Tap any paragraph to write a margin note. Your notes collect in the Desk below the text and file under cases with @. The side-by-side margin rail opens on a larger screen.

§
Marginalia
Code · REGISTER · 2008-07-18 · SECURITIES AND EXCHANGE COMMISSION · Notices

Notices. Amendment 1

198,092 words·~900 min read·/register/2008/07/18/08-1452

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

BILLING CODE 7590-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58140; File No. SR-BSE-2008-40] Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to a New Quote Removal Mechanism Upon Technical Disconnect July 10, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on July 8, 2008, the Boston Stock Exchange, Inc.
(“BSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Exchange filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act, 3 and Rule 19b-4(f)(5) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b-4(f)(5).
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to amend Chapter VI of the Boston Options Exchange Group LLC (“BOX”) Rules to add Section 16, Quote Removal Mechanism Upon Technical Disconnect (“Quote Removal Mechanism”). The text of the proposed rule change is available at *http://www.bostonstock.com* , the principal office of the Exchange, and the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change.
The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to amend the BOX Rules to add a new Quote Removal Mechanism in order to protect BOX Market Makers in the event that they lose communication with the BOX Trading Host 5 due to a loss of connectivity between their designated BOX Gateway 6 and the BOX Trading Host. 5 References herein to the term Trading Host will have the meaning as set forth in Section 1(a)(65) of Chapter I of the BOX Rules. 6 A “Gateway” is the system component through which Market Makers communicate their quotes to the Trading Host. *See* Proposed Chapter VI, Section 16, Supplementary Material .01, BOX Rules.
BOX Market Makers currently enter quotes into the Trading Host via Gateways. BOX currently has several Gateways, and multiple Market Makers may connect to the Trading Host through a single Gateway. All the quotes for each class to which a Market Maker is assigned may be sent through a particular Gateway or, alternatively, a single Market Maker may have the quotes for separate classes to which it is assigned sent through different Gateways. Under the proposed rule, if the Trading Host does not receive any Heartbeat messages (“Heartbeat”) 7 from a Gateway for a specified period of time, the Quote Removal Mechanism will automatically cancel all Market Maker quotes that were posted through the affected Gateway. 7 A Heartbeat message is a communication which acts as a virtual pulse between a Gateway and the Trading Host.
The Heartbeat message sent by the Gateway and subsequently received by the Trading Host allows the Trading Host to continually monitor its connection with the Gateways. As proposed, the Quote Removal Mechanism will monitor the connections between the Trading Host and the Gateways. The Trading Host will continuously count the number of seconds (“n”) (the “Counter”) since the last Heartbeat message was received from a particular Gateway. Each Heartbeat message received by the Trading Host from a particular Gateway will restart the Counter for that particular Gateway.
The Quote Removal Mechanism will be triggered, and a Market Maker's quotes will automatically be removed from the Trading Host, if the Counter reaches “n” seconds. Any non-connectivity is Gateway-specific. Therefore, the cancellation of the Market Makers' quotes entered into the Trading Host via a particular Gateway will neither impact nor determine the treatment of the quotes of the same or other Market Makers entered into the Trading Host via a separate and distinct Gateway.
After the Quote Removal Mechanism is employed, and upon a reconnection between the Gateway and the Trading Host, the Trading Host will send a message to the affected Market Makers informing them that their quotes through the specific affected Gateway have been automatically cancelled. The period of non-connectivity that will trigger the removal of the Market Makers' quotes via the Quote Removal Mechanism will be standard for all Market Makers. 8 The Quote Removal Mechanism will be enabled for all Market Makers on their appointed options classes during the trading day and may not be disabled by the Market Makers. 8 The Exchange will notify Market Makers via Regulatory Circular as to the setting of “n” seconds.
This value will be configurable by the Exchange and any subsequent re-configurations will be announced to Market Makers via Regulatory Circular. In no event shall “n” seconds be set for less than one
(1)second or greater than nine
(9)seconds. The following examples illustrate the manner in which the Quote Removal Mechanism will function: 9 9 For the purposes of this example only, “n” will be set at 5 seconds.
(1)11:30:00—Counter starts 11:30:02—Trading Host receives a Heartbeat message from Gateway 1. Counter re-starts
(2)3:30:00—Counter starts 3:30:02:—Trading Host receives a Heartbeat message from Gateway 1. Counter re-starts 3:30:07—No Heartbeat messages received from Gateway 1 after 5 seconds. Pursuant to the proposed Quote Removal Mechanism, all Market Maker quotes entered through Gateway 1 are removed from the Trading Host. As demonstrated above, the Counter will restart for a Gateway each time the Trading Host receives a Heartbeat message from that particular Gateway. Once connectivity to the Gateway is reestablished, the Market Makers affected by the mechanism will be able to send messages to the Trading Host in order to reestablish their quotes. Any quotes affected by the Quote Removal Mechanism, including quotes that are removed from the Trading Host and/or quotes sent to BOX during the period of non-connectivity, will not be taken into account when determining whether a Market Maker has fulfilled its continuous quoting obligations on BOX. 10 Only after connectivity to the Gateway has been reestablished will quotes once again be taken into account for this purpose. 10 *See* Section 6(d) of Chapter VI of the BOX Rules. 2. Statutory Basis The Exchange believes that the proposal is consistent with the requirements of Section 6(b) of the Act, 11 in general, and Section 6(b)(5) of the Act, 12 in particular, in that the proposal is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes that this proposed rule change will benefit the marketplace because it will reduce the risk of erroneous or stale quotes on the BOX Book in the event that the Trading Host loses connectivity with a Gateway. Furthermore, the proposed Quote Removal Mechanism will provide for the protection of Market Makers, who must bear the burden of market risk for stale quotes caused by circumstances outside of their control, as well as for the protection of investors and the efficiency and fairness of the markets as a whole. 11 15 U.S.C. 78f(b). 12 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 13 and Rule 19b-4(f)(5) 14 thereunder because the foregoing proposed rule change does not:
(i)Significantly affect the protection of investors or the public interest;
(ii)impose any significant burden on competition; and
(iii)have the effect of limiting the access to or availability of an existing order entry or trading system of the Exchange. 13 15 U.S.C. 78s(b)(3)(A)(iii). 14 17 CFR 19b-4(f)(5). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-BSE-2008-40 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-BSE-2008-40. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filings also will be available for inspection and copying at the principal office of BSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make publicly available. All submissions should refer to File Number SR-BSE-2008-40 and should be submitted on or before August 8, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-16401 Filed 7-17-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58153; File No. SR-CBOE-2008-67] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Delete References to Hybrid 2.0 Platform and Hybrid 2.0 Option Classes July 14, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on July 9, 2008, the Chicago Board Options Exchange, Incorporated (the “Exchange” or “CBOE”) filed with the Securities and Exchange Commission (the “Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a “non-controversial” proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b-4(f)(6) thereunder. 4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules to delete references to Hybrid 2.0 option classes and the Hybrid 2.0 Platform. The text of the proposed rule change is available at the Exchange, the Commission's Public Reference Room, and *http://www.cboe.org/Legal.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose CBOE proposes to amend its rules to delete references to Hybrid 2.0 option classes and the Hybrid 2.0 Platform. Initially, when CBOE implemented its Hybrid Trading System in 2003, it permitted Market-Makers to stream electronic quotes in their appointed classes provided they were physically present at the trading station. CBOE subsequently implemented an enhanced version of Hybrid called the Hybrid 2.0 Platform which allowed remote quoting in option classes, *i.e.* , Hybrid 2.0 option classes. ( *See* Rule 1.1(aaa).) Over time, CBOE migrated nearly all of its option classes to the Hybrid 2.0 Platform and permitted Market-Makers and formerly Remote Market-Makers 5 to quote remotely. 6 5 CBOE recently deleted reference to Remote Market-Makers in its rules. All Remote Market-Makers are now called Market-Makers. *See* Securities Exchange Act Release No. 57615 (April 3, 2008), 73 FR 19537 (April 10, 2008) (SR-CBOE-2007-120). 6 Presently, only three option classes are not traded on the Hybrid 2.0 Platform—MVR, OEX, and SPX. These three option classes are traded on the Hybrid 3.0 Platform, which is an electronic trading platform on the Hybrid Trading System that allows a single quoter to submit an electronic quote which represents the aggregate Market-Maker quoting interest in a series for the trading crowd. ( *See* Rule 1.1(aaa).) CBOE is not deleting reference to the Hybrid 3.0 Platform in this rule filing. In light of these changes, CBOE no longer believes it is necessary to distinguish in its rules between Hybrid option classes and Hybrid 2.0 option classes. Accordingly, CBOE proposes to delete the references in its rules to the Hybrid 2.0 Platform and Hybrid 2.0 option classes. Going forward, all option classes, except for the three traded on the Hybrid 3.0 Platform, would be referred to as Hybrid classes and traded on the Hybrid Trading System. CBOE also proposes to delete reference to “non-Hybrid” classes, since there are not any of these classes. Finally, CBOE proposes to make other technical changes to its rules necessitated by the deletion of Hybrid 2.0 option classes and the Hybrid 2.0 Platform, such as deleting duplicative material. CBOE believes that the foregoing changes to the rules are simply administrative in nature and are not substantive. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations under the Act applicable to a national securities exchange and, in particular, the requirements of Section 6(b) of the Act. Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) Act 7 requirements that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and, in general, to protect investors and the public interest. Deleting the references to Hybrid 2.0 option classes and the Hybrid 2.0 Platform also will eliminate any confusion regarding the trading platforms on which certain option classes trade. 7 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change does not:
(i)Significantly affect the protection of investors or the public interest;
(ii)impose any significant burden on competition; and
(iii)become operative for 30 days after the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 8 and subparagraph (f)(6) of Rule 19b-4 thereunder. 9 As required under Rule 19b-4(f)(6)(iii), 10 CBOE provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least 5 days prior to the filing of the proposed rule change. 8 15 U.S.C. 78s(b)(3)(A). 9 17 CFR 240.19b-4(f)(6). 10 17 CFR 240.19b-4(f)(6)(iii). A proposed rule change filed under Rule 19b-4(f)(6) normally may not become operative prior to the 30th day after the date of filing. 11 However, Rule 19b-4(f)(6)(iii) 12 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. CBOE requested that the Commission waive the 30-day operative delay and make the proposed rule change operative upon filing because deleting the references to Hybrid 2.0 option classes and the Hybrid 2.0 Platform is administrative in nature and does not substantively change CBOE's rules. Additionally, by making these changes, CBOE believes it will eliminate confusion as to the whether an option class is traded on the Hybrid Trading System or Hybrid 2.0 Platform. For these reasons, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission designates the proposed rule change operative upon filing with the Commission. 13 11 *See id.* 12 *Id.* 13 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate the rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-CBOE-2008-67 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-CBOE-2008-67. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2008-67 and should be submitted on or before August 8, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 14 14 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-16460 Filed 7-17-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58143; File No. SR-ISE-2008-52] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Linkage Fees July 11, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on June 24, 2008, the International Securities Exchange, LLC (the “Exchange” or the “ISE”) filed with the Securities and Exchange Commission the proposed rule change as described in Items I, II, and III below, which items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The ISE is proposing to extend through July 31, 2009 the current pilot program regarding transaction fees charged for trades executed through the intermarket options linkage (“Linkage”). The text of the proposed rule change is available at the Exchange, the Commission's Public Reference Room, and *http://www.ise.com.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this proposed rule change is to extend for one year the pilot program establishing ISE fees for Principal Orders (“P Orders”) and Principal Acting as Agent Orders (“P/A Orders”) sent through Linkage and executed on the ISE. The fees currently are effective for a pilot period scheduled to expire on July 31, 2008. 3 This filing would extend the pilot program for another year, through July 31, 2009. The ISE fees affected by this filing are: The Linkage P Order fee of $0.24 per contract; the Linkage P/A Order fee of $0.15 per contract; a surcharge fee of between $0.05 and $0.15 for trading certain licensed products; and a $0.03 comparison fee (collectively “linkage fees”). 4 These are the same fees that all ISE Members pay for non-customer transactions executed on the Exchange. 5 The ISE does not charge for the execution of Satisfaction Orders sent through Linkage and is not proposing to charge for such orders. 3 *See* Securities Exchange Act Release No. 56128 (July 24, 2007), 72 FR 42161 (August 1, 2007) (SR-ISE-2007-55) (Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change Relating to Linkage Fees). 4 Pursuant to other pilot programs, certain linkage fees may not apply during the Linkage pilot program. 5 The ISE charges these fees only to its Members, generally firms who clear P Orders and P/A Orders for market makers on the other linked exchanges. The Exchange believes it is appropriate to charge fees for P Orders and P/A Orders executed through Linkage. Notably, while market makers on competing exchanges always can match a better price on the ISE, they never are obligated to send orders to the ISE through Linkage. However, if such market makers do seek the ISE's liquidity, whether through conventional orders or through the use of P Orders or P/A Orders, ISE believes it is appropriate to charge its Members the same fees levied on other non-customer orders. ISE appreciates that there has been limited experience with Linkage and that the Commission is continuing to study Linkage in general and the effect of fees on Linkage trading. Thus, this filing would extend the status quo with Linkage fees for an additional year. The Exchange is making no substantive changes to the way the pilot is currently operating, other than to extend the date of operation through July 31, 2009. 2. Statutory Basis The basis under the Exchange Act for this proposed rule change is the requirement under Section 6(b)(4) that an exchange have an equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. As discussed above, the ISE believes that this proposed rule change will equitably allocate fees by having all non-customer users of ISE transaction services pay the same fees. The Exchange believes that, if it were not to charge Linkage fees, the Exchange's fee would not be equitable, in that ISE Members would be subsidizing the trading of their competitors, all of whom access the same trading services. B. Self-Regulatory Organization's Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Moreover, failing to adopt the proposed rule change would impose a burden on competition by requiring ISE Members to subsidize the trading of their competitors. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not:
(i)Significantly affect the protection of investors or the public interest;
(ii)impose any significant burden on competition; and
(iii)become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 6 and Rule 19b-4(f)(6) thereunder. 7 6 15 U.S.C. 78s(b)(3)(A). 7 17 CFR 240.19b-4(f)(6). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-ISE-2008-52 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-ISE-2008-52. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISE-2008-52 and should be submitted on or before August 8, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 8 8 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-16402 Filed 7-17-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58147; File No. SR-ISE-2008-53] Self-Regulatory Organizations; International Securities Exchange, Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Fee Changes July 11, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on June 27, 2008, the International Securities Exchange (“Exchange” or “ISE”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change. On July 7, 2008, the Exchange filed Amendment No. 1 to the proposed rule change. The proposed rule change, as modified by Amendment No. 1, is described in Items I, II, and III below, which Items have been prepared by ISE. ISE has designated this proposal as one establishing or changing a due, fee, or other charge imposed by ISE under Section 19(b)(3)(A)(ii) of the Act, 3 and Rule 19b-4(f)(2) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The ISE is proposing to amend its Schedule of Fees with respect to transactions executed in securities reported to Tape B. The text of the proposed rule change is available on the Exchange's Web site ( *http://www.ise.com* ), at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, ISE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The ISE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange's current equity fee schedule consists of a tiered rebate structure: the first five million maker shares executed on an average daily volume
(ADV)basis receive a rebate of $0.0032 per share, with an increase in the rebate to $0.0035 for each maker share executed above five million ADV. For shares executed on an order delivery basis, the Exchange currently rebates $0.0027 for maker shares executed. The Exchange proposes to retain this fee structure for transactions executed in securities reported to Tape A and Tape C (hereinafter referred to as Tape A and Tape C securities), but to change the fee structure for transactions executed in securities reported to Tape B (hereinafter, referred to as Tape B securities). Effective July 1, 2008, the Exchange proposes to adopt a fee structure for Tape B securities (excluding both order delivery and MidPoint Match orders) whereby the maker receives a per share rebate of $0.0017 and the taker fee is lowered from $0.003 to $0.0015 on all shares. The execution fee for equities priced under $1.00, regardless of which tape they are reported to, is 0.3% of trade value with no rebates for adding liquidity. For order delivery orders executed in Tape B securities, the Exchange proposes to provide a rebate of $0.0015 for maker shares. The Exchange is lowering these fees in an effort to increase the trading volume in Tape B securities. 5 5 *See* Amendment No. 1. The Exchange proposes to add a note to the Schedule of Fees to clarify that Tape B securities maker transactions count towards ADV totals for the purpose of calculating Tape A and Tape C securities rebates. 6 Additionally, the Exchange proposes to clarify that the routing fee of $0.003 continues to apply on a per share basis for all securities routed to another market center, including Tape B securities. 6 Equity EAMs receive a rebate of $0.0035 per share in Tape A and Tape C securities for the maker shares exceeding the monthly ADV of 5 million. The first 5 million shares per day will continue to receive a rebate of $0.0032 per share. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(4) of the Act 7 that an exchange have an equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. 7 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule change establishes or changes a due, fee, or other charge imposed by the Exchange, it has become effective pursuant to Section 19(b)(3)(A) of the Act 8 and Rule 19b-4(f)(2) 9 thereunder. At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 8 15 U.S.C. 78s(b)(3)(A). 9 17 CFR 19b-4(f)(2). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File No. SR-ISE-2008-53 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-ISE-2008-53. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISE-2008-53 and should be submitted on or before August 8, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 10 10 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-16404 Filed 7-17-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58123; File No. SR-NSCC-2007-08] Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Proposed Rule Change To Amend Membership Disqualification Criteria Rules July 9, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 notice is hereby given that on April 30, 2007, the National Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange Commission (“Commission”) and on February 7, 2008, and on March 18, 2008, amended the proposed rule change as described in Items I, II, and III below, which items have been prepared by NSCC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties. 1 15 U.S.C. 78s(b)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NSCC is seeking to amend its membership disqualification criteria rules in an effort to create more uniformity with the rules of the Fixed Income Clearing Corporation (“FICC”) and The Depository Trust Company (“DTC”). 2 2 DTC and FICC have filed proposed rule changes seeking to harmonize their membership disqualification criteria rules with each other and with NSCC. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NSCC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. NSCC has prepared summaries, set forth in sections (A), (B), and
(C)below, of the most significant aspects of these statements. 3 3 The Commission has modified the text of the summaries prepared by NSCC. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The purpose of this filing is to amend the NSCC rules as they relate to membership disqualification criteria in an effort to create more uniformity between the rules of NSCC and the rules of NSCC's affiliates, FICC and DTC. Currently, Addendum S of the rules sets forth NSCC's policy as to standards relating to competence for membership. The Addendum includes both objective and subjective factors that may be considered by NSCC in its evaluation of an applicant or the continued membership of a particular member. Going forward, NSCC is proposing to amend its rules to only include those disqualification criteria that can be objectively monitored by Risk Management staff. For example, NSCC proposes to delete from its rules specific references to criteria that may not be reported in a regulatory background check, such as an entity being subject to “heightened supervision” by a regulatory body. NSCC is proposing to include in its rules a general provision to permit consideration of events with respect to an applicant or member that may not be expressly mentioned but that may impact a member's suitability as a member. In addition, pursuant to NSCC's current disqualification criteria, NSCC can consider the criteria with respect to a person or entity that has “significant managerial responsibility” over the applicant or member. Because it is not easily ascertainable as to what entities or individuals have “significant managerial responsibility” over a particular entity, NSCC is proposing to amend these provisions in the rules so that they are consistent with internal surveillance procedures. Going forward, NSCC will extend the reach of certain disqualification criteria to persons and entities acting as “controlling management,” which will include those officers of the entity that are currently screened by Risk Management staff pursuant to internal procedures. Specifically, NSCC's disqualification criteria will now include:
(i)An applicant or member being subject to statutory disqualification as defined in Section 3(a)(39) of that Act. 4 While this provision currently exists in the rules, it will be moved within the rules and will be grouped with all other disqualification criteria. 4 The NSCC rules will also provide that applicants and members must notify NSCC if any member of its controlling management is or becomes subject to a statutory disqualification, as defined in Section 3(a)(39) of the Act.
(ii)An applicant, member, or its controlling management making a misstatement of material facts; committing fraudulent acts; or being convicted of any of the crimes listed in the rule.
(iii)An applicant, member, or its controlling management being permanently or temporarily enjoined from acting on behalf of a financial institution such as a broker-dealer.
(iv)An applicant or member's suspension or termination from participation in a national securities association, exchange registered under the Exchange Act, a self-regulatory organization, clearing agency, or securities depository. Pursuant to the proposed change, NSCC would also continue to be able to cease to act for a member when any of the factors in sections
(i)through
(iv)above are present. Addendum S would be struck entirely from the rules, and the listed disqualification criteria would be included in NSCC's proposed Rule 2A “Initial Membership Requirements.” 5 5 NSCC has also filed proposed rule change SR-NSCC-2006-17 which seeks to reorganize NSCC's rules related to membership standards and membership requirements. NSCC believes that the proposed rule change is consistent with the requirements of Section 17A of the Act 6 and the rules and regulations thereunder applicable to NSCC because it will remove impediments to the perfection of a national system for the prompt and accurate clearance and settlement of securities transactions and is not designed to permit unfair discrimination in the admission of participants or among participants in the use of NSCC by refining NSCC's rules and procedures with regard to applicants and members, and in general will protect investors and the public interest. 6 15 U.S.C. 78q-1. B. Self-Regulatory Organization's Statement on Burden on Competition NSCC does not believe that the proposed rule change would impose any burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were not and are not intended to be solicited with respect to the proposed rule change, and none have been received. NSCC will notify the Commission of any written comments it receives. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within thirty-five days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to ninety days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the self-regulatory organization consents, the Commission will:
(A)By order approve such proposed rule change or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-NSCC-2007-08 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NSCC-2007-08. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 am and 3 pm. Copies of such filing also will be available for inspection and copying at the principal office of NSCC and on NSCC's Web site at *http://www.dtcc.com/downloads/legal/rule_filings/2007/nscc/2007-08.pdf* . All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NSCC-2007-08 and should be submitted on or before August 8, 2008. For the Commission by the Division of Trading and Markets, pursuant to delegated authority. 7 7 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-16400 Filed 7-17-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58130; File No. SR-NYSEArca-2008-72] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Exchange's Quarterly Options Series Pilot Program July 9, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on July 2, 2008, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. The Exchange has designated this proposal as non-controversial under Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NYSE Arca proposes to amend its rules to
(i)extend the Quarterly Options Series pilot program (“Pilot Program”) until July 10, 2009,
(ii)add provisions to the Pilot Program regarding the addition of new strike prices and the delisting of inactive series and,
(iii)make minor technical changes. The text of the proposed rule change is available on the Exchange's Web site at ( *http://www.nyse.com* ), at the Exchange's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On July 12, 2006 the Exchange filed with the Commission a proposal to list and trade Quarterly Options Series on a pilot basis (“Pilot Program”) through July 10, 2007. The rule change was effective upon filing. 5 The original Pilot Program was subsequently extended and is now due to expire on July 10, 2008. 6 The Exchange now proposes to extend the Pilot Program for another year, so that it will now expire on July 10, 2009; to amend the Pilot Program in certain respects; and make minor technical changes. 5 *See* Securities Exchange Act Release No. 54166 (July 18, 2006), 71 FR 42151 (July 25, 2006) (SR-NYSEArca-2006-45). 6 *See* Securities Exchange Act Release No. 56119 (July 24, 2007), 72 FR 41563 (July 30, 2007) (SR-NYSEArca-2007-70). Pilot Extension The Exchange stated that it would submit, in connection with any proposed extension of the Pilot Program, a Pilot Program Report (“Report”) that would provide an analysis of the Pilot Program covering the entire period which the program was in effect. The Report was to include:
(1)Data and written analysis on the open interest and trading volume in the classes for which Quarterly Options Series were opened;
(2)an assessment of the appropriateness of the option classes selected for the Pilot Program;
(3)an assessment of the impact of the Pilot Program on the capacity on the Exchange, OPRA and on market data vendors (to the extent data from market data vendors is available);
(4)any capacity problems or other problems that arose during the operation of the Pilot Program and how the Exchange addressed such problems;
(5)any complaints that the Exchange received during the operation of the Pilot Program and how the Exchange addressed them; and
(6)any additional information that would assist the Commission in assessing the operation of the Pilot Program. The Exchange has submitted the Report. The Exchange represents that the Report supports its belief that extension of the Pilot Program is proper. Among other things, the Report shows the strength of the Pilot Program as reflected by the overall volume and open interest of Quarterly Options Series traded on NYSE Arca and other national options exchanges. The Report shows that the Pilot Program has not created, and in the future should not create, any capacity, operational or regulatory problems attributable to Quarterly Options Series. Finally, NYSE Arca represents that the Exchange has the necessary system capacity to support any additional series listed as part of the Pilot Program. Proposal Related to the Listing and Delisting of Strikes On August 7, 2007, the Chicago Board Options Exchange (“CBOE”) filed a proposal to revise the terms of its Quarterly Options Series pilot program. As part of this filing, CBOE proposed to implement new policies related to the listing and delisting of additional strike prices for Quarterly Options Series. The proposal, as amended, was approved by the Commission on March 3, 2008. 7 NYSE Arca proposes to adopt the revised terms of the CBOE's pilot program, for use in its own Pilot Program. 7 *See* Securities Exchange Act Release No. 57410 (March 3, 2008), 73 FR 12483 (March 7, 2008) (SR-CBOE-2007-96). Specifically, NYSE Arca proposes to amend Rule 6.4, Commentary .08 to permit the Exchange to list additional strike prices for Quarterly Options Series in exchange traded fund (“ETF”) options that fall within a percentage range (30%) above and below the price of the underlying ETF. 8 8 Pursuant to the existing Pilot Program, the Exchange is presently limited to listing new strike prices on Quarterly Options Series that fall within a $5 range from the closing price of the underlying security on the preceding day. Additionally, upon demonstrated customer interest, the Exchange also will be permitted to open additional strike prices of Quarterly Options Series in ETF options that are more than 30% above or below the current price of the underlying ETF. Market-makers trading for their own account will not be considered when determining customer interest under this provision. In addition to the initial listed series, the proposal will permit the Exchange to list up to sixty
(60)additional series per expiration month for each Quarterly Options Series in ETF options. The proposed policies regarding the listing of new strikes are identical to those approved for CBOE. The Exchange also proposes to adopt the same policy approved for CBOE, regarding the delisting of inactive strikes in Quarterly Options Series. Under the proposed delisting policy, the Exchange will, on a monthly basis, review Quarterly Options Series that are outside a range of five
(5)strikes above and five
(5)strikes below the current price of the underlying ETF, and delist series with no open interest in both the put and the call series having a strike price:
(i)Higher than the highest strike price with open interest in the put and/or call series for a given expiration month; or
(ii)lower than the lowest strike price with open interest in the put and/or call series for a given expiration month. Notwithstanding the proposed delisting policy, the Exchange will grant customer requests to add strikes and/or maintain strikes in Quarterly Options Series eligible for delisting. The delisting policy proposed by the Exchange is designed to mitigate the number of options series with no open interest, and reduce quote traffic accordingly. If during the life of the Pilot Program the Exchange identifies series for delisting, the Exchange will notify other options exchanges with similar delisting polices, and shall work with such other exchanges to develop a uniform list of securities to be delisted, to help to ensure uniform series delisting of multiply listed Quarterly Options Series in ETF options. Finally, the Exchange notes that the delisting policy, once approved, would become part of the Pilot Program and, going forward, would be considered by the Commission when the Exchange seeks to renew or make permanent the Pilot Program in the future. The proposed policies regarding the delisting of inactive strikes are identical to those in place as part of the CBOE Quarterly Options Series Pilot Program. Non-Substantive Changes The Exchange also proposes at this time to make minor, non-substantive changes, to Rule 5.19(a)(3) and Rule 6.4 Commentary .08 in order to revise the dates used in existing examples that describe the listing process for Quarterly Options Series, and to renumber certain subsections of the rule for clarity purposes. These changes serve only to update the text, and make no changes to the Pilot Program itself, or the rules governing such. 2. Statutory Basis The Exchange believes that the continuation of the Pilot Program, along with the proposed revision to the program, will continue to stimulate customer interest in options by creating greater trading opportunities and flexibility in investment choices. The Exchange further believes that continuation of the Pilot Program will provide the ability to more closely tailor investment strategies and provide a valuable hedging tool for investors. Also, the Exchange believes that by revising its Pilot Program to include similar provisions contained in the CBOE Quarterly Options Series pilot program will make for more uniform rules across exchanges that have implemented a Quarterly Options Series pilot program. For these reasons, the Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder and, in particular, the requirements of section 6(b) of the Act. 9 Specifically, the Exchange believes the proposed rule change is consistent with the section 6(b)(5) of the Act, 10 which requires that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action *The Exchange has designated the proposed rule change as one that:*
