Current through Register 2024 Notice Reg. No. 38, September 20, 2024
The federal regulations as incorporated by reference
and/or referred to in Sections
9789.30 through
9789.37 are set forth below in
numerical order. See Section
9789.39(a), (b),
for the Code of Federal Regulations reference for effective date, revisions,
and amendments by date of service.
42
C.F.R. §
419.2
Basis of payment.
(a) Unit of payment. Under the hospital
outpatient prospective payment system, predetermined amounts are paid for
designated services furnished to Medicare beneficiaries. These services are
identified by codes established under the Centers for Medicare & Medicaid
Services Common Procedure Coding System (HCPCS). The prospective payment rate
for each service or procedure for which payment is allowed under the hospital
outpatient prospective payment system is determined according to the
methodology described in subpart C of this part. The manner in which the
Medicare payment amount and the beneficiary copayment amount for each service
or procedure are determined is described in subpart D of this part.
(b) Determination of hospital outpatient
prospective payment rates: Included costs. The prospective payment system
establishes a national payment rate, standardized for geographic wage
differences, that includes operating and capital-related costs that are
directly related and integral to performing a procedure or furnishing a service
on an outpatient basis. In general, these costs include, but are not limited to
(1) Use of an operating suite, procedure
room, or treatment room;
(2) Use of
recovery room;
(3) Use of an
observation bed;
(4) Anesthesia,
certain drugs, biologicals, and other pharmaceuticals; medical and surgical
supplies and equipment; surgical dressings; and devices used for external
reduction of fractures and dislocations;
(5) Supplies and equipment for administering
and monitoring anesthesia or sedation;
(6) Intraocular lenses (IOLs);
(7) Incidental services such a
venipuncture;
(8) Capital-related
costs;
(9) Implantable items used
in connection with diagnostic x-ray tests, diagnostic laboratory tests, and
other diagnostic tests;
(10)
Durable medical equipment that is implantable;
(11) Implantable prosthetic devices (other
than dental) which replace all or part of an internal body organ (including
colostomy bags and supplies directly related to colostomy care), including
replacement of these devices; and;
(12) Costs incurred to procure donor tissue
other than corneal tissue.
(c) Determination of hospital outpatient
prospective payment rates: Excluded costs. The following costs are excluded
from the hospital outpatient prospective payment system.
(1) The costs of direct graduate medical
education activities as described in §413.86 of this chapter.
(2) The costs of nursing and allied health
programs as described in §413.86 of this chapter.
(3) The costs associated with interns and
residents not in approved teaching programs as described in §415.202 of
this chapter.
(4) The costs of
teaching physicians attributable to Part B services for hospitals that elect
cost-based reimbursement for teaching physicians under §415.160.
(5) The reasonable costs of anesthesia
services furnished to hospital outpatients by qualified nonphysician
anesthetists (certified registered nurse anesthetists and anesthesiologists'
assistants) employed by the hospital or obtained under arrangements, for
hospitals that meet the requirements under §412.113(c) of this
chapter.
(6) Bad debts for
uncollectible deductibles and coinsurances as described in §413.80(b) of
this chapter.
(7) Organ acquisition
costs paid under Part B.
(8)
Corneal tissue acquisition costs.
42
C.F.R. §
419.32
Calculation of prospective payment rates for hospital
outpatient services.
(a) Conversion
factor for 1999. CMS calculates a conversion factor in such a manner that
payment for hospital outpatient services furnished in 1999 would have equaled
the base expenditure target calculated in §419.30, taking into account APC
group weights and estimated service frequencies and reduced by the amounts that
would be payable in 1999 as outlier payments under §419.43(d) and
transitional pass-through payments under §419.43(e).
(b) Conversion factor for calendar year 2000
and subsequent years.
(1) Subject to
paragraph (b)(2) of this section, the conversion factor for a calendar year is
equal to the conversion factor calculated for the previous year adjusted as
follows:
(i) For calendar year 2000, by the
hospital inpatient market basket percentage increase applicable under section
1886(b)(3)(B)(iii) of the Act reduced by one percentage point.
