Medicare Program; Update of Ambulatory Surgical Center List of Covered Procedures, 23690-23768 [05-8875]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 70, Number 85 (Wednesday, May 4, 2005)]
[Rules and Regulations]
[Pages 23690-23768]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-8875]



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Part IV





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 416



Medicare Program; Update of Ambulatory Surgical Center List of Covered 
Procedures; Interim Final Rule

Federal Register / Vol. 70, No. 85 / Wednesday, May 4, 2005 / Rules 
and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 416

[CMS-1478-IFC]


Medicare Program; Update of Ambulatory Surgical Center List of 
Covered Procedures

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

ACTION: Interim final rule with comment period.

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SUMMARY: This interim final rule with comment period revises the list 
of procedures that are covered when furnished in an ambulatory surgery 
center (ASC) in accordance with section 1833(i)(1) of the Social 
Security Act. We published our proposed deletions and additions in the 
Federal Register on November 26, 2004.
    In this interim final rule, we respond to public comments and make 
final additions to and deletions from the current list of Medicare 
approved ambulatory surgical center (ASC) procedures.

DATES: Effective date: These regulations are effective on July 5, 2005.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on July 5, 2005.

ADDRESSES: In commenting, please refer to file code CMS-1478-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of three ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to https://www.cms.hhs.gov/regulations/
ecomments. (Attachments should be in Microsoft Word, WordPerfect, or 
Excel; however, we prefer Microsoft Word.)
    2. By mail. You may mail written comments (one original and two 
copies) to the following address ONLY: Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Attention: CMS-1478-
IFC, PO Box 8017, Baltimore, MD 21244-8017.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number (410) 786-7195 in advance to schedule your arrival 
with one of our staff members. Room 445-G, Hubert H. Humphrey Building, 
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    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: Dana Burley, (410) 786-0378.

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We will consider comments from the public 
regarding the addition of procedures to the ASC list, deletion of 
procedures from the ASC list, and the ASC payment group assignment for 
newly-added procedures that are identified with an asterisk in Addendum 
A to signify that the procedure was not proposed for addition or 
deletion in the November 26, 2004 rule. You can assist us by 
referencing the file code CMS-1478-IFC 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 electronic 
comments received before the close of the comment period on its public 
website as soon as possible after they have been received. Hard copy 
comments received timely will be available for public inspection as 
they are received, generally beginning approximately 3 weeks after 
publication of a document, at the headquarters of the Centers for 
Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, 
Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 
p.m. To schedule an appointment to view public comments, phone 1-800-
743-3951.

I. Background

    [If you choose to comment on issues in this section, please include 
the caption ``Background'' at the beginning of your comments.]

A. Legislative History

    Section 1832(a)(2)(F)(i) of the Social Security Act (the Act) 
provides that benefits under the Medicare Supplementary Medical 
Insurance program (Part B) include payment for facility services 
furnished in connection with surgical procedures we specify and which 
are performed in an ambulatory surgical center (ASC). To participate in 
the Medicare program as an ASC, a facility must meet the standards 
specified in section 1832(a)(2)(F)(i) of the Act; in 42 CFR 416.25, 
which sets forth general conditions and requirements for ASCs; and, in 
42 CFR 416, subpart C, which provides specific conditions for coverage 
for ASCs.
    There are two primary elements in the total cost of performing a 
surgical procedure--the cost of the physician's professional services 
in performing the procedure and the cost of items and services 
furnished by the facility where the procedure is performed (for 
example, surgical supplies and equipment and nursing services). This 
interim final rule with comment period addresses the second element, 
the coverage and payment of facility fees for ASC services under the 
current payment system. As we note below, section 626(b) of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA) (Pub. L. 108-173, enacted on December 8, 2003) requires that we 
develop a revised payment system for ASC facility services that would 
be implemented no earlier than January 1, 2006. This interim final rule 
addresses additions to and deletions from the list of Medicare approved 
ASC procedures before the implementation of that revised payment 
system.
    Under the current ASC facility services payment system, the ASC 
payment rate is a standard overhead amount established on the basis of 
our estimate of a fair fee that takes into account the costs incurred 
by ASCs generally in providing facility services in connection with 
performing a specific procedure. The report of the Conference Committee 
accompanying section 934 of the Omnibus Budget Reconciliation Act of 
1980 (OBRA) (Pub. L. 96-499), which enacted the ASC benefit in December 
1980, states that this overhead factor is expected to be calculated on 
a prospective basis

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using sample survey and similar techniques to establish reasonable 
estimated overhead allowances, which take account of volume (within 
reasonable limits), for each of the listed procedures. (See H.R. Rep. 
No. 96-1479, at 134 (1980)).
    To establish those reasonable estimated allowances for services 
furnished before implementation of the revised payment system mandated 
by the MMA, section 626(b)(1) of the MMA amended section 
1833(i)(2)(A)(i) of the Act to require us to take into account the 
audited costs incurred by ASCs to perform a procedure, in accordance 
with a survey. Payment for ASC facility services is subject to the 
usual Medicare Part B deductible and coinsurance requirements, and the 
amounts paid by Medicare must be 80 percent of the standard fee.
    Section 1833(i)(1) of the Act requires us to specify, in 
consultation with appropriate medical organizations, surgical 
procedures that can be safely performed in an ASC and to review and 
update the list of ASC procedures at least every two years.
    Section 141(b) of the Social Security Act Amendments of 1994 (SSAA 
1994) requires us to establish a process for reviewing the 
appropriateness of the payment amount provided under section 
1833(i)(2)(A)(iii) of the Act for intraocular lenses (IOLs) for a class 
of new-technology IOLs. That process was the subject of a separate 
final rule entitled ``Adjustment in Payment Amounts for New Technology 
Intraocular Lenses Furnished by Ambulatory Surgical Centers,'' 
published on June 16, 1999 in the Federal Register (64 FR 32198).