(1)Does not significantly affect the protection of investors or the public interest;
(2)does not impose any significant burden on competition; and
(3)does not become operative for 30 days from the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. Therefore, the foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and subparagraph (f)(6) of Rule 19b-4 thereunder. 12 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to provide the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has fulfilled this requirement. The Exchange has asked the Commission to waive the operative delay to permit the proposed rule change to become operative prior to the 30th day after filing. The Commission has determined that waiving the 30-day operative delay of the Exchange's proposal is consistent with the protection of investors and the public interest and will promote competition because such waiver will allow NYSE Arca to continue the existing Pilot Program without interruption. 13 Therefore, the Commission designates the proposal operative upon filing. 13 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). The Commission notes that NYSE Arca's proposed changes regarding additional series and the delisting policy will become part of the Pilot Program and, going forward, its effects will be considered by the Commission in the event that the Exchange seeks to renew or make permanent the Pilot Program. Thus, in the Exchange's future reports on the Pilot Program, the Exchange should include analysis of
(1)the impact of the additional series on the Exchange's market and quote capacity, and
(2)the implementation and effects of the delisting policy, including the number of series eligible for delisting during the period covered by the report, the number of series actually delisted during that period (pursuant to the delisting policy or otherwise), and documentation of any customer requests to maintain QOS strikes that were otherwise eligible for delisting. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate the rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File No. SR-NYSEArca-2008-72 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSEArca-2008-72. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-NYSEArca-2008-72 and should be submitted on or before August 8, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 14 14 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-16421 Filed 7-17-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-58144; File No. SR-Phlx-2008-49] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Transaction Charges Applicable to Linkage “P” and “P/A” Orders July 11, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on June 30, 2008, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx, pursuant to Section 19(b)(1) of the Act 3 and Rule 19b-4 thereunder, 4 proposes to extend for a one-year period until July 31, 2009, a pilot program relating to transaction fees applicable to the execution of Principal Acting as Agent Orders (“P/A Orders”) 5 and Principal Orders (“P Orders”) 6 sent to the Exchange via the Intermarket Options Linkage (“Linkage”) under the Plan for the Purpose of Creating and Operating an Intermarket Option Linkage (the “Plan”). 7 The text of the proposed rule change is available on the Exchange's Web site at *http://www.phlx.com,* at the Exchange, and the Commission's Public Reference Room. 3 15 U.S.C. 78s(b)(1). 4 17 CFR 240.19b-4. 5 A P/A Order is an order for the principal account of a specialist (or equivalent entity on another participant exchange that is authorized to represent Public Customer orders), reflecting the terms of a related unexecuted Public Customer order for which the specialist is acting as agent. *See* Exchange Rule 1083(k)(i). 6 A Principal Order is an order for the principal account of an Eligible Market Maker and is not a P/A Order. *See* Exchange rule 1083(k)(ii). 7 *See* Securities Exchange Act Release Nos. 44482 (June 27, 2001), 66 FR 35470 (July 5, 2001) (File No. 4-429) (Amendment to Plan to Conform to the Requirements of Securities Exchange Act Rule 11Ac1-7); 43573 (November 16, 2000), 65 FR 70851 (November 28, 2000) (File No. 4-429) (Order Approving Phlx Joining the Plan); and 43086 (July 28, 2000), 65 FR 48023 (August 4, 2000) (File No. 4-429) (Approval of the Plan). II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Phlx has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to extend the current pilot program for one year, through July 31, 2009. No substantive changes are being made to the pilot as it currently operates other than to extend the pilot through July 31, 2009. Currently, the Exchange charges $0.25 per option contract for P Orders sent to the Exchange and $0.15 per option contract for P/A Orders. By extending the current pilot program, the Exchange should remain competitive with other exchanges that charge fees for P Orders and P/A Orders. 8 Consistent with current practice, the Exchange will charge the clearing member organization of the sender of P Orders and P/A Orders. Also, consistent with current practice, the Exchange will not charge for the execution of Satisfaction Orders sent through Linkage. 8 *See, e.g.* , SR-ISE-2008-52 (filed June 24, 2008) and SR-CBOE-2008-69 (filed June 30, 2008). 2. Statutory Basis The Exchange believes that its proposal to amend its schedule of fees is consistent with Section 6(b) of the Act 9 in general, and furthers the objectives of Section 6(b)(4) of the Act 10 in particular, in that it is an equitable allocation of reasonable fees and other charges among Exchange members and issuers and other persons using its facilities. The Exchange believes that its proposal to extend the pilot program relating to transaction fees for Linkage P and P/A Orders provides for the equitable allocation of reasonable dues, fees, and other charges among its members by charging the same fees to all such members using the Exchange's facilities for transaction services relating to Linkage P Orders, and by charging the same fees to all such members using the Exchange's facilities for transaction services relating to Linkage P/A Orders. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change is being designated by the Exchange as a “non-controversial” rule pursuant to Section 19(b)(3)(A) of the Act 11 and subparagraph (f)(6) of Rule 19b-4 thereunder 12 because the foregoing rule change:
(i)Does not significantly affect the protection of investors or the public interest;
(ii)does not impose any significant burden on competition; and
(iii)by its terms, does not become operative for 30 days after the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. The Exchange has satisfied the pre-filing requirement contained in subparagraph (f)(6)(iii) of Rule 19b-4. 13 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f)(6). 13 17 CFR 240.19b-4(f)(6)(iii). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Phlx-2008-49 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Phlx-2008-49. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2008-49 and should be submitted on or before August 8, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 14 14 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-16403 Filed 7-17-08; 8:45 am] BILLING CODE 8010-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 11311 and # 11312] Missouri Disaster Number MO-00030 AGENCY: U.S. Small Business Administration. ACTION: Amendment 1. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for the State of Missouri (FEMA-1773-DR), dated 06/28/2008. *Incident:* Severe Storms and Flooding. *Incident Period:* 06/01/2008 and continuing. *Effective Date:* 07/11/2008. *Physical Loan Application Deadline Date:* 08/27/2008. *EIDL Loan Application Deadline Date:* 03/30/2009. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: M. Mitravich, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the Presidential disaster declaration for the State of Missouri, dated 06/28/2008 is hereby amended to include the following areas as adversely affected by the disaster: *Primary Counties: (Physical Damage and Economic Injury Loans):* Gentry, Linn, Livingston. *Contiguous Counties:* (Economic Injury Loans Only): Missouri: Adair, Andrew, Caldwell, Carroll, Chariton, Daviess, Dekalb, Grundy, Harrison, Macon, Nodaway, Sullivan, Worth. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E8-16451 Filed 7-17-08; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #11288 and #11289] Wisconsin Disaster Number WI-00013 AGENCY: U.S. Small Business Administration. ACTION: Amendment 6. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for the State of Wisconsin (FEMA-1768-DR), dated 06/14/2008. *Incident:* Severe Storms, Tornadoes, and Flooding. *Incident Period:* 06/05/2008 and continuing. *Effective Date:* 07/10/2008. *Physical Loan Application Deadline Date:* 08/13/2008. *EIDL Loan Application Deadline Date:* 03/13/2009. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: M. Mitravich, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the Presidential disaster declaration for the State of Wisconsin, dated 06/14/2008 is hereby amended to include the following areas as adversely affected by the disaster: *Primary Counties* ( Physical Damage and Economic Injury Loans): Monroe. All other counties contiguous to the above named primary county have previously been declared. All other information in the original declaration remains unchanged. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E8-16452 Filed 7-17-08; 8:45 am] BILLING CODE 8025-01-P SUSQUEHANNA RIVER BASIN COMMISSION Notice of Actions Taken at June 12, 2008 Meeting AGENCY: Susquehanna River Basin Commission. ACTION: Notice of Commission Actions. SUMMARY: At its regular business meeting on June 12, 2008 in Elmira, New York, the Commission:
(1)Heard a special infrastructure presentation by Ms. Sandra Allen of the N.Y. Department of Environmental Conservation,
(2)received a report on the present hydrologic conditions of the basin showing a drying trend in parts of the basin,
(3)approved a phased-in proposal to increase the Commission's consumptive use mitigation fee,
(4)rescinded certain unneeded Commission policies,
(5)adopted the FY-10 Budget,
(6)approved two contracts, and
(7)elected a new Chairman (Robert M. Summers of Maryland) and Vice-Chairman (Brig. Gen. Todd Semonite) to serve in the next fiscal year. In addition, the Commission heard a Legal Counsel's report, heard an update on recent activities in the regulatory program, and convened a public hearing to:
(1)Approve certain water resources projects, including one enforcement action;
(2)consider a request for a hearing on an administrative appeal regarding Docket No. 20080305, Mountainview Thoroughbred Racing Association, Inc.;
(3)consider a request to reopen Docket No. 20020809, Mountainview Thoroughbred Racing Association, Inc.; and
(4)consider a request by Mountainview Thoroughbred Racing Association, Inc. for reconsideration of a denial of a request for stay. Eight water resources projects were also tabled. See the Supplementary Information section below for more details on these actions. DATES: June 12, 2008. ADDRESSES: Susquehanna River Basin Commission, 1721 N. Front Street, Harrisburg, PA 17102-2391. FOR FURTHER INFORMATION CONTACT: Richard A. Cairo, General Counsel, telephone:
(717)238-0423; ext. 306; fax:
(717)238-2436; e-mail: *rcairo@srbc.net* or Deborah J. Dickey, Secretary to the Commission, telephone:
(717)238-0422, ext. 301; fax:
(717)238-2436; e-mail: *ddickey@srbc.net.* Regular mail inquiries may be sent to the above address. SUPPLEMENTARY INFORMATION: The Commission approved a contract for staff consulting work with Indiana County Conservation District on the Bear Run AMD Restoration Project in Banks Township, Indiana County, Pa., and another contract with the U.S. Army Corps of Engineers for work related to the establishment of ecological flow needs in critical stream reaches of the Susquehanna River Basin. The Commission also convened a public hearing and took the following actions: *Public Hearing—Projects Approved:* 1. *Project Sponsor and Facility:* Fortuna Energy Inc. (Southern Tier of N.Y., and Tioga and Bradford Counties, Pa.). Consumptive water use of up to 3.000 mgd in Steuben, Chemung, Schuyler, Tioga, and Broome Counties, N.Y., and Tioga and Bradford Counties, Pa. 2. *Project Sponsor and Facility:* Fortuna Energy Inc. (Catatonk Creek), Town of Spencer, Tioga County, N.Y. Surface water withdrawal of up to 0.101 mgd. 3. *Project Sponsor and Facility:* East Resources, Inc. (Elmira, N.Y., Area). Consumptive water use of up to 4.000 mgd in Chemung and Steuben Counties, N.Y., and Tioga County, Pa. 4. *Project Sponsor and Facility:* East Resources, Inc. (Chemung River), Town of Big Flats, Chemung County, N.Y. Surface water withdrawal of up to 0.107 mgd. 5. *Project Sponsor and Facility:* Fortuna Energy Inc. (Chemung River), Chemung Town, Chemung County, N.Y. Surface water withdrawal of up to 0.250 mgd. 6. *Project Sponsor and Facility:* East Resources, Inc. (Tioga River; at Tioga Junction), Lawrence Township, Tioga County, Pa. Surface water withdrawal of up to 0.107 mgd. 7. *Project Sponsor and Facility:* East Resources, Inc. (Mansfield, Pa., Area). Consumptive water use of up to 4.000 mgd in Tioga and Bradford Counties, Pa. 8. *Project Sponsor and Facility:* East Resources, Inc. (Tioga River; near Mansfield), Richmond Township, Tioga County, Pa. Surface water withdrawal of up to 0.107 mgd. 9. *Project Sponsor and Facility:* Keystone Landfill, Inc., Dunmore Borough, Lackawanna County, Pa. Consumptive water use of up to 0.100 mgd and groundwater withdrawal of 0.010 mgd from Well 1, 0.020 mgd from Well 2, and 0.020 mgd from Well 3, and settlement of an outstanding compliance matter. 10. *Project Sponsor:* Kratzer Run Development, LLC. Project Facility: Eagles Ridge Golf Club (formerly Grandview Golf Course/Susquehanna Recreation Corporation), Ferguson Township, Clearfield County, Pa. Consumptive water use of up to 0.099 mgd and surface water withdrawal of up to 0.099 mgd. 11. *Project Sponsor and Facility:* Commonwealth Environmental Systems, L.P., Foster, Frailey and Reily Townships, Schuylkill County, Pa. Modification of consumptive water use and groundwater approval (Docket No. 20070304). 12. *Project Sponsor and Facility:* Lykens Valley Golf Course (formerly Harrisburg North Golf Course), Upper Paxton Township, Dauphin County, Pa. Consumptive water use of up to 0.200 mgd and surface water withdrawal of up to 0.200 mgd. 13. *Project Sponsor and Facility:* Spring Creek Golf Course (Spring Creek), Derry Township, Dauphin County, Pa. Consumptive water use of up to 0.081 mgd and surface water withdrawal of up to 0.081 mgd. 14. *Project Sponsor:* Titanium Hearth Technologies, Inc. Project Facility: TIMET North American Operations, Caernarvon Township, Berks County, Pa. Consumptive water use of up to 0.133 mgd, and settlement of an outstanding compliance matter. 15. *Project Sponsor and Facility:* Conestoga Country Club (Well 1), Manor and Lancaster Townships, Lancaster County, Pa. Groundwater withdrawal of 0.281 mgd. 16. *Project Sponsor and Facility:* Rock Springs Generation Facility, Rising Sun, Cecil County, Maryland. Modification of surface water withdrawal, groundwater withdrawal, and consumptive water use approval (Docket No. 20001203). *Public Hearing—Enforcement Action:* The Commission accepted a settlement offer in the amount of $8,500 for the following project. *Project Sponsor and Facility:* Standing Stone Golf Club (Docket No. 20020612), Oneida Township, Huntington County, Pa. *Public Hearing—Denial of Request for Administrative Hearing:* Under Section 808.2 of the Commission's Regulation relating to administrative appeals, the Commission denied a request for an administrative hearing concerning the following project: *Project Sponsor:* *Mountainview Thoroughbred Racing Association; Project Facility:* Withdrawal of up to 0.400 mgd (30-day average) for maintenance and operation of a horse racing and casino gaming facility, Docket No. 20080305; *Location:* East Hanover Township, Dauphin County, Pa. Appellant: East Hanover Township, *et al.* *Public Hearing—Denial of Request to Reopen Docket:* Under Section 806.32 of the Commission's Regulation relating to reopening of project approvals, the Commission denied a request for the reopening of the following project approval: *Project Sponsor:* Mountainview Thoroughbred Racing Association Project; *Facility:* Consumptive Use of up to 0.438 mgd (peak day) for maintenance and operation of a horse racing and casino gaming facility, Docket No. 20020809; *Location:* East Hanover Township, Dauphin County, Pa. Appellant: East Hanover Township. *Public Hearing—Denial of Request for Reconsideration of Denial of Request for Stay:* Under Section 808.2 of the Commission's Regulation relating to administrative appeals, the Commission denied a request for reconsideration of its previous denial of a request for stay of the following project approval: *Project Sponsor:* Mountainview Thoroughbred Racing Association; Project *Facility:* Withdrawal of up to 0.400 mgd (30-day average) for maintenance and operation of a horse racing and casino gaming facility, Docket No. 20080305; *Location:* East Hanover Township, Dauphin County, Pa. Appellant: East Hanover Township, *et. al.* *Public Hearing—Projects Tabled:* 1. *Project Sponsor and Facility:* East Resources, Inc. (Seeley Creek), Town of Southport, Chemung County, N.Y. Applications for consumptive water use of up to 0.250 mgd and surface water withdrawal of up to 0.250 mgd. 2. *Project Sponsor and Facility:* East Resources, Inc. (Crooked Creek; near Middlebury Center), Middlebury Township, Tioga County, Pa. Applications for consumptive water use of up to 0.250 mgd and surface water withdrawal of up to 0.250 mgd. 3. *Project Sponsor and Facility:* Fortuna Energy Inc. (Sugar Creek), West Burlington Township, Bradford County, Pa. Applications for consumptive water use of up to 0.250 mgd and surface water withdrawal of up to 0.250 mgd. 4. *Project Sponsor and Facility:* Fortuna Energy Inc. (Towanda Creek), Franklin Township, Bradford County, Pa. Applications for consumptive water use of up to 0.250 mgd and surface water withdrawal of up to 0.250 mgd. 5. *Project Sponsor and Facility:* Fortuna Energy Inc. (Susquehanna River), Sheshequin Township, Bradford County, Pa. Applications for consumptive water use of up to 0.250 mgd and surface water withdrawal of up to 0.250 mgd. 6. *Project Sponsor and Facility:* Neptune Industries, Inc. (Lackawanna River), Borough of Archbald, Lackawanna County, Pa. Application for surface water withdrawal of up to 0.499 mgd. 7. *Project Sponsor:* United States Gypsum Company. Project Facility: Washingtonville Plant (Well W-A8), Derry Township, Montour County, Pa. Application for groundwater withdrawal of 0.350 mgd. 8. *Project Sponsor:* Pennsy Supply, Inc. Project Facility: Hummelstown Quarry, South Hanover Township, Dauphin County, Pa. Application for surface water withdrawal of up to 29.925 mgd. Authority: Public Law 91-575, 84 Stat. 1509 *et seq.* , 18 CFR parts 806, 807, and 808. Dated: July 10, 2008. Thomas W. Beauduy, Deputy Director. [FR Doc. E8-16540 Filed 7-17-08; 8:45 am] BILLING CODE 7040-01-P DEPARTMENT OF TRANSPORTATION National Highway Traffic Safety Administration Dorel Juvenile Group [Cosco] (DJG); Denial of Applications for Determination of Inconsequential Noncompliance Dorel Juvenile Group (DJG), of Columbus, Indiana, the parent company manufacturing Cosco brand child restraints, determined that certain tether webbing used on various child restraints (39 models and 3,957,826 units) failed the webbing strength requirements of S5.4.1(a) of Federal Motor Vehicle Safety Standard (FMVSS) No. 213, “Child Restraint Systems”. 1 DJG also determined that certain harness webbing used on various child restraints (14 models and 54,400 units) failed the webbing strength requirements of FMVSS No. 213, S5.4.1(b). For each noncompliance, DJG filed an appropriate report pursuant to 49 CFR part 573, “Defect and Noncompliance Reports.” DJG also applied to be exempted from the notification and remedy requirements of 49 U.S.C. Chapter 301, “Motor Vehicle Safety,” on the basis that the noncompliance in both situations is inconsequential to motor vehicle safety. 1 Throughout this Notice, all references to FMVSS No. 213 are based on the version of the standard in effect for the applicable manufacturing dates of the noncompliant webbing. Notices of receipt of the applications were published on July 30, 2002 and December 3, 2002 in the **Federal Register** (67 FR 49387 and 67 FR 72025) with 30-day comment periods. In response to the first petition, NHTSA received one comment from Advocates for Highway and Auto Safety (Advocates) in support of establishing a minimum breaking strength requirement (Docket No. NHTSA-2002-12479-2). NHTSA received no comments in response to the second petition. The noncompliant tether webbing used on Cosco child restraints failed to meet the percent-of-strength requirement of FMVSS No. 213 when subjected to the abrasion test. The tether webbing retained only 55 percent of its new webbing strength; 75 percent was and is required by the standard. The noncompliant harness webbing failed to meet the percent-of-strength requirement of FMVSS No. 213 when exposed to a carbon arc light. The harness webbing retained only 37 percent of its new webbing strength; 60 percent was and is required by the standard. As indicated above, NHTSA's standards were based on retention of a specified percentage of the original strength of the webbing. However, there was no minimum strength requirement. These DJG petitions for inconsequential noncompliance highlighted NHTSA's concern that the standard could allow manufacturers to use low strength and potentially unsafe webbing provided that the webbing retained most of its strength following exposure to abrasion or light. At the time of receiving these petitions, NHTSA had undertaken a rulemaking to consider whether to amend FMVSS No. 213 to require a minimum breaking strength for webbing to ensure that all child restraints being introduced into the market would have adequate webbing strength to provide child safety protection over their lifetimes. NHTSA postponed final determinations on these petitions in order to obtain the benefit of public comments responding to the proposed breaking strength requirements. In a rule published on June 7, 2006 (71 FR 32855), NHTSA established minimum breaking strength requirements. 2 2 Under the final rule the webbing must meet both minimum breaking strengths and percent-of-strength retention requirements to be compliant with the Standard. Abrasion Petition Summary As part of the Agency's 2001 testing activities, NHTSA tested the tether webbing used on DJG child restraints to the requirements in FMVSS No. 213. FMVSS No. 213, S5.4.1(a) “Performance requirements,” requires that the webbing of belts provided with a child restraint system, after being subjected to abrasion as specified in S5.1(d) or S5.3(c) of FMVSS No. 209, “Seat belt assemblies,” have a breaking strength of not less than 75 percent of the strength of the unabraded webbing when tested in accordance with S5.1(b) of FMVSS No. 209. Section 5.1(b) of FMVSS No. 209 requires that the median value of three webbing samples meet the abrasion requirement. 3 Following the abrasion test, the DJG tether webbing retained only 55 percent of the original webbing breaking strength (from 19,803 N to 10,903 N). The noncompliant tether webbing was manufactured between January 2000 and September 30, 2001. On July 11, 2001, as a result of its fiscal year 2001 testing, NHTSA notified DJG of a potential noncompliance regarding DJG's tether webbing utilized for their tether assembly. 3 The 75 percent webbing reduction requirement is calculated using median breaking strength values of abraded webbing (out of three samples) and original (unabraded) webbing (out of three samples). DJG determined that one of the tether webbing suppliers had provided some webbing that did not meet the abrasion test requirements. However, DJG contended that because its unabraded webbing strength was high, noncompliance with the 75 percent abrasion strength requirement of S5.4.1(a) of FMVSS No. 213 is inconsequential to motor vehicle safety. DJG stated that its abraded strength of 10,903 N is far in excess of the anchorage strength requirement specified in FMVSS No. 225, “Child restraint anchorage systems.” DJG also asserted that the abraded webbing strength test procedure set forth in S5.4.1(a) of FMVSS No. 213 is flawed, and that a minimum abraded breaking strength should be specified. Therefore, DJG filed the petition claiming that the noncompliance is inconsequential to motor vehicle safety. NHTSA Decision on Abrasion Petition As summarized above, DJG contended that because the unabraded webbing strength was high, the noncompliance with the 75 percent abrasion strength requirement was inconsequential to motor vehicle safety. However, both the unabraded webbing strength and the degradation rate requirements are important from a safety perspective, as explained in the preamble to the June 2006 final rule. 4 While DJG focused on the unabraded strength of the webbing, it largely ignored the high degradation rate of the webbing in the restraints covered by its Part 573 report. This lack of breaking strength retention after abrasion signals the distinct probability that the webbing strength would be insufficient throughout a lifetime of use. 5 4 71 FR 32856-858, June 7, 2006 (minimum breaking strength requirement for new webbing); 71 FR 32858-859, June 7, 2006 (minimum percent-of-strength requirement for exposed webbing). 5 We note that following abrasion, the Dorel tether webbing had a strength of 10,903 N. Under the 2006 rule, the minimum strength for new webbing is 15,000 N. That rule did not change the 75 percent strength retention requirement. As a frame of reference, webbing that had a strength of 15,000 N that retained 75 percent of its strength would have a strength of 11,250 N. The Dorel tether webbing had a strength, after exposure, of only 10,903 N. DJG also stated that the abraded webbing strength in its restraints, as measured at 10,903 N, is far in excess of the anchorage strength requirement specified in FMVSS No. 225. However, as noted in the preamble to the June 2006 final rule, the abrasion test is an accelerated aging test that provides a snapshot of the webbing over prolonged exposure to environmental conditions. The test does not replicate the lifetime use of the webbing 6 and therefore the webbing would have less strength after further abrasion. If the webbing from a child restraint lost a significant percentage of its strength under the test, there would be substantial questions about its ability to perform as intended over a long term use of the child restraint. The high degradation rate of the DJG webbing gives significant cause for concern that the webbing could abrade to the point where the webbing strength is lower than the tether anchor strength, providing for an unsafe connection to the vehicle. 6 71 FR 32859, June 7, 2006. Finally, DJG stated that a minimum abraded breaking strength should be specified in the standard. Advocates expressed a similar concern, stating in its comment that NHTSA should establish an absolute webbing strength requirement for unabraded webbing, as well as a minimum numerical breaking strength requirement for webbing that has been subjected to abrasion. 7 NHTSA agreed with both Dorel and Advocates and, following the submission of these petitions, published a proposal to revise the standard. The final rule reaffirmed that retaining control over material degradation rates is critical to ensure sufficient webbing strength over time. 8 7 Advocates made no recommendation either to grant or to deny the petition. 8 71 FR 32855-860, June 7, 2006. In summary, the DJG webbing met only 55 percent of the original webbing breaking strength in the abrasion test. Such substantial (almost 50 percent) degradation in strength, notwithstanding the original webbing strength, indicates that the webbing could not be relied upon to provide adequate strength for the life of the restraint. In consideration of the foregoing, NHTSA has decided that DJG has not met its burden of persuasion that the noncompliance it describes is inconsequential to motor vehicle safety. Accordingly, DJG's application is hereby denied. DJG must fulfill its obligation to notify and remedy under 49 U.S.C. 30118(d) and 30120(h). Light Exposure Petition Summary The noncompliant harness webbing was identified as gray Wellington style #N2216E1-917, lots numbered 2063F, 2100F, and 2140D, manufactured from March 15, 2002 through August 1, 2002. FMVSS No. 213, S5.4.1(b) requires that the webbing of belts provided with a child restraint system meet the requirements of S4.2(e) of FMVSS No. 209. FMVSS No. 209, S4.2(e), requires a breaking strength of not less than 60 percent of the strength before exposure to a carbon arc light when tested by the procedure specified in S5.1(e) of FMVSS No. 209. Following the carbon arc exposure test, the DJG harness webbing retained only 37 percent of the original webbing breaking strength (from 12,371 N to 4,539 N). DJG pointed out that testing at Veridian 9 (simulating a 30 mph (48 km/h) crash condition) showed a dynamic load of between 846 N and 1,433 N. DJG asserted that its light-exposed harness webbing breaking strength of 4,539 N far exceeded these dynamic loads. DJG argued that without a minimum breaking strength requirement, other webbing with a much lower initial breaking strength could comply with the standard at a much lower breaking strength than the DJG's 4,539 N, as long as it retained 60 percent of the original webbing strength. DJG commented that while its webbing, which was made of nylon fabrics, was noncompliant when exposed to carbon arc light filtered by a Corex-D filter (tested according to the standard's requirements), the webbing was compliant when exposed to carbon arc light filtered by a soda-lime glass filter (specified by the standard for use only for polyester fabrics). DJG also commented that because the standard relies on carbon arc light for resistance to light testing, the method is obsolete. DJG stated in Exhibit 7 to its petition that after being subjected to a xenon arc lamp for 300 hours the webbing retained 93.5 percent of its initial breaking strength. Therefore, DJG argued that the noncompliance is inconsequential to motor vehicle safety. 9 Veridian is now known as Calspan. NHTSA Decision on Light Exposure Petition First, DJG asserted that its light-exposed harness webbing breaking strength of 4,539 N far exceeds forces in dynamic crash testing at 30 mph by a factor of 3.1 to 6.8 times. NHTSA does not find this persuasive. A 30 mile per hour test is not indicative of the upper limit of safety. The test conditions in FMVSS No. 213 reflect the concern that child restraints will withstand even the most severe crashes. 10 These are well above 30 mph. 11 10 55 FR 17970, April 30, 1990. 11 The forces in a crash increase exponentially as velocity increases. DJG also asserted that under a standard that lacks a specific minimum strength requirement, manufacturers could produce webbing with very low after-exposure strength if the pre-exposure strength was also low. This assertion is theoretical. The agency's FY 2000 to FY 2002 available compliance test data for harness webbing 12 showed that the median strength after light exposure was 10,636 N, and that the median exposed/original webbing strength ratio was 10,636 N/12,594 N or 84 percent, both of which are far superior to DJG's webbing strength after light exposure of only 4539 N and strength ratio of 37%. 13 In order to prevent manufacturers from producing harness webbing with low strengths before and after light exposure, NHTSA established minimum breaking strengths in the June 2006 final rule. 12 70 FR 37734, June 30, 2005; Docket NHTSA-2005-21243-0002. 13 Of the 109 samples from the FY 2000 to FY 2002 compliance data, only the DJG (Cosco) harness webbing failed to meet the current 60 percent of original strength requirement after exposure to light. DJG provided test data for its nylon webbing filtered by a soda-lime glass filter. However, the standard specifies that webbing made of nylon fabrics, as in this case, be tested using the Corex-D filter. The soda-lime glass filter is appropriate only for polyester webbing. Therefore, the DJG compliant data was based on testing using an inappropriate light filter, and was not conducted according to FMVSS No. 213 requirements. Finally, DJG did not substantiate its statement that carbon arc testing is obsolete for testing child restraint webbing materials. NHTSA believes that the test results obtained by the carbon arc test method are an appropriate reflection of the strength capabilities of DJG's webbing. While NHTSA has decided to use a xenon arc lamp for weathering tests of glazing materials under FMVSS No. 205, “Glazing materials,” 14 the conclusion in that rulemaking does not mean that the carbon arc is not indicative of the sunlight spectral power distribution or that it produces invalid weathering results for webbing materials. 14 68 FR 43964, July 25, 2003. In summary, the DJG harness webbing met only 37 percent of the original webbing breaking strength when tested according to the standard with a Corex-D filter. Such a rapid (over 60 percent) strength degradation is an indication of a quality control problem for that webbing and signals the distinct probability that the webbing strength would be insufficient throughout its use. 15 15 We note that following light exposure, the Dorel harness webbing had a strength of 4539 N. Under the 2006 rule, the minimum strength for new webbing is 11,000 N. That rule did not change the 60 percent strength retention requirement. As a frame of reference, webbing that had a strength of 11,000 N that retained 60 percent of its strength would have a strength of 6,600 N. The Dorel tether webbing had a strength, after exposure to light, of only 4,539 N. In consideration of the foregoing, NHTSA has decided that DJG has not met its burden of persuasion that the noncompliance it describes is inconsequential to motor vehicle safety. Accordingly, DJG's application is hereby denied. DJG must fulfill its obligation to notify and remedy under 49 U.S.C. 30118(d) and 30120(h). Authority: 49 U.S.C 30118(d) and 30120(h); delegations of authority at 49 CFR 1.50 and 49 CFR 501.8 Issued on: July 14, 2008. Stephen R. Kratzke, Associate Administrator for Rulemaking. [FR Doc. E8-16431 Filed 7-17-08; 8:45 am] BILLING CODE 4910-59-P DEPARTMENT OF TRANSPORTATION Pipeline and Hazardous Materials Safety Administration Hazardous Materials: Meeting Future Hazardous Materials Transportation Safety Challenges AGENCY: Pipeline and Hazardous Materials Safety Administration (PHMSA), DOT. ACTION: Notice of public workshop—“Transporting Hazardous Materials Safely—the Next 100 Years.” SUMMARY: PHMSA is hosting a public workshop to identify and discuss strategies for meeting emerging hazardous materials transportation safety challenges, particularly in the development of innovative safety solutions that provide the Department of Transportation, other federal agencies, state agencies, the regulated community, and emergency response organizations with flexible tools to manage and reduce safety risks. The workshop will provide an opportunity for PHMSA and its stakeholders to discuss the future direction of the hazardous materials transportation safety program, with a focus on three broad themes:
(1)Safety, Risk Reduction, and Integrity Management;
(2)21st Century Solutions: Using New Technology for Improved Safety Controls/Improving Safety Controls for New Technology; and
(3)Achieving Balance and Effectiveness—Consistency and Uniformity. DATES: July 31, 2008, starting at 8:30 a.m. ADDRESSES: The workshop will be held at the U.S. Department of Housing and Urban Development Conference Facility, 451 7th Street, SW., Washington, DC 20410. For information on the facilities or to request special accommodations at the workshop, please contact Ms. Maria Howard by telephone or e-mail as soon as possible. FOR FURTHER INFORMATION CONTACT: Ms. Maria Howard, 202-266-0225, e-mail *Maria.Howard@dot.gov* or LaToya Moore, 202-366-0656, e-mail *Latoya.Moore@dot.gov* , Office of Hazardous Materials Safety, Pipeline and Hazardous Materials Safety Administration. SUPPLEMENTARY INFORMATION: The U.S. Department of Transportation (DOT), through PHMSA and other DOT operating administrations, is responsible for a comprehensive, nationwide program designed to protect the Nation from the risks to life, health, property, and the environment inherent in the commercial transportation of hazardous materials. This year marks the 100th anniversary of the hazardous materials transportation safety program, which originated with enactment of the Transportation of Explosives and Other Dangerous Articles Act (specifically, “An Act to promote the safe transportation in interstate commerce of explosives and other dangerous articles”) on May 30, 1908. The Act charged the Interstate Commerce Commission
