Medicare Program; Revised Payment System Policies for Services Furnished in Ambulatory Surgical Centers (ASCs) Beginning in CY 2008, 42470-42626 [07-3490]

Agencies

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

[Federal Register Volume 72, Number 148 (Thursday, August 2, 2007)]
[Rules and Regulations]
[Pages 42470-42626]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-3490]



[[Page 42469]]

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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 410 and 416



Medicare Program; Revised Payment System Policies for Services 
Furnished in Ambulatory Surgical Centers (ASCs) Beginning in CY 2008; 
Final Rule

Federal Register / Vol. 72, No. 148 / Thursday, August 2, 2007 / 
Rules and Regulations

[[Page 42470]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410 and 416

[CMS-1517-F]
RIN 0938-AO73


Medicare Program; Revised Payment System Policies for Services 
Furnished in Ambulatory Surgical Centers (ASCs) Beginning in CY 2008

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

ACTION: Final rule.

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SUMMARY: This final rule revises the Medicare ambulatory surgical 
center (ASC) payment system to implement certain related provisions of 
the Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 (MMA). This final rule establishes the ASC list of covered 
surgical procedures, identifies covered ancillary services under the 
revised ASC payment system, and sets forth the amounts and factors that 
will be used to determine the ASC payment rates for calendar year (CY) 
2008. The changes to the ASC payment system and ratesetting methodology 
in this final rule are applicable to services furnished on or after 
January 1, 2008.

DATES: Effective Date: This final rule is effective on January 1, 2008.

FOR FURTHER INFORMATION, CONTACT: Alberta Dwivedi, (410) 786-0378. Dana 
Burley, (410) 786-0378.

SUPPLEMENTARY INFORMATION:

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 
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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 This Final Rule

AHA American Hospital Association
AMA American Medical Association
APC Ambulatory payment classification
ASC Ambulatory surgical center
BESS [Medicare] Part B Extract Summary System
CAH Critical access hospital
CBSA Core-Based Statistical Area
CMS Centers for Medicare & Medicaid Services
CPI-U Consumer Price Index for All Urban Consumers
CPT [Physicians'] Current Procedural Terminology, Fourth Edition, 
2007, copyrighted by the American Medical Association. CPT[supreg] 
is a trademark of the American Medical Association.
CY Calendar year
DRA Deficit Reduction Act of 2005, Public Law 109-171
FY Federal fiscal year
GAO Government Accountability Office
HCPCS Healthcare Common Procedure Coding System
HOPD Hospital outpatient department
HQA Hospital Quality Alliance
IOL Intraocular lens
IPPS [Hospital] Inpatient prospective payment system
MAC Medicare administrative contractor
MedPAC Medicare Payment Advisory Commission
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Public Law 108-173
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
NTIOL New technology intraocular lens
OCE Outpatient Code Editor
OMB Office of Management and Budget
OPPS [Hospital] Outpatient prospective payment system
PM Program memorandum
PPAC Practicing Physicians Advisory Council
PPS Prospective payment system
PRA Paperwork Reduction Act of 1995
RFA Regulatory Flexibility Act
RVU Relative value unit

    To assist readers in referencing sections contained in this 
document, we are providing the following table of contents:

Table of Contents

I. Background
    A. Legislative and Regulatory History
    B. ASC Payment Method
    C. Provisions of Public Law 108-173 (MMA)
    D. Issuance of Proposed Rule
    E. Changes to the ASC List for CY 2007
II. Revisions to the ASC Payment System Effective January 1, 2008
    A. General
    B. Factors Considered in the Development of the Revised ASC 
Payment System
    C. Rulemaking for the Revised ASC Payment System in CY 2008
III. Covered Surgical Procedures Paid in ASCs On or After January 1, 
2008
    A. Payable Procedures
    1. Definition of Surgical Procedure
    2. Procedures Excluded From Payment Under the Revised ASC 
Payment System
    a. Significant Safety Risk
    b. Overnight Stay
    B. Treatment of Unlisted Procedure Codes and Procedures That Are 
Not Paid Separately Under the OPPS
    C. Treatment of Office-Based Procedures
    D. Specific Surgical Procedures Excluded From Payment Under the 
Revised ASC Payment System
IV. Ratesetting Methodology for the Revised ASC Payment System
    A. Overview of Current ASC Payment System
    B. ASC Relative Payment Weights Based on APC Groups and Relative 
Payment Weights Established Under the OPPS
    C. Packaging Policy
    1. General Policy
    2. Policies for Specific Items and Services
    a. Radiology Services
    b. Brachytherapy Sources
    c. Drugs and Biologicals
    d. Implantable Devices With Pass-Through Status Under the OPPS
    e. Implantable Devices Without Pass-Through Status Under the 
OPPS
    D. Payment for Corneal Tissue Under the Revised ASC Payment 
System
    E. Payment for Office-Based Procedures
    F. Payment Policies for Multiple and Interrupted Procedures
    1. Multiple Procedure Discounting Policy
    2. Interrupted Procedure Policies
    G. Geographic Adjustment
    H. Adjustment for Inflation
    I. Beneficiary Coinsurance
    J. Phase-In of Full Implementation of Payment Rates Calculated 
Under the Revised ASC Payment System Methodology
V. Calculation of ASC Conversion Factor and ASC Payment Rates for CY 
2008
    A. Overview
    B. Budget Neutrality Requirement
    C. Calculation of the ASC Payment Rates for CY 2008
    1. Proposed Method for Calculation of the ASC Payment Rates for 
CY 2008 in the August 2006 Proposed Rule
    a. Estimated Medicare Program Payments (Excluding Beneficiary 
Coinsurnace) Under the Current ASC Payment System in the August 2006 
Proposed Rule
    b. Estimated Medicare Program Payments (Excluding Beneficiary 
Coinsurance) Under the Proposed Revised ASC Payment System in the 
August 2006 Proposed Rule
    c. Calculation of the Proposed CY 2008 Budget Neutrality 
Adjustment in the August 2006 Proposed Rule
    d. Application of the Budget Neutrality Adjustment To Determine 
the Proposed CY 2008 ASC Conversion Factor in the August 2006 
Proposed Rule
    e. Calculation of the Proposed CY 2008 ASC Payment Rates Under 
the Revised ASC Payment System in the August 2006 Proposed Rule
    f. Calculation of the Proposed CY 2008 ASC Payment Rates Under 
the Transition in the August 2006 Proposed Rule
    2. Alternative Option for Calculating the Proposed Budget 
Neutrality Adjustment in the August 2006 Proposed Rule
    a. Estimated Medicare Program Payments (Excluding Beneficiary 
Coinsurance)

[[Page 42471]]