B. Summary of Updates of the ASC List

    Section 934 of the Omnibus Budget Reconciliation Act of 1980 
amended sections 1832(a)(2) and 1833 of the Act to authorize the 
Secretary to specify surgical procedures that, although appropriately 
performed in an inpatient hospital setting, can also be performed 
safely on an ambulatory basis in an ASC, a hospital outpatient 
department, or a rural primary care hospital. The report accompanying 
the legislation explained that the Congress intended procedures 
currently performed on an ambulatory basis in a physician's office that 
do not generally require the more elaborate facilities of an ASC not be 
included in the list of covered procedures (H.R. Rep. No. 96-1167, at 
390, reprinted in 1980 U.S.C.C.A.N. 5526, 5753). In a final rule 
published August 5, 1982 in the Federal Register (47 FR 34082), we 
established regulations that included criteria for specifying which 
surgical procedures were to be included for purposes of implementing 
the ASC facility benefit.
    Subsequently, in accordance with Sec.  416.65(c), we published an 
update of the ASC list in the Federal Register on March 28, 2003 (68 FR 
15268).
    During years when we do not update the list in the Federal 
Register, we revise the list to be consistent with annual calendar year 
changes in codes established by the American Medical Association (AMA) 
Current Procedural Terminology (CPT), removing from the ASC list codes 
that are deleted by CPT and adding new codes that replace codes already 
on the ASC list. These annual CPT updates are implemented through 
program instructions to carriers who process ASC claims.

C. Regulatory Requirements

1. Sections 416.65(a), (b), and (c)
    Section 416.65(a) specifies general standards for procedures on the 
ASC list. ASC procedures are those surgical and medical procedures that 
are--
     Commonly performed on an inpatient basis but may be safely 
performed in an ASC;
     Not of a type that are commonly performed or that may be 
safely performed in physicians' offices;
     Limited to procedures requiring a dedicated operating room 
or suite and generally requiring a post-operative recovery room or 
short term (not overnight) convalescent room; and
     Not otherwise excluded from Medicare coverage.
    Specific standards in Sec.  416.65(b) limit ASC procedures to those 
that do not generally exceed 90 minutes operating time and a total of 4 
hours recovery or convalescent time. If anesthesia is required, the 
anesthesia must be local or regional anesthesia, or general anesthesia 
of not more than 90 minutes duration.
    Section 416.65(c) excludes from the ASC list procedures that 
generally result in extensive blood loss, that require major or 
prolonged invasion of body cavities, that directly involve major blood 
vessels, or that are generally emergency or life-threatening in nature.
2. Criteria for Additions To or Deletions From the ASC List
    In April 1987, we adopted quantitative criteria as tools for 
identifying procedures that were commonly performed either in a 
hospital inpatient setting or in a physician's office. Collectively, 
commenters responding to a notice published on February 16, 1984 in the 
Federal Register (49 FR 6023) had recommended that virtually every 
surgical CPT code be included on the ASC list. Consulting with other 
specialist physicians and medical organizations as appropriate, our 
medical staff reviewed the recommended additions to the list to 
determine which code or series of codes were appropriately performed on 
an ambulatory basis within the framework of the regulatory criteria in 
Sec.  416.65. However, when we arrayed the proposed procedures by the 
site where they were most frequently performed according to our claims 
payment data files (1984 Part B Medicare Data (BMAD)), we found that 
many codes were not commonly performed on an inpatient basis or were 
performed in a physician's office the majority of the time, and, thus, 
would not meet the standards in our regulations. Therefore, we decided 
that if a procedure was performed on an inpatient basis 20 percent of 
the time or less, or in a physician's office 50 percent of the time or 
more, it would be excluded from the ASC list. (See Federal Register, 
April 21, 1987 (52 FR 13176).)
    At the time, we believed that these utilization thresholds best 
reflected the legislative objectives of moving procedures from the more 
expensive hospital inpatient setting to the less expensive ASC setting 
without encouraging the migration of procedures from the less expensive 
physician's office setting to the ASC. We applied these quantitative 
standards not only to codes proposed for addition to the ASC list, but 
also to the codes that were currently on the list, to delete codes that 
did not meet the thresholds.
    The trend towards performing surgery on an ambulatory or outpatient 
basis grew steadily, and by 1995, we discovered that a number of 
procedures that were on the ASC list at the time fell short of the 20 
percent and 50 percent thresholds even though the procedures were 
obviously appropriate in the ASC setting. The most notable of these was 
cataract extraction with intraocular lens insertion, very few cases of 
which were being performed on an inpatient basis by the early 1990s. 
The thresholds would also have excluded from the ASC list certain newer 
procedures, such as CPT code 66825, Repositioning of intraocular lens 
prosthesis, requiring an incision (separate procedure), that were 
rarely performed on a hospital inpatient basis but that were 
appropriate for the ASC setting. Strict adherence to the same 20 
percent and 50 percent thresholds both to add and remove procedures did 
not provide latitude for minor fluctuations in utilization across 
settings or errors that could occur in the

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site-of-service data drawn from the National Claims History File that 
we were then using, replacing BMAD data, for analysis.
    In an effort to avoid these anomalies but still retain a relatively 
objective standard for determining which procedures should comprise the 
ASC list, we adopted in the Federal Register notice published on 
January 26, 1995 (60 FR 5185) a modified standard for deleting 
procedures already on the list. We deleted from the list only those 
procedures whose combined inpatient, hospital outpatient, and ASC site 
of service volume was less than 46 percent of the procedure's total 
volume and that were either performed 50 percent of the time or more in 
the physician's office or 10 percent of the time or less in an 
inpatient hospital setting. We retained the 20 percent and 50 percent 
standard to determine which procedures would be appropriate additions 
to the ASC list.