(ICC)with formulating binding regulations “in accord with the best known practicable means for securing safety in transit, covering the packing, marking, loading, handling while in transit, and the precautions necessary to determine whether the material when offered is in proper condition to transport.” The Act specifically required the marking of every package containing explosives “or other dangerous articles” and prohibited false or deceptive markings, descriptions, or declarations. Since 1908, the federal program to minimize the risks associated with the commercial transportation of hazardous materials has evolved from its initial focus on the regulation of explosives to a broad and comprehensive safety and security program applicable to a wide variety of materials and articles shipped by multiple modes of transport across interstate and international boundaries and overseen by an array of federal and state agencies. Hazardous materials are essential to the economy of the United States and the well-being of its people. Hazardous materials fuel automobiles, and heat and cool homes and offices, and are used for farming and medical applications and in manufacturing, mining, and other industrial processes. More than 3 billion tons of regulated hazardous materials—including explosive, poisonous, corrosive, flammable, and radioactive materials—are transported in this country each year. Over 800,000 shipments of hazardous materials move daily by plane, train, truck, or vessel in quantities ranging from several ounces to many thousands of gallons. These shipments frequently move through densely populated or sensitive areas where the consequences of an incident could be loss of life or serious environmental damage. Our communities, the public, and workers engaged in hazardous materials commerce count on the safety and security of these shipments. The system of controls and standards developed over the last 100 years has achieved considerable success in reducing the risks posed by the commercial transportation of hazardous materials. As we look to the future, we want to build on this success, particularly in the development of innovative safety solutions that provide the agency, our federal and state partners, the regulated community, and emergency response officials with flexible tools to manage and reduce safety risks. To this end, PHMSA is hosting a public workshop on July 31, 2008. We are planning an interactive workshop that will engage our stakeholders on a range of topics that we consider critical to the future direction of the hazardous materials transportation safety program. This workshop will provide an opportunity for our stakeholders to suggest ways to improve on our vision and ideas for making the vision a reality. Equally important, the workshop will provide a forum for our stakeholders to identify common issues and problems and suggest synergistic strategies for addressing them. We hope that the workshop will surface a range of views on how to meet the challenges ahead, focusing on three broad areas: 1. Safety, Risk Reduction, and Integrity Management With safety as our top priority, the hazardous materials transportation safety program targets continued reduction in transportation risk, even as the size and complexity of the system grow. The program is challenged to quickly identify emerging risks and develop innovative, flexible, and effective safety controls to address those risks. For example, we are considering whether integrity management principles could be effectively applied to hazardous materials transportation activities to enhance safety. Integrity management is a risk reduction program that promotes continuous improvement in safety performance by requiring companies to collect and use information to guide system-specific planning and implementation of risk controls. PHMSA has successfully implemented integrity management requirements under its Pipeline Safety program, achieving improved safety performance without undue regulatory burden. Quality assurance programs may also be an effective way to identify and address system-wide safety risks. 2. 21st Century Solutions: New Technology for Improved Safety Controls/Improving Safety Controls for New Technology A second set of challenges for the hazardous materials transportation safety program reflects the opportunities and risks posed by rapid technological advances. The safety controls developed over the program's first 100 years need to keep pace with the demands of our fast-moving, far-reaching economy and transportation systems. As we embark on the program's second century, we are committed to improving the quality, reliability, and timeliness of information guiding all parts of the safety control system, including hazard communication. Because of their capabilities to improve the speed, accuracy, and efficiency of communications, wireless and electronic data systems and tools are rapidly replacing paper-based systems for documenting transactions, tracing shipments, and exchanging commercial information. As the private sector and government agencies transition to paperless systems, adherence to longstanding paper-based requirements for hazardous materials transportation places an increasing burden on the system, contributing to freight delays and congestion. At the same time, reliance on paper-based communications may limit the effectiveness of hazard communication and impair or delay response to hazmat incidents and emergencies. Deploying new communication technologies holds the promise of improving safety, even as it reduces regulatory burdens and improves the performance of the transportation system. A related challenge is to find ways to quickly develop and implement appropriate safety controls for new materials or technologies that are not covered by current regulatory requirements. Transportation is key to promoting the development and widespread utilization of new technologies. Government and industry must be able to address possible safety risks associated with new materials or technologies without undue delays in authorizing their transportation. One strategy may be for a company to invest in independent, third-party analyses of safety risks associated with a new material or technology that would then form the basis for development of rigorous transportation controls that would be approved by PHMSA pending promulgation of more general regulatory requirements. C. Achieving Balance and Effectiveness—Consistency and Uniformity A third challenge for the hazardous materials transportation safety program is to identify integrated strategies for advancing safety that involve the many regulatory agencies and non-federal jurisdictions with hazardous materials oversight responsibilities. A number of federal agencies, including the Environmental Protection Agency, the Occupational Safety and Health Administration, the Bureau of Alcohol, Tobacco, Firearms, and Explosives, and the Department of Homeland Security, have regulatory authority over facilities that manufacture, handle, and store hazardous materials outside of transportation. In addition, state and local governments may elect to regulate facilities that manufacture or store hazardous materials within their jurisdictions. Because these agencies and authorities have different interests and goals, regulated entities are sometimes confronted with a myriad of differing and, perhaps, inconsistent requirements that impair productivity and efficiency and could adversely affect safety. At the same time, critical safety issues may not be addressed at all. A broad strategy to more closely integrate all of these programs would enhance system wide risk reduction through information and data sharing, early identification of safety problems, and leveraging of resources. PHMSA invites all interested persons, including state and local officials, emergency response personnel, and hazardous materials shippers and carriers, to participate in this workshop. We would like to use this forum to promote a dialogue among all interested stakeholders to help us identify the most appropriate strategies for identifying and addressing emerging transportation safety challenges. If you wish to participate in the public workshop, you must provide your name and organization to Ms. Maria Howard by telephone (202-366-0225) or e-mail ( *Maria.Howard@dot.gov* ) or Latoya Moore by telephone (202-366-0656) or e-mail ( *Latoya.Moore@dot.gov* ) no later than July 24, 2008. Non-federal personnel must also provide the last five digits of their social security numbers. Providing this information will facilitate the security screening process for entry into the building on the day of the workshop. Participants should plan to arrive at 8 a.m. and must present a picture ID to enter the building. Participants do not need to prepare oral comments, but rather, be prepared to take part in an open discussion on the issues outlined above. Issued in Washington, DC on July 15, 2008. Theodore L. Willke, Associate Administrator for Hazardous Materials Safety. [FR Doc. E8-16503 Filed 7-17-08; 8:45 am] BILLING CODE 4910-60-P DEPARTMENT OF TRANSPORTATION Surface Transportation Board [STB Docket No. MC-F-21028] Delivery Acquisition, Inc.—Purchase—Transportation Management Systems, LLC and East West Resort Transportation, LLC AGENCY: Surface Transportation Board. ACTION: Notice Tentatively Approving Finance Transaction. SUMMARY: On June 19, 2008, Delivery Acquisition, Inc. (Delivery) an indirect subsidiary of Vail Resorts, Inc. (VRI), filed an application under 49 U.S.C. 14303 to acquire control, through purchase, of the properties of Transportation Management Systems, LLC f/k/a TMS, Inc. 1
(TMS)and East West Resort Transportation, LLC (EWRT). The application also sought Board authority for VRI to control Delivery, which will become a carrier upon its acquisition of the carrier assets, including operating authorities, of TMS and EWRT. Persons wishing to oppose this application must follow the rules at 49 CFR 1182.5 and 1182.8. The Board has tentatively approved the transaction, and, if no opposing comments are timely filed, this notice will be the final Board action. 1 Pursuant to 49 CFR 365.413, *et seq.* a notice of name change has been furnished contemporaneously to the Federal Motor Carrier Safety Administration reflecting that the correct name of the entity referred to as TMS, LLC in the Board's decision in Docket No. MC-F-20996, served January 10, 2003, is Transportation Management Systems, LLC. DATES: Comments must be filed by September 2, 2008. Applicants may file a reply by September 16, 2008. If no comments are filed by September 2, 2008, this notice is effective on that date. ADDRESSES: Send an original and 10 copies of any comments referring to STB Docket No. MC-F-21028 to: Surface Transportation Board, 395 E Street, SW., Washington, DC 20423-0001. In addition, send one copy of comments to Delivery's representative: Mark A. Davidson, Dufford & Brown P.C., 1700 Broadway, Suite 2100, Denver, CO 80290-2101, and send one copy of comments to TMS's representative: Thomas J. Burke, Jr., Jones & Keller, P.C., 1625 Broadway, Suite 1600, Denver, CO 80202-4727. FOR FURTHER INFORMATION CONTACT: Julia Farr
(202)245-0359 [Federal Information Relay
(FIRS)for the hearing impaired: 1-800-877-8339]. SUPPLEMENTARY INFORMATION: Delivery is a Colorado corporation and is a newly created direct subsidiary of The Vail Corporation, which is a subsidiary of Vail Holdings, Inc., which is, in turn, a subsidiary of VRI, a Delaware corporation. VRI operates year-round resorts in Colorado and controls, through The Vail Corporation, Grand Teton Lodge Company, a registered motor passenger carrier (MC-6259). Applicants seek authorization under 49 U.S.C. 14303(a)(5) for VRI, as a person in control of a carrier, to acquire control of the assets of EWRT and TMS through Delivery's transaction. Following the transaction, Delivery will be a carrier. Delivery and Grand Teton Lodge Company will become affiliated carriers through VRI, although none of these carriers will be in control of the others. Delivery will control, through purchase, the assets, including certificates of public convenience and necessity of EWRT and TMS 2 both of which are Delaware limited liability companies. TMS and EWRT are lessor and lessee, respectively, of the operating rights issued by the former Interstate Commerce Commission in MC-169714 and MC-174332, providing for special and charter operations in interstate and foreign commerce, and in MC-181367, providing for interstate and intrastate regular route operations. TMS and EWRT are also lessor and lessee, respectively, of an operating right issued by the Public Utilities Commission of the State of Colorado. Delivery will acquire the intrastate operating authority as a result of the transaction. 2 TMS does business under the following trade names: Colorado Mountain Express and/or CME Premier and/or Premier VIP Transportation, and/or Resort Express. To consummate the transaction, TMS and EWRT propose to sell all their assets, including their interests in the operating rights to Delivery, for a purchase price of $41.5 million, subject to certain adjustments. 3 3 The parties submitted a copy of the Asset Purchase Agreement, covering the entire transaction, with their application. Applicants state that the 12-month aggregate gross operating revenues of all motor carriers controlling, controlled by, or under common control with any party from all transportation sources exceed the $2 million jurisdictional threshold of 49 U.S.C. 14303(g). Under 49 U.S.C. 14303(b), the Board must approve and authorize a transaction we find consistent with the public interest, taking into consideration at least:
(1)The effect of the transaction on the adequacy of transportation to the public;
(2)the total fixed charges that result; and
(3)the interest of affected carrier employees. Applicants have submitted information, as required by 49 CFR 1182.2(a)(7), to demonstrate that the proposed acquisition of control is consistent with the public interest under 49 U.S.C. 14303(b). Applicants state that the proposed transaction will improve the efficiency of transportation services available to the public, that the operations of the carriers involved will remain unchanged, that there are no fixed charges associated with the proposed transaction, and that the employees of EWRT and TMS will not be adversely affected. In addition, applicants have submitted all of the other statements and verifications required by 49 CFR 1182.8. Additional information, including a copy of the application, may be obtained from applicants' representative. On the basis of the application, we find that the proposed acquisition of control is consistent with the public interest and should be authorized. If any opposing comments are timely filed, this finding will be deemed vacated, and unless a final decision can be made on the record as developed, a procedural schedule will be adopted to reconsider the application. *See* 49 CFR 1182.6(c). If no opposing comments are filed by the expiration of the comment period, this notice will take effect automatically and will be the final Board action. Board decisions and notices are available on our Web site at “ *http://www.stb.dot.gov.* ” This decision will not significantly affect either the quality of the human environment or the conservation of energy resources. *It is ordered:* 1. The proposed finance transaction is approved and authorized, subject to the filing of opposing comments. 2. If timely opposing comments are filed, the findings made in this notice will be deemed as having been vacated. 3. This notice will be effective on September 2, 2008, unless timely opposing comments are filed. 4. A copy of this notice will be served on:
(1)The U.S. Department of Transportation, Federal Motor Carrier Safety Administration, 1200 New Jersey Avenue, SE., Washington, DC 20590;
(2)the U.S. Department of Justice, Antitrust Division, 950 Pennsylvania Avenue, NW., Washington, DC 20530; and
(3)the U.S. Department of Transportation, Office of the General Counsel, 1200 New Jersey Avenue, SE., Washington, DC 20590. Decided: July 14, 2008. By the Board, Chairman Nottingham, Vice Chairman Mulvey, and Commissioner Buttrey. Anne K. Quinlan, Acting Secretary. [FR Doc. E8-16409 Filed 7-17-08; 8:45 am] BILLING CODE 4915-01-P DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency Privacy Act of 1974, as Amended; System of Records AGENCY: Office of the Comptroller of the Currency, Treasury. ACTION: Notice of systems of records. SUMMARY: In accordance with the requirements of the Privacy Act of 1974, as amended, 5 U.S.C. 552a, the Office of the Comptroller of the Currency, Treasury, is publishing its Privacy Act systems of records. SUPPLEMENTARY INFORMATION: Pursuant to the Privacy Act of 1974 (5 U.S.C. 552a) and the Office of Management and Budget
(OMB)Circular No. A-130, the Comptroller of the Currency
(OCC)has completed a review of its Privacy Act systems of records notices to identify minor changes that will more accurately describe these records. This publication incorporates the amendment to Treasury/CC.600—Consumer Complaint and Inquiry Information System that was published on October 18, 2006, at 71 FR 61538. Other changes throughout the document are editorial in nature and consist principally of revising address information and minor editorial changes. The systems of records were last published in their entirety on July 11, 2005, at 70 FR 39853-39864. On May 22, 2007, the Office of Management and Budget
(OMB)issued Memorandum M-07-16 entitled “Safeguarding Against and Responding to the Breach of Personally Identifiable Information.” It required agencies to publish a routine use providing for a breach remediation as recommended by the President's Identity Theft Task Force. As part of that effort, the Department published a notice of a proposed routine use on October 3, 2007, at 72 FR 56434, and it was effective on November 13, 2007. The new routine use has been added and is reflected in each OCC systems of records notices below. Department of the Treasury regulations require the Department to publish the existence and character of all systems of records every three years (31 CFR 1.23(a)(1)). With respect to its inventory of Privacy Act systems of records, the OCC has determined that the information contained in its systems of records is accurate, timely, relevant, complete, and is necessary to maintain the proper performance of a documented agency function. Systems Covered by This Notice This notice covers all systems of records adopted by the OCC up to June 3, 2008. The systems notices are reprinted in their entirety following the Table of Contents. Dated: July 11, 2008. Elizabeth Cuffe, Deputy Assistant Secretary for Privacy and Treasury Records. The Comptroller of the Currency
(OCC)Table of Contents CC.100—Enforcement Action Report System CC.110—Reports of Suspicious Activities CC.120—Bank Fraud Information System CC.200—Chain Banking Organizations System CC.210—Bank Securities Dealers System CC.220—Section 914 Tracking System CC.340—Access Control System CC.500—Chief Counsel's Management Information System CC.510—Litigation Information System CC.600—Consumer Complaint and Inquiry Information System CC.700—Correspondence Tracking System Treasury/Comptroller .100 System Name: Enforcement Action Report System—Treasury/Comptroller. System Location: Office of the Comptroller of the Currency (OCC), Enforcement and Compliance Division, 250 E Street, SW., Washington, DC 20219-0001. Categories of Individuals Covered by the System: *Individuals covered by this system are:*
(1)Current and former directors, officers, employees, shareholders, and independent contractors of financial institutions who have had enforcement actions taken against them by the OCC, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, or the National Credit Union Administration;
(2)Current and former directors, officers, employees, shareholders, and independent contractors of financial institutions who are the subjects of pending enforcement actions initiated by the OCC; and
(3)Individuals who must obtain the consent of the Federal Deposit Insurance Corporation pursuant to 12 U.S.C. 1829 to become or continue as an institution-affiliated party within the meaning of 12 U.S.C. 1813(u) of a federally-insured depository institution, a direct or indirect owner or controlling person of such an entity, or a direct or indirect participant in the conduct of the affairs of such an entity. Categories of Records in the System: Records maintained in this system may contain the names of individuals, their positions or titles with financial institutions, descriptions of offenses and enforcement actions, and descriptions of offenses requiring Federal Deposit Insurance Corporation approval under 12 U.S.C. 1829. Authority for Maintenance of the System: 12 U.S.C. 1, 27, 481, 1817(j), 1818, 1820, and 1831i. Purpose: This system of records is used by the OCC to monitor enforcement actions and to assist it in its regulatory responsibilities, including review of the qualifications and fitness of individuals who are or propose to become responsible for the business operations of CC-regulated entities. Routine Uses of Records Maintained in the System, Including Categories of Users and the Purposes of Such Uses: Information maintained in this system may be disclosed to:
(1)An OCC-regulated entity when the information is relevant to the entity's operations;
(2)Third parties to the extent necessary to obtain information that is relevant to an examination or investigation;
(3)The news media in accordance with guidelines contained in 28 CFR 50.2;
(4)Appropriate governmental or self-regulatory organizations when the OCC determines that the records are relevant and necessary to the governmental or self-regulatory organization's regulation or supervision of financial service providers, including the review of the qualifications and fitness of individuals who are or propose to become responsible for the business operations of such providers;
(5)The Department of Justice, a court, an adjudicative body, a party in litigation, or a witness if the OCC determines that the information is relevant and necessary to a proceeding in which the OCC, any OCC employee in his or her official capacity, any OCC employee in his or her individual capacity represented by the Department of Justice or the OCC, or the United States is a party or has an interest;
(6)A congressional office when the information is relevant to an inquiry made at the request of the individual about whom the record is maintained;
(7)A contractor or agent who needs to have access to this system of records to perform an assigned activity;
(8)Third parties when mandated or authorized by statute, or
(9)Appropriate agencies, entities, and persons when
(a)the Department suspects or has confirmed that the security or confidentiality of information in the system of records has been compromised;
(b)the Department has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Department or another agency or entity) that rely upon the compromised information; and
(c)the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Department's efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm. Policies and Practices for Storing, Retrieving, Accessing, Retaining, and Disposing of Records in the System: Storage: Records maintained in this system are stored electronically. Retrievability: Records maintained in this system may be retrieved by the name of an individual covered by the system. Safeguards: Access to electronic records is restricted to authorized personnel who have been issued non-transferrable access codes and passwords. Retention and Disposal: Records are retained in accordance with the OCC's records management policies and National Archives and Records Administration regulations. System Manager and Address: Director, Enforcement and Compliance Division, Law Department, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. Notification Procedure: An individual wishing to be notified if he or she is named in non-exempt records maintained in this system must submit a written request to the Disclosure Officer, Communications Division, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. See 31 CFR part 1, Subpart C, Appendix J. Identification Requirements: An individual seeking notification through the mail must establish his or her identity by providing a signature and an address as well as one other identifier bearing the individual's name and signature (such as a photocopy of a driver's license or other official document). An individual seeking notification in person must establish his or her identity by providing proof in the form of a single official document bearing a photograph (such as a passport or identification badge) or two items of identification that bear both a name and signature. Alternatively, identity may be established by providing a notarized statement, swearing or affirming to an individual's identity, and to the fact that the individual understands the penalties provided in 5 U.S.C. 552a(i)(3) for requesting or obtaining information under false pretenses. Additional documentation establishing identity or qualification for notification may be required, such as in an instance where a legal guardian or representative seeks notification on behalf of another individual. Record Access Procedures: See “Notification Procedure” above. Contesting Record Procedures: See “Notification Procedure” above. Record Source Categories: Non-exempt information maintained in this system is obtained from OCC personnel, OCC-regulated entities, other federal financial regulatory agencies, and criminal law enforcement authorities. Exemptions Claimed for this System: Records maintained in this system have been designated as exempt from 5 U.S.C. 552a(c)(3), (d)(1), (2), (3), and (4), (e)(1), (e)(4)(G), (H), and (I), and
(f)of the Privacy Act pursuant to 5 U.S.C. 552a(k)(2). See 31 CFR 1.36. Treasury/Comptroller .110 System Name: Reports of Suspicious Activities—Treasury/Comptroller. System Location: Office of the Comptroller of the Currency (OCC), Enforcement and Compliance Division, 250 E Street, SW., Washington, DC 20219-0001. Suspicious Activity Reports
(SARs)are managed by the Financial Crimes Enforcement Network (FinCEN), Department of the Treasury, 2070 Chain Bridge Road, Vienna, Virginia 22182, and stored at the IRS Computing Center in Detroit, Michigan. Information extracted from or relating to SARs or reports of crimes and suspected crimes is maintained in an OCC electronic database. This database, as well as the database managed by FinCEN, is accessible to designated OCC headquarters and district office personnel. Categories of Individuals Covered by the System: Individuals covered by this system are individuals who have been designated as suspects or witnesses in SARs or reports of crimes and suspected crimes. Categories of Records in the System: Records maintained in this system may contain the name of the entity to which a report pertains, the names of individual suspects and witnesses, the types of suspicious activity involved, and the amounts of known losses. Other records maintained in this system may contain arrest, indictment and conviction information, and information relating to administrative actions taken or initiated in connection with activities reported in a SAR or a report of crime and suspected crime. Authority for Maintenance of the System: 12 U.S.C. 1, 27, 481, 1817(j), 1818, 1820, and 1831i; 31 U.S.C. 5318. Purpose: This system of records is used by the OCC to monitor criminal law enforcement actions taken with respect to known or suspected criminal activities affecting OCC-regulated entities. System information is used to determine whether matters reported in SARs warrant the OCC's supervisory action. Information in this system also may be used for other supervisory and licensing purposes, including the review of the qualifications and fitness of individuals who are or propose to become responsible for the business operations of OCC-regulated entities. Routine uses of records maintained in the system, including categories of users and the purposes of such uses: *Information maintained in this system may be disclosed to:*
(1)The Department of Justice through periodic reports containing the identities of individuals suspected of having committed violations of criminal law;
(2)An OCC-regulated entity if the SAR relates to that institution;
(3)Third parties to the extent necessary to obtain information that is relevant to an examination or investigation;
(4)Appropriate governmental or self-regulatory organizations when the OCC determines that the records are relevant and necessary to the governmental or self-regulatory organization's regulation and supervision of financial service providers, including the review of the qualifications and fitness of individuals who are or propose to become responsible for the business operations of such providers;
(5)An appropriate governmental, international, tribal, self-regulatory, or professional organization if the information is relevant to a known or suspected violation of a law or licensing standard within that organization's jurisdiction;
(6)The Department of Justice, a court, an adjudicative body, a party in litigation, or a witness if the OCC determines that the information is relevant and necessary to a proceeding in which the OCC, any OCC employee in his or her official capacity, any OCC employee in his or her individual capacity represented by the Department of Justice or the OCC, or the United States is a party or has an interest;
(7)A contractor or agent who needs to have access to this system of records to perform an assigned activity;
(8)Third parties when mandated or authorized by statute, or
(9)Appropriate agencies, entities, and persons when
(a)the Department suspects or has confirmed that the security or confidentiality of information in the system of records has been compromised;
(b)the Department has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Department or another agency or entity) that rely upon the compromised information; and
(c)the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Department's efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm. Policies and practices for storing, retrieving, accessing, retaining, and disposing of records in the system: Storage: Records maintained in this system are stored electronically. Retrievability: Records maintained in this system may be retrieved by the name of an individual covered by the system. Safeguards: Access to electronic records is restricted to authorized personnel who have been issued non-transferrable access codes and passwords. Retention and Disposal: Records are retained in accordance with the OCC's records management policies and National Archives and Records Administration regulations. System Managers and Address: Director, Special Supervision Division, Midsize/Community Bank Supervision, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. Notification Procedure: An individual wishing to be notified if he or she is named in non-exempt records maintained in this system must submit a written request to the Disclosure Officer, Communications Division, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. See 31 CFR part 1, subpart C, Appendix J. Identification Requirements: An individual seeking notification through the mail must establish his or her identity by providing a signature and an address as well as one other identifier bearing the individual's name and signature (such as a photocopy of a driver's license or other official document). An individual seeking notification in person must establish his or her identity by providing proof in the form of a single official document bearing a photograph (such as a passport or identification badge) or two items of identification that bear both a name and signature. Alternatively, identity may be established by providing a notarized statement, swearing or affirming to an individual's identity, and to the fact that the individual understands the penalties provided in 5 U.S.C. 552a(i)(3) for requesting or obtaining information under false pretenses. Additional documentation establishing identity or qualification for notification may be required, such as in an instance where a legal guardian or representative seeks notification on behalf of another individual. Record Access Procedures: See “Notification Procedure” above. Contesting Record Procedures: See “Notification Procedure” above. Record Source Categories: Non-exempt information maintained in this system is obtained from CC personnel, OCC-regulated entities, other financial regulatory agencies, criminal law enforcement authorities, and FinCEN. Exemptions Claimed for the System: Records in this system have been designated as exempt from 5 U.S.C. 552a(c)(3) and (4), (d)(1), (2), (3), and (4), (e)(1), (e)(2), (e)(3), (e)(4)(G), (H), and (I), (e)(5), and (e)(8), (f), and
(g)of the Privacy Act pursuant to 5 U.S.C. 552a(j)(2) and (k)(2). See 31 CFR 1.36. Treasury/Comptroller .120 System Name: Bank Fraud Information System—Treasury/Comptroller. System Location: Office of the Comptroller of the Currency (OCC), Bank Supervision Operations, 250 E Street, SW., Washington, DC 20219-0001. Categories of Individuals Covered by the System: Individuals covered by this system are those who submit complaints or inquiries about fraudulent or suspicious financial instruments or transactions or who are the subjects of complaints or inquiries. Categories of Records in the System: *Records maintained in this system may contain:* The name, address, or telephone number of the individual who submitted a complaint or inquiry; the name, address, or telephone number of the individual or entity who is the subject of a complaint or inquiry; the types of activity involved; the date of a complaint or inquiry; and numeric codes identifying a complaint or inquiry's nature or source. Supporting records may contain correspondence between the OCC and the individual or entity submitting a complaint or inquiry, correspondence between the OCC and an OCC-regulated entity, or correspondence between the OCC and other law enforcement or regulatory bodies. Other records maintained in this system may contain arrest, indictment and conviction information, and information relating to administrative actions taken or initiated in connection with complaints or inquiries. Authority for Maintenance of the System: 12 U.S.C. 1, 27, 481, 1817(j), 1818, 1820, and 1831i; 31 U.S.C. 5318. Purpose: This system of records tracks complaints or inquiries concerning fraudulent or suspicious financial instruments and transactions. These records assist the OCC in its efforts to protect banks and their customers from fraudulent or suspicious banking activities. Routine Uses of Records Maintained in the System, Including Categories of Users and the Purposes of Such Uses: *Information maintained in this system may be disclosed to:*
(1)An OCC-regulated entity to the extent that such entity is the subject of a complaint, inquiry, or fraudulent activity;
(2)Third parties to the extent necessary to obtain information that is relevant to the resolution of a complaint or inquiry, an examination, or an investigation;
(3)Appropriate governmental or self-regulatory organizations when the OCC determines that the records are relevant and necessary to the governmental or self-regulatory organization's regulation or supervision of financial service providers;
(4)An appropriate governmental, international, tribal, self-regulatory, or professional organization if the information is relevant to a known or suspected violation of a law or licensing standard within that organization's jurisdiction;
(5)The Department of Justice, a court, an adjudicative body, a party in litigation, or a witness if the OCC determines that the information is relevant and necessary to a proceeding in which the OCC, any OCC employee in his or her official capacity, any OCC employee in his or her individual capacity represented by the Department of Justice or the OCC, or the United States is a party or has an interest;
(6)A congressional office when the information is relevant to an inquiry made at the request of the individual about whom the record is maintained;
(7)A contractor or agent who needs to have access to this system of records to perform an assigned activity;
(8)Third parties when mandated or authorized by statute, or
(9)Appropriate agencies, entities, and persons when
(a)the Department suspects or has confirmed that the security or confidentiality of information in the system of records has been compromised;
(b)the Department has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Department or another agency or entity) that rely upon the compromised information; and
