met:                                                                                (ii) Investigate and determine whether
        (i) The facility or organization is                     (iv) A facility or organization is not
                                                             considered to be in the ‘‘immediate                      the requirements in paragraph (d) of this
     located within a 35-mile radius of the                                                                           section (or, for periods before the
     main campus of the hospital or CAH                      vicinity’’ of the main provider unless
                                                             the facility or organization and the main                beginning of the hospital’s first cost
     that is the potential main provider;                                                                             reporting period beginning or or after
        (ii) The facility or organization is                 provider are located in the same State
                                                             or, when consistent with the laws of                     January 10, 2001, the requirements in
     owned and operated by a hospital or                                                                              applicable program instructions) were
     CAH that has a disproportionate share                   both States, adjacent States.
                                                                (v) An RHC that is otherwise qualified                met; and
     adjustment (as determined under
     § 412.106 of this chapter) greater than                 as a provider-based entity of a hospital                 *       *    *     *     *
     11.75 percent or is described in                        that is located in a rural area, as defined                 (2) Recovery of overpayments. If CMS
     § 412.106(c)(2) of this chapter                         in § 412.62(f)(1)(iii) of this chapter, and              finds that payments for services at the
     implementing section 1886(d)(5)(F)(i)(II)               has fewer than 50 beds, as determined                    facility or organization have been made
     of the Act and is—                                      under § 412.105(b) of this chapter, is not               as if the facility or organization were
        (A) Owned or operated by a unit of                   subject to the criteria in paragraphs                    provider-based, even though CMS had
     State or local government;                              (d)(7)(i) through (d)(7)(iv) of this                     not previously determined that the
        (B) A public or nonprofit corporation                section.                                                 facility or organization qualified for
     that is formally granted governmental                   *      *     *      *     *                              provider-based status, CMS will recover
     powers by a unit of State or local                         (g) Obligations of hospital outpatient                the difference between the amount of
     government; or                                          departments and hospital-based                           payments that actually were made and
        (C) A private hospital that has a                    entities. * * *                                          the amount of payments that CMS
     contract with a State or local                          *      *     *      *     *                              estimates should have been made in the
     government that includes the operation                     (7) When a Medicare beneficiary is                    absence of a determination of provider-
     of clinics located off the main campus                  treated in a hospital outpatient                         based status, except that recovery will
     of the hospital to assure access in a                   department or hospital-based entity                      not be made for any period before the
     well-defined service area to health care                (other than an RHC) that is not located                  beginning of the hospital’s first cost
     services to low-income individuals who                  on the main provider’s campus, the                       reporting period beginning or or after
     are not entitled to benefits under                      hospital has a duty to provide written                   January 10, 2001 if during all of that
     Medicare (or medical assistance under a                 notice to the beneficiary, before the                    period the management of the entity
     Medicaid State plan).                                   delivery of services, of the amount of                   made a good faith effort to operate it as
        (iii) The facility or organization                   the beneficiary’s potential financial                    a provider-based facility or organization,
     demonstrates a high level of integration                liability (that is, of the fact that the                 as described in paragraph (h)(3) of this
     with the main provider by showing that                  beneficiary will incur a coinsurance                     section.
     it meets all of the other provider-based                liability for an outpatient visit to the                 *       *    *     *     *
     criteria and demonstrates that it serves                hospital as well as for the physician
     the same patient population as the main                 service, and of the amount of that                       PART 419—PROSPECTIVE PAYMENT
     provider, by submitting records showing                 liability). The notice must be one that                  SYSTEM FOR HOSPITAL OUTPATIENT
     that, during the 12-month period                        the beneficiary can read and                             DEPARTMENT SERVICES
     immediately preceding the first day of                  understand. If the exact type and extent
                                                                                                                        B. Part 419 is amended as set forth
     the month in which the application for                  of care needed is not known, the
                                                                                                                      below:
     provider-based status is filed with CMS,                hospital may furnish a written notice to
     and for each subsequent 12-month                        the patient that explains the fact that the                1. The authority citation for part 419
     period—                                                 beneficiary will incur a coinsurance                     continues to read as follows:
        (A) At least 75 percent of the patients              liability to the hospital that he or she                   Authority: Secs. 1102, 1833(t), and 1871 of
     served by the facility or organization                  would not incur if the facility were not                 the Social Security Act (42 U.S.C. 1302,
     reside in the same zip code areas as at                 provider-based. The hospital may                         1395l(t), and 1395hh).
