[Federal Register: August 2, 2007 (Volume 72, Number 148)] [Proposed Rules] [Page 42627-43129] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr02au07-34] [[Page 42627]] ----------------------------------------------------------------------- Part III Book 2 of 2 Books Pages 42627-43130 Department of Health and Human Services ----------------------------------------------------------------------- Centers for Medicare & Medicaid Services ----------------------------------------------------------------------- 42 CFR Parts 410, 411, 414 et al. Medicare and Medicaid Programs: CY 2008 Proposed Changes; Proposed Rule [[Page 42628]] ----------------------------------------------------------------------- DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 410, 411, 414, 416, 419, 482 and 485 [CMS-1392-P] RIN 0938-AO71 Medicare Program: Proposed Changes to the Hospital Outpatient Prospective Payment System and CY 2008 Payment Rates; Proposed Changes to the Ambulatory Surgical Center Payment System and CY 2008 Payment Rates; Medicare and Medicaid Programs: Proposed Changes to Hospital Conditions of Participation; Proposed Changes Affecting Necessary Provider Designations of Critical Access Hospitals AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Proposed rule. ----------------------------------------------------------------------- SUMMARY: This proposed rule would revise the Medicare hospital outpatient prospective payment system to implement applicable statutory requirements and changes arising from our continuing experience with this system. In this proposed rule, we describe the proposed changes to the amounts and factors used to determine the payment rates for Medicare hospital outpatient services paid under the prospective payment system. These changes would be applicable to services furnished on or after January 1, 2008. In addition, this proposed rule would update the revised Medicare ambulatory surgical center (ASC) payment system to implement certain related provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). In this proposed rule, we propose the applicable relative payment weights and amounts for services furnished in ASCs, specific HCPCS codes to which the final policies of the ASC payment system would apply, and other pertinent ratesetting information for the CY 2008 ASC payment system. These changes would be applicable to services furnished on or after January 1, 2008. In this proposed rule, we also are proposing changes to the policies relating to the necessary provider designations of critical access hospitals (CAHs) that are being recertified when a CAH enters into a new co-location arrangement with another hospital or CAH or when the CAH creates or acquires an off-campus location. Further, we are proposing changes to several of the current conditions of participation that hospitals must meet to participate in the Medicare and Medicaid programs to require the completion and documentation in the medical record of medical histories and physical examinations of patients conducted after admission and prior to surgery or a procedure requiring anesthesia services and for postanesthesia evaluations of patients before discharge or transfer from the postanesthesia recovery area. DATES: To be assured consideration, comments on all sections of the preamble of this proposed rule must be received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. on September 14, 2007. ADDRESSES: In commenting, please refer to file code CMS-1392-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. You may submit comments in one of four ways (no duplicates, please): 1. Electronically. You may submit electronic comments on specific issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click on the link ``Submit electronic comments on CMS regulations with an open comment period.'' (Attachments should be in Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft Word.) 2. By regular mail. You may mail written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS- 1392-P, P.O. Box 8011, Baltimore, MD 21244-1850. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1392-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. 4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) before the close of the comment period to one of the following addresses: Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 21244- 1850. If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-9994 in advance to schedule your arrival with one of our staff members. (Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp- in clock is available for persons wishing to retain proof of filing by stamping in and retaining an extra copy of the comments being filed.) Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period. For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION CONTACT: Alberta Dwivedi, (410) 786-0378, Hospital outpatient prospective payment issues. Dana Burley, (410) 786-0378, Ambulatory surgical center issues. Suzanne Asplen, (410) 786-4558, Partial hospitalization and community mental health centers issues. Sheila Blackstock, (410) 786-3502, Reporting of quality data issues. Mary Collins, (410) 786-3189, and Jeannie Miller, (410) 786-3164, Necessary provider designations for CAHs Issues. Scott Cooper, (410) 786-9465, and Jeannie Miller, (410) 786-3164, Hospital conditions of participation Issues. SUPPLEMENTARY INFORMATION: Submitting Comments: We welcome comments from the public on all issues set forth in this proposed rule to assist us in fully considering issues and developing policies. You can assist us by referencing file code CMS-1392-P and the specific ``issue identifier'' that precedes the section on which you choose to comment. Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking. Click on the link ``Electronic Comments on CMS Regulations'' on that Web site to view public comments. Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication [[Page 42629]] of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951. Electronic Access This Federal Register document is also available from the Federal Register online database through GPO Access, a service of the U.S. Government Printing Office. Free public access is available on a Wide Area Information Server (WAIS) through the Internet and via asynchronous dial-in. Internet users can access the database by using the World Wide Web; the Superintendent of Documents' home page address is http://www.gpoaccess.gov/index.html, by using local WAIS client software, or by telnet to swais.access.gpo.gov, then login as guest (no password required). Dial-in users should use communications software and modem to call (202) 512-1661; type swais, then login as guest (no password required). Alphabetical List of Acronyms Appearing in the Proposed Rule ACEP American College of Emergency Physicians AHA American Hospital Association AHIMA American Health Information Management Association AMA American Medical Association APC Ambulatory payment classification AMP Average manufacturer price ASC Ambulatory Surgical Center ASP Average sales price AWP Average wholesale price BBA Balanced Budget Act of 1997, Pub. L. 105-33 BBRA Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 106-113 BCA Blue Cross Association BCBSA Blue Cross and Blue Shield Association BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, Pub. L. 106-554 CAH Critical access hospital CAP Competitive Acquisition Program CBSA Core-Based Statistical Area CCR Cost-to-charge ratio CERT Comprehensive Error Rate Testing CMHC Community mental health center CMS Centers for Medicare & Medicaid Services CoP [Hospital] Condition of participation CORF Comprehensive outpatient rehabilitation facility CPT [Physicians'] Current Procedural Terminology, Fourth Edition, 2007, copyrighted by the American Medical Association CRNA Certified registered nurse anesthetist CY Calendar year DMEPOS Durable medical equipment, prosthetics, orthotics, and supplies DMERC Durable medical equipment regional carrier DRA Deficit Reduction Act of 2005, Pub. L. 109-171 DSH Disproportionate share hospital EACH Essential Access Community Hospital E/M Evaluation and management EPO Erythropoietin ESRD End-stage renal disease FACA Federal Advisory Committee Act, Pub. L. 92-463 FAR Federal Acquisition Regulations FDA Food and Drug Administration FFS Fee-for-service FSS Federal Supply Schedule FTE Full-time equivalent FY Federal fiscal year GAO Government Accountability Office HCPCS Healthcare Common Procedure Coding System HCRIS Hospital Cost Report Information System HHA Home health agency HIPAA Health Insurance Portability and Accountability Act of 1996, Pub. L. 104-191 HOPD Hospital outpatient department HOP QDRP Hospital Outpatient Quality Data Reporting Program ICD-9-CM International Classification of Diseases, Ninth Edition, Clinical Modification IDE Investigational device exemption IOL Intraocular lens IPPS [Hospital] Inpatient prospective payment system IVIG Intravenous immune globulin MAC Medicare Administrative Contractors MedPAC Medicare Payment Advisory Commission MDH Medicare-dependent, small rural hospital MIEA-TRHCA Medicare Improvements and Extension Act under Division B, Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432 MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108-173 MPFS Medicare Physician Fee Schedule MSA Metropolitan Statistical Area NCCI National Correct Coding Initiative NCD National Coverage Determination NTIOL New technology intraocular lens OCE Outpatient Code Editor OMB Office of Management and Budget OPD [Hospital] Outpatient department OPPS [Hospital] Outpatient prospective payment system PHP Partial hospitalization program PM Program memorandum PPI Producer Price Index PPS Prospective payment system PPV Pneumococcal pneumonia (virus) PRA Paperwork Reduction Act QIO Quality Improvement Organization RFA Regulatory Flexibility Act RHQDAPU Reporting Hospital Quality Data for Annual Payment Update [Program] RHHI Regional home health intermediary SBA Small Business Administration SCH Sole community hospital SDP Single Drug Pricer SI Status indicator TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-248 TOPS Transitional outpatient payments USPDI United States Pharmacopoeia Drug Information WAC Wholesale acquisition cost In this document, we address two payment systems under the Medicare program: the hospital outpatient prospective payment system (OPPS) and the revised ambulatory surgical center (ASC) revised payment system. The provisions relating to the OPPS are included in sections I. through XV., XVII., and XIX. through XXII. of this proposed rule and in Addenda A, B, C (Addendum C is available on the Internet only; see section XIX. of this proposed rule), D1, D2, E, L, and M to this proposed rule. The provisions related to the revised ASC payment system are included in sections XVI., XVII., and XIX. through XXII. of this proposed rule and in Addenda AA, BB, DD1, and DD2 to this proposed rule. Table of Contents I. Background for the OPPS A. Legislative and Regulatory Authority for the Hospital Outpatient Prospective Payment System B. Excluded OPPS Services and Hospitals C. Prior Rulemaking D. APC Advisory Panel 1. Authority of the APC Panel 2. Establishment of the APC Panel 3. APC Panel Meetings and Organizational Structure E. Provisions of the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act of 2006 [[Page 42630]] F. Summary of the Major Contents of This Proposed Rule 1. Proposed Updates Affecting OPPS Payments 2. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies 3. Proposed OPPS Payment for Devices 4. Proposed OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 5. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, and Devices 6. Proposed OPPS Payment for Brachytherapy Sources 7. Proposed OPPS Coding and Payment for Drug Administration Services 8. Proposed OPPS Hospital Coding and Payment for Visits 9. Proposed OPPS Payment for Blood and Blood Products 10. Proposed OPPS Payment for Observation Services 11. Proposed Procedures That Will Be Paid Only as Inpatient Services 12. Proposed Nonrecurring Technical and Policy Changes 13. Proposed OPPS Payment Status and Comment Indicators 14. OPPS Policy and Payment Recommendations 15. Proposed Update of the Revised ASC Payment System 16. Proposed Quality Data for Annual Payment Updates 17. Proposed Changes Affecting Necessary Provider Critical Access Hospitals (CAHs) and Hospital Conditions of Participation (CoPs) 18. Regulatory Impact Analysis II. Proposed Updates Affecting OPPS Payments A. Proposed Recalibration of APC Relative Weights 1. Database Construction a. Database Source and Methodology b. Proposed Use of Single and Multiple Procedure Claims (1) Proposed Use of Date of Service Stratification and a Bypass List To Increase the Amount of Data Used To Determine Medians (2) Exploration of Allocation of Packaged Costs to Separately Paid Procedure Codes c. Proposed Calculation of CCRs 2. Proposed Calculation of Median Costs 3. Proposed Calculation of OPPS Scaled Payment Weights 4. Proposed Changes to Packaged Services a. Background b. Addressing Growth in OPPS Volume and Spending c. Proposed Packaging Approach (1) Guidance Services (2) Image Processing Services (3) Intraoperative Services (4) Imaging Supervision and Interpretation Services (5) Diagnostic Radiopharmaceuticals (6) Contrast Agents (7) Observation Services d. Proposed Development of Composite APCs (1) Background (2) Proposed Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (a) Background (b) Proposed Payment for LDR Prostate Brachytherapy (3) Proposed Cardiac Electrophysiologic Evaluation and Ablation Composite APC (a) Background (b) Proposed Payment for Cardiac Electrophysiologic Evaluation and Ablation e. Service-Specific Packaging Issues B. Proposed Payment for Partial Hospitalization 1. Background 2. Proposed PHP APC Update 3. Proposed Separate Threshold for Outlier Payments to CMHCs C. Proposed Conversion Factor Update D. Proposed Wage Index Changes E. Proposed Statewide Average Default CCRs F. Proposed OPPS Payments to Certain Rural Hospitals 1. Hold Harmless Transitional Payment Changes Made by Pub. L. 109-171 (DRA) 2. Proposed Adjustment for Rural SCHs Implemented in CY 2006 Related to Pub. L. 108-173 (MMA) G. Proposed Hospital Outpatient Outlier Payments H. Calculation of the Proposed National Unadjusted Medicare Payment I. Proposed Beneficiary Copayments 1. Background 2. Proposed Copayment 3. Calculation of a Proposed Adjusted Copayment Amount for an APC Group III. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies A. Proposed Treatment of New HCPCS and CPT Codes 1. Proposed Treatment of New HCPCS Codes Included in the April and July Quarterly OPPS Updates for CY 2007 2. Proposed Treatment of New Category I and III CPT Codes and Level II HCPCS Codes B. Proposed Changes--Variations Within APCs 1. Background 2. Application of the 2 Times Rule 3. Proposed Exceptions to the 2 Times Rule C. New Technology APCs 1. Introduction 2. Proposed Movement of Procedures From New Technology APCs to Clinical APCs a. Positron Emission Tomography (PET)/Computed Tomography (CT) Scans (New Technology APC 1511) b. IVIG Preadministration-Related Services (New Technology APC 1502) c. Other Services in New Technology APCs D. Proposed APC-Specific Policies 1. Hyperbaric Oxygen Therapy (APC 0659) 2. Skin Repair Procedures (APCs 0024, 0025, 0027, and 0686) 3. Cardiac Computed Tomography and Computed Tomographic Angiography (APCs 0282, 0376, 0377, and 0398) 4. Ultrasound Ablation of Uterine Fibroids With Magnetic Resonance Guidance (MRgFUS) (APCs 0195 and 0202) 5. Single Allergy Tests (APC 0381) 6. Myocardial Positron Emission Tomography (PET) Scans (APC 0307) 7. Implantation of Cardioverter-Defibrillators (APCs 0107 and 0108) 8. Implantation of Spinal Neurostimulators (APC 0222) 9. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 0065, 0066, and 0067) 10. Blood Transfusion (APC 0110) 11. Screening Colonscopies and Screening Flexible Sigmoidoscopies (APCs 0158 and 0159) IV. Proposed OPPS Payment for Devices A. Proposed Treatment of Device-Dependent APCs 1. Background 2. Proposed Payment 3. Proposed Payment When Devices Are Replaced With Partial Credit to the Hospital B. Pass-Through Payments for Devices 1. Expiration of Transitional Pass-Through Payments for Certain Devices a. Background b. Proposed Policy 2. Proposed Provisions for Reducing Transitional Pass-Through Payments to Offset Costs Packaged Into APC Groups a. Background b. Proposed Policy V. Proposed OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals A. Proposed Transitional Pass-Through Payment for Additional Costs of Drugs and Biologicals 1. Background 2. Drugs and Biologicals with Expiring Pass-Through Status in CY 2007 3. Drugs and Biologicals With Proposed Pass-Through Status in CY 2008 B. Proposed Payment for Drugs, Biologicals, and Radiopharmaceuticals Without Pass-Through Status 1. Background 2. Proposed Criteria for Packaging Payment for Drugs and Biologicals 3. Proposed Payment for Drugs and Biologicals Without Pass- Through Status That Are Not Packaged a. Payment for Specified Covered Outpatient Drugs (1) Background (2) Proposed Payment Policy (3) Proposed Payment for Blood Clotting Factors (4) Proposed Payment for Radiopharmaceuticals (a) Background (b) Proposed Payment for Diagnostic Radiopharmaceuticals (c) Proposed Payment for Therapeutic Radiopharmaceuticals b. Proposed Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital Claims Data VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices A. Total Allowed Pass-Through Spending B. Proposed Estimate of Pass-Through Spending VII. Proposed OPPS Payment for Brachytherapy Sources A. Background B. Proposed Payment for Brachytherapy Sources [[Page 42631]] VIII. Proposed OPPS Drug Administration Coding and Payment A. Background B. Proposed Coding and Payment for Drug Administration Services IX. Proposed Hospital Coding and Payments for Visits A. Background B. Proposed Policies for Hospital Outpatient Visits 1. Clinic Visits: New and Established Patient Visits and Consultations 2. Emergency Department Visits C. Proposed Visit Reporting Guidelines 1. Background 2. CY 2007 Work on Visit Guidelines 3. Proposed Visit Guidelines X. Proposed OPPS Payment for Blood and Blood Products A. Background B. Proposed Payment for Blood and Blood Products XI. Proposed OPPS Payment for Observation Services XII. Proposed Procedures That Will Be Paid Only as Inpatient Procedures A. Background B. Proposed Changes to the Inpatient List XIII. Proposed Nonrecurring Technical and Policy Changes A. Outpatient Hospital Services and Supplies Incident to a Physician Service B. Interrupted Procedures C. Transitional Adjustments Hold Harmless Provisions D. Reporting of Wound Care Services E. Reporting of Cardiac Rehabilitation Services F. Reporting of Bone Marrow and Stem Cell Processing Services XIV. Proposed OPPS Payment Status and Comment Indicators A. Proposed Payment Status Indicator Definitions 1. Proposed Payment Status Indicators to Designate Services That Are Paid under the OPPS 2. Proposed Payment Status Indicators to Designate Services That Are Paid Under a Payment System Other Than the OPPS 3. Proposed Payment Status Indicators to Designate Services That Are Not Recognized under the OPPS But That May Be Recognized by Other Institutional Providers 4. Proposed Payment Status Indicators to Designate Services That Are Not Payable by Medicare B. Proposed Comment Indicator Definitions XV. OPPS Policy and Payment Recommendations A. MedPAC Recommendations B. APC Panel Recommendations XVI. Proposed Update of the Revised Ambulatory Surgical Center Payment System A. Legislative and Regulatory Authority for the ASC Payment System B. Rulemaking for the Revised ASC Payment System C. Revisions to the ASC Payment System Effective January 1, 2008 1. Covered Surgical Procedures under the Revised ASC Payment System a. Definition of Surgical Procedure b. Identification of Surgical Procedures Eligible for Payment under the Revised ASC Payment System c. Payment for Covered Surgical Procedures under the Revised ASC Payment System (1) General Policies (2) Office-Based Procedures (3) Device-Intensive Procedures (4) Multiple and Interrupted Procedure Discounting (5) Transition to Revised ASC Payment Rates 2. Covered Ancillary Services under the Revised ASC Payment System a. General Policies b. Payment Policies for Specific Items and Services (1) Radiology Services (2) Brachytherapy Sources (3) Drugs and Biologicals (4) Implantable Devices with Pass-Through Status under the OPPS (5) Corneal Tissue Acquisition 3. General Payment Policies a. Geographic Adjustment b. Beneficiary Coinsurance D. Proposed Treatment of New HCPCS Codes 1. Treatment of New CY 2008 Category I and III CPT Codes and Level II HCPCS Codes 2. Proposed Treatment of New Mid-Year Category III CPT Codes 3. Proposed Treatment of Level II HCPCS Codes Released on a Quarterly Basis E. Proposed Updates to Covered Surgical Procedures and Covered Ancillary Services 1. Identification of Covered Surgical Procedures a. General Policies b. Proposed Changes in Designation of Covered Surgical Procedures as Office-Based c. Proposed Changes in Designation of Covered Surgical Procedures as Device-Intensive 2. Proposed Changes in Identification of Covered Ancillary Services F. Proposed Payment for Covered Surgical Procedures and Covered Ancillary Services 1. Proposed Payment for Covered Surgical Procedures a. Proposed Update to Payment Rates b. Payment Policies When Devices Are Replaced at No Cost or With Credit (1) Policy When Devices Are Replaced at No Cost or With Full Credit (2) Proposed Policy When Implantable Devices Are Replaced With Partial Credit 2. Proposed Payment for Covered Ancillary Services G. Physician Payment for Procedures and Services Provided in ASC H. Proposed Changes to Definitions of ``Radiology and Certain Other Imaging Services'' and ``Outpatient Prescription Drugs'' I. New Technology Intraocular Lenses 1. Background 2. Changes to the NTIOL Determination Process Finalized for CY 2008 3. NTIOL Application Process for CY 2008 Payment Adjustment 4. Classes of NTIOLS Approved for Payment Adjustment 5. Payment Adjustment 6. Proposed CY 2008 ASC Payment for Insertion of IOLs J. Proposed ASC Payment and Comment Indicators K. ASC Policy and Payment Recommendations L. Proposed Calculation of the ASC Conversion Factor and ASC Payment Rates 1. Overview 2. Budget Neutrality Requirement 3. Calculation of the ASC Payment Rates for CY 2008 4. Calculation of the ASC Payment Rates for CY 2009 and FutureYears XVII. Reporting Quality Data for Annual Payment Rate Updates A. Background 1. Reporting Hospital Outpatient Quality Data for Annual Payment Update 2. Reporting ASC Quality Data for Annual Payment Increase B. Proposed Hospital Outpatient Measures C. Other Proposed Hospital Outpatient Measures D. Proposed Implementation of the HOP QDRP E. Proposed Requirements for HOP Quality Data Reporting for CY 2009 and Subsequent Calendar Years 1. Administrative Requirements 2. Data Collection and Submission Requirements 3. HOP QDRP Validation Requirements F. Publication of HOP QDRP Data Collected G. Proposed Attestation Requirement for Future Payment Years H. HOP QDRP Reconsiderations I. Reporting of ASC Quality Data XVIII. Proposed Changes Affecting Critical Access Hospitals (CAHs) and Hospital Conditions of Participation (CoPs) A. Proposed Changes Affecting CAHs 1. Background 2. Co-Location of Necessary Provider CAHs 3. Provider-Based Facilities of CAHs 4. Termination of Provider Agreement 5. Proposed Regulation Changes B. Proposed Revisions to Hospital CoPs 1. Background 2. Provisions of the Proposed Regulations a. Proposed Timeframes for Completion of the Medical History and Physical Examination b. Proposed Requirements for Preanesthesia and Postanesthesia Evaluations c. Proposed Technical Amendment to Nursing Services CoP XIX. Files Available to the Public Via the Internet A. Information in Addenda Related to the CY 2008 Hospital OPPS B. Information in Addenda Related to the CY 2008 ASC Payment System XX. Collection of Information Requirements XXI. Response to Comments XXII. Regulatory Impact Analysis A. Overall Impact 1. Executive Order 12866 2. Regulatory Flexibility Act (RFA) 3. Small Rural Hospitals [[Page 42632]] 4. Unfunded Mandates 5. Federalism B. Effects of OPPS Changes in This Proposed Rule 1. Alternatives Considered 2. Limitation of Our Analysis 3. Estimated Impact of This Proposed Rule on Hospitals and CMHCs 4. Estimated Effect of This Proposed Rule on Beneficiaries 5. Conclusion 6. Accounting Statement C. Effects of ASC Payment System Changes in This Proposed Rule 1. Alternatives Considered 2. Limitations on Our Analysis 3. Estimated Effects of This Proposed Rule on ASCs 4. Estimated Effects of This Proposed Rule on Beneficiaries 5. Conclusion 6. Accounting Statement D. Effects of the Proposed Requirements for Reporting of Quality Data for Hospital Outpatient Settings E. Effects of the Proposed Policy on CAH Off-Campus and Co- Location Requirements F. Effects of Proposed Policy Revisions to the Hospital CoPs G. Executive Order 12866 Regulation Text Addenda Addendum A--Proposed OPPS APCs for CY 2008 Addendum AA--Proposed ASC Covered Surgical Procedures for CY 2008 (Including Surgical Procedures for Which Payment is Packaged) Addendum B--Proposed OPPS Payment By HCPCS Code for CY 2008 Addendum BB--Proposed ASC Covered Ancillary Services Integral to Covered Surgical Procedures for CY 2008 (Including Ancillary Services for Which Payment Is Packaged) Addendum D1--Proposed OPPS Payment Status Indicators Addendum D2--Proposed OPPS Comment Indicators Addendum DD1--Proposed ASC Payment Indicators Addendum DD2--Proposed ASC Comment Indicators Addendum E--Proposed HCPCS Codes That Would Be Paid Only as Inpatient Procedures for CY 2008 Addendum L--Proposed Out-Migration Adjustment Addendum M--Proposed HCPCS Codes for Assignment to Composite APCs for CY 2008 I. Background for the OPPS A. Legislative and Regulatory Authority for the Hospital Outpatient Prospective Payment System When the Medicare statute was originally enacted, Medicare payment for hospital outpatient services was based on hospital-specific costs. In an effort to ensure that Medicare and its beneficiaries pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a prospective payment system (PPS). The Balanced Budget Act (BBA) of 1997 (Pub. L. 105-33) added section 1833(t) to the Social Security Act (the Act) authorizing implementation of a PPS for hospital outpatient services (OPPS). The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 1999 (Pub. L. 106-113) made major changes in the hospital OPPS. The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA) of 2000 (Pub. L. 106-554) made further changes in the OPPS. Section 1833(t) of the Act was also amended by the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 (Pub. L. 108-173). The Deficit Reduction Act (DRA) of 2005 (Pub. L. 109-171), enacted on February 8, 2006, made additional changes in the OPPS. In addition, the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act (MIEA- TRHCA) of 2006 (Pub. L. 109-432), enacted on December 20, 2006, made further changes in the OPPS. A discussion of these provisions is included in sections I.E., VII., and XVII. of this proposed rule. The OPPS was first implemented for services furnished on or after August 1, 2000. Implementing regulations for the OPPS are located at 42 CFR Part 419. Under the OPPS, we pay for hospital outpatient services on a rate- per-service basis that varies according to the ambulatory payment classification (APC) group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) codes (which include certain Current Procedural Terminology (CPT) codes) and descriptors to identify and group the services within each APC group. The OPPS includes payment for most hospital outpatient services, except those identified in section I.B. of this proposed rule. Section 1833(t)(1)(B)(ii) of the Act provides for Medicare payment under the OPPS for hospital outpatient services designated by the Secretary (which includes partial hospitalization services furnished by community mental health centers (CMHCs)) and hospital outpatient services that are furnished to inpatients who have exhausted their Part A benefits, or who are otherwise not in a covered Part A stay. Section 611 of Pub. L. 108-173 added provisions for Medicare coverage of an initial preventive physical examination, subject to the applicable deductible and coinsurance, as an outpatient department service, payable under the OPPS. The OPPS rate is an unadjusted national payment amount that includes the Medicare payment and the beneficiary copayment. This rate is divided into a labor-related amount and a nonlabor-related amount. The labor-related amount is adjusted for area wage differences using the hospital inpatient wage index value for the locality in which the hospital or CMHC is located. All services and items within an APC group are comparable clinically and with respect to resource use (section 1833(t)(2)(B) of the Act). In accordance with section 1833(t)(2) of the Act, subject to certain exceptions, services and items within an APC group cannot be considered comparable with respect to the use of resources if the highest median (or mean cost, if elected by the Secretary) for an item or service in the APC group is more than 2 times greater than the lowest median cost for an item or service within the same APC group (referred to as the ``2 times rule''). In implementing this provision, we use the median cost of the item or service assigned to an APC group. Special payments under the OPPS may be made for New Technology items and services in one of two ways. Section 1833(t)(6) of the Act provides for temporary additional payments, which we refer to as ``transitional pass-through payments,'' for at least 2 but not more than 3 years for certain drugs, biological agents, brachytherapy devices used for the treatment of cancer, and categories of other medical devices. For New Technology services that are not eligible for transitional pass-through payments, and for which we lack sufficient data to appropriately assign them to a clinical APC group, we have established special APC groups based on costs, which we refer to as New Technology APCs. These New Technology APCs are designated by cost bands which allow us to provide appropriate and consistent payment for designated new procedures that are not yet reflected in our claims data. Similar to pass-through payments, an assignment to a New Technology APC is temporary; that is, we retain a service within a New Technology APC until we acquire sufficient data to assign it to a clinically appropriate APC group. B. Excluded OPPS Services and Hospitals Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the hospital outpatient services that are paid under the OPPS. While most hospital outpatient services are payable under the OPPS, section [[Page 42633]] 1833(t)(1)(B)(iv) of the Act excludes payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule. Section 614 of Pub. L. 108- 173 amended section 1833(t)(1)(B)(iv) of the Act to exclude OPPS payment for screening and diagnostic mammography services. The Secretary exercised the authority granted under the statute to exclude from the OPPS those services that are paid under fee schedules or other payment systems. Such excluded services include, for example, the professional services of physicians and nonphysician practitioners paid under the Medicare Physician Fee Schedule (MPFS); laboratory services paid under the clinical diagnostic laboratory fee schedule (CLFS); services for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD composite rate; and services and procedures that require an inpatient stay that are paid under the hospital inpatient prospective payment system (IPPS). We set forth the services that are excluded from payment under the OPPS in Sec. 419.22 of the regulations. Under Sec. 419.20(b) of the regulations, we specify the types of hospitals and entities that are excluded from payment under the OPPS. These excluded entities include Maryland hospitals, but only for services that are paid under a cost containment waiver in accordance with section 1814(b)(3) of the Act; critical access hospitals (CAHs); hospitals located outside of the 50 States, the District of Columbia, and Puerto Rico; and Indian Health Service hospitals. C. Prior Rulemaking On April 7, 2000, we published in the Federal Register a final rule with comment period (65 FR 18434) to implement a prospective payment system for hospital outpatient services. The hospital OPPS was first implemented for services furnished on or after August 1, 2000. Section 1833(t)(9) of the Act requires the Secretary to review certain components of the OPPS, no less often than annually, and to revise the groups, relative payment weights, and other adjustments that take into account changes in medical practices, changes in technologies, and the addition of new services, new cost data, and other relevant information and factors. Since initially implementing the OPPS, we have published final rules in the Federal Register annually to implement statutory requirements and changes arising from our continuing experience with this system. We published in the Federal Register on November 24, 2006 the CY 2007 OPPS/ASC final rule with comment period (71 FR 67960). In that final rule with comment period, we revised the OPPS to update the payment weights and conversion factor for services payable under the CY 2007 OPPS on the basis of claims data from January 1, 2005, through December 31, 2005, and to implement certain provisions of Pub. L. 108- 173 and Pub. L. 109-171. In addition, we responded to public comments received on the provisions of the November 10, 2005 final rule with comment period (70 FR 86516) pertaining to the APC assignment of HCPCS codes identified in Addendum B of that rule with the new interim (NI) comment indicator; and public comments received on the August 23, 2006 OPPS/ASC proposed rule for CY 2007 (71 FR 49506). D. APC Advisory Panel 1. Authority of the APC Panel Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of the BBRA, and redesignated by section 202(a)(2) of the BBRA, requires that we consult with an outside panel of experts to review the clinical integrity of the payment groups and their weights under the OPPS. The Act further specifies that the panel will act in an advisory capacity. The Advisory Panel on Ambulatory Payment Classification (APC) Groups (the APC Panel), discussed under section I.D.2. of this proposed rule, fulfills these requirements. The APC Panel is not restricted to using data compiled by CMS, and may use data collected or developed by organizations outside the Department in conducting its review. 2. Establishment of the APC Panel On November 21, 2000, the Secretary signed the initial charter establishing the APC Panel. This expert panel, which may be composed of up to 15 representatives of providers subject to the OPPS (currently employed full-time, not as consultants, in their respective areas of expertise), reviews clinical data and advises CMS about the clinical integrity of the APC groups and their weights. For purposes of this Panel, consultants or independent contractors are not considered to be full-time employees. The APC Panel is technical in nature, and is governed by the provisions of the Federal Advisory Committee Act (FACA). Since its initial chartering, the Secretary has renewed the APC Panel's charter three times: on November 1, 2002; on November 1, 2004; and effective November 21, 2006. The current charter specifies, among other requirements, that the APC Panel continue to be technical in nature; be governed by the provisions of the FACA; may convene up to three meetings per year; has a Designated Federal Officer (DFO); and is chaired by a Federal official designated by the Secretary. The current APC Panel membership and other information pertaining to the APC Panel, including its charter, Federal Register notices, meeting dates, agenda topics, and meeting reports can be viewed on the CMS Web site at: http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage . 3. APC Panel Meetings and Organizational Structure The APC Panel first met on February 27, February 28, and March 1, 2001. Since the initial meeting, the APC Panel has held 11 subsequent meetings, with the last meeting taking place on March 7 and 8, 2007. Prior to each meeting, we publish a notice in the Federal Register to announce the meeting, and when necessary to solicit and announce nominations for the APC Panel's membership. The APC Panel has established an operational structure that, in part, includes the use of three subcommittees to facilitate its required APC review process. The three current subcommittees are the Data Subcommittee, the Observation and Visit Subcommittee, and the Packaging Subcommittee. The Data Subcommittee is responsible for studying the data issues confronting the APC Panel, and for recommending options for resolving them. The Observation and Visit Subcommittee reviews and makes recommendations to the APC Panel on all technical issues pertaining to observation services and hospital outpatient visits paid under the OPPS (for example, APC configurations and APC payment weights). The Packaging Subcommittee studies and makes recommendations on issues pertaining to services that are not separately payable under the OPPS, but whose payments are bundled or packaged into APC payments. Each of these subcommittees was established by a majority vote from the full APC Panel during a scheduled APC Panel meeting, and their continuation as subcommittees was approved at the March 2007 APC Panel meeting. All subcommittee recommendations are discussed and voted upon by the full APC Panel. Discussions of the recommendations resulting from the APC Panel's March [[Page 42634]] 2007 meeting are included in the sections of this proposed rule that are specific to each recommendation. For discussions of earlier APC Panel meetings and recommendations, we reference previous hospital OPPS final rules or the Web site mentioned earlier in this section. E. Provisions of the Medicare Improvements and Extension Act Under Division B of Title I of the Tax Relief and Health Care Act of 2006 The Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act (MIEA-TRHCA) of 2006, Pub. L. 109-432, enacted on December 20, 2006, included the following provisions affecting the OPPS: 1. Section 107(a) of the MIEA-TRHCA amended section 1833(t)(16)(C) of the Act to extend the period for payment of brachytherapy devices based on the hospital's charges adjusted to cost for 1 additional year, through December 31, 2007. 2. Section 107(b)(1) of the MIEA-TRHCA amended section 1833(t)(2)(H) of the Act by adding stranded and non-stranded devices furnished on or after July 1, 2007, as additional classifications of brachytherapy devices for which separate payment groups must be established for payment under the OPPS. Section 107(b)(2) of the MIEA- TRCHA provides that the Secretary may implement the section 107(b)(1) amendment to section 1833(t)(2)(H) of the Act ``by program instruction or otherwise.'' 3. Section 109(a) of the MIEA-TRHCA added new paragraph (17) to section 1833(t) of the Act which authorizes the Secretary, beginning in 2009 and each subsequent year, to reduce the OPPS full annual update by 2.0 percentage points if a hospital paid under the OPPS fails to submit data as required by the Secretary in the form and manner specified on selected measures of quality of care, including medication errors. In accordance with this provision, the selected measures are those that are appropriate for the measurement of quality of care furnished by hospitals in the outpatient setting, that reflect consensus among affected parties and, to the extent feasible and practicable, that include measures set forth by one or more of the national consensus entities, and that may be the same as those required for reporting by hospitals paid under the IPPS. This provision specifies that a reduction for 1 year cannot be taken into account when computing the OPPS update for a subsequent year. In addition, this provision requires the Secretary to establish a process for making the submitted data available for public review. F. Summary of the Major Contents of This Proposed Rule In this proposed rule, we are setting forth proposed changes to the Medicare hospital OPPS for CY 2008. These changes would be effective for services furnished on or after January 1, 2008. We are also setting forth proposed changes to the Medicare ASC payment system for CY 2008. These changes would be effective for services furnished on or after January 1, 2008. The following is a summary of the major changes that we are proposing to make: 1. Proposed Updates Affecting OPPS Payments In section II. of this proposed rule, we set forth-- The methodology used to recalibrate the proposed APC relative payment weights. The proposed payment for partial hospitalization services, including the proposed separate threshold for outlier payments for CMHCs. The proposed update to the conversion factor used to determine payment rates under the OPPS. The proposed retention of our current policy to use the IPPS wage indices to adjust, for geographic wage differences, the portion of the OPPS payment rate and the copayment standardized amount attributable to labor-related cost. The proposed update of statewide average default CCRs. The proposed application of hold harmless transitional outpatient payments (TOPs) for certain small rural hospitals. The proposed payment adjustment for rural SCHs. The proposed calculation of the hospital outpatient outlier payment. The calculation of the proposed national unadjusted Medicare OPPS payment. The proposed beneficiary copayments for OPPS services. 2. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies In section III. of this proposed rule, we discuss the proposed additions of new procedure codes to the APCs; our proposal to establish a number of new APCs; and our analyses of Medicare claims data and certain recommendations of the APC Panel. We also discuss the application of the 2 times rule and proposed exceptions to it; proposed changes to specific APCs; and the proposed movement of procedures from New Technology APCs to clinical APCs. 3. Proposed OPPS Payment for Devices In section IV. of this proposed rule, we discuss proposed payment for device-dependent APCs and the pass-through payment for specific categories of devices. 4. Proposed OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals In section V. of this proposed rule, we discuss the proposed CY 2008 OPPS payment for drugs, biologicals, and radiopharmaceuticals, including the proposed payment for drugs, biologicals, and radiopharmaceuticals with and without pass-through status. 5. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, and Devices In section VI. of this proposed rule, we discuss the estimate of CY 2008 OPPS transitional pass-through spending for drugs, biologicals, and devices. 6. Proposed OPPS Payment for Brachytherapy Sources In section VII. of this proposed rule, we discuss our proposal concerning coding and payment for brachytherapy sources. 7. Proposed OPPS Coding and Payment for Drug Administration Services In section VIII. of this proposed rule, we set forth our proposed policy concerning coding and payment for drug administration services. 8. Proposed OPPS Hospital Coding and Payments for Visits In section IX. of this proposed rule, we set forth our proposed changes to policies for the coding and reporting of clinic and emergency department visits and critical care services on claims paid under the OPPS. 9. Proposed OPPS Payment for Blood and Blood Products In section X. of this proposed rule, we discuss our proposed payment for blood and blood products. 10. Proposed OPPS Payment for Observation Services In section XI. of this proposed rule, we discuss the proposed payment policies for observation services furnished to patients on an outpatient basis. 11. Proposed Procedures That Will Be Paid Only as Inpatient Services In section XII. of this proposed rule, we discuss the procedures that we are [[Page 42635]] proposing to remove from the inpatient list and assign to APCs. 12. Proposed Nonrecurring Technical and Policy Changes In section XIII. of this proposed rule, we set forth our proposals for nonrecurring technical and policy changes and clarifications relating to outpatient hospital services and supplies incident to a physician service; payment for interrupted procedures prior to and after the administration of anesthesia; transitional adjustments to payments for covered outpatient services furnished by small rural hospitals and SCHs located in rural areas; and reporting requirements for wound care services, cardiac rehabilitation services, and bone marrow and stem cell processing services. 13. Proposed OPPS Payment Status and Comment Indicators In section XIV. of this proposed rule, we discuss proposed changes to the definitions of status indicators assigned to APCs and present our proposed comment indicators for the OPPS/ASC final rule with comment period. 14. OPPS Policy and Payment Recommendations In section XV. of this proposed rule, we address recommendations made by MedPAC and the APC Panel regarding the OPPS for CY 2008. 15. Proposed Update of the Revised ASC Payment System In section XVI. of this proposed rule, we discuss the proposed update of the revised ASC payment system payment rates for CY 2008. We also discuss our proposed changes to our regulations Sec. 414.22 (b)(5)(i)(A) and (B) regarding physician payment for performing noncovered ASC surgical procedures in ASCs. In addition, we are proposing to revise the definitions of ``radiology and certain other imaging services'' and ``outpatient prescription drugs'' when provided integral to an ASC covered surgical procedure. 16. Reporting Quality Data for Annual Payment Rate Updates In section XVII. of this proposed rule, we discuss the proposed quality measures for reporting hospital outpatient quality data for CY 2009 and subsequent years and set forth the requirements for data collection and submission for the annual payment update. We also briefly discuss the legislative provisions of the MIEA-TRHCA that give the Secretary authority to develop quality measures for reporting by ASCs. 17. Proposed Changes Affecting Necessary Provider Critical Access Hospitals (CAHs) and Hospital Conditions of Participation (CoPs) In section XVIII. of this proposed rule, we discuss our proposed changes affecting necessary provider designations for CAHs that are being recertified when the CAH enters into a new co-location arrangement with another hospital or CAH or when the CAH creates or acquires an off-campus location. We also discuss our proposed changes relating to several hospital CoPs to require the completion of physical examinations and medical histories, and documentation in the medical records, for patients after admission and prior to surgery or a procedure requiring anesthesia services and for postanesthesia evaluations of patients before discharge or transfer from the postanesthesia recovery area. 18. Regulatory Impact Analysis In section XXII. of this proposed rule, we set forth an analysis of the impact the proposed changes will have on affected entities and beneficiaries. II. Proposed Updates Affecting OPPS Payments A. Proposed Recalibration of APC Relative Weights (If you choose to comment on issues in this section, please include the caption ``APC Relative Weights'' at the beginning of your comment.) 