(c)the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Department's efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm. Policies and Practices for Storing, Retrieving, Accessing, Retaining, and Disposing of Records in the System: Storage: Records maintained in this system are stored electronically, in card files, and in file folders. Retrievability: Records maintained in this system may be retrieved by the name of an individual covered by the system. Safeguards: Access to electronic records is restricted to authorized personnel who have been issued non-transferrable access codes and passwords. Other records are maintained in locked file cabinets or rooms. Retention and Disposal: Records are retained in accordance with the OCC's records management policies and National Archives and Records Administration regulations. System Manager and Address: Director, Special Supervision, Bank Supervision Operations, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, D.C. 20219-0001. Notification Procedure: An individual wishing to be notified if he or she is named in non-exempt records maintained in this system must submit a written request to the Disclosure Officer, Communications Division, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. See 31 CFR part 1, subpart C, Appendix J. Identification Requirements: An individual seeking notification through the mail must establish his or her identity by providing a signature and an address as well as one other identifier bearing the individual's name and signature (such as a photocopy of a driver's license or other official document). An individual seeking notification in person must establish his or her identity by providing proof in the form of a single official document bearing a photograph (such as a passport or identification badge) or two items of identification that bear both a name and signature. Alternatively, identity may be established by providing a notarized statement, swearing or affirming to an individual's identity, and to the fact that the individual understands the penalties provided in 5 U.S.C. 552a(i)(3) for requesting or obtaining information under false pretenses. Additional documentation establishing identity or qualification for notification may be required, such as in an instance where a legal guardian or representative seeks notification on behalf of another individual. Record Access Procedures: See “Notification Procedure” above. Contesting Record Procedures: See “Notification Procedure” above. Record Source Categories: Non-exempt information maintained in this system is obtained from individuals and entities who submit complaints or inquiries, OCC personnel, OCC-regulated entities, criminal law enforcement authorities, and governmental or self-regulatory bodies. Exemptions Claimed for the System: Records maintained in this system have been designated as exempt from 5 U.S.C. 552a(c)(3) and (4), (d)(1), (2), (3), and (4), (e)(1), (e)(2), (e)(3), (e)(4)(G), (H), and (I), (e)(5), (e)(8), (f), and
(g)of the Privacy Act pursuant to 5 U.S.C. 552a(j)(2) and (k)(2). See 31 CFR 1.36. Treasury/Comptroller .200 System Name: Chain Banking Organizations System—Treasury/Comptroller. System Location: Office of the Comptroller of the Currency (OCC), Operations Risk Policy, 250 E Street, SW., Washington, DC 20219-0001, and the OCC's district offices as follows: Central District Office, One Financial Place, Suite 2700, 440 South LaSalle Street, Chicago, IL 60605-1073; Northeastern District Office, 340 Madison Avenue, Fifth Floor, New York, NY 10017-2613; Southern District Office, 500 North Akard Street, Suite 1600, Dallas, TX 75201-3394; and Western District Office, 1225 17th Street, Suite 300, Denver, CO 80202-5534. Categories of Individuals Covered by the System: Individuals covered by this system are individuals who directly, indirectly, or acting through or in concert with one or more other individuals, own or control a chain banking organization. A chain banking organization exists when two or more independently chartered financial institutions, including at least one OCC-regulated entity, are controlled either directly or indirectly by the same individual, family, or group of individuals closely associated in their business dealings. Control generally exists when the common ownership has the ability or power, directly or indirectly, to:
(1)Control the vote of 25 percent or more of any class of an organization's voting securities;
(2)Control in any manner the election of a majority of the directors of an organization; or
(3)Exercise a controlling influence over the management or policies of an organization. A registered multibank holding company and its subsidiary banks are not ordinarily considered a chain banking group unless the holding company is linked to other banking organizations through common control. Categories of Records in the System: Records maintained in this system contain the names of individuals who, either alone or in concert with others, own or control a chain banking organization. Other information may contain: The name, location, charter number, charter type, and date of last examination of each organization comprising a chain; the percentage of outstanding stock owned or controlled by controlling individuals or groups; and the name of any intermediate holding entity and the percentage of such entity owned or controlled by the individual or group. Authority for Maintenance of the System: 12 U.S.C. 1, 481, 1817(j), and 1820. Purpose: Information maintained in this system is used by the OCC to carry out its supervisory responsibilities with respect to national banks and District of Columbia banks operating under the OCC's regulatory authority, including the coordination of examinations, supervisory evaluations and analyses, and administrative enforcement actions with other financial regulatory agencies. Routine uses of records maintained in the system, including categories of users and the purposes of such uses: *Information maintained in this system may be disclosed to:*
(1)An OCC-regulated entity when information is relevant to the entity's operation;
(2)Appropriate governmental or self-regulatory organizations when the OCC determines that the records are relevant and necessary to the governmental or self-regulatory organization's regulation or supervision of financial service providers;
(3)An appropriate governmental, tribal, self-regulatory, or professional organization if the information is relevant to a known or suspected violation of a law or licensing standard within the organization's jurisdiction;
(4)The Department of Justice, a court, an adjudicative body, a party in litigation, or a witness if the OCC determines that the information is relevant and necessary to a proceeding in which the OCC, any OCC employee in his or her official capacity, any OCC employee in his or her individual capacity represented by the Department of Justice or the OCC, or the United States is a party or has an interest;
(5)A Congressional office when the information is relevant to an inquiry made at the request of the individual about whom the record is maintained;
(6)A contractor or agent who needs to have access to this system of records to perform an assigned activity;
(7)Third parties when mandated or authorized by statute, or
(8)Appropriate agencies, entities, and persons when
(a)the Department suspects or has confirmed that the security or confidentiality of information in the system of records has been compromised;
(b)the Department has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Department or another agency or entity) that rely upon the compromised information; and
(c)the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Department's efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm. Policies and practices for storing, retrieving, accessing, retaining, and disposing of records in the system: Storage: Records maintained in this system are stored electronically. Retrievability: Records maintained in this system may be retrieved by the name of an individual covered by the system. Safeguards: Access to electronic records is restricted to authorized personnel who have been issued non-transferrable access codes and passwords. Retention and Disposal: Records are retained in accordance with the OCC's records management policies and National Archives and Records Administration regulations. System Manager and Address: Director, Operational Risk Policy, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. Notification Procedure: An individual wishing to be notified if he or she is named in non-exempt records maintained in this system must submit a written request to the Disclosure Officer, Communications Division, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. See 31 CFR part 1, Subpart C, Appendix J. Identification Requirements: An individual seeking notification through the mail must establish his or her identity by providing a signature and an address as well as one other identifier bearing the individual's name and signature (such as a photocopy of a driver's license or other official document). An individual seeking notification in person must establish his or her identity by providing proof in the form of a single official document bearing a photograph (such as a passport or identification badge) or two items of identification that bear both a name and signature. Alternatively, identity may be established by providing a notarized statement, swearing or affirming to an individual's identity, and to the fact that the individual understands the penalties provided in 5 U.S.C. 552a(i)(3) for requesting or obtaining information under false pretenses. Additional documentation establishing identity or qualification for notification may be required, such as in an instance where a legal guardian or representative seeks notification on behalf of another individual. Record Access Procedures: See “Notification Procedure” above. Contesting Record Procedures: See “Notification Procedure” above. Record Source Categories: Information maintained in this system is obtained from OCC personnel, other Federal financial regulatory agencies, and individuals who file notices of their intention to acquire control over an OCC-regulated financial institution. Exemptions Claimed for the System: None. Treasury/Comptroller .210 System Name: Bank Securities Dealers System—Treasury/Comptroller. System Location: Office of the Comptroller of the Currency (OCC), Credit and Market Risk, 250 E Street, SW., Washington, DC 20219-0001. Categories of Individuals Covered by the System: Individuals covered by this system are individuals who are or seek to be associated with a municipal securities dealer or a government securities broker/dealer that is a national bank, a District of Columbia bank operating under the OCC's regulatory authority, or a department or division of any such bank in the capacity of a municipal securities principal, municipal securities representative, or government securities associated person. Categories of Records in the System: Records maintained in this system may contain an individual's name, address history, date and place of birth, social security number, educational and occupational history, certain professional qualifications and testing information, disciplinary history, or information about employment termination. Authority for Maintenance of the System: 12 U.S.C. 1, 481, 1818, and 1820; 15 U.S.C. 78o-4, 78o-5, 78q, and 78w. Purpose: This system of records will be used by the OCC to carry out its responsibilities under the Federal securities laws relating to the professional qualifications and fitness of individuals who engage or propose to engage in securities activities on behalf of national banks and District of Columbia banks operating under the OCC's regulatory authority. Routine uses of records maintained in the system, including categories of users and the purposes of such systems: *Information maintained in this system may be disclosed to:*
(1)An OCC-regulated entity in connection with its filing relating to the qualifications and fitness of an individual serving or proposing to serve the entity in a securities-related capacity;
(2)Third parties to the extent needed to obtain additional information concerning the professional qualifications and fitness of an individual covered by the system;
(3)Third parties inquiring about the subject of an OCC enforcement action;
(4)Appropriate governmental or self-regulatory organizations when the OCC determines that the records are relevant and necessary to the governmental or self-regulatory organization's regulation or supervision of financial service providers, including the review of the qualifications and fitness of individuals who are or propose to become involved in the provider's securities business;
(5)An appropriate governmental, tribal, self-regulatory, or professional organization if the information is relevant to a known or suspected violation of a law or licensing standard within that organization's jurisdiction;
(6)The Department of Justice, a court, an adjudicative body, a party in litigation, or a witness if the OCC determines that the information is relevant and necessary to a proceeding in which the OCC, any OCC employee in his or her official capacity, any OCC employee in his or her individual capacity represented by the Department of Justice or the OCC, or the United States is a party or has an interest;
(7)A Congressional office when the information is relevant to an inquiry made at the request of the individual about whom the record is maintained;
(8)A contractor or agent who needs to have access to this system of records to perform an assigned activity;
(9)Third parties when mandated or authorized by statute, or
(10)Appropriate agencies, entities, and persons when
(a)the Department suspects or has confirmed that the security or confidentiality of information in the system of records has been compromised;
(b)the Department has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Department or another agency or entity) that rely upon the compromised information; and
(c)the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Department's efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm. Policies and practices for storing, retrieving, accessing, retaining, and disposing of records in the system: Storage: Records maintained in this system are stored electronically and in file folders. Retrievability: Records maintained in this system may be retrieved by the name of an individual covered by the system. Safeguards: Access to the electronic database is restricted to authorized personnel who have been issued non-transferrable access codes and passwords. Other records are maintained in locked file cabinets or rooms. Retention and Disposal: Records are retained in accordance with the OCC's records management policies and National Archives and Records Administration regulations. System Manager and Address: Deputy Comptroller, Credit and Market Risk, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. Notification Procedure: An individual wishing to be notified if he or she is named in non-exempt records maintained in this system must submit a written request to the Disclosure Officer, Communications Division, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. See 31 CFR part 1, Subpart C, Appendix J. Identification Requirements: An individual seeking notification through the mail must establish his or her identity by providing a signature and an address as well as one other identifier bearing the individual's name and signature (such as a photocopy of a driver's license or other official document). An individual seeking notification in person must establish his or her identity by providing proof in the form of a single official document bearing a photograph (such as a passport or identification badge) or two items of identification that bear both a name and signature. Alternatively, identity may be established by providing a notarized statement, swearing or affirming to an individual's identity, and to the fact that the individual understands the penalties provided in 5 U.S.C. 552a(i)(3) for requesting or obtaining information under false pretenses. Additional documentation establishing identity or qualification for notification may be required, such as in an instance where a legal guardian or representative seeks notification on behalf of another individual. Record Access Procedures: See “Notification Procedure” above. Contesting Record Procedures: See “Notification Procedure” above. Record Source Categories: Information maintained in this system is obtained from OCC-regulated entities that are: Municipal securities dealers and/or government securities brokers/dealers; individuals who are or propose to become municipal securities principals, municipal securities representatives, or government securities associated persons; or governmental and self-regulatory organizations that regulate the securities industry. Exemptions Claimed for the System: None. Treasury/Comptroller .220 System Name: Section 914 Tracking System—Treasury/Comptroller. System Location: Office of the Comptroller of the Currency (OCC), Special Supervision, 250 E Street, SW., Washington, DC 20219-0001. Categories of Individuals Covered by the System: Individuals covered by this system are those who are named in notices filed under 12 CFR 5.51 as proposed directors or senior executive officers of national banks, District of Columbia banks operating under the OCC's regulatory authority, or federal branches of foreign banks (OCC-regulated entities). OCC-regulated entities file notices if they:
(1)Have a composite rating of 4 or 5 under the Uniform Financial Institutions Rating System;
(2)Are subject to cease and desist orders, consent orders, or formal written agreements;
(3)Have been determined by the OCC to be in “troubled condition;”
(4)Are not in compliance with minimum capital requirements prescribed under 12 CFR Part 3; or
(5)Have been advised by the OCC, in connection with its review of an entity's capital restoration plan, that such filings are appropriate. Categories of Records in the System: Records maintained in this electronic database may contain: the names, charter numbers, and locations of the OCC-regulated entities that have submitted notices pursuant to 5 CFR 5.51; the names, addresses, dates of birth, and social security numbers of individuals proposed as either directors or senior executive officers; and the actions taken by the OCC in connection with these notices. Authority for Maintenance of the System: 12 U.S.C. 1, 27, 93a, 481, 1817(j), 1818, 1820, and 1831i. Purpose: Information maintained in this system is used by the OCC to carry out its statutory and other regulatory responsibilities, including other reviews of the qualifications and fitness of individuals who propose to become responsible for the business operations of OCC-regulated entities. Routine Uses of Records Maintained in The System, including Categories of Users and the Purposes of Such Uses: *Information maintained in this system may be disclosed to:*
(1)An OCC-regulated entity in connection with review and action on a notice filed by that entity pursuant to 12 CFR 5.51;
(2)Third parties to the extent necessary to obtain information that is pertinent to the OCC's review and action on a notice received under 12 CFR 5.51;
(3)Appropriate governmental or self-regulatory organizations when the OCC determines that the records are relevant and necessary to the governmental or self-regulatory organization's regulation or supervision of financial service providers, including the review of the qualifications and fitness of individuals who are or propose to become responsible for the business operations of such providers;
(4)An appropriate governmental, tribal, self-regulatory, or professional organization if the information is relevant to a known or suspected violation of a law or licensing standard within that organization's jurisdiction;
(5)The Department of Justice, a court, an adjudicative body, a party in litigation, or a witness if the OCC determines that the information is relevant and necessary to a proceeding in which the OCC, any OCC employee in his or her official capacity, any OCC employee in his or her individual capacity represented by the Department of Justice or the OCC, or the United States is a party or has an interest;
(6)A congressional office when the information is relevant to an inquiry made at the request of the individual about whom the record is maintained;
(7)A contractor or agent who needs to have access to this system of records to perform an assigned activity;
(8)Third parties when mandated or authorized by statute, or
(9)Appropriate agencies, entities, and persons when
(a)the Department suspects or has confirmed that the security or confidentiality of information in the system of records has been compromised;
(b)the Department has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Department or another agency or entity) that rely upon the compromised information; and
(c)the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Department's efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm. Policies and Practices for Storing, Retrieving, Accessing, Retaining, and Disposing of Records in the System: Storage: Records maintained in this system are stored electronically. Retrievability: Records maintained in this system may be retrieved by the name of an individual covered by the system. Safeguards: Access to electronic records is restricted to authorized personnel who have been issued non-transferrable access codes and passwords. Retention and Disposal: Records are retained in accordance with the OCC's records management policies and National Archives and Records Administration regulations. System Manager and Address: Director, Special Supervision, Bank Supervision Operations, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. Notification Procedure: An individual wishing to be notified if he or she is named in non-exempt records maintained in this system must submit a written request to the Disclosure Officer, Communications Division, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. See 31 CFR part 1, Subpart C, Appendix J. Identification Requirements: An individual seeking notification through the mail must establish his or her identity by providing a signature and an address as well as one other identifier bearing the individual's name and signature (such as a photocopy of a driver's license or other official document). An individual seeking notification in person must establish his or her identity by providing proof in the form of a single official document bearing a photograph (such as a passport or identification badge) or two items of identification that bear both a name and signature. Alternatively, identity may be established by providing a notarized statement, swearing or affirming to an individual's identity, and to the fact that the individual understands the penalties provided in 5 U.S.C. 552a(i)(3) for requesting or obtaining information under false pretenses. Additional documentation establishing identity or qualification for notification may be required, such as in an instance where a legal guardian or representative seeks notification on behalf of another individual. Record Access Procedures: See “Notification Procedure” above. Contesting Record Procedures: See “Notification Procedure” above. Record Source Categories: Information maintained in this system is obtained from OCC-regulated entities, individuals named in notices filed pursuant to 5 CFR 5.51, Federal or State financial regulatory agencies, criminal law enforcement authorities, credit bureaus, and OCC personnel. Exemptions Claimed for the System: Records maintained in this system have been designated as exempt from 5 U.S.C. 552a(c)(3), (d)(1), (2), (3), and (4), (e)(1), (e)(4)(G), (H), and (I), and
(f)of the Privacy Act pursuant to 5 U.S.C. 552a(k)(2). See 31 CFR 1.36. Treasury/Comptroller .340 System Name: Access Control System—Treasury/Comptroller. System Location: Office of the Comptroller of the Currency (OCC), Security Office, Office of Management, 250 E Street, SW., Washington, DC 20219-001. Categories of Individuals Covered by the System: Individuals covered by this system are OCC employees, contractors, agents, and volunteers who have been issued an OCC identification card. Categories of Records in the System: Records maintained in this system may contain an individual's name, location information, picture, and authorizations to use the OCC's fitness facility or its headquarters parking garage, if applicable. This system of records also may contain time records of entrances and exits and attempted entrances and exits of OCC premises. Authority for Maintenance of the System: 12 U.S.C. 1, 481, and 482; 5 U.S.C. 301. Purpose: The OCC has an electronic security system linked to identification cards which limits access to its premises to authorized individuals and records the time that individuals are on the premises. This system of records is used to assist the OCC in maintaining the security of its premises and to permit the OCC to identify individuals on its premises at particular times. Routine Uses of Records Maintained in the System, Including Categories of Users and the Purposes of Such Uses: *Information maintained in this system may be disclosed to:*
(1)Third parties to the extent necessary to obtain information that is relevant to an investigation concerning access to or the security of the OCC's premises;
(2)An appropriate governmental authority if the information is relevant to a known or suspected violation of a law within that organization's jurisdiction;
(3)The Department of Justice, a court, an adjudicative body, a party in litigation, or a witness if the OCC determines that the information is relevant and necessary to a proceeding in which the OCC, any OCC employee in his or her official capacity, any OCC employee in his or her individual capacity represented by the Department of Justice or the OCC, or the United States is a party or has an interest;
(4)A congressional office when the information is relevant to an inquiry made at the request of the individual about whom the record is maintained;
(5)A contractor or agent who needs to have access to this system of records to perform an assigned activity;
(6)Third parties when mandated or authorized by statute, or
(7)Appropriate agencies, entities, and persons when
(a)the Department suspects or has confirmed that the security or confidentiality of information in the system of records has been compromised;
(b)the Department has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Department or another agency or entity) that rely upon the compromised information; and
(c)the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Department's efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm. Policies and Practices for Storing, Retrieving, Accessing, Retaining, and Disposing of Records in the System: Storage: Records maintained in this system are stored electronically and in file folders. Retrievability: Records maintained in this system may be retrieved by the name of an individual covered by the system. Safeguards: Access to electronic records is restricted to authorized personnel who have been issued non-transferrable access codes and passwords. Other records are maintained in locked file cabinets or rooms. Retention and Disposal: Records are retained in accordance with the OCC's records Management policies and National Archives and Records Administration regulations. System Manager and Address: Assistant Director for Critical Infrastructure Protection and Security (CIPS), Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. Notification Procedure: An individual wishing to be notified if he or she is named in non-exempt records maintained in this system must submit a written request to the Disclosure Officer, Communications Division, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. See 31 CFR part 1, Subpart C, Appendix J. Identification Requirements: An individual seeking notification through the mail must establish his or her identity by providing a signature and an address as well as one other identifier bearing the individual's name and signature (such as a photocopy of a driver's license or other official document). An individual seeking notification in person must establish his or her identity by providing proof in the form of a single official document bearing a photograph (such as a passport or identification badge) or two items of identification that bear both a name and signature. Alternatively, identity may be established by providing a notarized statement, swearing or affirming to an individual's identity, and to the fact that the individual understands the penalties provided in 5 U.S.C. 552a(i)(3) for requesting or obtaining information under false pretenses. Additional documentation establishing identity or qualification for notification may be required, such as in an instance where a legal guardian or representative seeks notification on behalf of another individual. Record Access Procedures: See “Notification Procedure” above. Contesting Record Procedures: See “Notification Procedure” above. Record Source Categories: Information maintained in this system is obtained from individuals and the OCC's official personnel records. Information concerning entry and exit of OCC premises is obtained from identification card scanners. Exemptions Claimed for the System: None. Treasury/Comptroller .500 System Name: Chief Counsel's Management Information System—Treasury/Comptroller. System Location: Office of the Comptroller of the Currency (OCC), Office of Chief Counsel, 250 E Street, SW., Washington, DC 20219-0001. Categories of Individuals Covered by the System: Individuals covered by the system are: Individuals who have requested information or action from the OCC; parties or witnesses in civil proceedings or administrative actions; individuals who have submitted requests for testimony and/or production of documents pursuant to 12 CFR part 4, Subpart C; individuals who have been the subjects of administrative actions or investigations initiated by the OCC, including current or former shareholders, directors, officers, employees and agents of OCC-regulated entities, current, former, or potential bank customers, and OCC employees. Categories of Records in the System: Records maintained in this system may contain the names of: Banks; requestors; parties; witnesses; current or former shareholders; directors, officers, employees and agents of OCC-regulated entities; current, former or potential bank customers; and current or former OCC employees. These records contain summarized information concerning the description and status of Law Department work assignments. Supporting records may include pleadings and discovery materials generated in connection with civil proceedings or administrative actions, and correspondence or memoranda related to work assignments. Authority for Maintenance of the System: 12 U.S.C. 1, 93(d)(second), 481, 1818, and 1820. Purpose: This system of records is used to track the progress and disposition of OCC Law Department work assignments. Routine uses of records maintained in the system, including categories of users and the purposes of such uses: *Information maintained in this system may be disclosed to:*
(1)An OCC-regulated entity involved in an assigned matter;
(2)Third parties to the extent necessary to obtain information that is relevant to the resolution of an assigned matter;
(3)The news media in accordance with guidelines contained in 28 CFR 50.2;
(4)Appropriate governmental or self-regulatory organizations when the OCC determines that the records are relevant and necessary to the governmental or self-regulatory organization's regulation or supervision of financial service providers;
(5)An appropriate governmental, tribal, self-regulatory, or professional organization if the information is relevant to a known or suspected violation of a law or licensing standard within that organization's jurisdiction;
(6)The Department of Justice, a court, an adjudicative body, a party in litigation, or a witness if the OCC determines that the information is relevant and necessary to a proceeding in which the OCC, any OCC employee in his or her official capacity, any OCC employee in his or her individual capacity represented by the Department of Justice or the OCC, or the United States is a party or has an interest;
(7)A Congressional office when the information is relevant to an inquiry made at the request of the individual about whom the record is maintained;
(8)A contractor or agent who needs to have access to this system of records to perform an assigned activity;
(9)Third parties when mandated or authorized by statute, or
(10)Appropriate agencies, entities, and persons when
(a)the Department suspects or has confirmed that the security or confidentiality of information in the system of records has been compromised;
(b)the Department has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Department or another agency or entity) that rely upon the compromised information; and
(c)the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Department's efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm. Policies and practices for storing, retrieving, accessing, retaining, and disposing of records in the system: Storage: Records maintained in this system are stored electronically and in file folders. Retrievability: Records maintained in this system may be retrieved by the name of an individual covered by the system. Safeguards: Access to electronic records is restricted to authorized personnel who have been issued non-transferrable access codes and passwords. Other records are maintained in locked file cabinets or rooms. Retention and Disposal: Records are retained in accordance with the OCC's records management policies and National Archives and Records Administration regulations. System Manager and Address: Executive Assistant to the Chief Counsel, Law Department, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. Notification Procedure: An individual wishing to be notified if he or she is named in non-exempt records maintained in this system must submit a written request to the Disclosure Officer, Communications Division, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. See 31 CFR part 1, Subpart C, Appendix J. Identification Requirements: An individual seeking notification through the mail must establish his or her identity by providing a signature and an address as well as one other identifier bearing the individual's name and signature (such as a photocopy of a driver's license or other official document). An individual seeking notification in person must establish his or her identity by providing proof in the form of a single official document bearing a photograph (such as a passport or identification badge) or two items of identification that bear both a name and signature. Alternatively, identity may be established by providing a notarized statement, swearing or affirming to an individual's identity, and to the fact that the individual understands the penalties provided in 5 U.S.C. 552a(i)(3) for requesting or obtaining information under false pretenses. Additional documentation establishing identity or qualification for notification may be required, such as in an instance where a legal guardian or representative seeks notification on behalf of another individual. Record Access Procedures: See “Notification Procedure” above. Contesting Record Procedures: See “Notification Procedure” above. Record Source Categories: Non-exempt information maintained in this system is obtained from individuals who request information or action from the OCC, individuals who are involved in legal proceedings in which the OCC is a party or has an interest, OCC personnel, and OCC-regulated entities and other entities, including governmental, tribal, self-regulatory, and professional organizations. Exemptions Claimed for the System: Records maintained in this system have been designated as exempt from 5 U.S.C. 552a(c)(3) and (4), (d)(1), (2), (3), and (4), (e)(1), (e)(2), (e)(3), (e)(4)(G), (H), and (I), (e)(5), (e)(8), (f), and
(g)of the Privacy Act pursuant to 5 U.S.C. 552a(j)(2) and (k)(2). See 31 CFR 1.36. Treasury/Comptroller .510 System Name: Litigation Information System—Treasury/Comptroller. System Location: Office of the Comptroller of the Currency (OCC), Office of Chief Counsel, Litigation Division, 250 E Street, SW., Washington, DC 20219-0001. Categories of Individuals Covered by the System: Individuals covered by the system are parties or witnesses in civil proceedings or administrative actions, and individuals who have submitted requests for testimony or the production of documents pursuant to 12 CFR part 4, Subpart C. Categories of Records in the System: Records maintained in this system are those generated in connection with civil proceedings or administrative actions, such as discovery materials, evidentiary materials, transcripts of testimony, pleadings, memoranda, correspondence, and requests for information pursuant to 12 CFR part 4, Subpart C. Authority for Maintenance of the System: 12 U.S.C. 1, 93(d) (second), 481, 1818, and 1820. Purpose: This system of records is used by the OCC in representing its interests in legal actions and proceedings in which the OCC, its employees, or the United States is a party or has an interest. Routine uses of records maintained in the system, including categories of users and the purposes of such uses: *Information maintained in this system may be disclosed to:*
(1)Third parties to the extent necessary to obtain information that is relevant to the subject matter of civil proceedings or administrative actions involving the OCC;
(2)The news media in accordance with guidelines contained in 28 CFR 50.2;
(3)Appropriate governmental or self-regulatory organizations when the OCC determines that the records are relevant and necessary to the governmental or self-regulatory organization's regulation or supervision of financial service providers;
(4)An appropriate governmental, tribal, self-regulatory, or professional organization if the information is relevant to a known or suspected violation of a law or licensing standard within that organization's jurisdiction;
(5)The Department of Justice, a court, an adjudicative body, a party in litigation, or a witness if the OCC determines that the information is relevant and necessary to a proceeding in which the OCC, any OCC employee in his or her official capacity, any OCC employee in his or her individual capacity represented by the Department of Justice or the OCC, or the United States is a party or has an interest;
(6)A Congressional office when the information is relevant to an inquiry made at the request of the individual about whom the record is maintained;