     least 75 percent of the patients served                 furnish an estimate based on typical or
                                                                                                                      Subpart A—General Provisions
     by the main provider;                                   average charges for visits to the facility,
        (B) At least 75 percent of the patients              while stating that the patient’s actual                    2. In § 419.2, paragraph (c) is revised
     served by the facility or organization                  liability will depend upon the actual                    to read as follows:
     who required the type of care furnished                 services furnished by the hospital. If the
     by the main provider received that care                 beneficiary is unconscious, under great                  § 419.2      Basis of payment.
     from that provider (for example, at least               duress, or for any other reason unable to                *       *       *     *    *


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                             Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules                                             44719

        (c) Determination of hospital                        § 419.22 Hospital outpatient services                    ‘‘copayment’’ is added in its place as
     outpatient prospective payment rates:                   excluded from payment under the hospital                 follows:
     Excluded costs. The following costs are                 outpatient prospective payment system.
     excluded from the hospital outpatient                     The following services are not paid                    § 419.40    Payment concepts.
     prospective payment system.                             for under the hospital outpatient                          (a) In addition to the payment rate
        (1) The costs of direct graduate                     prospective payment system:                              described in § 419.32, for each APC
     medical education activities as                         *     *     *    *     *                                 group there is a predetermined
     described in § 413.86 of this chapter.                    (r) Services defined in § 419.21(b) that               beneficiary copayment amount as
                                                             are furnished to inpatients of hospitals                 described in § 419.41(a). The Medicare
        (2) The costs of nursing and allied
                                                             that do not submit claims for outpatient                 program payment amount for each APC
     health programs as described in § 413.85
                                                             services under Medicare Part B.                          group is calculated by applying the
     of this chapter.
                                                                                                                      program payment percentage as
        (3) The costs associated with interns                Subpart C—Basic Methodology for                          described in § 419.41(b).
     and residents not in approved teaching                  Determining Prospective Payment                            (b) For purposes of this section—
     programs as described in § 415.202 of                   Rates for Hospital Outpatient Services                     (1) Coinsurance percentage is
     this chapter.                                                                                                    calculated as the difference between the
        (4) The costs of teaching physicians                   5. In § 419.32, paragraph (b)(1) is                    program payment percentage and 100
     attributable to Part B services for                     revised to read as follows:                              percent. The coinsurance percentage in
     hospitals that elect cost-based                         § 419.32 Calculation of prospective                      any year is thus defined for each APC
     reimbursement for teaching physicians                   payment rates for hospital outpatient                    group as the greater of the following: the
     under § 415.160.                                        services.                                                ratio of the APC group unadjusted
        (5) The reasonable costs of anesthesia               *       *     *    *    *                                copayment amount to the annual APC
     services furnished to hospital                             (b) Conversion factor for calendar                    group payment rate, or 20 percent.
     outpatients by qualified nonphysician                   year 2000 and subsequent years. (1)                        (2) Program payment percentage is
     anesthetists (certified registered nurse                Subject to paragraph (b)(2) of this                      calculated as the lower of the following:
     anesthetists and anesthesiologists’                     section, the conversion factor for a                     the ratio of the APC group payment rate
     assistants) employed by the hospital or                 calendar year is equal to the conversion                 minus the APC group unadjusted
     obtained under arrangements, for                        factor calculated for the previous year                  copayment amount, to the APC group
     hospitals that meet the requirements                    adjusted as follows:                                     payment rate, or 80 percent.