1. Database Construction a. Database Source and Methodology Section 1833(t)(9)(A) of the Act requires that the Secretary review and revise the relative payment weights for APCs at least annually. In the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we explained in detail how we calculated the relative payment weights that were implemented on August 1, 2000, for each APC group. Except for some reweighting due to a small number of APC changes, these relative payment weights continued to be in effect for CY 2001. This policy is discussed in the November 13, 2000 interim final rule (65 FR 67824 through 67827). We are proposing to use the same basic methodology that we described in the April 7, 2000 OPPS final rule with comment period to recalibrate the APC relative payment weights for services furnished on or after January 1, 2008, and before January 1, 2009. That is, we are proposing to recalibrate the relative payment weights for each APC based on claims and cost report data for outpatient services. We are proposing to use the most recent available data to construct the database for calculating APC group weights. For the purpose of recalibrating the proposed APC relative payment weights for CY 2008, we used approximately 131 million final action claims for hospital OPD services furnished on or after January 1, 2006, and before January 1, 2007. (For exact counts of claims used, we refer readers to the claims accounting narrative under supporting documentation for this proposed rule on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/ ). Of the 131 million final action claims for services provided in hospital outpatient settings, approximately 101 million claims were of the type of bill potentially appropriate for use in setting rates for OPPS services (but did not necessarily contain services payable under the OPPS). Of the 101 million claims, approximately 46 million were not for services paid under the OPPS or were excluded as not appropriate for use (for example, erroneous cost- to-charge ratios (CCRs) or no HCPCS codes reported on the claim). We were able to use approximately 50 million whole claims of the approximately 54 million claims that remained to set the OPPS APC relative weights we are proposing for the CY 2008 OPPS. From the 50 million whole claims, we created approximately 88 million single records, of which approximately 58 million were ``pseudo'' single claims (created from multiple procedure claims using the process we discuss in this section). Approximately 822,000 claims trimmed out on cost or units in excess of 3 standard deviations from the geometric mean, yielding approximately 87 million single bills used for median setting. Ultimately, we were able to use for proposed CY 2008 ratesetting some portion of 92 percent of the CY 2006 claims containing services payable under the OPPS. The proposed APC relative weights and payments for CY 2008 in Addenda A and B to this proposed rule were calculated using claims from this period that were processed before January 1, 2007, and continue to be based on the median hospital costs for services in the APC groups. We selected claims for services paid under the OPPS and matched these claims to the most recent cost report filed by the individual hospitals represented in our claims data. We continue to believe that it is appropriate to use the most current full calendar year claims data and the most [[Page 42636]] recently submitted cost reports to calculate the median costs which we are proposing to convert to relative payment weights for purposes of calculating the CY 2008 payment rates. b. Proposed Use of Single and Multiple Procedure Claims For CY 2008, in general, we are proposing to continue to use single procedure claims to set the medians on which the APC relative payment weights would be based, with some exceptions as discussed below. We have received many requests asking that we ensure that the data from claims that contain charges for multiple procedures are included in the data from which we calculate the relative payment weights. Requesters believe that relying solely on single procedure claims to recalibrate APC relative payment weights fails to take into account data for many frequently performed procedures, particularly those commonly performed in combination with other procedures. They believe that if a service is frequently performed in combination with others, the individual services are more complex and more resource-intensive than if they were performed alone. Stakeholders have suggested that including data from multiple procedure claims could increase the median cost estimates for the individual services. They believe that depending upon single procedure claims alone results in basing relative payment weights on the least costly services that are not representative of the typical services, thereby introducing downward bias to the medians on which the weights are based. We generally use single procedure claims to set the median costs for APCs because we believe that it is important that the OPPS relative weights on which payment rates are based be appropriate when one and only one procedure is furnished and because we are, so far, unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service. We agree that, optimally, it is desirable to use the data from as many claims as possible to recalibrate the APC relative payment weights, including those claims for multiple procedures. We engaged in several efforts this year to improve our use of multiple procedure claims for ratesetting. As we have for several years, we continue to use date of service stratification and a list of codes to be bypassed to convert multiple procedure claims to ``pseudo'' single procedure claims. We also continued our internal efforts to better understand the patterns of services and costs from multiple bills toward the goal of using more multiple bill information by assessing the amount of packaging in the multiple bills and, specifically, by exploring the amount of packaging for drug administration services in the single and multiple bill claims. Moreover, in many cases, the proposed expansion of packaging also enables the use of more claims data by enabling us to treat claims with multiple procedure codes as single claims. We refer readers to section II.A.4. of this proposed rule for a full discussion of this proposal for CY 2008. (1) Proposed Use of Date of Service Stratification and a Bypass List To Increase the Amount of Data Used To Determine Medians By bypassing specified codes that we believe do not have significant packaged costs, we are able to use more data from multiple procedure claims. In many cases, this enables us to create multiple ``pseudo'' single claims from claims that, as submitted, contained multiple separately paid procedures on the same claim. We refer to these newly created single procedure claims as ``pseudo'' single claims because they were submitted by providers as multiple procedure claims. The history of our use of a bypass list to generate ``pseudo'' single claims is well documented, most recently in the CY 2007 OPPS/ASC final rule with comment period (71 FR 67969 through 67970). The date of service stratification and bypass list process we used for the CY 2007 OPPS (combined with the packaging changes we are proposing in section II.A.4. of this proposed rule) resulted in our being able to use some part of approximately 92 percent of the total claims that are eligible for use in the OPPS ratesetting and modeling for this proposed rule. This process enabled us to create, for CY 2008 approximately 58 million ``pseudo'' singles and approximately 30 million ``natural'' single bills. For this proposed rule, ``pseudo'' single procedure bills represented 66 percent of all single bills used to calculate median costs. This compares favorably to the CY 2007 OPPS final rule data in which ``pseudo'' single bills represented 68 percent of all single bills used to calculate the median costs on which the CY 2007 OPPS payment rates were based. We believe that the reduction in the percent of ``pseudo'' single bills and the corresponding increase in the proportion of ``natural'' single bills occurred largely because of our proposal to increase packaging as discussed in section II.A.4. of this proposed rule. In many cases, the packaging proposal for CY 2008 enabled us to use claims that would otherwise have been considered to be multiple procedure claims and, absent the proposal for additional packaging, could have been used for ratesetting only if we had been able to create ``pseudo'' single claims from them. For CY 2008, we are proposing to bypass 425 HCPCS codes that are identified in Table 1 of this proposed rule. We are proposing to continue the use of the codes on the CY 2007 OPPS bypass list but to remove codes we are proposing to package for CY 2008. We also are proposing to remove codes that were on the CY 2007 bypass list that ceased to meet the empirical criteria under the proposed packaging changes when clinical review confirmed that their removal would be appropriate in the context of the full proposal for the CY 2008 OPPS. Since the inception of the bypass list, we have calculated the percent of natural single bills that contained packaging for each code and the amount of packaging in each ``natural'' single bill for each code. We retained the codes on the previous year's bypass list and used the update year's data to determine whether it would be appropriate to add additional codes to the previous year's bypass list. The entire list (including the codes that remained on the bypass list from prior years) was open to public comment. For this CY 2008 proposed rule, we explicitly reviewed all ``natural'' single bills against the empirical criteria for all codes on the CY 2007 bypass list because of the proposal for greater packaging discussed in section II.A.4. of this proposed rule, as this effort increased the packaging associated with some codes. We removed 106 HCPCS codes from the CY 2007 bypass list for the CY 2008 proposal. We note also that many of the codes we are proposing to newly package for CY 2008 were on the bypass list used for setting the OPPS payment rates for CY 2007 and are no longer proposed for bypass because we are proposing to package them, as discussed in more detail below. We also are proposing to add to the bypass list HCPCS codes that, using the proposed rule data, meet the same previously established empirical criteria for the bypass list that are reviewed below or which our clinicians believe would have little associated packaging if the services were correctly coded. The CY 2008 packaging proposal minimally reduced the percentage of total claims that we were able to use, in whole or in part, from 93 percent for CY 2007 to 92 percent for this proposed rule. The proposed packaging approach increased the number of ``natural'' single bills, in spite of reducing the [[Page 42637]] universe of codes requiring single bills for ratesetting, but reduced the number of ``pseudo'' single bills. More ``natural'' single procedure bills can be created by the packaging of codes that always appear with another procedure because these dependent services are supportive of and ancillary to the primary independent procedures for which payment is being made. A claim containing two independent procedure codes on the same date of service and not on the bypass list previously could not be used for ratesetting, but packaging the cost of one of the codes on the claim frees the claim to be used to calculate the median cost of the procedure that is not packaged. On the other hand, our proposed packaging approach reduced the number of codes eligible for the bypass list because of the limitation on packaging set by our previously established empirical criteria. A smaller bypass list and the presence of greater packaging on claims reduced the final number of ``pseudo'' single claims. In prior years, roughly 68 percent of single bills were ``pseudo'' single bills, but based on the CY 2008 proposed rule data, 66 percent of single bills were ``pseudo'' singles. Moreover, the number of ``natural'' single bills and ``pseudo'' single bills are reduced by the volume of services that we are proposing to package. Hence, our CY 2008 proposal to package payment for some HCPCS codes with relatively high frequencies would eliminate for ratesetting the number of available ``natural'' and ``pseudo'' single bills attributable to the codes that we are proposing to package. As in prior years, we are proposing to use the following empirical criteria to determine the additional codes to add to the CY 2007 bypass list to create the CY 2008 bypass list. We assume that the representation of packaging on the single claims for any given code is comparable to packaging for that code in the multiple claims: There are 100 or more single claims for the code. This number of single claims ensures that observed outcomes are sufficiently representative of packaging that might occur in the multiple claims. Five percent or fewer of the single claims for the code have packaged costs on that single claim for the code. This criterion results in limiting the amount of packaging being redistributed to the payable procedure remaining on the claim after the bypass code is removed and ensures that the costs associated with the bypass code represent the cost of the bypassed service. The median cost of packaging observed in the single claims is equal to or less than $50. This limits the amount of error in redistributed costs. The code is not a code for an unlisted service. In addition, we are proposing to add to the bypass list codes that our clinicians believe have minimal associated packaging based on their clinical assessment of the full CY 2008 OPPS proposal. We note that this list contains bypass codes that are appropriate to claims for services in CY 2006 and, therefore, includes codes that have been deleted for CY 2007. Moreover, there are codes on the bypass list that are new for CY 2007 and which are appropriate additions to the bypass list in preparation for use of the CY 2007 claims for creation of the CY 2009 OPPS. In order to keep the established empirical criteria for the bypass list constant, we are seeking public comment on whether we should adjust the $50 packaging cost criterion for inflation each year and, if so, recommendations for the source of the adjustment. Adding an inflation adjustment factor would ensure that the same amount of packaging associated with candidate codes for the bypass list is reviewed each year relative to nominal costs. Table 1.--Proposed CY 2008 Bypass Codes for Creating ``Pseudo'' Single Claims for Calculating Median Costs ------------------------------------------------------------------------ HCPCS code Short descriptor ------------------------------------------------------------------------ 11056............................ Trim skin lesions, 2 to 4. 11057............................ Trim skin lesions, over 4. 11300............................ Shave skin lesion. 11301............................ Shave skin lesion. 11719............................ Trim nail(s). 11720............................ Debride nail, 1-5. 11721............................ Debride nail, 6 or more. 11954............................ Therapy for contour defects. 17003............................ Destruct premalg les, 2-14. 31231............................ Nasal endoscopy, dx. 31579............................ Diagnostic laryngoscopy. 51798............................ Us urine capacity measure. 54240............................ Penis study. 56820............................ Exam of vulva w/scope. 67820............................ Revise eyelashes. 69210............................ Remove impacted ear wax. 69220............................ Clean out mastoid cavity. 70030............................ X-ray eye for foreign body. 70100............................ X-ray exam of jaw. 70110............................ X-ray exam of jaw. 70120............................ X-ray exam of mastoids. 70130............................ X-ray exam of mastoids. 70140............................ X-ray exam of facial bones. 70150............................ X-ray exam of facial bones. 70160............................ X-ray exam of nasal bones. 70200............................ X-ray exam of eye sockets. 70210............................ X-ray exam of sinuses. 70220............................ X-ray exam of sinuses. 70250............................ X-ray exam of skull. 70260............................ X-ray exam of skull. 70328............................ X-ray exam of jaw joint. 70330............................ X-ray exam of jaw joints. 70336............................ Magnetic image, jaw joint. 70355............................ Panoramic x-ray of jaws. 70360............................ X-ray exam of neck. 70370............................ Throat x-ray & fluoroscopy. 70371............................ Speech evaluation, complex. 70450............................ Ct head/brain w/o dye. 70480............................ Ct orbit/ear/fossa w/o dye. 70486............................ Ct maxillofacial w/o dye. 70490............................ Ct soft tissue neck w/o dye. 70544............................ Mr angiography head w/o dye. 70551............................ Mri brain w/o dye. 71010............................ Chest x-ray. 71015............................ Chest x-ray. 71020............................ Chest x-ray. 71021............................ Chest x-ray. 71022............................ Chest x-ray. 71023............................ Chest x-ray and fluoroscopy. 71030............................ Chest x-ray. 71034............................ Chest x-ray and fluoroscopy. 71035............................ Chest x-ray. 71100............................ X-ray exam of ribs. 71101............................ X-ray exam of ribs/chest. 71110............................ X-ray exam of ribs. 71111............................ X-ray exam of ribs/chest. 71120............................ X-ray exam of breastbone. 71130............................ X-ray exam of breastbone. 71250............................ Ct thorax w/o dye. 72010............................ X-ray exam of spine. 72020............................ X-ray exam of spine. 72040............................ X-ray exam of neck spine. 72050............................ X-ray exam of neck spine. 72052............................ X-ray exam of neck spine. 72069............................ X-ray exam of trunk spine. 72070............................ X-ray exam of thoracic spine. 72072............................ X-ray exam of thoracic spine. 72074............................ X-ray exam of thoracic spine. 72080............................ X-ray exam of trunk spine. 72090............................ X-ray exam of trunk spine. 72100............................ X-ray exam of lower spine. 72110............................ X-ray exam of lower spine. 72114............................ X-ray exam of lower spine. 72120............................ X-ray exam of lower spine. 72125............................ Ct neck spine w/o dye. 72128............................ Ct chest spine w/o dye. 72131............................ Ct lumbar spine w/o dye. 72141............................ Mri neck spine w/o dye. 72146............................ Mri chest spine w/o dye. 72148............................ Mri lumbar spine w/o dye. 72170............................ X-ray exam of pelvis. 72190............................ X-ray exam of pelvis. 72192............................ Ct pelvis w/o dye. 72202............................ X-ray exam sacroiliac joints. 72220............................ X-ray exam of tailbone. 73000............................ X-ray exam of collar bone. 73010............................ X-ray exam of shoulder blade. 73020............................ X-ray exam of shoulder. 73030............................ X-ray exam of shoulder. 73050............................ X-ray exam of shoulders. 73060................ X-ray exam of humerus. 73070................ X-ray exam of elbow. 73080................ X-ray exam of elbow. 73090................ X-ray exam of forearm. 73100................ X-ray exam of wrist. 73110................ X-ray exam of wrist. 73120................ X-ray exam of hand. [[Page 42638]] 73130................ X-ray exam of hand. 73140................ X-ray exam of finger(s). 73200................ Ct upper extremity w/o dye. 73218................ Mri upper extremity w/o dye. 73221................ Mri joint upr extrem w/o dye. 73510................ X-ray exam of hip. 73520................ X-ray exam of hips. 73540................ X-ray exam of pelvis & hips. 73550................ X-ray exam of thigh. 73560................ X-ray exam of knee, 1 or 2. 73562................ X-ray exam of knee, 3. 73564................ X-ray exam, knee, 4 or more. 73565................ X-ray exam of knees. 73590................ X-ray exam of lower leg. 73600................ X-ray exam of ankle. 73610................ X-ray exam of ankle. 73620................ X-ray exam of foot. 73630................ X-ray exam of foot. 73650................ X-ray exam of heel. 73660................ X-ray exam of toe(s). 73700................ Ct lower extremity w/o dye. 73718................ Mri lower extremity w/o dye. 73721................ Mri jnt of lwr extre w/o dye. 74000................ X-ray exam of abdomen. 74010................ X-ray exam of abdomen. 74020................ X-ray exam of abdomen. 74022................ X-ray exam series, abdomen. 74150................ Ct abdomen w/o dye. 74210................ Contrst x-ray exam of throat. 74220................ Contrast x-ray, esophagus. 74230................ Cine/vid x-ray, throat/esoph. 74246................ Contrst x-ray uppr gi tract. 74247................ Contrst x-ray uppr gi tract. 74249................ Contrst x-ray uppr gi tract. 76020................ X-rays for bone age. 76040................ X-rays, bone evaluation. 76061................ X-rays, bone survey. 76062................ X-rays, bone survey. 76065................ X-rays, bone evaluation. 76066................ Joint survey, single view. 76070................ Ct bone density, axial. 76071................ Ct bone density, peripheral. 76075................ Dxa bone density, axial. 76076................ Dxa bone density/peripheral 76077................ Dxa bone density/v-fracture. 76078................ Radiographic absorptiometry. 76100................ X-ray exam of body section. 76400................ Magnetic image, bone marrow. 76510................ Ophth us, b & quant a. 76511................ Ophth us, quant a only. 76512................ Ophth us, b w/non-quant a. 76513................ Echo exam of eye, water bath. 76514................ Echo exam of eye, thickness. 76516................ Echo exam of eye. 76519................ Echo exam of eye. 76536................ Us exam of head and neck. 76645................ Us exam, breast(s). 76700................ Us exam, abdom, complete. 76705................ Echo exam of abdomen. 76770................ Us exam abdo back wall, comp. 76775................ Us exam abdo back wall, lim. 76778................ Us exam kidney transplant. 76801................ Ob us < 14 wks, single fetus. 76805................ Ob us >/= 14 wks, sngl fetus. 76811................ Ob us, detailed, sngl fetus. 76816................ Ob us, follow-up, per fetus. 76817................ Transvaginal us, obstetric. 76830................ Transvaginal us, non-ob. 76856................ Us exam, pelvic, complete. 76857................ Us exam, pelvic, limited. 76870................ Us exam, scrotum. 76880................ Us exam, extremity. 76970................ Ultrasound exam follow-up. 76977................ Us bone density measure. 76999................ Echo examination procedure. 77300................ Radiation therapy dose plan. 77301................ Radiotherapy dose plan, imrt. 77315................ Teletx isodose plan complex. 77326................ Brachytx isodose calc simp. 77327................ Brachytx isodose calc interm. 77328................ Brachytx isodose plan compl. 77331................ Special radiation dosimetry. 77336................ Radiation physics consult. 77370................ Radiation physics consult. 77401................ Radiation treatment delivery. 77402................ Radiation treatment delivery. 77403................ Radiation treatment delivery. 77404................ Radiation treatment delivery. 77407................ Radiation treatment delivery. 77408................ Radiation treatment delivery. 77409................ Radiation treatment delivery. 77411................ Radiation treatment delivery. 77412................ Radiation treatment delivery. 77413................ Radiation treatment delivery. 77414................ Radiation treatment delivery. 77416................ Radiation treatment delivery. 77418................ Radiation tx delivery, imrt. 77470................ Special radiation treatment. 77520................ Proton trmt, simple w/o comp. 77523................ Proton trmt, intermediate. 80500.............. Lab pathology consultation. 80502.............. Lab pathology consultation. 85097.............. Bone marrow interpretation. 86510.............. Histoplasmosis skin test. 86850.............. RBC antibody screen. 86870.............. RBC antibody identification. 86880.............. Coombs test, direct. 86885.............. Coombs test, indirect, qual. 86886.............. Coombs test, indirect, titer. 86890.............. Autologous blood process. 86900.............. Blood typing, ABO. 86901.............. Blood typing, Rh (D). 86903.............. Blood typing, antigen screen. 86904.............. Blood typing, patient serum. 86905.............. Blood typing, RBC antigens. 86906.............. Blood typing, Rh phenotype. 86930.............. Frozen blood prep. 86970.............. RBC pretreatment. 88104.............. Cytopath fl nongyn, smears. 88106.............. Cytopath fl nongyn, filter. 88107.............. Cytopath fl nongyn, sm/fltr. 88108.............. Cytopath, concentrate tech. 88112.............. Cytopath, cell enhance tech. 88160.............. Cytopath smear, other source. 88161.............. Cytopath smear, other source. 88162.............. Cytopath smear, other source. 88172.............. Cytopathology eval of fna. 88173.............. Cytopath eval, fna, report. 88182.............. Cell marker study. 88184.............. Flowcytometry/tc, 1 marker. 88185.............. Flowcytometry/tc, add-on. 88300.............. Surgical path, gross. 88302.............. Tissue exam by pathologist. 88304.............. Tissue exam by pathologist. 88305.............. Tissue exam by pathologist. 88307.............. Tissue exam by pathologist. 88311.............. Decalcify tissue. 88312.............. Special stains. 88313.............. Special stains. 88321.............. Microslide consultation. 88323.............. Microslide consultation. 88325.............. Comprehensive review of data. 88331.............. Path consult intraop, 1 bloc. 88342.............. Immunohistochemistry. 88346.............. Immunofluorescent study. 88347.............. Immunofluorescent study. 88348.............. Electron microscopy. 88358.............. Analysis, tumor. 88360.............. Tumor immunohistochem/manual. 88365.............. Insitu hybridization (fish). 88368.............. Insitu hybridization, manual. 88399.............. Surgical pathology procedure. 89049.............. Chct for mal hyperthermia. 89230.............. Collect sweat for test. 89240.............. Pathology lab procedure. 90761............ Hydrate iv infusion, add-on. 90766............ Ther/proph/dg iv inf, add-on. 90801............ Psy dx interview. 90802............ Intac psy dx interview. 90804............ Psytx, office, 20-30 min. 90805............ Psytx, off, 20-30 min w/e&m. 90806............ Psytx, off, 45-50 min. 90807............ Psytx, off, 45-50 min w/e&m. 90808............ Psytx, office, 75-80 min. 90809............ Psytx, off, 75-80, w/e&m. 90810............ Intac psytx, off, 20-30 min. 90812............ Intac psytx, off, 45-50 min. 90816............ Psytx, hosp, 20-30 min. 90818............ Psytx, hosp, 45-50 min. 90826............ Intac psytx, hosp, 45-50 min. 90845............ Psychoanalysis. 90846............ Family psytx w/o patient. 90847............ Family psytx w/patient. 90853............ Group psychotherapy. 90857............ Intac group psytx. 90862............ Medication management. 92002............ Eye exam, new patient. 92004............ Eye exam, new patient. 92012............ Eye exam established pat. 92014............ Eye exam & treatment. 92020............ Special eye evaluation. 92081............ Visual field examination(s). 92082............ Visual field examination(s). 92083............ Visual field examination(s). 92135............ Opthalmic dx imaging. 92136............ Ophthalmic biometry. 92225............ Special eye exam, initial. 92226............ Special eye exam, subsequent. 92230............ Eye exam with photos. 92240............ Icg angiography. 92250............ Eye exam with photos. 92275............ Electroretinography. 92285............ Eye photography. 92286............ Internal eye photography. 92520............ Laryngeal function studies. 92541............ Spontaneous nystagmus test. 92546............ Sinusoidal rotational test. 92548............ Posturography. 92552............ Pure tone audiometry, air. 92553............ Audiometry, air & bone. 92555............ Speech threshold audiometry. [[Page 42639]] 92556............ Speech audiometry, complete. 92557............ Comprehensive hearing test. 92567............ Tympanometry. 92582............ Conditioning play audiometry. 92585............ Auditor evoke potent, compre. 92603............ Cochlear implt f/up exam 7 >. 92604............ Reprogram cochlear implt 7 >. 92626............ Eval aud rehab status. 93005............ Electrocardiogram, tracing. 93225............ ECG monitor/record, 24 hrs. 93226............ ECG monitor/report, 24 hrs. 93231............................ Ecg monitor/record, 24 hrs. 93232............................ ECG monitor/report, 24 hrs. 93236............................ ECG monitor/report, 24 hrs. 93270............................ ECG recording. 93271............................ Ecg/monitoring and analysis. 93278............................ ECG/signal-averaged. 93727............................ Analyze ilr system. 93731............................ Analyze pacemaker system. 93732............................ Analyze pacemaker system. 93733............................ Telephone analy, pacemaker. 93734............................ Analyze pacemaker system. 93735............................ Analyze pacemaker system. 93736............................ Telephonic analy, pacemaker. 93741............................ Analyze ht pace device sngl. 93742............................ Analyze ht pace device sngl. 93743............................ Analyze ht pace device dual. 93744............................ Analyze ht pace device dual. 93786............................ Ambulatory BP recording. 93788............................ Ambulatory BP analysis. 93797............................ Cardiac rehab. 93798............................ Cardiac rehab/monitor. 93875............................ Extracranial study. 93880............................ Extracranial study. 93882............................ Extracranial study. 93886............................ Intracranial study. 93888............................ Intracranial study. 93922............................ Extremity study. 93923............................ Extremity study. 93924............................ Extremity study. 93925............................ Lower extremity study. 93926............................ Lower extremity study. 93930............................ Upper extremity study. 93931............................ Upper extremity study. 93965............................ Extremity study. 93970............................ Extremity study. 93971............................ Extremity study. 93975............................ Vascular study. 93976............................ Vascular study. 93978............................ Vascular study. 93979............................ Vascular study. 93990............................ Doppler flow testing. 94015............................ Patient recorded spirometry. 94690............................ Exhaled air analysis. 95115............................ Immunotherapy, one injection. 95117............................ Immunotherapy injections. 95165............................ Antigen therapy services. 95805............................ Multiple sleep latency test. 95806............................ Sleep study, unattended. 95807............................ Sleep study, attended. 95808............................ Polysomnography, 1-3. 95812............................ Eeg, 41-60 minutes. 95813............................ Eeg, over 1 hour. 95816............................ Eeg, awake and drowsy. 95819............................ Eeg, awake and asleep. 95822............................ Eeg, coma or sleep only. 95869............................ Muscle test, thor paraspinal. 95900............................ Motor nerve conduction test. 95921............................ Autonomic nerv function test. 95925............................ Somatosensory testing. 95930............................ Visual evoked potential test. 95950............................ Ambulatory eeg monitoring. 95953............................ EEG monitoring/computer. 95970............................ Analyze neurostim, no prog. 95972............................ Analyze neurostim, complex. 95974............................ Cranial neurostim, complex. 95978............................ Analyze neurostim brain/1h. 96000............................ Motion analysis, video/3d. 96101............................ Psycho testing by psych/phys. 96111............................ Developmental test, extend. 96116............................ Neurobehavioral status exam. 96118............................ Neuropsych tst by psych/phys. 96119............................ Neuropsych testing by tec. 96150............................ Assess hlth/behave, init. 96151............................ Assess hlth/behave, subseq. 96152............................ Intervene hlth/behave, indiv. 96153............................ Intervene hlth/behave, group. 96415............................ Chemo, iv infusion, addl hr. 96423............................ Chemo ia infuse each addl hr. 96900............................ Ultraviolet light therapy. 96910............................ Photochemotherapy with UV-B. 96912............................ Photochemotherapy with UV-A. 96913............................ Photochemotherapy, UV-A or B. 96920............................ Laser tx, skin < 250 sq cm. 98925............................ Osteopathic manipulation. 98926............................ Osteopathic manipulation. 98927............................ Osteopathic manipulation. 98940............................ Chiropractic manipulation. 98941............................ Chiropractic manipulation. 98942............................ Chiropractic manipulation. 99204............................ Office/outpatient visit, new. 99212............................ Office/outpatient visit, est. 99213............................ Office/outpatient visit, est. 99214............................ Office/outpatient visit, est. 99241............................ Office consultation. 99242............................ Office consultation. 99243............................ Office consultation. 99244............................ Office consultation. 99245............................ Office consultation. 0144T............................ CT heart wo dye; qual calc. C8951............................ IV inf, tx/dx, each addl hr. C8955............................ Chemotx adm, IV inf, addl hr. G0008............................ Admin influenza virus vac. G0101............................ CA screen;pelvic/breast exam. G0127............................ Trim nail(s). G0130............................ Single energy x-ray study. G0166............................ Extrnl counterpulse, per tx. G0175............................ OPPS Service,sched team conf. G0332............................ Preadmin IV immunoglobulin. G0340............................ Robt lin-radsurg fractx 2-5. G0344............................ Initial preventive exam. G0365............................ Vessel mapping hemo access. G0367............................ EKG tracing for initial prev. G0376............................ Smoke/tobacco counseling >10. M0064............................ Visit for drug monitoring. Q0091............................ Obtaining screen pap smear. ------------------------------------------------------------------------ (2) Exploration of Allocation of Packaged Costs to Separately Paid Procedure Codes During its August 23-24, 2006 meeting, the APC Panel recommended that CMS provide claims analysis of the contributions of packaged costs (including packaged revenue code charges and charges for packaged HCPCS codes) to the median cost of each drug administration service. (We refer readers to Recommendation 28 in the August 23-24, 2006 meeting recommendation summary on the CMS Web site at: http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage. ) In our continued effort to better understand the multiple claims in order to extract single bill information from them, we examined the extent to which the packaging in multiple procedure claims differs from the packaging in the single procedure claims on which we base the median costs both in general and more specifically for drug administration services. We performed this analysis using the claims data on which we based the CY 2007 OPPS/ASC final rule with comment period. We examined the amount of packaging in multiple procedure versus single procedure claims in general and in claims for drug administration services in particular. We conducted this analysis without taking into account the proposed packaging approach presented in this proposed rule. However, we do not expect the services newly proposed for packaged payment to commonly appear with a drug administration service. Therefore, we believe that the analysis conducted on the CY 2007 final rule with comment period data is sufficient to inform our development of this proposed rule. In general, we do not believe that the proportionate amount of packaged costs in the multiple bills relative to the number of primary services is greater than that in the single bills. The costs in uncoded revenue codes and HCPCS codes with a packaged status indicator account for 22 percent of observed costs in the universe of all CY 2005 claims that we used to model the CY 2007 OPPS (including both the single and multiple procedure bills). Similarly, the costs in uncoded revenue codes and HCPCS codes with a packaged status indicator account for 18 percent of the total cost in the subset of CY 2005 single bills that we used to calculate the median costs on which the relative weights are based. However, the bypass methodology creates a ``pseudo'' single bill for all claims for services or items on the bypass list, and these ``pseudo'' single bills have no associated packaging, by definition of the application of the bypass list. Excluding the total cost associated with bypass codes, 28 percent of observed costs in the single [[Page 42640]] bills are attributable to packaged services, and 29 percent of observed costs across all claims are attributable to packaged services. Therefore, we conclude that, in general, the extent of packaging in all bills is similar to the amount of packaging in the single procedure bills we use to set median costs for most APCs. We recognize that aggregate numbers do not address the packaging associated with single and multiple procedure claims for specific services. We have received comments stating that the amount of packaging in the single bills for drug administration services is not representative of the typical packaged costs of these drug administration services, which are usually performed in combination with one another, because the single bills represent less complex and less resource-intensive services than the usual cases. We published a study in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68120 through 68121) that discussed the amount of packaging on the single bills for drug administration procedure codes, and we promised to replicate that study for the APC Panel. We discussed the results of this study with the APC Panel at its March 2007 meeting, in accordance with the APC Panel's August 2006 recommendation. Table 2 below shows the drug administration HCPCS codes and their descriptors, status indicators, deleted code status, and CY 2007 APC assignments in columns 1, 2, 3, and 4, respectively. HCPCS codes for additional hours of infusion services are not presented because these codes were included on the CY 2007 bypass list and, therefore, we explicitly associated no packaged costs with them, as discussed in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68117 through 68118). Column 6 of the table contains the number of single bills relative to total occurrences of the code in the CY 2005 claims, and column 8 shows the percentage of single bills used to set payment rates. Drug administration services demonstrate reasonable single bill representation in comparison with other OPPS services. Single bills for drug administration constitute, roughly, 30 percent of all observed occurrences of drug administration services, varying by code from 7 to 55 percent. Columns 10 through 13 of the table show measures of central tendency for packaged costs as a percentage of total cost on each single claim. Columns 10 and 11 show the mean and median of all packaged costs as a percentage of total costs, and columns 12 and 13 break out the costs of packaged drug HCPCS codes and uncoded pharmacy revenue code charges for revenue codes in the 0250 series (Pharmacy), 0260 series (IV Therapy), and 0630 series (Pharmacy--Extension). These columns demonstrate that packaged costs substantially contribute to median cost estimates for the majority of drug administration HCPCS codes. For all single bills for CPT code 90780 (Intravenous infusion for therapy/diagnosis, administered by physician or under direct supervision of physician; up to one hour), on average, packaged costs were 31 percent of total cost (median 27 percent). For the same code, packaged drug and pharmacy costs comprised, on average, 23 percent of total costs (median 15 percent). Single bills make up 34 percent of all line-item occurrences of the service, suggesting that this single bill median cost was fairly robust and probably captured packaging adequately. On the other hand, CPT code 90784 (Therapeutic, prophylactic or diagnostic injection (specify material injected); subcutaneous or intramuscular) demonstrates limited packaging (median 0 percent and mean 17 percent), and the median cost for the code is derived from only 7 percent of all occurrences of the code. Across all drug administration codes, over half show significant median packaged costs largely attributable to packaged drug and pharmacy costs. Table 2.--Packaged Cost Data for CY 2005 Single Claims for Drug Administration Services -------------------------------------------------------------------------------------------------------------------------------------------------------- All packaged costs Packaged drug and as a percent of pharmacy costs as a Deleted Single Total Percent Median total cost percent of total HCPCS code Short descriptor SI code APC bills frequency single cost ($) ---------------------- cost bills --------------------- Median Mean Median Mean (1) (2)............... (3).... (4)....... (5) (6) (7) (8) (9) (10) (11) (12) (13) -------------------------------------------------------------------------------------------------------------------------------------------------------- 90780...... IV infusion S...... X......... 0440 1,008,055 2,974,785 33.9 110.43 27.1 30.8 15.3 22.6 therapy, 1 hour. 90782...... Injection, sc/im.. S...... X......... 0437 1,326,094 2,894,231 45.8 24.77 0.0 10.1 0.0 8.7 90783...... Injection, ia..... S...... X......... 0438 427 3,012 14.2 51.35 0.0 10.9 0.0 6.8 90784...... Injection, iv..... S...... X......... 0438 183,096 2,812,204 6.5 49.54 0.0 16.7 0.0 9.7 90788...... Injection of S...... X......... 0437 19,400 141,293 13.7 45.96 24.6 32.3 20.7 30.4 antibiotic. 96400...... Chemotherapy, sc/ S...... .......... 0438 57,472 81,546 70.5 51.98 0.0 6.3 0.0 4.5 im. 96405...... Chemo S...... .......... 0438 142 181 78.5 193.65 0.0 12.0 0.0 10.5 intralesional, up to 7. 96406...... Chemo S...... .......... 0438 2 7 28.6 46.42 0.0 0.0 0.0 0.0 intralesional over 7. 96408...... Chemotherapy, push S...... .......... 0439 21,113 134,447 15.7 96.85 10.6 21.3 2.4 13.6 technique. 96410...... Chemotherapy, S...... .......... 0441 161,872 555,170 29.2 151.55 21.4 27.0 12.4 19.6 infusion method. 96414...... Chemo, infuse S...... .......... 0441 2,370 14,561 16.3 182.89 15.4 23.0 8.6 15.6 method add-on. 96420...... Chemo, ia, push S...... .......... 0439 170 933 18.2 99.86 9.6 27.6 4.2 15.4 tecnique. 96422...... Chemo ia infusion S...... .......... 0441 556 1,814 30.7 162.94 45.9 46.5 31.0 35.1 up to 1 hr. 96425...... Chemotherapy, S...... .......... 0441 149 557 26.8 216.68 29.4 33.5 14.7 24.4 infusion method. 96440...... Chemotherapy, S...... .......... 0439 38 104 36.5 37.12 0.0 2.1 0.0 1.5 intracavitary. 96445...... Chemotherapy, S...... .......... 0439 43 137 31.4 61.98 23.8 25.0 23.7 21.1 intracavitary. 96450...... Chemotherapy, into S...... .......... 0441 394 869 45.3 160.03 25.8 28.7 2.0 8.3 CNS. 96520...... Port pump refill & S...... .......... 0440 9,771 23,928 40.8 140.66 29.0 31.5 16.8 23.6 main. 96530...... Syst pump refill & S...... .......... 0440 8,334 19,283 43.2 100.00 7.4 22.2 0.7 13.7 main. 96542...... Chemotherapy S...... .......... 0438 511 929 55.0 51.56 0.0 10.8 0.0 6.5 injection. -------------------------------------------------------------------------------------------------------------------------------------------------------- By definition, we are unable to precisely assess the amount of packaging associated with drug administration codes in the multiple bills. As a proxy, we estimated packaging as a percent of total cost on [[Page 42641]] each claim for two subsets of claims. Both analyses suggest the presence of moderate packaged costs, especially drug and pharmacy costs, associated with drug administration services in the multiple bills. Table 3 below shows measures of central tendency for packaging percentages in the multiple bills or portions of multiple bills remaining after ``pseudo'' singles have been created. We refer to this group of the multiple bills as the ``hardcore'' multiple bills. For the first subset of ``hardcore'' multiple bills with only drug administration codes, that is, where multiple drug administration codes are the only separately paid procedure codes on the claim (defined as procedure codes with a status indicator of ``S,'' ``T,'' ``V,'' ``X,'' or ``P''), we estimate that packaged costs are 22 percent of total costs (27 percent, on average), where total costs consist of costs for all payable codes. Costs for packaged drug HCPCS codes and pharmacy revenue codes comprise 13 percent of total cost at the median (19 percent, on average). For the second subset of ``hardcore'' multiple bills with any drug administration code, that is, where a drug administration code appears with other payable codes (largely radiology services and visits), we estimate packaged costs are 13 percent of total cost at the median (19 percent, on average). Costs for packaged drugs and pharmacy revenue codes comprise 6 percent of total cost at the median (10 percent, on average). The amount of packaging in both proxy measures, but especially the first subset, closely resembles the packaged costs as a percentage of drug administration costs observed in the single bills for drug administration services. While finding a way to accurately use data from the ``hardcore'' multiple bills to estimate drug administration median costs undoubtedly would impact medians, these comparisons suggest that the multiple bill data probably would support current median estimates. Table 3.--Packaged Costs on Multiple Bill Claims for Drug Administration Services ---------------------------------------------------------------------------------------------------------------- All packaged costs as a Packaged drug and pharmacy percent of total cost costs as a percent of total Total frequency -------------------------------- cost ------------------------------- Median Mean Median Mean ---------------------------------------------------------------------------------------------------------------- Subset 1: ``Hardcore'' Multiple Claims with Only Drug Administration Codes ---------------------------------------------------------------------------------------------------------------- 693,925......................................... 21.6 26.8 12.7 19.3 ---------------------------------------------------------------------------------------------------------------- Subset 2: ``Multiple'' Claims with At Least One Drug Administration Code ---------------------------------------------------------------------------------------------------------------- 4,816,338....................................... 