(ii) For calendar year 2001 --
(A) For services furnished on or after
January 1, 2001 and before April 1, 2001, by the hospital inpatient market
basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the
Act reduced by one percentage point; and
(B) For services furnished on or after April
1, 2001 and before January 1, 2002, by the hospital inpatient market basket
percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act, and
increased by a transitional percentage allowance equal to 0.32
percent.
(iii) For the
portion of calendar year 2002 that is affected by these rules, by the hospital
inpatient market basket percentage increase applicable under section
1886(b)(3)(B)(iii) of the Act reduced by one percentage point, without taking
into account the transitional percentage allowance referenced in
§419.32(b)(ii)(B).
(iv) For
calendar year 2003 and subsequent years, by the hospital inpatient market
basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the
Act.
(2) Beginning in
calendar year 2000, CMS may substitute for the hospital inpatient market basket
percentage in paragraph (b) of this section a market basket percentage increase
that is determined and applied to hospital outpatient services in the same
manner that the hospital inpatient market basket percentage increase is
determined and applied to inpatient hospital services.
(c) Payment rates. The payment rate for
services and procedures for which payment is made under the hospital outpatient
prospective payment system is the product of the conversion factor calculated
under paragraph (a) or paragraph (b) of this section and the relative weight
determined under §419.31(b).
(d) Budget neutrality.
(1) CMS adjusts the conversion factor as
needed to ensure that updates and adjustments under §419.50(a) are budget
neutral.
(2) In determining
adjustments for 2004 and 2005, CMS will not take into account any additional
expenditures per section 1833(t)(14) of the Act that would not have been made
but for enactment of section 621 of the Medicare Prescription Drug,
Improvement, and Mordernization Act of 2003.
42
C.F.R. §
419.43
Adjustments to national program payment and beneficiary
copayment amounts.
(a) General rule.
CMS determines national prospective payment rates for hospital outpatient
department services and determines a wage adjustment factor to adjust the
portion of the APC payment and national beneficiary copayment amount
attributable to labor-related costs for relative differences in labor and
labor-related costs across geographic regions in a budget neutral
manner.
(b) Labor-related portion
of payment and copayment rates for hospital outpatient services. CMS determines
the portion of hospital outpatient costs attributable to labor and
labor-related costs (known as the "labor-related portion" of hospital
outpatient costs) in accordance with §419.31(c)(1).
(c) Wage index factor. CMS uses the hospital
inpatient prospective payment system wage index established in accordance with
part 412 of this chapter to make the adjustment referred to in paragraph (a) of
this section.
(d) Outlier
adjustment --
(1) General rule. Subject to
paragraph (d)(4) of this section, CMS provides for an additional payment for a
hospital outpatient service (or group of services) not excluded under paragraph
(f) of this section for which a hospital's charges, adjusted to cost, exceed
the following:
(i) A fixed multiple of the sum
of --
(A) The applicable Medicare hospital
outpatient payment amount determined under §419.32(c), as adjusted under
§419.43 (other than for adjustments under this paragraph (d) or paragraph
(e) of this section); and
(B) Any
transitional pass-through payment under paragraph (e) of this
section.
(ii) At the
option of CMS, a fixed dollar amount.
(2) Amount of adjustment. The amount of the
additional payment under paragraph (d)(1) of this section is determined by CMS
and approximates the marginal cost of care beyond the applicable cutoff point
under paragraph (d)(1) of this section.
(3) Limit on aggregate outlier adjustments --
(i) In general. The total of the additional
payments made under this paragraph (d) for covered hospital outpatient
department services furnished in a year (as estimated by CMS before the
beginning of the year) may not exceed the applicable percentage specified in
paragraph (d)(3)(ii) of this section of the total program payments (sum of both
the Medicare and beneficiary payments to the hospital) estimated to be made
under this part for all hospital outpatient services furnished in that year. If
this paragraph is first applied to less than a full year, the limit applies
only to the portion of the year.