Under the Existing ASC Payment System in the August 2006 Proposed 
Rule
    b. Estimated Medicare Program Payments (Excluding Beneficiary 
Coinsurance) Under the Proposed Revised ASC Payment System in the 
August 2006 Proposed Rule
    c. Calculation of the Proposed CY 2008 Budget Neutrality 
Adjustment in the August 2006 Proposed Rule
    d. Discussion of the Alternative Calculation of the Budget 
Neutrality Adjustment
    3. Calculation of the Estimated CY 2008 Budget Neutrality 
Adjustment According to the Final Policy
    4. Final Calculation of the Estimated ASC Payment Rates for CY 
2008
    a. Estimated CY 2008 Medicare Program Payments (Excluding 
Beneficiary Coinsurance) Under the Existing ASC Payment System
    b. Estimated Medicare Program Payments (Excluding Beneficiary 
Coinsurance) Under the Revised ASC Payment System
    c. Calculation of the Final Estimated CY 2008 Budget Neutrality 
Adjustment
    d. Calculation of the Final Estimated CY 2008 ASC Payment Rates
    D. Calculation of the ASC Payment Rates for CY 2009 and Future 
Years
    1. Updating the ASC Relative Payment Weights
    2. Updating the ASC Conversion Factor
    E. Annual Updates
VI. Information in Addenda Related to the Revised CY 2008 ASC 
Payment System
VII. ASC Regulatory Changes
    A. Regulatory Changes That Were Finalized in the CY 2007 OPPS/
ASC Final Rule With Comment Period
    B. Regulatory Changes Included in This Final Rule
VIII. Files Available to the Public Via the Internet
IX. Collection of Information Requirements
X. Regulatory Impact Analysis
    A. Overall Impact
    1. Executive Order 12866
    2. Regulatory Flexibility Act
    3. Small Rural Hospitals
    4. Unfunded Mandates
    5. Federalism
    B. Effects of the Revisions to the ASC Payment System for CY 
2008
    1. Alternatives Considered
    2. Limitations of Our Analysis
    3. Estimated Effects of This Final Rule on ASCs
    4. Estimated Effects of This Final Rule on Beneficiaries
    5. Conclusion
    6. Accounting Statement
    C. Executive Order 12866
Regulation Text
Addendum AA.--Illustrative ASC Covered Surgical Procedures for CY 
2008 (Including Surgical Procedures for Which Payment Is Packaged)
Addendum BB.--Illustrative ASC Covered Ancillary Services Integral 
to Covered Surgical Procedures for CY 2008 (Including Ancillary 
Services for Which Payment Is Packaged)
Addendum DD1.--Illustrative ASC Payment Indicators

I. Background

A. Legislative and Regulatory 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 specified by the 
Secretary that 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, which are 
implemented in 42 CFR Part 416, Subpart B and Subpart C of our 
regulations. The regulations at 42 CFR 416, Subpart B set forth general 
conditions and requirements for ASCs, and the regulations at Subpart C 
provide specific conditions for coverage for ASCs.
    The ASC services benefit was enacted by Congress through the 
Omnibus Reconciliation Act of 1980 (Pub. L. 96-499). For a detailed 
discussion of the legislative history related to ASCs, we refer readers 
to the June 12, 1998 proposed rule (63 FR 32291).
    Section 1833(i)(1)(A) of the Act requires the Secretary to specify 
surgical procedures that, although appropriately performed in an 
inpatient hospital setting, also can be performed safely on an 
ambulatory basis in an ASC, critical access hospital (CAH), or a 
hospital outpatient department (HOPD). The report accompanying the 
legislation explained that 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 ASC covered procedures (H.R. Rep. No. 96-1167, 
at 390-91, reprinted in 1980 U.S.C.C.A.N. 5526, 5753-54). In a final 
rule published on 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. Medicare only allows payment 
to ASCs for procedures that are specified on the ASC list.
    Section 626(b) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003, Public Law 108-173, repealed the requirement 
formerly found in section 1833(i)(2)(A) of the Act that the Secretary 
conduct a survey of ASC costs for purposes of updating ASC payment 
rates and, instead, requires the Secretary to implement a revised ASC 
payment system, to be effective not later than January 1, 2008. Section 
5103 of the Deficit Reduction Act of 2005 (DRA), Public Law 109-171, 
amended section 1833(i)(2) of the Act by adding a new subparagraph (E) 
to place a limitation on payments for surgical procedures in ASCs. 
Section 1833(i)(2) of the Act provides that if the standard overhead 
amount under section 1833(i)(2)(A) of the Act for a facility service 
for such procedure, without application of any geographic adjustment, 
exceeds the Medicare payment amount under the hospital outpatient 
prospective payment system (OPPS) for the service for that year, 
without application of any geographic adjustment, the Secretary shall 
substitute the OPPS payment amount for the ASC standard overhead 
amount. This provision applies to surgical procedures furnished in ASCs 
on or after January 1, 2007, and before the effective date of the 
revised ASC payment system implemented in this final rule.
    In the November 24, 2006 final rule with comment period for the CY 
2007 OPPS and ASC payment systems (71 FR 67960), we addressed the 
changes in payment to ASCs mandated by section 5103 of Public Law 109-
171 and finalized Sec.  416.1(a)(5) of the regulations to implement 
this provision. (Hereinafter, the November 24, 2006 final rule with 
comment period is referred to as the CY 2007 OPPS/ASC final rule with 
comment period.) We also addressed additions to and deletions from the 
ASC list of covered surgical procedures that were implemented on 
January 1, 2007. In addition, we made changes in the process to review 
payment adjustments for insertion of new technology intraocular lenses 
(NTIOLs) under section 1833(i)(2)(A)(iii) of the Act.
    Section 416.65(a) of the regulations specifies general standards 
for procedures on the ASC list. ASC procedures are those surgical and 
other 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 postoperative recovery room or 
short-term (not overnight) convalescent room; and
     Not otherwise excluded from Medicare coverage.
    Specific standards in Sec.  416.65(b) limit covered ASC procedures 
to those that do not generally exceed 90 minutes operating time and a 
total of 4 hours recovery or convalescent time. If

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anesthesia is required, the anesthesia must be local or regional 
anesthesia, or general anesthesia of not more than 90 minutes duration.
    Section 416.65(b)(3) of the regulations 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.
    A detailed history of published changes to the ASC list and ASC 
payment rates can be found in the June 12, 1998 proposed rule (63 FR 
32291). Subsequently, in accordance with Sec.  416.65(c), we published 
updates of the ASC list in the Federal Register on March 28, 2003 (68 
FR 15268), May 4, 2005 (70 FR 23690), and in the CY 2007 OPPS/ASC final 
rule with comment period (71 FR 67960).
    During years when we have not updated the ASC list in the Federal 
Register, we have revised the list to be consistent with annual 
calendar year changes to the Healthcare Common Procedure Coding System 
(HCPCS) and Current Procedural Terminology (CPT) codes. These annual 
coding updates have been implemented through program instructions to 
the carriers that process ASC claims. (We note that Medicare Part B 
carriers are transitioning to Medicare Administrative Contractors 
(MACs) through 2011, as described in a final rule with comment period 
published in the Federal Register on November 24, 2006 (71 FR 68229).) 
We last issued program instructions to update the list only to conform 
to CPT and HCPCS coding changes on December 20, 2006, via Transmittal 
1134, Change Request 5211. This transmittal can be found on the CMS Web 
site at: https://www.cms.hhs.gov/Transmittals/).