     under § 412.113(c) of this chapter.                        (i) For calendar year 2000, by the                      (3) Unadjusted copayment amount is
        (6) Bad debts for uncollectible                      hospital inpatient market basket                         calculated as 20 percent of the wage-
     deductibles and coinsurances as                         percentage increase applicable under                     adjusted national median of charges for
     described in § 413.80(b) of this chapter.               section 1886(b)(3)(B)(iii) of the Act                    services within an APC group furnished
        (7) Organ acquisition costs paid under               reduced by one percentage point.                         during 1996, updated to 1999 using an
     Part B.                                                    (ii) For calendar year 2001—                          actuarial projection of charge increases
        (8) Corneal tissue acquisition costs.                   (A) For services furnished on or after                for hospital outpatient department
                                                             January 1, 2001 and before April 1,                      services during the period 1996 to 1999.
     Subpart B—Categories of Hospitals                       2001, by the hospital inpatient market                     (c) Limitation of copayment amount
     and Services Subject to and Excluded                    basket percentage increase applicable                    to inpatient hospital deductible amount.
     From the Hospital Outpatient                            under section 1886(b)(3)(B)(iii) of the                  The copayment amount for a procedure
     Prospective Payment System                              Act reduced by one percentage point;                     performed in a year cannot exceed the
                                                             and                                                      amount of the inpatient hospital
       3. In § 419.20, paragraph (a) is revised,                (B) For services furnished on or after                deductible established under section
     and paragraphs (b)(3) and (b)(4) are                    April 1, 2001 and before January 1,                      1813(b) of the Act for that year.
     added to read as follows:                               2002, by the hospital inpatient market                     7. Amend § 419.41 as follows:
                                                             basket percentage increase applicable                      A. The section heading is revised.
     § 419.20 Hospitals subject to the hospital
     outpatient prospective payment system.
                                                             under section 1886(b)(3)(B)(iii) of the                    B. The word ‘‘coinsurance’’ is
                                                             Act, and increased by a transitional                     removed each time it appears, and the
        (a) Applicability. The hospital                      percentage allowance equal to 0.32                       word ‘‘copayment’’ is added in its place.
     outpatient prospective payment system                   percent.                                                   C. Paragraph (c)(4)(ii) is redesignated
     is applicable to any hospital                              (iii) For calendar year 2002, by the                  as paragraph (c)(4)(iv).
     participating in the Medicare program,                  hospital inpatient market basket                           D. Paragraphs (c)(4)(ii) and (c)(4)(iii)
     except those specified in paragraph (b)                 percentage increase applicable under                     are added as follows:
     of this section, for services furnished on              section 1886(b)(3)(B)(iii) of the Act
     or after August 1, 2000.                                reduced by one percentage point,                         § 419.41 Calculation of national
                                                                                                                      beneficiary copayment amounts and
        (b) Hospitals excluded from the                      without taking into account the                          national Medicare program payment
     outpatient prospective payment system.                  transitional percentage allowance                        amounts.
     *      *     *     *     *                              referenced in § 419.32(b)(ii)(B).
                                                                (iv) For calendar year 2003 and                          (c) * * *
        (3) A hospital located outside one of                                                                            (4) * * *
     the 50 States, the District of Columbia,                subsequent years, by the hospital
                                                             inpatient market basket percentage                          (i) Effective for services furnished
     and Puerto Rico is excluded from the                                                                             from April 1, 2001 through December
     hospital outpatient prospective payment                 increase applicable under section
                                                             1886(b)(3)(B)(iii) of the Act.                           31, 2001, the national unadjusted
     system.                                                                                                          coinsurance rate for an APC cannot
        (4) A hospital of the Indian Health                  *       *     *    *    *                                exceed 57 percent of the prospective
     Service.                                                                                                         payment rate for that APC.