(ii) Applicable percentage. For purposes of
paragraph (d)(3)(i) of this section, the term "applicable percentage" means a
percentage specified by CMS up to (but not to exceed) --
(A) For a year (or portion of a year) before
2004, 2.5 percent; and
(B) For 2004
and thereafter, 3.0 percent.
(4) Transitional authority. In applying
paragraph (d)(1) of this section for hospital outpatient services furnished
before January 1, 2002, CMS may --
(i) Apply
paragraph (d)(1) of this section to a bill for these services related to an
outpatient encounter (rather than for a specific service or group of services)
using hospital outpatient payment amounts and transitional pass-through
payments covered under the bill; and
(ii) Use an appropriate cost-to-charge ratio
for the hospital or CMHC (as determined by CMS), rather than for specific
departments within the hospital.
(e) Budget neutrality. CMS establishes
payment under paragraph (d) of this section in a budget-neutral manner
excluding services and groups specified in paragraph (f) of this
section.
(f) Excluded services and
groups. Drugs and biologicals that are paid under a separate APC and devices of
branchytherapy, consisting of a seed or seeds (including radioactive source)
are excluded from qualification for outlier payments.
42
C.F.R. §
419.44
(a) Multiple surgical procedures. When more
than one surgical procedure for which payment is made under the hospital
outpatient prospective payment system is performed during a single surgical
encounter, the Medicare program payment amount and the beneficiary copayment
amount are based on --
(1) The full amounts
for the procedure with the highest APC payment rate; and
(2) One-half of the full program and the
beneficiary payment amounts for all other covered
procedures.
(b)
Terminated procedures. When a surgical procedure is terminated prior to
completion due to extenuating circumstances or circumstances that threaten the
well-being of the patient, the Medicare program payment amount and the
beneficiary copayment amount are based on --
(1) The full amounts if the procedure is
discontinued after the induction of anesthesia or after the procedure is
started; or
(2) One-half of the
full program and the beneficiary coinsurance amounts if the procedure is
discontinued after the patient is prepared for surgery and taken to the room
where the procedure is to be performed but before anesthesia is induced.]
42
C.F.R. §
419.62
Transitional pass-through payments: General rules.
(a) General. CMS provides for additional
payments under §§419.64 and 419.66 for certain innovative medical
devices, drugs, and biologicals.
(b) Budget neutrality. CMS establishes the
additional payments under §§419.64 and 419.66 in a budget neutral
manner.
(c) Uniform prospective
reduction of pass-through payments.
(1) If
CMS estimates before the beginning of a calendar year that the total amount of
pass-through payments under §§419.64 and 419.66 for the year would
exceed the applicable percentage (as described in paragraph (c)(2) of this
section) of the total amount of Medicare payments under the outpatient
prospective payment system. CMS will reduce, pro rata, the amount of each of
the additional payments under §§419.64 and 419.66 for that year to
ensure that the applicable percentage is not exceeded.
(2) The applicable percentages are as
follows:
(i) For a year before CY 2004, the
applicable percentage is 2.5 percent.
(ii) For 2004 and subsequent years, the
applicable percentage is a percentage specified by CMS up to (but not to
exceed) 2.0
percent.
(d) CY 2002 incorporated amount. For the
portion of CY 2002 affected by these rules, CMS incorporated 75 percent of the
estimated pass-through costs (before the incorporation and any pro rata
reduction) for devices into the procedure APCs associated with these devices.
42
C.F.R. §
419.64
Transitional pass-through payments: drugs and
biologicals.
(a) Eligibility for
pass-through payment. CMS makes a transitional pass-through payment for the
following drugs and biologicals that are furnished as part of an outpatient
hospital service:
(1) Orphan drugs. A drug or
biological that is used for a rare disease or condition and has been designated
as an orphan drug under section
526 of the Federal Food, Drug and
Cosmetic Act if payment for the drug or biological as an outpatient hospital
service was being made on August 1, 2000.