B. ASC Payment Method

    On August 23, 2006, we proposed in the Federal Register (71 FR 
49635) a revised payment system for ASCs to be implemented effective 
January 1, 2008, in accordance with section 626(b) of Public Law 108-
173, including revisions to the ratesetting methodology and the 
applicable ASC regulations to incorporate the requirements and payments 
for ASC services under the revised ASC payment system. We also proposed 
a new ``exclusionary'' approach for revising the ASC list of covered 
surgical procedures beginning CY 2008. We proposed to evaluate surgical 
procedures to identify those that could pose a significant safety risk 
or that would be expected to require an overnight stay when performed 
in ASCs, and that would, therefore, be excluded from Medicare payment 
under the revised ASC payment system. Using that exclusionary method, 
we developed a list of surgical procedures that we believed were safe 
for Medicare beneficiaries in ASCs and that were appropriate for 
Medicare payment. We proposed to adopt an exclusionary approach for 
identifying surgical procedures that were appropriate for payment under 
the revised ASC payment system, and the result of that process was a 
proposed list of surgical procedures for which separate payment would 
be made. We refer to that list of payable procedures hereinafter as the 
ASC ``list of covered surgical procedures.''
    There are two primary elements in the total cost of performing a 
surgical procedure: (a) The cost of the physician's professional 
services to perform the procedure; and (b) the cost of items and 
services furnished by the facility where the procedure is performed 
(for example, surgical supplies, equipment, and nursing services). 
Payment for the first element is made under the Medicare Physician Fee 
Schedule (MPFS). The August 2006 OPPS/ASC proposed rule addressed the 
second element, payment for the cost of items and services furnished by 
the facility.
    Under the current ASC payment system, the ASC payment rate is a 
standard overhead amount established on the basis of our estimate of a 
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 Reconciliation Act of 1980 states that this overhead 
amount is expected to be calculated on a prospective basis using sample 
survey data and similar techniques to establish reasonable estimated 
overhead allowances, which take into account volume (within reasonable 
limits), for each of the listed procedures (H.R. Rept. No. 96-1479, at 
134-35 (1980)).
    As stated earlier, to establish those reasonable estimated 
allowances for services furnished prior to implementation of the 
revised ASC payment system, section 626(b)(1) of Public Law 108-73 
amended section 1833(i)(2)(A)(i) of the Act that required us to take 
into account the audited costs incurred by ASCs to perform a procedure 
in accordance with a survey. Further, beginning January 1, 2007, and 
prior to implementation of a revised ASC payment system, in accordance 
with section 5103 of Pub. L. 109-171, no ASC standard overhead amount 
may be greater than the OPPS payment rate for a given service for that 
year. Except for screening colonoscopies and flexible sigmoidoscopies, 
payment for ASC 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 overhead amount. As 
required by section 1834(d) of the Act and implemented in regulations 
at 42 CFR 410.152(i), the amount paid by Medicare must be 75 percent of 
the fee schedule payment amount for screening colonoscopies and 
flexible sigmoidoscopies.
    Section 1833(i)(1) of the Act requires us to specify, in 
consultation with appropriate medical organizations, surgical 
procedures that are appropriately performed on an inpatient basis in a 
hospital but that can be safely performed in an ASC, a CAH, or an HOPD 
and to review and update the list of ASC procedures at least every 2 
years.
    Section 141(b) of the Social Security Act Amendments of 1994, 
Public Law 103-432, 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) that belong 
to a class of NTIOLs. 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). We 
proposed changes to the NTIOL request for review process in the CY 2007 
OPPS/ASC proposed rule published in the Federal Register on August 23, 
2006 (71 FR 49631 through 49635) and finalized changes to that process 
in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68175 
through 68181).

C. Provisions of Public Law 108-173 (MMA)

    Section 626(a) of Public Law 108-173 (MMA) amended section 
1833(i)(2)(C) of the Act, which requires the Secretary to update ASC 
payment rates using the Consumer Price Index for All Urban Consumers 
(CPI-U) (U.S. city average) if the Secretary has not otherwise updated 
the amounts under the revised ASC payment system. As amended by Pub. L. 
108-173, section 1833(i)(2)(C) of the Act requires that, if the 
Secretary is required to apply the CPI-U increase, the CPI-U percentage 
increase is to be applied on a fiscal year (FY) basis beginning with FY 
1986 through FY 2005 and on a

[[Page 42473]]

calendar year (CY) basis beginning with CY 2006.
    Section 626(a) of Public Law 108-173 further amended section 
1833(i)(2)(C) of the Act to require us in FY 2004, beginning April 1, 
2004, to increase the ASC payment rates using the CPI-U as estimated 
for the 12-month period ending March 31, 2003, minus 3.0 percentage 
points. Section 626(a) of Public Law 108-173 also requires that the 
CPI-U adjustment factor equal zero percent in FY 2005, the last quarter 
of CY 2005, and each calendar year from CY 2006 through CY 2009.
    Section 626(b) of Public Law 108-173 repealed the requirement that 
CMS conduct a survey of ASC costs upon which to base a standard 
overhead payment amount for surgical services performed in ASCs, and 
added section 1833(i)(2)(D) of the Act. Section 1833(i)(2)(D)(iii) of 
the Act requires us to implement by no earlier than January 1, 2006, 
and not later than January 1, 2008, a revised ASC payment system. The 
revised payment system under section 1833(i)(2)(D)(i) of the Act is to 
take into account the recommendations contained in a Report to Congress 
that the Government Accountability Office (GAO) was required to submit 
by January 1, 2005. Section 1833(i)(2)(D)(ii) of the Act requires that 
the revised ASC payment system be designed to result in the same 
aggregate amount of expenditures for surgical services furnished in 
ASCs the year the system is implemented as would be made if the new 
system did not apply as estimated by the Secretary. This requirement is 
to take into account the limitation in ASC expenditures resulting from 
implementation of section 5103 of Public Law 109-171 beginning January 
1, 2007, as we described in sections XVII.A.1. and XVII.E. of the 
preamble to the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68165 and 68174, respectively).
    Section 1833(i)(2)(D)(iv) of the Act exempts the classification 
system, relative weights, payment amounts, and geographic adjustment 
factor (if any) under the revised ASC payment system from 
administrative and judicial review.
    Section 626(c) of Public Law 108-173 added a conforming amendment 
to section 1833(a)(1) of the Act, which provides that the amounts paid 
under the revised ASC payment system shall equal 80 percent of the 
lesser of the actual charge for the services or the payment amount that 
we determine under the revised ASC payment system.