(7)A contractor or agent who needs to have access to this system of records to perform an assigned activity;
(8)Third parties when mandated or authorized by statute, or
(9)Appropriate agencies, entities, and persons when
(a)the Department suspects or has confirmed that the security or confidentiality of information in the system of records has been compromised;
(b)the Department has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Department or another agency or entity) that rely upon the compromised information; and
(c)the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Department's efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm. Policies and practices for storing, retrieving, accessing, retaining, and disposing of records in the system: Storage: Records maintained in this system are stored in file folders. Retrievability: Records maintained in this system may be retrieved by the name of an individual covered by the system. Safeguards: System records are maintained in locked file cabinets or rooms. Retention and Disposal: Records are retained in accordance with the OCC's records management policies and National Archives and Records Administration regulations. System Manager and Address: Director, Litigation Division, Law Department, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. Notification Procedure: An individual wishing to be notified if he or she is named in non-exempt records maintained in this system must submit a written request to the Disclosure Officer, Communications Division, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. See 31 CFR part 1, Subpart C, Appendix J. Identification Requirements: An individual seeking notification through the mail must establish his or her identity by providing a signature and an address as well as one other identifier bearing the individual's name and signature (such as a photocopy of a driver's license or other official document). An individual seeking notification in person must establish his or her identity by providing proof in the form of a single official document bearing a photograph (such as a passport or identification badge) or two items of identification that bear both a name and signature. Alternatively, identity may be established by providing a notarized statement, swearing or affirming to an individual's identity, and to the fact that the individual understands the penalties provided in 5 U.S.C. 552a(i)(3) for requesting or obtaining information under false pretenses. Additional documentation establishing identity or qualification for notification may be required, such as in an instance where a legal guardian or representative seeks notification on behalf of another individual. Record Access Procedures: See “Notification Procedure” above. Contesting Record Procedures: See “Notification Procedure” above. Record Source Categories: Non-exempt information maintained in this system is obtained from: Individuals or entities involved in legal proceedings in which the OCC is a party or has an interest; OCC-regulated entities; and governmental, tribal, self-regulatory or professional organizations. Exemptions Claimed for the System: Records maintained in this system have been designated as exempt from 5 U.S.C. 552a(c)(3) and (4), (d)(1), (2), (3), and (4), (e)(1), (e)(2), (e)(3), (e)(4)(G), (H), and (I), (e)(5), (e)(8), (f), and
(g)of the Privacy Act pursuant to 5 U.S.C. 552a(j)(2) and (k)(2). See 31 CFR 1.36. Treasury/Comptroller .600 System Name: Consumer Complaint and Inquiry Information System—Treasury/Comptroller. System Location: Office of the Comptroller of the Currency (OCC), Customer Assistance Group, 1301 McKinney Street, Suite 3450, Houston, TX 77010-3034. Categories of Individuals Covered by the System: Individuals covered by this system are individuals who submit complaints or inquiries about national banks, District of Columbia banks operating under OCC's regulatory authority, federal branches and agencies of foreign banks, or subsidiaries of any such entity (OCC-regulated entities), and other entities that the OCC does not regulate. This includes individuals who file complaints and inquiries directly with the OCC or through other parties, such as attorneys, members of Congress, or other governmental organizations. Categories of Records in the System: Records maintained in this system may contain: The name and address of the individual who submitted the complaint or inquiry; when applicable, the name of the individual or organization referring a matter; the name of the entity that is the subject of the complaint or inquiry; the date of the incoming correspondence and its receipt; numeric codes identifying the complaint or inquiry's nature, source, and resolution; the OCC office and personnel assigned to review the correspondence; the status of the review; the resolution date; and, when applicable, the amount of reimbursement. Supporting records may contain correspondence between the OCC and the individual submitting the complaint or inquiry, correspondence between the OCC and the regulated entity, and correspondence between the OCC and other law enforcement or regulatory bodies. Authority for Maintenance of the System: 12 U.S.C. 1, 481, and 1820; 15 U.S.C. 41 *et seq.* Purpose: This system of records is used to administer the OCC's Customer Assistance Program and to track the processing and resolution of complaints and inquiries. Routine uses of records maintained in the system, including categories of users and the purposes of such uses: *Information maintained in this system may be disclosed to:*
(1)An OCC-regulated entity that is the subject of a complaint or inquiry;
(2)Third parties to the extent necessary to obtain information that is relevant to the resolution of a complaint or inquiry;
(3)The appropriate governmental, tribal, self-regulatory or professional organization if that organization has jurisdiction over the subject matter of the complaint or inquiry, or the entity that is the subject of the complaint or inquiry;
(4)An appropriate governmental, tribal, self-regulatory, or professional organization if the information is relevant to a known or suspected violation of a law or licensing standard within that organization's jurisdiction;
(5)The Department of Justice, a court, an adjudicative body, a party in litigation, or a witness if the OCC determines that the information is relevant and necessary to a proceeding in which the OCC, any OCC employee in his or her official capacity, any OCC employee in his or her individual capacity represented by the Department of Justice or the OCC, or the United States is a party or has an interest;
(6)A Congressional office or appropriate governmental or tribal organization when the information is relevant to a complaint or inquiry referred to the OCC by that office or organization on behalf of the individual about whom the information is maintained;
(7)An appropriate governmental or tribal organization in communication with the OCC about a complaint or inquiry the organization has received concerning the actions of an OCC-regulated entity. Information that may be disclosed under this routine use will ordinarily consist of a description of the conclusion made by the OCC concerning the actions of such an entity and the corrective action taken, if any;
(8)A contractor or agent who needs to have access to this system of records to perform an assigned activity;
(9)Third parties when mandated or authorized by statute, or
(10)Appropriate agencies, entities, and persons when
(a)the Department suspects or has confirmed that the security or confidentiality of information in the system of records has been compromised;
(b)the Department has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Department or another agency or entity) that rely upon the compromised information; and
(c)the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Department's efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm. Policies and practices for storing, retrieving, accessing, retaining, and disposing of records in the system: Storage: Records maintained in this system are stored electronically and in file folders. Retrievability: Records maintained in this system may be retrieved by the name of an individual covered by the system. Safeguards: Access to electronic records is restricted to authorized personnel who have been issued non-transferrable access codes and passwords. Other records are maintained in locked file cabinets or rooms. Retention and Disposal: Records are retained in accordance with the OCC's records management policies and National Archives and Records Administration regulations. System Manager and Address: Ombudsman, Office of the Comptroller of the Currency, 1301 McKinney Street, Suite 3450, Houston, TX 77010-3034. Notification Procedure: An individual wishing to be notified if he or she is named in non-exempt records maintained in this system must submit a written request to the Disclosure Officer, Communications Division, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. See 31 CFR part 1, Subpart C, Appendix J. Identification Requirements: An individual seeking notification through the mail must establish his or her identity by providing a signature and an address as well as one other identifier bearing the individual's name and signature (such as a photocopy of a driver's license or other official document). An individual seeking notification in person must establish his or her identity by providing proof in the form of a single official document bearing a photograph (such as a passport or identification badge) or two items of identification that bear both a name and signature. Alternatively, identity may be established by providing a notarized statement, swearing or affirming to an individual's identity, and to the fact that the individual understands the penalties provided in 5 U.S.C. 552a(i)(3) for requesting or obtaining information under false pretenses. Additional documentation establishing identity or qualification for notification may be required, such as in an instance where a legal guardian or representative seeks notification on behalf of another individual. Record Access Procedures: See “Notification Procedure” above. Contesting Record Procedures: See “Notification Procedure” above. Record Source Categories: Non-exempt information maintained in this system is obtained from individuals and entities filing complaints and inquiries, other governmental authorities, and OCC-regulated entities that are the subjects of complaints and inquiries. Exemptions Claimed for the System: Records maintained in this system have been designated as exempt from 5 U.S.C. 552a(c)(3), (d)(1), (2), (3), and (4), (e)(1), (e)(4)(G), (H), and (I), and
(f)of the Privacy Act pursuant to 5 U.S.C. 552a(k)(2). See 31 CFR 1.36. Treasury/Comptroller .700 System Name: Correspondence Tracking System—Treasury/Comptroller. System Location: Office of the Comptroller of the Currency (OCC), Office of Chief Counsel, 250 E Street, SW., Washington, DC 20219-0001. Components of this record system are maintained in the Comptroller of the Currency's Office and the Chief Counsel's Office. Categories of Individuals Covered by the System: Individuals covered by this system are those whose correspondence is submitted to the Comptroller of the Currency or the Chief Counsel. Categories of Records in the System: Records maintained in this system may contain the names of individuals who correspond with the OCC, information concerning the subject matter of the correspondence, correspondence disposition information, correspondence tracking dates, and internal office assignment information. Supporting records may contain correspondence between the OCC and the individual. Authority for Maintenance of the System: 12 U.S.C. 1; 5 U.S.C. 301. Purpose: This system of records is used by the OCC to track the Comptroller of the Currency's or the Chief Counsel's correspondence, including the progress and disposition of the OCC's response. Routine Uses of Records Maintained in the System, Including Categories of Users and the Purposes of Such Uses: *Information maintained in this system may be disclosed to:*
(1)The OCC-regulated entity involved in correspondence;
(2)Third parties to the extent necessary to obtain information that is relevant to the response;
(3)Appropriate governmental or self-regulatory organizations when the OCC determines that the records are relevant and necessary to the governmental or self-regulatory organization's regulation or supervision of financial service providers;
(4)An appropriate governmental, tribal, self-regulatory, or professional organization if the information is relevant to a known or suspected violation of a law or licensing standard within that organization's jurisdiction;
(5)The Department of Justice, a court, an adjudicative body, a party in litigation, or a witness if the OCC determines that the information is relevant and necessary to a proceeding in which the OCC, any OCC employee in his or her official capacity, any OCC employee in his or her individual capacity represented by the Department of Justice or the OCC, or the United States is a party or has an interest;
(6)A congressional office when the information is relevant to an inquiry made at the request of the individual about whom the record is maintained;
(7)A contractor or agent who needs to have access to this system of records to perform an assigned activity;
(8)Third parties when mandated or authorized by statute, or
(9)Appropriate agencies, entities, and persons when
(a)the Department suspects or has confirmed that the security or confidentiality of information in the system of records has been compromised;
(b)the Department has determined that as a result of the suspected or confirmed compromise there is a risk of harm to economic or property interests, identity theft or fraud, or harm to the security or integrity of this system or other systems or programs (whether maintained by the Department or another agency or entity) that rely upon the compromised information; and
(c)the disclosure made to such agencies, entities, and persons is reasonably necessary to assist in connection with the Department's efforts to respond to the suspected or confirmed compromise and prevent, minimize, or remedy such harm. Policies and Practices for Storing, Retrieving, Accessing, Retaining, and Disposing of Records in the System: Storage: Records maintained in this system are stored electronically and in file folders. Retrievability: Records maintained in this system may be retrieved by the name of an individual covered by the system. Safeguards: Access to electronic records is restricted to authorized personnel who have been issued non-transferable access codes and passwords. Other records are maintained in locked file cabinets or rooms. Retention and Disposal: Electronic and other records are retained in accordance with the OCC's records management policies and National Archives and Records Administration regulations. System Managers and Addresses: Executive Assistant to the Comptroller, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. Special Assistant to the Chief Counsel, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. Notification Procedure: An individual wishing to be notified if he or she is named in non-exempt records maintained in this system must submit a written request to the Disclosure Officer, Communications Division, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219-0001. See 31 CFR part 1, Subpart C, Appendix J. Identification Requirements: An individual seeking notification through the mail must establish his or her identity by providing a signature and an address as well as one other identifier bearing the individual's name and signature (such as a photocopy of a driver's license or other official document). An individual seeking notification in person must establish his or her identity by providing proof in the form of a single official document bearing a photograph (such as a passport or identification badge) or two items of identification that bear both a name and signature (such as credit cards). Alternatively, identity may be established by providing a notarized statement, swearing or affirming to an individual's identity, and to the fact that the individual understands the penalties provided in 5 U.S.C. 552a(i)(3) for requesting or obtaining information under false pretenses. Additional documentation establishing identity or qualification for notification may be required, such as in an instance where a legal guardian or representative seeks notification on behalf of another individual. Record Access Procedures: See “Notification Procedure” above. Contesting Record Procedures: See “Notification Procedure” above. Record Source Categories: Information maintained in this system is obtained from individuals who submit correspondence and OCC personnel. Exemptions Claimed for the System: None. [FR Doc. E8-16462 Filed 7-17-08; 8:45 am] BILLING CODE 4810-33-P 73 139 Friday, July 18, 2008 Proposed Rules Part II Department of Health and Human Services Centers for Medicare & Medicaid Services 42 CFR Parts 410 and 419 Medicare Program: Proposed Changes to the Hospital Outpatient Prospective Payment System and CY 2009 Payment Rates; Proposed Changes to the Ambulatory Surgical Center Payment System and CY 2009 Payment Rates; Proposed Rule DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 410 and 419 [CMS-1404-P] RIN 0938-AP17 Medicare Program: Proposed Changes to the Hospital Outpatient Prospective Payment System and CY 2009 Payment Rates; Proposed Changes to the Ambulatory Surgical Center Payment System and CY 2009 Payment Rates AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Proposed rule. SUMMARY: This proposed rule would revise the Medicare hospital outpatient prospective payment system to implement applicable statutory requirements and changes arising from our continuing experience with this system. In this proposed rule, we describe the proposed changes to the amounts and factors used to determine the payment rates for Medicare hospital outpatient services paid under the prospective payment system. These changes would be applicable to services furnished on or after January 1, 2009. In addition, this proposed rule would update the revised Medicare ambulatory surgical center
(ASC)payment system to implement applicable statutory requirements and changes arising from our continuing experience with this system. In this proposed rule, we propose the applicable relative payment weights and amounts for services furnished in ASCs, specific HCPCS codes to which these proposed changes would apply, and other pertinent ratesetting information for the CY 2009 ASC payment system. These changes would be applicable to services furnished on or after January 1, 2009. DATES: To be assured consideration, comments on all sections of the preamble of this proposed rule must be received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. EST on September 2, 2008. ADDRESSES: In commenting, please refer to file code CMS-1404-P. Because of staff and resource limitations, we cannot accept comments by facsimile
(FAX)transmission. You may submit comments in one of four ways (no duplicates, please): 1. *Electronically* . You may submit electronic comments on this regulation to *http://www.regulations.gov* . Follow the instructions for “Comment or Submission” and enter the filecode to find the document accepting comments. 2. *By regular mail* . You may mail written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1404-P, P.O. Box 8013, Baltimore, MD 21244-1850. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. *By express or overnight mail* . You may send written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1404-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. 4. *By hand or courier* . If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) before the close of the comment period to one of the following addresses: a. Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201. (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.) b. 7500 Security Boulevard, Baltimore, MD 21244-1850. If you intend to deliver your comments to the Baltimore address, please call the telephone number
(410)786-9994 in advance to schedule your arrival with one of our staff members. Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period. *Submission of comments on paperwork requirements* . You may submit comments on this document's paperwork requirements by following the instructions at the end of the “Collection of Information Requirements” section in this document. For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION CONTACT: Alberta Dwivedi,
(410)786-0378—Hospital outpatient prospective payment issues; Dana Burley,
(410)786-0378—Ambulatory surgical center issues; Suzanne Asplen,
(410)786-4558—Partial hospitalization and community mental health center issues; Sheila Blackstock,
(410)786-3502—Reporting of quality data issues. SUPPLEMENTARY INFORMATION: *Inspection of Public Comments:* All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: *http://www.regulations.gov* . Follow the search instructions on that Web site to view public comments. Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday through Friday of each week from 8:30 a.m. to 4 p.m. EST. To schedule an appointment to view public comments, phone 1-800-743-3951. Electronic Access This **Federal Register** document is also available from the **Federal Register** online database through *GPO Access* , a service of the U.S. Government Printing Office. Free public access is available on a Wide Area Information Server
(WAIS)through the Internet and via asynchronous dial-in. Internet users can access the database by using the World Wide Web; the Superintendent of Documents' home page address is *http://www.gpoaccess.gov/index.html* , by using local WAIS client software, or by telnet to swais.access.gpo.gov, then login as guest (no password required). Dial-in users should use communications software and modem to call
(202)512-1661; type swais, then login as guest (no password required). Alphabetical List of Acronyms Appearing in This Proposed Rule ACEP American College of Emergency Physicians AHA American Hospital Association AHIMA American Health Information Management Association AMA American Medical Association APC Ambulatory payment classification AMP Average manufacturer price ASC Ambulatory Surgical Center ASP Average sales price AWP Average wholesale price BBA Balanced Budget Act of 1997, Pub. L. 105-33 BBRA Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 106-113 BCA Blue Cross Association BCBSA Blue Cross and Blue Shield Association BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, Pub. L. 106-554 CAH Critical access hospital CAP Competitive Acquisition Program CBSA Core-Based Statistical Area CCR Cost-to-charge ratio CERT Comprehensive Error Rate Testing CMHC Community mental health center CMS Centers for Medicare & Medicaid Services CoP Condition of participation CORF Comprehensive outpatient rehabilitation facility CPT [Physicians'] Current Procedural Terminology, Fourth Edition, 2007, copyrighted by the American Medical Association CRNA Certified registered nurse anesthetist CY Calendar year DMEPOS Durable medical equipment, prosthetics, orthotics, and supplies DMERC Durable medical equipment regional carrier DRA Deficit Reduction Act of 2005, Pub. L. 109-171 DSH Disproportionate share hospital EACH Essential Access Community Hospital E/M Evaluation and management EPO Erythropoietin ESRD End-stage renal disease FACA Federal Advisory Committee Act, Pub. L. 92-463 FAR Federal Acquisition Regulations FDA Food and Drug Administration FFS Fee-for-service FSS Federal Supply Schedule FTE Full-time equivalent FY Federal fiscal year GAO Government Accountability Office GME Graduate medical education HCPCS Healthcare Common Procedure Coding System HCRIS Hospital Cost Report Information System HHA Home health agency HIPAA Health Insurance Portability and Accountability Act of 1996, Pub. L. 104-191 HOPD Hospital outpatient department HOP QDRP Hospital Outpatient Quality Data Reporting Program ICD-9-CM International Classification of Diseases, Ninth Edition, Clinical Modification IDE Investigational device exemption IME Indirect medical education I/OCE Integrated Outpatient Code Editor IOL Intraocular lens IPPS [Hospital] Inpatient prospective payment system IVIG Intravenous immune globulin MAC Medicare Administrative Contractors MedPAC Medicare Payment Advisory Commission MDH Medicare-dependent, small rural hospital MIEA-TRHCA Medicare Improvements and Extension Act under Division B, Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432 MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108-173 MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 110-173 MPFS Medicare Physician Fee Schedule MSA Metropolitan Statistical Area NCCI National Correct Coding Initiative NCD National Coverage Determination NTIOL New technology intraocular lens OMB Office of Management and Budget OPD [Hospital] Outpatient department OPPS [Hospital] Outpatient prospective payment system PHP Partial hospitalization program PM Program memorandum PPI Producer Price Index PPS Prospective payment system PPV Pneumococcal pneumonia vaccine PRA Paperwork Reduction Act QIO Quality Improvement Organization RFA Regulatory Flexibility Act RHQDAPU Reporting Hospital Quality Data for Annual Payment Update [Program] RHHI Regional home health intermediary SBA Small Business Administration SCH Sole community hospital SDP Single Drug Pricer SI Status indicator TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-248 TOPS Transitional outpatient payments USPDI United States Pharmacopoeia Drug Information WAC Wholesale acquisition cost In this document, we address two payment systems under the Medicare program: The hospital outpatient prospective payment system
(OPPS)and the revised ambulatory surgical center
(ASC)payment system. The provisions relating to the OPPS are included in sections I. through XIV., and XVI. through XXI. of this proposed rule and in Addenda A, B, C (Addendum C is available on the Internet only; see section XVIII. of this proposed rule), D1, D2, E, L, and M to this proposed rule. The provisions related to the revised ASC payment system are included in sections XV. and XVII. through XXI. of this proposed rule and in Addenda AA, BB, DD1, DD2, and EE (Addendum EE is available on the Internet only; see section XVIII. of this proposed rule) to this proposed rule. Table of Contents I. Background for the OPPS A. Legislative and Regulatory Authority for the Hospital Outpatient Prospective Payment System B. Excluded OPPS Services and Hospitals C. Prior Rulemaking D. APC Advisory Panel 1. Authority of the APC Panel 2. Establishment of the APC Panel 3. APC Panel Meetings and Organizational Structure E. Provisions of the Medicare, Medicaid, and SCHIP Extension Act of 2007 F. Summary of the Major Contents of This Proposed Rule 1. Proposed Updates Affecting OPPS Payments 2. Proposed OPPS Ambulatory Payment Classification
(APC)Group Policies 3. Proposed OPPS Payment for Devices 4. Proposed OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 5. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices 6. Proposed OPPS Payment for Brachytherapy Sources 7. Proposed OPPS Payment for Drug Administration Services 8. Proposed OPPS Payment for Hospital Outpatient Visits 9. Proposed Payment for Partial Hospitalization Services 10. Proposed Procedures That Will Be Paid Only as Inpatient Services 11. OPPS Nonrecurring and Policy Clarifications 12. Proposed OPPS Payment Status and Comment Indicators 13. OPPS Policy and Payment Recommendations 14. Proposed Update of the Revised Ambulatory Surgical Center Payment System 15. Proposed Quality Data for Annual Payment Updates 16. Healthcare-Associated Conditions 17. Regulatory Impact Analysis II. Proposed Updates Affecting OPPS Payments A. Proposed Recalibration of APC Relative Weights 1. Database Construction a. Database Source and Methodology b. Proposed Use of Single and Multiple Procedure Claims c. Proposed Calculation of CCRs
(1)Development of the CCRs
(2)Charge Compression 2. Proposed Calculation of Median Costs a. Claims Preparations b. Splitting Claims and Creation of “Pseudo” Single Claims c. Completion of Claim Records and Median Cost Calculations d. Proposed Calculation of Single Procedure APC Criteria-Based Median Costs
(1)Device-Dependent APCs
(2)Blood and Blood Products
(3)Single Allergy Tests
(4)Echocardiography Services
(5)Nuclear Medicine Services
(6)Hyperbaric Oxygen Therapy
(7)Payment for Ancillary Outpatient Services When Patient Expires (-CA Modifier) e. Proposed Calculation of Composite APC Criteria-Based Median Costs
(1)Extended Assessment and Management Composite APCs (APCs 8002 and 8003)
(2)Low Dose Rate
(LDR)Prostate Brachytherapy Composite APC (APC 8001)
(3)Cardiac Electrophysiologic Evaluation and Ablation Composite APC (APC 8000)
(4)Mental Health Services Composite APC (APC 0034)
(5)Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) 3. Proposed Calculation of OPPS Scaled Payment Weights 4. Proposed Changes to Packaged Services a. Background b. Service-Specific Packaging Issues
(1)Package Services Addressed by APC Panel Recommendations
(2)IVIG Preadministration-Related Services B. Proposed Conversion Factor Update C. Proposed Wage Index Changes D. Proposed Statewide Average Default CCRs E. Proposed OPPS Payments to Certain Rural Hospitals 1. Hold Harmless Transitional Payment Changes Made by Pub. L. 109-171
(DRA)2. Proposed Adjustment for Rural SCHs Implemented in CY 2006 Related to Pub. L. 108-173
(MMA)F. Proposed Hospital Outpatient Outlier Payments 1. Background 2. Proposed Outlier Calculation 3. Outlier Reconciliation G. Proposed Calculation of an Adjusted Medicare Payment from the National Unadjusted Medicare Payment H. Proposed Beneficiary Copayments 1. Background 2. Proposed Copayments 3. Calculation of a Proposed Adjusted Copayment Amount for an APC Group III. Proposed OPPS Ambulatory Payment Classification
(APC)Group Policies A. Proposed OPPS Treatment of New HCPCS and CPT Codes 1. Proposed Treatment of New HCPCS Codes Included in the April and July Quarterly OPPS Updates for CY 2008 2. Proposed Treatment of New Category I and III CPT Codes and Level II HCPCS Codes B. Proposed OPPS Changes—Variations within APCs 1. Background 2. Application of the 2 Times Rule 3. Proposed Exceptions to the 2 Times Rule C. New Technology APCs 1. Background 2. Proposed Movement of Procedures from New Technology APCs to Clinical APCs D. Proposed OPPS APC-Specific Policies 1. Trauma Response Associated with Hospital Critical Care Services (APC 0618) 2. Suprachoroidal Delivery of Pharmacologic Agent (APC 0236) 3. Closed Treatment Fracture of Finger/Toe/Trunk (APC 0043) 4. Individual Psychotherapy (APCs 0322 and 0323) 5. Implant Injection for Vesicoureteral Reflex (APC 0162) IV. Proposed OPPS Payment for Devices A. Pass-Through Payments for Devices 1. Expiration of Transitional Pass-Through Payments for Certain Devices a. Background b. Proposed Policy 2. Proposed Provisions for Reducing Transitional Pass-Through Payments to Offset Costs Packaged into APC Groups a. Background b. Proposed Policy B. Proposed Adjustment to OPPS Payments for Partial or Full Credit Devices 1. Background 2. Proposed APCs and Devices Subject to the Adjustment Policy V. Proposed OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals A. Proposed OPPS Transitional Pass-Through Payment for Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals 1. Background 2. Proposed Drugs and Biologicals with Expiring Pass-Through Status in CY 2008 3. Proposed Drugs, Biologicals, and Radiopharmaceuticals with New or Continuing Pass-Through Status in CY 2009 4. Proposed Reduction of Transitional Pass-Through Payments for Diagnostic Radiopharmaceuticals to Offset Costs Packaged into APC Groups B. Proposed OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals without Pass-Through Status 1. Background 2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and Radiopharmaceuticals a. Drugs, Biologicals, and Therapeutic Radiopharmaceuticals b. Proposed Payment for Diagnostic Radiopharmaceuticals and Contrast Agents 3. Proposed Payment for Drugs and Biologicals without Pass-Through Status That Are Not Packaged a. Payment for Specified Covered Outpatient Drugs (SCODs) b. Proposed Payment Policy c. Proposed Payment for Blood Clotting Factors 4. Proposed Payment for Therapeutic Radiopharmaceuticals a. Background b. Proposed Payment Policy 5. Proposed Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals with HCPCS Codes, but without OPPS Hospital Claims Data VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices A. Background B. Proposed Estimate of Pass-Through Spending VII. Proposed OPPS Payment for Brachytherapy Sources A. Background B. Proposed OPPS Payment Policy VIII. Proposed OPPS Payment for Drug Administration Services A. Background B. Proposed Coding and Payment for Drug Administration Services IX. Proposed OPPS Payment for Hospital Outpatient Visits A. Background B. Proposed Policies for Hospital Outpatient Visits 1. Clinic Visits: New and Established Patient Visits 2. Emergency Department Visits 3. Visit Reporting Guidelines X. Proposed Payment for Partial Hospitalization Services A. Background B. Proposed PHP APC Update C. Proposed Policy Changes 1. Proposal to Deny Payments for Low Intensity Days 2. Proposal to Strengthen PHP Patient Eligibility Criteria 3. Proposed Partial Hospitalization Coding Update C. Proposed Separate Threshold for Outlier Payments to CMHCs XI. Proposed Procedures That Will Be Paid Only as Inpatient Procedures A. Background B. Proposed Changes to the Inpatient List XII. OPPS Nonrecurring Technical and Policy Clarifications A. Physician Supervision of HOPD Services 1. Background 2. Summary B. Reporting of Pathology Services for Prostrate Saturation Biopsy XIII. Proposed OPPS Payment Status and Comment Indicators A. Proposed OPPS Payment Status Indicator Definitions 1. Proposed Payment Status Indicators to Designate Services That Are Paid under the OPPS 2. Proposed Payment Status Indicators to Designate Services That Are Paid under a Payment System Other Than the OPPS 3. Proposed Payment Status Indicators to Designate Services That Are Not Recognized under the OPPS But That May Be Recognized by Other Institutional Providers 4. Proposed Payment Status Indicators to Designate Services That Are Not Payable by Medicare B. Proposed Comment Indicator Definitions XIV. OPPS Policy and Payment Recommendations A. Medicare Payment Advisory Commission (MedPAC) Recommendations 1. March 2008 Report 2. June 2007 Report B. APC Panel Recommendations C. OIG Recommendations XV. Proposed Update of the Revised Ambulatory Surgical Center Payment System A. Background 1. Legislative Authority for the ASC Payment System 2. Prior Rulemaking 3. Policies Governing Changes to the Lists of HCPCS Codes and Payment Rates for ASC Covered Surgical Procedures and Covered Ancillary Services B. Proposed Treatment of New Codes 1. Proposed Treatment of New Category I and III CPT Codes and Level II HCPCS Codes 2. Proposed Treatment of New Level II HCPCS Codes Implemented in April and July 2008 C. Proposed Update to the Lists of ASC Covered Surgical Procedures and Covered Ancillary Services 1. Covered Surgical Procedures a. Proposed Additions to the List of ASC Covered Surgical Procedures b. Covered Surgical Procedures Designated as Office Based
(1)Background
(2)Proposed Changes to Covered Surgical Procedures Designated as Office-Based for CY 2009 c. Covered Surgical Procedures Designated as Device-Intensive
(1)Background
(2)Proposed Changes to List of Covered Surgical Procedures Designated as Device-Intensive for CY 2009 2. Covered Ancillary Services D. Proposed ASC Payment for Covered Surgical Procedures and Covered Ancillary Services 1. Proposed Payment for Covered Surgical Procedures a. Background b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for CY 2009 c. Proposed Adjustment to ASC Payments for Partial or Full Device Credit 2. Proposed Payment for Covered Ancillary Services a. Background b. Proposed Payment for Covered Ancillary Services for CY 2009 E. New Technology Intraocular Lenses 1. Background 2. NTIOL Application Process for Payment Adjustment 3. Classes of NTIOLs Approved and New Request for Payment Adjustment a. Background b. Requests to Establish New NTIOL Class for CY 2009 and Deadline for Public Comment 4. Proposed Payment Adjustment 5. Proposed ASC Payment for Insertion of IOLs F. Proposed ASC Payment and Comment Indicators 1. Background 2. Proposed ASC Payment and Comment Indicators G. Calculation of the ASC Conversion Factor and ASC Payment Rates 1. Background 2. Proposed Policy Regarding Calculation of the ASC Payment Rates a. Updating the ASC Relative Payment Weights for CY 2009 and Future Years b. Updating the ASC Conversion Factor 3. Display of Proposed ASC Payment Rates XVI. Reporting Quality Data for Annual Payment Rate Updates A. Background 1. Reporting Hospital Outpatient Quality Data for Annual Payment Update 2. Reporting ASC Quality Data for Annual Payment Update B. Existing Hospital Outpatient Measures for CY 2009 C. Proposed Quality Measures for CY 2010 and Subsequent Calendar Years and Proposed Process to Update Measures 1. Proposed Quality Measures for CY 2010 Payment Determinations 2. Proposed Process for Updating Measures 3. Possible New Quality Measures for CY 2011 and Subsequent Calendar Years D. Proposed Payment Reduction for Hospitals That Fail to Meet the HOP QDRP Requirements for the CY 2009 Payment Update 1. Background 2. Proposed Reduction of OPPS Payments for Hospitals That Fail to Meet the HOP QDRP CY 2009 Payment Update Requirements a. Calculation of Reduced National Unadjusted Payment Rates b. Calculation of Reduced Minimum Unadjusted and National Unadjusted Beneficiary Copayments c. Treatment of Other Payment Adjustments E. Requirements for HOP Quality Data Reporting for CY 2010 and Subsequent Calendar Years 1. Administrative Requirements 2. Data Collection and Submission Requirements 3. HOP QDRP Validation Requirements a. Proposed Data Validation Requirements for CY 2010 b. Alternative Data Validation Approaches for CY 2011 F. Publication of HOP QDRP Data G. Proposed HOP QDRP Reconsideration and Appeals Procedures H. Reporting of ASC Quality Data XVII. Healthcare-Associated Conditions A. Background B. Broadening the Concept of the IPPS Hospital-Acquired Conditions Payment Provision to the OPPS 1. Criteria for Possible Candidate OPPS Conditions 2. Collaboration Process 3. Potential OPPS Healthcare-Associated Conditions 4. OPPS Infrastructure and Payment for Encounters Resulting in Healthcare-Associated Conditions XVIII. Files Available to the Public Via the Internet A. Information in Addenda Related to the Proposed CY 2009 Hospital OPPS B. Information in Addenda Related to the Proposed CY 2009 ASC Payment System XIX. Collection of Information Requirements A. Legislative Requirement for Solicitation of Comments B. Associated Information Collections Not Specified in Regulatory Text C. Addresses for Submittal of Comments on ICRs XX. Response to Comments XXI. Regulatory Impact Analysis A. Overall Impact 1. Executive Order 12866 2. Regulatory Flexibility Act