                                                             Subpart D—Payments to Hospitals
        4. In § 419.22, the introductory text is                                                                         (ii) The national unadjusted
     republished, and paragraph (r) is added                    6. In § 419.40, the word                              coinsurance rate for an APC cannot
     to read as follows:                                     ‘‘coinsurance’’ is removed and the word                  exceed 55 percent in calendar years


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     44720                            Federal Register / Vol. 66, No. 165 / Friday, August 24, 2001 / Proposed Rules

     2002 and 2003; 50 percent in calendar                                          § 419.70 Transitional adjustment to limit                                    physicians, RNs, or LPNs, the
     year 2004; 45 percent in calendar year                                         decline in payment.                                                          department’s personnel must be given
     2005; and 40 percent in calendar year                                          *     *      *    *     *                                                    protocols that direct them to contact
     2006 and thereafter.                                                             (d) Hold harmless provisions * * *                                         emergency personnel at the main
     *      *     *    *     *                                                      *     *      *    *     *                                                    hospital campus for direction. Under
        8. In § 419.42 paragraph (a), (c), and                                        (2) Permanent treatment for cancer                                         this direction, and in accordance with
     (e) are revised as follows:                                                    hospitals and children’s hospitals. In                                       protocols established in advance by the
                                                                                    the case of a hospital described in                                          hospital, the personnel at the off-
     § 419.42 Hospital election to reduce
     coinsurance.
                                                                                    § 412.23(d) or § 412.23(f) of this chapter                                   campus department must describe
                                                                                    for which the prospective payment                                            patient appearance and report
        (a) A hospital may elect to reduce                                          system amount is less than the pre-BBA
     coinsurance for any or all APC groups                                                                                                                       symptoms and, if appropriate, either
                                                                                    amount for covered hospital outpatient                                       arrange transportation of the individual
     on a calendar year basis. A hospital may
                                                                                    services, the amount of payment under                                        to the main hospital campus in
     not elect to reduce copayment amounts
                                                                                    this part is increased by the amount of                                      accordance with paragraph (i)(3)(i) of
     for some, but not all, services within the
                                                                                    this difference.
     same group.                                                                                                                                                 this section or assist in an appropriate
                                                                                    *     *      *    *     *                                                    transfer as described in paragraphs
     *      *     *     *    *
        (c) The hospital’s election must be                                                                                                                      (i)(3)(ii) and (d)(2) of this section. Any
                                                                                    PART 489—PROVIDER AGREEMENTS
     properly documented. It must                                                   AND SUPPLIER APPROVAL                                                        contact with emergency personnel at the
     specifically identify the APCs to which                                                                                                                     main hospital campus should either be
     it applies and the copayment amount                                              C. Part 489 is amended as set forth                                        made after or concurrently with the
     (within the limits identified below) that                                      below:                                                                       actions needed to arrange an
     the hospital has selected for each group.                                        1. The authority citation to part 489                                      appropriate transfer under paragraph
     *      *     *     *    *                                                      continues to read as follows:                                                (i)(3)(ii) of this section if doing
        (e) In electing reduced coinsurance, a                                        Authority: Secs. 1102 and 1871 of the                                      otherwise would significantly
     hospital may elect a copayment amount                                          Social Security Act (42 U.S.C. 1302 and                                      jeopardize the life or health of the
     that is less than that year’s wage-                                            1395hh).                                                                     individual.
     adjusted copayment amount for the
     group but not less than 20 percent of the                                      Subpart B—Essentials of Provider                                             *      *      *     *     *
     APC payment rate as determined in                                              Agreements                                                                   (Catalog of Federal Domestic Assistance
     § 419.32.                                                                        2. In § 489.24, paragraph (i)(2)(ii) is                                    Program No. 93.773, Medicare—
     *      *     *     *    *                                                      revised to read as follows:                                                  Hospital Insurance; and Program No.
                                                                                                                                                                 93.774, Medicare—Supplementary
     § 419.43      [Amended]                                                        § 489.24 Special responsibilities of                                         Medical Insurance Program)
        9. Section 419.43 is amended by                                             Medicare hospitals in emergency cases.
     removing the word ‘‘coinsurance’’ from                                         *      *     *      *   *                                                      Dated: August 3, 2001.
     the section heading and from paragraph                                           (i) Off-campus departments. * * *                                          Thomas A. Scully,
     (a), and adding the word ‘‘copayment’’                                           (2) Protocols for off-campus                                               Administrator, Centers for Medicare &
     in its place.                                                                  departments. * * *                                                           Medicaid Services.