D. Issuance of Proposed Rule

    As stated earlier, in the August 23, 2006 Federal Register (71 FR 
49635), we proposed to implement revisions to the ASC payment system so 
that the revised system is first effective on January 1, 2008.
    In addition, we set forth an analysis of the impact that the 
proposed revised ASC payment system would have on affected entities and 
Medicare beneficiaries.
    We received over 8,900 pieces of correspondence in response to our 
August 23, 2006 proposal for the revised ASC payment system, which 
included some comments recommending various changes to how CMS pays for 
ASC services and processes ASC claims that we did not propose in the 
August 23, 2006 Federal Register. While we read those comments with 
interest, we generally do not address them, nor have we made any 
changes in this final rule based on them. We summarize the numerous 
comments and recommendations that are pertinent to what we proposed, 
and we respond to them in the appropriate sections of this final rule.

E. Changes to the ASC List for CY 2007

    As part of the CY 2007 OPPS/ASC final rule with comment period, we 
finalized additions to and deletions from the ASC list of covered 
surgical procedures, effective January 1, 2007 (71 FR 68166). We did 
not change the criteria for adding or deleting items from the ASC list 
effective January 1, 2007. However, in the August 2006 proposed rule 
(71 FR 49628), we discussed changes to the criteria in the context of 
developing the proposed revised ASC payment system to be effective 
January 1, 2008. The changes to the criteria that we proposed resulted 
in the proposed addition for CY 2008 of many procedures that do not 
meet the current criteria for addition to the list.

II. Revisions to the ASC Payment System Effective January 1, 2008

A. General

    As we discussed earlier, generally, there are two primary elements 
in the total cost of performing a surgical procedure: (a) The cost of 
the physician's professional services for performing the procedure; and 
(b) the cost of services furnished by the facility where the procedure 
is performed (for example, surgical supplies, equipment, nursing 
services, and overhead). The former is covered by the MPFS. The latter 
is covered by a Medicare benefit enacted in 1980 that authorized 
payment of a fee to ASCs for services furnished in connection with 
performing certain surgical procedures.
    Section 1833(i)(1) of the Act requires us to specify surgical 
procedures that are appropriately and safely performed on an ambulatory 
basis in an ASC. Moreover, we are required to review and update the 
list of these procedures not less often than every 2 years, in 
consultation with appropriate trade and professional associations. The 
ASC list of covered surgical procedures was limited in 1982 to 
approximately 100 procedures. Currently, the list consists of more than 
2,500 CPT codes encompassing a cross-section of surgical services, 
although 150 of these codes account for more than 90 percent of the 
approximately 4.5 million procedures paid for each year under the ASC 
Part B benefit. Eye, pain management, and gastrointestinal endoscopic 
procedures are the highest volume ASC surgeries performed under the 
present ASC payment system.
    In CY 2007, Medicare only allows payment to ASCs for procedures on 
the ASC list of covered surgical procedures. Except for screening 
colonoscopy services, 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 
overhead amount. As discussed earlier, under section 626(b) of Public 
Law 108-173, Congress mandated implementation of a revised payment 
system for ASC surgical services by no later than January 1, 2008. 
Public Law 108-173 set forth several requirements for the revised 
payment system, but did not amend those provisions of the statute 
pertaining to the ASC list.
    As we proposed in the August 2006 proposed rule (71 FR 49635), in 
this final rule, we address two components of the ASC payment system 
that will go into effect January 1, 2008. First, we are establishing 
the ASC list of covered surgical procedures for which an ASC may 
receive Medicare payment for facility services under the revised ASC 
payment system, as well as those covered ancillary services that may be 
separately paid if they are provided integral to a covered surgical 
procedure. Second, we are specifying the method we will use to set 
payment rates for ASC services furnished in association with covered 
surgical procedures. In this final rule, we also specify the regulatory 
changes that we are making to 42 CFR Parts 410 and 416 to incorporate 
the rules governing ASC payments that will be applicable beginning in 
CY 2008.

[[Page 42474]]