D. Office of the Inspector General Recommendations, January 2003

    In January 2003, the Office of the Inspector General (OIG) issued 
the results of a study entitled ``Payments for Procedures in Outpatient 
Departments and Ambulatory Surgical Centers'' (OEI-05-00-00340). The 
objective of that study was to determine the extent to which Medicare 
payments for the same procedures continue to vary between hospital 
outpatient departments and ambulatory surgical centers and to assess 
the effect of this variance on the Medicare program.
    The OIG concluded, as a result of its study, that there should be a 
greater parity of payments for services performed in an outpatient 
setting and those performed in ASCs. The OIG based this conclusion both 
on its belief that the Congress intended Medicare to be a prudent 
purchaser of services and to pay only for those costs that are 
necessary for the efficient delivery of needed health services and on 
its finding that disparities in Medicare payment amounts for the same 
services furnished in ASCs and hospital outpatient departments resulted 
in an estimated $1.1 billion in additional Medicare program payments. 
The OIG also found that our failure to remove certain procedure codes 
from the list of ASC-approved procedures resulted in an estimated $8 to 
$14 million in additional Medicare program payments.
    The OIG recommended that we--
     Seek authority to set rates that are consistent across 
sites and reflect only the costs necessary for the efficient delivery 
of health services;
     Conduct surveys and use timely ASC survey data to 
reevaluate ASC payment rates; and
     Remove the procedure codes that meet our criteria for 
removal from the ASC list of covered procedures. (In its final report, 
the OIG included a list of 72 CPT codes that it found, based on its 
analysis of calendar year 1999 data, met our criteria for deletion from 
the ASC list.)
    In our response to the OIG's recommendations, we indicated that we 
would consider the OIG's first recommendation as we develop future 
legislative proposals. In response to the second recommendation, we 
indicated our concerns about using survey data as the basis for setting 
ASC payment rates and that we were considering how to implement the 
survey requirement. (Enactment of section 626(b) of the MMA repealing 
the survey requirement and mandating implementation of a revised 
payment system in accordance with certain requirements set forth in the 
MMA supersedes our earlier response to this OIG recommendation.)

E. Current ASC Payment Rates

    Procedures on the ASC list are assigned to one of nine payment 
groups based on our estimate of the costs incurred by the facility to 
perform a procedure. Payment groups 1 through 8 were first implemented 
in September 1990, based on a survey of ASC costs conducted in 1986 (55 
FR 4539). Payment group 9 was added on December 31, 1991 (56 FR 67666) 
to establish a payment rate for extracorporeal shockwave lithotripsy 
(ESWL). There is no clinical consistency among the procedures in a 
payment group. Rather, assignment to a payment group is based solely on 
an estimate of facility costs associated with performing the 
procedures.
    In a proposed rule published on June 12, 1998 in the Federal 
Register (63 FR 32290), we proposed a new ratesetting methodology based 
on ambulatory payment classification (APC) groups that were proposed 
for the new hospital outpatient prospective payment system (OPPS). We 
used data from a survey of ASC costs collected in 1994 as the basis for 
the APC payment rates in the June 12, 1998 proposed rule. The Balanced 
Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) required us to 
phase in full implementation of the proposed ASC rates over a 3-year 
period. The Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000 (BIPA) (Pub. L. 106-554) prohibited 
implementation of a revised prospective payment system for ASCs before 
January 1, 2002 and required that, by January 1, 2003, ASC rates be 
rebased using data from a 1999 or later Medicare survey of ASC costs.
    We discuss in the final rule published on March 28, 2003 in the 
Federal Register (68 FR 15270) the reasons why we did not implement the 
requirements set forth in BBRA and BIPA with regard to rebasing ASC 
payment rates. The March 28, 2003 final rule with comment period 
implemented additions to and deletions from the ASC list that had been 
proposed in the June 12, 1998 proposed rule, but did not implement any 
of the other proposed changes, including the proposed ratesetting 
methodology. We indicated that we were studying approaches to 
ratesetting, some of which may require legislative changes.
    Section 626(b) of MMA repeals the requirement that we conduct a 
survey of ASC costs as the basis for rebasing ASC rates and requires us 
to implement a revised payment system between January 1, 2006 and 
January 1, 2008, that takes into account recommendations in the report 
to the Congress that was to be submitted by January 1, 2005 by the 
Comptroller General of the United States. Since section 626(b)(1) 
amends section 1833(i)(2) of Act, we are required to base payment for 
ASC services on survey data before implementation of the revised 
payment system. Therefore, the additions to the ASC list in this 
interim final rule are assigned to one of the existing nine ASC payment 
groups and rates that are derived from data collected in the 1986 
survey of ASC costs, updated for inflation. The payment group for each 
addition to the ASC list in this interim final rule is based on the 
payment group to which procedures currently on the list, which our 
medical advisors judged to be similar in terms of time and resource 
inputs, are assigned. As of April 1, 2004, in accordance with the 
requirements in section 626(a) of MMA and instructions that we issued 
to our contractors who process ASC claims in Transmittal 51, Change 
Request 3082, on February 6, 2004, the ASC payment rates are the 
following:

Group 1...........................  $333
Group 2...........................  $446
Group 3...........................  $510
Group 4...........................  $630
Group 5...........................  $717
Group 6...........................  $826 ($676 plus $150 for IOL)
Group 7...........................  $995
Group 8...........................  $973 ($823 plus $150 for IOL)
Group 9...........................  $1339
 


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F. Summary of the Provisions of the Proposed Rule

    In the November 26, 2004 proposed rule, we proposed to delete 54 
procedures from the ASC list based on the OIG recommendations. An 
additional 46 deletions were proposed based on data that indicated that 
either the physician office or the inpatient setting was the 
predominant site of service or based on recommendations from specialty 
organizations that there were beneficiary safety concerns associated 
with furnishing the procedure(s) in the ASC.
    We also proposed to add to the list 25 procedures that were 
recommended by commenters and other interested parties.