13.2 19.4 5.8 10.0 ---------------------------------------------------------------------------------------------------------------- We have received several comments over the past few years offering algorithms for packaging the costs associated with specific revenue codes or packaged drugs with certain drug administration codes. Because of the complexity of even routine OPPS claims, prior research suggests that such algorithms have limited power to generate additional single bill claims and do little to change median cost estimates. We continue to look for simple, but powerful, methodologies like the bypass list and packaging of HCPCS codes for additional ancillary and supportive services to assign packaged costs to all services within the ``hardcore'' multiple bills. Ideally, these methodologies should be intuitive to the provider community, easily integrated into the complexity of OPPS median cost estimation, and simple to maintain from year to year. We solicit and will carefully consider methodologies for creation of single bills that meet these criteria. c. Proposed Calculation of CCRs We calculate hospital-specific overall CCRs and hospital-specific departmental CCRs for each hospital for which we have claims data in the period of claims being used to calculate the median costs that we convert to scaled relative weights for purposes of setting the OPPS payment rates. We apply the hospital-specific CCR to the hospital's charges at the most detailed level possible, based on a revenue code- to-cost center crosswalk that contains a hierarchy of CCRs used to estimate costs from charges for each revenue code. That crosswalk is available for review and continuous comment on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage. Comments on the proposed configuration of the crosswalk for CY 2008 should be included with comments on this section of this proposed rule. We calculate CCRs for the standard and nonstandard cost centers accepted by the electronic cost report database. In general, the most detailed level at which we calculate CCRs is the hospital-specific departmental level. Following the expiration of most medical devices from pass-through status in CY 2003, prior to which devices were paid at charges reduced to cost using the hospital's overall CCR, we received comments that our OPPS cost estimates for device implantation procedures systematically underestimate the cost of the devices included in the packaged payment for the procedures. Commenters informed us that hospitals routinely mark up charges for low cost items to a much greater extent than they mark up high cost items, and that these items are often combined in a single cost center on their Medicare cost report. Commenters stated that when items with widely varying costs are combined in a single cost center using that cost center's CCR to estimate costs from charges for those items, this approach will overestimate the cost of low cost items and underestimate the cost of high cost items. This is commonly known as ``charge compression.'' They stated that, in the case of implantable devices, the charges for both high cost devices and low cost supplies typically are reported under the medical supply revenue code series and that the costs of both typically are reported in the medical supply cost center on the cost report. Commenters stated that the application of one medical supply CCR to charges for all items reported under the medical supply revenue code underestimates the cost of expensive medical supplies and overestimates the cost of inexpensive supplies. They indicated that when these costs are packaged into the costs of the procedures in which they are used, the result is inaccurate median costs for the HCPCS codes and APCs, and thus the standard OPPS ratesetting methodology systematically distorts [[Page 42642]] relative payment weights for procedures using devices. In CY 2006, the device industry commissioned a study to interpolate a device-specific CCR from the medical supply CCR, using publicly available hospital claim and Medicare cost report data rather than proprietary data on device costs. After reviewing the device industry's data analysis and study model, CMS contracted with RTI International (RTI) to study the impact of charge compression on the cost-based weight methodology adopted in the FY 2007 IPPS final rule, to evaluate this model and to propose solutions. For more information, interested individuals can view RTI's report on the CMS Web site at: http://www.cms.hhs.gov/reports/downloads/Dalton.pdf . Any study of cost estimation in general, and charge compression specifically, has obvious importance for both the OPPS and the IPPS. RTI's research explicitly focused on the IPPS for several reasons, which include greater Medicare expenditure under the IPPS, a desire to evaluate the model quickly given IPPS regulation deadlines, and a focus on other components of the new FY 2007 IPPS cost-based weight methodology (CMS Contract No. 500-00-0024-T012, ``A Study of Charge Compression in Calculating DRG Relative Weights,'' page 5). The study first addressed the possibility of cross-aggregation bias in the CCRs used to estimate costs under the IPPS created by the IPPS methodology of aggregating cost centers into larger departments before calculating CCRs. The report also addressed potential bias created by estimating costs using a CCR that reflects the combined costs and charges of services with wide variation in the amount of hospital markup. In its assessment of the latter, RTI targeted its attempt to identify the presence of charge compression to those cost centers presumably associated with revenue codes demonstrating significant IPPS expenditures and utilization. RTI assessed the correlation between cost report CCRs and the percent of charges in a cost center attributable to a set of similar services represented by a group of revenue codes. RTI did not examine the correlation between CCRs and revenue codes without significant IPPS expenditures or a demonstrated concentration in a specific Diagnosis Related Group (DRG). For example, RTI did not examine revenue code groups within the pharmacy cost center with low proportionate inpatient charges that might be important to the OPPS, such as ``Pharmacy Incident to Radiology.'' RTI states this limitation in its study and specifically recommends that disaggregated CCRs be reestimated for outpatient hospital charges. Cost report CCRs combine both inpatient and outpatient services. Ideally, RTI would be able to examine the correlation between CCRs for Medicare inpatient services and inpatient claim charges and the correlation between CCRs for Medicare outpatient services and outpatient claim charges. However, the comprehensive nature of the cost report CCR (which combines inpatient and outpatient services) argues for an analysis of the correlation between CCRs and combined inpatient and outpatient claim charges. As noted, the RTI study accepted some measurement error in its analysis by matching an ``all charges'' CCR to inpatient estimates of charges for groups of similar services represented by revenue codes because of short timelines and because inpatient costs dominate outpatient costs in many ancillary cost centers. We believe that CCR adjustments used to calculate payment should be based on the comparison of cost report CCRs to combined inpatient and outpatient charges. An ``all charges'' model would reduce measurement error and estimate adjustments to disaggregated CCRs that could be used in both hospital inpatient and outpatient payment systems. RTI made several short-term recommendations for improving the accuracy of DRG weight estimates from a cost-based methodology to address bias in combining cost centers and charge compression that could be considered in the context of OPPS policy. We discuss each recommendation within the context of the OPPS and provide our assessment of its application to the OPPS. We do not discuss RTI's recommendations to change cost report policy, which, by definition, would not have an effect on payment weight estimates until several years in the future. (1) RTI recommends expansion of the number of CCRs used under the IPPS (RTI study, pages 11 and 85). Our OPPS methodology is already more specific than the RTI recommendation. To the extent possible, the OPPS uses hospital-specific cost centers, both standard and nonstandard, to reduce charges to estimated costs and, therefore, the OPPS ratesetting methodology is already more specific than the RTI recommendation. (2) RTI recommends disaggregation of emergency department and blood products from the ``other services'' CCR used in the IPPS (RTI study, pages 11 and 85). Because we use standard and nonstandard cost center data, our OPPS methodology already comports with this RTI recommendation. Further, we estimate a CCR for blood that is often higher than that in the cost report based on a special methodology that is discussed further in section X of this proposed rule. Therefore, the OPPS is already meeting, and in several cases exceeding, the RTI recommendation for specificity with regard to estimating the costs associated with emergency department and blood product services. (3) RTI recommends reclassification of intermediate care charges from the intensive care unit to the routine cost center (RTI study, pages 10 and 85). This recommendation is not relevant to the OPPS because our methodology for calculating costs under the OPPS relies solely on ancillary cost centers and does not use either cost center included in the recommendation to estimate costs for hospital outpatient services. (4) RTI recommends establishment of regression-based estimates as a temporary or permanent method for disaggregating national average CCRs for medical supplies, drugs, and radiology services under the IPPS (RTI study, pages 11 and 86). With regard to radiology services, RTI estimated significantly lower CCRs for the cost centers for computed tomography (CT) scans and magnetic resonance imaging (MRI) services. RTI triangulated its findings with lower observed CCRs for the one- third of providers reporting nonstandard cost centers, specifically MRI Scan and CT Scan. However, in using CCRs for nonstandard cost centers, including MRI Scan and CT Scan, the OPPS already has partially implemented RTI's recommendation to use lower CCRs to estimate costs for those OPPS services allocated to these two imaging cost centers. For reasons discussed in more detail below, we are proposing to develop an all-charges model that would compare variation in CCRs with variation in combined inpatient and outpatient charges for sets of similar services and establish disaggregated CCRs that could be applied to both inpatient and outpatient charges. We are proposing to evaluate the results of that methodology for purposes of determining whether the resulting disaggregated CCRs should be proposed for use in developing the CY 2009 OPPS payment rates. The revised all-charges model and resulting disaggregated CCRs will not be available in time for use in the CY 2008 OPPS/ASC final rule with comment period. There are several reasons that we are not proposing to use the intradepartmental CCRs that RTI estimated using IPPS charges for the CY 2008 OPPS estimation of median costs. We agree with RTI that the [[Page 42643]] intradepartmental CCRs it calculated for the IPPS would not always be appropriate for application to the OPPS (RTI study, pages 34 and 35). While RTI recommends that the model be recalibrated for outpatient charges before it is applied to the OPPS, we believe that the combined nature of the CCRs available from the cost report prevents an accurate outpatient recalibration that would be appropriate for the OPPS alone. The addition of outpatient charges could change the variability of combined charges for some groups of services. For example, if hospitals use a high volume of less complex devices with lower charges in the outpatient department, the inclusion or omission of the outpatient charges for these high volume and lower cost devices could change the estimated disaggregated device CCR. Furthermore, RTI's analysis excluded some revenue codes with extensive outpatient charges because these revenue codes play a minor role in the IPPS. Therefore, we believe that an all-charges model examining an expanded subset of revenue codes is most appropriate, and that this model must be developed before we could apply the resulting disaggregated CCRs to the charges for supplies paid under the OPPS. Moreover, to implement the disaggregated IPPS-based CCRs in the OPPS that RTI estimated for CY 2008 could result in greater instability in relative payment weights for CY 2008 than would otherwise occur. Significant changes in CCRs, both increases and decreases, could prompt the reassignment of services to different APCs due to the new estimates of median costs and require modification of the overall APC structure. Not only might there be significant fluctuations in payment between the CY 2007 and CY 2008 OPPS, but a subsequent change to application of the disaggregated CCRs resulting from development of an all-charges model might also result in significant fluctuations in median costs and increased instability in payments from CY 2008 to CY 2009. Therefore, these sequential changes could result in significant increases in median costs in one year and significant declines in median costs in the next year. Therefore, we are not proposing to adopt the RTI disaggregated CCRs under the CY 2008 OPPS. We will consider whether it would be appropriate to adopt disaggregated CCRs for the OPPS after we analyze the results of the use of both inpatient and outpatient charges across all payers to recalculate disaggregated CCRs. 2. Proposed Calculation of Median Costs In this section of this proposed rule, we discuss the use of claims to calculate the proposed OPPS payment rates for CY 2008. The hospital OPPS page on the CMS Web site on which this proposed rule is posted provides an accounting of claims used in the development of the proposed rates on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS. The accounting of claims used in the development of this proposed rule is included on the Web site under supplemental materials for the CY 2008 proposed rule. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below we discuss the files of claims that comprise the data sets that are available for purchase under a CMS data user contract. Our CMS Web site, http://www.cms.hhs.gov/HospitalOutpatientPPS , includes information about purchasing the following two OPPS data files: ``OPPS Limited Data Set'' and ``OPPS Identifiable Data Set.'' We used the following methodology to establish the relative weights we are proposing to use in calculating the OPPS payment rates for CY 2008 shown in Addenda A and B to this proposed rule. This methodology is as follows: We used outpatient claims for the full CY 2006, processed before January 1, 2007, to set the proposed relative weights for CY 2008. To begin the calculation of the relative weights for CY 2008, we pulled all claims for outpatient services furnished in CY 2006 from the national claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, CAH claims and hospital claims for clinical laboratory services for persons who are neither inpatients nor outpatients of the hospital). We then excluded claims with condition codes 04, 20, 21, and 77. These are claims that providers submitted to Medicare knowing that no payment will be made. For example, providers submit claims with a condition code 21 to elicit an official denial notice from Medicare and document that a service is not covered. We then excluded claims for services furnished in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands because hospitals in those geographic areas are not paid under the OPPS. We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 101 million claims that contain hospital bill types paid under the OPPS. 1. Claims that were not bill types 12X, 13X, 14X (hospital bill types), or 76X (CMHC bill types). Other bill types are not paid under the OPPS and, therefore, these claims were not used to set OPPS payment. 2. Claims that were bill types 12X, 13X, or 14X (hospital bill types). These claims are hospital outpatient claims. 3. Claims that were bill type 76X (CMHC). (These claims are later combined with any claims in item 2 above with a condition code 41 to set the per diem partial hospitalization rate determined through a separate process.) For the CCR calculation process, we used the same general approach as we used in developing the final APC rates for CY 2007, using the revised CCR calculation which excluded the costs of paramedical education programs and weighted the outpatient charges by the volume of outpatient services furnished by the hospital. We refer readers to the CY 2007 OPPS/ASC final rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost reports to only those for hospitals that filed outpatient claims in CY 2006 before determining whether the CCRs for such hospitals were valid. We then calculated the CCRs for each cost center and the overall CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Healthcare Cost Report Information System (HCRIS). We used the most recent available cost report data, in most cases, cost reports for CY 2005. We used the most recently submitted cost report to calculate the CCRs to be used to calculate median costs for the proposed CY 2008 OPPS rates. If the most recent available cost report was submitted but not settled, we looked at the last settled cost report to determine the ratio of submitted to settled cost using the overall CCR, and we then adjusted the most recent available submitted but not settled cost report using that ratio. We calculated both an overall CCR and cost center-specific CCRs for each hospital. We used the overall CCR calculation discussed in section II.A.1.c. of this proposed rule for all purposes that require use of an overall CCR. We then flagged CAH claims, which are not paid under the OPPS, and claims from hospitals with invalid CCRs. The latter included claims from hospitals without a CCR; those from hospitals paid an all- inclusive rate; those from hospitals with obviously erroneous CCRs (greater than 90 or less than .0001); and those from hospitals with [[Page 42644]] overall CCRs that were identified as outliers (3 standard deviations from the geometric mean after removing error CCRs). In addition, we trimmed the CCRs at the cost center (that is, departmental) level by removing the CCRs for each cost center as outliers if they exceeded 3 standard deviations from the geometric mean. We used a four-tiered hierarchy of cost center CCRs to match a cost center to every possible revenue code appearing in the outpatient claims, with the top tier being the most common cost center and the last tier being the default CCR. If a hospital's cost center CCR was deleted by trimming, we set the CCR for that cost center to ``missing,'' so that another cost center CCR in the revenue center hierarchy could apply. If no other cost center CCR could apply to the revenue code on the claim, we used the hospital's overall CCR for the revenue code in question. For example, if a visit was reported under the clinic revenue code, but the hospital did not have a clinic cost center, we mapped the hospital- specific overall CCR to the clinic revenue code. The hierarchy of CCRs is available for inspection and comment on the CMS Web site: http://www.cms.hhs.gov/HospitalOutpatientPPS . We then converted the charges to costs on each claim by applying the CCR that we believed was best suited to the revenue code indicated on the line with the charge. Table 4 of this proposed rule contains a list of the allowed revenue codes. Revenue codes not included in Table 4 are those not allowed under the OPPS because their services cannot be paid under the OPPS (for example, inpatient room and board charges), and thus charges with those revenue codes were not packaged for creation of the OPPS median costs. One exception is the calculation of median blood costs, as discussed in section X. of this proposed rule. Thus, we applied CCRs as described above to claims with bill types 12X, 13X, or 14X, excluding all claims from CAHs and hospitals in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands and claims from all hospitals for which CCRs were flagged as invalid. We identified claims with condition code 41 as partial hospitalization services of hospitals and moved them to another file. These claims were combined with the 76X claims identified previously to calculate the partial hospitalization per diem rate. We then excluded claims without a HCPCS code. We moved to another file claims that contained nothing but influenza and pneumococcal pneumonia (``PPV'') vaccines. Influenza and PPV vaccines are paid at reasonable cost and, therefore, these claims are not used to set OPPS rates. We note that the separate file containing partial hospitalization claims is included in the files that are available for purchase as discussed above. Unlike years past, we did not create a separate file of claims containing observation services because we are proposing to package all observation care for the CY 2008 OPPS. We next copied line-item costs for drugs, blood, and devices (the lines stay on the claim, but are copied onto another file) to a separate file. No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit mean and median and a per day mean and median for drugs, radiopharmaceutical agents, blood and blood products, and devices, including, but not limited to, brachytherapy sources, as well as other information used to set payment rates, such as a unit-to-day ratio for drugs. We then divided the remaining claims into the following five groups: 1. Single Major Claims: Claims with a single separately payable procedure (that is, status indicator ``S,'' `` T,'' ``V,'' or ``X''). 2. Multiple Major Claims: Claims with more than one separately payable procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or ``X''), or multiple units for one payable procedure. As discussed below, some of these can be used in median setting. We also included in this set claims that contain one unit of one code when the bilateral modifier is appended to the code and the code is one that is conditionally or independently bilateral. In these cases, these claims represent more than one unit of the service described by the code, notwithstanding that only one unit is billed. 3. Single Minor Claims: Claims with a single HCPCS code that is assigned to status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' or ``N.'' 4. Multiple Minor Claims: Claims with multiple HCPCS codes that are assigned to status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' or ``N.'' 5. Non-OPPS Claims: Claims that contain no services payable under the OPPS (that is, all status indicators other than those listed for major or minor status). These claims are excluded from the files used for the OPPS. Non-OPPS claims have codes paid under other fee schedules, for example, durable medical equipment or clinical laboratory tests, and do not contain either a code for a separately paid service or a code for a packaged service. We use status indicator ``Q'' in Addendum B to this proposed rule to identify services that receive separate HCPCS code-specific payment when specific criteria are met, and payment for the individual service is packaged in all other circumstances. We are proposing several different sets of criteria to determine whether separate payment would be made for specific services. For example, HCPCS code G0379 (Direct admission of patient for hospital observation care) is assigned to status indicator ``Q'' in Addendum B to this proposed rule because we are proposing that it receive separate payment only if it is billed on the same date of service as HCPCS code G0378 (Hospital observation service, per hour), without any services with status indicator ``T'' or ``V,'' or Critical Care (APC 0617). Proposed payment for observation services is discussed in section XI. of this proposed rule. The specific services in the proposed composite APCs discussed in section II.A.4. of this proposed rule also are assigned to status indicator ``Q'' in Addendum B to this proposed rule because we are proposing that their payment would be bundled into a single composite payment for a combination of major procedures under certain circumstances. These services would only receive separate code-specific payment if certain criteria are met. The same is true for those less intensive outpatient mental health treatment services for which payment is limited to the partial hospitalization per diem rate and which also are assigned to status indicator ``Q'' in Addendum B to this proposed rule. According to longstanding OPPS payment policy (65 FR 18455), payment for these individual mental health services is bundled into a single payment, APC 0034 (Mental Health Services Composite), when the sum of the individual mental health service payments for all of these mental health services provided on the same day would exceed payment for a day of partial hospitalization services. However, the largest number of specific HCPCS codes identified by status indicator ``Q'' in Addendum B to this proposed rule are those codes that we identify as ``special'' packaged codes, where we are proposing that a service receives separate payment when it appears on the same day on a claim without another service that is assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X.'' We are proposing to package payment for these HCPCS codes when the code appears on the same date of service with any other service that is [[Page 42645]] assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X.'' This last and largest subset of conditionally packaged services have to be integrated into the identification of single and multiple bills to ensure that the costs for these services are appropriately packaged when they appear with any other separately paid service. We handle these conditionally packaged services in the data by assigning the HCPCS code an APC and a data status indicator of ``N.'' When the conditionally packaged HCPCS code appears with a HCPCS code with a status indicator of ``S,'' ``T,'' ``V,'' or ``X'' on the same date of service, it is treated as a packaged code. The costs that appear on the line with the code are packaged into the cost of the HCPCS code with a status indicator of ``S,'' ``T,'' ``V,'' or ``X.'' When the conditionally packaged HCPCS code appears by itself, we change the status indicator on the line to the status indicator of the APC to which the conditionally packaged code is assigned, converting the service from a minor to a major procedure. This creates single bills for these conditionally packaged services that are then used to set the median cost for the conditionally packaged code and for the APC to which it is assigned when it is separately paid. The claims listed in numbers 1, 2, 3, and 4 above are included in the data files that can be purchased as described above. In years prior to the CY 2007 OPPS, we made a determination of whether each HCPCS code was a major code or a minor code or a code other than a major or minor code. We used those code-specific determinations to sort claims into the five groups identified above. For the CY 2007 OPPS, we used status indicators to sort the claims into these groups. We defined major procedures as any procedure having a status indicator of ``S,'' ``T,'' ``V,'' or ``X;'' defined minor procedures as any code having a status indicator of ``N;'' and classified ``other'' procedures as any code having a status indicator other than ``S,'' ``T,'' ``V,'' ``X,'' or ``N.'' For the CY 2007 OPPS proposed rule limited data set and identifiable data set, these definitions excluded claims on which hospitals billed drugs and devices without also billing separately paid procedure codes and, therefore, these public use files did not contain all claims used to calculate the drug and device frequencies and medians. We corrected this for the CY 2007 OPPS/ASC final rule with comment period limited data set and identifiable data set by extracting claims containing drugs and devices from the set of ``other'' claims and adding them to the public use files. At its March 2007 meeting, the APC Panel recommended that CMS edit and return for correction claims that contain a HCPCS code for a separately paid drug or device but that also do not contain a HCPCS code assigned to a procedural APC (that is, those not assigned status indicator ``S,'' ``T,'' ``V,'' or ``X''). The APC Panel stated that this edit should improve the claims data and may increase the number of single bills available for ratesetting. We note that such an edit would be broader than the device-to-procedure code edits we implemented for CY 2007 for selected devices. While we encourage hospitals to code correctly in accordance with CPT, CMS, and local contractor guidance, in general we have historically implemented claims processing edits under the OPPS when we believe that these edits help ensure complete claims data for ratesetting. In the case of such Outpatient Code Editor (OCE) edits for drugs and devices that are separately paid, it is unclear to us that these edits would improve our claims data for median cost calculation because the items receive separate payment and do not result in multiple procedure claims when they are reported. We also are uncertain about the clinical circumstances that could result in a hospital submitting an OPPS claim that only reported a separately paid drug or device. We are soliciting comments specifically on the impact of establishing such edits on hospital billing processes and on related potential improvements to claims data used for median setting. Therefore, in view of the prior public comments and our desire to ensure that the public data files contain all appropriate data, for the CY 2008 OPPS, we are proposing to define major procedures as HCPCS codes that have a status indicator of ``S,'' ``T,'' ``V,'' or ``X.'' We are proposing to define minor procedures as HCPCS codes that have a status indicator of ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' or ``N'' but, as we discuss above, to make single bills out of any claims for single procedures with a minor code that also has an APC assignment. This ensures that the claims that contain only codes for drugs and biologicals or devices but that do not contain codes for procedures are included in the limited data set and the identifiable data set. It also ensures, as discussed above, that conditionally packaged services that receive separate payment only when they are billed without any other separately payable OPPS services are treated appropriately for purposes of median cost calculations. We are proposing to define ``other'' services as HCPCS codes that have a status indicator other than those defined as major or minor procedures. We continue to believe that using status indicators, with the proposed changes, is an appropriate way to sort the claims into these groups and also to make our process more transparent to the public. We further believe that this proposed method of sorting claims would enhance the public's ability to derive useful information for analysis and public comment on this proposed rule. We set aside the single minor, multiple minor, and non-OPPS claims (numbers 3, 4, and 5 above) because we did not use these claims in calculating median costs of procedural APCs. We then examined the multiple major claims for dates of service to determine if we could break them into single procedure claims using the dates of service on all lines on the claim. If we could create claims with single major procedures by using date of service, we created a single procedure claim record for each separately paid procedure on a different date of service (that is, a ``pseudo'' single). We then used the bypass codes listed in Table 1 of this proposed rule and discussed in section II.A.1.b. of this proposed rule to remove separately payable procedures that we determined contain limited costs or no packaged costs or were otherwise suitable for inclusion on the bypass list from a multiple procedure bill. When one of the two separately payable procedures on a multiple procedure claim was on the bypass list, we split the claim into two ``pseudo'' single procedure claims records. The single procedure claim record that contained the bypass code did not retain packaged services. The single procedure claim record that contained the other separately payable procedure (but no bypass code) retained the packaged revenue code charges and the packaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as ``pseudo'' single claims by dividing the cost for the multiple units by the number of units on the line. Where one unit of a single, separately paid procedure code remained on the claim after removal of the multiple units of the bypass code, we created a ``pseudo'' single claim from that residual claim record, which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used. We excluded those claims that we were not able to [[Page 42646]] convert to single claims even after applying all of the techniques for creation of ``pseudo'' singles. Among those excluded were claims that contain codes that are viewed as independently or conditionally bilateral and that contain the bilateral modifier (Modifier 50, Bilateral procedure) because the line-item cost for the code represents the cost of two units of the procedure, notwithstanding that the code appears with a unit of one. Therefore, the charge on the line represents the charge for two services rather than a single service and using the line as reported would overstate the cost of a single procedure. We then packaged the costs of packaged HCPCS codes (codes with status indicator ``N'' listed in Addendum B to this proposed rule) and packaged revenue codes into the cost of the single major procedure remaining on the claim. The list of packaged revenue codes is shown in Table 4 of this proposed rule. At its March 2007 meeting the APC Panel recommended that CMS review the final list of packaged revenue codes for consistency with OPPS policy and ensure that future versions of the OCE edit accordingly. We compared the packaged revenue codes in the OCE to the finalized list of packaged revenue codes for the CY 2007 OPPS (71 FR 67989 through 67990) that we used for packaging costs in median calculation. As a result of that analysis, we are accepting the APC Panel's recommendation and we are proposing to change the list of packaged revenue codes for the CY 2008 OPPS in the following manner. First, we are proposing to remove revenue codes 0274 (Prosthetic/ Orthotic devices) and 0290 (Durable Medical Equipment) from the list of packaged revenue codes because we do not permit hospitals to report implantable devices in these revenue codes (Internet Only Manual 100-4, Chapter 4, section 20.5.1.1). We also are proposing to add revenue code 0273 (Take Home Supplies) to the list of packaged revenue codes because we believe that the charges under this revenue code are for the incidental supplies that hospitals sometimes provide for patients who are discharged at a time when it is not possible to secure the supplies needed for a brief time at home. We are proposing to conform the list of packaged revenue codes in the OCE to the OPPS for CY 2008. We packaged the costs of the HCPCS codes that are shown with status indicator ``N'' into the cost of the independent service to which the packaged service is ancillary or supportive. We refer readers to section II.A.4. of this proposed rule for a more complete discussion of the packaging changes we are proposing for CY 2008. After removing claims for hospitals with error CCRs, claims without HCPCS codes, claims for immunizations not covered under the OPPS, and claims for services not paid under the OPPS, approximately 54 million claims were left. Of these 54 million claims, we were able to use some portion of approximately 50 million whole claims (92 percent of approximately 54 million potentially usable claims) to create approximately 88 million single and ``pseudo'' single claims, of which we used 87 million single bills (after trimming out just over 822,000 claims as discussed below) in the CY 2008 median development and for ratesetting. We also excluded (1) claims that had zero costs after summing all costs on the claim and (2) claims containing packaging flag number 3. Effective for services furnished on or after July 1, 2004, the OCE assigns packaging flag number 3 to claims on which hospitals submit token charges for a service with status indicator ``S'' or ``T'' (a major separately paid service under the OPPS) for which the fiscal intermediary is required to allocate the sum of charges for services with a status indicator equaling ``S'' or ``T'' based on the weight for the APC to which each code is assigned. We do not believe that these charges, which were token charges as submitted by the hospital, are valid reflections of hospital resources. Therefore, we deleted these claims. We also deleted claims for which the charges equal the revenue center payment (that is, the Medicare payment) on the assumption that where the charge equals the payment, to apply a CCR to the charge would not yield a valid estimate of relative provider cost. For the remaining claims, we then standardized 60 percent of the costs of the claim (which we have previously determined to be the labor-related portion) for geographic differences in labor input costs. We made this adjustment by determining the wage index that applied to the hospital that furnished the service and dividing the cost for the separately paid HCPCS code furnished by the hospital by that wage index. As has been our policy since the inception of the OPPS, we are proposing to use the pre-reclassified wage indices for standardization because we believe that they better reflect the true costs of items and services in the area in which the hospital is located than the post- reclassification wage indices and, therefore, would result in the most accurate unadjusted median costs. We also excluded claims that were outside 3 standard deviations from the geometric mean of units for each HCPCS code on the bypass list (because, as discussed above, we used claims that contain multiple units of the bypass codes). We used the remaining claims to calculate the CY 2008 proposed median costs for each separately payable HCPCS code and each APC. The comparison of HCPCS and APC medians determines the applicability of the ``2 times'' rule. Section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median (or mean cost, if elected by the Secretary) for an item or service in the group is more than 2 times greater than the lowest median cost for an item or service within the same group (``the 2 times rule''). Finally, we reviewed the medians and reassigned HCPCS codes to different APCs where we believed that it was appropriate. Section III. of this proposed rule includes a discussion of certain proposed HCPCS code assignment changes that resulted from examination of the medians and for other reasons. The APC medians were recalculated after we reassigned the affected HCPCS codes. Both the HCPCS medians and the APC medians were weighted to account for the inclusion of multiple units of the bypass codes in the creation of ``pseudo'' single bills. In our review of median costs for HCPCS codes and their assigned APCs, we have frequently noticed that some services are consistently rarely performed in the hospital outpatient setting for the Medicare population. In particular, there are a number of services, such as several procedures related to the care of pregnant women, that have annual Medicare claims volume of 100 or fewer occurrences. By definition, these services also have a small number of single bills from which to estimate median costs. In addition, in some cases, these codes have been historically assigned to clinical APCs where all the services are low volume. Therefore, the median costs for these services and APCs often fluctuate from year to year, in part due to the variability created by such a small number of claims. One of the benefits of basing payment on the median cost of many HCPCS codes with sufficient single bill representation in an APC is that such fluctuation is moderated by the increased number of observations for similar services on which the APC median cost is also based. We considered proposing a distinct methodology for calculation of the [[Page 42647]] median cost of low total volume APCs in order to provide more stability in payment from year to year for these low total volume services. However, after examination of the low total volume OPPS services and their assigned APCs, we concluded that there were other clinical APCs with higher volumes of total claims to which these low total volume services could be reassigned, while ensuring the continued clinical and resource homogeneity of the clinical APCs to which they would be newly reassigned. Therefore, we believe that it is more appropriate to reconfigure clinical APCs to eliminate most of the low total volume APCs. These low volume services differ from other OPPS services only because they are not often furnished to the Medicare population. Therefore, we are proposing to reconfigure certain clinical APCs for CY 2008 as a way to promote stability and appropriate payment for the services assigned to them, including low total volume services. We believe that these proposed reconfigurations maintain APC clinical and resource homogeneity. We are proposing these changes as an alternative to developing specific quantitative approaches to treating low total volume APCs differently for purposes of median calculation. As a result of this proposal, 3 APCs proposed for CY 2008 (all of which are New Technology APCs) have a total volume of services less than 100, and only 17 APCs have a total volume of less than 1,000, in comparison with CY 2007 where 9 APCs (including 3 New Technology APCs) had a total volume of less than 100 and 36 APCs had a total volume of less than 1,000. A detailed discussion of the medians for blood and blood products is included in section X. of this proposed rule. A discussion of the medians for APCs that require one or more devices when the service is performed is included in section IV.A. of this proposed rule. A discussion of the median for partial hospitalization is included below in section II.B. of this proposed rule. Table 4.--Proposed CY 2008 Packaged Revenue Codes ------------------------------------------------------------------------ Revenue code Description ------------------------------------------------------------------------ 0250.................. PHARMACY. 0251.................. GENERIC. 0252.................. NONGENERIC. 0254.................. PHARMACY INCIDENT TO OTHER DIAGNOSTIC. 0255.................. PHARMACY INCIDENT TO RADIOLOGY. 0257.................. NONPRESCRIPTION DRUGS. 0258.................. IV SOLUTIONS. 0259.................. OTHER PHARMACY. 0260.................. IV THERAPY, GENERAL CLASS. 0262.................. IV THERAPY/PHARMACY SERVICES. 0263.................. SUPPLY/DELIVERY. 0264.................. IV THERAPY/SUPPLIES. 0269.................. OTHER IV THERAPY. 0270.................. M&S SUPPLIES. 0271.................. NONSTERILE SUPPLIES. 0272.................. STERILE SUPPLIES. 0273.................. TAKE HOME SUPPLIES. 0275.................. PACEMAKER DRUG. 0276.................. INTRAOCULAR LENS SOURCE DRUG. 0278.................. OTHER IMPLANTS. 0279.................. OTHER M&S SUPPLIES. 0280.................. ONCOLOGY. 0289.................. OTHER ONCOLOGY. 0343.................. DIAGNOSTIC RADIOPHARMS. 0344.................. THERAPEUTIC RADIOPHARMS. 0370.................. ANESTHESIA. 0371.................. ANESTHESIA INCIDENT TO RADIOLOGY. 0372.................. ANESTHESIA INCIDENT TO OTHER DIAGNOSTIC. 0379.................. OTHER ANESTHESIA. 0390.................. BLOOD STORAGE AND PROCESSING. 0399.................. OTHER BLOOD STORAGE AND PROCESSING. 0560.................. MEDICAL SOCIAL SERVICES. 0569.................. OTHER MEDICAL SOCIAL SERVICES. 0621.................. SUPPLIES INCIDENT TO RADIOLOGY. 0622.................. SUPPLIES INCIDENT TO OTHER DIAGNOSTIC. 0624.................. INVESTIGATIONAL DEVICE (IDE). 0630.................. DRUGS REQUIRING SPECIFIC IDENTIFICATION, GENERAL CLASS. 0631.................. SINGLE SOURCE. 0632.................. MULTIPLE. 0633.................. RESTRICTIVE PRESCRIPTION. 0681.................. TRAUMA RESPONSE, LEVEL I. 0682.................. TRAUMA RESPONSE, LEVEL II. 0683.................. TRAUMA RESPONSE, LEVEL III. 0684.................. TRAUMA RESPONSE, LEVEL IV. 0689.................. TRAUMA RESPONSE, OTHER. 0700.................. CAST ROOM. 0709.................. OTHER CAST ROOM. 0710.................. RECOVERY ROOM. 0719.................. OTHER RECOVERY ROOM. 0720.................. LABOR ROOM. [[Page 42648]] 0721.................. LABOR. 0762.................. OBSERVATION ROOM. 0810.................. ORGAN ACQUISITION. 0819.................. OTHER ORGAN ACQUISITION. 0942.................. EDUCATION/TRAINING. ------------------------------------------------------------------------ 3. Proposed Calculation of OPPS Scaled Payment Weights Using the median APC costs discussed previously, we calculated the proposed relative payment weights for each APC for CY 2008 shown in Addenda A and B to this proposed rule. In years prior to CY 2007, we standardized all the relative payment weights to APC 0601 (Mid Level Clinic Visit) because it is one of the most frequently performed services in the hospital outpatient setting. We assigned APC 0601 a relative payment weight of 1.00 and divided the median cost for each APC by the median cost for APC 0601 to derive the relative payment weight for each APC. Beginning with the CY 2007 OPPS, we standardized all of the relative payment weights to APC 0606 (Level 3 Clinic Visits) because we deleted APC 0601 as part of the reconfiguration of the visit APCs. We chose APC 0606 as the base because under our proposal to reconfigure the APCs where clinic visits are assigned for CY 2007, APC 0606 is the middle level clinic visit APC (that is, Level 3 of five levels). We have historically used the median cost of the middle level clinic visit APC (that is APC 0601 through CY 2006) to calculate unscaled weights because mid-level clinic visits are among the most frequently performed services in the hospital outpatient setting. Therefore, to maintain consistency in using a median for calculating unscaled weights representing the median cost of some of the most frequently provided services, we proposed to continue to use the median cost of the mid- level clinic APC, proposed APC 0606, to calculate unscaled weights. Following our standard methodology, but using the CY 2007 median for APC 0606, for CY 2007 we assigned APC 0606 a relative payment weight of 1.00 and divided the median cost of each APC by the median cost for APC 0606 to derive the unscaled relative payment weight for each APC. The choice of the APC on which to base the relative weights for all other APCs does not affect the payments made under the OPPS because we scale the weights for budget neutrality. We are again proposing to use APC 0606 as the base for the CY 2008 OPPS relative weights. Section 1833(t)(9)(B) of the Act requires that APC reclassification and recalibration changes, wage index changes, and other adjustments be made in a manner that assures that aggregate payments under the OPPS for CY 2008 are neither greater than nor less than the aggregate payments that would have been made without the changes. To comply with this requirement concerning the APC changes, we compared aggregate payments using the CY 2007 relative weights to aggregate payments using the CY 2008 proposed relative weights. This year, we included payments to CMHCs in our comparison. Based on this comparison, we adjusted the relative weights for purposes of budget neutrality. The unscaled relative payment weights were adjusted by a weight scaler of 1.3665 for budget neutrality. In addition to adjusting for increases and decreases in weight due to the recalibration of APC medians, the scaler also accounts for any change in the base, other than changes in volume, which are not a factor in the weight scaler. The proposed relative payment weights listed in Addenda A and B to this proposed rule incorporate the recalibration adjustments discussed in sections II.A.1. and 2. of this proposed rule. Section 1833(t)(14)(H) of the Act, as added by section 621(a)(1) of Pub. L. 108-173, states that ``Additional expenditures resulting from this paragraph shall not be taken into account in establishing the conversion factor, weighting and other adjustment factors for 2004 and 2005 under paragraph (9) but shall be taken into account for subsequent years.'' Section 1833(t)(14) of the Act provides the payment rates for certain ``specified covered outpatient drugs.'' Therefore, the cost of those specified covered outpatient drugs (as discussed in section V. of this proposed rule) is included in the budget neutrality calculations for the CY 2008 OPPS. 4. Proposed Changes to Packaged Services (If you choose to comment on the issues in this section, please include the caption ``OPPS: Packaged Services'' at the beginning of your comment.) a. Background When the Medicare program was first implemented, it paid for hospital services (inpatient and outpatient) based on hospital-specific reasonable costs attributable to furnishing services to Medicare beneficiaries. Later the law was amended to limit payment to the lesser of the hospital's reasonable cost or customary charges for services furnished to Medicare beneficiaries. Specific service-based methodologies were then developed for certain types of services, such as clinical laboratory tests and durable medical equipment, while payments for outpatient surgical procedures and other diagnostic tests were based on a blend of the hospital's aggregate Medicare costs for these services and Medicare's payment for similar services in other ambulatory settings. While this mix of different payment methodologies was in use, hospital outpatient services were growing rapidly following the implementation of the IPPS in 1983. The brisk increase in hospital outpatient services led to an interest in creating payment incentives to promote more efficient delivery of hospital outpatient services through a Medicare prospective payment system for hospital outpatient services, and the final statutory requirements for the OPPS were established by the BBA and the BBRA. During the period of time when different approaches to prospective payment for hospital outpatient services were being considered, a variety of reports to Congress (June 1988, September 1990, and March 1995) discussed three major issues related to defining the unit of payment for the payment system, specifically the extent to which clinically similar procedures should be grouped for payment purposes and the logic that should be used for the groupings; the extent to which payment for minor, ancillary services associated with a significant [[Page 42649]] procedure should be packaged into a single payment for the procedure (which we refer to as ``packaging''); and the extent to which payment for multiple significant procedures related to an outpatient encounter or to an episode of care should be bundled into a single unit of payment (which we refer to as ``bundling''). Both packaging and bundling were presented as approaches to creating incentives for efficiency, with their potential policy disadvantages including inconsistency with other ambulatory fee schedules, reduced transparency of service-specific payment, and the potential for hospitals shifting the delivery of packaged or bundled services to delivery settings other than the hospital outpatient department (HOPD). The OPPS, like other prospective payment systems, relies on the concept of averaging, where the payment may be more or less than the estimated costs of providing a service or package of services for a particular patient, but with the exception of outlier cases, it is adequate to ensure access to appropriate care. Decisions about packaging and bundling payment involve a balance between ensuring some separate payment for individual services and establishing incentives for efficiency through larger units of payment. In many situations, the final payment rate for a package of services may do a better job of balancing variability in the relative costs of component services compared to individual rates covering a smaller unit of service without packaging or bundling. Packaging payments into larger payment bundles promotes the stability of payment for services over time, a characteristic that reportedly is very important to hospitals. Unlike packaged services, the costs of individual services typically show greater variation because the higher variability for some component items and services cannot be balanced with lower variability for others and because relative weights are typically estimated using a smaller set of claims. When compared to service-specific payment, packaging or bundling payment for component services may change payment at the hospital level to the extent that there are systematic differences across hospitals in their performance of the services included in that unit of payment. Hospitals spending more per case than payment received would be encouraged to review their service patterns to ensure that they furnish services as efficiently as possible. Similarly, we believe that unpackaging services heightens the hospital's focus on pricing individual services, rather than the efficient delivery of those services. Over the past several years of the OPPS, greater unpackaging of payment has occurred simultaneously with continued tremendous growth in OPPS expenditures as a result of increasing volumes of individual services, as discussed in further detail below. Also discussed in further detail below, most recently in its comments to the CY 2007 OPPS/ASC proposed rule and in the context of this rapid spending growth, the Medicare Payment Advisory Commission (MedPAC) encouraged CMS to broaden the payment bundles under the OPPS to encourage providers to use resources efficiently. As permitted under section 1833(t)(2)(B) of the Act, the OPPS establishes groups of covered HOPD services, namely APC groups, and uses them as the basic unit of payment. During the evolution of the OPPS over the past 7 years, significant attention has been concentrated on service-specific payment for services furnished to particular patients, rather than on creating incentives for the efficient delivery of services through encounter or episode-of-care-based payment. Overall packaging included in the clinical APCs has decreased, and the procedure groupings have become smaller as the focus has shifted to refining service-level payment. Specifically, in the CY 2003 OPPS, there were 569 APCs, but by CY 2007, the number of APCs had grown to 862, a 51-percent increase in 4 years. Similarly, the percentage of CPT codes for procedural services that receive packaged payment declined by over 10 percent between CY 2003 and CY 2007. Currently, the APC groups reflect a modest degree of packaging, including packaged payment for minor ancillary services, inexpensive drugs, medical supplies, implantable devices, capital-related costs, operating and recovery room use, and anesthesia services. Bundling payment for multiple significant services provided in the same hospital outpatient encounter or during an episode of care is not currently a common OPPS payment practice, because the APC groups generally reflect only the modest packaging associated with individual procedures or services. Unconditionally packaged services with HCPCS codes are identified by the status indicator ``N.'' Conditionally packaged services, specifically those services whose payment is packaged unless specific criteria for separate payment are met, are assigned to status indicator ``Q.'' To the extent possible, hospitals may use HCPCS codes to report any packaged services that were performed, consistent with CPT or CMS coding guidelines, but packaged costs also may be uncoded and included in specific revenue code charges. Hospitals include charges for packaged services on their claims, and the costs associated with those packaged services are then added into the costs of separately payable procedures on the same claims in establishing payment rates for the separately payable services. Packaging and bundling payment for multiple interrelated services into a single payment creates incentives for providers to furnish services in the most efficient way by enabling hospitals to manage their resources with maximum flexibility, thereby encouraging long-term cost containment. For example, where there are a variety of supplies that could be used to furnish a service, some of which are more expensive than others, packaging encourages hospitals to use the least expensive item that meets the patient's needs, rather than to routinely use a more expensive item. Packaging also encourages hospitals to negotiate carefully with manufacturers and suppliers to reduce the costs of purchased items and services or to explore alternative group purchasing arrangements, thereby encouraging the most economical health care. Similarly, packaging encourages hospitals to establish protocols that ensure that services are furnished only when they are important and to carefully scrutinize the services ordered by practitioners to maximize the efficient use of hospital resources. Finally, packaging payments into larger payment bundles promotes the stability of payment for services over time. Packaging also may reduce the importance of refining service-specific payment because there is more opportunity for hospitals to average payment across higher cost cases requiring many ancillary services and lower cost cases requiring fewer ancillary services. b. Addressing Growth in OPPS Volume and Spending Creating additional incentives for providing only necessary services in the most efficient manner is of vital importance to Medicare today, in view of the recent explosion of growth in program expenditures for hospital outpatient services paid under the OPPS. As illustrated in Table 5 below, total spending has been growing at a rate of roughly 10 percent per year under the OPPS, and the Medicare Trustees project that total spending under the OPPS will increase by more than $3 billion from CY 2007 through CY 2008 to nearly $35 billion. Implementation of the OPPS has not [[Page 42650]] slowed outpatient spending growth over the past few years; in fact, double-digit spending growth has generally been occurring. We are greatly concerned with this rate of increase in program expenditures under the OPPS. Table 5.