B. Factors Considered in the Development of the Revised ASC Payment 
System

    On August 2, 2005, we convened a listening session teleconference 
on revising the Medicare ASC payment system. Over 450 callers 
participated, including ASC staff, physicians, and representatives of 
industry trade associations. The listening session provided an 
opportunity for participants to identify the issues and concerns that 
they wanted us to address as we developed the revised ASC payment 
system.
    Callers encouraged us to foster beneficiary access to ASCs by 
creating incentives for physicians to use ASCs. The issues raised by 
participants included suggestions to expand or eliminate altogether the 
ASC list, recommendations to model payment on the OPPS, and concerns 
about how we would propose to treat the geographic wage index 
adjustment and the annual ASC payment rate update. Several callers also 
raised concerns about ensuring adequate payment for supplies, ancillary 
services, and implantable devices under the revised payment system, as 
well as developing a process to allow special payment for new 
technology.
    We also met with representatives of the ASC industry over the past 
several years to discuss options for ratesetting other than conducting 
a survey, to discuss timely updates to the ASC list, and to listen to 
industry concerns related to the implementation of a revised payment 
system. We appreciate the thoughtful suggestions that were presented. 
We considered the concerns and issues brought to our attention, the 
proposals for revising the ASC list of covered surgical procedures, and 
the suggested methods by which we could set ASC payment rates in 
developing the policies in this final rule.
    In the August 23, 2006 Federal Register (71 FR 49506), we proposed 
the policies for the revised ASC payment system to be effective 
beginning in CY 2008. In response to those proposed policies, we 
received over 8,900 pieces of correspondence from the public that we 
are addressing in this final rule.
    Subsequent to publication of the August 2006 proposed rule for the 
revised ASC payment system, the GAO published the statutorily mandated 
report entitled, ``Medicare: Payment for Ambulatory Surgical Centers 
Should Be Based on the Hospital Outpatient Payment System'' (GAO-07-86) 
on November 30, 2006. We considered the report's methodology, findings, 
and recommendations in the development of this CY 2008 final rule for 
the revised ASC payment system. The GAO methodology, results, and 
recommendations are summarized below.
    The GAO was directed to conduct a study comparing the relative 
costs of procedures furnished in ASCs to those furnished in HOPDs paid 
under the OPPS, including examining the accuracy of the ambulatory 
payment classifications (APC) with respect to surgical procedures 
furnished in ASCs. Section 626(d) of Pub. L. 108-173 indicated that the 
report should include recommendations on the following matters:
    1. Appropriateness of using groups of covered services and relative 
weights established for the OPPS as the basis of payment for ASCs.
    2. If the OPPS relative weights are appropriate for this purpose, 
whether the ASC payments should be based on a uniform percentage of the 
payment rates or weights under the OPPS, or should vary, or the weights 
should be revised based on specific procedures or types of services.
    3. Whether a geographic adjustment should be used for ASC payment 
and, if so, the labor and nonlabor shares of such payment.
    To compare the relative costs of procedures performed in ASCs and 
HOPDs, the GAO first compiled information on ASCs' costs and the 
surgical procedures performed. It conducted a survey of 600 randomly 
selected ASCs from the universe of all ASCs to obtain their CY 2004 
cost and procedure data. The GAO received 397 responses from facilities 
and, through data reliability testing, determined that data from 290 
responding facilities were sufficiently reliable and geographically 
representative of ASCs. Furthermore, to compare the delivery of 
surgical procedures and their relative costs between ASC and HOPD 
settings, the GAO analyzed OPPS claims data from CY 2003. It also 
interviewed officials at CMS, representatives from ASC industry 
organizations and physician specialty societies, and representatives 
from nine ASCs.
    In order to allocate ASCs' total costs among the individual 
procedures they performed, the GAO developed a specific methodology to 
allocate the portion of an ASC's costs accounted for by each procedure. 
It constructed a relative weight scale for Medicare's covered ASC 
procedures that captured the general variation in resources associated 
with performing different procedures. Primarily, it used data that CMS 
collects for the purpose of setting the practice expense component of 
physician payment rates, supplemented by information from specialty 
societies and physicians who work for CMS for those procedures for 
which CMS had no data on the resources used.
    To calculate per-procedure costs based upon data gathered through 
its survey of ASCs, the GAO deducted costs that Medicare considers 
unallowable, that is, advertising and entertainment costs. In addition, 
it also removed costs for services that Medicare pays for separately, 
such as physician and nonphysician practitioner services. The remaining 
facility costs were then divided into direct and indirect costs. The 
GAO defined direct costs as those associated with the clinical staff, 
equipment, and supplies utilized during the procedure. Indirect costs 
included all remaining costs. Next, to allocate each facility's direct 
costs across the procedures it performed, the GAO applied its relative 
weight scale. It allocated indirect costs equally across all procedures 
performed by the facility. For each procedure performed by a responding 
ASC facility, it summed the allocated direct and indirect costs to 
determine a total cost for the procedure. To obtain a per-procedure 
cost across all ASCs, the GAO arrayed the calculated costs for all ASCs 
performing that procedure and identified the median cost.
    To compare per-procedure costs for ASCs and HOPDs, the GAO obtained 
the list of OPPS APCs and their assigned procedures, along with the 
OPPS median cost of each procedure and its related APC group. It then 
calculated a ratio between each procedure's ASC median cost as 
determined by the survey and the median cost of the procedure's 
corresponding APC group under the OPPS, referred to as the ASC-to-APC 
cost ratio. It calculated a corresponding ratio between each ASC 
procedure's median cost under the OPPS and the median cost of the 
procedure's APC group using CMS data, referred to as the OPPS-to-APC 
cost ratio. In order to evaluate the difference in procedure costs 
between the two settings, the GAO compared the ASC-to-APC cost ratio to 
the OPPS-to-APC cost ratio. Next, to assess how well the relative costs 
of procedures in the OPPS, defined by their assignment to APC groups, 
reflect the relative costs of procedures in the ASC setting, it 
evaluated the distribution of both the ASC-to-APC cost ratios and the 
OPPS-to-APC cost ratios.
    The GAO also analyzed Medicare claims data for the top 20 
procedures with the highest Medicare ASC claims volume in CY 2004 to 
examine the delivery of additional services with

[[Page 42475]]