(RFA)3. Small Rural Hospitals 4. Unfunded Mandates 5. Federalism B. Effects of OPPS Changes in This Proposed Rule 1. Alternatives Considered 2. Limitation of Our Analysis 3. Estimated Effects of This Proposed Rule on Hospitals 4. Estimated Effects of This Proposed Rule on CMHCs 5. Estimated Effects of This Proposed Rule on Beneficiaries 6. Conclusion 7. Accounting Statement C. Effects of ASC Payment System Changes in This Proposed Rule 1. Alternatives Considered 2. Limitations on Our Analysis 3. Estimated Effects of This Proposed Rule on ASCs 4. Estimated Effects of This Proposed Rule on Beneficiaries 5. Conclusion 6. Accounting Statement D. Effects of Proposed Requirements for Reporting of Quality Data for Annual Hospital Payment Update E. Executive Order 12866 Regulation Text Addenda Addendum A—Proposed OPPS APCs for CY 2009 Addendum AA—Proposed ASC Covered Surgical Procedures for CY 2009 (Including Surgical Procedures for Which Payment Is Packaged) Addendum B—Proposed OPPS Payment by HCPCS Code for CY 2009 Addendum BB—Proposed ASC Covered Ancillary Services Integral to Covered Surgical Procedures for CY 2009 (Including Ancillary Services for Which Payment Is Packaged) Addendum D1—Proposed OPPS Payment Status Indicators Addendum DD1—Proposed ASC Payment Indicators Addendum D2—Proposed OPPS Comment Indicators Addendum DD2—Proposed ASC Comment Indicators Addendum E—Proposed HCPCS Codes That Would Be Paid Only as Inpatient Procedures for CY 2009 Addendum L—Proposed Out-Migration Adjustment Addendum M—Proposed HCPCS Codes for Assignment to Composite APCs for CY 2009 I. Background for the OPPS A. Legislative and Regulatory Authority for the Hospital Outpatient Prospective Payment System When the Medicare statute was originally enacted, Medicare payment for hospital outpatient services was based on hospital-specific costs. In an effort to ensure that Medicare and its beneficiaries pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a prospective payment system (PPS). The Balanced Budget Act
(BBA)of 1997 (Pub. L. 105-33) added section 1833(t) to the Social Security Act (the Act) authorizing implementation of a PPS for hospital outpatient services. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act
(BBRA)of 1999 (Pub. L. 106-113) made major changes in the hospital outpatient prospective payment system (OPPS). The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
(BIPA)of 2000 (Pub. L. 106-554) made further changes in the OPPS. Section 1833(t) of the Act was also amended by the Medicare Prescription Drug, Improvement, and Modernization Act
(MMA)of 2003 (Pub. L. 108-173). The Deficit Reduction Act
(DRA)of 2005 (Pub. L. 109-171), enacted on February 8, 2006, also made additional changes in the OPPS. In addition, the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act (MIEA-TRHCA) of 2006 (Pub. L. 109-432), enacted on December 20, 2006, made further changes in the OPPS. Further, the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007 (Pub. L. 110-173), enacted on December 29, 2007, made additional changes in the OPPS. A discussion of these changes is included in sections I.E., II.C., V., and VII. of this proposed rule. The OPPS was first implemented for services furnished on or after August 1, 2000. Implementing regulations for the OPPS are located at 42 CFR part 419. Under the OPPS, we pay for hospital outpatient services on a rate-per-service basis that varies according to the ambulatory payment classification
(APC)group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) codes (which include certain Current Procedural Terminology
(CPT)codes) and descriptors to identify and group the services within each APC group. The OPPS includes payment for most hospital outpatient services, except those identified in section I.B. of this proposed rule. Section 1833(t)(1)(B)(ii) of the Act provides for Medicare payment under the OPPS for hospital outpatient services designated by the Secretary (which includes partial hospitalization services furnished by community mental health centers (CMHCs)) and hospital outpatient services that are furnished to inpatients who have exhausted their Part A benefits, or who are otherwise not in a covered Part A stay. Section 611 of Pub. L. 108-173 added provisions for Medicare coverage of an initial preventive physical examination, subject to the applicable deductible and coinsurance, as an outpatient department service, payable under the OPPS. The OPPS rate is an unadjusted national payment amount that includes the Medicare payment and the beneficiary copayment. This rate is divided into a labor-related amount and a nonlabor-related amount. The labor-related amount is adjusted for area wage differences using the hospital inpatient wage index value for the locality in which the hospital or CMHC is located. All services and items within an APC group are comparable clinically and with respect to resource use (section 1833(t)(2)(B) of the Act). In accordance with section 1833(t)(2) of the Act, subject to certain exceptions, services and items within an APC group cannot be considered comparable with respect to the use of resources if the highest median (or mean cost, if elected by the Secretary) for an item or service in the APC group is more than 2 times greater than the lowest median cost for an item or service within the same APC group (referred to as the “2 times rule”). In implementing this provision, we generally use the median cost of the item or service assigned to an APC group. For new technology items and services, special payments under the OPPS may be made in one of two ways. Section 1833(t)(6) of the Act provides for temporary additional payments, which we refer to as “transitional pass-through payments,” for at least 2 but not more than 3 years for certain drugs, biological agents, brachytherapy devices used for the treatment of cancer, and categories of other medical devices. For new technology services that are not eligible for transitional pass-through payments, and for which we lack sufficient data to appropriately assign them to a clinical APC group, we have established special APC groups based on costs, which we refer to as New Technology APCs. These New Technology APCs are designated by cost bands which allow us to provide appropriate and consistent payment for designated new procedures that are not yet reflected in our claims data. Similar to pass-through payments, an assignment to a New Technology APC is temporary; that is, we retain a service within a New Technology APC until we acquire sufficient data to assign it to a clinically appropriate APC group. B. Excluded OPPS Services and Hospitals Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the hospital outpatient services that are paid under the OPPS. While most hospital outpatient services are payable under the OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule. Section 614 of Pub. L. 108-173 amended section 1833(t)(1)(B)(iv) of the Act to exclude payment for screening and diagnostic mammography services from the OPPS. The Secretary exercised the authority granted under the statute to also exclude from the OPPS those services that are paid under fee schedules or other payment systems. Such excluded services include, for example, the professional services of physicians and nonphysician practitioners paid under the Medicare Physician Fee Schedule (MPFS); laboratory services paid under the clinical diagnostic laboratory fee schedule (CLFS); services for beneficiaries with end-stage renal disease
(ESRD)that are paid under the ESRD composite rate; and services and procedures that require an inpatient stay that are paid under the hospital inpatient prospective payment system (IPPS). We set forth the services that are excluded from payment under the OPPS in § 419.22 of the regulations. Under § 419.20(b) of the regulations, we specify the types of hospitals and entities that are excluded from payment under the OPPS. These excluded entities include Maryland hospitals, but only for services that are paid under a cost containment waiver in accordance with section 1814(b)(3) of the Act; critical access hospitals (CAHs); hospitals located outside of the 50 States, the District of Columbia, and Puerto Rico; and Indian Health Service hospitals. C. Prior Rulemaking On April 7, 2000, we published in the **Federal Register** a final rule with comment period (65 FR 18434) to implement a prospective payment system for hospital outpatient services. The hospital OPPS was first implemented for services furnished on or after August 1, 2000. Section 1833(t)(9) of the Act requires the Secretary to review certain components of the OPPS, not less often than annually, and to revise the groups, relative payment weights, and other adjustments that take into account changes in medical practices, changes in technologies, and the addition of new services, new cost data, and other relevant information and factors. Since initially implementing the OPPS, we have published final rules in the **Federal Register** annually to implement statutory requirements and changes arising from our continuing experience with this system. We published in the **Federal Register** on November 27, 2007 the CY 2008 OPPS/ASC final rule with comment period (72 FR 66580). In that final rule with comment period, we revised the OPPS to update the payment weights and conversion factor for services payable under the CY 2008 OPPS on the basis of claims data from January 1, 2006, through December 31, 2006, and to implement certain provisions of Pub. L. 108-173 and Pub. L. 109-171. In addition, we responded to public comments received on the provisions of the November 26, 2006 final rule with comment period (71 FR 67960) pertaining to the APC assignment of HCPCS codes identified in Addendum B to that rule with the new interim
(NI)comment indicator; and public comments received on the August 2, 2007 OPPS/ASC proposed rule for CY 2008 (72 FR 42628). Subsequent to publication of the CY 2008 OPPS/ASC final rule with comment period, we published in the **Federal Register** on February 22, 2008, a correction notice (73 FR 9860) to correct certain technical errors in the CY 2008 OPPS/ASC final rule with comment period. D. APC Advisory Panel 1. Authority of the APC Panel Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of the BBRA, and redesignated by section 202(a)(2) of the BBRA, requires that we consult with an outside panel of experts to review the clinical integrity of the payment groups and their weights under the OPPS. The Act further specifies that the panel will act in an advisory capacity. The Advisory Panel on Ambulatory Payment Classification
(APC)Groups (the APC Panel), discussed under section I.D.2. of this proposed rule, fulfills these requirements. The APC Panel is not restricted to using data compiled by CMS, and it may use data collected or developed by organizations outside the Department in conducting its review. 2. Establishment of the APC Panel On November 21, 2000, the Secretary signed the initial charter establishing the APC Panel. This expert panel, which may be composed of up to 15 representatives of providers subject to the OPPS (currently employed full-time, not as consultants, in their respective areas of expertise), reviews clinical data and advises CMS about the clinical integrity of the APC groups and their payment weights. For purposes of this APC Panel, consultants or independent contractors are not considered to be full-time employees. The APC Panel is technical in nature, and is governed by the provisions of the Federal Advisory Committee Act (FACA). Since its initial chartering, the Secretary has renewed the APC Panel's charter three times: on November 1, 2002; on November 1, 2004; and effective November 21, 2006. The current charter specifies, among other requirements, that the APC Panel continues to be technical in nature; is governed by the provisions of the FACA; may convene up to three meetings per year; has a Designated Federal Officer (DFO); and is chaired by a Federal official designated by the Secretary. The current APC Panel membership and other information pertaining to the APC Panel, including its charter, **Federal Register** notices, membership, meeting dates, agenda topics, and meeting reports can be viewed on the CMS Web site at: *http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.* 3. APC Panel Meetings and Organizational Structure The APC Panel first met on February 27, February 28, and March 1, 2001. Since the initial meeting, the APC Panel has held 13 subsequent meetings, with the last meeting taking place on March 5, and March 6, 2008. Prior to each meeting, we publish a notice in the **Federal Register** to announce the meeting, and when necessary, to solicit nominations for APC Panel membership, and to announce new members. The APC Panel has established an operational structure that, in part, includes the use of three subcommittees to facilitate its required APC review process. At its March 2008 meeting, the APC Panel recommended that the Observation and Visit Subcommittee's name be changed to the “Visits and Observation Subcommittee.” We are accepting this recommendation and will refer to the subcommittee by its new name, as appropriate, throughout this proposed rule. Thus, the three current subcommittees are the Data Subcommittee, the Visits and Observation Subcommittee, and the Packaging Subcommittee. The Data Subcommittee is responsible for studying the data issues confronting the APC Panel, and for recommending options for resolving them. The Visits and Observation Subcommittee reviews and makes recommendations to the APC Panel on all technical issues pertaining to observation services and hospital outpatient visits paid under the OPPS (for example, APC configurations and APC payment weights). The Packaging Subcommittee studies and makes recommendations on issues pertaining to services that are not separately payable under the OPPS, but whose payments are bundled or packaged into APC payments. Each of these subcommittees was established by a majority vote from the full APC Panel during a scheduled APC Panel meeting, and their continuation as subcommittees was last approved at the March 2008 APC Panel meeting. All subcommittee recommendations are discussed and voted upon by the full APC Panel. Discussions of the recommendations resulting from the APC Panel's March 2008 meeting are included in the sections of this proposed rule that are specific to each recommendation. For discussions of earlier APC Panel meetings and recommendations, we refer readers to previously published hospital OPPS final rules or the Web site mentioned earlier in this section. E. Provisions of the Medicare, Medicaid, and SCHIP Extension Act of 2007 The Medicare, Medicaid and SCHIP Extension Act (MMSEA) of 2007, (Pub. L. 110-173), enacted on December 29, 2007, included the following provisions that affect the OPPS and the revised APC payment system: 1. Increase in Physician Payment Update Section 101 of the MMSEA provides a 0.5 percent increase in the physician payment update from January 1, 2008 through June 30, 2008; revises the Physician Assistance and Quality Initiative Fund, and extends through 2009 the physician quality reporting system. We refer readers to section XV. of this proposed rule for discussion of the effect of this provision on services paid under the revised ASC payment system. 2. Extended Expiration Date for Cost-Based OPPS Payment for Brachytherapy Sources and Therapeutic Radiopharmaceuticals Section 106 of the MMSEA amended section 1833(t)(16)(C) of the Act, as amended by section 107 of the MIEA-TRCHA to extend for an additional 6 months, through June 30, 2008, payment for brachytherapy devices at hospitals' charges adjusted to costs and to mandate that the same cost-based payment methodology apply to therapeutic radiopharmaceuticals for the same extended payment period. We refer readers to sections V. and VII of this proposed rule for discussion of this provision. 3. Alternative Volume Weighting in Computation of Average Sales Price
(ASP)for Medicare Part B Drugs Section 112 of the MMSEA amended section 1847A(b) to provide for application of alternative volume weighting in computing the average sales price
(ASP)for payment of Part B multiple source and single source drugs furnished after April 1, 2008, and for a special rule, beginning April 1, 2008, for payment of single source drugs or biologicals treated as a multiple source drug. This provision is discussed in section V. of this proposed rule. 4. Extended Expiration Date for Certain IPPS Wage Index Geographic Reclassifications and Special Exceptions Section 117 of the MMSEA extended through September 30, 2008, both the reclassifications that were extended by section 106 of MIEA-TRCHA as well as certain special exception wage indices referenced in the FY 2005 IPPS final rule (69 FR 49105 and 49107). This provision also amended section 508 of Pub. L. 108-173 to specify conditions specific to the reclassification of a group of hospitals in a geographic area for discharges occurring during FY 2008. In addition, for hospital reclassifications extended by section 106(a) of the MIEA-TRCHA, that resulted in a lower wage index for the second half of FY 2007 than applicable to such hospitals during the first half of FY 2007, section 117 of the MMSEA directs the Secretary to apply a higher wage index to such hospitals for the entire FY 2007. We refer readers to section II.C. of this proposed rule for discussion of this provision. F. Summary of the Major Contents of This Proposed Rule In this proposed rule, we are setting forth proposed changes to the Medicare hospital OPPS for CY 2009. These changes would be effective for services furnished on or after January 1, 2009. We are also setting forth proposed changes to the Medicare revised ASC payment system for CY 2009. These changes would be effective for services furnished on or after January 1, 2009. The following is a summary of the major changes that we are proposing to make: 1. Proposed Updates Affecting OPPS Payments In section II. of this proposed rule, we set forth— • The methodology used to recalibrate the proposed APC relative payment weights. • The proposed changes to packaged services. • The proposed update to the conversion factor used to determine payment rates under the OPPS. In this section we set forth changes in the amounts and factors for calculating the full annual update increase to the conversion factor. • The proposed retention of our current policy to use the IPPS wage indices to adjust, for geographic wage differences, the portion of the OPPS payment rate and the copayment standardized amount attributable to labor-related cost. • The proposed update of statewide average default CCRs. • The proposed application of hold harmless transitional outpatient payments
(TOPs)for certain small rural hospitals. • The proposed payment adjustment for rural SCHs. • The proposed calculation of the hospital outpatient outlier payment. • The calculation of the proposed national unadjusted Medicare OPPS payment. • The proposed beneficiary copayments for OPPS services. 2. Proposed OPPS Ambulatory Payment Classification
(APC)Group Policies In section III. of this proposed rule, we discuss the proposed additions of new procedure codes to the APCs; our proposal to establish a number of new APCs; and our analyses of Medicare claims data and certain recommendations of the APC Panel. We also discuss the application of the 2 times rule and proposed exceptions to it; proposed changes to specific APCs; and the proposed movement of procedures from New Technology APCs to clinical APCs. 3. Proposed OPPS Payment for Devices In section IV. of this proposed rule, we discuss proposed pass-through payment for specific categories of devices and the proposed adjustment for devices furnished at no cost or with partial or full credit. 4. Proposed OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals In section V. of this proposed rule, we discuss proposed CY 2009 OPPS payment for drugs, biologicals, and radiopharmaceuticals, including the proposed payment for drugs, biologicals, and radiopharmaceuticals with and without pass-through status. 5. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices In section VI. of this proposed rule, we discuss the estimate of CY 2009 OPPS transitional pass-through spending for drugs, biologicals, and devices. 6. Proposed OPPS Payment for Brachytherapy Sources In section VII. of this proposed rule, we discuss our proposal concerning coding and payment for brachytherapy sources. 7. Proposed OPPS Payment for Drug Administration Services In section VIII. of this proposed rule, we set forth our proposed policy concerning payment and coding for drug administration services. 8. Proposed OPPS Payment for Hospital Outpatient Visits In section IX. of this proposed rule, we set forth our proposed policies for the payment of clinic and emergency department visits and critical care services based on claims paid under the OPPS. 9. Proposed Payment for Partial Hospitalization Services In section X. of this proposed rule, we set forth our proposed payment for partial hospitalization services, including the proposed separate threshold for outlier payments for CMHCs. 10. Proposed Procedures That Will Be Paid Only as Inpatient Procedures In section XI. of this proposed rule, we discuss the procedures that we are proposing to remove from the inpatient list and assign to APCs. 11. OPPS Nonrecurring Technical and Policy Clarifications In section XII. of this proposed rule, we set forth our nonrecurring technical and policy clarifications. 12. Proposed OPPS Payment Status and Comment Indicators In section XIII. of this proposed rule, we discuss our proposed changes to the definitions of status indicators assigned to APCs and present our proposed comment indicators for the CY 2009 OPPS/ASC final rule with comment period. 13. OPPS Policy and Payment Recommendations In section XIV. of this proposed rule, we address recommendations made by the Medicare Payment Advisory Commission (MedPAC) in its June 2007 and March 2008 reports to Congress, by the APC Panel regarding the OPPS for CY 2009, and by the Office of the Inspector General
(OIG)in its June 2007 report. 14. Proposed Update of the Revised Ambulatory Surgical Center Payment System In section XV. of this proposed rule, we discuss the proposed update of the revised ASC payment system payment rates for CY 2009. 15. Proposed Reporting of Hospital Outpatient Quality Data for Annual Hospital Payment Rate Updates and CY 2009 Payment Reduction In section XVI. of this proposed rule, we discuss the proposed quality measures for reporting hospital outpatient quality data for CY 2010 and subsequent calendar years, set forth the requirements for data collection and submission for the annual payment update, and propose a reduction in the OPPS payment for hospitals that fail to meet the HOP QDRP requirements for CY 2009. 16. Healthcare-Associated Conditions In section XVII. of this proposed rule, we discuss considerations related to potentially extending the principle of Medicare not paying more for the preventable healthcare-associated conditions acquired during inpatient stays paid under the IPPS to other Medicare payment systems for healthcare-associated conditions that occur or result from care in other settings. 17. Regulatory Impact Analysis In section XXI. of this proposed rule, we set forth an analysis of the impact the proposed changes would have on affected entities and beneficiaries. II. Proposed Updates Affecting OPPS Payments A. Proposed Recalibration of APC Relative Weights 1. Database Construction a. Database Source and Methodology Section 1833(t)(9)(A) of the Act requires that the Secretary review and revise the relative payment weights for APCs at least annually. In the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we explained in detail how we calculated the relative payment weights that were implemented on August 1, 2000 for each APC group. As discussed in the November 13, 2000 interim final rule (65 FR 67824 through 67827), except for some reweighting due to a small number of APC changes, these relative payment weights continued to be in effect for CY 2001. We are proposing to use the same basic methodology that we described in the April 7, 2000 OPPS final rule with comment period to recalibrate the APC relative payment weights for services furnished on or after January 1, 2009, and before January 1, 2010 (CY 2009). That is, we are proposing to recalibrate the relative payment weights for each APC based on claims and cost report data for outpatient services. We are proposing to use the most recent available data to construct the database for calculating APC group weights. For the purpose of recalibrating the proposed APC relative payment weights for CY 2009, we used approximately 130 million final action claims for hospital outpatient department
(HOPD)services furnished on or after January 1, 2007, and before January 1, 2008. (For exact counts of claims used, we refer readers to the claims accounting narrative under supporting documentation for this proposed rule on the CMS Web site at: *http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/* ). Of the 130 million final action claims for services provided in hospital outpatient settings used to calculate the CY 2009 OPPS payment rates for this proposed rule, approximately 100 million claims were of the type of bill potentially appropriate for use in setting rates for OPPS services (but did not necessarily contain services payable under the OPPS). Of the 100 million claims, approximately 45 million were not for services paid under the OPPS or were excluded as not appropriate for use (for example, erroneous cost-to-charge ratios
(CCRs)or no HCPCS codes reported on the claim). We were able to use approximately 52 million whole claims of the approximately 54 million claims that remained to set the OPPS APC relative weights that we are proposing for the CY 2009 OPPS. From the 52 million whole claims, we created approximately 90 million single records, of which approximately 60 million were “pseudo” single claims (created from multiple procedure claims using the process we discuss in this section). Approximately 627,000 claims trimmed out on cost or units in excess of +/−3 standard deviations from the geometric mean, yielding approximately 89 million single bills used for median setting. Ultimately, we were able to use for proposed CY 2009 ratesetting some portion of the data from 96 percent of the CY 2007 claims containing services payable under the OPPS. The proposed APC relative weights and payments for CY 2009 in Addenda A and B to this proposed rule were calculated using claims from CY 2007 that were processed before January 1, 2008, and continue to be based on the median hospital costs for services in the APC groups. We selected claims for services paid under the OPPS and matched these claims to the most recent cost report filed by the individual hospitals represented in our claims data. We continue to believe that it is appropriate to use the most current full calendar year claims data and the most recently submitted cost reports to calculate the median costs which we are proposing to convert to relative payment weights for purposes of calculating the CY 2009 payment rates. b. Proposed Use of Single and Multiple Procedure Claims For CY 2009, in general, we are proposing to continue to use single procedure claims to set the medians on which the APC relative payment weights would be based, with some exceptions as discussed below. We generally use single procedure claims to set the median costs for APCs because we believe that it is important that the OPPS relative weights on which payment rates are based be appropriate when one and only one procedure is furnished and because we are, so far, unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service. We agree that, optimally, it is desirable to use the data from as many claims as possible to recalibrate the APC relative payment weights, including those claims for multiple procedures. As we have for several years, we continued to use date of service stratification and a list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims. Through bypassing specified codes that we believe do not have significant packaged costs, we are able to use more data from multiple procedure claims. In many cases, this enables us to create multiple “pseudo” single claims from claims that, as submitted, contained numerous separately paid procedures reported on the same date on one claim. We refer to these newly created single procedure claims as “pseudo” single claims because they were submitted by providers as multiple procedure claims. The history of our use of a bypass list to generate “pseudo” single claims is well documented, most recently in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66590 through 66597). In addition, for CY 2008, we increased packaging and created composite APCs, which also increased the number of bills we were able to use for median calculation by enabling us to use claims that contained multiple major procedures that previously would not have been usable. We refer readers to section II.A.2.e. of this proposed rule for discussion of the use of claims to establish median costs for composite APCs. We are proposing to continue to apply these processes to enable us to use as much claims data as possible for ratesetting for the CY 2009 OPPS. Application of these processes in development of this proposed rule data resulted in our being able to use some or all of the data from 96 percent of the total claims that are eligible for use in the OPPS ratesetting and modeling for this proposed rule. This process enabled us to create, for this proposed rule, approximately 60 million “pseudo” single claims, including multiple imaging composite “single session” bills (we refer readers to section II.A.2.e.(5) of this proposed rule for further discussion), and approximately 30 million “natural” single bills. For this proposed rule, “pseudo” single procedure bills represent 67 percent of all single bills used to calculate median costs. This compares favorably to the CY 2008 OPPS/ASC final rule with comment period data in which “pseudo” single bills represented 66 percent of all single bills used to calculate the median costs on which the CY 2008 OPPS payment rates were based. For CY 2009, we are proposing to bypass 452 HCPCS codes that are identified in Table 1 of this proposed rule. We are proposing to continue the use of the codes on the CY 2008 OPPS bypass list. Since the inception of the bypass list, we have calculated the percent of “natural” single bills that contained packaging for each HCPCS code and the amount of packaging in each “natural” single bill for each code. We have generally retained the codes on the previous year's bypass list and used the update year's data (for CY 2009, data available for the first CY 2008 APC Panel meeting for services furnished on and after January 1, 2007 through and including September 30, 2007) to determine whether it would be appropriate to add additional codes to the previous year's bypass list. The entire list (including the codes that remained on the bypass list from prior years) is open to public comment. We removed two HCPCS codes from the CY 2008 bypass list for this CY 2009 proposal because the codes were deleted on December 31, 2005, specifically C8951 (Intravenous infusion for therapy/diagnosis; each additional hour (List separately in addition to C8950)) and C8955 (Chemotherapy administration, intravenous; infusion technique, each additional hour (List separately in addition to C8954)). We updated HCPCS codes on the CY 2008 bypass list that were mapped to new HCPCS codes for CY 2009 ratesetting. We are proposing to add to the bypass list all HCPCS codes not on the CY 2008 bypass list that, using the APC Panel data, meet the same previously established empirical criteria for the bypass list that are summarized below. We assume that the representation of packaging in the single claims for any given code is comparable to packaging for that code in the multiple claims. The proposed criteria for the bypass list are: • There are 100 or more single claims for the code. This number of single claims ensures that observed outcomes are sufficiently representative of packaging that might occur in the multiple claims. • Five percent or fewer of the single claims for the code have packaged costs on that single claim for the code. This criterion results in limiting the amount of packaging being redistributed to the separately payable procedure remaining on the claim after the bypass code is removed and ensures that the costs associated with the bypass code represent the cost of the bypassed service. • The median cost of packaging observed in the single claims is equal to or less than $50. This limits the amount of error in redistributed costs. • The code is not a code for an unlisted service. In addition, we are proposing to add to the bypass list HCPCS codes that CMS medical advisors believe have minimal associated packaging based on their clinical assessment of the complete CY 2009 OPPS proposal. To ensure clinical consistency in our treatment of related services, we are also proposing to add the other CPT add-on codes for drug administration services to the CY 2009 bypass list, in addition to the CPT codes for additional hours of infusion that were previously included on the CY 2008 bypass list, because adding them enables us to use many correctly coded claims for initial drug administration services that would otherwise not be available for ratesetting. The result of this proposal is that the packaged costs associated with add-on drug administration services are packaged into payment for the initial administration service, as has been our payment policy for the past 2 years for the CPT codes for additional hours of infusion. We are also proposing to add HCPCS code G0390 (Trauma response team activation associated with hospital critical care service) because we think it is appropriate to attribute all of the packaged costs that appear on a claim with HCPCS code G0390 and CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) to CPT code 99291. If we did not add HCPCS code G0390 to the bypass list, we would have many fewer claims to use to set the median costs for APCs 0617 (Critical Care) and 0618 (Trauma Response with Critical Care). By definition, we could not have any properly coded “natural” single bills for HCPCS code G0390. Including HCPCS code G0390 on the bypass list allows us to create more “pseudo” single bills for CPT code 99291 and HCPCS code G0390, and, therefore, to improve the accuracy of the median costs of APCs 0617 and 0618 to which the two codes are assigned, respectively. The Integrated Outpatient Code Editor (I/OCE) logic rejects a line for HCPCS code G0390 if CPT code 99291 is not also reported on the claim. Therefore, we cannot assess whether HCPCS code G0390 would meet the empirical criteria for inclusion on the bypass list because we have no “natural” single claims for HCPCS code G0390. As a result of the multiple imaging composite APCs that we are proposing to establish for CY 2009 as discussed in section II.A.2.e.(5) of this proposed rule, the “pseudo” single converter logic for bypassed codes that are also members of multiple imaging composite APCs would change. When creating the set of “pseudo” single claims, claims that contain “overlap bypass codes,” that is, those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs, are identified first. These HCPCS codes are then processed to create multiple imaging composite “single” bills, that is, claims containing HCPCS codes from only one imaging family, thus suppressing the initial use of these codes as bypass codes. However, these “overlap bypass codes” are retained on the bypass list because single unit occurrences of these codes are identified as single bills at the end of the “pseudo” single processing logic. The net effect of using these HCPCS codes in building multiple imaging composite “single session” claims rather than for bypass purposes is a slight reduction in the number of “pseudo” single claims available for the “overlap bypass codes” and a handful of services that would be frequently billed with an “overlap bypass code.” This process also creates multiple imaging composite “single session” bills that can be used for calculating composite APC median costs. “Overlap bypass codes” that would be members of the proposed multiple imaging composite APCs are identified by asterisks (*) in Table 1. We note that this list contains bypass codes that were appropriate to claims for services in CY 2007 and, therefore, includes codes that were deleted for CY 2008. Moreover, there are codes on the proposed bypass list that are new for CY 2008 and which are appropriate additions to the bypass list in preparation for use of the CY 2008 claims for creation of the CY 2010 OPPS. Table 1 below includes a list of the bypass codes that we are proposing for CY 2009. We specifically request public comment on this proposed list of bypass codes for CY 2009. Table 1.