--Growth in Expenditures Under OPPS From CY 2001-CY 2008 [Projected Expenditures for CY 2006-CY 2008, in Billions] ---------------------------------------------------------------------------------------------------------------- OPPS growth CY 2001 CY 2002 CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008 ---------------------------------------------------------------------------------------------------------------- Incurred Cost................... 17.702 19.561 21.156 23.866 26.572 29.338 31.641 34.960 Percent Increase................ ........ 10.5 8.2 12.8 11.3 10.4 7.8 10.5 ---------------------------------------------------------------------------------------------------------------- Source: CY 2007 Medicare Trustees' Report. As with the other Medicare fee-for-service payment systems that are experiencing rapid spending growth, brisk growth in the intensity and utilization of services is the major reason for the current rates of growth in the OPPS, rather than general price or enrollment changes. Table 6 below illustrates the increases in the volume and intensity of hospital outpatient services over the past several years. Table 6.--Percent Increase in Volume and Intensity of Hospital Outpatient Services ---------------------------------------------------------------------------------------------------------------- CY 2006 CY 2007 CY 2008 CY 2002 CY 2003 CY 2004 CY 2005 (Est.) (Est.) (Est.) ---------------------------------------------------------------------------------------------------------------- Percent Increase................................. 3.5 2.5 7.6 7.4 8.6 6.4 5.8 ---------------------------------------------------------------------------------------------------------------- Source: CY 2007 Medicare Trustees' Report. For hospital outpatient services, the volume and intensity of services are estimated to have continued to increase significantly in recent years, at a rate of 8.6 percent between CY 2005 and CY 2006, the last two completed calendar years. As we discussed in the CY 2007 OPPS/ ASC final rule with comment period (71 FR 68189 through 68190), the rapid growth in utilization of services under the OPPS shows that Medicare is paying mainly for more services each year, regardless of their quality or impact on beneficiary health. In its March 2007 Report to Congress (pages 55 and 56), MedPAC confirmed that much of the growth in service volume from 2003 to 2005 resulted from increases in the number of services per beneficiary who received care, rather than from increases in the number of beneficiaries served. The MedPAC found that while the rate of growth in service volume declined over that time period, the complexity of services, defined as the sum of the relative payment weights of all OPPS services divided by the volume of all services, increased, and that most of the growth was attributable to the insertion of devices and the provision of complex imaging services. The MedPAC further found that regression analysis suggested that relatively complex hospital outpatient services may be more profitable for hospitals than less complex services. In addition, its analysis indicated that favorable payments for complex services give hospitals an incentive to provide more of those complex services rather than fewer basic services, which increases overall service complexity. The MedPAC expressed concern about this relationship and concluded that the historically large increases in outpatient volume and service complexity suggest a need to recalibrate the OPPS. In the future, MedPAC plans to examine options for recalibrating the payment system to accurately match payments to the costs of individual services (Medicare Payment Advisory Commission Report to the Congress: Medicare Payment Policy, March 2007, pages 55 and 56). As proposed for the CY 2007 OPPS and finalized for the CY 2009 OPPS, we developed a plan to promote higher quality services under the OPPS, so that Medicare spending would be directed toward those higher quality services (71 FR 68189 through 68197). We believe that Medicare payments should encourage physicians and other providers in their efforts to achieve better health outcomes for Medicare beneficiaries at a lower cost. In the CY 2007 OPPS/ASC final rule with comment period, we discussed the concept of ``value-based purchasing'' in the OPPS as well as in other Medicare payment systems. ``Value-based purchasing'' may use a range of incentives to achieve identified quality and efficiency goals, as a means of promoting better quality of care and more effective resource use in the Medicare payment systems. In developing the concept of value-based purchasing for Medicare, we have been working closely with stakeholder partners. We continue to believe that the collection and submission of performance data and the public reporting of comparative information are strong incentives for hospital accountability in general and quality improvement in particular, while encouraging the most efficient and effective care. Measurement and reporting can focus the attention of hospitals and consumers on specific goals and on hospitals' performance relative to those goals. Development and implementation of performance measurement and reporting by hospitals can thus produce quality improvement in health care delivery. Hospital performance measures may also provide a foundation for performance-based rather than volume-based payments. In the CY 2007 OPPS/ASC final rule with comment period, as a first step in the OPPS toward value-based purchasing, we finalized a policy that would employ our equitable adjustment authority under section 1833(t)(2)(E) of the Act to establish an OPPS Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program based on measures specifically developed to characterize the quality of outpatient care (71 FR 68197). We finalized implementation of the program for CY 2009, when we would implement a 2.0 point reduction to the OPPS conversion factor update for those hospitals that do not meet the specific requirements of the CY 2009 OPPS RHQDAPU program. We described the [[Page 42651]] CY 2009 program which would be based upon CY 2008 hospital reporting of appropriate measures of the quality of hospital outpatient care that have been carefully developed and evaluated, and endorsed as appropriate, with significant input from stakeholders. We reiterated our belief that ensuring that Medicare beneficiaries receive the care they need and that such services are of high quality are the necessary initial steps to incorporating value-based purchasing into the OPPS. We explained that we are specifically seeking to encourage care that is both efficient and of high quality in the HOPD. Subsequent to the publication of the CY 2007 OPPS/ASC final rule with comment period, section 109(b) of the MIEA-TRHCA specifies that in the case of a subsection (d) hospital (defined under section 1886(d)(1)(B) of the Act as hospitals that are located in the 50 States or the District of Columbia other than those categories of hospitals or hospital units that are specifically excluded from the IPPS, including psychiatric, rehabilitation, long-term care, children's, and cancer hospitals or hospital units) that does not submit to the Secretary the quality reporting data required for CY 2009 and each subsequent year, the OPPS annual update factor shall be reduced by 2.0 percentage points. The quality reporting program proposed for CY 2008 according to this provision is referred to as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP) and is discussed in detail in section XVII. of this proposed rule. As the next step in our movement toward value-based purchasing under the OPPS and to complement the HOP QDRP for CY 2009, with measure reporting beginning in CY 2008, we believe it is important to initiate specific payment approaches to explicitly encourage efficiency in the hospital outpatient setting that we believe will control future growth in the volume of OPPS services. While the HOP QDRP will encourage the provision of higher quality hospital outpatient services that lead to improved health outcomes for Medicare beneficiaries, we believe that more targeted approaches are also necessary to encourage increased hospital efficiency. Two alternatives we have considered that would be feasible under current law include establishing a methodology to measure the growth in volume and reduce OPPS payment rates to account for unnecessary increases in volume or developing payment incentives for hospitals to ensure that they provide necessary services as efficiently as possible. With respect to the first alternative, section 1833(t)(2)(F) of the Act requires us to establish a methodology for controlling unnecessary increases in the volume of covered OPPS services, and section 1833(t)(9)(C) of the Act authorizes us to adjust the update to the conversion factor if, under section 1833(t)(2)(F) of the Act, we determine that there is growth in volume that exceeds established tolerances. As we indicated in the September 8, 1998 proposed rule proposing the establishment of the OPPS (63 FR 47585), we considered creating a system that mirrors the sustainable growth rate (SGR) methodology applied to the MPFS update to control unnecessary growth in service volume. However, implementing such a system could have the potentially undesirable effect of escalating service volume as payment rates stagnate and hospital costs rise, thus actually resulting in a growth in volume rather than providing an incentive to control volume. Therefore, this approach to addressing the volume growth under the OPPS could inadvertently result in the exact opposite of our desired outcome. The second alternative we considered is to expand the packaging of supportive ancillary services and ultimately bundle payment for multiple independent services into a single OPPS payment. We believe that this would create incentives for hospitals to monitor and adjust the volume and efficiency of services themselves, by enabling them to manage their resources with maximum flexibility. Instead of external controls on volume, we believe that it is preferable for the OPPS to create payment incentives for hospitals to carefully scrutinize their service patterns to ensure that they furnish only those services that are necessary for high quality care and to ensure that they provide care as efficiently as possible. Specifically, we believe that increased packaging and bundling are the most appropriate payment strategies to establish such incentives in a prospective payment system, and that this approach is clearly preferable to the establishment of an SGR or other methodology that seeks to control spending by addressing significant growth in volume and program spending with lower payments. In its October 6, 2006 letter of comment on the CY 2007 OPPS/ASC proposed rule, MedPAC urged us to establish broader payment bundles in both the revised ASC and hospital outpatient prospective payment systems to promote efficient resource use and better align the two payment systems. In particular, our proposal for the CY 2008 revised ASC payment system proposed to package payment for all items and services directly related to the provision of covered surgical procedures into the ASC facility payment for the associated surgical procedure (71 FR 49468). These other items and services included all drugs, biologicals, contrast agents, implantable devices, and diagnostic services such as imaging. Because a number of these items and services are separately paid under the OPPS and the proposal included the establishment of most ASC payment weights based on the procedures' corresponding OPPS payment weights, MedPAC encouraged us to align the payment bundles in the two payment systems by increasing the size of the payment bundles under the OPPS. Moreover, MedPAC staff indicated in testimony at the January 9, 2007 MedPAC public meeting that the growth in OPPS spending and volume raises questions about whether the OPPS should be changed to encourage greater efficiency (page 390 of the January 9, 2007 MedPAC meeting transcript available at http://www.medpac.gov). MedPAC staff explained at that time that MedPAC intends to perform a long-term assessment of the design of the OPPS, including considering the bundling of payments for procedures and visits furnished over a period of time into a single payment, assessing whether there should be an expenditure target for hospital outpatient services, evaluating whether payments for multiple imaging services provided in the same session should be discounted, and reviewing the methodology used by CMS to determine relative payment weights for hospital outpatient services. We welcome MedPAC's study of these areas, particularly with regard to how we might develop appropriate payment rates for larger bundles of services. Because we believe it is important that the OPPS create enhanced incentives for hospitals to provide only necessary, high quality care and to provide that care as efficiently as possible, we have given considerable thought to how we could increase packaging under the OPPS in a manner that would not place hospitals at substantial financial risk but which would create incentives for efficiency and volume control, while providing hospitals with flexibility to provide care in the most appropriate way for each Medicare beneficiary. We are considering the possibility of greater bundling of payment for major hospital outpatient services, which could result in establishing OPPS payments for episodes of care, and for this reason we particularly welcome MedPAC's [[Page 42652]] exploration of how such an approach might be incorporated into the OPPS payment methodology. We are particularly concerned about the potential for shifting higher cost bundled services to other ambulatory settings, and we welcome ideas on deterring such activity. We are currently considering the complex policy issues related to the possible development and implementation of a bundled payment policy for hospital outpatient services that involves significant services provided over a period of time which could be paid through an episode-based payment methodology, but we consider this possible approach to be a long-term policy objective. We encourage public comments regarding the specific hospital outpatient services, clinical and financial issues, ratesetting methodologies, and operational challenges we should consider in our exploratory work in this area. We also are examining how we might possibly establish payments for same-day care encounters, building upon the current use of APCs for payment through greater packaging of supportive ancillary services. This could include conditional packaging of supportive ancillary services into payment for the procedure that is the reason for the OPPS encounter (for example, diagnostic tests performed on the day of a scheduled procedure). Another approach could include creation of composite APCs for frequently performed combinations of surgical procedures (for example, one APC payment for multiple cardiac electrophysiologic procedures performed on the same date). Not only could these encounter-based payment groups create enhanced incentives for efficiency, but they may also enable us to utilize for ratesetting many of the multiple procedure claims that are not now used in our establishment of OPPS rates for single procedures. (We refer readers to section II.A.1.b. of this proposed rule for a more detailed discussion of the treatment of multiple procedure claims in the ratesetting process.) For CY 2008, we are proposing two new composite APCs for CY 2008 payment of combinations of services in two clinical care areas, as discussed under section II.A.4.d. of this proposed rule. We look forward to receiving public comment on this proposal as we explore the possibility of moving toward basing OPPS payment on larger packages and bundles of services provided in a single hospital outpatient encounter. We intend to involve the APC Panel in our future exploration of how we can develop encounter-based and episode-based payment groups, and we look forward to the findings and recommendations of MedPAC in this area. This is a significant change in direction for the OPPS, and we specifically seek the recommendations of all stakeholders with regard to which ancillary services could be packaged and those combinations of services provided in a single encounter or over time that could be bundled together for payment. We are hopeful that expanded packaging and, ultimately, greater bundling under the OPPS may result in sufficient moderation of growth in volume and spending that further controls would not be needed. However, if spending were to continue to escalate at the current rates, even after we have exhausted our options for increased packaging and bundling, we are considering multiple options under our authority to address these issues, including the possibility of imposing external controls that could link growth in volume to reduced payments under the OPPS in the future. c. Proposed Packaging Approach With the exception of the two composite APCs that we are proposing for CY 2008 and discuss in detail in section II.A.4.d. of this proposed rule, we are not currently prepared to propose an episode-based or fully developed encounter-based payment methodology for CY 2008 as our next step in value-based purchasing for the OPPS. However, in reviewing our approach to revising payment packages and bundles, we have examined services currently provided under the OPPS, looking for categories of ancillary items and services for which we believe payment could be appropriately packaged into larger payment packages for the encounter. For this first step in creating larger payment groups, we examined the HCPCS code definitions (including CPT code descriptors) to see whether there were categories of codes for which packaging would be a logical expansion of the longstanding packaging policy that has been a part of the OPPS since its inception. In general, we have often packaged the costs of selected HCPCS codes into payment for services reported with other HCPCS codes where we believed that one code reported an item or service that was integral to the provision of care that was reported by another HCPCS code. As an example of a previous change in the OPPS packaging status for a HCPCS code that is ancillary and supportive, under the CY 2007 OPPS, we note that CPT code 93641 (Electrophysiologic evaluation of single or dual chamber pacing cardioverter defibrillator leads including defibrillation threshold evaluation (induction of arrhythmia, evaluate of sensing an pacing for arrhythmia termination) at the time of initial implantation or replacement; with testing of single chamber or dual chamber cardioverter defibrillator) went from separate to packaged payment. This service is only performed during the course of a surgical procedure for implantation or replacement of implantable cardioverter- defibrillator (ICD) leads, and these surgical implantation procedures are currently assigned to APC 0106 (Insertion/Replacement/Repair of Pacemaker and/or Electrodes) and APC 0108 (Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads). We considered the electrophysiologic evaluation service (CPT code 93641) to be an ancillary supportive service that may be performed only in the same operative session as a procedure that could otherwise be performed independently of the electrophysiologic evaluation service. In this particular case, the APC Panel recommended for CY 2007 that we package payment for this diagnostic test and we adopted that recommendation for the CY 2007 OPPS. Making this payment change in this specific case resulted in the availability of significantly more claims data and, therefore, establishment of more valid and representative estimated median costs for the lead insertion and electrophysiologic evaluation services furnished in the single hospital encounter. In the case of much of the care furnished in the HOPD, we believe that it is appropriate to view a complete service as potentially being reported by a combination of two or more HCPCS codes, rather than a single code, and to establish payment policy that supports this view. Ideally, we would consider a complete HOPD service to be the totality of care furnished in a hospital outpatient encounter or in an episode of care. In general, we believe that it is particularly appropriate to package payment for those items and services that are typically ancillary and supportive into the payment for the primary diagnostic or therapeutic modalities in which they are used. As a significant first step towards creating payment units that represent larger units of service, we examined whether there are categories of HCPCS codes that are typically ancillary and supportive to diagnostic and therapeutic modalities. Specifically, as our initial substantial step toward creating larger payment groups for hospital outpatient care, we are proposing to package payment for [[Page 42653]] items and services in the seven categories listed below into the payment for the primary diagnostic or therapeutic modality to which we believe these items and services are typically ancillary and supportive. We specifically chose these categories of HCPCS codes for packaging because we believe that the items and services described by the codes in these categories are the HCPCS codes that are typically ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are an integral part of the primary service they support. We are proposing to assign status indicator ``N'' to those HCPCS codes that we believe are always integral to the performance of the primary modality and to package their costs into the costs of the separately paid primary services with which they are billed. We are proposing to assign status indicator ``Q'' to those HCPCS codes that we believe are typically integral to the performance of the primary modality and to package payment for their costs into the costs of the separately paid primary services with which they are usually billed but to pay them separately in those uncommon cases in which no other separately paid primary service is furnished in the hospital outpatient encounter. For ease of reference in our subsequent discussion in each of the seven areas, we refer to the HCPCS codes for which we are proposing to package (or conditionally package) payment as dependent services. We use the term ``independent service'' to refer to the HCPCS codes that represent the primary therapeutic or diagnostic modality into which we are proposing to package payment for the dependent service. We note that, in future years as we consider the development of larger payment groups that more broadly reflect services provided in an encounter or episode of care, it is possible that we might propose to bundle payment for a service that we now refer to as ``independent'' in this proposed rule. Specifically, we are proposing to package the payment for HCPCS codes describing the dependent items and services in the following seven categories into the payment for the independent services with which they are furnished: Guidance services. Image processing services. Intraoperative services. Imaging supervision and interpretation services. Diagnostic radiopharmaceuticals. Contrast media and. Observation services. We identify the HCPCS codes we are proposing to package for CY 2008, explain our rationale for proposing to package the codes in these categories, provide examples of how HCPCS and APC median costs and payments would change under these proposals, and discuss the impact of these changes in the discussion below under each category. The median costs of services at the HCPCS level for many separately paid procedures change as a result of this proposal because we are proposing to change the composition of the payment packages associated with the HCPCS codes. Moreover, as a result of changes to the HCPCS median costs, we are proposing to reassign some HCPCS codes to different clinical APCs for CY 2008 to avoid 2 times violations and to ensure continuing clinical and resource homogeneity of the APCs. Therefore, the APC median costs change not only as a result of the increased packaging itself but also as a result of the migration of HCPCS codes into and out of APCs through APC reconfiguration. The file of HCPCS code and APC median costs resulting from our proposal is found under supporting documentation for this proposed rule on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage . Review of the HCPCS median costs indicates that, while the proposed median costs rise for some HCPCS codes as a result of increased packaging that expands the costs included in the payment packages, there are also cases in which the proposed median costs decline as a result of these proposed changes. While it seems intuitive to believe that the proposed median costs of the remaining separately paid services should rise when the costs of services previously paid separately are packaged into larger payment groups, it is more challenging to understand why the proposed median costs of separately paid services would not change or would decline when the costs of previously paid services are packaged. Medians are generally more stable than means because they are less sensitive to extreme observations, but medians typically do not reflect subtle changes in cost distributions. The OPPS' use of medians rather than means usually results in relative weight estimates being less sensitive to packaging decisions. Specifically, the median cost for a particular independent procedure generally will be higher as a result of added packaging, but also could change little or be lower because median costs typically do not reflect small distributional changes and also because changes to the packaged HCPCS codes affect both the number and composition of single bills and the mix of hospitals contributing those single bills. Such a decline, no change, or an increase in the median cost at the HCPCS code level could result from a change in the number of single bills used to set the median cost. With greater packaging, more ``natural'' single bills are created for some codes but fewer ``pseudo'' single bills are created. Thus, some APCs gain single bills and some lose single bills due to packaging changes, as well as to the reassignment of some codes to different APCs. When more claims from a different mix of providers are used to set the median cost for the HCPCS code, the median cost could move higher or lower within the array of per claim costs. Similarly, proposed revisions to APC assignments that are necessary to resolve 2 times violations that could arise as a result of changes in the HCPCS median cost for one or more codes due to additional packaging may also result in increases or decreases to APC median costs and, therefore, to increases or decreases in the payments for HCPCS codes that would not be otherwise affected except for the CY 2008 proposed packaging approach for the seven categories of items and services. We have examined the proposed aggregate impact of making these changes on payment for CY 2008. Because the OPPS is a budget neutral payment system in which the amount of payment weight in the system is annually adjusted for changes in expenditures created by changes in APC weights and codes (but is not currently adjusted based on estimated growth in service volume), the effects of the packaging changes we are proposing result in changes to scaled weights and, therefore, to the payment rates for all separately paid procedures. These changes result from both shifts in median costs as a result of increased packaging, changes in multiple procedure discounting patterns, and a higher weight scaler that is applied to all unscaled APC weights. (We refer readers to section II.A.3. of this proposed rule for an explanation of the weight scaler.) In a budget neutral system, the monies previously paid for services that are now proposed to be packaged are not lost, but are redistributed to all other services. A higher weight scaler would increase payment rates relative to observed median costs for independent services by redistributing the lost weight of packaged items that historically have [[Page 42654]] been paid separately and the lost weight when the median costs of independent services do not completely reflect the full incremental cost of the packaged services. The impact of this proposed change on proposed CY 2008 OPPS payments is discussed in section XXII B. of this proposed rule, and the impact on various classifications of hospitals is shown in Column 2B in Table 67 in that section. We estimate that our CY 2008 proposal would redistribute approximately 1.2 percent of the estimated CY 2007 base year expenditures under the OPPS. The monies associated with this redistribution would be in addition to any increase that would otherwise occur due to a proposed higher median cost for the APC as a result of the expanded payment package. If the relative weight for a particular APC decreases as a result of the proposed packaging approach, the increased weight scaler may or may not result in a relative weight that is equal to or greater than the relative weight that would occur without the proposed packaging approach. In general, the packaging that we are proposing would have more effect on payment for some services than on payment for others because the dependent items and services that we are proposing for packaging are furnished more often with some independent services than with others. However, because of the amount of payment weight that would be redistributed by this proposal, there would be some impact on payments for all OPPS services whose rates are set based on payment weights, and the impact on any given hospital would vary based on the mix of services furnished by the hospital. The following discussion separately addresses each of the seven categories of items and services for which we are proposing to package payment under the CY 2008 OPPS as part of our packaging proposal. Many codes that we are proposing to package for CY 2008 could fit into more than one of those seven categories. For example, CPT code 93325 (Doppler echocardiography color flow velocity mapping (List separately in addition to codes for echocardiography)) could be included in both the intraoperative and image processing categories. Therefore, for organizational purposes, both to ensure that each code appears in only one category and to facilitate discussion of our CY 2008 proposal, we have created a hierarchy of categories that determines which category each code appropriately falls into. This hierarchy is organized from the most clinically specific to the most general type of category. The hierarchy of categories is as follows: guidance services, image processing services, intraoperative services, and imaging supervision and interpretation services. Therefore, while CPT code 93325 may logically be grouped with either imaging processing services or intraoperative services, it is treated as an image processing service because that group is more clinically specific and precedes intraoperative services in the hierarchy. We did not believe it was necessary to include diagnostic radiopharmaceuticals, contrast media, or observation categories in this list because those services generally map to only one of those categories. We note that there is no cost estimation or payment implications related to the assignment of a HCPCS code for purposes of discussion to any specific category. (1) Guidance Services We are proposing to package payment for HCPCS guidance codes for CY 2008, specifically those codes that are reported for supportive guidance services, such as ultrasound, fluoroscopic, and stereotactic navigation services, that aid the performance of an independent procedure. We performed a broad search for such services, relying upon the American Medical Association's (AMA's) CY 2007 book of CPT codes and the CY 2007 book of Level II HCPCS codes, which identified specific HCPCS codes as guidance codes. Moreover, we performed a clinical review of all HCPCS codes to capture additional codes that are not necessarily identified as ``guidance'' services but describe services that provide directional information during the course of performing an independent procedure. For example, we are proposing to package CPT code 61795 (Stereotactic computer-assisted volumetric (navigational) procedure, intracranial, extracranial, or spinal (List separately in addition to code for primary procedure)) because we consider it to be a guidance service that provides three-dimensional information to direct the performance of intracranial or other diagnostic or therapeutic procedures. We also included HCPCS codes that existed in CY 2006 but were deleted and were replaced in CY 2007. We included the CY 2006 HCPCS codes because we are proposing to use the CY 2006 claims data to calculate the CY 2008 OPPS median costs on which the CY 2008 payment rates would be based. Many, although not all, of the CPT guidance codes we identified are designated by CPT as add-on codes that are to be reported in addition to the CPT code for the primary procedure. We also note that there are a number of CPT codes describing independent surgical procedures but which the code descriptors indicate that guidance is included in the code reported for the surgical procedure if it is used and, therefore, packaged payment is already made for the associated guidance service under the OPPS. For example, the independent procedure described by CPT code 55873 (Cryosurgical ablation of the prostate (includes ultrasonic guidance for interstitial cryosurgical probe placement)) already includes the ultrasound guidance that may be used. We believe packaging payment for every guidance service under the OPPS would provide consistently packaged payment for all these services that are used to direct independent procedures, even if they are currently separately reported. Because these dependent guidance procedures support the performance of an independent procedure and they are generally provided in the same operative session as the independent procedure, we believe that it would be appropriate to package their payment into the OPPS payment for the independent procedure performed. However, guidance services differ from some of the other categories of services that we are proposing to package for CY 2008. Hospitals sometimes may have the option of choosing whether to perform a guidance service immediately preceding or during the main independent procedure, or not at all, unlike many of the imaging supervision and interpretation services, for example, which are generally always reported when the independent procedure is performed. Once a hospital decides that guidance is appropriate, the hospital may have several options regarding the type of guidance service that can be performed. For example, when inserting a central venous access device, hospitals have the option of using no guidance, ultrasound guidance, or fluoroscopic guidance, and the selection in any specific case will depend upon the specific clinical circumstances of the device insertion procedure. In fact, the historical hospital claims data demonstrate that various guidance services for the insertion of these devices, which have historically received packaged payment under the OPPS, are used frequently for the insertion of vascular access devices. Thus, we recognize hospitals have several options regarding the performance and types of guidance services they use. However, we believe that hospitals utilize the most appropriate form of guidance for the specific procedure that is performed. [[Page 42655]] We do not want to create payment incentives to use guidance for all independent procedures or to provide one form of guidance instead of another. Therefore, by proposing to package payment for all forms of guidance, we are specifically encouraging hospitals to utilize the most cost effective and clinically advantageous method of guidance that is appropriate in each situation by providing them with the maximum flexibility associated with a single payment for the independent procedure. Similarly, hospitals may appropriately not utilize guidance services in certain situations based on clinical indications. Because guidance services can be appropriately reported in association with many independent procedures, under our proposed packaging of guidance services for CY 2008, the costs associated with guidance services would be mapped to a larger number of independent procedures than some other categories of codes that we are proposing to package. For example, CPT code 76001 (Fluoroscopy, physician time more than one hour, assisting a non-radiologic physician (e.g., nephrostolithotomy, ERCP, bronchoscopy, transbronchial biopsy)) can be reported with a wide range of services. According to the CPT code descriptor, these procedures include nephrostolithotomy, which may be reported with CPT code 50080 (Percutaneous nephrostolithotomy or pyelostolithotomy, with or without dilation, endoscopy, lithotripsy, stenting, or basket extraction; up to 2 cm), and endoscopic retrograde cholangiopancreatography, which may be reported with CPT code 43260 (Endoscopic retrograde cholangiopancreatography (ERCP); diagnostic, with or without collection of specimen(s) by brushing or washing (separate procedure)). Therefore, the cost of the fluoroscopic guidance would be reflected in the payment for each of these independent services, in addition to numerous other procedures, rather than in the payment for only one or two independent services, as is the case for some of the other categories of codes that we are proposing to package for CY 2008. In addition, because independent procedures such as CPT code 20610 (Arthrocentesis, aspiration and/or injection; major joint or bursa (e.g., shoulder, hip, knee joint, subacromial bursa)) may be reported with or without guidance, the cost for the guidance will be reflected in the median cost for the independent procedure as a function of the frequency that guidance is reported with that procedure. As we stated previously, the median cost for a particular independent procedure generally will be higher as a result of added packaging, but also could change little or be lower because median costs typically do not reflect small distributional changes and because changes to the packaged HCPCS codes affect both the number and composition of single bills and the mix of hospitals contributing those single bills. In fact, the CY 2007 CPT book indicates that if guidance is performed with CPT code 20610, it may be appropriate to bill CPT code 76942 (Ultrasonic guidance for needle placement (e.g. biopsy, aspiration, injection, localization device), imaging supervision and interpretation); 77002 (Fluoroscopic guidance for needle placement (e.g. biopsy, aspiration, injection, localization device)); 77012 (Computed tomography guidance for needle placement (e.g. biopsy, aspiration, injection, localization device), radiological supervision and interpretation); or 77021 (Magnetic resonance guidance for needle placement (e.g., for biopsy, needle aspiration, injection, or placement of localization device) radiological supervision and interpretation). The CY 2007 CPT book also implies that it is not always clinically necessary to use guidance in performing an arthrocentesis described by CPT code 20610. The guidance procedures that we are proposing to package for CY 2008 vary in their resource costs. Resource cost was not a factor we considered when proposing to package guidance procedures. Notably, most of the guidance procedures are relatively low cost in comparison to the independent services they frequently accompany. The codes we are proposing to identify as guidance codes for CY 2008 that would receive packaged payment are listed in Table 8 below. Several of these codes, including CPT code 76937 (Ultrasound guidance for vascular access requiring ultrasound evaluation of potential access sites, documentation of selected vessel patency, concurrent realtime ultrasound visualization of vascular needle entry, with permanent recording and reporting (List separately in addition to code for primary procedure)), are already unconditionally (that is, always) packaged under the CY 2007 OPPS, where they have been assigned to status indicator ``N.'' Payment for these services is currently made as part of the payment for the separately payable, independent services with which they are billed. No separate payment is made for services that we have assigned to status indicator ``N.'' We are not proposing status indicator changes for the five guidance procedures that were unconditionally packaged for CY 2007. We are proposing to change the status indicators for 31 guidance procedures from separately paid to unconditionally packaged (status indicator ``N'') for the CY 2008 OPPS. We believe that these services are always integral to and dependent upon the independent services that they support and, therefore, their payment would be appropriately packaged because they would generally be performed on the same date and in the same hospital as the independent services. We are proposing to change the status indicator for 1 guidance procedure from separately paid to conditionally packaged (status indicator ``Q''), and we will treat it as a ``special'' packaged code for the CY 2008 OPPS, specifically, CPT code 76000 (Fluoroscopy (separate procedure), up to 1 hour physician time, other than 71023 or 71034 (e.g. cardiac fluoroscopy)). This code was discussed in the past with the Packaging Subcommittee of the APC Panel which determined that, consistent with its code descriptor as a separate procedure, this procedure could sometimes be provided alone, without any other services on the claim. We believe that this procedure would usually be provided by a hospital as guidance in conjunction with another significant independent procedure on the same date of service but may occasionally be provided without another independent service. As a ``special'' packaged code, if the fluoroscopy service were billed without any other service assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X'' reported on the same date of service, under our proposal we would not treat the fluoroscopy procedure as a dependent service for purposes of payment. If we were to unconditionally package payment for this procedure, treating it as a dependent service, hospitals would receive no payment at all when providing this service alone, although the procedure would not be functioning as a guidance service in that case. However, according to our proposal, its conditionally packaged status with its designation as a ``special'' packaged code would allow payment to be provided for this ``Q'' status fluoroscopy procedure, in which case it would be treated as an independent service under these limited circumstances. On the other hand, when the fluoroscopy service is furnished as a guidance procedure on the same day and in the same hospital as independent, separately paid services that are assigned to status indicator ``S,'' [[Page 42656]] ``T,'' ``V,'' or ``X,'' we are proposing to package payment for it as a dependent service. In all cases, we are proposing that hospitals that furnish independent services on the same date as dependent guidance services must bill them all on the same claim. We believe that when dependent guidance services and independent services are furnished on the same date and in the same facility, they are part of a single complete hospital outpatient service that is reported with more than one HCPCS code, and no separate payment should be made for the guidance service which supports the independent service. We have calculated the median costs on which the proposed CY 2008 payment rates are based using the packaging status of each code as provided in Table 8 below. As we discussed earlier in more detail, this has the effect of both changing the median cost for the independent service into which the cost of the dependent service is packaged and also of redistributing payment that would otherwise have been made separately for the service we are proposing to newly package for CY 2008. For example, CPT code 76940 (Ultrasound guidance for, and monitoring of, parenchymal tissue ablation) is assigned to APC 0268 (Level I Ultrasound Guidance Procedures) for CY 2007. We are proposing to discontinue APC 0268 for CY 2008 and to provide packaged payment for the HCPCS codes that were previously assigned to APC 0268. CPT code 76940 was billed with CPT code 47382 (Ablation, one or more liver tumor(s), percutaneous, radiofrequency) 148 times in the CY 2008 OPPS proposed rule claims data, and 42 percent of the claims for CPT code 76940 reported CPT code 47382 on the same date of service. Similarly, we note that almost 19 percent of the claims for CPT code 47382 also reported the ultrasound guidance service described by CPT code 76940. Under our proposed policy for the CY 2008 OPPS, we are proposing to expand the packaging associated with CPT code 47382 so that payment for the ultrasound guidance, if performed, would be packaged into the payment for the liver tumor ablation. Specifically, we would package payment for CPT code 76940 so that under the CY 2008 OPPS, the dependent procedure, in this case ultrasound guidance, would receive packaged payment through the separate OPPS payment for the independent procedure, in this case, the liver tumor ablation. The payment rates for this example associated with our CY 2008 proposal are outlined in Table 7 below. In this case, the proposed CY 2008 median cost for APC 0423 (Level II Percutaneous Abdominal and Biliary Procedures) to which CPT code 47382 is assigned is $2,775.33, while the CY 2007 median cost of APC 0423 is $2,283.08 and of APC 0268 is $72.61. However, as discussed in section II.A.4.c. of this proposed rule concerning our general proposed packaging approach, the added effect of the budget neutrality adjustment that would result from the aggregate effects of the CY 2008 packaging proposal (were there no further budget neutrality adjustment for other reasons) significantly changes the final payment rates relative to median cost estimates. Table 7 presents a comparison of the CY 2007 payment for CPT codes 47382 and 76940, where CPT code 76940 is paid separately, to the CY 2008 payment we are proposing for CPT codes 47382 and 76940, where payment for CPT code 76940 would be packaged. This example cannot demonstrate the overall impact of packaging guidance services on payment to any given hospital because each individual hospital's case-mix and billing patterns would be different. The overall impact of packaging payment for CPT code 76940, as well as all the other proposed packaging changes we are proposing for CY 2008, can only be assessed in the aggregate for classes of hospitals. Section XXII.B. of this proposed rule displays the overall impact of APC weight recalibration and packaging changes we are proposing by classes of hospitals, and the OPPS Hospital-Specific Impacts--Provider-Specific Data file presents our estimates of CY 2008 hospital payment for those hospitals we include in our ratesetting and payment simulation database. The hospital-specific impacts file can be found on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/ under supporting documentation for this proposed rule. Table 7.--Example of the Effects of the CY 2008 Packaging Proposal on Payment for CPT Codes 76940 and 47382 ---------------------------------------------------------------------------------------------------------------- Sum of CY 2007 Sum of CY 2008 payment (76940 proposed HCPCS code Short descriptor paid payment (76940 separately) packaged) ---------------------------------------------------------------------------------------------------------------- 76940..................................... Us guide, tissue ablation spine $73.04 $0.00 (dependent service). 47382..................................... Percut ablate liver rf (independent 2,296.47 2,810.08 service). ------------------------------- Total Payment......................... .................................... 2,369.51 2,810.08 ---------------------------------------------------------------------------------------------------------------- The estimated overall impact of these changes presented in section XXII.B. of this proposed rule is based on the assumption that hospital behavior would not change with regard to when these dependent services are performed on the same date and by the same hospital that performs the independent services. To the extent that hospitals could change their behavior and perform the guidance services more or less frequently, on subsequent dates, or at settings outside of the hospital, the data would show such a change in practice in future years and that change would be reflected in future budget neutrality adjustments. However, with respect to guidance services in particular, we believe that hospitals are limited in the extent to which they could change their behavior with regard to how they furnish these services. By their definition, these guidance services generally must be furnished on the same date and at the same operative location as the independent procedure in order for the guidance service to meaningfully contribute to the treatment of the patient in directing the performance of the independent procedure. We do not believe the clinical characteristics of the guidance services reported with the guidance HCPCS codes listed in Table 8 below will change in the immediate future. As we indicated earlier, in all cases we are proposing that hospitals that furnish the guidance service on the same date as the independent service [[Page 42657]] must bill both services on the same claim. We expect to carefully monitor any changes in billing practices on a service-specific and hospital-specific basis to determine whether there is reason to request that Quality Improvement Organizations (QIOs) review the quality of care furnished or to request that Program Safeguard Contractors review the claims against the medical record. Table 8.