surgical procedures in ASCs and HOPDs. Last, to calculate the 
percentage of labor-related costs among the responding ASCs, for each 
ASC, the GAO divided total labor costs by total costs and then 
determined the range of the percentage of labor-related costs among all 
of the ASCs between the 25th and the 75th percentile, as well as the 
mean and median percentage of labor-related costs.
    Based on its extensive analyses, the GAO determined that the APC 
groups in the OPPS accurately reflect the relative costs of the 
procedures performed in ASCs. GAO's analysis of the cost ratios showed 
that the ASC-to-APC cost ratios were more tightly distributed around 
their median cost ratio than were the OPPS-to-APC cost ratios. These 
patterns demonstrated that the APC groups reflect the relative costs of 
procedures performed by ASCs and, therefore, that the APC groups could 
be used as the basis for an ASC payment system. The GAO determined, in 
fact, that there was less variation in the ASC setting between 
individual procedures' costs and the costs of their assigned APC groups 
than there is in the HOPD setting. It concluded that, as a group, the 
costs of procedures performed in ASCs have a relatively consistent 
relationship with the costs of the APC groups to which they would be 
assigned under the OPPS. The GAO's analysis also found that procedures 
in the ASC setting had substantially lower costs than those same 
procedures in the HOPD. While ASC costs for individual procedures 
varied, in general, the median costs for procedures were lower in ASCs, 
relative to the median costs of their APC groups, than the median costs 
for the same procedures in the HOPD setting. The median cost ratio 
among all ASC procedures was 0.39 (0.84 when weighted by Medicare 
volume based on CY 2004 claims), whereas the median cost ratio among 
all OPPS procedures was 1.04.
    The GAO found many similarities in the additional items and 
services provided by ASCs and HOPDs for the top 20 ASC procedures. 
However, of these additional items and services, few resulted in 
additional payment in one setting but not the other. HOPDs were paid 
for some of the related services separately, while in the ASC setting, 
other Part B suppliers billed Medicare and received payment for many of 
the related services.
    Finally, in its analysis of labor-related costs, the GAO determined 
that the mean labor-related proportion of costs was 50 percent. The 
range of the labor-related costs for the middle 50 percent of 
responding ASCs was 43 percent to 57 percent of total costs.
    Based on its findings from the study, the GAO recommended that CMS 
implement a payment system for procedures performed in ASCs based on 
the OPPS, taking into account the lower relative costs of procedures 
performed in ASCs compared to HOPDs in determining ASC payment rates.
    Comment: A number of commenters noted that, by the close of the 
public comment period for the August 2006 proposed rule for the revised 
ASC payment system, the GAO had not yet provided recommendations 
regarding ASC payment in a report to Congress that it was required to 
submit by January 1, 2005. Some commenters recommended that, although 
CMS was directed to take into account these recommendations in 
implementing the revised ASC payment system, should the GAO's 
recommendations be provided before publication of the final rule 
establishing the policies of the revised ASC payment system, CMS should 
not take them into consideration, given the public's inability to 
provide input to CMS during the comment period regarding the GAO's 
methodology, findings, and recommendations. Other commenters 
recommended that, if the GAO Report was forthcoming shortly, CMS should 
provide another opportunity for public comment prior to finalizing the 
policies of the revised ASC payment system in order to allow the public 
to provide CMS with their perspectives on those recommendations.
    Response: As described earlier, the GAO published its report (GAO-
07-86) on November 30, 2006. In accordance with section 
1833(i)(2)(D)(i) of the Act, we did take into account the 
recommendations made in the GAO Report in developing the final policies 
for the revised ASC payment system. The GAO's findings and 
recommendations are summarized above, and its specific recommendations 
are further discussed in the particular sections of this final rule 
that address the related topics. We appreciate the public's interest in 
providing us with detailed input regarding the revised ASC payment 
system from a variety of perspectives. In regard to the commenters' 
recommendation for a second opportunity for public comment prior to 
finalizing the policies of the revised ASC payment system after the GAO 
Report was published, we note that the GAO's recommendations are in 
complete accord with our August 2006 proposal for the revised ASC 
payment system. Therefore, we are not providing another opportunity for 
public comment prior to finalizing the policies of the revised ASC 
payment system, because the proposed revised system is fully consistent 
with the recommendations of the GAO Report and we already provided a 
90-day comment period regarding our proposal for CY 2008. We believe 
that the comment period for the August 2006 proposed rule provided the 
public with ample opportunity to comment on the policies that were 
recommended by the GAO. The considerable operational changes required 
to implement the revised ASC payment system necessitate significant 
lead time that would not be possible if we were to provide another 
comment period prior to finalizing the policies. We also believe that 
our consideration of the recent GAO study, as well as other available 
information regarding HOPD and ASC costs and payments, in addition to 
our prior discussions with stakeholders and the many public comments on 
the proposed rule, provide us with the necessary breadth and depth of 
information and viewpoints to finalize our payment policies for the 
revised ASC payment system in this final rule.
    At its December 2006 meeting, the Practicing Physicians Advisory 
Council (PPAC) made two recommendations to CMS regarding the final rule 
for the revised ASC payment system. First, the PPAC recommended that 
CMS establish a process to consult with national medical specialty 
societies and the ASC community to develop and adopt a systematic and 
adaptable means of fairly reimbursing ASCs for all safe and appropriate 
services, allowing for changes in technology and current day practice. 
Second, the PPAC recommended that CMS apply any payment policies 
uniformly to both ASCs and HOPDs, as appropriate.
    We have considered the GAO Report, in addition to the 
recommendations of the PPAC, all public comments received on the 
proposed rule, and other concerns and issues brought to our attention 
by interested parties over the past several years, in developing this 
final rule for the CY 2008 revised ASC payment system. Specific 
policies are discussed, comments summarized and responses provided, and 
policies finalized in subsequent sections of this final rule.

C. Rulemaking for the Revised ASC Payment System in CY 2008

    In response to comments submitted timely regarding the proposals 
set forth in the proposed rule for the revised ASC payment system 
published on August 23, 2006, this final rule establishes the final 
policies and regulations of the

[[Page 42476]]

revised ASC payment system for initial implementation in CY 2008. All 
tables included in this final rule listing HCPCS codes subject to 
pertinent final policies of the revised ASC payment system, as well as 
estimated payment rates, are illustrative only, based on CY 2007 HCPCS 
codes and final CY 2007 OPPS and MPFS information, with application of 
the most current update estimates for CY 2008. The information in the 
Addenda to this final rule is also only illustrative, to provide 
examples of the results of applying the final policies of the revised 
ASC payment system, based on the most recent information available for 
CY 2007. As further discussed in sections V.E. and VI. of this final 
rule, we will propose the CY 2008 relative payment weights, payment 
amounts, specific HCPCS codes to which the final policies of the 
revised ASC payment system would apply, and other pertinent ratesetting 
information for the CY 2008 revised ASC payment system in the proposed 
OPPS/ASC rule to update the payment systems for CY 2008 to be issued in 
mid-summer of CY 2007. We will then publish final relative payment 
weights, payment amounts, specific CY 2008 HCPCS codes to which the 
final policies will apply, and other pertinent ratesetting information 
for the CY 2008 revised ASC payment system in the final OPPS/ASC rule 
to update the payment systems for CY 2008. The ASC payment system 
treatment of new CY 2008 HCPCS codes published in the CY 2008 OPPS/ASC 
final rule will provide interim determinations, open to public comment 
on that final rule, and we will respond to comments about those 
determinations in the OPPS/ASC final rule for CY 2009.