—Proposed CY 2009 Bypass Codes for Creating “Pseudo” Single Claims for Calculating Median Costs HCPCS code Short descriptor “Overlap bypass codes” 11056 Trim skin lesions, 2 to 4 11057 Trim skin lesions, over 4 11300 Shave skin lesion 11301 Shave skin lesion 11719 Trim nail(s) 11720 Debride nail, 1-5 11721 Debride nail, 6 or more 11954 Therapy for contour defects 17000 Destruct premalg lesion 17003 Destruct premalg les, 2-14 29220 Strapping of low back 31231 Nasal endoscopy, dx 31579 Diagnostic laryngoscopy 51798 Us urine capacity measure 53661 Dilation of urethra 54240 Penis study 56820 Exam of vulva w/scope 57150 Treat vagina infection 67820 Revise eyelashes 69210 Remove impacted earwax 69220 Clean out mastoid cavity 70030 X-ray eye for foreign body 70100 X-ray exam of jaw 70110 X-ray exam of jaw 70120 X-ray exam of mastoids 70130 X-ray exam of mastoids 70140 X-ray exam of facial bones 70150 X-ray exam of facial bones 70160 X-ray exam of nasal bones 70200 X-ray exam of eye sockets 70210 X-ray exam of sinuses 70220 X-ray exam of sinuses 70250 X-ray exam of skull 70260 X-ray exam of skull 70328 X-ray exam of jaw joint 70330 X-ray exam of jaw joints 70336 Magnetic image, jaw joint * 70355 Panoramic x-ray of jaws 70360 X-ray exam of neck 70370 Throat x-ray & fluoroscopy 70371 Speech evaluation, complex 70450 Ct head/brain w/o dye * 70480 Ct orbit/ear/fossa w/o dye * 70486 Ct maxillofacial w/o dye * 70490 Ct soft tissue neck w/o dye * 70544 Mr angiography head w/o dye * 70551 Mri brain w/o dye * 71010 Chest x-ray 71015 Chest x-ray 71020 Chest x-ray 71021 Chest x-ray 71022 Chest x-ray 71023 Chest x-ray and fluoroscopy 71030 Chest x-ray 71034 Chest x-ray and fluoroscopy 71035 Chest x-ray 71100 X-ray exam of ribs 71101 X-ray exam of ribs/chest 71110 X-ray exam of ribs 71111 X-ray exam of ribs/chest 71120 X-ray exam of breastbone 71130 X-ray exam of breastbone 71250 Ct thorax w/o dye * 72010 X-ray exam of spine 72020 X-ray exam of spine 72040 X-ray exam of neck spine 72050 X-ray exam of neck spine 72052 X-ray exam of neck spine 72069 X-ray exam of trunk spine 72070 X-ray exam of thoracic spine 72072 X-ray exam of thoracic spine 72074 X-ray exam of thoracic spine 72080 X-ray exam of trunk spine 72090 X-ray exam of trunk spine 72100 X-ray exam of lower spine 72110 X-ray exam of lower spine 72114 X-ray exam of lower spine 72120 X-ray exam of lower spine 72125 Ct neck spine w/o dye * 72128 Ct chest spine w/o dye * 72131 Ct lumbar spine w/o dye * 72141 Mri neck spine w/o dye * 72146 Mri chest spine w/o dye * 72148 Mri lumbar spine w/o dye * 72170 X-ray exam of pelvis 72190 X-ray exam of pelvis 72192 Ct pelvis w/o dye * 72202 X-ray exam sacroiliac joints 72220 X-ray exam of tailbone 73000 X-ray exam of collar bone 73010 X-ray exam of shoulder blade 73020 X-ray exam of shoulder 73030 X-ray exam of shoulder 73050 X-ray exam of shoulders 73060 X-ray exam of humerus 73070 X-ray exam of elbow 73080 X-ray exam of elbow 73090 X-ray exam of forearm 73100 X-ray exam of wrist 73110 X-ray exam of wrist 73120 X-ray exam of hand 73130 X-ray exam of hand 73140 X-ray exam of finger(s) 73200 Ct upper extremity w/o dye * 73218 Mri upper extremity w/o dye * 73221 Mri joint upr extrem w/o dye * 73510 X-ray exam of hip 73520 X-ray exam of hips 73540 X-ray exam of pelvis & hips 73550 X-ray exam of thigh 73560 X-ray exam of knee, 1 or 2 73562 X-ray exam of knee, 3 73564 X-ray exam, knee, 4 or more 73565 X-ray exam of knees 73590 X-ray exam of lower leg 73600 X-ray exam of ankle 73610 X-ray exam of ankle 73620 X-ray exam of foot 73630 X-ray exam of foot 73650 X-ray exam of heel 73660 X-ray exam of toe(s) 73700 Ct lower extremity w/o dye * 73718 Mri lower extremity w/o dye * 73721 Mri jnt of lwr extre w/o dye * 74000 X-ray exam of abdomen 74010 X-ray exam of abdomen 74020 X-ray exam of abdomen 74022 X-ray exam series, abdomen 74150 Ct abdomen w/o dye * 74210 Contrst x-ray exam of throat 74220 Contrast x-ray, esophagus 74230 Cine/vid x-ray, throat/esoph 74246 Contrst x-ray uppr gi tract 74247 Contrst x-ray uppr gi tract 74249 Contrst x-ray uppr gi tract 76100 X-ray exam of body section 76510 Ophth us, b & quant a 76511 Ophth us, quant a only 76512 Ophth us, b w/non-quant a 76513 Echo exam of eye, water bath 76514 Echo exam of eye, thickness 76516 Echo exam of eye 76519 Echo exam of eye 76536 Us exam of head and neck 76645 Us exam, breast(s) 76700 Us exam, abdom, complete * 76705 Echo exam of abdomen * 76770 Us exam abdo back wall, comp * 76775 Us exam abdo back wall, lim * 76776 Us exam k transpl w/doppler * 76801 Ob us <14 wks, single fetus 76805 Ob us ≥14 wks, sngl fetus 76811 Ob us, detailed, sngl fetus 76816 Ob us, follow-up, per fetus 76817 Transvaginal us, obstetric 76830 Transvaginal us, non-ob 76856 Us exam, pelvic, complete * 76857 Us exam, pelvic, limited * 76870 Us exam, scrotum * 76880 Us exam, extremity 76970 Ultrasound exam follow-up 76977 Us bone density measure 76999 Echo examination procedure 77072 X-rays for bone age 77073 X-rays, bone length studies 77074 X-rays, bone survey, limited 77075 X-rays, bone survey complete 77076 X-rays, bone survey, infant 77077 Joint survey, single view 77078 Ct bone density, axial 77079 Ct bone density, peripheral 77080 Dxa bone density, axial 77081 Dxa bone density/peripheral 77082 Dxa bone density, vert fx 77083 Radiographic absorptiometry 77084 Magnetic image, bone marrow 77280 Set radiation therapy field 77285 Set radiation therapy field 77290 Set radiation therapy field 77295 Set radiation therapy field 77300 Radiation therapy dose plan 77301 Radiotherapy dose plan, imrt 77315 Teletx isodose plan complex 77326 Brachytx isodose calc simp 77327 Brachytx isodose calc interm 77328 Brachytx isodose plan compl 77331 Special radiation dosimetry 77332 Radiation treatment aid(s) 77333 Radiation treatment aid(s) 77334 Radiation treatment aid(s) 77336 Radiation physics consult 77370 Radiation physics consult 77401 Radiation treatment delivery 77402 Radiation treatment delivery 77403 Radiation treatment delivery 77404 Radiation treatment delivery 77407 Radiation treatment delivery 77408 Radiation treatment delivery 77409 Radiation treatment delivery 77411 Radiation treatment delivery 77412 Radiation treatment delivery 77413 Radiation treatment delivery 77414 Radiation treatment delivery 77416 Radiation treatment delivery 77418 Radiation tx delivery, imrt 77470 Special radiation treatment 77520 Proton trmt, simple w/o comp 77523 Proton trmt, intermediate 80500 Lab pathology consultation 80502 Lab pathology consultation 85097 Bone marrow interpretation 86510 Histoplasmosis skin test 86850 RBC antibody screen 86870 RBC antibody identification 86880 Coombs test, direct 86885 Coombs test, indirect, qual 86886 Coombs test, indirect, titer 86890 Autologous blood process 86900 Blood typing, ABO 86901 Blood typing, Rh
(D)86903 Blood typing, antigen screen 86904 Blood typing, patient serum 86905 Blood typing, RBC antigens 86906 Blood typing, Rh phenotype 86930 Frozen blood prep 86970 RBC pretreatment 86977 RBC pretreatment, serum 88104 Cytopath fl nongyn, smears 88106 Cytopath fl nongyn, filter 88107 Cytopath fl nongyn, sm/fltr 88108 Cytopath, concentrate tech 88112 Cytopath, cell enhance tech 88160 Cytopath smear, other source 88161 Cytopath smear, other source 88162 Cytopath smear, other source 88172 Cytopathology eval of fna 88173 Cytopath eval, fna, report 88182 Cell marker study 88184 Flowcytometry/ tc, 1 marker 88185 Flowcytometry/tc, add-on 88300 Surgical path, gross 88302 Tissue exam by pathologist 88304 Tissue exam by pathologist 88305 Tissue exam by pathologist 88307 Tissue exam by pathologist 88311 Decalcify tissue 88312 Special stains 88313 Special stains 88321 Microslide consultation 88323 Microslide consultation 88325 Comprehensive review of data 88331 Path consult intraop, 1 bloc 88342 Immunohistochemistry 88346 Immunofluorescent study 88347 Immunofluorescent study 88348 Electron microscopy 88358 Analysis, tumor 88360 Tumor immunohistochem/manual 88361 Tumor immunohistochem/comput 88365 In situ hybridization
(FISH)88368 Insitu hybridization, manual 88399 Surgical pathology procedure 89049 Chct for mal hyperthermia 89230 Collect sweat for test 89240 Pathology lab procedure 90472 Immunization admin, each add 90474 Immune admin oral/nasal addl 90761 Hydrate iv infusion, add-on 90766 Ther/proph/dg iv inf, add-on 90767 Tx/proph/dg addl seq iv inf 90770 Sc ther infusion, addl hr 90771 Sc ther infusion, reset pump 90775 Tx/pro/dx inj new drug add-on 90801 Psy dx interview 90802 Intac psy dx interview 90804 Psytx, office, 20-30 min 90805 Psytx, off, 20-30 min w/e&m 90806 Psytx, off, 45-50 min 90807 Psytx, off, 45-50 min w/e&m 90808 Psytx, office, 75-80 min 90809 Psytx, off, 75-80, w/e&m 90810 Intac psytx, off, 20-30 min 90811 Intac psytx, 20-30, w/e&m 90812 Intac psytx, off, 45-50 min 90816 Psytx, hosp, 20-30 min 90818 Psytx, hosp, 45-50 min 90826 Intac psytx, hosp, 45-50 min 90845 Psychoanalysis 90846 Family psytx w/o patient 90847 Family psytx w/patient 90853 Group psychotherapy 90857 Intac group psytx 90862 Medication management 90899 Psychiatric service/therapy 92002 Eye exam, new patient 92004 Eye exam, new patient 92012 Eye exam established pat 92014 Eye exam & treatment 92020 Special eye evaluation 92025 Corneal topography 92081 Visual field examination(s) 92082 Visual field examination(s) 92083 Visual field examination(s) 92135 Ophth dx imaging post seg 92136 Ophthalmic biometry 92225 Special eye exam, initial 92226 Special eye exam, subsequent 92230 Eye exam with photos 92240 Icg angiography 92250 Eye exam with photos 92275 Electroretinography 92285 Eye photography 92286 Internal eye photography 92520 Laryngeal function studies 92541 Spontaneous nystagmus test 92546 Sinusoidal rotational test 92548 Posturography 92552 Pure tone audiometry, air 92553 Audiometry, air & bone 92555 Speech threshold audiometry 92556 Speech audiometry, complete 92557 Comprehensive hearing test 92567 Tympanometry 92582 Conditioning play audiometry 92585 Auditor evoke potent, compre 92603 Cochlear implt f/up exam 7 > 92604 Reprogram cochlear implt 7 > 92626 Eval aud rehab status 93005 Electrocardiogram, tracing 93017 Cardiovascular stress test 93225 ECG monitor/record, 24 hrs 93226 ECG monitor/report, 24 hrs 93231 Ecg monitor/record, 24 hrs 93232 ECG monitor/report, 24 hrs 93236 ECG monitor/report, 24 hrs 93270 ECG recording 93271 Ecg/monitoring and analysis 93278 ECG/signal-averaged 93727 Analyze ilr system 93731 Analyze pacemaker system 93732 Analyze pacemaker system 93733 Telephone analy, pacemaker 93734 Analyze pacemaker system 93735 Analyze pacemaker system 93736 Telephonic analy, pacemaker 93741 Analyze ht pace device sngl 93742 Analyze ht pace device sngl 93743 Analyze ht pace device dual 93744 Analyze ht pace device dual 93786 Ambulatory BP recording 93788 Ambulatory BP analysis 93797 Cardiac rehab 93798 Cardiac rehab/monitor 93875 Extracranial study 93880 Extracranial study 93882 Extracranial study 93886 Intracranial study 93888 Intracranial study 93922 Extremity study 93923 Extremity study 93924 Extremity study 93925 Lower extremity study 93926 Lower extremity study 93930 Upper extremity study 93931 Upper extremity study 93965 Extremity study 93970 Extremity study 93971 Extremity study 93975 Vascular study 93976 Vascular study 93978 Vascular study 93979 Vascular study 93990 Doppler flow testing 94015 Patient recorded spirometry 94690 Exhaled air analysis 95115 Immunotherapy, one injection 95117 Immunotherapy injections 95165 Antigen therapy services 95250 Glucose monitoring, cont 95805 Multiple sleep latency test 95806 Sleep study, unattended 95807 Sleep study, attended 95808 Polysomnography, 1-3 95812 Eeg, 41-60 minutes 95813 Eeg, over 1 hour 95816 Eeg, awake and drowsy 95819 Eeg, awake and asleep 95822 Eeg, coma or sleep only 95869 Muscle test, thor paraspinal 95872 Muscle test, one fiber 95900 Motor nerve conduction test 95921 Autonomic nerv function test 95925 Somatosensory testing 95926 Somatosensory testing 95930 Visual evoked potential test 95950 Ambulatory eeg monitoring 95953 EEG monitoring/computer 95970 Analyze neurostim, no prog 95972 Analyze neurostim, complex 95974 Cranial neurostim, complex 95978 Analyze neurostim brain/1h 96000 Motion analysis, video/3d 96101 Psycho testing by psych/phys 96111 Developmental test, extend 96116 Neurobehavioral status exam 96118 Neuropsych tst by psych/phys 96119 Neuropsych testing by tec 96150 Assess hlth/behave, init 96151 Assess hlth/behave, subseq 96152 Intervene hlth/behave, indiv 96153 Intervene hlth/behave, group 96402 Chemo hormon antineopl sq/im 96411 Chemo, iv push, addl drug 96415 Chemo, iv infusion, addl hr 96417 Chemo iv infus each addl seq 96423 Chemo ia infuse each addl hr 96900 Ultraviolet light therapy 96910 Photochemotherapy with UV-B 96912 Photochemotherapy with UV-A 96913 Photochemotherapy, UV-A or B 96920 Laser tx, skin <250 sq cm 98925 Osteopathic manipulation 98926 Osteopathic manipulation 98927 Osteopathic manipulation 98940 Chiropractic manipulation 98941 Chiropractic manipulation 98942 Chiropractic manipulation 99204 Office/outpatient visit, new 99212 Office/outpatient visit, est 99213 Office/outpatient visit, est 99214 Office/outpatient visit, est 99241 Office consultation 99242 Office consultation 99243 Office consultation 99244 Office consultation 99245 Office consultation 0144T CT heart wo dye; qual calc G0008 Admin influenza virus vac G0101 CA screen; pelvic/breast exam G0127 Trim nail(s) G0130 Single energy x-ray study G0166 Extrnl counterpulse, per tx G0175 OPPS Service,sched team conf G0340 Robt lin-radsurg fractx 2-5 G0344 Initial preventive exam G0365 Vessel mapping hemo access G0367 EKG tracing for initial prev G0376 Smoke/tobacco counseling >10 G0389 Ultrasound exam AAA screen G0390 Trauma response w/hosp criti M0064 Visit for drug monitoring Q0091 Obtaining screen pap smear c. Proposed Calculation of CCRs
(1)Development of the CCRs We calculated hospital-specific overall CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2007 claims data. For CY 2009 OPPS ratesetting, we used the set of claims processed during CY 2007. We applied the hospital-specific CCR to the hospital's charges at the most detailed level possible, based on a revenue code-to-cost center crosswalk that contains a hierarchy of CCRs used to estimate costs from charges for each revenue code. That crosswalk is available for review and continuous comment on the CMS Web site at: *http://www.cms.hhs.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage.* We calculated CCRs for the standard and nonstandard cost centers accepted by the electronic cost report database. In general, the most detailed level at which we calculated CCRs was the hospital-specific departmental level. We are proposing to make a change to the revenue code-to-cost center crosswalk for the CY 2009 OPPS. Specifically, for revenue code 0904 (Activity Therapy), we are proposing to make cost center 3550 (Psychiatric/Psychological Services) the primary cost center and to make cost center 6000 (Clinic services) the secondary cost center. For CY 2008, for revenue code 0904, the primary cost center is 3580 (Recreational Therapy), cost center 3550 is secondary; and cost center 6000 is tertiary. We are proposing this change to conform the OPPS methodology for hospital claims to the crosswalk that is being used to calculate partial hospitalization costs for CMHCs. We would like to affirm that the longstanding Medicare principles of cost apportionment at § 413.53 convey that, under the departmental method of apportionment, the cost of each ancillary department is to be apportioned separately rather than being combined with another department. However, CMS does not specify a revenue code-to-cost center crosswalk that hospitals must adopt to prepare the cost report, but instead, requires hospitals to submit their individual crosswalk to the Medicare contractor when the cost report is filed. The proposed CY 2009 OPPS revenue code-to-cost center crosswalk contains several potential cost center locations for a revenue code because it is an attempt to best represent the association of revenue codes with cost centers across all hospitals for modeling purposes. Assignment to cost centers is mutually exclusive and only defaults to the next level when the cost center with higher priority is unavailable. The changes to the crosswalk for revenue code 0904 mentioned above are used by CMS for modeling purposes only, and we fully expect hospitals to comply with the Medicare reimbursement policies when reporting their costs and charges on the cost report. At the March 2008 APC Panel meeting, we reviewed with the APC Panel's Data Subcommittee the current revenue code-to-cost center crosswalk, as well as other data in preparation for the CY 2009 rulemaking cycle. At this meeting, the APC Panel recommended that the Data Subcommittee continue its work and we are accepting that recommendation. We will continue to work with the APC Panels' Data Subcommittee to prepare and review data and analyses relevant to the APC configurations and OPPS payment policies for hospital outpatient items and services.
(2)Charge Compression Since the implementation of the OPPS, some commenters have raised concerns about potential bias in the OPPS cost-based weights due to “charge compression,” which is the practice of applying a lower charge markup to higher-cost services and a higher charge markup to lower-cost services. As a result, the cost-based weights suffer from aggregation bias, undervaluing high cost items and overvaluing low cost items if an estimate of average markup embodied in a single CCR is applied to items of widely varying costs in the same cost center. Commenters expressed increased concern about the impact of charge compression when, partially in response to recommendations of the Medicare Payment Advisory Commission (MedPAC), CMS proposed to set the relative weights for payment under the IPPS based on the costs of inpatient hospital services, rather than the charges for the services. To explore this issue, in August 2006 we awarded a contract to RTI International
(RTI)to study the effects of charge compression in calculating the IPPS relative weights, particularly with regard to the impact on inpatient diagnosis-related group
(DRG)payments, and to consider methods to reduce the variation in the CCRs used to calculate costs for the IPPS relative weights across services within cost centers. Of specific note was RTI's analysis of a regression-based methodology estimating an average adjustment for CCR by type of revenue code from an observed relationship between provider cost center CCRs and proportional billing of high and low cost services in the cost center. RTI issued a report in March 2007 with its findings on charge compression. The report is available on the CMS Web site at: * http://www.cms.hhs.gov/reports/downloads/Dalton.pdf.* Although this report was focused largely on charge compression in the context of the IPPS cost-based relative weights, several of the findings were relevant to the OPPS. Therefore, we discussed the findings and our responses to that interim draft report in the CY 2008 OPPS/ASC proposed rule (72 FR 42641 through 42643) and reiterated them in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66599 through 66602). As RTI noted in its 2007 report that its research was limited to IPPS DRG cost-based weights and that it did not examine potential areas of charge compression specific to hospital outpatient services, we were concerned that the analysis was too limited in scope because typically hospital cost report CCRs encompass both inpatient and outpatient services for each cost center. Further, because both the IPPS and OPPS rely on cost-based weights, we preferred to introduce any methodological adjustments to both payment systems at the same time. We believe that because charge compression affects the cost estimates for services paid under both IPPS and OPPS in the same way, it is appropriate that we would use the same approach to address the issue. Finally, we noted that we wished to assess the educational activities being undertaken by the hospital community to improve cost reporting accuracy in response to RTI's findings, either as an adjunct to or in lieu of regression-based adjustments to CCRs. We have since expanded RTI's analysis of charge compression to incorporate outpatient services. In August 2007, we again contracted with RTI. Under this contract, we asked RTI to evaluate the cost estimation process for the OPPS relative weights. This research included a reassessment of the regression-based CCR models using hospital outpatient and inpatient charge data, as well as a detailed review of the OPPS revenue code-to-cost center crosswalk and the OPPS' hospital-specific CCR methodology. In evaluating cost-based estimation, in general, the results of RTI's analyses impact both the OPPS APC relative weights and the IPPS MS-DRG (Medicare-Severity) relative weights. With the release of the IPPS FY 2009 proposed rule in April 2008, CMS also posted an interim report discussing RTI's research findings for the IPPS MS-DRG relative weights to be available during the public comment period on the FY 2009 IPPS proposed rule. This report can be found on RTI's Web site at: *http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200804.pdf.* The IPPS-specific chapters, which were separately displayed in the April 2008 interim report, as well as the more recent OPPS chapters, are included in the July 2008 RTI final report entitled, “Refining Cost to Charge Ratios for Calculating APC and DRG Relative Payment Weights,” that became available at the time of the development of this proposed rule. The RTI final report can be found on RTI's Web site at: *http://www.rti.org.* RTI's final report distinguished between two types of research findings and recommendations, those pertaining to the accounting or cost report data itself and those related to statistical regression analysis. Because the OPPS uses a hospital-specific CCR methodology, employs detailed cost report data, and estimates costs at the claim level, CMS asked RTI to closely evaluate the accounting component of the cost-based weight methodology, specifically the revenue code-to-cost center crosswalk. In reviewing the cost report data for nonstandard cost centers used in the crosswalk, RTI discovered some problems concerning the classification of nonstandard cost centers, and reclassified nonstandard cost centers by reading providers' cost center labels. Standard cost centers are preprinted in the CMS-approved cost report software, while nonstandard cost centers are identified and updated periodically through analysis of frequently used labels. RTI also evaluated the revenue code-to-cost center crosswalk after examining hospitals' cost report and revenue code billing patterns in order to reduce aggregation bias inherent in defaulting to the overall ancillary CCR and generally to improve the empirical accuracy of the crosswalk. With regard to the statistical adjustments, RTI confirmed the findings of its March 2007 report that regression models are a valid approach for diagnosing potential aggregation bias within selected services for the IPPS and found that regression models are equally valid for setting payments under the OPPS. RTI also suggested that regression-based CCRs could provide a short-term correction until accounting data could be refined to support more accurate CCR estimates under both the IPPS and the OPPS. RTI again found aggregation bias in devices, drugs, and radiology and, using combined outpatient and inpatient claims, expanded the number of recommended regression-adjusted CCRs. In almost all cases, RTI observed that potential distortions in the APC relative weights were proportionally much greater than for MS-DRGs for both accounting-based and statistical adjustments because APC groups are small and generally price a single service. However, just as the overall impacts on MS-DRGs were more moderate because MS-DRGs experienced offsetting effects of changes in cost estimation, a given hospital outpatient visit might include more than one service, leading to offsetting effects in cost estimation for services provided in the outpatient episode as a whole. In general, APC relative weights are more volatile than MS-DRG relative weights from year to year yet OPPS provider impacts are typically quite modest and, in light of this experience, we expect that overall provider impacts could be much more moderate than those suggested by individual APC impacts from the RTI analysis. Notwithstanding likely offsetting effects at the provider-level, RTI asserted that, while some averaging is appropriate for a prospective payment system, extreme distortions in APC payments for individual services bias perceptions of service profitability and may lead hospitals to inappropriately set their charge structure. RTI noted that this may not be true for “core” hospital services, such as oncology, but has a greater impact in evolving areas with greater potential for provider-induced demand, such as specialized imaging services. RTI also noted that cost-based weights are only one component of a final prospective payment rate. There are other rate adjustments (wage index, indirect medical education (IME), and disproportionate share hospital (DSH)) to payment derived from the revised cost-based weights and the cumulative effect of these components may not improve the ability of final payment to reflect resource cost. With regard to APCs and MS-DRGs that contain substantial device costs, RTI cautioned that other prospective payment system adjustments (wage index, IME, and DSH) largely offset the effects of charge compression among hospitals that receive these adjustments. RTI endorsed short-term regression-based adjustments, but also concluded that more refined and accurate accounting data are the preferred long-term solution to mitigate charge compression and related bias in hospital cost-based weights. As a result of this research, RTI made 11 recommendations, 2 of which are specific to IPPS MS-DRGs and are not discussed in this proposed rule. The first set of non-IPPS-specific recommendations concentrates on short-term accounting changes to current cost report data; the second set addresses short-term regression-based and other statistical adjustments. RTI concluded its recommendations with longer-term accounting changes to the cost report. (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008). Given the magnitude and scope of impacts on APC relative weights that would result from adopting both accounting and statistical changes, as specifically observed in Chapter 6 of RTI's July 2008 final report and Attachments 4a, 4b, and 5 (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008), we are not proposing to adopt any short-term adjustments to OPPS payment rate calculations for CY 2009. Furthermore, the numerous and substantial changes that RTI recommends have significantly complex interactions with one another and we believe that we should proceed cautiously. In a budget neutral payment system, increases in payment for some services must be countered by reductions to payment for other services. We are, however, specifically seeking public comments on several of RTI's recommended accounting-based changes pertaining to the cost report as discussed below because we plan to consider these public comments in our current revision to the Medicare hospital cost report and in our decisions pertaining to the CY 2010 OPPS. We believe that improved and more precise cost reporting is the best way to improve the accuracy of all cost-based payment weights, including relative weights for the IPPS MS-DRGs. Because both the IPPS and the OPPS rely on cost-based weights derived, in part, from data on the Medicare hospital cost report form, public comments on recommended changes to the cost report should address any impact on both the inpatient and outpatient payment systems. We noted in the FY 2009 IPPS proposed rule that we are updating the cost report form to eliminate outdated requirements in conjunction with the Paperwork Reduction Act (PRA), and that we plan to propose actual changes to the cost reporting form, the attending cost reporting software, and the cost report instructions in Chapter 36 of the Medicare Provider Reimbursement Manual (PRM), Part II (73 FR 23546 through 23547). We anticipate proposing these revisions shortly. We would consider any public comments on our proposals for cost report changes, as well as any public comments on RTI's cost estimation findings and recommendations for revising the cost report in general, in updating the cost report. We expect the revised cost report may be available for hospitals to use when submitting cost reports during FY 2010, that is, for cost reporting periods beginning after October 1, 2008, and we expect that we would be able to use some of these data for setting payment rates for future OPPS updates. RTI's first set of four recommendations for accounting changes addressed improved use of existing cost report and claims data. RTI recommended:
(1)Immediately using text searches of providers' line descriptions to more appropriately classify nonstandard cost centers in current hospital cost report data;
(2)changing cost report preparation software to impose fixed descriptions on nonstandard cost centers;
(3)slightly revising CMS' cost center aggregation table to eliminate duplicative or misplaced nonstandard cost centers and to add nonstandard cost centers for common services without one; and
(4)adopting RTI's recommended changes to the revenue code-to-cost center crosswalk. Given the magnitude and scope of impacts resulting from RTI's recommended revisions, we are not proposing to adopt any of the short-term accounting changes, including text searches of providers' line descriptions to more appropriately classify nonstandard cost centers and recommended changes to the revenue code-to-cost center crosswalk. We will modify the cost report preparation software that will accompany the revised Medicare cost report form to print a brief fixed description with a nonstandard cost center number, while continuing to allow the hospital to enter a line description. With regard to revisions to the cost center aggregation table, we are specifically inviting public comment on whether several identified cost centers are duplicative (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008). We are also specifically requesting public comment on creation of new nonstandard cost centers for services that are well represented in line descriptions associated with “other ancillary services” cost centers, but for which no distinct nonstandard cost center currently exists and for which UB-04 revenue codes do exist, including cardiac rehabilitation, hyperbaric oxygen therapy, and patient education (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008). We will consider these comments as we continue our work on revising the Medicare hospital cost report form. Furthermore, we are interested in public comment on RTI's recommended changes to the OPPS revenue code-to-cost center crosswalk, and we may propose to adopt crosswalk changes for CY 2010 based on RTI's analyses and related public comments received on this issue. Although available on the CMS Web site for continuous public comment, we have received relatively few public comments over the last several years on the OPPS revenue code-to-cost center crosswalk, which has undergone only minimal change since the inception of the OPPS. RTI's revised crosswalk in Attachment 2b of its final report reflected all accounting changes, including reclassification of nonstandard cost centers from text searches, removal of duplicative cost centers, and addition of new nonstandard cost centers for common services. Throughout the July 2008 final report, RTI used a subscripting nomenclature developed from CMS' aggregation table to identify cost centers. To disentangle the combined impact of these changes and clearly communicate RTI's recommended changes in current cost center numbers, we have made available on the CMS Web site a revised (RTI-recommended) crosswalk using current standard and nonstandard cost centers in the same format as the crosswalk proposed for the CY 2009 OPPS. This revised (RTI-recommended) crosswalk may be found on the CMS Web site under supporting documentation for this proposed rule at: *http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage.* We did not include RTI's recommended new or collapsed nonstandard cost centers in this revised crosswalk. We are specifically inviting public comment on the numerous changes included in this crosswalk. Areas of specific interest include the addition of “default” CCRs for clinic, cardiology, and therapy services before defaulting to the overall ancillary CCR, as is our current policy. The overall ancillary CCR is charge-weighted and heavily influenced by the relationship between costs and charges for surgical and imaging services. RTI also introduced cost center 4300 (Radioisotope) as a primary cost converter for the nuclear medicine revenue codes (034X). Further, RTI added secondary and tertiary crosswalk maps for services that frequently appear together, such as CCRs for Computed Tomography
(CT)Scan as a secondary cost converter for the Magnetic Resonance Imaging
(MRI)revenue codes
(061X)(RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008). RTI's second set of recommendations concentrated on short-term statistical regression-based adjustments to address aggregation bias. RTI recommended:
(1)Adopting regression-adjusted OPPS CCRs for Devices, Other Supplies Sold, Additional Detail Coded Drugs, and Intravenous
(IV)Solutions and Other Drugs Sold; and
(2)adopting a set of CCRs that blend corrected cost report and regression-adjusted CCRs for CT scanning, MRI, therapeutic radiology, nuclear medicine, and other diagnostic radiology services for hospitals that did not report these standard and nonstandard cost centers. We agree that improved data for cost estimation in these areas is a desirable goal. However, we have chosen to concentrate our efforts on concrete steps to improve the quality of cost report accounting data that ultimately would be used to calculate both hospital inpatient and outpatient prospective payment system relative weights. In the proposed rule for the FY 2009 IPPS (73 FR 23544), for which the public comment period closed on June 13, 2008, we emphasize this fundamental goal of improving cost report accounting data rather than making short-term statistical adjustments. RTI's third and final set of recommendations focused on long-term accounting revisions to the cost report and educational efforts to improve the overall accuracy of accounting data. RTI recommended:
(1)Clarifying cost report instructions and requiring hospitals to use all standard lines in the cost report if their facility offers the described services;
(2)creating new standard lines on the cost report for CT Scanning, MRI, Cardiac Catheterization, Devices, and Drugs Requiring Additional Coding; and