--Guidance HCPCS Codes Proposed for Packaged Payment in CY 2008 ---------------------------------------------------------------------------------------------------------------- Inactive HCPCS Code effective 1/1/2008 or Proposed Proposed earlier Short HCPCS code Short descriptor CY 2007 CY 2007 CY 2008 CY 2008 (listed on the descriptor of SI APC SI APC same line as the inactive its HCPCS code replacement code) ---------------------------------------------------------------------------------------------------------------- 19295............ Place breast S 0657 N n/a clip, precut. 61795............ Brain surgery S 0302 N n/a using computer. 62160............ Neuroendoscopy T 0122 N n/a add-on. 76000............ Fluoroscope X 0272 Q 0272 examination. 76001............ Fluoroscope N n/a N n/a exam, extensive. 76930............ Echo guide, S 0268 N n/a cardiocentesis. 76932............ Echo guide for S 0309 N n/a heart biopsy. 76936............ Echo guide for S 0309 N n/a artery repair. 76937............ Us guide, N n/a N n/a vascular access. 76940............ Us guide, tissue S 0268 N n/a ablation. 76941............ Echo guide for S 0268 N n/a transfusion. 76942............ Echo guide for S 0268 N n/a biopsy. 76945............ Echo guide, S 0268 N n/a villus sampling. 76946............ Echo guide for S 0268 N n/a amniocentesis. 76948............ Echo guide, ova S 0309 N n/a aspiration. 76950............ Echo guidance S 0268 N n/a radiotherapy. 76965............ Echo guidance S 0308 N n/a radiotherapy. 76975............ GI endoscopic S 0266 N n/a ultrasound. 76998............ Us guide, S 0266 N n/a 76986 Ultrasound intraop. guide intraoper. 77001............ Fluoro guide for N n/a N n/a 75998 Fluoro guide vein device. for vein device. 77002............ Needle N n/a N n/a 76003 Needle localization by localization xray. by xray. 77003............ Fluoroguide for N n/a N n/a 76005 Fluoroguide for spine inject. spine inject. 77011............ Ct scan for S 0283 N n/a 76355 Ct scan for localization. localization. 77012............ Ct scan for S 0283 N n/a 76360 Ct scan for needle biopsy. needle biopsy. 77013............ Ct guide for S 0333 N n/a 76362 Ct guide for tissue ablation. tissue ablation. 77014............ Ct scan for S 0282 N n/a 76370 Ct scan for therapy guide. therapy guide. 77021............ Mr guidance for S 0335 N n/a 76393 Mr guidance for needle place. needle place. 77022............ Mri for tissue S 0335 N n/a 76394 Mri for tissue ablation. ablation. 77031............ Stereotact guide X 0264 N n/a 76095 Stereotactic for brst bx. breast biopsy. 77032............ Guidance for X 0263 N n/a needle, breast. 77417............ Radiology port X 0260 N n/a film(s). 77421............ Stereoscopic x- S 0257 N n/a ray guidance. 95873............ Guide nerv S 0215 N n/a destr, elec stim. 95874............ Guide nerv S 0215 N n/a destr, needle emg. 0054T............ Bone surgery S 0302 N n/a using computer. 0055T............ Bone surgery S 0302 N n/a using computer. 0056T............ Bone surgery S 0302 N n/a using computer. ---------------------------------------------------------------------------------------------------------------- (2) Image Processing Services We are proposing to package payment for ``image processing'' HCPCS codes for CY 2008, specifically those codes that are reported as supportive dependent services to process and integrate diagnostic test data in the development of images, performed concurrently or after the independent service is complete. We performed a broad search for such services, relying upon the AMA's CY 2007 book of CPT codes and the CY 2007 book of Level II HCPCS codes, which identified specific codes as ``processing'' codes. In addition, we performed a clinical review of all HCPCS codes to capture additional codes that we consider to be image processing. For example, we are proposing to package payment for CPT code 93325 (Doppler echocardiography color flow velocity mapping (List separately in addition to codes for echocardiography)) because it is an image processing procedure, even though the code descriptor does not specifically indicate it as such. An image processing service processes and integrates diagnostic test data that were captured during another independent procedure, usually one that is separately payable under the OPPS. The image processing service is not necessarily provided on the same date of service as the independent procedure. In fact, several of the image processing services that we are proposing to package for CY 2008 do not need to be provided face-to-face with the patient in the same encounter as the independent service. While this approach to service delivery may be administratively advantageous from a hospital's perspective, providing separate payment for each image processing service whenever it is performed is not consistent with encouraging value-based purchasing under the OPPS. We believe it is important to package payment for supportive dependent services that accompany independent services but that may not need to be provided face-to-face with the patient in the same [[Page 42658]] encounter because the supportive services utilize data that were collected during the preceding independent services and packaging their payment encourages the most efficient use of hospital resources. We are particularly concerned with any continuance of current OPPS payment policies that could encourage certain inefficient and more costly service patterns. As stated above, packaging encourages hospitals to establish protocols that ensure that services are furnished only when they are medically necessary and to carefully scrutinize the services ordered by practitioners to minimize unnecessary use of hospital resources. Our standard methodology to calculate median costs packages the costs of dependent services with the costs of independent services on ``natural'' single claims across different dates of service, so we are confident that we would capture the costs of the supportive image processing services for ratesetting when they are packaged according to our CY 2008 proposal, even if they were provided on a different date than the independent procedure. We list the image processing services that would be packaged for CY 2008 in Table 10 below. As these services support the performance of an independent service, we believe it would be appropriate to package their payment into the OPPS payment for the independent service provided. As many independent services may be reported with or without image processing services, the cost of the image processing services will be reflected in the median cost for the independent HCPCS code as a function of the frequency that image processing services are reported with that particular HCPCS code. Again, while the median cost for a particular independent procedure generally will be higher as a result of added packaging, it could also change little or be lower because median costs typically do not reflect small distributional changes and because changes to the packaged HCPCS codes affect both the number and composition of single bills and the mix of hospitals contributing those single bills. For example, CPT code 70450 (Computed tomography, head or brain; without contrast material) may be provided alone or in conjunction with CPT code 76376 (3D rendering with interpretation and reporting of computed tomography, magnetic resource imaging, ultrasound, or other tomographic modality; not requiring image postprocessing on an independent workstation). In fact, CPT code 70450 was provided approximately 1.5 million times based on CY 2008 proposed rule claims data. CPT code 76376 was provided with CPT code 70450 less than 2 percent of the total instances that CPT code 70450 was billed. Therefore, as the frequency of CPT code 76376 provided in conjunction with CPT code 70450 increases, the median cost for CPT code 70450 would be more likely to reflect that additional cost. The image processing services that we are proposing to package vary in their hospital resource costs. Resource cost was not a factor we considered when proposing to package supportive image processing services. Notably, the majority of image processing services that we are proposing to package have modest median costs in relationship to the cost of the independent service that they typically accompany. Several of these codes, including CPT code 76350 (Subtraction in conjunction with contrast studies), are already unconditionally (that is, always) packaged under the CY 2007 OPPS, where they have been assigned to status indicator ``N.'' Payment for these services is made as part of the payment for the separately payable, independent services with which they are billed. No separate payment is made for services that we have assigned to status indicator ``N.'' We are not proposing status indicator changes for the four image processing services that were unconditionally packaged for CY 2007. We are proposing to change the status indicator for seven image processing services from separately paid to unconditionally packaged (status indicator ``N'') for the CY 2008 OPPS. We believe that these services are always integral to and dependent upon the independent service that they support and, therefore, their payment would be appropriately packaged. We have calculated the median costs on which the proposed CY 2008 payment rates are based using the packaging status of each code as provided in Table 10 below. As we discuss above in more detail, this has the effect of both changing the median cost for the independent service into which the cost of the dependent service is packaged and also of redistributing payment that would otherwise have been made separately for the service we are proposing to newly package for CY 2008. For example, CPT code 93325 (Doppler echocardiography color flow velocity mapping (List separately in addition to codes for echocardiography)) is assigned to APC 0697 (Level I Echocardiogram Except Transesophageal) for CY 2007. The proposed CY 2008 median cost of APC 0697 is $302.40. CPT code 93325 was billed with CPT code 93350 (Echocardiography, transthoracic, real-time with image documentation (2D), with or without M-mode recording, during rest and cardiovascular stress test using treadmill, bicycle exercise and/or pharmacologically induced stress, with interpretation and report) approximately 43,000 times in the CY 2008 OPPS proposed rule data, and 5 percent of the claims for CPT code 93325 reported CPT code 93350 on the same date of service. Similarly, we note that almost 35 percent of the claims for CPT code 93350 also reported the image processing service described by CPT code 93325. Because CPT code 93350 is designated by CPT as an add- on code to a stress test service, as would be expected, we also observed that a CPT code for a stress test, most commonly CPT code 93017 (Cardiovascular stress test using maximal or submaximal treadmill or bicycle exercise, continuous electrocardiographic monitoring, and/or pharmacological stress; with physician supervision, with interpretation and report) was also frequently reported on the same claim on the same day as both of the other two CPT codes. CPT code 93017 is assigned to APC 0100 (Cardiac Stress Tests) with a proposed CY 2008 median cost of $180.10. Under our proposed policy for the CY 2008, we are proposing to expand the packaging associated with the independent stress test and echocardiography services so that payment for the echocardiography color flow velocity mapping, if performed, would be packaged. Specifically, we would package payment for CPT code 93325, the echocardiography color flow velocity mapping, so that this dependent procedure would receive packaged payment through the separate OPPS payments for the independent procedures, here the stress test and echocardiography services. The payment rates for this example associated with our CY 2008 proposal are outlined in Table 9 below. In this case, the proposed CY 2008 median cost for APC 0100 to which CPT code 93017 is assigned is $180.10. The proposed CY 2008 median cost for APC 0697, to which CPT code 93350 is assigned, is $302.40. The CY 2007 median cost for APC 0100 is $154.83 and the median cost for APC 0697 is $97.61. However, as discussed in section II.A.4.c. of this proposed rule concerning our general proposed packaging approach, the added effect of the budget neutrality adjustment that would result from the aggregate effects of the CY 2008 packaging proposal [[Page 42659]] (were there no further budget neutrality adjustment for other reasons) significantly changes the final payment rates relative to the median cost estimates. Table 9 presents a comparison of payments for CPT codes 93017, 93350, and 93325 in CY 2007, where payment for CPT code 93325 is made separately, to our CY 2008 proposed payments for CPT codes 93017, 93350, and 93325, where payment for CPT code 93325 would be packaged. This example cannot demonstrate the overall impact of packaging image processing services on payment to any given hospital because each individual hospital's case-mix and billing patterns would be different. The overall impact of packaging payment for CPT code 93325, as well as the proposed packaging changes that we are proposing for CY 2008, can only be assessed in the aggregate for classes of hospitals. Section XXII.B. of this proposed rule displays the overall impact of APC weight recalibration and packaging changes that we are proposing by classes of hospitals, and the OPPS Hospital-Specific Impacts--Provider-Specific Data file presents our estimates of CY 2008 hospital payment for those hospitals we include in our ratesetting and payment simulation database. The hospital-specific impacts file can be found on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/ under supporting documentation for this proposed rule. Table 9.--Example of the Effects of the CY 2008 Packaging Proposal on Payment for CPT Codes 93325, 93350, and 93017 ---------------------------------------------------------------------------------------------------------------- Sum of CY 2007 Sum of CY 2008 payment (93325 proposed HCPCS code Short descriptor paid payment (93325 separately) Packaged) ---------------------------------------------------------------------------------------------------------------- 93325..................................... Doppler color flow add-on (dependent $98.18 $0.00 service). 93350..................................... Echo transthoracic (independent 197.64 306.18 service). 93017..................................... Cardiovascular stress test 155.74 182.36 (independent service). ------------------------------- Total Payment......................... .................................... 451.56 488.54 ---------------------------------------------------------------------------------------------------------------- The estimated overall impact of these proposed changes presented in section XXII.B. of this proposed rule is based on the assumption that hospital behavior would not change with regard to how often these dependent image processing services are performed in conjunction with the independent services. To the extent that hospitals could change their behavior and perform the image processing services more or less frequently, the data would show such a change in practice in future years and that change would be reflected in future budget neutrality adjustments. As we indicated earlier, in all cases we are proposing that hospitals that furnish the image processing procedure in association with the independent service must bill both services on the same claim. We expect to carefully monitor any changes in billing practices on a service-specific and hospital-specific basis to determine whether there is reason to request that QIOs review the quality of care furnished or to request that Program Safeguard Contractors review the claims against the medical record. Table 10.--Image Processing HCPCS Codes Proposed for Packaged Payment in CY 2008 -------------------------------------------------------------------------------------------------------------------------------------------------------- Inactive CPT code effective 1/ 1/08 or earlier Short descriptor of HCPCS code Short descriptor CY 2007 SI CY 2007 APC Proposed CY 2008 SI (listed on the the inactive CPT same line as its code replacement code -------------------------------------------------------------------------------------------------------------------------------------------------------- 76125................ Cine/video x-rays X.................... 0260................. N .................... add-on. 76350................ Special x-ray N.................... n/a.................. N .................... contrast study. 76376................ 3d render w/o X.................... 0340................. N .................... postprocess. 76377................ 3d rendering w/ S.................... 0282................. N .................... postprocess. 93325................ Doppler color flow S.................... 0697................. N .................... add-on. 93613................ Electrophys map 3d, T.................... 0087................. N .................... add-on. 95957................ EEG digital analysis S.................... 0214................. N .................... 0159T................ Cad breast MRI...... N.................... n/a.................. N .................... 0174T................ Cad cxr remote...... N.................... n/a.................. N.................... 0152T Computer chest add- on. 0175T................ Cad cxr with interp. N.................... n/a.................. N.................... 0152T Computer chest add- on. G0288................ Recon, CTA for surg S.................... 0417................. N .................... plan. -------------------------------------------------------------------------------------------------------------------------------------------------------- (3) Intraoperative Services We are proposing to package payment for ``intraoperative'' HCPCS codes for CY 2008, specifically those codes that are reported for supportive dependent diagnostic testing or other minor procedures performed during independent procedures. We performed a broad search for possible intraoperative HCPCS codes, relying upon the AMA's CY 2007 book of CPT codes and the CY 2007 book of Level II HCPCS codes, to identify specific codes as ``intraoperative'' codes. Furthermore, we performed a clinical review of all HCPCS codes to capture additional supportive diagnostic testing or other minor intraoperative or intraprocedural codes that are not necessarily identified as ``intraoperative'' codes. For example, we are proposing to package payment for CPT code 95955 (Electroencephalogram (EEG) during [[Page 42660]] nonintracranial surgery (e.g., carotid surgery)) because it is a minor intraoperative diagnostic testing procedure even though the code descriptor does not indicate it as such. Although we use the term ``intraoperative'' to categorize these procedures, we also have included supportive dependent services in this group that are provided during an independent procedure, although that procedure may not necessarily be a surgical procedure. These dependent services clearly fit into this category because they are provided during, and are integral to, an independent procedure, like all the other intraoperative codes, but the independent procedure they accompany may not necessarily be a surgical procedure. For example, we are proposing to package HCPCS code G0268 (Removal of impacted cerumen (one or both ears) by physician on same date of service as audiologic function testing). While specific audiologic function testing procedures are not surgical procedures performed in an operating room, they are independent procedures that are separately payable under the OPPS, and HCPCS code G0268 is a supportive dependent service always provided in association with one of these independent services. All references to ``intraoperative'' below refer to services that are usually or always provided during a surgical procedure or other independent procedure. By definition, a service that is performed intraoperatively is provided during and, therefore, on the same date of service as another procedure that is separately payable under the OPPS. Because these intraoperative services support the performance of an independent procedure and they are provided in the same operative session as the independent procedure, we believe it would be appropriate to package their payment into the OPPS payment for the independent procedure performed. Therefore, we are not proposing to package payment for CY 2008 for those diagnostic services, such as CPT code 93005 (Electrocardiogram, routine ECG with at least 12 leads; tracing only, without interpretation and report) that are sometimes or only rarely performed and reported as supportive services in association with other independent procedures. Instead, we are proposing to include those HCPCS codes that are usually or always performed intraoperatively, based upon our review of the codes described above. The intraoperative services that we are proposing to package vary in hospital resource costs. Resource cost was not a factor we considered when determining which supportive intraoperative procedures to package. The codes we are proposing to identify as intraoperative services for CY 2008 that would receive packaged payment under the OPPS are listed in Table 12 below. Several of these codes, including CPT code 93640 (Electrophysiologic evaluation of single or dual chamber pacing cardioverter-defibrillator leads including defibrillation threshold evaluation (induction of arrhythmia, evaluation of sensing and pacing for arrhythmia termination) at the time of initial implantation or replacement), are already unconditionally (that is, always) packaged under the CY 2007 OPPS, where they have been assigned to status indicator ``N.'' Payment for these services is made through the payment for the separately payable, independent services with which they are billed. No separate payment is made for services that we have assigned to status indicator ``N.'' We are not proposing status indicator changes for the five diagnostic intraoperative services that were unconditionally packaged for CY 2007. We are proposing to change the status indicator for 34 intraoperative services from separately paid to unconditionally packaged (status indicator ``N'') for the CY 2008 OPPS. We believe that these services are always integral to and dependent upon the independent services that they support and, therefore, their payment would be appropriately packaged because they would generally be performed on the same date and in the same hospital as the independent services. We are also proposing to change the status indicator for one intraoperative procedure from unconditionally packaged to conditionally packaged (status indicator ``Q'') as a ``special'' packaged code for the CY 2008 OPPS, specifically, CPT code 0126T (Common carotid intima- media thickness (IMT) study for evaluation of atherosclerotic burden or coronary heart disease risk factor assessment). This code was discussed in the past with the Packaging Subcommittee of the APC Panel which determined that, consistent with its code descriptor as a separate procedure, this procedure could sometimes be provided alone, without any other OPPS services on the claim. We believe that this procedure would usually be provided by a hospital in conjunction with another independent procedure on the same date of service but may occasionally be provided without another independent service. As a ``special'' packaged code, if the study were billed without any other service assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X'' reported on the same date of service, under our proposal we would not treat the IMT study as a dependent service for purposes of payment. If we were to continue to unconditionally package payment for this procedure, treating it as a dependent service, hospitals would receive no payment at all when providing this service alone, although the procedure would not be functioning as an intraoperative service in that case. However, according to our proposal, its conditionally packaged status as a ``special'' packaged code would allow payment to be provided for this ``Q'' status IMT study when provided alone, in which case it would be treated as an independent service under these limited circumstances. On the other hand, when this service is furnished as an intraoperative procedure on the same day and in the same hospital as independent, separately paid services that are assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X,'' we are proposing to package payment for it as a dependent service. In all cases, we are proposing that hospitals that furnish independent services on the same date as this IMT procedure must bill them all on the same claim. We believe that when dependent and independent services are furnished on the same date and in the same facility, they are part of a single complete hospital outpatient service that is reported with more than one HCPCS code, and no separate payment should be made for the intraoperative procedure that supports the independent service. We have calculated the median costs on which the proposed CY 2008 payment rates are based using the packaging status of each code as provided in Table 12 below. As we discuss above in more detail, this has the effect of both changing the median cost for the independent service into which the cost of the dependent service is packaged and also of redistributing payment that would otherwise have been made separately for the service we are proposing to newly package for CY 2008. For example, CPT code 92547 (Use of vertical electrodes (List separately in addition to code for primary procedure)) is assigned to APC 0363 (Level I Otorhinolaryngologic Function Tests) for CY 2007. The proposed CY 2008 median cost of APC 0363 is $53.73. CPT code 92547 was billed with CPT code 92541 (Spontaneous nystagmus test, including gaze and fixation nystagmus, with recording) 6,056 times in the CY 2008 OPPS proposed rule data, and 97 [[Page 42661]] percent of the claims for CPT code 92547 reported CPT code 92541 on the same date of service. Similarly, we note that over half of the claims for CPT code 92541 also reported the service described by CPT code 92547. Under our proposed policy for the CY 2008 OPPS, we are proposing to expand the packaging associated with the independent nystagmus test so that payment for the use of vertical electrodes, if used, would be packaged. Specifically, we would package payment for CPT code 92547 so that under the CY 2008 OPPS the commonly billed dependent procedure, the use of vertical electrodes, would receive packaged payment through the separate OPPS payment for the independent procedure, in this case the nystagmus test. The payment rates for this example associated with our CY 2008 proposal are outlined in Table 11 below. In this case, the proposed CY 2008 median cost for APC 0363, to which CPT code 92541 is assigned, is $53.73, while the CY 2007 median cost of this APC with status indicator ``S'' and to which both CPT codes 92547 and 02541 are assigned is $52.09. However, as discussed in the section II.A.4. of this proposed rule concerning our general proposed packaging approach, the added effect of the budget neutrality adjustment that would result from the aggregate effects of the complete CY 2008 packaging proposal (were there no further budget neutrality adjustment for other reasons) significantly changes the final payment rates relative to median cost estimates. Table 11 presents a comparison of payment for CPT codes 92541 and 92547 in CY 2007, where CPT code 92547 is paid separately, to our CY 2008 proposed payment for CPT codes 92541 and 92547, where payment for CPT code 92547 would be packaged. This example cannot demonstrate the overall impact of packaging intraoperative services on payment to any given hospital because each individual hospital's case-mix and billing patterns would be different. The overall impact of packaging payment for CPT code 92547, as well as all other packaging changes we are proposing for CY 2008, can only be assessed in the aggregate for classes of hospitals. Section XXII.B. of this proposed rule displays the overall impact of APC weight recalibration and packaging changes we are proposing by classes of hospitals, and the OPPS Hospital-Specific Impacts--Provider-Specific Data file presents our estimates of CY 2008 hospital payment for those hospitals we include in our ratesetting and payment simulation database. The hospital-specific impacts file can be found on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/ under supporting documentation for this proposed rule. Table 11.-- Example of the Effects of the CY 2008 Packaging Proposal on Payment for CPT Codes 92541 and 92547 ---------------------------------------------------------------------------------------------------------------- Sum of CY 2007 Sum of CY 2008 payment (92547 proposed HCPCS Code Short descriptor paid payment (92547 separately) packaged) ---------------------------------------------------------------------------------------------------------------- 92541..................................... Spontaneous nystagmus study $52.40 $54.41 (independent service). 92547..................................... Supplemental electrical test 52.40 0.00 (dependent service). --------------------------------------------------------------------- Total Payment............................................................... 104.80 54.41 ---------------------------------------------------------------------------------------------------------------- The estimated overall impact of these proposed changes is based on the assumption that hospital behavior would not change with regard to when these dependent intraoperative services are performed on the same date and by the same hospital that performs the independent services. To the extent that hospitals could change their behavior and perform the intraoperative services more or less frequently, on subsequent dates, or at settings outside of the hospital, the data would show such a change in practice in future years and that change would be reflected in future budget neutrality adjustments. However, with respect to intraoperative services in particular, we believe that hospitals are limited in the extent to which they could change their behavior with regard to how they furnish these services. By their definition, these intraoperative services generally must be furnished on the same date and at the same operative location as the independent procedure in order to be considered intraoperative. For these codes, we assume that both the dependent and independent services would be furnished on the same date in the same hospital, and hospitals should bill them on the same claim with the same date of service. As we indicated earlier, in all cases we are proposing that hospitals that furnish the intraoperative procedure on the same date as the independent service must bill both services on the same claim. We expect to carefully monitor any changes in billing practices on a service-specific and hospital-specific basis to determine whether there is reason to request that QIOs review the quality of care furnished or to request that Program Safeguard Contractors review the claims against the medical record. Table 12.--Intraoperative HCPCS Codes Proposed for Packaged Payment in CY 2008 ---------------------------------------------------------------------------------------------------------------- HCPCS Code Short descriptor CY 2007 SI CY 2007 APC Proposed CY 2008 SI ---------------------------------------------------------------------------------------------------------------- 20975.................. Electrical bone X...................... 0340 N stimulation. 31620.................. Endobronchial us add- S...................... 0670 N on. 37250.................. Iv us first vessel add- S...................... 0416 N on. 37251.................. Iv us each add vessel S...................... 0416 N add-on. 58110.................. Bx done w/colposcopy T...................... 0188 N add-on. 67299.................. Eye surgery procedure. T...................... 0235 N 73530.................. X-ray exam of hip..... X...................... 0261 N 74300.................. X-ray bile ducts/ X...................... 0263 N pancreas. [[Page 42662]] 74301.................. X-rays at surgery add- X...................... 0263 N on. 75898.................. Follow-up angiography. X...................... 0263 N 78020.................. Thyroid met uptake.... S...................... 0399 N 78478.................. Heart wall motion add- S...................... 0399 N on. 78480.................. Heart function add-on. S...................... 0399 N 78496.................. Heart first pass add- S...................... 0399 N on. 92547.................. Supplemental X...................... 0363 N electrical test. 92978.................. Intravasc us, heart S...................... 0670 N add-on. 92979.................. Intravasc us, heart S...................... 0416 N add-on. 93320.................. Doppler echo exam, S...................... 0697 N heart. 93321.................. Doppler echo exam, S...................... 0697 N heart. 93571.................. Heart flow reserve S...................... 0670 N measure. 93572.................. Heart flow reserve S...................... 0416 N measure. 93609.................. Map tachycardia, add- T...................... 0087 N on. 93613.................. Electrophys map 3d, T...................... 0087 N add-on. 93621.................. Electrophysiology T...................... 0085 N evaluation. 93622.................. Electrophysiology T...................... 0085 N evaluation. 93623.................. Stimulation, pacing T...................... 0087 N heart. 93631.................. Heart pacing, mapping. T...................... 0087 N 93640.................. Evaluation heart N...................... n/a N device. 93641.................. Electrophysiology N...................... n/a N evaluation. 93662.................. Intracardiac ecg (ice) S...................... 0670 N 95829.................. Surgery S...................... 0214 N electrocorticogram. 95920.................. Intraop nerve test add- S...................... 0216 N on. 95955.................. EEG during surgery.... S...................... 0213 N 95999.................. Neurological procedure S...................... 0215 N 96020.................. Functional brain X...................... 0373 N mapping. 0126T.................. Chd risk imt study.... N...................... n/a Q 0173T.................. Iop monit io pressure. N...................... n/a N G0268.................. Removal of impacted X...................... 0340 N wax md. G0275.................. Renal angio, cardiac N...................... n/a N cath. G0278.................. Iliac art angio, N...................... n/a N cardiac cath. ---------------------------------------------------------------------------------------------------------------- (4) Imaging Supervision and Interpretation Services We are proposing to change the packaging status of many imaging supervision and interpretation codes for CY 2008. We define ``imaging supervision and interpretation codes'' as HCPCS codes for services that are defined as ``radiological supervision and interpretation'' in the radiology series, 70000 through 79999, of the AMA's CY 2007 book of CPT codes, with the addition of some services in other code ranges of CPT, Category III CPT tracking codes, or Level II HCPCS codes that are clinically similar or directly crosswalk to codes defined as radiological supervision and interpretation services in the CPT radiology range. We also included HCPCS codes that existed in CY 2006 but were deleted and were replaced in CY 2007. We included the CY 2006 HCPCS codes because we are proposing to use the CY 2006 claims data to calculate the CY 2008 OPPS median costs on which the CY 2008 payment rates would be based. In its discussion of ``radiological supervision and interpretation,'' CPT indicates that ``when a procedure is performed by two physicians, the radiologic portion of the procedure is designated as `radiological supervision and interpretation'.'' In addition, CPT guidance notes that, ``When a physician performs both the procedure and provides imaging supervision and interpretation, a combination of procedure codes outside the 70000 series and imaging supervision and interpretation codes are to be used.'' In the hospital outpatient setting, the concept of one or more than one physician performing related procedures does not apply to the reporting of these codes, but the radiological supervision and interpretation codes clearly are established for reporting in association with other procedural services outside the CPT 70000 series. Because these imaging supervision and interpretation codes are always reported for imaging services that support the performance of an independent procedure and they are, by definition, always provided in the same operative session as the independent procedure, we believe that it would be appropriate to package their payment into the OPPS payment for the independent procedure performed. In addition to radiological supervision and interpretation codes in the radiology range of CPT codes, there are CPT codes in other series that describe similar procedures that we are proposing to include in the group of imaging supervision and interpretation codes proposed for packaging under the CY 2008 OPPS. For example, CPT code 93555 (Imaging supervision, interpretation and report for injection procedure(s) during cardiac catheterization; ventricular and/or atrial angiography) whose payment under the OPPS is currently packaged, is commonly reported with an injection procedure code, such as CPT code 93543 (Injection procedure during cardiac catheterization; for selective left ventricular or left atrial angiography), whose payment is also currently packaged under the OPPS, and a cardiac catheterization procedure code, such as CPT code 93526 (Combined right heart catheterization and retrograde left heart catheterization), that is separately paid. In the case of cardiac catheterization, CPT code 93555 describes an imaging supervision and interpretation service in support of the cardiac catheterization procedure, and this dependent service is clinically quite similar to radiological supervision and interpretation codes in the radiology range of CPT. Payment for the cardiac catheterization imaging [[Page 42663]] supervision and interpretation services has been packaged since the beginning of the OPPS. Therefore, in developing this proposal for the CY 2008 proposed rule, we conducted a comprehensive clinical review of all Category I and Category III CPT codes and Level II HCPCS codes to identify all codes that describe imaging supervision and interpretation services. The codes we are proposing to identify as imaging supervision and interpretation codes for CY 2008 that would receive packaged payment are listed in Table 14 below. Several of these codes, including CPT code 93555 discussed above, are already unconditionally (that is, always) packaged under the CY 2007 OPPS, where they have been assigned to status indicator ``N.'' Payment for these services is made as part of the payment for the separately payable, independent services with which they are billed. No separate payment is made for services that we have assigned to status indicator ``N.'' We are not proposing status indicator changes for the six imaging supervision and interpretation services that were unconditionally packaged for CY 2007. We are proposing to change the status indicator for 33 imaging supervision and interpretation services from separately paid to unconditionally packaged (status indicator ``N'') for the CY 2008 OPPS. We believe that these services are always integral to and dependent upon the independent services that they support and, therefore, their payment would be appropriately packaged because they would generally be performed on the same date and in the same hospital as the independent services. We are proposing to change the status indicator for 93 imaging supervision and interpretation services from separately paid to conditionally packaged (status indicator ``Q'') as ``special'' packaged codes for the CY 2008 OPPS. These services may occasionally be provided at the same time and at the same hospital with one or more other procedures for which payment is currently packaged under the OPPS, most commonly injection procedures, and in these cases we would not treat the imaging supervision and interpretation services as dependent services for purposes of payment. If we were to unconditionally package payment for these imaging supervision and interpretation services as dependent services, hospitals would receive no payment at all for providing the imaging supervision and interpretation service and the other minor procedure(s). However, according to our proposal, their conditional packaging status as ``special'' packaged codes would allow payment to be provided for these ``Q'' status imaging supervision and interpretation services as independent services in these limited circumstances, and for which payment for the accompanying minor procedure would be packaged. However, when these imaging supervision and interpretation dependent services are furnished on the same day and in the same hospital as independent separately paid services, specifically, any service assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X,'' we are proposing to package payment for them as dependent services. In all cases, we are proposing that hospitals that furnish the independent services on the same date as the dependent services must bill them all on the same claim. We believe that when the dependent and independent services are furnished on the same date and in the same hospital, they are part of a single complete hospital outpatient service that is reported with more than one HCPCS code, and no separate payment should be made for the imaging supervision and interpretation service that supports the independent service. In the case of services for which we are proposing conditional packaging, we would expect that, although these services would always be performed in the same session as another procedure, in some cases that other procedure's payment would also be packaged. For example, CPT code 73525 (Radiological examination, hip, arthrography, radiological supervision and interpretation) and CPT code 27093 (Injection procedure for hip arthrography; without anesthesia) could be provided in a single hospital outpatient encounter and reported as the only two services on a claim. In the case where only these two services were performed, the conditionally packaged status of CPT code 73525 would appropriately allow for its separate payment as an independent imaging supervision and interpretation arthrography service, into which payment for the dependent injection procedure would be packaged. We have calculated the median costs on which the proposed CY 2008 payment rates are based using the packaging status of each code as provided in Table 14 below. As we discuss above in more detail, this has the effect of both changing the median cost for the independent service into which the cost of the dependent service is packaged and also of redistributing payment that would otherwise have been made separately for the service we are proposing to newly package for CY 2008. For example, CPT code 72265 (Myelography, lumbosacral, radiological supervision and interpretation) is assigned to APC 0274 (Myelography) for CY 2007. The proposed CY 2008 median cost of APC 0274 is $245.38. CPT code 72265 was billed with CPT code 72132 (Computed tomography, lumbar spine; with contrast material) 20,233 times in the CY 2008 OPPS proposed rule data, and 62 percent of the claims for CPT code 72265 reported CPT code 72132 on the same date of service. Similarly, we note that over half of the claims for CPT code 72132 also reported the myelography service described by CPT code 72265. As would be expected, we also observed that a CPT code for the clinically necessary intrathecal injection, specifically CPT code 62284 (Injection procedure for myelography and/or computed tomography, spinal (other than C1-C2 and posterior fossa)) was also frequently reported on the same claim on the same day as both of the other two CPT codes. Payment for CPT code 62284 is already packaged under the OPPS for CY 2007, as is payment for most HCPCS codes that describe dependent injection procedures that accompany independent procedures. Under our proposed policy for the CY 2008 OPPS, we are proposing to expand the packaging associated with the independent spinal computed tomography (CT) scan so that payment for both the associated injection procedure and the related myelography service, if performed, would be packaged. Specifically, we would package payment for CPT code 72265 when it appears on the same claim with a separately paid service such as CPT code 72132, so that, under the CY 2008 OPPS, both commonly billed dependent procedures, the injection procedure and the myelography service, would receive packaged payment through the separate OPPS payment for the independent procedure, the CT scan. The payment rates for this example associated with our CY 2008 proposal are outlined in Table 13 below. The proposed conditionally packaged status for CPT code 72265 would ensure that if lumbosacral myelography was performed alone, separate payment for the myelography service would be made under the OPPS as the myelography service would not be a dependent service in that situation. The proposed policy would result in no separate payment for CPT code 72265 when it is billed on the same day and by the same hospital as any separately paid service, such as CPT code 72132. Moreover, as discussed [[Page 42664]] later in this section, the proposed policy would provide packaged payment for the contrast agent that is required to perform the independent computed tomography service. For purposes of the example in Table 13 below, we include the payment for HCPCS code Q9947 (Low osmolar contrast material 200-249 mg/ml iodine concentration, per ml) which was reported on about one-third of the CY 2008 proposed rule claims for CPT code 72132. To calculate the CY 2007 payment for the contrast agent, we multiplied the mean number of units per day from our CY 2008 proposed rule data (48.3) by the April 2007 per unit payment rate for HCPCS code Q9947 ($1.33). In this case, the proposed CY 2008 median cost for APC 0316 (Level II Computed Tomography with Contrast) to which CPT code 72132 is assigned is $741.80. The CY 2007 median cost for APC 0283 to which CPT code 72132 is assigned is $249.48 and the median cost of APC 0274 to which CPT code 72265 is assigned is $156.10. However, as discussed in section II.A.4.c. of this proposed rule concerning our general proposed packaging approach, the added effect of the budget neutrality adjustment that would result from the aggregate effects of the CY 2008 packaging proposal (were there no further budget neutrality adjustment for other reasons) significantly changes the final payment rates relative to median cost estimates. Table 13 presents a comparison of payment for CPT codes 72132 and 72265 and HCPCS code Q9947 in CY 2007, where CPT code 72265 and HCPCS code Q9947 are paid separately, to our CY 2008 proposed payment for CPT codes 72132 and 77265 and HCPCS code Q9947, where payment for CPT code 72265 and HCPCS code Q9947 would be packaged. This example cannot demonstrate the overall impact of packaging imaging supervision and interpretation services on payment to any given hospital because each individual hospital's case-mix and billing patterns would be different. The overall impact of packaging payment CPT code 77265 when it appears with any other separately paid service, as well as all other packaging changes that we are proposing for CY 2008, can only be assessed in aggregate for classes of hospitals. Section XXII.B. of this proposed rule displays the overall impact of APC weight recalibration and packaging changes we are proposing by classes of hospitals, and the OPPS Hospital-Specific Impacts--Provider-Specific Data file presents our estimates of CY 2008 hospital payment for those hospitals we include in our ratesetting and payment simulation database. The hospital-specific impacts file can be found on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/ under supporting documentation for this proposed rule. Table 13.--Example of the Effects of the CY 2008 Packaging Proposal on Payment for CPT Codes 72265 and 72132 and HCPCS Code Q9947 ---------------------------------------------------------------------------------------------------------------- Sum of CY 2007 Sum of CY 2008 payment (72265 proposed HCPCS code Short descriptor paid payment (72265 separately) packaged) ---------------------------------------------------------------------------------------------------------------- 62284...................................... Injection for myelogram (dependent $0.00 $0.00 service). Q9947*..................................... LOCM 200-249mg/ml iodine, 1ml 64.24 0.00 (dependent service). 72265...................................... Contrast x-ray lower spine 157.01 0.00 (dependent service). 72132...................................... CT lumbar spine w/dye (independent 250.94 751.09 service). ------------------------------- Total Payment.......................... ................................... 472.14 751.09 ---------------------------------------------------------------------------------------------------------------- * Based on the mean number of units per day from our CY 2008 proposed rule data (48.3) and the April 2007 per unit payment rate for Q9947 ($1.33). The estimated overall impact of these changes presented in XXII.B. of this proposed rule is based on the assumption that hospital behavior would not change with regard to when these dependent services are performed on the same date and by the same hospital that performs the independent services. To the extent that hospitals could change their behavior and perform the imaging supervision and interpretation services more or less frequently, on subsequent dates, or at settings outside of the hospital, the data would show such a change in practice in future years and that change would be reflected in future budget neutrality adjustments. However, with respect to the imaging supervision and interpretation services in particular, we believe that hospitals are limited in the extent to which they could change their behavior with regard to how they furnish these services. By their definition, these imaging and supervision services generally must be furnished on the same date and at the same operative location as the independent procedure in order for the imaging service to meaningfully contribute to the diagnosis or treatment of the patient. For those radiological supervision and interpretation codes in the radiology range of CPT in particular, if the same physician is able to perform both the procedure and the supervision and interpretation as stated by CPT, we assume that both the dependent and independent services would be furnished on the same date in the same hospital, and hospitals should bill them on the same claim with the same date of service. As we indicated earlier in this section, in all cases we are proposing that hospitals that furnish the imaging supervision and interpretation service on the same date as the independent service must bill both services on the same claim. We expect to carefully monitor any changes in billing practices on a service-specific and hospital- specific basis to determine whether there is reason to request that QIOs review the quality of care furnished or to request that Program Safeguard Contractors review the claims against the medical record. [[Page 42665]] Table 14.