II. Analysis of and Responses to Public Comments Received on the 
November 26, 2004 Proposed Rule and Provisions of This Interim Final 
Rule With Comment Period

    [If you choose to comment on issues in this section, please include 
the caption ``ANALYSIS OF AND RESPONSES TO PUBLIC COMMENTS RECEIVED ON 
THE NOVEMBER 26, 2004 PROPOSED RULE AND PROVISIONS OF THIS INTERIM 
FINAL RULE WITH COMMENT PERIOD'' at the beginning of your comments.]

A. General Comments

    Summaries of the public comments and our responses to those 
comments are set forth in the various sections of this preamble under 
the appropriate headings.
    We received a number of general public comments on our proposed 
changes to the ASC list.
    Comment: The comments we received expressed opposition to our 
proposed deletions. Although we received many comments requesting that 
we not delete specific procedures, we also received many from 
individual physicians, ASCs, professional and trade associations, and 
medical societies and organizations expressing their belief that our 
proposed deletion of 100 procedures from the ASC list was misguided. 
The overwhelming response from the public was that there are many 
beneficiaries for whom the ASC setting is the safest and most 
appropriate setting for a number of surgical procedures. The commenters 
were especially concerned about our proposals to delete procedures 
based on either the OIG recommendations or high physician office 
utilization.
    They stated that there were several detrimental effects that would 
likely result from deletion of the codes as proposed. They believe that 
deleting the procedures will result in beneficiaries' decreased access 
to the most appropriate care, increased costs for the Medicare program 
and for beneficiaries because the procedures will have to be furnished 
in the more costly hospital outpatient department if the ASC is not an 
option, and creation of incentives to perform procedures in 
inappropriate settings.
    Response: As will be discussed in more detail in other sections of 
this interim final rule, we recognize the validity of the arguments and 
clinical evidence that was provided to us by commenters. As a result, 
we will delete fewer procedures from the ASC list than we proposed.
    Comment: We also received a number of comments that expressed 
disappointment that we have not adopted new criteria for determining 
which procedures are to be included on the ASC list. The commenters 
stated that the current criteria are obsolete and are in need of 
updating to account for new clinical practices and technological 
advances. Furthermore, many commenters objected to having an ASC list 
of procedures. They believe that we should adopt an exclusionary list 
instead.
    Response: We are embarking on development of a new payment system 
as mandated by section 626 of the MMA. As part of that process, we will 
review the criteria for determining which procedures are eligible for 
inclusion on the ASC list.
    Comment: We received several comments that expressed doubt about 
our proposals for ASC list additions and deletions based on 
reimbursement. The commenters believe that we are overstepping our 
authority in considering payment levels before we add codes to the ASC 
list. Specifically, they use as an example our decision to exclude from 
the ASC list procedures that would be paid significantly more by 
Medicare under the ASC payment system than they are currently being 
paid under the hospital outpatient prospective system.
    Response: As discussed in our March 28, 2003 final rule (68 FR 
15270), we do not add procedures to the lowest ASC payment group that 
would be paid significantly more in an ASC than the same procedure is 
paid in the hospital outpatient department. We believe that our process 
is consistent with the law and its intent. The legislative history of 
section 934 of the Omnibus Reconciliation Act of 1980 (Pub. L. 96-499), 
which created the ASC benefit, indicates congressional intent to 
encourage performance of surgery in lower cost settings. Thus, we 
believe it is antithetical to the statutory mandate to create 
incentives which could shift those procedures to an ASC setting for 
increased Medicare payment. Similarly, we try not to add procedures to 
the list that would be significantly underpaid in the highest ASC 
payment group.
    In the June 1998 proposed rule, we proposed the addition of CPT 
code 50590, Extracorporeal shock wave lithotripsy to what would have 
been the highest payment group. The American Lithotripsy Society 
disagreed with the addition payment rate and, through litigation, 
avoided that addition. We now are embarking on development of a new 
payment system for ASCs, and so are not adopting any revisions to our 
rate-setting method before that development. At this time, we are 
updating the list of procedures on the ASC list, and it is beyond the 
scope of this rule to create payment groups that would provide payments 
closer to the costs of procedures that are either much more costly or 
much less costly than the existing highest and lowest ASC payment 
group.
    In the November 26, 2004 ASC proposed rule, we proposed to delete 
100 procedures from the ASC list, most of which were being performed in 
the office setting in more than half the number of cases. We also 
proposed to add 25 new procedures to the ASC list. Comments on the 
proposed rule indicate that the ASC cases for codes proposed for 
deletion from the ASC list will migrate to the outpatient hospital 
setting rather than to the physician office setting because the 
procedures performed in ASCs involve patients who need anesthesia, or 
who have significant comorbidities or anatomic abnormalities, or who 
require a sterile operating room.
    Based in part on the convincing arguments and clinical evidence 
submitted by commenters, we are deleting only five procedures from the 
ASC list out of the original 100 procedures that we proposed to delete. 
We have noted minimal shifts among ambulatory sites of service over the 
past decade even though most of the codes that we proposed to delete 
have been on the ASC list throughout that period. In other words, the 
availability of these procedures in ASCs has not induced substantial 
shifts in the site of service. We are also adding 67 procedures to the 
ASC list, based on commenters' recommendations.
    Over the past several years, the number of small, physician-owned 
specialty hospitals specializing in surgical and orthopedic services 
has grown rapidly. We have investigated this set of hospitals as part 
of our