III. Covered Surgical Procedures Paid in ASCs On or After January 1, 
2008

A. Payable Procedures

    In its March 2004 Report to the Congress, the Medicare Payment 
Advisory Commission (MedPAC) recommended replacing the current 
``inclusive'' list of procedures, which are the only surgical 
procedures for which Medicare allows payment to an ASC, with an 
``exclusionary'' list. That is, rather than limiting payment to ASCs to 
a list of procedures that CMS specifies, Medicare would allow payment 
to ASCs for any surgical procedure except those that CMS explicitly 
excludes from payment. MedPAC further recommended that clinical safety 
standards and the need for an overnight stay be the only criteria for 
excluding a procedure from eligibility for Medicare ASC payment. MedPAC 
suggested that some of the criteria, such as site-of-service volume and 
time limits, which we have used in the past to identify procedures for 
the ASC list of covered surgical procedures, are probably no longer 
clinically relevant.
    In the August 2006 proposed rule for the revised ASC payment 
system, we noted that we had given careful consideration to MedPAC's 
recommendations and participated in considerable discussion and 
consultation with members of ASC trade associations and physicians, who 
represent a variety of surgical specialties, regarding the criteria 
that we would use to identify procedures for payment under the revised 
ASC payment system. We agreed that adoption of a policy similar to that 
recommended by MedPAC would serve both to protect beneficiary safety 
and increase beneficiary access to procedures in appropriate clinical 
settings, recognizing the ASC industry's interest in obtaining Medicare 
payment for a much wider spectrum of services than is now allowed. 
Therefore, in the August 2006 proposed rule (71 FR 49636), we proposed 
that, under the revised ASC payment system for services furnished on or 
after January 1, 2008, Medicare would allow payment to ASCs for any 
surgical procedure performed in an ASC, except those surgical 
procedures that we determine are not payable under the ASC benefit.
    Further, we proposed to establish beneficiary safety and the 
expected need for an overnight stay as the principal clinical 
considerations and decisive factors in determining whether ASC payment 
would be allowed for a particular surgical procedure. As discussed in 
section XVIII.B.2. of the preamble of the proposed rule, we also 
proposed to exclude from separate payment under the revised ASC payment 
system those surgical procedures that are on the OPPS inpatient list, 
that are not eligible for separate payment under the OPPS, and that are 
CPT surgical unlisted procedure codes.
    We discuss below the criteria that we proposed as the basis for 
identifying procedures that would pose a significant safety risk to a 
Medicare beneficiary when performed in an ASC, or procedures following 
which we would expect a Medicare beneficiary to require overnight care.
1. Definition of Surgical Procedure
    In order to delineate the scope of procedures that constitute 
``outpatient surgical procedures'' in the August 2006 proposed rule, we 
first proposed to clarify what we considered to be a ``surgical'' 
procedure. Under the existing ASC payment system, we define a surgical 
procedure as any procedure described within the range of Category I CPT 
codes that the CPT Editorial Panel of the American Medical Association 
(AMA) defines as ``surgery'' (CPT codes 10000 through 69999). Under the 
revised payment system, we proposed to continue to define surgery using 
that standard. The CPT Editorial Panel is responsible for maintaining 
the CPT nomenclature, with authority to revise, update, or modify the 
CPT codes. A larger body of CPT advisors, the CPT Advisory Committee, 
supports the work of the CPT Editorial Panel. Members of the CPT 
Editorial Panel include individuals nominated by physician and hospital 
associations and insurers, providing for diverse specialty input.
    In addition, in the August 2006 proposed rule for the revised ASC 
payment system, we proposed to include within the scope of surgical 
procedures payable in an ASC those procedures that are described by 
Level II HCPCS codes or by Category III CPT codes that directly 
crosswalk to or are clinically similar to procedures in the CPT 
surgical range. We proposed to include all three types of codes in our 
definition of surgical procedures because they all may be eligible for 
separate payment under the OPPS and, to the extent it is reasonable to 
do so, we proposed that the revised ASC payment system parallel the 
OPPS in its policies.
    In the August 2006 proposed rule, we provided an example of a Level 
II HCPCS code that we believe represents a procedure that could be 
safely and appropriately performed in an ASC, specifically HCPCS code 
G0297 (Insertion of single chamber pacing cardioverter-defibrillator 
pulse generator). We developed this Level II HCPCS code for use in the 
OPPS because CPT code 33240 (Insertion of single or dual chamber pacing 
cardioverter-defibrillator pulse generator), which describes the 
surgical insertion of a cardioverter-defibrillator pulse generator, 
does not distinguish insertion of a single chamber cardioverter-
defibrillator generator from insertion of a dual chamber cardioverter-
defibrillator generator. Under the OPPS, we were concerned that 
different facility resources could be required for the insertion of 
these two types of cardioverter-defibrillator pulse generators, so we 
developed Level II HCPCS codes to permit HOPDs to more accurately 
report the resources required when these surgical procedures are 
performed. In instances such as this, when a Level II HCPCS code is

[[Page 42477]]

established as a substitute for a CPT surgical procedure code which 
does not adequately describe, from a facility perspective, the nature 
of a surgical service, we proposed to allow payment for the Level II 
HCPCS code under the proposed revised ASC payment system. We proposed 
not to allow ASC payment for Level II HCPCS codes or Category III CPT 
codes that describe services that fall outside the scope of, that is, 
that do not correspond to, surgical procedures described by CPT codes 
10000 through 69999.
    We recognized in the proposed rule that continuing to use this 
definition of surgery would exclude from ASC payment certain invasive, 
``surgery-like'' procedures, such as cardiac catheterization or certain 
radiation treatment services which are assigned codes outside the CPT 
surgical range. However, we believed that continuing to rely on the CPT 
definition of surgery would be administratively straightforward, 
logically related to the categorization of services by physician 
experts who both establish the codes and perform the procedures, and 
consistent with our proposal to allow ASC payment for all outpatient 
surgical procedures. Given the number of other changes that we expected 
to implement as part of the revised payment system, along with the 
significant expansion of ASC covered surgical procedures that we 
proposed, we explained that we believed it would be prudent at the 
outset to continue to define surgery as it is defined by the CPT code 
set, which is used to report services for payment under both the MPFS 
and the OPPS. During the development of the August 2006 proposed rule, 
we reviewed thousands of CPT codes in the surgical range (CPT codes 
10000 through 69999), and we proposed to not exclude from payment over 
750 surgical procedures previously excluded, in addition to providing 
ASC payment for the more than 2,500 CPT codes on the CY 2007 ASC list 
of covered surgical procedures.
    However, we are cognizant of the dynamic nature of ambulatory 
surgery, which has resulted in a dramatic shift of services from the 
inpatient setting to the outpatient setting over the past two decades. 
Therefore, in the proposed rule, we solicited comments regarding other 
services that are invasive and ``surgery-like,'' which could safely and 
appropriately be performed in an ASC, and which require the resources 
typical of an ASC, even though the procedures are described by codes 
that fall outside the range of CPT surgical codes. In particular, we 
were interested in considering commenters' views regarding what 
constitutes a ``surgical'' procedure.
    We received many public comments about our August 2006 proposal to 
define the surgical procedures for which we would make payment to ASCs 
as those falling within the surgical code range specified by the CPT 
Editorial Panel.
    Comment: While, in general, hospital associations and device 
manufacturers supported the proposal to maintain the definition of a 
surgical procedure used under the existing ASC payment system, many ASC 
industry representatives provided a broad range of suggestions about 
how the definition should be expanded. Some of the commenters requested 
that CMS place no limit on the procedures that would be payable in ASCs 
because there is no such limit on Medicare payments to HOPDs. Other 
commenters suggested a more limited expansion of procedures eligible 
for payment under the revised ASC payment system. These commenters 
specifically recommended that CMS expand its definition of a surgical 
procedure to include:
    (a) Medical procedures that are invasive and require general 
anesthesia or that are specifically designated as intraoperative 
procedures;
    (b) X-ray, fluoroscopy, and ultrasound procedures that require 
insertion of a needle, catheter, tube, or probe via a natural orifice 
or through the skin;
    (c) Radiology procedures integral to performance of nonradiologic 
procedures, performed either during or immediately following the 
surgical procedure; and
    (d) Level II HCPCS and Category III CPT codes that describe 
procedures that crosswalk directly or are clinically similar to those 
listed in suggestions (a) through (c) above.
    Response: We have given consideration to the many recommendations 
of the commenters. In general, we continue to believe it is appropriate 
to provide payments to ASCs for the resources associated with 
performing those services that are surgical procedures as defined by 
the CPT Editorial Panel. From the Panel's broad experience in regularly 
addressing the complex issues associated with new and emerging health 
care technologies, as well as the difficulties encountered with 
obsolete procedures, we believe its members are well-positioned to 
maintain and refine the existing coding taxonomy, which defines certain 
procedures as surgery, to appropriately reflect medical practice in an 
evolving health care delivery system. In addition, we believe that our 
proposal to pay for surgical procedures in ASCs that are reported by 
Level II HCPCS and Category III CPT codes that directly crosswalk or 
are clinically similar to procedures in the surgical range of CPT codes 
that are payable in ASCs is consistent with our definition of surgery 
according to the CPT surgical code range, while providing ASC payment 
for some procedures that have not yet been categorized by the CPT 
Editorial Panel or for which Medicare recognizes alternative HCPCS 
codes for payment.
    Although we are not changing our definition of surgery as suggested 
by commenters, we did review procedures that are coded by specific 
Level II HCPCS or Category III CPT codes that were identified by 
commenters as surgical procedures that should be payable in ASCs. We 
assessed those procedures using the same final criteria discussed in 
section III.A.2. of this final rule that we used to evaluate all 
surgical procedures for their safety or the expected need for an 
overnight stay in making decisions about their exclusion from ASC 
payment. As we proposed, we also evaluated the codes in the context of 
whether they directly crosswalk or are clinically similar to procedures 
in the CPT surgical range that we have determined do not pose a 
significant safety risk or for which an overnight stay is not expected 
when performed in ASCs. As a result of that review, 14 additional Level 
II HCPCS codes and 15 Category III CPT codes beyond those we proposed 
for CY 2008 payment will be payable as covered surgical procedures when 
performed in ASCs beginning in CY 2008.
    Furthermore, as discussed in section IV. of this final rule, 
although we are not expanding our definition of surgical procedures, we 
will provide separate ASC payment for a number of covered ancillary 
services when they are furnished on the same day as a covered surgical 
procedure and are integral to the performance of that procedure in the 
ASC setting. Those services include certain radiology procedures, such 
as some fluoroscopy and ultrasound services, that some commenters 
recommended we define as surgical procedures for addition to the ASC 
list of covered surgical procedures.
    Comment: Several commenters expressed concern regarding CMS' 
proposed exclusion from ASC payment of all procedures described within 
the range of Category I CPT codes defined as ``radiology'' in 
accordance with the CPT Editorial Panel designation. The commenters 
asserted that regulations regarding the Federal physician self-referral 
prohibition (section 1877 of the Act) exclude interventional and