--Imaging Supervision and Interpretation HCPCS Codes Proposed for Packaged Payment in CY 2008 -------------------------------------------------------------------------------------------------------------------------------------------------------- Inactive CPT code effective 1/ 1/2008 or Proposed CY 2008 Proposed CY earlier Short descriptor of the HCPCS code Short descriptor CY 2007 SI CY 2007 APC SI 2008 APC (listed on inactive CPT code the same line as its replacement code) -------------------------------------------------------------------------------------------------------------------------------------------------------- 70010............ Contrast x-ray of brain. S................ 0274 Q................ 0274 70015............ Contrast x-ray of brain. S................ 0274 Q................ 0274 70170............ X-ray exam of tear duct. X................ 0264 Q................ 0264 70332............ X-ray exam of jaw joint. S................ 0275 Q................ 0275 70373............ Contrast x-ray of larynx X................ 0263 Q................ 0263 70390............ X-ray exam of salivary X................ 0263 Q................ 0263 duct. 71040............ Contrast x-ray of X................ 0263 Q................ 0263 bronchi. 71060............ Contrast x-ray of X................ 0263 Q................ 0263 bronchi. 71090............ X-ray & pacemaker X................ 0272 N................ n/a insertion. 72240............ Contrast x-ray of neck S................ 0274 Q................ 0274 spine. 72255............ Contrast x-ray, thorax S................ 0274 Q................ 0274 spine. 72265............ Contrast x-ray, lower S................ 0274 Q................ 0274 spine. 72270............ Contrast x-ray, spine... S................ 0274 Q................ 0274 72275............ Epidurography........... S................ 0274 N................ n/a 72285............ X-ray c/t spine disk.... S................ 0388 Q................ 0388 72291............ Perq vertebroplasty, S................ 0274 N................ n/a 76012 Perq vertebroplasty, fluor. fluor. 72292............ Perq vertebroplasty, ct. S................ 0274 N................ n/a 76013 Perq vertebroplasty, ct. 72295............ X-ray of lower spine S................ 0388 Q................ 0388 disk. 73040............ Contrast x-ray of S................ 0275 Q................ 0275 shoulder. 73085............ Contrast x-ray of elbow. S................ 0275 Q................ 0275 73115............ Contrast x-ray of wrist. S................ 0275 Q................ 0275 73525............ Contrast x-ray of hip... S................ 0275 Q................ 0275 73542............ X-ray exam, sacroiliac S................ 0275 Q................ 0275 joint. 73580............ Contrast x-ray of knee S................ 0275 Q................ 0275 joint. 73615............ Contrast x-ray of ankle. S................ 0275 Q................ 0275 74190............ X-ray exam of peritoneum S................ 0264 Q................ 0264 74235............ Remove esophagus S................ 0257 N................ n/a obstruction. 74305............ X-ray bile ducts/ X................ 0263 N................ n/a pancreas. 74320............ Contrast x-ray of bile X................ 0264 Q................ 0264 ducts. 74327............ X-ray bile stone removal S................ 0296 N................ n/a 74328............ X-ray bile duct N................ n/a N................ n/a endoscopy. 74329............ X-ray for pancreas N................ n/a N................ ma endoscopy. 74330............ X-ray bile/panc N................ n/a N................ n/a endoscopy. 74340............ X-ray guide for GI tube. X................ 0272 N................ n/a 74350............ X-ray guide, stomach X................ 0263 N................ n/a tube. 74355............ X-ray guide, intestinal X................ 0263 N................ n/a tube. 74360............ X-ray guide, GI dilation S................ 0257 N................ n/a 74363............ X-ray, bile duct S................ 0297 N................ n/a dilation. 74425............ Contrast x-ray, urinary S................ 0278 Q................ 0278 tract. 74430............ Contrast x-ray, bladder. S................ 0278 Q................ 0278 74440............ X-ray, male genital S................ 0278 Q................ 0278 tract. 74445............ X-ray exam of penis..... S................ 0278 Q................ 0278 74450............ X-ray, urethra/bladder.. S................ 0278 Q................ 0278 74455............ X-ray, urethra/bladder.. S................ 0278 Q................ 0278 74470............ X-ray exam of kidney X................ 0263 Q................ 0263 lesion. 74475............ X-ray control, cath S................ 0297 Q................ 0297 insert. 74480............ X-ray control, cath S................ 0296 Q................ 0296 insert. 74485............ X-ray guide, GU dilation S................ 0296 Q................ 0296 74740............ X-ray, female genital X................ 0264 Q................ 0264 tract. 74742............ X-ray, fallopian tube... X................ 0264 N................ 75600............ Contrast x-ray exam of S................ 0280 Q................ 0280 aorta. 75605............ Contrast x-ray exam of S................ 0280 Q................ 0280 aorta. 75625............ Contrast x-ray exam of S................ 0280 Q................ 0280 aorta. 75630............ X-ray aorta, leg S................ 0280 Q................ 0280 arteries. 75635............ Ct angio abdominal S................ 0662 Q................ 0662 arteries. 75650............ Artery x-rays, head & S................ 0280 Q................ 0280 neck. 75658............ Artery x-rays, arm...... S................ 0279 Q................ 0279 75660............ Artery x-rays, head & S................ 0668 Q................ 0668 neck. 75662............ Artery x-rays, head & S................ 0280 Q................ 0280 neck. 75665............ Artery x-rays, head & S................ 0280 Q................ 0280 neck. 75671............ Artery x-rays, head & S................ 0280 Q................ 0280 neck. [[Page 42666]] 75676............ Artery x-rays, neck..... S................ 0280 Q................ 0280 75680............ Artery x-rays, neck..... S................ 0280 Q................ 0280 75685............ Artery x-rays, spine.... S................ 0280 Q................ 0280 75705............ Artery x-rays, spine.... S................ 0668 Q................ 0668 75710............ Artery x-rays, arm/leg.. S................ 0280 Q................ 0280 75716............ Artery x-rays, arms/legs S................ 0280 Q................ 0280 75722............ Artery x-rays, kidney... S................ 0280 Q................ 0280 75724............ Artery x-rays, kidneys.. S................ 0280 Q................ 0280 75726............ Artery x-rays, abdomen.. S................ 0280 Q................ 0280 75731............ Artery x-rays, adrenal S................ 0280 Q................ 0280 gland. 75733............ Artery x-rays, adrenals. S................ 0668 Q................ 0668 75736............ Artery x-rays, pelvis... S................ 0280 Q................ 0280 75741............ Artery x-rays, lung..... S................ 0279 Q................ 0279 75743............ Artery x-rays, lungs.... S................ 0280 Q................ 0280 75746............ Artery x-rays, lung..... S................ 0279 Q................ 0279 75756............ Artery x-rays, chest.... S................ 0279 Q................ 0279 75774............ Artery x-ray, each S................ 0279 N................ n/a vessel. 75790............ Visualize A-V shunt..... S................ 0279 Q................ 0279 75801............ Lymph vessel x-ray, arm/ X................ 0264 Q................ 0264 leg. 75803............ Lymph vessel x-ray,arms/ X................ 0264 Q................ 0264 legs. 75805............ Lymph vessel x-ray, X................ 0264 Q................ 0264 trunk. 75807............ Lymph vessel x-ray, X................ 0264 Q................ 0264 trunk. 75809............ Nonvascular shunt, x-ray X................ 0263 Q................ 0263 75810............ Vein x-ray, spleen/liver S................ 0279 Q................ 0279 75820............ Vein x-ray, arm/leg..... S................ 0668 Q................ 0668 75822............ Vein x-ray, arms/legs... S................ 0668 Q................ 0668 75825............ Vein x-ray, trunk....... S................ 0279 Q................ 0279 75827............ Vein x-ray, chest....... S................ 0279 Q................ 0279 75831............ Vein x-ray, kidney...... S................ 0279 Q................ 0279 75833............ Vein x-ray, kidneys..... S................ 0279 Q................ 0279 75840............ Vein x-ray, adrenal S................ 0280 Q................ 0280 gland. 75842............ Vein x-ray, adrenal S................ 0280 Q................ 0280 glands. 75860............ Vein x-ray, neck........ S................ 0668 Q................ 0668 75870............ Vein x-ray, skull....... S................ 0668 Q................ 0668 75872............ Vein x-ray, skull....... S................ 0279 Q................ 0279 75880............ Vein x-ray, eye socket.. S................ 0668 Q................ 0668 75885............ Vein x-ray, liver....... S................ 0280 Q................ 0280 75887............ Vein x-ray, liver....... S................ 0279 Q................ 0279 75889............ Vein x-ray, liver....... S................ 0280 Q................ 0280 75891............ Vein x-ray, liver....... S................ 0279 Q................ 0279 75893............ Venous sampling by Q................ 0668 Q................ 0668 catheter. 75894............ X-rays, transcath S................ 0298 N................ n/a therapy. 75896............ X-rays, transcath S................ 0263 N................ n/a therapy. 75901............ Remove cva device X................ 0263 N................ n/a obstruct. 75902............ Remove cva lumen X................ 0263 N................ n/a obstruct. 75940............ X-ray placement, vein S................ 0298 N................ n/a filter. 75945............ Intravascular us........ S................ 0267 Q................ 0267 75946............ Intravascular us add-on. S................ 0266 N................ n/a 75960............ Transcath iv stent rs&i. S................ 0668 N................ n/a 75961............ Retrieval, broken S................ 0668 N................ n/a catheter. 75962............ Repair arterial blockage S................ 0668 Q................ 0668 75964............ Repair Artery blockage, S................ 0668 N................ n/a each. 75966............ Repair arterial blockage S................ 0668 Q................ 0668 75968............ Repair Artery blockage, S................ 0668 N................ n/a each. 75970............ Vascular biopsy......... S................ 0668 N................ n/a 75978............ Repair venous blockage.. S................ 0668 Q................ 0668 75980............ Contrast xray exam bile S................ 0297 N................ n/a duct. 75982............ Contrast xray exam bile S................ 0297 N................ n/a duct. 75984............ Xray control catheter X................ 0263 N................ n/a change. 75989............ Abscess drainage under x- N................ ........... N................ n/a ray. 75992............ Atherectomy, x-ray exam. S................ 0668 N................ n/a 75993............ Atherectomy, x-ray exam. S................ 0668 N................ n/a 75994............ Atherectomy, x-ray exam. S................ 0668 N................ n/a [[Page 42667]] 75995............ Atherectomy, x-ray exam. S................ 0668 N................ n/a 75996............ Atherectomy, x-ray exam. S................ 0668 N................ n/a 76080............ X-ray exam of fistula... X................ 0263 Q................ 0263 76975............ GI endoscopic ultrasound S................ 0266 Q................ 0266 77053............ X-ray of mammary duct... X................ 0263 Q................ 0263 76086 X-ray of mammary duct. 77054............ X-ray of mammary ducts.. X................ 0263 Q................ 0263 76088 X-ray of mammary ducts. 93555............ Imaging, cardiac cath... N................ n/a N................ n/a 93556............ Imaging, cardiac cath... N................ n/a N................ n/a -------------------------------------------------------------------------------------------------------------------------------------------------------- (5) Diagnostic Radiopharmaceuticals For CY 2008, we are proposing to change the packaging status of diagnostic radiopharmaceuticals as part of our overall enhanced packaging approach for the CY 2008 OPPS. Packaging costs into a single aggregate payment for a service, encounter, or episode of care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, packaging the costs of supportive items and services into the payment for the independent procedure or service with which they are associated encourages hospital efficiencies and also enables hospitals to manage their resources with maximum flexibility. As we stated in the CY 2007 OPPS/ASC final rule with comment period, we believe that a policy to package payment for additional radiopharmaceuticals (other than those already packaged when their per day costs are below the packaging threshold for OPPS drugs, biologicals, and radiopharmaceuticals based on data for the update year) is consistent with OPPS packaging principles and would provide greater administrative simplicity for hospitals (71 FR 68094). All nuclear medicine procedures require the use of at least one radiopharmaceutical, and there are only a small number of radiopharmaceuticals that may be appropriately billed with each diagnostic nuclear medicine procedure. While examining the CY 2005 hospital claims data in preparation for the CY 2007 OPPS/ASC proposed rule, we identified a significant number of diagnostic nuclear medicine procedure claims that were missing HCPCS codes for the associated radiopharmaceutical. At that time, we believed that there could be two reasons for the presence of these claims in the data. One reason could be that the radiopharmaceutical used for the procedure was packaged under the OPPS and, therefore, some hospitals may have decided not to include the specific radiopharmaceutical HCPCS code and an associated charge on the claim. A second reason could be that the hospitals may have incorporated the cost of the radiopharmaceutical into the charges for the associated nuclear medicine procedures. A third possibility not offered in the CY 2007 OPPS/ASC proposed rule is that hospitals may have included the charges for radiopharmaceuticals on an uncoded revenue code line. In the CY 2007 OPPS/ASC proposed rule, we did not propose packaging payment for radiopharmaceuticals with per day costs above the $55 CY 2007 packaging threshold because we indicated that we were concerned that payments for certain nuclear medicine procedures could potentially be less than the costs of some of the packaged radiopharmaceuticals, especially those that are relatively expensive. At the same time, we also noted the GAO's comment in reference to the CY 2006 OPPS proposed rule that stated a methodology that includes packaging all radiopharmaceutical costs into the payments for the nuclear medicine procedures may result in payments that exceed hospitals' acquisition costs for certain radiopharmaceuticals because there may be more than one radiopharmaceutical that may be used for a particular procedure. We also expressed concern that packaging payment for additional radiopharmaceuticals could provoke treatment decisions that may not reflect use of the most clinically appropriate radiopharmaceutical for a particular nuclear medicine procedure in any specific case (71 FR 68094). After considering this issue further and examining our CY 2006 claims data for the CY 2008 OPPS update, we believe that it is most appropriate to package payment for some radiopharmaceuticals, specifically diagnostic radiopharmaceuticals, into the payment for diagnostic nuclear medicine procedures for CY 2008. We expect that packaging would encourage hospitals to use the most cost efficient diagnostic radiopharmaceutical products that are clinically appropriate. We anticipate that hospitals would continue to provide care that is aligned with the best interests of the patient. Furthermore, we believe that it would be the intent of most hospitals to provide both the diagnostic radiopharmaceutical and the associated diagnostic nuclear medicine procedure at the time the diagnostic radiopharmaceutical is administered and not to send patients to a different provider for administration of the radiopharmaceutical. We do not believe that our packaging proposal would limit beneficiaries' ability to receive clinically appropriate diagnostic procedures. Again, the OPPS is a system of averages, and payment in the aggregate is intended to be adequate, although payment for any one service may be higher or lower than a hospital's actual costs in that case. For CY 2008, we have separated radiopharmaceuticals into two groupings. The first group includes diagnostic radiopharmaceuticals, while [[Page 42668]] the second group includes therapeutic radiopharmaceuticals. We identified all diagnostic radiopharmaceuticals as those Level II HCPCS codes that include the term ``diagnostic'' along with a radiopharmaceutical in their long code descriptors. Therefore, we were able to distinguish therapeutic radiopharmaceuticals from diagnostic radiopharmaceuticals as those Level II HCPCS codes that have the term ``therapeutic'' along with a radiopharmaceutical in their long code descriptors. There currently are no HCPCS C-codes used to report radiopharmaceuticals under the OPPS. For CY 2008, we are proposing to package payment for all diagnostic radiopharmaceuticals that are not otherwise packaged according to the proposed CY 2008 packaging threshold for drugs, biologicals, and radiopharmaceuticals. We are proposing this packaging approach for diagnostic radiopharmaceuticals, while we are proposing to continue to pay separately for therapeutic radiopharmaceuticals with an average per day cost of more than $60 as discussed in section V.B.3. of this proposed rule. In that section, we review our reasons for treating diagnostic radiopharmaceuticals (as well as contrast media) differently from other types of specified covered outpatient drugs identified in section 1833(t)(B) of the Act. Diagnostic radiopharmaceuticals are always intended to be used with a diagnostic nuclear medicine procedure. In examining our CY 2006 claims data, we were able to match most diagnostic radiopharmaceuticals to their associated diagnostic procedures and most diagnostic nuclear medicine procedures to their associated diagnostic radiopharmaceuticals in the vast majority of single bills used for ratesetting. We estimate that less than 5 percent of all claims with a diagnostic radiopharmaceutical had no corresponding diagnostic nuclear medicine procedure. In addition, we found that only about 13 percent of all single bills with a diagnostic nuclear medicine procedure code had no corresponding diagnostic radiopharmaceutical billed. These statistics indicate that, in a majority of our single bills for diagnostic nuclear medicine procedures, a diagnostic radiopharmaceutical HCPCS code is included on the single bill. Table 15 presents the top 20 diagnostic nuclear medicine procedures in terms of the overall frequency with which they are reported in the OPPS claims data. Among these high volume diagnostic nuclear medicine procedures, their single bills include a HCPCS code for a diagnostic radiopharmaceutical at least 84 percent of the time for 19 out of the top 20 procedures. More specifically, 84 to 86 percent of the single bills for 4 diagnostic nuclear medicine procedures include a diagnostic radiopharmaceutical, 87 to 89 percent of the single bills for 8 diagnostic nuclear medicine procedures include a diagnostic radiopharmaceutical, and 90 percent or more of the single bills for 7 diagnostic nuclear medicine procedures include a diagnostic radiopharmaceutical. Table 15.--Top 20 Diagnostic Nuclear Medicine Procedures Sorted by CY 2006 OPPS Total Volume -------------------------------------------------------------------------------------------------------------------------------------------------------- Single bills with a Single bills Total line- radiopharmaceutical as a percent HCPCS code Short descriptor SI APC item frequency as a percent of all of total line- single bills item frequency -------------------------------------------------------------------------------------------------------------------------------------------------------- 78465................... Heart image (3d), multiple..... S....................... 0377 566,252 88 9 78306................... Bone imaging, whole body....... S....................... 0396 368,452 90 76 78815................... Tumorimage pet/ct skul-thigh... S....................... 0308 122,126 100 84 78223................... Hepatobiliary imaging.......... S....................... 0394 69,066 85 90 78315................... Bone imaging, 3 phase.......... S....................... 0396 56,524 89 88 78464................... Heart image (3d), single....... S....................... 0398 35,866 93 29 78472................... Gated heart, planar, single.... S....................... 0398 32,154 89 80 78264................... Gastric emptying study......... S....................... 0395 31,190 88 94 78812................... Tumor image (pet)/skul-thigh... S....................... 0308 27,345 100 86 78007................... Thyroid image, mult uptakes.... S....................... 0391 23,703 84 96 78195................... Lymph system imaging........... S....................... 0400 20,187 89 18 78585................... Lung V/Q imaging............... S....................... 0378 20,036 91 48 78070................... Parathyroid nuclear imaging.... S....................... 0391 18,752 94 84 78006................... Thyroid imaging with uptake.... S....................... 0390 18,613 86 95 78300................... Bone imaging, limited area..... S....................... 0396 18,333 89 90 78320................... Bone imaging (3D).............. S....................... 0396 16,710 84 35 78588................... Perfusion lung image........... S....................... 0378 14,323 88 48 78707................... K flow/funct image w/o drug.... S....................... 0404 13,820 89 90 78580................... Lung perfusion imaging......... S....................... 0401 13,011 66 19 78816................... Tumor image pet/ct full body... S....................... 0308 12,349 100 86 -------------------------------------------------------------------------------------------------------------------------------------------------------- Among the lower volume diagnostic nuclear medicine procedures (which are outside the top 20 in terms of volume), there is still good representation of diagnostic radiopharmaceutical HCPCS codes on the single bills for most procedures. About 40 percent of the low volume diagnostic nuclear medicine procedures have at least 80 percent of the single bills for that diagnostic procedure that include a diagnostic radiopharmaceutical HCPCS code; about 37 percent of the low volume diagnostic procedures have between 50 to 79 percent of the single bills that include a diagnostic radiopharmaceutical HCPCS code; and about 23 percent of the low volume diagnostic procedures have less than 50 percent of the single bills that include a diagnostic radiopharmaceutical HCPCS code. For the few diagnostic nuclear medicine procedures where less than 50 percent of the single bills include a diagnostic radiopharmaceutical HCPCS code, we believe there could be several reasons why the percentage of single bills for the diagnostic nuclear medicine procedure with a diagnostic radiopharmaceutical HCPCS code is low. As noted earlier, it is possible that hospitals may be including the charge for the radiopharmaceutical in the [[Page 42669]] charge for the diagnostic nuclear medicine procedure itself or on an uncoded revenue code line instead of reporting charges for a specific diagnostic radiopharmaceutical HCPCS code. We found that 24 percent of all single bills for a diagnostic nuclear medicine procedure but without a coded diagnostic radiopharmaceutical had uncoded costs in a revenue code that might contain diagnostic radiopharmaceutical costs, specifically, revenue codes 0254 (Drugs Incident to Other Diagnostic Services), 0255 (Drugs Incident to Radiology), 0343 (Diagnostic Radiopharmaceuticals), 0621 (Supplies Incident to Radiology), and 0622 (Supplies Incident to Other Diagnostic Services). In comparison, we found that only 2 percent of diagnostic nuclear medicine single bills with a nuclear medicine procedure and a coded diagnostic radiopharmaceutical had uncoded costs in these revenue codes. It is also possible that some of these procedures typically use a diagnostic radiopharmaceutical subject to packaged payment under the CY 2006 OPPS, and hospitals may have chosen not to report a separate charge for the diagnostic radiopharmaceutical. Payment for diagnostic radiopharmaceuticals commonly used with some diagnostic nuclear medicine procedures would already be packaged because these diagnostic radiopharmaceuticals' average per day cost were less than $50 in CY 2006. The CY 2008 proposal to package additional diagnostic radiopharmaceuticals would have little impact on the payment for those diagnostic procedures that typically use inexpensive diagnostic radiopharmaceuticals that would be packaged under our proposed CY 2008 packaging threshold of $60, except to the extent that the budget neutrality adjustment due to the broader packaging proposal leads to an increase in the scaler and an increase in the payment for procedures in general. At its March 2007 meeting, the APC Panel recommended that CMS work with stakeholders on issues related to payment for radiopharmaceuticals, including evaluating claims data for different classes of radiopharmaceuticals and ensuring that a nuclear medicine procedure claim always includes at least one reported radiopharmaceutical agent. We are accepting the APC Panel's recommendation, and we specifically welcome public comment on the hospitals' burden involved should we require such precise reporting. We also are seeking comment on the importance of such a requirement in light of our above discussion on the representation of diagnostic radiopharmaceuticals in the single bills for diagnostic nuclear medicine procedures, the presence of uncoded revenue code charges specific to diagnostic radiopharmaceuticals on claims without a coded diagnostic radiopharmaceutical, and our proposal to package payment for all diagnostic radiopharmaceuticals. It has come to our attention that several diagnostic radiopharmaceuticals may be used for multiple day studies; that is, a particular diagnostic radiopharmaceutical may be administered on one day and a related diagnostic nuclear medicine procedure may be performed on a subsequent day. While we understand that multiple day episodes for diagnostic radiopharmaceuticals and the related diagnostic nuclear medicine procedures occur, we expect that this would be a small proportion of all diagnostic nuclear medicine imaging procedures. We estimate that, roughly, 15 diagnostic radiopharmaceuticals have a half- life longer than one day such that they could support diagnostic nuclear medicine scans on different days. We believe these diagnostic radiopharmaceuticals would be concentrated in a specific set of diagnostic procedures. Excluding the 5 percent of diagnostic radiopharmaceutical claims with no matching diagnostic nuclear medicine scan for the same beneficiary, we found that a diagnostic nuclear medicine scan was reported on the same day as a coded diagnostic radiopharmaceutical 90 percent or more of the time for 10 of these 15 diagnostic radiopharmaceuticals. Further, between 80 and 90 percent single bills for each of the remaining 5 diagnostic radiopharmaceuticals had a diagnostic nuclear medicine scan on the same day. In the ``natural'' single bills we use for ratesetting, we package payment across dates of service. In light of such high percentages of extended half-life diagnostic radiopharmaceuticals with same day diagnostic nuclear medicine scans and the ability of ``natural'' singles to package costs across days, we believe that our standard OPPS ratesetting methodology of using median costs calculated from claims data adequately captures the costs of diagnostic radiopharmaceuticals associated with diagnostic nuclear medicine procedures that are not provided on the same date of service. This packaging proposal reduces the overall frequency of single bills for diagnostic nuclear medicine procedures, but the percent of single bills out of total claims remains robust for the majority of diagnostic nuclear medicine procedures. Typically, packaging more procedures should improve the number of single bill claims from which to derive median cost estimates because packaging reduces the number of separately paid procedures on a claim, thereby creating more single procedure bills. In the case of diagnostic nuclear medicine procedures, packaging diagnostic radiopharmaceuticals reduces the overall number of single bills available to calculate median costs by increasing packaged costs that previously were ignored in the bypass process. In prior years, we did not consider the costs of radiopharmaceuticals when we used our bypass methodology to extract ``pseudo'' single claims because we assumed that the cost of radiopharmaceutical overhead and handling would be included in the line-item charge for the radiopharmaceutical, and the diagnostic radiopharmaceuticals were subject to potential separate payment if their mean per day cost fell above the packaging threshold. The bypass process sets empirical and clinical criteria for minimal packaging for a specific list of procedures and services in order to assign packaged costs to other procedures on a claim and is discussed at length in section II.A.1. of this proposed rule. Generally, changing the status of diagnostic radiopharmaceuticals to packaged increases packaging on each claim. This could make it both harder for nuclear medicine procedures to qualify for the bypass list and more difficult to assign packaging to individual diagnostic nuclear medicine procedures, resulting in a possible reduction of the number of ``pseudo'' singles that are produced by the bypass process. Notwithstanding this potentiality, diagnostic nuclear medicine procedures continue to have good representation in the single bills. On average, single bills as a percent of total occurrences remains substantial at 55 percent for individual procedures. We discuss our process for ratesetting, including the construction and use of single and multiple bills, in greater detail in section II.A.1. of this proposed rule. We believe our CY 2006 claims data support our CY 2008 proposal to package payment for all diagnostic radiopharmaceuticals and lead to proposed payment rates for diagnostic nuclear medicine procedures that appropriately reflect payment for the costs of the diagnostic radiopharmaceuticals that are administered to carry out those diagnostic nuclear medicine procedures. Among the top 20 high volume [[Page 42670]] diagnostic nuclear medicine procedures, at least 84 percent of the single bills for almost every diagnostic nuclear medicine procedure included a diagnostic radiopharmaceutical HCPCS code. While a diagnostic radiopharmaceutical, by definition, would be anticipated to accompany 100 percent of the diagnostic nuclear medicine procedures, it is not unexpected that while percentages in our claims data are high, they are less than 100 percent. As noted previously, we have heard anecdotal reports that some hospitals may include the charges for diagnostic radiopharmaceuticals in their charge for the diagnostic nuclear medicine procedure or on an uncoded revenue code line, rather than reporting a HCPCS code for the diagnostic radiopharmaceutical. Thus, it is likely that the frequency of diagnostic radiopharmaceutical costs reflected in our claims data are even higher than the percentages indicate. Furthermore, we note that the OPPS ratesetting methodology is based on medians, which are less sensitive to extremes than means and typically do not reflect subtle changes in cost distributions. Therefore, to the extent that the vast majority of single bills for a particular diagnostic nuclear medicine procedure include a diagnostic radiopharmaceutical HCPCS code, the fact that the percentage is somewhat less than 100 percent is likely to have minimal impact on the median cost of the procedure in most cases. Even in those few instances where we have a low total number of single bills, largely because of low overall volume, we have ample representation of diagnostic radiopharmaceutical HCPCS codes on the single bills for the majority of lower volume nuclear medicine procedures. We also continue to have reasonable representation of single bills out of total claims in general. Finally, as noted previously, to the extent that the diagnostic radiopharmaceuticals commonly used with a particular diagnostic nuclear medicine procedure are already packaged, the proposal to package additional diagnostic radiopharmaceuticals would have little impact on the payment for these procedures. We have calculated the median costs on which we are proposing to base the CY 2008 payment rates using the packaging status of each diagnostic radiopharmaceutical HCPCS code as provided in Table 17 below. As we discussed earlier in more detail, this has the effect of both changing the median cost for the independent service (the diagnostic nuclear medicine procedure) into which the cost of the dependent service (the diagnostic radiopharmaceutical) is packaged and also of redistributing payment that would otherwise have been made separately for the service we are proposing to newly package for CY 2008. For example, HCPCS code A9552 (Fluorodeoxyglucose F-18 FDG, Diagnostic, per study dose, up to 45 millicuries) that describes the diagnostic radiopharmaceutical commonly called FDG is frequently billed with CPT code 78815 (Tumor imaging, positron emission tomography (PET) with concurrently acquired computed tomography (CT) for attenuation correction and anatomical localization; skull base to mid-thigh). HCPCS code A9552 is assigned to APC 1651 (F18 fdg) for CY 2007. HCPCS code A9552 was billed with CPT code 78815 101,242 times in the single bills available for this CY 2008 proposed rule, and 97 percent of the single bills for CPT code 78815 also reported HCPCS code A9552. Under our proposed policy for CY 2008, we are proposing to package payment for HCPCS code A9552 into the payment for separately payable procedures that are provided in conjunction with HCPCS code A9552. In this example, HCPCS code A9552 would receive packaged payment through the separate OPPS payment for CPT code 78815. CPT code 78815 is assigned to APC 1511 (New Technology--Level XI ($900-$1000)) for CY 2007 with a CY 2007 median cost for PET/CT procedures of $850.36 and to APC 0308 (Non- Myocardial Positron Emission Tomography (PET) Imaging) for CY 2008 with a proposed CY 2008 APC median cost of $1,093.52. The proposed CY 2008 payment rates associated with this example are outlined in Table 16 below. The table indicates that the proposed CY 2008 payment rate for the skull base to mid-thigh PET/CT scan would be substantially higher than the CY 2007 payment amount for that code. The proposed increase for the PET/CT scan is slightly more than the estimated average CY 2007 payment for the separately payable FDG (paid in CY 2007 at charges reduced to cost). This example cannot demonstrate the overall impact of packaging diagnostic radiopharmaceuticals on payment to any given hospital because each individual hospital's case mix and billing patterns would be different. The overall impact of packaging diagnostic radiopharmaceuticals, as well as all other packaging changes proposed for CY 2008, can only be assessed in the aggregate for each hospital. Section XXII.B. of this proposed rule displays the overall impact of APC weight recalibration and packaging changes that we are proposing by classes of hospitals, and the OPPS Hospital-Specific Impacts--Provider- Specific Data file presents our estimates of CY 2008 hospital payment for those hospitals we include in our ratesetting and payment simulation database. The hospital-specific impacts file can be found on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/ under supporting documentation for this proposed rule. Table 16.--Example of the Effects of the CY 2008 Packaging Proposal on Payment for HCPCS Code A9552 and CPT Code 78815 ---------------------------------------------------------------------------------------------------------------- Sum of CY 2007 payment (A9552 Sum of CY 2008 HCPCS code Short descriptor paid proposed separately at payment (A9552 cost) packaged) ---------------------------------------------------------------------------------------------------------------- A9552..................................... F18 fdg (dependent service)......... *$279.29 0.00 78815..................................... Tumor image pet/ct skul-thigh 950.00 1,107.22 (independent service). ------------------------------- Total Payment............................................................... 1,229.29 1,107.22 ---------------------------------------------------------------------------------------------------------------- *Estimated average CY 2007 payment at charges reduced to cost. [[Page 42671]] The estimated overall impact of these changes that we are proposing for CY 2008 is based on the assumption that hospital behavior would not change with regard to when the dependent diagnostic radiopharmaceuticals are provided by the same hospital that performs the independent services. In order to provide diagnostic nuclear medicine procedures under this proposal, hospitals would either need to administer the necessary diagnostic radiopharmaceuticals themselves or refer patients elsewhere for the administration of the diagnostic radiopharmaceuticals. In the latter case, claims data would show such a change in practice in future years and that change would be reflected in future ratesetting. However, with respect to diagnostic radiopharmaceuticals, we believe that hospitals are limited in the extent to which they could change their behavior with regard to how they furnish these items because diagnostic radiopharmaceuticals are typically provided on the same day as a diagnostic nuclear medicine procedure. It would be difficult for Hospital A to send patients to receive diagnostic radiopharmaceuticals from Hospital B and then have the patients return to Hospital A for the diagnostic nuclear medicine procedure in the appropriate timeframe (given the radiopharmaceutical's half life) to perform a high quality study. We would expect that hospitals would always bill the diagnostic radiopharmaceutical on the same claim as the other independent services for which the radiopharmaceutical was administered. As we indicate above, in all cases, we are proposing that hospitals that furnish diagnostic radiopharmaceuticals in association with diagnostic nuclear medicine procedures bill both the item and the procedure on the same claim so that the costs of the diagnostic radiopharmaceuticals can be appropriately packaged into payment for the diagnostic nuclear medicine procedure. We expect to carefully monitor any changes in billing practices on a service-specific and hospital- specific basis to determine whether there is reason to request that QIOs review the quality of care furnished or to request that Program Safeguard Contractors review the claims against the medical record. Table 17.--Diagnostic Radiopharmaceutical HCPCS Codes Proposed for Packaged Payment in CY 2008 ---------------------------------------------------------------------------------------------------------------- HCPCS code Short descriptor CY 2007 SI CY 2007 APC CY 2008 proposed SI ---------------------------------------------------------------------------------------------------------------- A4641.................. Radiopharm dx agent N...................... n/a N noc. A4642.................. In111 satumomab....... H...................... 0704 N A9500.................. Tc99m sestamibi....... H...................... 1600 N A9502.................. Tc99m tetrofosmin..... H...................... 0705 N A9503.................. Tc99m medronate....... N...................... n/a N* A9504.................. Tc99m apcitide........ N...................... n/a N* A9505.................. TL201 thallium........ H...................... 1603 N A9507.................. In111 capromab........ H...................... 1604 N A9508.................. I131 iodobenguate, dx. H...................... 1045 N A9510.................. Tc99m disofenin....... N...................... n/a N* A9512.................. Tc99m pertechnetate... N...................... n/a N* A9516.................. I123 iodide cap, dx... H...................... 9148 N A9521.................. Tc99m exametazime..... H...................... 1096 N A9524.................. I131 serum albumin, dx H...................... 9100 N A9526.................. Nitrogen N-13 ammonia. H...................... 0737 N A9528.................. Iodine I-131 iodide H...................... 1088 N cap, dx. A9529.................. I131 iodide sol, dx... N...................... n/a N A9531.................. I131 max 100uCi....... N...................... n/a N* A9532.................. I125 serum albumin, dx N...................... n/a N A9536.................. Tc99m depreotide...... H...................... 0739 N A9537.................. Tc99m mebrofenin...... N...................... n/a N* A9538.................. Tc99m pyrophosphate... N...................... n/a N* A9539.................. Tc99m pentetate....... H...................... 0722 N* A9540.................. Tc99m MAA............. N...................... n/a N* A9541.................. Tc99m sulfur colloid.. N...................... n/a N* A9542.................. In111 ibritumomab, dx. H...................... 1642 N A9544.................. I131 tositumomab, dx.. H...................... 1644 N A9546.................. Co57/58............... H...................... 0723 N A9547.................. In111 oxyquinoline.... H...................... 1646 N A9548.................. In111 pentetate....... H...................... 1647 N A9550.................. Tc99m gluceptate...... H...................... 0740 N A9551.................. Tc99m succimer........ H...................... 1650 N A9552.................. F18 fdg............... H...................... 1651 N A9553.................. Cr51 chromate......... H...................... 0741 N A9554.................. I125 iothalamate, dx.. N...................... n/a N A9555.................. Rb82 rubidium......... H...................... 1654 N A9556.................. Ga67 gallium.......... H...................... 1671 N A9557.................. Tc99m bicisate........ H...................... 1672 N A9558.................. Xe133 xenon 10mci..... N...................... n/a N* A9559.................. Co57 cyano............ H...................... 0724 N A9560.................. Tc99m labeled rbc..... H...................... 0742 N A9561.................. Tc99m oxidronate...... N...................... n/a N* A9562.................. Tc99m mertiatide...... H...................... 0743 N A9565.................. In111 pentetreotide... H...................... 1677 N A9566.................. Tc99m fanolesomab..... H...................... 1678 N A9567.................. Technetium TC-99m H...................... 0829 N* aerosol. [[Page 42672]] A9568.................. Tc99m arcitumomab..... H...................... 1648 N ---------------------------------------------------------------------------------------------------------------- * Indicates that the radiopharmaceutical would have been packaged under the $60 packaging threshold methodology in CY 2008, even in the absence of the broader packaging proposal for radiopharmaceuticals. (6) Contrast Agents For CY 2008, we are proposing to package payment for all contrast media into their associated independent diagnostic and therapeutic procedures as part of our proposed packaging approach for the CY 2008 OPPS. As noted in section II.A.4.c. of this proposed rule, packaging the costs of supportive items and services into the payment for the independent procedure or service with which they are associated encourages hospital efficiencies and also enables hospitals to manage their resources with maximum flexibility. We believe that contrast agents are particularly well suited for packaging because they are always provided in support of an independent diagnostic or therapeutic procedure that involves imaging, and thus payment for contrast agents can be packaged into the payment for the associated separately payable procedures. Contrast agents are generally considered to be those substances introduced into or around a structure that, because of the differential absorption of x-rays, alteration of magnetic fields, or other effects of the contrast medium in comparison with surrounding tissues, permit visualization of the structure through an imaging modality. The use of certain contrast agents is generally associated with specific imaging modalities, including x-ray, computed tomography (CT), ultrasound, and magnetic resonance imaging (MRI), for purposes of diagnostic testing or treatment. They are most commonly administered through an oral or intravascular route in association with the performance of the independent procedures involving imaging that are the basis for their administration. Even in the absence of this proposal to package payment for all contrast agents, we would propose to package the majority of HCPCS codes for contrast agents recognized under the OPPS in CY 2008. We consider contrast agents to be drugs under the OPPS, and as a result they are packaged if their estimated mean per day cost is equal to or less than $60 for CY 2008. (For more discussion of our drug packaging criteria, we refer readers to section V.B.2 of this proposed rule.) Seventy-five percent of contrast agents HCPCS codes have an estimated mean per day cost equal to or less than $60 based on our CY 2006 claims data. Contrast agents are described by those Level II HCPCS codes in the range from Q9945 through Q9964. There currently are no HCPCS C-codes or other Level II HCPCS codes outside the range specified above used to report contrast agents under the OPPS. As shown in Table 19, in CY 2007, we packaged 7 out of 20 of these contrast agent HCPCS codes based on the $55 packaging threshold. For CY 2008, we are proposing to package all drugs with a per day mean cost of $60 or less. For CY 2008, the vast majority of contrast agents would be packaged under the traditional OPPS packaging methodology using the $60 packaging threshold, based on the CY 2006 claims data available for this proposed rule. In fact, of the 20 contrast agent HCPCS codes we are including in our proposed packaging approach, 15 would have been proposed to be packaged for CY 2008 under our drug packaging methodology. These 15 codes represent 94 percent of all occurrences of contrast agents billed under the OPPS. We believe that this shift in the packaging status for several of these agents between CYs 2007 and 2008 may be because, in CY 2007, a number of the contrast agents exceeded the $55 threshold by only a small amount and, based on our latest claims data for CY 2008, a number of these products have now fallen below the proposed $60 threshold. Given that the vast majority of contrast agents billed would already be packaged under the OPPS in CY 2008, we believe it would be desirable to package payment for the remaining contrast agents as it promotes efficiency and results in a consistent payment policy across products that may be used in many of the same independent procedures. We also note that the significant costs associated with these 15 contrast agents would already be reflected in the proposed median costs for those independent procedures and, if we were to pay for the 5 remaining agents separately, we would be treating these 5 agents differently than the others. If the 5 agents remained separately payable, there would effectively be two payments for contrast agents when these 5 agents were billed--a separate payment and a payment for packaged contrast agents that was part of the procedure payment. This could potentially provide a payment incentive to administer certain contrast agents that might not be the most clinically appropriate or cost effective. Moreover, as noted previously, contrast agents are always provided with independent procedures and, under a consistent approach to packaging in keeping with our enhanced efforts to encourage hospital efficiency and promote value-based purchasing under the OPPS, their payment would be appropriately packaged for CY 2008. We have calculated the median costs on which the proposed CY 2008 payment rates are based using the packaging status of each contrast agent HCPCS code as provided in Table 19 below. As we discussed earlier in more detail, this has the effect of both changing the median cost for the independent service (the diagnostic or therapeutic procedure requiring imaging) into which the cost of the dependent service (the contrast agent) is packaged and also of redistributing payment that would otherwise have been made separately for the service we are proposing to newly package for CY 2008. For example, HCPCS code Q9947 (Low osmolar contrast material, 200- 249 mg/ml iodine concentration, per ml) is one of the contrast agents that we are proposing to package that would not otherwise be packaged in CY 2008 under the proposed $60 packaging threshold. HCPCS code Q9947 is sometimes billed with CPT code 71260 (Computed tomography, thorax; with contrast material(s)). HCPCS code Q9947 is assigned to APC 9159 (LOCM 200-249 mg/ml iodine, 1ml) for CY 2007. HCPCS code Q9947 was billed with CPT code 71260 8,172 times in the single bills available for this CY 2008 proposed rule, and 2 percent of the single bills for CPT code 71260 also reported HCPCS code Q9947. Under our proposed policy for CY 2008, we are proposing to package payment for [[Page 42673]] HCPCS code Q9947 into the payment for separately payable procedures that are provided in conjunction with the contrast agent. Specifically, we would package payment for HCPCS code Q9947 so that, in this example, HCPCS code Q9947 would receive packaged payment through the separate OPPS payment for CPT code 71260. CPT code 71260 is assigned to APC 0283 (Computed Tomography with Contrast) for CY 2007 with a CY 2007 median cost of $249.48. The procedure is assigned to APC 0283, with a proposed APC name change to ``Level I Computed Tomography with Contrast'' for CY 2008 and a proposed CY 2008 median cost of $286.13. The proposed CY 2008 payment rates associated with this example are outlined in Table 18 below. The table indicates that the CY 2008 payment that we are proposing for CPT code 71260 is higher than the CY 2007 payment amount for that code. The proposed increase in the payment rate for CPT code 71260 in CY 2008 is slightly greater than the estimated CY 2007 payment for the separately payable HCPCS code Q9947. Notably, a number of low osmolar contrast agents other than HCPCS code Q9947 that were separately paid in CY 2007 also are proposed for packaged payment in CY 2008 because their mean per day cost falls below the $60 packaging threshold for drugs, biologicals, and radiopharmaceuticals for CY 2008. Packaging the costs of these contrast media also affects the proposed payment rate for CPT code 71260. For another example of packaging contrast agents, we refer readers to the example included in Table 13 of section II.A.4.c.