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research in support of a report to the Congress mandated by section 
507(c) of the MMA. Among other findings, we discovered that the 
surgical and orthopedic hospitals that billed the program in 2003 had 
an average daily census of 4.5. The predominant services in these 
hospitals appeared to be outpatient services rather than inpatient 
services. We speculate that physicians may be participating in the 
ownership of small hospitals rather than ASCs partly in order to take 
advantage of payment differences: Under Medicare's current payment 
systems, outpatient services in many instances receive higher payments 
under the outpatient prospective payment system than under the ASC fee 
schedule.
    Section 626 of the MMA requires and sets parameters for a revision 
to the ASC fee schedule. The existing fee schedule is comparatively 
crude, with only nine payment rates used for approximately 2500 
different surgical procedures. Consequently, each payment cell spans a 
broad set of clinically heterogeneous services. In addition, the basic 
structure of rates has not been updated since 1990. This combination of 
factors has resulted, among other things, in incentives to perform 
procedures in a hospital outpatient setting rather than an ASC, or the 
converse, when payment rates for particular procedures diverge 
significantly from the resources consumed in connection with the 
procedures. Reforming the ASC fee schedule can materially reduce these 
divergences and mitigate inappropriate incentives from this quarter 
that favor proliferation of specialty hospitals.
    The MMA requires that the new payment system be implemented after 
December 2005 and not later than 2008. GAO has prepared and is about to 
conduct a survey to determine the relative costs associated with 
procedures performed in ASCs as part of a report to Congress required 
under the MMA. We are to take into account the recommendations 
contained in the GAO report. Given the need to collect and analyze data 
and to complete full notice-and-comment rulemaking, we plan to 
implement the ASC payment reform January 1, 2008. Flowing from the MMA 
requirement that the GAO compare the relative costs of procedures 
furnished in ASCs to the relative costs of procedures furnished in 
hospital outpatient departments, we are exploring relating the ASC fee 
schedule to the outpatient prospective payment system, using the same 
or very similar ambulatory payment classifications. Linking the two 
systems could provide a mechanism for automatic updates of weights in 
the ASC system and reduce divergences between the two payments to an 
average percentage value.

B. Proposed Deletions

    In accordance with the statutory requirement that we review and 
update the ASC list at least every 2 years, we, in consultation with 
our medical advisors, reviewed the current ASC list against the 
criteria. In this review, we also considered deletions recommended by 
medical specialty societies and other commenters. Further, we reviewed 
the codes that the OIG recommended for deletion from the ASC list. In 
most cases, our medical advisors agreed that the procedures recommended 
by the OIG for deletion no longer met the criteria for ASC procedures, 
and we proposed to delete most of them from the ASC list. We removed 
the following seven procedures recommended for deletion by the OIG from 
the ASC list: CPT codes 21920, 42104, 51725, 56405, 56605, 62367, and 
62368.
    However, there were 11 procedures the OIG recommended for deletion 
that our medical advisors determined, for health and safety reasons, 
should be retained on the list:

   Table 1.--Procedures OIG Recommended for Deletion Not Proposed for
                                Deletion
------------------------------------------------------------------------
             CPT code                         Short descriptor
------------------------------------------------------------------------
30802.............................  Cauterization, inner nose.
31525.............................  Diagnostic laryngoscopy.
31570.............................  Laryngoscopy with injection.
45305.............................  Proctosigmoidoscopy w/bx.
46050.............................  Incision of anal abscess.
51710.............................  Change of bladder tube.
51726.............................  Complex cystometrogram.
51772.............................  Urethra pressure profile.
52285.............................  Cystoscopy and treatment.
67031.............................  Laser surgery, eye strands.
67921.............................  Repair eyelid defect.
------------------------------------------------------------------------

    We received no comments about this proposal, and we are making 
final our proposal to retain these procedures on the ASC list.
    Based on our review of other procedures on the ASC list, we 
proposed to delete from the ASC list those listed in Table 2, for the 
reasons specified.
    Rationale for deletion is indicated as follows:
    1. Procedure is performed in physician's office more than 50 
percent of the time.
    2. Medical specialty organizations recommended deletion because of 
safety concerns.
    3. Procedure is performed predominantly in the inpatient setting.
    4. OIG recommended for deletion and CMS medical advisors concur.

             Table 2.--Proposed Deletions From the ASC List
------------------------------------------------------------------------
           CPT code                 Short descriptor         Rationale
------------------------------------------------------------------------
11404.........................  Removal of skin lesion..               4
11424.........................  Removal of skin lesion..               4
11444.........................  Removal of skin lesion..               4
11446.........................  Removal of skin lesion..               4
11604.........................  Removal of skin lesion..               4
11624.........................  Removal of skin lesion..               4
11644.........................  Removal of skin lesion..               4
12021.........................  Closure of split wound..               4
13100.........................  Repair of wound or                     4
                                 lesion.
13101.........................  Repair of wound or                     4
                                 lesion.
13120.........................  Repair of wound or                     4
                                 lesion.
13121.........................  Repair of wound or                     4
                                 lesion.
13131.........................  Repair of wound or                     4
                                 lesion.
13132.........................  Repair of wound or                     4
                                 lesion.
13150.........................  Repair of wound or                     4
                                 lesion.
13151.........................  Repair of wound or                     4
                                 lesion.
13152.........................  Repair of wound or                     4
                                 lesion.
14000.........................  Skin tissue                            4
                                 rearrangement.
14020.........................  Skin tissue                            4
                                 rearrangement.
14021.........................  Skin tissue                            4
                                 rearrangement.

[[Page 23695]]