     Subpart G—Transitional Corridors                                               *      *     *      *   *                                                      Approved: August 3, 2001.
                                                                                      (ii) If the off-campus department is a                                     Tommy G. Thompson,
       10. In § 419.70, paragraph (d)(2) is                                         physical therapy, radiology, or other
                                                                                                                                                                 Secretary.
     revised to read as follows:                                                    facility not routinely staffed with
       ADDENDUM A.—LIST OF AMBULATORY PAYMENT CLASSIFICATIONS (APCS) WITH STATUS INDICATORS, RELATIVE WEIGHTS, PAYMENT
                                    RATES, AND COPAYMENT AMOUNTS CALENDAR YEAR 2002
                                                                                                                                                                                          National     Minimum
                                                                                                                                                  Status     Relative        Payment
      APC                                                           Group Title                                                                                                          Unadjusted   Unadjusted
                                                                                                                                                 Indicator   Weight           Rate       Copayment    Copayment

       0001     Photochemotherapy ...................................................................................................        S                      0.45        $22.88        $8.24        $4.58
       0002     Fine needle Biopsy/Aspiration ....................................................................................           T                      0.47        $23.90       $13.14        $4.78
       0003     Bone Marrow Biopsy/Aspiration .................................................................................              T                      1.11        $56.43       $27.99       $11.29
       0004     Level I Needle Biopsy/ Aspiration Except Bone Marrow ...........................................                             T                      3.00       $152.53       $32.57       $30.51
       0005     Level II Needle Biopsy /Aspiration Except Bone Marrow ..........................................                             T                      6.71       $341.15      $119.75       $68.23
       0006     Level I Incision & Drainage ........................................................................................         T                      2.36       $119.99       $33.95       $24.00
       0007     Level II Incision & Drainage .......................................................................................         T                      7.28       $370.13       $74.03       $74.03
       0008     Level III Incision and Drainage ..................................................................................           T                     11.36       $577.57      $115.51      $115.51
       0009     Nail Procedures ..........................................................................................................   T                      0.68        $34.57        $8.99        $6.91
       0010     Level I Destruction of Lesion .....................................................................................          T                      0.71        $36.10        $9.86        $7.22
       0011     Level II Destruction of Lesion ....................................................................................          T                      1.57        $79.82       $29.53       $15.96
       0012     Level I Debridement & Destruction ............................................................................               T                      0.72        $36.61        $9.18        $7.32
       0013     Level II Debridement & Destruction ...........................................................................               T                      1.51        $76.77       $17.66       $15.35
       0015     Level IV Debridement & Destruction ..........................................................................                T                      2.29       $116.43       $31.20       $23.29
       0016     Level V Debridement & Destruction ...........................................................................                T                      3.31       $168.29       $70.68       $33.66
       0017     Level VI Debridement & Destruction ..........................................................................                T                     10.51       $534.35      $245.80      $106.87
       0018     Biopsy of Skin/Puncture of Lesion .............................................................................              T                      1.16        $58.98       $17.66       $11.80
       0019     Level I Excision/ Biopsy .............................................................................................       T                      4.56       $231.84       $78.91       $46.37
       0020     Level II Excision/ Biopsy ............................................................................................       T                      8.56       $435.21      $130.53       $87.04
       0021     Level IV Excision/ Biopsy ...........................................................................................        T                     12.74       $647.73      $236.51      $129.55
       0022     Level V Excision/ Biopsy ............................................................................................        T                     15.07       $766.19      $292.94      $153.24
       0023     Exploration Penetrating Wound .................................................................................              T                      2.18       $110.84       $40.37       $22.17
       0024     Level I Skin Repair .....................................................................................................    T                      2.48       $126.09       $44.50       $25.22
       0025     Level II Skin Repair ....................................................................................................    T                      3.71       $188.62       $70.66       $37.72



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