(4) of this proposed rule on packaging imaging supervision and interpretation services. That example illustrates the effect of packaging both a supervision and interpretation service (CPT code 72265 (Myelography, lumbosacral, radiological supervision and interpretation)) and a contrast agent (HCPCS code Q9947 (low osmolar contrast material, 200-249 mg/ml iodine, per ml)) into the payment for an imaging procedure (CPT code 72132 (Computed tomography, lumbar spine; with contrast material)). This example cannot demonstrate the overall impact of packaging contrast agents on any given hospital because each individual hospital's case mix and billing pattern differs. The overall impact of packaging contrast agents, as well as all the other proposed packaging changes, can only be assessed in the aggregate for classes of hospitals. Section XXII.B. of this proposed rule displays the overall impact of APC weight recalibration and packaging changes we are proposing by classes of hospitals, and the OPPS Hospital-Specific Impacts--Provider-Specific Data file presents our estimates of CY 2008 hospital payment for those hospitals we include in our ratesetting and payment simulation database. The hospital-specific impact file can be found on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/ under supporting documentation for this proposed rule. Table 18.--Example of the Effects of the CY 2008 Packaging Proposal on Payment for CPT Code 72160 and HCPCS Code Q9947 ---------------------------------------------------------------------------------------------------------------- Sum of CY 2007 Sum of CY 2008 payment (Q9947 proposed HCPCS code Short descriptor paid payment (Q9947 separately) packaged) ---------------------------------------------------------------------------------------------------------------- Q9947..................................... LOCM 200-249 mg/ml iodine, 1 ml *$64.24 $0.00 (dependent service). 71260..................................... Ct thorax w/dye (independent 250.94 289.71 service). ------------------------------- Total Payment............................................................... 315.18 289.71 ---------------------------------------------------------------------------------------------------------------- *Based on the mean number of units per day from our CY 2008 proposed rule data (48.3) and the April 2007 per unit payment rate for Q9947 ($1.33). The estimated overall impact of these changes that we are proposing for CY 2008 is based on the assumption that hospital behavior would not change with regard to when the contrast agents are provided by the same hospital that performs the imaging procedure. Under this proposal, in order to provide imaging procedures requiring contrast agents, hospitals would either need to administer the necessary contrast agent themselves or refer patients elsewhere for the administration of the contrast agent. In the latter case, claims data would show such a change in practice in future years and that change would be reflected in future ratesetting. However, with respect to contrast agents, we believe that hospitals are limited in the extent to which they could change their behavior with regard to how they furnish these services because contrast agents are typically provided on the same day immediately prior to an imaging procedure being performed. We would expect that hospitals would always bill the contrast agent on the same claim as the other independent services for which the contrast agent was administered. As we indicated earlier, in all cases we are proposing that hospitals that furnish the supportive contrast agent in association with independent procedures involving imaging must bill both services on the same claim so that the cost of the contrast agent can be appropriately packaged into payment for the significant independent procedure. We expect to carefully monitor any changes in billing practices on a service-specific and hospital specific basis to determine whether there is reason to request that QIOs review the quality of care furnished or to request that Program Safeguard Contractors review the claims against the medical record. Table 19.--Contrast Media HCPCS Codes Proposed for Packaged Payment in CY 2008 ---------------------------------------------------------------------------------------------------------------- HCPCS code Short descriptor CY 2007 SI CY 2007 APC Proposed CY 2008 SI ---------------------------------------------------------------------------------------------------------------- Q9945.................. LOCM < =149 mg/ml K...................... 9157 N* iodine, 1 ml. Q9946.................. LOCM 150-199 mg/ml K...................... 9158 N* iodine, 1 ml. Q9947.................. LOCM 200-249 mg/ml K...................... 9159 N iodine, 1 ml. [[Page 42674]] Q9948.................. LOCM 250-299 mg/ml K...................... 9160 N* iodine, 1 ml. Q9949.................. LOCM 300-349 mg/ml K...................... 9161 N* iodine, 1 ml. Q9950.................. LOCM 350-399 mg/ml K...................... 9162 N* iodine, 1 ml. Q9951.................. LOCM >= 400 mg/ml K...................... 9163 N* iodine, 1 ml. Q9952.................. Inj Gad-base MR K...................... 9164 N* contrast, 1 ml. Q9953.................. Inj Fe-based MR K...................... 1713 N contrast, 1 ml. Q9954.................. Oral MR contrast, 100 K...................... 9165 N* ml. Q9955.................. Inj perflexane lip K...................... 9203 N* micros, ml. Q9956.................. Inj octafluoropropane K...................... 9202 N mic, ml. Q9957.................. Inj perflutren lip K...................... 9112 N micros, ml. Q9958.................. HOCM < =149 mg/ml N...................... n/a N* iodine, 1 ml. Q9959.................. HOCM 150-199 mg/ml N...................... n/a N iodine, 1 ml. Q9960.................. HOCM 200-249 mg/ml N...................... n/a N* iodine, 1 ml. Q9961.................. HOCM 250-299 mg/ml N...................... n/a N* iodine, 1 ml. Q9962.................. HOCM 300-349 mg/ml N...................... n/a N* iodine, 1 ml. Q9963.................. HOCM 350-399 mg/ml N...................... n/a N* iodine, 1 ml. Q9964.................. HOCM>= 400 mg/ml N...................... n/a N* iodine, 1 ml. ---------------------------------------------------------------------------------------------------------------- *Indicates that the contrast agent would have been packaged under the $60 packaging threshold methodology in CY 2008, even in the absence the broader packaging proposal for contrast agents. (7) Observation Services We are proposing to package payment for all observation care, reported under HCPCS code G0378 (Hospital observation services, per hour) for CY 2008. Payment for observation would be packaged as part of the payment for the separately payable services with which it is billed. We have defined observation care as a well-defined set of specific, clinically appropriate services that include ongoing short- term treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital. Observation status is commonly assigned to patients who present to the emergency department and who then require a significant period of treatment or monitoring before a decision is made concerning their next placement or to patients with unexpectedly prolonged recovery after surgery. Throughout this proposed rule, as well as in our manuals and guidance documents, we use both of the terms ``observation services'' and ``observation care'' in reference to the services defined above. Payment for all observation care under the OPPS was packaged prior to CY 2002. Since CY 2002, separate payment of a single unit of an observation APC for an episode of observation care has been provided in limited circumstances. Effective for services furnished on or after April 1, 2002, separate payment for observation was made if the beneficiary had chest pain, asthma, or congestive heart failure and met additional criteria for diagnostic testing, minimum and maximum limits to observation care time, physician care, and documentation in the medical record (66 FR 59856, 59879). Payment for observation care that did not meet these specified criteria was packaged. Between CY 2003 and CY 2006, several more changes were made to the OPPS policy regarding separate payment for observation services, such as: Clarification that observation is not separately payable when billed with ``T'' status procedures on the day of or day before observation care; development of specific Level II HCPCS codes for hospital observation services and direct admission to observation care; and removal of the initially established diagnostic testing requirements for separately payable observation (67 FR 66794, 69 FR 65828, and 70 FR 68688). Throughout this time period, we maintained separate payment for observation care only for the three specified medical conditions, and OPPS payment for observation for all other clinical conditions remained packaged. Since January 1, 2006, hospitals have reported observation services based on an hourly unit of care using HCPCS code G0378. This code has a status indicator of ``Q'' under the CY 2007 OPPS, meaning that the OPPS claims processing logic determines whether the observation is packaged or separately payable. The OCE's current logic determines whether observation services billed under HCPCS code G0378 are separately payable through APC 0339 (Observation) or whether payment for observation services will be packaged into the payment for other separately payable services provided by the hospital in the same encounter based on criteria discussed subsequently. (We note that if an HOPD directly admits a patient to observation, Medicare currently pays separately for that direct admission reported under HCPCS code G0379 (Direct admission of patient for hospital observation care) in situations where payment for the actual observation care reported under HCPCS code G0378 is packaged.) For CY 2008, as discussed in more detail later in this proposed rule (section XI.), we are proposing to continue the coding and payment methodology for direct admission to observation status, with the exception of the requirement that HCPCS code G0379 is only eligible for separate payment if observation care reported under HCPCS code G0378 does not qualify for separate payment. This requirement would no longer be applicable under our proposal to package all observation services reported under HCPCS code G0378. Currently, separate OPPS payment may be made for observation services reported under HCPCS code G0378 provided to a patient when all of the following requirements are met. The hospital would receive a single separate payment for an episode of observation care (APC 0339) when: 1. Diagnosis Requirements a. The beneficiary must have one of three medical conditions: congestive heart failure, chest pain, or asthma. b. Qualifying ICD-9-CM diagnosis codes must be reported in Form Locator (FL) 76, Patient Reason for Visit, or FL 67, principal diagnosis, or both in order for the hospital to receive separate payment for APC 0339. If a qualifying ICD-9-CM diagnosis code(s) is reported in the secondary diagnosis field, but is [[Page 42675]] not reported in either the Patient Reason for Visit field (FL 76) or in the principal diagnosis field (FL 67), separate payment for APC 0339 is not allowed. 2. Observation Time a. Observation time must be documented in the medical record. b. A beneficiary's time in observation (and hospital billing) begins with the beneficiary's admission to an observation bed. c. A beneficiary's time in observation (and hospital billing) ends when all clinical or medical interventions have been completed, including followup care furnished by hospital staff and physicians that may take place after a physician has ordered the patient be released or admitted as an inpatient. d. The number of units reported with HCPCS code G0378 must equal or exceed 8 hours. 3. Additional Hospital Services a. The claim for observation services must include one of the following services in addition to the reported observation services. The additional services listed below must have a line-item date of service on the same day or the day before the date reported for observation: An emergency department visit (APC 0609, 0613, 0614, 0615, or 0616); or A clinic visit (APC 0604, 0605, 0606, 0607, or 0608); or Critical care (APC 0617); or Direct admission to observation reported with HCPCS code G0379 (APC 0604). b. No procedure with a ``T'' status indicator can be reported on the same day or day before observation care is provided. 4. Physician Evaluation a. The beneficiary must be in the care of a physician during the period of observation, as documented in the medical record by admission, discharge, and other appropriate progress notes that are timed, written, and signed by the physician. b. The medical record must include documentation that the physician explicitly assessed patient risk to determine that the beneficiary would benefit from observation care. In the context of our proposed CY 2008 packaging approach, for several reasons we believe that it is appropriate to package payment for all observation services reported with HCPCS code G0378 under the CY 2008 OPPS. Primarily, observation services are ideal for packaging because they are always provided as a supportive service in conjunction with other independent separately payable hospital outpatient services such as an emergency department visit, surgical procedure, or another separately payable service, and thus observation costs can logically be packaged into OPPS payment for independent services. As discussed extensively earlier in this section, packaging payment into larger payment bundles creates incentives for providers to furnish services in the most efficient way that meets the needs of the patient, encouraging long-term cost containment. As we discussed in the general overview of the CY 2008 packaging approach earlier in this section (section II.A.4.b. of this proposed rule), there has been substantial growth in program expenditures for hospital outpatient services under the OPPS in recent years. The primary reason for this upsurge is growth in the intensity and utilization of services rather than the general price of services or enrollment changes. This observed trend is notably reflected in the frequency and costs of separately payable observation care for the last few years. While median costs for an episode of observation care that would meet the criteria for separate payment have remained relatively stable between CY 2003 and CY 2006, the frequency of claims for separately payable observation services has rapidly increased. Comparing claims data for separately payable observation care available for proposed rules spanning from CY 2005 to CY 2008 (that is, claims data reflecting services furnished from CY 2003 to CY 2006), we see substantial growth in separately payable observation care billed under the OPPS over that time. In CY 2003, the full first year when observation care was separately payable, there were approximately 56,000 claims for separately payable observation care. In CY 2004, there were approximately 77,000 claims for separately payable observation care. In CY 2005, that number increased to approximately 124,300 claims, representing about a 61 percent increase in one year. In addition, in the CY 2006 data available for this proposed rule, the frequency of claims for separately payable observation services increased again, to more than 271,200 claims, about a 118-percent increase over CY 2005 and more than triple the number of claims from 2 years earlier. While it is not possible to discern the specific factors responsible for the growth in claims for separately payable observation services, as there have been minor changes in both the process and criteria for separate payment for these services over this time period, the substantial growth by itself is noteworthy. We are also concerned that the current criteria for separate payment for observation services may provide disincentives for efficiency. In order for observation services to be separately payable, they must last at least 8 hours. While this criterion was put in place to ensure that separate payment is made only for observation services of a substantial duration, it may create a financial disincentive for an HOPD to make a timely determination regarding a patient's safe disposition after observation care ends. By packaging payment for all observation services, regardless of their duration, we would provide incentives for more efficient delivery of services and timely decision- making. The current criterion also prohibits separate payment for observation services when a ``T'' status procedure (generally a surgical procedure) is provided on the same day or the previous day by the HOPD to the same Medicare beneficiary. Again, this may create a financial disincentive for hospitals to provide minor surgical procedures during a patient's observation stay, unless those procedures are essential to the patient's care during that time period, even if the most efficient and effective performance of those procedures could be during the single HOPD encounter. Currently, the OPPS pays separately for observation care for only the three original medical conditions designated in CY 2002, specifically chest pain, asthma, and congestive heart failure. As discussed in more detail in the observation section (section XI.) of this proposed rule, the APC Panel recommended at its March 2007 meeting that we consider expanding separate payment for observation services to include two additional diagnoses, syncope and dehydration. As mentioned previously, we have defined observation care as a well-defined set of specific, clinically appropriate services, which include ongoing, short-term treatment, assessment, and reassessment, that are furnished while a decision is being made regarding whether a patient will require further treatment as a hospital inpatient or if the individual is able to be discharged from the hospital. Given the definition of observation services, it is clear that, in certain circumstances, observation care could be appropriate for patients with a range of diagnoses. Both the APC Panel and numerous commenters to prior OPPS proposed rules have confirmed their agreement with this perspective. In addition, the June 2006 [[Page 42676]] Institute of Medicine (IOM) Report entitled, ``Hospital-Based Emergency Care: At the Breaking Point,'' encourages hospitals to apply tools to improve the flow of patients through emergency departments, including developing clinical decisions units where observation care is provided. The IOM's Committee on the Future of Emergency Care in the United States Health System recommended that CMS remove the current limitations on the medical conditions that are eligible for separate observation care payment in order to encourage the development of such observation units. As packaging payment provides desirable incentives for greater efficiency in the delivery of health care and provides hospitals with significant flexibility to manage their resources, we believe it is most appropriate to treat observation care for all diagnoses similarly by packaging its costs into payment for the separately payable independent services with which the observation is associated. This consistent payment methodology would provide hospitals with the flexibility to assess their approaches to patient care and patient flow and provide observation care for patients with a variety of clinical conditions when hospitals conclude that observation services would improve their treatment of those patients. Approximately 70 percent of the occurrences of observation care billed under the OPPS are currently packaged, and this proposal would extend the incentives for efficiency already present for the vast majority of observation services that are already packaged under the OPPS to the remaining 30 percent of observation services for which we currently make separate payment. We have calculated the median costs on which the proposed CY 2008 payment rates are based according to our proposed packaging approach under which payment for HCPCS code G0378 would always be packaged (status indicator ``N''). As we discussed previously in more detail, in this section, this has the effect of both changing the median costs for the independent services into which the costs of the dependent and supportive observation services are packaged and also of redistributing payment that would otherwise have been made separately for the observation services we are proposing to newly package for CY 2008. For example, separately payable observation care is frequently billed with CPT code 99285 (Emergency department visit for the evaluation and management of a patient (Level 5)). In the CY 2008 OPPS proposed rule claims data, CPT code 99285 was billed 157,668 times on claims with HCPCS code G0378 that meet our current criteria for separate payment for observation care. In addition, about 57 percent of the claims for HCPCS code G0378 that meet our current criteria for separate payment also reported CPT code 99285. Under our proposed policy for CY 2008, we are proposing to package payment for HCPCS code G0378 into the payment for separately payable procedures that are provided in conjunction with HCPCS code G0378. Specifically, we would package payment for HCPCS code G0378 when it is provided with a separately paid service such as CPT code 99285, so that in this example observation would receive packaged payment through the separate OPPS payment for the Level 5 emergency department visit. CPT code 99285 is assigned to APC 0616 (Level 5 Emergency Visits), with a CY 2007 APC median cost of $323.36 and a proposed CY 2008 median cost of $344.50. The CY 2007 median cost of APC 0339 for separately payable observation is $440.22. The proposed CY 2008 payment rates associated with this example are outlined in Table 20 below. The table indicates that the proposed CY 2008 payment for a Level 5 emergency department visit is higher than the CY 2007 payment amount for that code. However, the proposed increase in the Level 5 emergency department visit payment rate for CY 2008 is significantly less than the CY 2007 payment for separately payable observation. This is due to the fact that, although observation services are commonly billed with a Level 5 emergency department visit, the proportion of all Level 5 emergency department visits that include observation (12 percent) is relatively small. Thus, when observation care that would have met the CY 2007 criteria for separate payment is packaged into payment for separately payable services such as a Level 5 emergency department visit, it raises the payment rate for that separately payable service for all occurrences of the service, even those occurrences where observation care is not provided. As a result, the payment rate for the separately payable service, the Level 5 emergency department visit, does not increase by the full amount of the former payment rate for separately payable observation care as that amount is spread over many more occurrences of Level 5 emergency department visits. In addition, OPPS' use of medians leads relative weight estimates to be less sensitive to packaging decisions. Table 20.--Example of the Effects of the CY 2008 Packaging Proposal on Payment for Observation Care (HCPCS Code G0378) and CPT Code 99295 ---------------------------------------------------------------------------------------------------------------- Sum of CY 2007 Sum of CY 2008 payment (some proposed HCPCS code Short descriptor G0378 paid payment (G0378 separately) packaged) ---------------------------------------------------------------------------------------------------------------- G0378 (under criteria for separately paid Hospital observation per hr $442.81 $0.00 observation care). (dependent service). 99285......................................... Emergency dept visit 325.26 348.81 (independent service). ------------------------------- Total Payment............................. ................................ 768.07 348.81 ---------------------------------------------------------------------------------------------------------------- This example cannot demonstrate the overall impact of packaging observation services on any given hospital because each individual hospital's case-mix and billing pattern would be different. The overall impact of packaging HCPCS code G0378, as well as all other packaging changes that we are proposing for CY 2008, can only be assessed in the aggregate for classes of hospitals. Section XXII.B. of this proposed rule displays the overall impact of APC weight recalibration and packaging changes that we are proposing by classes of hospitals, and the OPPS Hospital-Specific Impacts--Provider-Specific Data file presents our estimates of CY 2008 hospital payment [[Continued on page 42677]] From the Federal Register Online via GPO Access [wais.access.gpo.gov] ] [[pp. 42677-42726]] Medicare Program: Proposed Changes to the Hospital Outpatient Prospective Payment System and CY 2008 Payment Rates; Proposed Changes to the Ambulatory Surgical Center Payment System and CY 2008 Payment Rates; Medicare and Medicaid Programs: Proposed Changes to [[Page 42677]] [[Continued from page 42676]] [[Page 42677]] for those hospitals we include in our ratesetting and payment simulation database. The hospital-specific impact file can be found at http://www.cms.hhs.gov/HospitalOutpatientPPS/ under supporting documentation for this proposed rule. The estimated overall impact of these changes that we are proposing for CY 2008 presented in section XXII.B. of this proposed rule is based on the assumption that hospital behavior would not change with regard to when the dependent observation care is provided in the same encounter and by the same hospital that performs the independent services. To the extent that hospitals could change their behavior and cease providing observation services, refer patients elsewhere for that care, or increase the frequency of observation services, the data would show such a change in practice in future years and that change would be reflected in future budget neutrality adjustments. However, with respect to observation care, we believe that hospitals are limited in the extent to which they could change their behavior with regard to how they furnish these services because observation care, by definition, is short-term treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital after receiving the independent services. We believe it is unlikely that hospitals would cease providing medically necessary observation care or refer patients elsewhere for that care if they were unable to reach a decision that the patient could be safely discharged from the outpatient department. We would expect that hospitals would always bill the supportive observation care on the same claim as the other independent services provided in the single hospital encounter. As we indicated earlier, in all cases we are proposing that hospitals that furnish the observation care in association with independent services must bill those services on the same claim so that the costs of the observation care can be appropriately packaged into payment for the independent services. We expect to carefully monitor any changes in billing practices on a service-specific and hospital- specific basis to determine whether there is reason to request that QIOs review the quality of care furnished or to request that Program Safeguard Contractors review the claims against the medical record. In summary, we are proposing to package payment for all observation services reported with HCPCS code G0378 for CY 2008. Payment for observation services would be made as part of the payment for the separately payable independent services with which they are billed. As part of this proposal, we would change the status indicator for HCPCS code G0378 from ``Q'' to ``N.'' In addition, we would no longer require the current criteria for separate payment related to hospital visits and ``T'' status procedures, minimum number of hours, and qualifying diagnoses. However, we would retain as general reporting requirements those criteria related to physician evaluation, documentation, and observation beginning and ending time as listed in sections II.A.2.a., b., and c., and 4.a. and b. of this proposed rule. Those are more general requirements that encourage hospitals to provide medically reasonable and necessary care and help to ensure the proper reporting of observation services on correctly coded hospital claims that reflect the full charges associated with all hospital resources utilized to provide the reported services. d. Proposed Development of Composite APCs (1) Background As we discuss above in regard to our reasons for our proposed packaging approach for the CY 2008 OPPS, we believe that it is crucial that the payment approach of the OPPS create incentives for hospitals to seek ways to provide services more efficiently than exist under the current OPPS structure and allow hospitals maximum flexibility to manage their resources. The current OPPS structure usually provides payment for individual services which are generally defined by individual HCPCS codes. We currently package the costs of some items and services (such as drugs and biologicals with an average per day cost of less than $55) into the payment for separately payable individual services. However, because the extent of packaging in the OPPS is currently modest, furnishing many individual separately payable services increases total payment to the hospital. We believe that this aspect of the current OPPS structure is a significant factor in the growth in volume and spending that we discuss in our general overview and provides a primary rationale for our proposed packaging approach for services in the CY 2008 OPPS. While packaging payment for supportive dependent services into the payment for the independent services which they accompany promotes greater efficiency and gives hospitals some flexibility to manage their resources, we believe that payment for larger bundles of major separately paid services that are commonly performed in the same hospital outpatient encounter or as part of a multi-day episode of care would create even more incentives for efficiency, as discussed earlier. Moreover, defining the ``service'' paid under the OPPS by combinations of HCPCS codes for component services that are commonly performed in the same encounter and that result in the provision of a complete service would enable us to use more claims data and to establish payment rates that we believe more appropriately capture the costs of services paid under the OPPS. Section 1833(t)(1)(B) of the Act permits us to define what constitutes a ``service'' for purposes of payment under the OPPS and is not restricted to defining a ``service'' as a single HCPCS code. For example, the OPPS currently packages payment for certain items and services reported with HCPCS codes into the payment for other separately payable services on the claim. Consistent with our statutory flexibility to define what constitutes a service under the OPPS, we are proposing to view a service, in some cases, as not just the diagnostic or treatment modality identified by one individual HCPCS code but as the totality of care provided in a hospital outpatient encounter that would be reported with two or more HCPCS codes for component services. In view of this statutory flexibility to define what constitutes a ``service'' for purposes of OPPS payment, our desire to encourage efficiency in HOPD care, our focus on value-based purchasing, and our desire to use as much claims data as possible to set payment rates under the OPPS, we examined our claims data to determine how we could best use the multiple procedure claims (``hardcore'' multiples) that are otherwise not available for ratesetting because they include multiple separately payable procedures furnished on the same date of service. As discussed in more detail in our discussion of single and multiple procedure claims in section II.A.1.b. of this proposed rule, we have focused in recent years on ways to convert multiple procedure claims to single procedure claims to maximize our use of the claims data in setting median costs for separately payable procedures. We have been successful in using the bypass list to generate ``pseudo'' single procedure claims for use in median setting, but this approach generally does not enable us to use the hardcore multiple claims that contain multiple separately payable [[Page 42678]] procedures, all with associated packaging that cannot be split among them. We believe that we could use the data from many more multiple procedure claims by creating APCs for payment of those services defined as frequently occurring common combinations of HCPCS codes for component services that we see in correctly coded multiple procedure claims. Our examination of data for multiple procedure claims identified two specific sets of services that we believe are good candidates for payment based on the naturally occurring common combinations of component codes that we see on the multiple procedure claims. These are low dose rate (LDR) prostate brachytherapy and cardiac electrophysiologic evaluation and ablation services. Specifically, we have been told (and our data support) that claims for LDR prostate brachytherapy, when correctly coded, report at least two major separately payable procedure codes the majority of the time. For reasons discussed below, we are proposing to use these correctly coded claims that would otherwise be unusable hardcore multiples as the basis for an encounter-based composite APC that would make a single payment when both codes are reported with the same date of service. We also are proposing to pay separately for these procedure codes in cases where only one of the two procedures is provided in a hospital encounter, through the APC associated with that component procedure code that is furnished. Similarly, we have been told (and our data support) that multiple cardiac electrophysiologic evaluation, mapping, and ablation services are typically furnished on the same date of service and that the correctly coded claims are typically the multiple procedure claims that include several component services and that we are unable to use in our current claims process. The CY 2007 CPT book introductory discussion in the section entitled ``Intracardiac Electrophysiological Procedures/ Studies'' notes that, in many circumstances, patients with arrhythmias are evaluated and treated at the same encounter. Therefore, as discussed in detail below, we are also proposing to establish an encounter based composite APC for these services that would provide a single payment for certain common combinations of component cardiac electrophysiologic services that are reported on the same date of service. These composite APCs reflect an evolution in our approach to payment under the OPPS. Where the claims data show that combinations of services are commonly furnished together, in the future we will actively examine whether it would be more appropriate to establish a composite APC under which we would pay a single rate for the service reported with a combination of HCPCS codes on the same date of service (or different dates of service) than to continue to pay for these individual services under service-specific APCs. We are proposing these specific encounter-based composite APCs for CY 2008 because we believe that this approach could move the OPPS toward possible payment based on an encounter or episode-of-care basis, enable us to use more valid and complete claims data, create hospital incentives for efficiency, and provide hospitals with significant flexibility to manage their resources that do not exist when we pay for services on a per service basis. As such, these proposed composite APCs may serve as a prototype for future creation of more composite APCs, through which we could provide OPPS payment for other types of services in the future. We note that while these proposed composite APCs for CY 2008 are based on observed combinations of component HCPCS codes reported on the same date of service for a single encounter, we also will be exploring in the future how we could set payments based on episodes of care involving services that extend beyond the same date but which are all supportive of a single, related course of treatment. While we are not proposing to implement multi-day episode-of-care APCs in CY 2008, we welcome comments on the concept of developing these APCs to provide payment for such episodes in order to inform our future analyses in this area. While we have never previously used the term ``composite'' APC under the OPPS, we do have one historical payment policy that resembles the CY 2008 proposed composite APC policy. Since the inception of the OPPS, CMS has limited the aggregate payment for specified less intensive mental health services furnished on the same date to the payment for a day of partial hospitalization, which we considered to be the most resource intensive of all outpatient mental health treatment (65 FR 18455). The costs associated with administering a partial hospitalization program represent the most resource intensive of all outpatient mental health treatment, and we do not believe that we should pay more for a day of individual mental health services under the OPPS. Through the OCE, when the payment for specified mental health services provided by one hospital to a single beneficiary on one date of service based on the payment rates associated with the APCs for the individual services would exceed the per diem partial hospitalization payment (listed as APC 0033 (Partial Hospitalization)), those specified mental health services are assigned to APC 0034, which has the same payment rate as APC 0033, and the hospital is paid one unit of APC 0034. This longstanding policy regarding payment of APC 0034 for combinations of independent services provided in a single hospital encounter resembles the payment policy for composite APCs that we are proposing for LDR prostate brachytherapy and cardiac electrophysiologic evaluation and ablation services for CY 2008. Similar to the logic for the proposed composite APCs, the OCE determines whether to pay these specified mental health services individually or to make a single payment at the same rate as the per diem rate for partial hospitalization for all of the specified mental health services furnished on that date of service. However, we note this established policy for payment of APC 0034 differs from the proposed policies for the new CY 2008 composite APCs because APC 0034 is only paid if the sum of the individual payment rates for the specified mental health services provided on one date of service exceeds the APC 0034 payment rate, which equals the per diem rate of APC 0033 for partial hospitalization. We are not proposing to change this mental health services payment policy for CY 2008. However, we are proposing to change the status indicator from ``S'' to ``Q'' for the HCPCS codes for the specified mental health services to which APC 0034 applies because those codes are conditionally packaged when the sum of the payment rates for the single code APCs to which they are assigned exceeds the per diem payment rate for partial hospitalization. While we have not published APC 0034 in Addendum A in the past, we are including it in Addendum A to this proposed rule entitled ``Mental Health Composite,'' consistent with our naming taxonomy and publication of the two other proposed composite APCs. We are also including the mental health composite APC 0034 and its member HCPCS codes in Addendum M to this proposed rule in the same way that we show the HCPCS codes to which the LDR Prostate Brachytherapy Composite APC and Cardiac Electrophysiologic Evaluation and Ablation Composite APC apply. [[Page 42679]] In summary, we are not proposing a change to the longstanding payment policy under which the OPPS pays one unit of APC 0034 in cases in which the total payments for specified mental health services provided on the same date of service would otherwise exceed the payment rate for APC 0033. However, we are proposing to change the status indicator to ``Q'' for the HCPCS codes for mental health services to which this policy applies and which comprise this existing composite APC, because payment for these services would be packaged unless the sum of the individual payments assigned to the codes would be less than the payment for APC 0034. We look forward to public comments on the concept of composite APCs in general and, specifically, the two new proposed encounter-based composite APCs for CY 2008, and we hope to involve the public and the APC Panel in the creation of additional composite APCs. Our goal would be to use the many naturally occurring multiple procedure claims that cannot currently be incorporated under the existing APC structure, regardless of whether the naturally occurring pattern of multiple procedure claims prevents the development of single bills. (2) Proposed Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (a) Background LDR prostate brachytherapy is a treatment for prostate cancer in which needles or catheters are inserted into the prostate, and then radioactive sources are permanently implanted into the prostate through the hollow needles or catheters. The needles or catheters are then removed from the body, leaving the radioactive sources in the prostate forever, where they slowly give off radiation to destroy the cancer cells until the sources are no longer radioactive. At least two CPT codes are used to report the composite treatment service because there are separate codes that describe placement of the needles or catheters and application of the brachytherapy sources. LDR prostate brachytherapy cannot be furnished without the services described by both of these codes. Generally, the component services represented by both codes occur in the same operative session in the same hospital on the same date of service. However, we have been told of uncommon cases in which they are furnished in different locations, with the patient being transported from one location to another for application of the sources. In addition, other services, commonly CPT code 76965 (Ultrasonic guidance for interstitial radioelement application) and CPT code 77290 (Therapeutic radiology simulation-aided field setting; complex) are often provided in the same hospital encounter. CPT code 55875 (Transperineal placement of needles or catheters into prostate for interstitial radioelement application, with or without cystoscopy) reports the placement of the needles or catheters for services furnished on or after January 1, 2007. Before this date, including in the claims for services furnished in CY 2006 that were used to develop this proposed rule, CPT code 55859 (Transperineal placement of needles or catheters into prostate for interstitial radioelement application, with or without cystoscopy) reported this service. All of the claims for CPT code 55859 (as reported in the CY 2006 claims data) are for the placement of needles or catheters for prostate brachytherapy, although not all are related to permanent brachytherapy source application. CPT code 77778 (Interstitial radiation source application; complex) reports the application of brachytherapy sources and, when billed with CPT code 55859 (or CPT code 55875 after January 1, 2007) for the same encounter, reports placement of the sources in the prostate. We have been told that application of brachytherapy sources to the prostate is estimated to be about 85 percent of all occurrences of CPT code 77778 under the OPPS, consistent with our CY 2006 claims data used for CY 2008 ratesetting. CPT code 77778 is also used to report the application of sources of brachytherapy to body sites other than the prostate. Historical coding, APC assignments, and payment rates for CPT codes 55859 (CPT code 55875 beginning in CY 2007) and 77778 are shown below in Table 21. Table 21.--Historical Payment Rates for Complex Interstitial Application of Brachytherapy Sources -------------------------------------------------------------------------------------------------------------------------------------------------------- Payment rate for APC for Payment rate APC for OPPS CY Combination APC CPT code HCPCS code for CPT codes HCPCS code Brachytherapy source 77778 77778 55859/55875 55859 -------------------------------------------------------------------------------------------------------------------------------------------------------- 2000.................................... N/A........................ $198.31 APC 0312 $848.04 APC 0162 Pass-through. 2001.................................... N/A........................ 205.49 APC 0312 878.72 APC 0162 Pass-through. 2002.................................... N/A........................ 6,344.67 APC 0312 2,068.23 APC 0163 Pass-through with pro rata reduction. 2003 (prostate brachytherapy with iodine G0261, APC 648, $5,154.34.. n/a n/a n/a n/a Packaged. sources). 2003 (prostate brachytherapy with G0256, APC 649, $5,998.24.. n/a n/a n/a n/a Packaged. palladium sources). 2003 (not prostate brachytherapy, not N/A........................ 2,853.58 APC 0651 1,479.60 APC 0163 Separate payment based on including sources). scaled median cost per source. 