 
14040.........................  Skin tissue                            4
                                 rearrangement.
14041.........................  Skin tissue                            4
                                 rearrangement.
14060.........................  Skin tissue                            4
                                 rearrangement.
14061.........................  Skin tissue                            4
                                 rearrangement.
15732.........................  Muscle-skin graft, head/               2
                                 neck.
15734.........................  Muscle-skin graft, trunk               2
15738.........................  Muscle-skin graft, leg..               2
15740.........................  Island pedicle flap                    4
                                 graft.
19100.........................  Bx breast percut w/o                   4
                                 image.
20670.........................  Removal of support                     4
                                 implant.
21040.........................  Removal of jaw bone                    1
                                 lesion.
21050.........................  Removal of jaw joint....               2
21206.........................  Reconstruct upper jaw                  1
                                 bone.
21210.........................  Face bone graft.........               1
21249.........................  Reconstruction of jaw...               1
21325.........................  Treatment of nose                      1
                                 fracture.
21355.........................  Treat cheek bone                       1
                                 fracture.
21440.........................  Treat dental ridge                     1
                                 fracture.
21485.........................  Reset dislocated jaw....               1
22305.........................  Treat spine process                    4
                                 fracture.
23600.........................  Treat humerus fracture..               4
23620.........................  Treat humerus fracture..               4
24576.........................  Treat humerus fracture..               1
24670.........................  Treat ulnar fracture....               4
25505.........................  Treat fracture of radius               1
26605.........................  Treat metacarpal                       4
                                 fracture.
27520.........................  Treat kneecap fracture..               4
27760.........................  Treatment of ankle                     4
                                 fracture.
27780.........................  Treatment of fibula                    4
                                 fracture.
27786.........................  Treatment of ankle                     4
                                 fracture.
27808.........................  Treatment of ankle                     4
                                 fracture.
28400.........................  Treatment of heel                      4
                                 fracture.
30801.........................  Cauterization, inner                   4
                                 nose.
30915.........................  Ligation, nasal sinus                  2
                                 artery.
30920.........................  Ligation, upper jaw                    2
                                 artery.
31233.........................  Nasal/sinus endoscopy,                 4
                                 dx.
31235.........................  Nasal/sinus endoscopy,                 4
                                 dx.
31237.........................  Nasal/sinus endoscopy,                 4
                                 surg.
31238.........................  Nasal/sinus endoscopy,                 4
                                 surg.
38505.........................  Needle biopsy, lymph                   4
                                 nodes.
40700.........................  Repair cleft lip/nasal..               2
40701.........................  Repair cleft lip/nasal..               2
40814.........................  Excise/repair mouth                    4
                                 lesion.
41009.........................  Drainage of mouth lesion               1
41010.........................  Incision of tongue fold.               1
41112.........................  Excision of tongue                     4
                                 lesion.
41520.........................  Reconstruction, tongue                 1
                                 fold.
41800.........................  Drainage of gum lesion..               1
41827.........................  Excision of gum lesion..               1
42000.........................  Drainage mouth roof                    1
                                 lesion.
42107.........................  Excision lesion, mouth                 1
                                 roof.
42200.........................  Reconstruct cleft palate               2
42205.........................  Reconstruct cleft palate               2
42210.........................  Reconstruct cleft palate               2
42215.........................  Reconstruct cleft palate               2
42220.........................  Reconstruct cleft palate               2
42409.........................  Drainage of salivary                   1
                                 cyst.
42425.........................  Excise parotid gland/                  3
                                 lesion.
42860.........................  Excision of tonsil tags.               1
42892.........................  Revision pharyngeal                    3
                                 walls.
52000.........................  Cystoscopy..............               4
52281.........................  Cystoscopy and treatment               4
53850.........................  Prostatic microwave                    1
                                 thermotx.
55700.........................  Biopsy of prostate......               4
58820.........................  Drain ovary abscess,                   3
                                 open.
60000.........................  Drain thyroid/tongue                   1
                                 cyst.
64420.........................  N block inj, intercost,                4
                                 sng.
64430.........................  N block inj, pudendal...               1
64736.........................  Incision of chin nerve..               1
65800.........................  Drainage of eye.........               1
65805.........................  Drainage of eye.........               4
67141.........................  Treatment of retina.....               4

[[Page 23696]]

 
68340.........................  Separate eyelid                        1
                                 adhesions.
68810.........................  Probe nasolacrimal duct.               4
69145.........................  Remove ear canal                       4
                                 lesion(s).
69450.........................  Eardrum revision........               2
69725.........................  Release facial nerve....               1
69740.........................  Repair facial nerve.....               2
69745.........................  Repair facial nerve.....               2
69840.........................  Revise inner ear window.               1
------------------------------------------------------------------------

    As displayed in Table 2, among the codes we proposed to delete from 
the ASC list were CPT codes 52000, Cystourethroscopy, 52281, 
Cystourethroscopy, with calibration and/or dilation of urethral 
stricture or stenosis, with or without meatotomy, with or without 
injection procedure for cystography, and 55700, Biopsy, prostate; 
needle or punch, single or multiple, any approach. We proposed deletion 
of these codes from the list in response to the recommendations of the 
OIG. The study recommended that Medicare be a prudent purchaser of 
services and only pay for those that are necessary for the efficient 
delivery of needed health services. The OIG found that discrepancies in 
the payment amounts between services furnished in the ASC and in the 
hospital outpatient setting resulted in additional and unnecessary 
program payments. The OIG also asserted that retention of these codes 
was inconsistent with our criteria for procedures that are 
appropriately performed in an ASC. Based on their study findings, the 
OIG recommended that procedures be removed from the ASC list with the 
expectation that those deleted services would then be furnished in the 
physician office setting at a lower cost to Medicare.
    These procedures have been on the list of Medicare-approved ASC 
procedures since its inception. However, in our review of the 
procedures on the ASC list for the biennial update, we found that the 
codes did not satisfy our criteria for inclusion on the list and, in 
addition, the OIG's report recommendation made it clear that we should 
propose removal of the procedures.
    Comment: We received several hundred comments from the public 
opposing the deletion of these three codes. The commenters provided a 
number of arguments for retaining the codes on the ASC list. They 
asserted that there are circumstances when clinically compelling 
reasons require that these procedures be performed in a facility 
setting rather than in the physician office. Examples of those 
circumstances include the need for general anesthesia and the need for 
access to more highly qualified staff and a full spectrum of emergency 
equipment for patients with various comorbidities. Many Medicare 
beneficiaries have diabetes, prior myocardial infarctions, renal 
insufficiency or urological malignancies, any of which may indicate 
performance of the procedure in a facility setting.
    The commenters also questioned our estimated cost savings as a 
result of the deletions. They stated that the procedures would not 
shift from the ASC to the physician office as assumed by the OIG, but 
would instead shift to the hospital outpatient department in most 
cases. Further, they asserted that deletion of the codes from the ASC 
list will impose a barrier to access for those beneficiaries with 
limited access to a hospital outpatient facility. They asserted that 
the deletion of these codes would actually result in additional costs 
for the Medicare program.
    Response: We have considered the comments and conclude that CPT 
codes 52000, 52281, and 55700 should be retained on the ASC list. We 
find the clinical arguments contained in the comments to be compelling, 
and we believe that protecting patient safety and access to appropriate 
care is our primary responsibility.
    We examined Medicare site of service data for the past 10 years and 
found that the pattern for the site of service for the procedures 
generally was stable. Consistently, the physician office is the 
predominant service setting even though the procedures were included on 
the ASC list. As exhibited in Table 3 below, in 1992, 70 percent of 
cystourethroscopies (52,000) were furnished in the physician office, 
17.5 percent in the outpatient department and 3.3 percent in the ASC. 
The change in distribution across sites of service for this procedure 
from 1992 through 2003 is minimal. Generally, the data show a trend of 
decreasing volume in the hospital outpatient department accompanied by 
an increased volume in the physician office. With the exception of CY 
2000, volume in the ASC setting has remained significantly less than 10 
percent of the total cases.