(2) Cancer therapy drugs and biologicals. A
drug or biological that is used in cancer therapy, including, but not limited
to, a chemotherapeutic agent, an antiemetic, a hematopoietic growth factor, a
colony stimulating factor, a biological response modifier, and a bisphosphonate
if payment for the drug or biological as an outpatient hospital service was
being made on August 1, 2000.
(3)
Radiopharmaceutical drugs and biological products. A radiopharmaceutical drug
or biological product used in diagnostic, monitoring, and therapeutic nuclear
medicine services if payment for the drug or biological as an outpatient
hospital service was being made on August 1, 2000.
(4) Other drugs and biologicals. A drug or
biological that meets the following conditions:
(i) It was first payable as an outpatient
hospital service after December 31, 1996.
(ii) CMS has determined the cost of the drug
or biological is not insignificant in relation to the amount payable for the
applicable APC (as calculated under §419.32(c)) as defined in paragraph
(b) of this section.
(b) Cost. CMS determines the cost of a drug
or biological to be not insignificant if it meets the following requirements:
(1) Services furnished before January 1,
2003. The expected reasonable cost of a drug or biological must exceed 10
percent of the applicable APC payment amount for the service related to the
drug or biological.
(2) Services
furnished after December 31, 2002. CMS considers the average cost of a new drug
or biological to be not insignificant if it meets the following conditions:
(i) The estimated average reasonable cost of
the drug or biological in the category exceeds 10 percent of the applicable APC
payment amount for the service related to the drug or biological.
(ii) The estimated average reasonable cost of
the drug or biological exceeds the cost of the drug or biological portion of
the APC payment amount for the related service by at least 25
percent.
(iii) The difference
between the estimated reasonable cost of the drug or biological and the
estimated portion of the APC payment amount for the drug or biological exceeds
10 percent of the APC payment amount for the related
service.
(c)
Limited period of payment. CMS limits the eligibility for a pass-through
payment under this section to a period of at least 2 years, but not more than 3
years, that begins as follows:
(1) For a drug
or biological described in paragraphs (a)(1) through (a)(3) of this section --
August 1, 2000.
(2) For a drug or
biological described in paragraph (a)(4) of this section -- the date that CMS
makes its first pass-through payment for the drug or
biological.
(d) Amount of
pass-through payment.
(1) Subject to any
reduction determined under §419.62(b), the pass-through payment for a drug
or biological as specified in section 1842(o)(1)(A) and (o)(1)(D)(i) of the Act
is 95 percent of the average wholesale price of the drug or biological minus
the portion of the APC payment CMS determines is associated with the drug or
biological.
(2) Subject to any
reduction determined under §419.62(b), the pass-through payment for a drug
or biological as specified in section 1842(o)(1)(B) and (o)(1)(E)(i) of the act
is 85 percent of the average wholesale price, determined as of April 1, 2003,
of the drug or biological minus the portion of the APC payment CMS determines
is associated with the drug or biological.
42
C.F.R. §
419.66
Transitional pass-through payments: medical
devices.
(a) General rule. CMS makes a
pass-through payment for a medical device that meets the requirements in
paragraph (b) of this section and that is described by a category of devices
established by CMS under the criteria in paragraph (c) of this
section.
(b) Eligibility. A medical
device must meet the following requirements:
(1) If required by the FDA, the device must
have received FDA approval or clearance (except for a device that has received
an FDA investigational device exemption (IDE) and has been classified as a
Category B device by the FDA in accordance with §§405.203 through
405.207 and 405.211 through 405.215 of this chapter) or another appropriate FDA
exemption.
(2) The device is
determined to be reasonable and necessary for the diagnosis or treatment of an
illness or injury or to improve the functioning of a malformed body part (as
required by section 1862(a)(1)(A) of the Act).