2004.................................... N/A........................ 558.24 APC 0651 1,848.55 APC 0163 Cost. 2005.................................... N/A........................ 1,248.93 APC 0651 2,055.63 APC 0163 Cost. 2006.................................... N/A........................ 666.21 APC 0651 1,993.35 APC 0163 Cost. 2007.................................... N/A........................ 1,035.50 APC 0651 2,146.84 APC 0163 Cost. -------------------------------------------------------------------------------------------------------------------------------------------------------- Payment rates for CPT code 77778, in particular, have fluctuated over the years. We have frequently been informed by the public that reliance on single procedure claims to set the median costs for these services results in use of only incorrectly coded claims for LDR prostate brachytherapy because, for application of brachytherapy sources to the prostate, a correctly coded claim is a multiple procedure claim. Specifically, we have been informed that a correctly coded claim for LDR prostate brachytherapy should include, for the same date of service, both CPT [[Page 42680]] codes 55859 and 77778, brachytherapy sources reported with Level II HCPCS codes, and typically separately coded imaging and radiation therapy planning services, and that we should use correctly coded claims to set the median for APC 0651 (Complex Interstitial Radiation Source Application) in particular (where CPT code 77778 is assigned). In presentations to the APC Panel in its March 2006 meeting, and in response to the CY 2006 and CY 2007 OPPS proposed rules, commenters urged us to set the payment rate for LDR prostate brachytherapy services using only multiple procedure claims. Specifically for CY 2007, they urged us to sum the costs on multiple procedure claims containing CPT codes 77778 and 55859 (and no other separately payable services not on the bypass list) and, excluding the costs of sources, split the resulting aggregate median cost on the multiple procedure claim according to a preestablished attribution ratio between CPT codes 77778 and 55859. They indicated that any claim for a brachytherapy service that did not also report a brachytherapy source should be considered to be incorrectly coded and thus not reflective of the hospital's resources required for the interstitial source application procedure. The presenters to the APC Panel believed that claims that did not contain both brachytherapy source and source application codes should be excluded from use in establishing the median cost for APC 0651. They believed that hospitals that reported the brachytherapy sources on their claims were more likely to report complete charges for the associated brachytherapy source application procedure than hospitals that did not report the separately payable brachytherapy sources. As a result of those comments, for both CY 2006 and CY 2007, we used multiple procedure claims containing both CPT codes 55859 and 77778 to determine a median cost for the totality of both services (with both packaging and bypassing of the other commonly furnished services). We compared the median calculated from this subset of claims reflecting the most common clinical scenario to the single bill median costs for CPT codes 55859 and 77778 as a method of determining whether the total payment to the hospital for both services furnished to provide LDR prostate brachytherapy would be reasonable. In both years, we found that the sum of the single bill medians was reasonably close to the median cost of both services from multiple claims when they were treated as a single procedure and the supporting services were either packaged or bypassed for purposes of calculating the median for the combined pair of codes. (We refer readers to the CY 2006 final rule with comment period (70 FR 68596) and the CY 2007 final rule with comment period (71 FR 68043) for specific discussion of these findings.) Hence, we concluded that the single bill median costs were reasonable and, for both the CY 2006 OPPS and CY 2007 OPPS, we based payment for CPT codes 55859 and 77778 on single procedure claims. (b) Proposed Payment for LDR Prostate Brachytherapy For the CY 2008 OPPS, we are proposing to create a composite APC 8001, titled ``LDR Prostate Brachytherapy Composite,'' that would provide one bundled payment for LDR prostate brachytherapy when the hospital bills both CPT codes 55875 and 77778 as component services provided during the same hospital encounter. It is shown in Addendum A to this proposed rule as APC 8001 (LDR Prostate Brachytherapy Composite). As discussed in detail in section VII. of this proposed rule, we are proposing to continue to pay sources of brachytherapy separately in accordance with the requirements of the statute. In the CY 2006 claims used to calculate the proposed CY 2008 median costs, CPT code 55859 was reported 14,083 times. The proposed rule median cost for CPT code 55859, calculated from 2,232 single and ``pseudo'' single bills, is $2,328.56. The CY 2008 proposed rule median cost for APC 0163 (Level IV Cystourethroscopy and other Genitourinary Procedures) to which CPT code 55859 was assigned for CY 2006 and to which CPT code 55875 is assigned for CY 2007 is $2,322.30. In the set of claims used to calculate the median cost for APC 0651, to which CPT code 77778 is the only assigned service, CPT code 77778 was reported 11,850 times. The CY 2008 proposed rule median cost for APC 0651 (and, therefore, for CPT code 77778) based on 339 single and ``pseudo'' single procedure bills is $969.73. In examining the claims data used to calculate the median costs for this proposed rule, we found 9,807 claims on which both CPT code 55859 and CPT code 77778 were billed on the same date of service. These data suggest that LDR prostate brachytherapy constituted at least 70 percent of CY 2006 claims for CPT code 55859, with the remainder of claims representing the insertion of needles or catheters for high dose rate prostate brachytherapy or unusual clinical situations where the LDR sources were not applied in the same operative session as the insertion of the needles or catheters. These data are consistent with our understanding of current clinical practice for prostate brachytherapy, and we believe that those multiple claims are correctly coded claims for this common clinical scenario. Similarly, 83 percent of the claims for complex interstitial brachytherapy source application CPT code 77778 also included the CPT code for inserting needles or catheters into the prostate, consistent with our understanding that the vast majority of cases of complex interstitial brachytherapy source application procedures are specifically for the treatment of prostate cancer, rather than other types of cancer. Using the proposed packaging approach for imaging supervision and interpretation services and guidance services for CY 2008, we were able to identify 1,343 claims, 14 percent of all OPPS claims that reported these two procedures on the same date, that contain both CPT codes 55859 and 77778 on the same date of service and no other separately paid procedure code. We were not able to use more claims to develop this composite APC median cost because there are several radiation therapy planning codes that are commonly reported with CPT codes 55859 and 77778 and that are both separately paid and not on the bypass list because the amount of their associated packaging exceeds the threshold for inclusion on the bypass list. A complete discussion of the bypass list under our CY 2008 packaging proposal is provided in section II.A. of this proposed rule. We packaged the costs of packaged revenue codes and packaged HCPCS codes into the sum of the costs for CPT codes 55859 and 77778 to derive a total proposed median cost of $3,127.35 for the composite LDR prostate brachytherapy service based upon the 1,343 claims that contained both CPT codes and no other separately paid procedure codes. This is reasonably comparable to $3,298.29, the sum of the CPT median costs we calculated using the single procedure bills for CPT codes 55859 and 77778 (($2,328.56 plus $969.73). We believe that the difference between the composite APC median cost based upon those claims that contain both codes and the sum of the median costs for the APCs to which the two individual CPT codes map is minimal and may be attributable to efficiencies in furnishing the services together during a single encounter. [[Page 42681]] We believe that creation of the composite APC for the payment of LDR prostate brachytherapy is consistent with the statute and with our desire to use more claims data for ratesetting, particularly data from correctly coded claims that reflect typical clinical practice, and to make payment for larger packages and bundles of services to provide enhanced incentives for efficiency and cost containment under the OPPS and to maximize hospital flexibility in managing resources. Under our proposal, hospitals that furnish LDR prostate brachytherapy would report CPT codes 55875 and 77778 and the codes for the applicable brachytherapy sources in the same manner that they currently report these items and services (in addition to reporting any other services provided), using the same HCPCS codes and reporting the same charges. We would require that hospitals report both CPT codes resulting in the composite APC payment on the same claim when they are furnished to a single Medicare beneficiary in the same facility on the same date of service, and we would make any necessary conforming changes to the billing instructions to ensure that they do not present an obstacle to correct reporting. We may implement edits to ensure that hospitals do not submit two separate claims for these two procedures when furnished on the same date in the same facility. When this combination of codes is reported, the OCE would assign the composite APC 8001 and the Pricer would pay based on the payment rate for the composite APC. The OCE would assign APC 0163 or APC 0651 only when both codes are not reported on the same claim with the same date of service, and we would expect this to be the atypical case. The composite APC would have a status indicator of ``T'' so that payment for other procedures also assigned to status indicator ``T'' with lower payment rates would be reduced by 50 percent when furnished on the same date of service as the composite service, in order to reflect the efficiency that occurs when multiple procedures are furnished to a Medicare beneficiary in a single operative session. We would not expect that the composite APC payment would be commonly reduced because we believe that it is unlikely that a higher paid procedure would be performed on the same date. We are proposing to continue to establish separate payment rates for APC 0651 (to which only CPT code 77778 is assigned) and for APC 0163 (to which we are proposing to continue to assign CPT code 55875). In some cases, CPT 55875 may be reported for the insertion of needles or catheters for high dose rate prostate brachytherapy, and the low dose rate brachytherapy source application procedure (CPT code 77778) would not be reported. In high dose rate prostate brachytherapy, the sources are applied temporarily several times over a few days while the needles or catheters remain in the prostate, and the needles or catheters are removed only after all the treatment fractions have been completed. We have also been told by hospitals that, even when LDR prostate brachytherapy is planned, there are occasions in which the needles or catheters are inserted in one facility and the patient is moved to another facility for the application of the sources. In those cases, we would need to be able to appropriately pay the hospital that inserted the needles or catheters before the patient was discharged prior to source application. Moreover, there are cases in which the needles or catheters are inserted but it is not possible to proceed to the application of the sources and, therefore, the hospital would correctly report only CPT code 55875. Similarly, more than 10 brachytherapy sources can be applied interstitially (as described by CPT code 77778) to sites other than the prostate and it is, therefore, necessary to have a separate payment rate for CPT code 77778. Hence, for CY 2008 we are proposing to continue to pay for CPT code 55875 (the successor to CPT code 55859) through APC 0163 and to pay for CPT code 77778 through APC 0651 when the services are individually furnished other than on the same date of service in the same facility. In summary, we are proposing to establish a composite APC, shown in Addendum A as APC 8001, to provide payment for LDR prostate brachytherapy when the composite service, billed as CPT codes 55875 and 77778, is furnished in a single hospital encounter and to base the payment for the composite APC on the median cost derived from claims that contain both codes. These two CPT codes are assigned to status indicator ``Q'' in Addendum B to this proposed rule to signify their conditionally packaged status, and their composite APC assignments are noted in Addendum M. This proposal would permit us to base payment on claims for the most common clinical scenario for interstitial radiation source application to the prostate. We note that this payment bundle would also include payment for the commonly associated imaging guidance services, which would be newly packaged under our proposed CY 2008 packaging approach. Most importantly, this composite APC payment methodology that we are proposing would contribute to our goal of providing payment under the OPPS for a larger bundle of component services provided in a single hospital outpatient encounter, creating additional hospital incentives for efficiency and cost containment, while providing hospitals with the most flexibility to manage their resources. (3) Proposed Cardiac Electrophysiologic Evaluation and Ablation Composite APC (a) Background During its March 2007 meeting, members of the APC Panel indicated that the reason we found so few single bills for procedures assigned to APC 0087 (Cardiac Electrophysiologic Recording/Mapping), specifically 72 of 11,834 or 0.61 percent of all proposed rule CY 2006 claims, is that most of the services assigned to APCs 0085 (Level II Electrophysiologic Evaluation), 0086 (Ablate Heart Dysrhythm Focus), and 0087 are performed in varying combinations with one another. Therefore, correctly coded claims would most often include multiple codes for component services that are reported with different CPT codes and that are now paid separately through different APCs. There would never be many single bills and those that are reported as single bills would likely represent atypical cases or incorrectly coded claims. We examined the combinations of services observed in our claims data across these three APCs to see whether there was the potential for handling the data differently so that we could use more claims data to set the payment rates for these procedures, particularly those services assigned to APC 0087 where we have had a persistent concern regarding the limited and reportedly unrepresentative single bills available for use in calculating the median cost according to our standard OPPS methodology. We initially developed and examined frequency distributions of unique combinations of codes on claims which contained at least one unit of any code assigned to APC 0085, 0086, or 0087 and then broadened these analysis to any combination of an electrophysiologic evaluation and ablation code. Our initial frequency distributions supported the APC Panel members' description of their experiences. We identified and enumerated the most commonly appearing unique occurrences (either single procedures or combinations) of codes for services [[Page 42682]] assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X'' that contained at least one code assigned to APC 0085, 0086, or 0087. There were 7,379 claims in the top 100 occurrence types. Table 22 shows the 10 most common unique occurrences from CY 2006 claims available for this proposed rule. Table 22.--Ten Most Frequently Occurring Unique Occurrences of Cardiac Electrophysiologic Evaluation, Mapping, and Ablation Procedures and Other Separately Payable Services ---------------------------------------------------------------------------------------------------------------- CY 2007 CY 2007 Combination number Frequency HCPCS code Short descriptor APC SI ---------------------------------------------------------------------------------------------------------------- 1................................... 763 93620 Electrophysiology 0085 T evaluation. 2................................... 509 93609 Map tachycardia, add-on.... 0087 T 93620 Electrophysiology 0085 T evaluation. 93621 Electrophysiology 0085 T evaluation. 93623 Stimulation, pacing heart.. 0087 T 93651 Ablate heart dysrhythm 0086 T focus. 3................................... 398 93609 Map tachycardia, add-on.... 0087 T 93620 Electrophysiology 0085 T evaluation. 93621 Electrophysiology 0085 T evaluation. 93651 Ablate heart dysrhythm 0086 T focus. 4................................... 381 93650 Ablate heart dysrhythm 0086 T focus. 5................................... 376 93620 Electrophysiology 0085 T evaluation. 93623 Stimulation, pacing heart.. 0087 T 6................................... 248 93005 Electrocardiogram, tracing. 0099 S 93609 Map tachycardia, add-on.... 0087 T 93620 Electrophysiology 0085 T evaluation. 93621 Electrophysiology 0085 T evaluation. 93623 Stimulation, pacing heart.. 0087 T 93651 Ablate heart dysrhythm 0086 T focus. 7................................... 225 93005 Electrocardiogram, tracing. 0099 S 93609 Map tachycardia, add-on.... 0087 T 93620 Electrophysiology 0085 T evaluation. 93621 Electrophysiology 0085 T evaluation. 93651 Ablate heart dysrhythm 0086 T focus. 8................................... 225 93613 Electrophys map 3d, add-on. 0087 T 93620 Electrophysiology 0085 T evaluation. 93621 Electrophysiology 0085 T evaluation. 93651 Ablate heart dysrhythm 0086 T focus. 9................................... 217 93005 Electrocardiogram, tracing. 0099 S 93620 Electrophysiology 0085 T evaluation. 10.................................. 185 93613 Electrophys map 3d, add-on. 0087 T 93620 Electrophysiology 0085 T evaluation. 93621 Electrophysiology 0085 T evaluation. 93623 Stimulation, pacing heart.. 0087 T 93651 Ablate heart dysrhythm 0086 T focus. ---------------------------------------------------------------------------------------------------------------- Although the number of claims for each unique occurrence was modest, we were able to determine that there were certain combinations of codes that occurred most often together. Based on our review of the most frequently occurring combinations of codes on claims that also contained at least one code assigned to APC 0085, 0086 or 0087 and our clinical review of the codes, we proceeded to study combination claims that contained at least one code from group A for evaluation services and at least one code from group B for ablation services reported on the same date of service on an individual claim, as specified in Table 23 below. Table 23.--Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures for Further Analysis ------------------------------------------------------------------------ Codes used in combinations: at least one in Group A and one in HCPCS code CY 2007 APC CY 2007 Group B SI ------------------------------------------------------------------------ Group A: Electrophysiology evaluation... 93619 0085 T Electrophysiology evaluation... 93620 0085 T Group B: Ablate heart dysrhythm focus... 93650 0086 T Ablate heart dysrhythm focus... 93651 0086 T Ablate heart dysrhythm focus... 93652 0086 T ------------------------------------------------------------------------ When we studied claims that contained a code in group A and also a code in group B, we found that there were 5,118 claims that met these criteria, and that of these 5,118 claims, 4,552 (89 percent) contained both CPT code 93620 (Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple [[Page 42683]] electrode catheters with induction or attempted induction of arrhythmia; with right atrial pacing and recording, right ventricular pacing and recording, His bundle recording) from APC 0085 and CPT code 93651 (Intracardiac catheter ablation of arrhythmogenic focus; for treatment of supraventricular tachycardia by ablation of fast or slow atrioventricular pathways, accessory atrioventricular connections or other atrial foci, singly or in combination) from APC 0086 with the same date of service. Given that CPT code 93651 had a total frequency of 8,091, this means that more than 55 percent of the claims for CPT code 93651 also contained CPT code 93620. CPT code 93620 had a total frequency of 12,624, approximately 50 percent higher than the total frequency for CPT code 93651, which is consistent with our expectations because CPT code 93620 describes a diagnostic service and CPT code 93651 is a treatment service that may be provided based upon the findings of the evaluation described by CPT code 93620. In addition to the codes for group A and group B services, the combination claims also contained costs for packaged services that were reported under revenue codes without HCPCS codes and under packaged HCPCS codes. As we discuss in considerable detail above, we lack a methodology that could be used to allocate these packaged costs to major separately paid procedures in a manner which gives us confidence that the costs would be attributed correctly. We have explored and will continue to explore an alternative strategy that would enable us to use these correctly coded multiple procedure claims for ratesetting. In our review of these claims, not only did we find a high number of claims on which there was one code from group A and one code from group B, but we also found that claims for procedures assigned to APC 0087 for CY 2007 usually appeared on claims that contained a code from APC 0085 or APC 0086, or both. The most frequently appearing CPT codes that were assigned to APC 0087 for CY 2007 were, as shown above, 93609 (Intraventricular and/or intra-atrial mapping of tachycardia site(s), with catheter manipulation to record from multiple sites to identify origin of tachycardia (List separately in addition to code for primary procedure)), 93613 (Intracardiac electrophysiologic 3-dimensional mapping (List separately in addition to code for primary procedure)), 93621 (Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of arrhythmia; with left atrial pacing and recording from coronary sinus or left atrium (List separately in addition to code for primary procedure)), 93622 (Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of arrhythmia; with left ventricular pacing and recording (List separately in addition to code for primary procedure)), and 93623 (Programmed simulation and pacing after intravenous drug infusion (List separately in addition to code for primary procedure)). These codes are all CPT add-on codes that CPT indicates are to be reported in addition to the code for the primary procedure. Our clinical review of the services described by these five CPT codes determined that they are supportive dependent services that are provided most often as supplemental to procedures assigned to APCs 0085 and 0086. The procedures in APCs 0085 and 0086 can be performed without these supportive add-on procedures, but these dependent services cannot be done except as a supplement to another electrophysiologic procedure. Therefore, we are proposing to unconditionally package all of these five CPT codes under the grouping of intraoperative services for the CY 2008 OPPS. We discuss the packaging of intraoperative services in general, including these services, above. However, packaging these supportive ancillary services that are so often reported with the cardiac electrophysiologic evaluation and ablation services does not enable us to use many more claims because, as we noted previously, the claims on which these codes most commonly appeared typically also contained at least one separately paid code from APC 0085 and one code from APC 0086. Although the most common combination of codes from APCs 0085 and 0086 is the pair of CPT codes 93620 and 93651, there are numerous other combinations of services from APCs 0085 and 0086 that are performed and, while not as frequent, these combinations are also reflected in the multiple claims. In order to use more claims and adequately reflect the varied, common combinations of electrophysiologic evaluation and ablation CPT codes, we calculated a composite median cost from all claims containing at least one code from group A and at least one code from group B as if they were a single service. We selected multiple procedure claims that contained at least one code in group A and one code in group B on the same date of service and calculated a median cost from the total costs on these claims. Some claims had more than one code from each group. Although the claim was required to contain at least one code from each group to be included, the claim could also contain any number of codes from either group and any number of units of those codes. In addition, the costs of the five supportive intraoperative services previously assigned to APC 0087 that we identify above were packaged, as well as the costs of the other items and services proposed to be packaged for the CY 2008 OPPS. This selection process yielded 5,118 claims to use for the calculation. The proposed composite median cost for these claims using the CY 2008 proposed rule data is $8,528.83. We believe that this cost is attributable largely to the 4,552 claims that contain one unit each of CPT code 93620 and CPT code 93651 (and some unknown numbers and combinations of packaged services). In comparison, the sum of the CY 2008 proposed rule CPT code median costs for CPT code 93620 (which is $3,111.76) and CPT code 93651 (which is $5,643.95) is $8,755.71. If the 50 percent multiple procedure discount is applied to the CPT code median cost for the lower cost procedure based on its assignment to an APC with a ``T'' status, the adjusted sum of the median costs is $7,199.83 ($5,643.95 + $1,555.88). These medians were calculated using only claims that contain correct devices and do not contain token charges or the ``FB'' modifier. We believe the significant positive difference between the composite and discounted costs still reflects efficiencies, as the sum of the discounted median costs does not take into account the cost of other procedures also provided that are assigned to APCs 0085 and 0086, while the composite median cost of $8,528.83 does, to some extent, reflect the cost of other multiple procedures in APCs 0085 and 0086 that were also reported on the claims used to develop the composite median cost. In addition, these two calculations are based upon two different sets of claims, single procedure claims in one case (which do not represent the way the service is typically furnished) and the specified subset of clinically common combination claims in the second case. Moreover, while the 50 percent multiple procedure reduction is our best aggregate estimate of the overall degree of efficiency applicable to multiple surgeries, it may or may not be specifically appropriate to this particular combination of procedures. [[Page 42684]] By selecting the multiple procedure claims that contained at least one code in each group, we were able to use many more claims than were available to establish the individual APC medians. The percents by CPT code for the composite configuration below in Table 24 represent the sum of the frequency of single bills used to set the medians for APCs 0085 and 0086 with packaging of the five intraoperative services and the frequency of multiple bills used to set the medians for the composite claims containing at least one code from each group and with packaging of the costs of the five intraoperative services, divided by the total frequency of each CPT code. Table 24.--Percentage of Claims Used To Calculate Median Costs for Cardiac Electrophysiologic Evaluation and Ablation Procedures ---------------------------------------------------------------------------------------------------------------- Standard configuration Composite (with packaging of configuration intraoperative services) (with -------------------------- packaging of intra- operative Codes used in combinations: at least HCPCS code Proposed CY SI services) one in group A and one in Group B 2008 APC CPT Overall APC -------------- percentage percentage CPT of single of single percentage of claims claims single and combination claims ---------------------------------------------------------------------------------------------------------------- Group A: Electrophysiology evaluation..... 93619 0085 T..... 38.99 25.47 63.96 Electrophysiology evaluation..... 93620 0085 T..... 22.30 25.47 61.77 Group B: Ablate heart dysrhythm focus..... 93650 0085 T..... 39.58 25.47 52.50 Ablate heart dysrhythm focus..... 93651 0086 T..... 4.59 4.68 63.30 Ablate heart dysrhythm focus..... 93652 0086 T..... 7.53 4.68 58.78 ---------------------------------------------------------------------------------------------------------------- Moreover, by packaging CPT codes 93609, 93613, 93621, 93622, and 93623, we use many more of the claims for these codes from the most common clinical scenarios than would otherwise be possible if the supportive intraoperative services were separately paid. Wherever any of these codes appears on a claim that can be used for median setting, the cost data for these codes are packaged in the calculation of the median cost for the separately paid services on the claim. (b) Proposed Payment for Cardiac Electrophysiologic Evaluation and Ablation In view of our findings with regard to how often the codes in groups A and B appear together on the same claim, we are proposing to establish one composite APC, shown in Addendum A as APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite), for CY 2008 that would pay for a composite service made up of any number of services in groups A and B when at least one code from group A and at least one code from group B appear on the same claim with the same date of service. The five CPT codes involved in this composite APC are assigned to status indicator ``Q'' in Addendum B to this proposed rule to identify their conditionally packaged status, and their composite APC assignments are identified in Addendum M. We are proposing to use the composite median cost of $8,528.83 as the basis for establishing the relative weight for this newly created APC for the composite electrophysiologic evaluation and ablation service. Under this composite APC, unlike most other APCs, we would make a single payment for all services reported in groups A and B. We are proposing that hospitals would continue to code using CPT codes to report these services and that the OCE would recognize when the criteria for payment of the composite APC are met and would assign the composite APC instead of the single procedure APCs as currently occurs. The Pricer would make a single payment for the composite APC that would encompass the program payment for the code in group A, the code in group B, and any other codes reported in groups A or B, as well as the packaged services furnished on the same date of service. The proposed composite APC would have a status indicator of ``T'' so that payment for other procedures also assigned to status indicator ``T'' with lower payment rates would be reduced by 50 percent when furnished on the same date of service as the composite service, in order to reflect the efficiency that occurs when multiple procedures are furnished to a Medicare beneficiary in a single operative session. We would not expect that the proposed composite APC payment would be commonly reduced because we believe that it is unlikely that a higher paid procedure would be performed on the same date. We are proposing to continue to pay separately for other separately paid services that are not reported under the codes in groups A and B (such as chest x-rays and electrocardiograms). Moreover, where a service in group A is furnished on a date of service that is different from the date of service for a code in group B for the same beneficiary, we are proposing that payments would be made under the single procedure APCs and the composite APC would not apply. Given our CY 2008 proposal to unconditionally package payment for five cardiac electrophysiologic CPT codes as members of the category of intraoperative services that were previously assigned to APCs 0085 and 0087, we are also proposing to reconfigure APCs 0084 through 0087, where many of the cardiac electrophysiologic procedures that will be separately paid when they are not paid according to the composite APC are assigned. Specifically, we are proposing to discontinue APC 0087, and reconfigure APCs 0084, 0085, and 0086, with proposed titles and median costs of Level I Electrophysiologic Procedures (APC 0084) at $647.41; Level II Electrophysiologic Procedures (APC 0085) at $3,059.46; and Level III Electrophysiologic Procedures (APC 0086) at $5,709.52, respectively. We refer readers to section IV.A.2. of this proposed rule for a discussion of [[Page 42685]] calculation of median costs for device-dependent APCs. We believe this reconfiguration improves the clinical and resource homogeneity of these APCs which would provide payment for cardiac electrophysiologic procedures that would be individually paid when they do not meet the criteria for payment of the composite APC. We believe that creation of the proposed composite APC for cardiac electrophysiologic evaluation and ablation services is the most efficient and effective way to use the claims data for the majority of these services and best represents the hospital resources associated with performing the common combinations of these services that are clinically typical. We believe that this proposed ratesetting methodology results in an appropriate median cost for the composite service when at least one evaluation service in group A is furnished on the same date as at least one ablation service in group B. This approach creates incentives for efficiency by providing a single payment for a larger bundle of major procedures when they are performed together, in contrast to continued separate payment for each of the individual procedures. We expect to develop additional composite APCs in the future as we learn more about major currently separately paid services that are commonly furnished together during the same hospital outpatient encounter. e. Service-Specific Packaging Issues As a result of requests from the public, a Packaging Subcommittee to the APC Panel was established to review all the procedural CPT codes with a status indicator of ``N.'' Commenters to past rules have suggested that certain packaged services could be provided alone, without any other separately payable services on the claim, and requested that these codes not be assigned status indicator ``N.'' In deciding whether to package a service or pay for a code separately, we have historically considered a variety of factors, including whether the service is normally provided separately or in conjunction with other services; how likely it is for the costs of the packaged code to be appropriately mapped to the separately payable codes with which it was performed; and whether the expected cost of the service is relatively low. As discussed above regarding our proposed packaging approach for CY 2008, we have modified the historical considerations outlined above in developing our proposal for the CY 2008 OPPS. The Packaging Subcommittee discussed many HCPCS codes during the March 2007 APC Panel meeting, prior to development of the proposed packaging approach discussed above, and we have summarized and responded to the APC Panel's packaging-related recommendations below. Three of the codes reviewed by the Packaging Subcommittee at the March 2007 APC Panel meeting are included in the seven categories of services identified for packaging under the CY 2008 OPPS. For those three codes, we specifically applied the proposed CY 2008 criteria for determining whether a code should be proposed as packaged or separately payable for CY 2008. Specifically, we determined whether the service is a dependent service falling into one of the seven specified categories that is always or almost always provided integral to an independent service. For those four codes that were reviewed during the March 2007 APC Panel meeting but that do not fit into any of the seven categories of codes that are part of our CY 2008 proposed packaging approach, we applied the packaging criteria described above that were historically used under the OPPS. Moreover, we took into consideration our interest in expanding the size of payment groups for component services to provide encounter-based and episode-of-care-based payment in the future in order to encourage hospital efficiency and provide hospitals with maximal flexibility to manage their resources. In accordance with a recommendation of the APC Panel, for the CY 2007 OPPS, we implemented a new policy that designates certain codes as ``special'' packaged codes, assigned to status indicator ``Q'' under the OPPS, where separate payment is provided if the code is reported without any other services that are separately payable under the OPPS on the same date of service. Otherwise, payment for the ``special'' packaged code is packaged into payment for the separately payable services provided by the hospital on the same date. We note that these ``special'' packaged codes are a subset of those HCPCS codes that are assigned to status indicator ``Q,'' which means that their payment is conditionally packaged under the OPPS. We are proposing to update our criteria to determine packaged versus separate payment for ``special'' packaged HCPCS codes assigned to status indicator ``Q'' for CY 2008. For CY 2008, payment for ``special'' packaged codes would be packaged when these HCPCS codes are billed on the same date of service as a code assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X.'' When one of the ``special'' packaged codes assigned to status indicator ``Q'' is billed on a date of service without a code that is assigned to any of the four status indicators noted above, the ``special'' packaged code assigned to status indicator ``Q'' would be separately payable. The Packaging Subcommittee identified areas for change for some currently packaged CPT codes that it believed could frequently be provided to patients as the sole service on a given date and that required significant hospital resources as determined from hospital claims data. Based on the comments received, additional issues, and new data that we shared with the Packaging Subcommittee concerning the packaging status of codes for CY 2008, the Packaging Subcommittee reviewed the packaging status of numerous HCPCS codes and reported its findings to the APC Panel at its March 2007 meeting. The APC Panel accepted the report of the Packaging Subcommittee, heard several presentations on certain packaged services, discussed the deliberations of the Packaging Subcommittee, and recommended that-- 1. CMS place CPT code 76937 (Ultrasound guidance for vascular access requiring ultrasound evaluation of potential access sites, documentation of selected vessel patency, concurrent realtime ultrasound visualization of vascular needle entry, with permanent recording and reporting (list separately in addition to code for primary procedure)) on the list of ``special'' packaged codes (status indicator ``Q''). (Recommendation 1) 2. CMS evaluate providing separate payment for trauma activation when it is reported on a claim for an ED visit, regardless of the level of the emergency department visit. (Recommendation 2) 3. CMS place CPT code 0175T (Computer aided detection (CAD) (computer algorithm analysis of digital image data for lesion detection) with further physician review for interpretation and report, with or without digitization of film radiographic images, chest radiograph(s), performed remote from primary interpretation) on the list of ``special'' packaged codes (status indicator ``Q''). (Recommendation 3) 4. CMS place CPT code 0126T (Common carotid intima-media thickness (IMT) study for evaluation of atherosclerotic burden or coronary heart disease risk factor assessment) on the list of ``special'' packaged codes (status indicator ``Q'') and that CMS consider mapping the code to APC 340 (Minor Ancillary Procedures). (Recommendation 4) [[Page 42686]] 5. CMS place CPT code 0069T (Acoustic heart sound recording and computer analysis only) on the list of ``special'' packaged codes (status indicator ``Q'') and that CMS exclude APC 0096 (Non-Invasive Vascular Studies) as a potential placement for this CPT code. (Recommendation 5) 6. CMS maintain the packaged status of HCPCS code A4306 (Disposable drug delivery system, flow rate of less than 50 ml per hour) and that CMS present additional data on this system to the APC Panel when available. (Recommendation 6) 7. CMS reevaluate the packaged OPPS payment for CPT code 99186 (Hypothermia; total body) based on current research and availability of new therapeutic modalities. (Recommendation 7) 8. The Packaging Subcommittee remains active until the next APC Panel meeting. (Recommendation 8) We address each of these recommendations in turn in the discussion that follows. Recommendation 1 For CY 2008, we are proposing to maintain CPT code 76937 as a packaged service. We are not adopting the APC Panel's recommendation to pay separately for this code in some circumstances as a ``special'' packaged code. In the CY 2006 OPPS final rule with comment period (70 FR 68544 through 68545), in response to several public comments, we reviewed in detail the claims data related to CPT code 76937. During its March 2006 APC Panel meeting, after reviewing data pertinent to CPT code 76937, the APC Panel recommended that CMS maintain the packaged status of this code for CY 2007, and we accepted that recommendation. During the March 2007 APC Panel meeting, after reviewing current data and listening to a public presentation, the Panel recommended that we treat this code as a ``special'' packaged code for CY 2008, noting that certain uncommon clinical scenarios could occur where it would be possible to bill this service alone on a claim, without any other separately payable OPPS services. We are proposing to maintain CPT code 76937 as an unconditionally packaged service for CY 2008, fully consistent with the proposed packaging approach for the CY 2008 OPPS, as discussed above. Because CPT code 76937 is a guidance procedure and we are proposing to package payment for all guidance procedures for CY 2008, we believe it is appropriate to maintain the unconditionally packaged status of this code, which is a CPT designated add-on procedure that we would expect to be generally provided only in association with other independent services. We applied the updated criteria for determining whether this service should receive packaged or separately payment under the CY 2008 OPPS. Specifically, we determined that this service is a supportive ancillary service that is integral to an independent service, resulting in our CY 2008 proposal to packaged payment for the service. We discussed this code extensively in both the CY 2006 and CY 2007 final rules with comment period (70 FR 68544 through 68545; 71 FR 67996 through 67997). Our hospital claims data demonstrate that guidance services are used frequently for the insertion of vascular access devices, and we have no evidence that patients lack appropriate access to guidance services necessary for the safe insertion of vascular access devices in the hospital outpatient setting. Because we believe that ultrasound guidance would almost always be provided with one or more separately payable independent procedures, its costs would be appropriately bundled with the handful of vascular access device insertion procedures with which it is most commonly performed. We further believe that hospital staff chooses whether to use no guidance or fluoroscopic guidance or ultrasound guidance on an individual basis, depending on the clinical circumstances of the vascular access device insertion procedure. Therefore, we do not believe that CPT code 76937 is an appropriate candidate for designation as a ``special'' packaged code. The CY 2007 CPT book indicates that this code is an add-on code and should be reported in addition to the code reported for the primary procedure. According to our CY 2006 claims data available for this proposed rule, this code was billed over 60,000 times, yet less than one-tenth of 1 percent of all claims for the procedure were billed without any separately payable OPPS service on the claim. Because this code is provided alone only extremely rarely, we believe this code would not be appropriately treated as a ``special'' packaged code. Therefore, we are proposing to continue to unconditionally package CPT code 76937 for CY 2008. Recommendation 2 For CY 2008, we are proposing to maintain the packaged status of revenue code 068x, trauma response, when the trauma response is provided without critical care services. During the August 2006 APC Panel meeting, the APC Panel encouraged CMS to pay differentially for critical care services provided with and without trauma activation. For CY 2007, as a result of the APC Panel's August 2006 discussion and our own data analysis, we finalized a policy to pay differentially for critical care provided with and without trauma activation. The CY 2007 payment rate for critical care unassociated with trauma activation is $405.04 (APC 0617, Critical Care), while the payment rate for critical care associated with trauma activation is $899.58 (APC 0617 and APC 0618 (Trauma Response with Critical Care)). During the March 2007 APC Panel meeting, a presenter requested that CMS also pay differentially for emergency department visits provided with and without trauma activation. Two organizations that submitted comment letters for the APC Panel's review specifically requested separate payment for revenue code 068x every time it appears on a claim, regardless of the other services that were billed on that claim. The APC Panel recommended that CMS evaluate providing separate payment for trauma activation when it is reported on a claim for an emergency department visit, regardless of the level of the emergency department visit. After accepting the APC Panel's recommendation and evaluating this issue, we continue to believe that, while it is currently appropriate to pay separately for trauma activation when billed in association with critical care services, it is also currently appropriate to maintain the packaged payment status of revenue code 068x when trauma response services are provided in association with both clinic and emergency department visits under the CY 2008 OPPS. As mentioned above, it is our general objective to expand the size of the payment groups under the OPPS to move toward encounter-based and episode-of-care-based payments in order to encourage maximum hospital efficiency with a focus on value-based purchasing. Because trauma activation in association with emergency department or clinic visits would always be provided in the same hospital outpatient encounter as the visit for care of the injured Medicare beneficiary, packaging payment for trauma activation when billed in association with both clinic and emergency department visits is most consistent with our proposed packaging approach. We are also concerned that unpackaging payment for trauma activation in those circumstances where the trauma response would be less likely to be essential to appropriately treating a [[Page 42687]] Medicare beneficiary would reduce the incentive for hospitals to provide the most efficient and cost-effective care. We note that, while we are proposing for CY 2008 to continue to provide separate payment for trauma activation in association with critical care services, we may reconsider this payment policy for future OPPS updates as we further develop encounter-based and episode-of-care-based payment approaches. Furthermore, continued packaged payment for trauma activation when unassociated with critical care is consistent with the principles of a prospective payment system, where hospitals receive payment based on the median cost related to all of the hospital resources associated with the main service provided. In various situations, each hospital's costs may be higher or lower than the median cost used to set payment rates. In light of our proposed packaging approach for the CY 2008 OPPS, we believe it is particularly important not to make any changes in our payment policies for other services that are not fully aligned with promoting efficient, judicious, and deliberate care decisions by hospitals that allow them maximum flexibility to manage their resources through encouraging the most cost-effective use of hospital resources in providing the care necessary for the treatment of Medicare beneficiaries. Packaging payment encourages hospitals to establish protocols that ensure that services are furnished only when they are medically necessary and to carefully scrutinize the services ordered by practitioners to minimize unnecessary use of hospital resources. Therefore, we are adopting the APC Panel's recommendation that we evaluate providing separate payment for revenue code 068x when provided in association with emergency department visits. For CY 2008, after our thorough assessment, we are proposing to maintain the packaged status of revenue code 068x, except when revenue code 068x is billed in association with critical care services. Recommendation 3 For CY 2008, we are proposing to maintain the unconditionally packaged status of CPT codes 0174T (Computer aided detection (CAD) (computer algorithm analysis of digital image data for lesion detection) with further physician review for interpretation and report, with or without digitization of film radiographic images, chest radiograph(s), performed concurrent with primary interpretation) and 0175T. These services involve the application of computer algorithms and classification technologies to chest x-ray images to acquire and display information regarding chest x-ray regions that may contain indications of cancer. CPT code 0152T (Computer aided detection (computer algorithm analysis of digital image data for lesion detection) with further physician review for interpretation, with or without digitization of film radiographic images; chest radiograph(s) (List separately in addition to code for primary procedure)), the predecessor code to CPT codes 0174T and 0175T, was indicated as an add- on code to chest x-ray CPT codes for CY 2006, according to the AMA's CY 2006 CPT book. However, on July 1, 2006, the AMA released to the public an update that deleted CPT codes 0152T and replaced it with the two new Category III CPT codes 0174T and 0175T. In its March 2006 presentation to the APC Panel, before the AMA had released the CY 2007 changes to CPT code 0152T, a presenter requested that we pay separately for this service and assign it to a New Technology APC with a payment rate of $15, based on its estimated cost, clinical considerations, and similarity to other image post processing services that are paid separately. We proposed to accept the APC Panel's recommendation to package CPT code 0152T for CY 2007. In its August 2006 presentation to the APC Panel, after the AMA had released the CY 2007 code changes, the same presenter requested that we assign both of the two new codes to a New Technology APC with a payment rate of $15. The APC Panel members discussed these codes extensively. They considered the possibility of treating CPT code 0175T as a ``special'' packaged code, thereby assigning payment to the code only when it was performed by a hospital without any other separately payable OPPS service also provided on the same day. They questioned the meaning of the word ``remote'' in the code descriptor for CPT code 0175T, noting that was unclear as to whether remote referred to time, geography, or a specific provider. They believed it was likely that a hospital without a CAD system that performed a chest x-ray and sent the x-ray to another hospital for performance of the CAD would be providing the CAD service under arrangement and, therefore, would be providing at least one other service (chest x-ray) that would be separately paid. Thus, even in these cases, payment for the CAD service could be appropriately packaged. After significant and lengthy deliberation, the APC Panel recommended that we package payment for both of the new CPT codes, 0174T and 0175T, for CY 2007. In its March 2007 presentation to the APC Panel, the same presenter requested that we pay separately for CPT codes 0174T and 0175T, mapping them to New Technology APC 1492, with a payment rate of $15. The presenter indicated that chest x-ray CAD is not a screening tool and should only be billed to Medicare when applied to chest x-rays suspicious for lung cancer. The presenter also explained that additional and distinct hospital resources are required for chest x-ray CAD that are not required for a standard chest x-ray. In addition, remote chest x-ray CAD described by CPT code 0175T can be performed at a different time or location or by a different provider than the chest x-ray service. The presenter expressed concern that if hospitals were not paid separately for this technology, hospitals would not be able to provide it, thereby limiting beneficiary access to chest x-ray CAD. The APC Panel recommended conditional packaging as a ``special'' packaged code for CPT code 0175T, but did not recommend a change to the unconditionally packaged status of CPT code 0174T. We are not adopting the APC Panel's recommendation for designation of CPT code 0175T as a ``special'' packaged code under the CY 2008 OPPS. We believe that packaged payment for diagnostic chest x-ray CAD under a prospective payment methodology for outpatient hospital services is most appropriate. We are proposing to maintain CPT codes 0174T and 0175T as unconditionally packaged services for CY 2008, fully consistent with the proposed packaging approach for the CY 2008 OPPS, as discussed above. Because CPT codes 0174T and 0175T are supportive ancillary services that fit into the ``image processing'' category, and we are proposing to package payment for all image processing services for CY 2008, we believe it is appropriate to maintain the packaged status of these codes. We applied the updated criteria for determining whether these two CAD services should receive packaged or separate payment. Specifically, we determined that this service is a dependent service that is integral to an independent service, in this case, the chest x-ray or other OPPS service that we would expect to be provided in addition to the CAD service. After hearing many public presentations and discussions regarding the use of chest x-ray CAD, we continue to believe that even the remote service would almost always be provided by a hospital either in conjunction with other separately payable services or [[Page 42688]] under arrangement. For example, if a physician orders a chest x-ray and CAD servi