                                        Table 3.--Site of Service for Cystourethroscopies (CPT 52000), 1992-2003
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Percent                         Percent                         Percent
                  Year                        Office          (total)           OPD           (total)           ASC           (total)          Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
1992....................................         563,548            70.0         140,805            17.5          26,369             3.3         804,683
1995....................................         581,672            72.1         133,024            16.5          41,990             5.2         807,302
2000....................................         618,984            74.1         102,109            12.2          79,116             9.5         835,669
2003....................................         725,000            80.1          92,981            10.3          55,543             6.1         904,860
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We found similar patterns in the Medicare site of service data for 
the other two high volume urology procedures, CPT codes 52281 and 
55700, that we proposed to delete. We believe that the relative 
stability of the utilization and site of service is evidence that the 
inclusion of the codes on the ASC list has not influenced the 
physician's selection of setting for performance of the procedures and 
provides strong evidence that there is a small but consistent 
population of beneficiaries for whom the ASC setting is the most 
appropriate for these procedures.
    In light of the evidence presented to us in the comments, we agree 
with

[[Page 23697]]

commenters that these procedures should be retained on the ASC list in 
spite of the high percentage of cases performed in the physician office 
setting. Moreover, in light of our plans to develop and implement a new 
payment system for ASCs by 2008 and our expectation that the criteria 
for inclusion on the ASC list will be reviewed as part of developing 
the new payment system, we believe that deleting these codes at this 
time could cause undue confusion and hardship for many beneficiaries.
    If we accept the commenters' assertions that many of the procedures 
currently furnished in the ASC must be performed in a facility setting, 
as we have, we must reconsider the cost savings estimates that we 
assumed when we proposed deletion of these codes. If a significant 
portion of the procedures will migrate to the hospital outpatient 
department rather than to the physician office, then we may have 
diminished cost saving estimates compared to those included in our 
proposed rule, with resultant increased payment by the Medicare program 
rather than savings. See section IV of this interim final rule for a 
full discussion of cost savings estimates.
    Comment: In addition to the comments requesting that we not delete 
the three procedures, CPT codes 52000, 52281, and 55700, we received 
about 100 comments requesting that we not delete CPT codes 11404 
through 15740, as listed in Table 2. These commenters made many of the 
same points discussed above regarding deletion of this range of 
procedure codes. The same concerns regarding patient safety and access 
to appropriate care were consistently raised.
    The commenters presented equally compelling clinical arguments 
opposing deletion of these procedures. They assert that it is often 
difficult to schedule these non-emergent procedures in outpatient 
departments but that the need for sterile conditions for the procedures 
requires a facility setting rather than the physician office. Many 
patients require heavy sedation or general anesthesia because of the 
delicate nature of many of the procedures, and need a facility setting 
due to Medicare patient comorbidities. Further, commenters cited a 
number of CPT coding definitions that make it impossible to identify 
important information about specific procedures that are performed. 
That is, one code describes a number of different procedures, some of 
which are significantly more complex than others reported using the 
same CPT code. For example, CPT code 31233, Nasal/sinus endoscopy, 
diagnostic with maxillary sinusoscopy (via inferior meatus or canine 
fossa puncture), describes a procedure that may be accomplished by 
either of two distinct approaches, one of which may require no 
anesthesia while the other (requiring insertion of a trochar through 
the roof of the patient's mouth) does require sedation in a facility 
setting.
    Further, they assert that the deletion of the codes as proposed 
will not result in cost savings for the Medicare program but will 
result in diminished beneficiary access to appropriate care and to cost 
increases because the cases currently performed in the ASC will shift 
to hospital outpatient departments.
    Response: We find the commenters' arguments convincing. We examined 
the site of service for these procedures over the past 5 years, and, as 
was the case for the urology codes, we found that the patterns for 
provision of these services were generally unchanged during that time. 
In light of the clinical evidence presented in the comments and our 
finding that the percent of procedures that are being performed in the 
ASC today is no greater than it was in 1999, we conclude that these 
procedures should be retained on the ASC list, and we will not make 
final our proposal to delete them.
    Further, we believe that the estimated cost savings included in the 
proposed rule may have been over-stated. Therefore, we performed cost 
analyses using predicted site of service distribution changes that we 
believe are more realistic than those we used in the proposed rule. A 
full discussion of the cost estimates is presented in section V of this 
rule.
    Comment: We received comments opposing the deletion of almost every 
procedure we proposed to delete in the proposed rule. The reasons 
provided were generally the same as those presented by the commenters 
regarding the urology and skin codes discussed above: that there is a 
portion of the Medicare patient population who, due to clinical 
characteristics or due to limitations on access, is best served by 
having access to these procedures in an ASC.
    Response: We have examined the comments, the site of service data, 
and the list of proposed deletions, and we have decided that the 
evidence supplied by the commenters regarding the three urology 
procedures and the skin procedures, combined with the impending 
implementation of a new payment system in 2008 argue against making 
major changes in the ASC list at this time. Maintaining a degree of 
stability in the ASC list until the new payment system is implemented 
will minimize the risk of limiting beneficiary access to needed 
services as well as unintended incentives that could result in 
significant shifts of procedures to the generally more costly hospital 
outpatient setting.
    Therefore, we will delete only the five codes about which we 
received no comments. CPT codes 21440, 23600, and 23620 are all 
procedures that are performed in the office setting more than half of 
the time. CPT code 69725 is performed as an inpatient procedure 100 
percent of the time. The resources required to perform CPT code 53850 
significantly exceed the highest ASC payment group. Therefore, we are 
making final our proposal to delete the five codes listed in Table 4.