(3) The device is an integral and subordinate
part of the service furnished, is used for one patient only, comes in contact
with human tissue, and is surgically implanted or inserted whether or not it
remains with the patient when the patient is released from the
hospital.
(4) The device is not any
of the following:
(i) Equipment, an
instrument, apparatus, implement, or item of this type for which depreciation
and financing expenses are recovered as depreciable assets as defined in
Chapter 1 of the Medicare Provider Reimbursement Manual (CMS Pub.
15-1).
(ii) A material or supply
furnished incident to a service (for example, a suture, customized surgical
kit, or clip, other than radiological site marker).
(iii) A material that may be used to replace
human skin (for example, a biological or synthetic
material).
(c)
Criteria for establishing device categories. CMS uses the following criteria to
establish a category of devices under this section:
(1) CMS determines that a device to be
included in the category is not described by any of the existing categories or
by any category previously in effect, and was not being paid for as an
outpatient service as of December 31, 1996.
(2) CMS determines that a device to be
included in the category has demonstrated that it will substantially improve
the diagnosis or treatment of an illness or injury or improve the functioning
of a malformed body part compared to the benefits of a device or devices in a
previously established category or other available treatment.
(3) Except for medical devices identified in
paragraph (e) of this section, CMS determines the cost of the device is not
insignificant as described in paragraph (d) of this
section.
(d) Cost
criteria. CMS considers the average cost of a category of devices to be not
insignificant if it meets the following conditions:
(1) The estimated average reasonable cost of
devices in the category exceeds 25 percent of the applicable APC payment amount
for the service related to the category of devices.
(2) The estimated average reasonable cost of
the devices in the category exceeds the cost of the device-related portion of
the APC payment amount for the related service by at least 25
percent.
(3) The difference between
the estimated average reasonable cost of the devices in the category and the
portion of the APC payment amount for the device exceeds 10 percent of the APC
payment amount for the related
service.
(e) Devices exempt from cost criteria. The
following medical devices are not subject to the cost requirements described in
paragraph (d) of this section, if payment for the device was being made as an
outpatient service on August 1, 2000:
(1) A
device of brachytherapy.
(2) A
device of temperature-monitored cryoablation.
(f) Identifying a category for a device. A
device is described by a category, if it meets the following conditions:
(1) Matches the long descriptor of the
category code established by CMS.
(2) Conforms to guidance issued by CMS
relating to the definition of terms and other information in conjunction with
the category descriptors and codes.
(g) Limited period of payment for devices.
CMS limits the eligibility for a pass-through payment established under this
section to a period of at least 2 years, but not more than 3 years beginning on
the date that CMS establishes a category of devices.
(h) Amount of pass-through payment. Subject
to any reduction determined under §419.62(b), the pass-through payment for
a device is the hospital's charge for the device, adjusted to the actual cost
for the device, minus the amount included in the APC payment amount for the
device.
1. New
section filed 1-2-2004 as an emergency; operative 1-2-2004 (Register 2004, No.
2). A Certificate of Compliance must be transmitted to OAL by 5-3-2004 or
emergency language will be repealed by operation of law on the following
day.
2. Certificate of Compliance as to 1-2-2004 order, including
amendment of section, transmitted to OAL 4-30-2004 and filed 6-15-2004
(Register 2004, No. 25).
3. Amendment of first paragraph filed
12-27-2012; operative 1-1-2013 as a file and print only pursuant to Government
Code section 11340.9(g) (Register 2012, No. 52).
4. Amendment of
first paragraph filed 4-1-2021; operative 3-1-2021 pursuant to Labor Code
section 5307.1(g)(2). Submitted to OAL for filing and printing only pursuant to
Labor Code section 5307.1(g)(2) (Register 2021, No.
14).
Note: Authority cited: Sections
133, 4603.5, 5307.1 and 5307.3,
Labor Code. Reference: Sections
4600, 4603.2 and 5307.1, Labor
Code.