[[Page 42478]]

intraoperative radiology services from the definition of ``radiology'' 
services subject to the law's self-referral prohibition, and that CMS 
should, therefore, treat those services as surgical services that are 
eligible for payment as covered surgical procedures under the revised 
ASC payment system. They believed that interventional radiology and 
intraoperative radiology services that require insertion of a needle, 
catheter, tube, probe, or similar device are appropriately considered 
surgical in nature for purposes of ASC payment.
    Response: The commenters' statements with respect to the treatment 
of interventional radiology procedures under the physician self-
referral regulations seem overly broad. The physician self-referral 
regulations provide that the following services (which may include 
some, but not all, interventional radiology procedures) are not 
``radiology and certain other imaging services'' for purposes of 
section 1877 of the Act: (i) X-ray, fluoroscopy, or ultrasound 
procedures that require the insertion of a needle, catheter, tube, or 
probe through the skin or into a body orifice; and (ii) radiology 
procedures that are integral to the performance of a nonradiological 
medical procedure and performed either during the nonradiological 
medical procedure or immediately following the nonradiological medical 
procedure when necessary to confirm placement of an item inserted 
during the nonradiological medical procedure. We do not believe that 
Medicare's exclusion of specific services from the definition of 
``radiology and certain other imaging services'' for purposes of the 
physician self-referral prohibition should result in such services 
being considered ``surgical services'' for purposes of the revised ASC 
payment system.
    Further, as we explain above, we believe that the characterization 
of procedures as surgery for purposes of their performance in ASCs is 
best left to the expertise of the CPT Editorial Panel. We do not 
believe that services designated as radiology services by the CPT 
Editorial Panel are appropriately classified as covered surgical 
procedures in ASCs, facilities that specialize in the delivery of 
ambulatory surgical services. However, as discussed further in section 
IV.C.2. of this final rule, we do believe that it is appropriate to 
provide separate ASC payment for certain ancillary services that are 
integral to the covered surgical procedures. Thus, we will provide 
separate payment to ASCs under the revised payment system for radiology 
services that are integral to the performance of an ASC covered 
surgical procedure when that radiology procedure is one of those for 
which separate payment is made under the OPPS. That is, separate 
payment will be made for covered ancillary radiology services integral 
to covered surgical procedures that are provided in the ASC immediately 
before, during, or immediately following the surgical procedure.
    After consideration of the public comments we received, we are 
finalizing our proposal to define surgery as those procedures described 
by CPT codes within the surgical range of 10000 through 69999, without 
modification. In addition, we are including within our definition of a 
covered surgical procedure payable in the ASC setting those Level II 
HCPCS codes or Category III CPT codes that directly crosswalk or are 
clinically similar to procedures in the CPT surgical range that we have 
determined do not pose a significant safety risk, that we would not 
expect to require an overnight stay when performed in ASCs, and that 
are separately paid under the OPPS. An illustrative list of covered 
surgical procedures under the revised ASC payment system, including 
Category I and Category III CPT codes and Level II HCPCS codes, can be 
found in Addendum AA to this final rule. An illustrative list of 
radiology services and other covered ancillary services that are 
eligible for separate ASC payment when provided integral to an ASC 
covered surgical procedure on the same day is located in Addendum BB to 
this final rule.
2. Procedures Excluded From Payment Under the Revised ASC Payment 
System
    As stated above, in the August 2006 proposed rule for the revised 
ASC payment system, we proposed to allow payment to ASCs for all 
procedures described by CPT codes within the surgical range of 10000 
through 69999, or by Level II HCPCS codes or Category III CPT codes 
that directly crosswalk or are clinically similar to procedures in the 
CPT surgical range, that do not pose a significant safety risk to 
Medicare beneficiaries and that are not expected to require an 
overnight stay. Having established what we consider to be a ``surgical 
procedure,'' we next considered criteria that would enable us to 
identify procedures that could pose a significant safety risk when 
performed in an ASC or that we expect would require an overnight stay 
within the bounds of prevailing medical practice. We discuss in the 
next section how we proposed to identify procedures that could pose a 
significant safety risk.
a. Significant Safety Risk
    First, we proposed to exclude from ASC payment any procedure that 
is included on the current OPPS inpatient list, that is, those 
procedures designated as requiring inpatient care under Sec.  
419.22(n). (S