         Table 4.--Final List of Codes Deleted From the ASC List
------------------------------------------------------------------------
             CPT code                            Descriptor
------------------------------------------------------------------------
21440.............................  Treat dental ridge fracture.
23600.............................  Treat humerus fracture.
23620.............................  Treat humerus fracture.
53850.............................  Prostatic microwave thermotx.
69725.............................  Release facial nerve.
------------------------------------------------------------------------

C. Proposed Additions

1. Additions Recommended by Commenters and Other Interested Parties
    In response to public comments and our medical staff review, we 
proposed to add the procedures displayed in Table 5 to the list of 
Medicare-approved ASC procedures.

    Table 5.--Proposed Additions Recommended by Commenters and Other
                           Interested Parties
------------------------------------------------------------------------
                                                             Proposed
          HCPCS code                Short descriptor      payment  group
------------------------------------------------------------------------
15001.........................  Skin graft add-on.......               1
15836.........................  Excise excessive skin                  3
                                 tissue.

[[Page 23698]]

 
15839.........................  Excise excessive skin                  3
                                 tissue.
21120.........................  Reconstruction of chin..               7
21125.........................  Augmentation, lower jaw                7
                                 bone.
29873.........................  Knee arthroscopy/surgery               3
30220.........................  Insert nasal septal                    3
                                 button.
31500.........................  Insert emergency airway.               1
31603.........................  Incision of windpipe....               1
35475.........................  Repair arterial blockage               9
35476.........................  Repair venous blockage..               9
36834.........................  Repair AV aneurysm......               3
37205.........................  Transcatheter stent.....               9
37206.........................  Transcatheter stent add-               9
                                 on.
37500.........................  Endoscopy ligate perf                  3
                                 veins.
42665.........................  Ligation of salivary                   7
                                 duct.
44397.........................  Colonoscopy w/stent.....               1
45327.........................  Proctosigmoidoscopy w/                 1
                                 stent.
45341.........................  Sigmoidoscopy w/                       1
                                 ultrasound.
45342.........................  Sigmoidoscopy w/us guide               1
                                 bx.
45345.........................  Sigmoidoscopy w/stent...               1
45387.........................  Colonoscopy w/stent.....               1
57288.........................  Repair bladder defect...               5
62264.........................  Epidural lysis on single               1
                                 day.
67343.........................  Release eye tissue......               7
------------------------------------------------------------------------

    Comment: We received many comments in support of the proposed 
additions to the ASC list. However, we received one comment that 
opposed the additions of CPT codes 37205, 37206, 35475, and 35476. The 
commenter stated that these procedures were not appropriate for the ASC 
setting and would allow for potential substandard care.
    Response: Our medical staff's reconsideration of these procedures 
led to our decision not to add them to the ASC list. The procedures 
involve major vessels and therefore do not meet our criteria for 
inclusion on the ASC list.
    CPT code 31500, Insert emergency airway, also will be removed from 
the list of additions to be made final. We will not add this procedure 
to the ASC list because it would be significantly overpaid even in the 
lowest ASC payment group. As discussed in our March 2003, final rule 
(68 FR 15270), our policy is not to add procedures for which 
significant overpayments would result.
    However, we will make final our proposal to add the other codes in 
Table 5. The final list of all procedures to be added to the ASC list 
is in section II, Table 7.
    Comment: We also received a number of comments requesting higher 
payment levels than those proposed for some of the codes. Table 6 
provides a summary display of the procedure codes and the proposed 
payment group assignments and the commenter-requested payment group 
assignments for the codes for which a specific group was identified. 
For several procedures, there was variation among commenters regarding 
payment group requests and so more than one payment group is 
identified.

                   Table 6.--Payment Group Assignments Proposed and As Requested by Commenters
----------------------------------------------------------------------------------------------------------------
                                                                                   NPRM  payment     Requested
                HCPCS code                            Short descriptor                 group      payment  group
----------------------------------------------------------------------------------------------------------------
15836.....................................  Excise excessive skin tissue........               3               5
15839.....................................  Excise excessive skin tissue........               3               5
29873.....................................  Knee arthroscopy/surgery............               3               4
37500.....................................  Endoscopy ligate perf veins.........               3             N/A
44397.....................................  Colonoscopy w/stent.................               1               3
45327.....................................  Proctosigmoidoscopy w/stent.........               1               3
45341.....................................  Sigmoidoscopy w/ultrasound..........               1        2, 3 & 9
45342.....................................  Sigmoidoscopy w/us guide bx.........               1        2, 3 & 9
45345.....................................  Sigmoidoscopy w/stent...............               1        2, 3 & 9
45387.....................................  Colonoscopy w/stent.................               1               3
57288.....................................  Repair bladder defect...............               1               9
62264.....................................  Epidural lysis on single day........               1             N/A
----------------------------------------------------------------------------------------------------------------

    Response: We considered each of these requests and believe that the 
payment groups that we proposed are appropriate. In making the proposed 
assignments, we considered the assignments of codes already on the ASC 
list that the proposed additions most closely resembled in terms of 
clinical work and resource inputs such as equipment, supplies, and time 
required in the operating suite. To the extent possible, we assigned 
the

[[Page 23699]]

add