(3)educating hospitals through industry-led educational initiatives directed at methods for capital cost finding, specifically encouraging providers to use direct assignment of equipment depreciation and lease costs wherever possible, or at least to allocate moveable equipment depreciation based on dollar value of assigned depreciation costs. We will consider the best means to clarify the principle of departmental apportionment of costs at § 413.53, which states that hospitals should apportion separately the costs and charges of each ancillary department for which charges are customarily made separately rather than combining those costs and charges with another ancillary department. RTI noted that many hospitals combine costs and charges for therapeutic radiology and nuclear medicine services under the diagnostic radiology cost center, when these are services with their own specific and distinct charges and cost centers (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008). We seek to better understand the reason for this aggregation and other relatively common scenarios, such as a failure to report the standard cost center 4700 (Blood Storing, Processing & Transp.) when the hospital bills Medicare for blood products that always have storage and processing costs and charges, as well as any concerns hospitals may have about reporting all appropriate standard cost centers. With regard to creating new standard lines on the cost report, we are proposing standard lines on the cost report for Devices and Drugs Requiring Additional Coding. In the FY 2009 IPPS proposed rule (73 FR 23546), we proposed to create two new cost centers, Medical Supplies Charged to Patients and Implantable Devices Charged to Patients, to replace the current cost center called Supplies Charged to Patients as part of our initiative to revise and update the Medicare hospital cost report form. In our discussion of pharmacy overhead cost in section V.B.3. of this proposed rule, we are proposing to create two other new cost centers, Drugs with High Overhead Costs Charged to Patients and Drugs with Low Overhead Costs Charged to Patients, to replace the current cost center called Drugs Charged to Patient. Public comment on the proposal for these two other new cost centers included in this proposed rule should be made in reference to that detailed discussion. We believe that standard cost centers for CT Scanning, MRI, and Cardiac Catheterization also may be appropriate as we revise the Medicare hospital cost report form. CMS already has established nonstandard cost centers for these services and many, but not all, hospitals currently report costs and charges in these cost centers. As noted earlier in this section, cost center coding is a way to standardize cost reporting across hospitals. Standard cost centers are preprinted through CMS-approved cost report software, and nonstandard cost centers are identified and updated periodically through analysis of frequently used labels. While we currently use available nonstandard cost center CCRs for cost estimation under the OPPS, creating standard lines for CT Scanning, MRI, and Cardiac Catheterization would do more to require hospitals to break out their costs and charges for services in these clinical areas, especially as we pursue clarifying our departmental apportionment regulations requiring reporting of distinct charge types in separate ancillary cost centers. We are specifically inviting public comment on the appropriateness of creating standard cost centers for CT Scanning, MRI, and Cardiac Catheterization, rather than continuing the established nonstandard cost centers for these services. The accuracy of capital cost allocation under Medicare allocation methods remains an issue when discussing the accuracy of CCRs for radiology and other capital-intensive services. We are supportive of industry-led educational initiatives to improve the quality of reporting capital costs on the cost report and, as we explained in the FY 2008 IPPS final rule with comment period (72 FR 47196), we are willing to work with the hospital industry to further such initiatives. In summary, for CY 2009, we are proposing to adopt or support several of RTI's accounting recommendations that would improve the accuracy of cost report data, including educational initiatives on reporting capital costs, additional standard cost centers on the cost report for Drugs with High Overhead Costs and Drugs with Low Overhead Costs, adding fixed descriptions to the cost report software, and clarifying instructions requiring hospitals to report all standard cost centers if they offer services of the appropriate type. We are interested in significant public discussion of some of RTI's short-term and long-term recommendations, including RTI's suggested revisions to the revenue code-to-cost center crosswalk and recommended creation of standard cost centers for CT Scanning, MRI, and Cardiac Catheterization. We believe our CY 2009 proposals and certain short-term and long-term recommendations included in RTI's July 2008 final report would further our pursuit of concrete steps for CY 2009 and future years to improve the overall accuracy of cost report accounting data and, therefore, hospital cost-based relative weights. 2. Proposed Calculation of Median Costs In this section of this proposed rule, we discuss the use of claims to calculate the proposed OPPS payment rates for CY 2009. The hospital OPPS page on the CMS Web site on which this proposed rule is posted provides an accounting of claims used in the development of the proposed rates at: *http://www.cms.hhs.gov/HospitalOutpatientPPS.* The accounting of claims used in the development of this proposed rule is included on the Web site under supplemental materials for the CY 2009 proposed rule. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below we discuss the files of claims that comprise the data sets that are available for purchase under a CMS data user contract. Our CMS Web site, *http://www.cms.hhs.gov/HospitalOutpatientPPS,* includes information about purchasing the following two OPPS data files: “OPPS Limited Data Set” and “OPPS Identifiable Data Set.” These files are available for the claims that were used to calculate the proposed payment rates for the CY 2009 OPPS. We used the following methodology to establish the relative weights used in calculating the proposed OPPS payment rates for CY 2009 shown in Addenda A and B to this proposed rule. a. Claims Preparation We used the CY 2007 hospital outpatient claims processed before January 1, 2008, to set the proposed relative weights for CY 2009. To begin the calculation of the relative weights for CY 2009, we pulled all claims for outpatient services furnished in CY 2007 from the national claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, CAH claims and hospital claims for clinical laboratory services for persons who are neither inpatients nor outpatients of the hospital). We then excluded claims with condition codes 04, 20, 21, and 77. These are claims that providers submitted to Medicare knowing that no payment would be made. For example, providers submit claims with a condition code 21 to elicit an official denial notice from Medicare and document that a service is not covered. We then excluded claims for services furnished in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands because hospitals in those geographic areas are not paid under the OPPS. We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 100 million claims that contain hospital bill types paid under the OPPS. 1. Claims that were not bill types 12X, 13X (hospital bill types), or 76X (CMHC bill types). Other bill types are not paid under the OPPS and, therefore, these claims were not used to set OPPS payment. In prior years, we also used claims of bill type 14X to set payment rates under the OPPS. However, bill type 14X ceased to be used to report any services for which payment is made under the OPPS effective April 1, 2006. Therefore, we did not use these claims in development of the proposed CY 2009 OPPS rates. 2. Claims that were bill types 12X or 13X (hospital bill types). These claims are hospital outpatient claims. 3. Claims that were bill type 76X (CMHC). (These claims are later combined with any claims in item 2 above with a condition code 41 to set the per diem partial hospitalization rate determined through a separate process.) For the CCR calculation process, we used the same general approach as we used in developing the final APC rates for CY 2007 using the revised CCR calculation which excluded the costs of paramedical education programs and weighted the outpatient charges by the volume of outpatient services furnished by the hospital. We refer readers to the CY 2007 OPPS/ASC final rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost reports to only those for hospitals that filed outpatient claims in CY 2007 before determining whether the CCRs for such hospitals were valid. We then calculated the CCRs for each cost center and the overall CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Healthcare Cost Report Information System (HCRIS). We used the most recent available cost report data, in most cases, cost reports for CY 2006. For this proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate median costs for the proposed CY 2009 OPPS rates. If the most recent available cost report was submitted but not settled, we looked at the last settled cost report to determine the ratio of submitted to settled cost using the overall CCR, and we then adjusted the most recent available submitted but not settled cost report using that ratio. We calculated both an overall CCR and cost center-specific CCRs for each hospital. We used the overall CCR calculation discussed in section II.A.1.c. of this proposed rule for all purposes that require use of an overall CCR. We then flagged CAH claims, which are not paid under the OPPS, and claims from hospitals with invalid CCRs. The latter included claims from hospitals without a CCR; those from hospitals paid an all-inclusive rate; those from hospitals with obviously erroneous CCRs (greater than 90 or less than .0001); and those from hospitals with overall CCRs that were identified as outliers (3 standard deviations from the geometric mean after removing error CCRs). In addition, we trimmed the CCRs at the cost center (that is, departmental) level by removing the CCRs for each cost center as outliers if they exceeded ± 3 standard deviations from the geometric mean. We used a four-tiered hierarchy of cost center CCRs to match a cost center to every possible revenue code appearing in the outpatient claims, with the top tier being the most common cost center and the last tier being the default CCR. If a hospital's cost center CCR was deleted by trimming, we set the CCR for that cost center to “missing” so that another cost center CCR in the revenue center hierarchy could apply. If no other cost center CCR could apply to the revenue code on the claim, we used the hospital's overall CCR for the revenue code in question. For example, if a visit was reported under the clinic revenue code, but the hospital did not have a clinic cost center, we mapped the hospital-specific overall CCR to the clinic revenue code. The hierarchy of CCRs is available for inspection and comment on the CMS Web site: *http://www.cms.hhs.gov/HospitalOutpatientPPS.* We note that as discussed in section II.A.1.c.(1) of this proposed rule, we are proposing to remove cost center 3580 (Recreational Therapy) from the hierarchy of CCRs for revenue code 0904 (Activity Therapy). We then converted the charges to costs on each claim by applying the CCR that we believed was best suited to the revenue code indicated on the line with the charge. Table 2 of this proposed rule contains a list of the revenue codes we are proposing to package. Revenue codes not included in Table 2 are those not allowed under the OPPS because their services could not be paid under the OPPS (for example, inpatient room and board charges), and thus charges with those revenue codes were not packaged for creation of the OPPS median costs. One exception to this general methodology for converting charges to costs on each claim is the calculation of median blood costs, as discussed in section II.A.2.d.(2) of this proposed rule. Thus, we applied CCRs as described above to claims with bill type 12X or 13X, excluding all claims from CAHs and hospitals in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands and claims from all hospitals for which CCRs were flagged as invalid. We identified claims with condition code 41 as partial hospitalization services of hospitals and moved them to another file. These claims were combined with the 76X claims identified previously to calculate the partial hospitalization per diem rate. We then excluded claims without a HCPCS code. We moved to another file claims that contained nothing but influenza and pneumococcal pneumonia
(PPV)vaccines. Influenza and PPV vaccines are paid at reasonable cost and, therefore, these claims are not used to set OPPS rates. We note that the separate file containing partial hospitalization claims is included in the files that are available for purchase as discussed above. We next copied line-item costs for drugs, blood, and brachytherapy sources (the lines stay on the claim, but are copied onto another file) to a separate file. No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit mean and median cost and a per day mean and median cost for drugs, radiopharmaceutical agents, blood and blood products, and brachytherapy sources, as well as other information used to set payment rates, such as a unit-to-day ratio for drugs. b. Splitting Claims and Creation of “Pseudo” Single Claims We then split the remaining claims into five groups: single majors, multiple majors, single minors, multiple minors, and other claims. (Specific definitions of these groups follow below.) We are proposing to continue our current policy of defining major procedures as any procedure having a status indicator of “S,” “T,” “V,” or “X;” defining minor procedures as any code having a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N,” and classifying “other” procedures as any code having a status indicator other than one that we have classified as major or minor. For CY 2009, we are proposing that status indicator “R” would be assigned to blood and blood products; status indicator “U” would be assigned to brachytherapy sources; status indicator “Q1” would be assigned to all “STVX-packaged codes;” status indicator “Q2” would be assigned to all “T-packaged codes;” and status indicator “Q3” would be assigned to all codes that may be paid through a composite APC based on composite-specific criteria or paid separately through single code APCs when the criteria are not met. The codes with proposed status indicators “Q1,” “Q2,” and “Q3” were previously assigned status indicator “Q” for the CY 2008 OPPS. As we discuss in section XIII.A.1. of this proposed rule, we are proposing to assign these new status indicators to facilitate identification of the different categories of codes. We are proposing to treat these codes in the same manner for data purposes for CY 2009 as we treated them for CY 2008. Specifically, we are proposing to continue to evaluate whether the criteria for separate payment of codes with status indicator “Q1” or “Q2” are met in determining whether they are treated as major or minor codes. Codes with status indicator “Q1” or “Q2” are carried through the data either with status indicator “N” as packaged or, if they meet the criteria for separate payment, they are given the status indicator of the APC to which they are assigned and are considered as “pseudo” single major codes. Codes assigned status indicator “Q3” are paid under individual APCs unless they occur in the combinations that qualify for payment as composite APCs and, therefore, they carry the status indicator of the individual APC to which they are assigned through the data process and are treated as major codes during both the split and “pseudo” single creation process. The calculation of the median costs for composite APCs from multiple major claims is discussed in section II.A.2.e. of this proposed rule. Specifically, we divided the remaining claims into the following five groups: 1. *Single Major Claims:* Claims with a single separately payable procedure (that is, status indicator “S,” “T,” “V,” or “X,” which includes codes with status indicator “Q3”); claims with one unit of a status indicator “Q1” code (“STVX-packaged”) where there was no code with status indicator “S,” “T,” “V,” or “X” on the same claim on the same date; or claims with one unit of a status indicator “Q2” code (“T-packaged”) where there was no code with a status indicator “T” on the same claim on the same date. 2. *Multiple Major Claims:* Claims with more than one separately payable procedure (that is, status indicator “S,” “T,” “V,” or “X,” which includes codes with status indicator “Q3”), or multiple units of one payable procedure. These claims include those codes with a status indicator “Q2” code (“T-packaged”) where there was no procedure with a status indicator “T” on the same claim on the same date of service but where there was another separately paid procedure on the same claim with the same date of service (that is, another code with status indicator “S,” “V,” or “X”). We also include in this set claims that contained one unit of one code when the bilateral modifier was appended to the code and the code was conditionally or independently bilateral. In these cases, the claims represented more than one unit of the service described by the code, notwithstanding that only one unit was billed. 3. *Single Minor Claims:* Claims with a single HCPCS code that was assigned status indicator “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N” and not status indicator “Q1” (“STVX-packaged”) or status indicator “Q2” (“T-packaged”) code. 4. *Multiple Minor Claims:* Claims with multiple HCPCS codes that are assigned status indicator “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N;” claims that contain more than one code with status indicator “Q1” (“STVX-packaged”) or more than one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” “V,” or “X” on the same date of service; or claims that contain more than one code with status indicator “Q2” (T-packaged), or “Q2” and “Q1,” or more than one unit of a code with status indicator “Q2” but no code with status indicator “T” on the same date of service. 5. *Non-OPPS Claims:* Claims that contain no services payable under the OPPS (that is, all status indicators other than those listed for major or minor status). These claims were excluded from the files used for the OPPS. Non-OPPS claims have codes paid under other fee schedules, for example, durable medical equipment or clinical laboratory tests, and do not contain either a code for a separately paid OPPS service or a code for a packaged service. Non-OPPS claims include claims for “sometimes” therapy HCPCS codes for wound care paid sometimes under the OPPS but billed, in these non-OPPS cases, with revenue codes indicating that the therapy services would be paid under the Medicare Physician Fee Schedule (MPFS). The claims listed in numbers 1, 2, 3, and 4 above are included in the data files that can be purchased as described above. Claims that contain codes to which we are proposing to assign status indicators “Q1” (“STVX-packaged”) and “Q2” (“T-packaged”) appear in the data for the single major file, the multiple major file, and the multiple minor file used in this proposed rule. Claims that contain codes to which we are proposing to assign status indicator “Q3” (composite APC members) appear in both the data of the single and multiple major files used in this proposed rule, depending on the specific composite calculation. To develop “pseudo” single claims for this proposed rule, we examined both the multiple major claims and the multiple minor claims. We first examined the multiple major claims for dates of service to determine if we could break them into “pseudo” single procedure claims using the dates of service for all lines on the claim. If we could create claims with single major procedures by using dates of service, we created a single procedure claim record for each separately paid procedure on a different date of service (that is, a “pseudo” single). We also used the bypass codes listed earlier in Table 1 and discussed in section II.A.1.b. of this proposed rule to remove separately payable procedures that we determined contained limited or no packaged costs or that were otherwise suitable for inclusion on the bypass list from a multiple procedure bill. When one of the two separately payable procedures on a multiple procedure claim was on the bypass list, we split the claim into two “pseudo” single procedure claim records. The single procedure claim record that contained the bypass code did not retain packaged services. The single procedure claim record that contained the other separately payable procedure (but no bypass code) retained the packaged revenue code charges and the packaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single claims by dividing the cost for the multiple units by the number of units on the line. Where one unit of a single, separately paid procedure code remained on the claim after removal of the multiple units of the bypass code, we created a “pseudo” single claim from that residual claim record, which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used. However, where only one unit of one of an “overlap bypass code” appeared on a claim with only one unit of another separately paid code, we used the line-item cost of the “overlap bypass code” to create a “pseudo” single procedure claim for the “overlap bypass code” but did not use the remaining costs on the claim for the other separately paid procedure. We did not incorporate the changes to create “pseudo” single claims from the remaining information on these claims in the data development process for this proposed rule. We believe this simplifies our communication of the claims development process to the public by not adding unnecessary complexity. Furthermore, the limited increase of only 1 percent in the number of “pseudo” single claims that would be created from the remaining data made it impractical to include the changes to the data development process that would be required, taking into consideration the complexity of making such changes. We also examined the multiple minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes with status indicator “Q1” (“STVX-packaged”) on the same date of service or contained multiple units of a single code with status indicator “Q1,” we selected the status indicator “Q1” HCPCS code that had the highest CY 2008 relative weight, moved the units to one on that HCPCS code, and packaged all costs for other codes with status indicator “Q1,” as well as all other packaged HCPCS code and packaged revenue code costs, into a total single cost for the claim to create a “pseudo” single claim for the selected code. We changed the status indicator for selected codes from the data status indicator of “N” to the status indicator of the APC to which the selected procedure was assigned for further data processing and considered this claim as a major procedure claim. We used this claim in the calculation of the APC median cost for the status indicator “Q1” HCPCS code. Similarly, where a multiple minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) or multiple units of a single code with status indicator “Q2,” we selected the status indicator “Q2” HCPCS code that had the highest CY 2008 relative weight, moved the units to one on that HCPCS code, and packaged all costs for other codes with status indicator “Q2,” as well as all other packaged HCPCS code and packaged revenue code costs into a total single cost for the claim to create a “pseudo” single claim for the selected code. We changed the status indicator for the selected code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned, and we considered this claim as a major procedure claim. Lastly, where a multiple minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q1” (“STVX-packaged”), we selected the status indicator “Q2” HCPCS code (“T-packaged”) that had the highest relative weight for CY 2008, moved the units to one on that HCPCS code, and packaged all costs for other codes with status indicator “Q2,” costs of all codes with status indicator “Q1” (“STVX-packaged”), other packaged HCPCS code and packaged revenue code costs into a total single cost for the claim to create a “pseudo” single claim for the selected (“T-packaged”) code. We favor status indicator “Q2” over “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2008 relative weights. If a status indicator “Q1” HCPCS code had a higher CY 2008 relative weight, it would become the primary code for the simulated single bill process. We changed the status indicator for the selected status indicator “Q2” (“T-packaged”) code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned and we considered this claim as a major procedure claim. After we assessed the conditional packaging of HCPCS codes with proposed status indicators “Q1” and “Q2,” we then assessed the claims to determine if the proposed criteria for the multiple imaging composite APCs, discussed in section II.A.2.e.(5) of this proposed rule, were met. Where the criteria for the proposed imaging composite APCs were met, we created a “single session” claim for the applicable imaging composite service and determined whether we could use the claim in ratesetting. For HCPCS codes that are both conditionally packaged and are proposed members of a multiple imaging composite APC, we first assessed whether the code would be packaged and if so, the code ceased to be available for further assessment as part of the composite APC. Because the code would not be a separately payable procedure, we considered it to be unavailable for use in setting the composite APC median cost. We excluded those claims that we were not able to convert to single claims even after applying all of the techniques for creation of “pseudo” singles to multiple majors and to multiple minors. As has been our practice in recent years, we also excluded claims that contained codes that were viewed as independently or conditionally bilateral and that contained the bilateral modifier (Modifier 50 (Bilateral procedure)) because the line-item cost for the code represented the cost of two units of the procedure, notwithstanding that the code appeared with a unit of one. c. Completion of Claim Records and Median Cost Calculations We then packaged the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to this proposed rule and the costs of those lines for codes with status indicator “Q1” or “Q2” when they are not separately paid) and packaged revenue codes into the cost of the single major procedure remaining on the claim. The list of packaged revenue codes is shown in Table 2 below. As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation that requires CMS to review the final list of packaged revenue codes for consistency with OPPS policy and ensure that future versions of the I/OCE edit accordingly. We compared the packaged revenue codes in the I/OCE to the final list of packaged revenue codes for the CY 2008 OPPS (72 FR 66608 through 66609) that we used for packaging costs in median calculation. As a result of that analysis, we are proposing to use the packaged revenue codes for CY 2009 displayed in Table 2 below. We also excluded
(1)claims that had zero costs after summing all costs on the claim and
(2)claims containing packaging flag number 3. Effective for services furnished on or after July 1, 2004, the I/OCE assigned packaging flag number 3 to claims on which hospitals submitted token charges for a service with status indicator “S” or “T” (a major separately paid service under the OPPS) for which the fiscal intermediary was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the weight of the APC to which each code was assigned. We do not believe that these charges, which were token charges as submitted by the hospital, are valid reflections of hospital resources. Therefore, we deleted these claims. We also deleted claims for which the charges equaled the revenue center payment (that is, the Medicare payment) on the assumption that where the charge equaled the payment, to apply a CCR to the charge would not yield a valid estimate of relative provider cost. For the remaining claims, we then standardized 60 percent of the costs of the claim (which we have previously determined to be the labor-related portion) for geographic differences in labor input costs. We made this adjustment by determining the wage index that applied to the hospital that furnished the service and dividing the cost for the separately paid HCPCS code furnished by the hospital by that wage index. As has been our policy since the inception of the OPPS, we are proposing to use the pre-reclassified wage indices for standardization because we believe that they better reflect the true costs of items and services in the area in which the hospital is located than the post-reclassification wage indices and, therefore, would result in the most accurate unadjusted median costs. We also excluded claims that were outside 3 standard deviations from the geometric mean of units for each HCPCS code on the bypass list (because, as discussed above, we used claims that contain multiple units of the bypass codes). After removing claims for hospitals with error CCRs, claims without HCPCS codes, claims for immunizations not covered under the OPPS, and claims for services not paid under the OPPS, approximately 54 million claims were left for this proposed rule. Of these 54 million claims, we were able to use some portion of approximately 52 million whole claims (96 percent of approximately 54 million potentially usable claims) to create approximately 90 million single and “pseudo” single claims, of which we used 89 million single bills (after trimming out approximately 627,000 claims as discussed below) in the CY 2009 median development and ratesetting. We used the remaining claims to calculate the proposed CY 2009 median costs for each separately payable HCPCS code and each APC. The comparison of HCPCS and APC medians determines the applicability of the 2 times rule. Section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median (or mean cost, if elected by the Secretary) for an item or service in the group is more than 2 times greater than the lowest median cost for an item or service within the same group (the 2 times rule). Finally, we reviewed the medians and reassigned HCPCS codes to different APCs where we believed that it was appropriate. Section III. of this proposed rule includes a discussion of certain proposed HCPCS code assignment changes that resulted from examination of the medians and for other reasons. The APC medians were recalculated after we reassigned the affected HCPCS codes. Both the HCPCS medians and the APC medians were weighted to account for the inclusion of multiple units of the bypass codes in the creation of “pseudo” single bills. In some cases, APC median costs are calculated using variations of the process outlined above. Section II.A.2.d. of this proposed rule that follows addresses the calculation of single APC criteria-based median costs. Section II.A.2.e. of this proposed rule discusses the calculation of composite APC criteria-based median costs. Section X.B. of this proposed rule addresses the methodology for calculating the median cost for partial hospitalization services. Table 2.—Proposed CY 2009 Packaged Revenue Codes Revenue code Description 0250 PHARMACY. 0251 GENERIC. 0252 NONGENERIC. 0254 PHARMACY INCIDENT TO OTHER DIAGNOSTIC. 0255 PHARMACY INCIDENT TO RADIOLOGY. 0257 NONPRESCRIPTION DRUGS. 0258 IV SOLUTIONS. 0259 OTHER PHARMACY. 0260 IV THERAPY, GENERAL CLASS. 0262 IV THERAPY/PHARMACY SERVICES. 0263 SUPPLY/DELIVERY. 0264 IV THERAPY/SUPPLIES. 0269 OTHER IV THERAPY. 0270 M&S SUPPLIES. 0271 NONSTERILE SUPPLIES. 0272 STERILE SUPPLIES. 0273 TAKE HOME SUPPLIES. 0275 PACEMAKER DRUG. 0276 INTRAOCULAR LENS SOURCE DRUG. 0278 OTHER IMPLANTS. 0279 OTHER M&S SUPPLIES. 0280 ONCOLOGY. 0289 OTHER ONCOLOGY. 0343 DIAGNOSTIC RADIOPHARMS. 0344 THERAPEUTIC RADIOPHARMS. 0370 ANESTHESIA. 0371 ANESTHESIA INCIDENT TO RADIOLOGY. 0372 ANESTHESIA INCIDENT TO OTHER DIAGNOSTIC. 0379 OTHER ANESTHESIA. 0390 BLOOD STORAGE AND PROCESSING. 0399 OTHER BLOOD STORAGE AND PROCESSING. 0560 MEDICAL SOCIAL SERVICES. 0569 OTHER MEDICAL SOCIAL SERVICES. 0621 SUPPLIES INCIDENT TO RADIOLOGY. 0622 SUPPLIES INCIDENT TO OTHER DIAGNOSTIC. 0624 INVESTIGATIONAL DEVICE (IDE). 0630 DRUGS REQUIRING SPECIFIC IDENTIFICATION, GENERAL CLASS. 0631 SINGLE SOURCE. 0632 MULTIPLE. 0633 RESTRICTIVE PRESCRIPTION. 0681 TRAUMA RESPONSE, LEVEL I. 0682 TRAUMA RESPONSE, LEVEL II. 0683 TRAUMA RESPONSE, LEVEL III. 0684 TRAUMA RESPONSE, LEVEL IV. 0689 TRAUMA RESPONSE, OTHER. 0700 CAST ROOM. 0709 OTHER CAST ROOM. 0710 RECOVERY ROOM. 0719 OTHER RECOVERY ROOM. 0720 LABOR ROOM. 0721 LABOR. 0732 TELEMETRY. 0762 OBSERVATION ROOM. 0801 HEMODIALYSIS. 0802 PERITONEAL DIALYSIS. 0803 CAPD. 0804 CCPD. 0809 OTHER INPATIENT DIALYSIS. 0810 ORGAN ACQUISITION. 0819 OTHER ORGAN ACQUISITION. 0821 HEMODIALYSIS COMP OR OTHER RATE. 0824 MAINTENANCE 100%. 0825 SUPPORT SERVICES. 0829 OTHER HEMO OUTPATIENT. 0942 EDUCATION/TRAINING. d. Proposed Calculation of Single Procedure APC Criteria-Based Median Costs
(1)Device-Dependent APCs Device-dependent APCs are populated by HCPCS codes that usually, but not always, require that a device be implanted or used to perform the procedure. For a full history of how we have calculated payment rates for device-dependent APCs in previous years, and a detailed discussion of how we developed the standard device-dependent APC ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739 through 66742). Overviews of the procedure-to-device edits and device-to-procedure edits used in ratesetting for device-dependent APCs are available in the CY 2005 OPPS final rule with comment period (69 FR 65761 through 65763) and the CY 2007 OPPS/ASC final rule with comment period (71 FR 68070 through 68071). For CY 2009, we are proposing to continue using our standard methodology for calculating median costs for device-dependent APCs, which utilizes claims data that generally represent the full cost of the required device. Specifically, we are proposing to calculate the medians for device-dependent APCs for CY 2009 using only the subset of single bills from CY 2007 claims data that pass the procedure-to-device edits; do not contain token charges for devices; and do not contain the “FB” modifier signifying that the device was furnished without cost to the provider, supplier, or practitioner, or where a full credit was received. We continue to believe that this methodology gives us the most appropriate median costs for device-dependent APCs in which the hospital incurs the full cost of the device. While the median costs for the majority of device-dependent APCs show increases from CY 2008 based on the CY 2009 proposed rule claims data, the median costs for three APCs involving electrode/lead implantation decreased significantly compared to the CY 2008 final rule with comment period median costs. Specifically, APCs 0106 (Insertion/Replacement of Pacemaker Leads and/or Electrodes), 0225 (Implantation of Neurostimulator Electrodes, Cranial Nerve), and 0418 (Insertion of Left Ventricular Pacing Electrode), demonstrate median decreases of 26 percent, 52 percent, and 47 percent, respectively. We believe these decreases reflect hospitals' correction of inaccurate and incomplete billing practices for these services due to the implementation of device-to-procedure edits beginning in CY 2007. As discussed in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68070 through 68071), in the course of examining claims data for calculation of the CY 2007 payment rates, we identified circumstances in which hospitals billed a device code but failed to bill any procedure code with which the device could be used correctly. For APCs 0106, 0225, and 0418 in particular, we saw that hospitals frequently billed a procedure code for lead/electrode implantation with device HCPCS codes for a lead/electrode and the more expensive pulse generator, but failed to report a procedure code for generator implantation. These errors in billing led to the costs of the pulse generator being packaged incorrectly into the procedure codes for lead/electrode implantation. Hospitals that coded and billed in this manner received no payment for the procedure to implant the pulse generator, but these erroneous claims caused the payment rate for the lead/electrode implantation APCs to be inappropriately high. To address this problem, we implemented edits to correct the coding for CY 2007, and the decreases to the median costs of APCs 0106, 0225, and 0418 for CY 2009 are consistent with what we expect, based on what we understand to be the nature of the services and the costs of correctly coded devices. We also note an anticipated decrease in our frequency of single bills for the services assigned to APCs 0106, 0225, and 0418, most likely because the device-to-procedure edits led hospitals to include the pulse generator implantation HCPCS codes on the same claims, resulting in fewer single claims for the lead/electrode implantation procedures. APC 0625 (Level IV Vascular Access Procedures) as configured for CY 2008 and calculated based on CY 2007 claims data also demonstrates a significant decrease in median cost (approximately 59 percent) relative to CY 2008 (based on CY 2006 claims data). We believe this decrease is attributable to the implementation of procedure-to-device edits on January 1, 2007, for the only CPT code assigned to this APC, specifically CPT code 36566 (Insertion of tunneled centrally inserted central venous access device, requiring two catheters via two separate venous access sites; with subcutaneous port(s)). Because the procedure described by CPT code 36566 involves the insertion of a dialysis access system, our edits require that the HCPCS code for that device be present on the claim any time a hospital bills CPT code 36566. Prior to January 1, 2007, we believe that hospitals often reported CPT code 36566 without also reporting the device HCPCS code for the dialysis access system, or incorrectly billed CPT code 36566 for procedures that do not require the use of the device. Therefore, with the implementation of procedure-to-device edits, the volume of total CY 2007 claims for CPT code 36566 decreased as hospitals corrected their claims to report this service only under the appropriate circumstances, while the correctly coded claims reporting the required device (and available for CY 2009 ratesetting) increased significantly from CY 2006 to CY 2007. We believe that the CY 2009 proposed rule median cost of $2,092 calculated for CPT code 36566 from those claims is accurate and appropriately reflects correct hospital reporting of the procedure and the associated device. Furthermore, because of the decrease in the median cost for CPT code 36566, we are proposing for CY 2009 to reassign the code to APC 0623 (Level III Vascular Access Procedures), which has a median cost of approximately $1,939. We also are proposing to delete APC 0625 because no other procedures would map to this APC once CPT code 36566 is reassigned. In addition, we note a decrease of approximately 19 percent for APC 0681 (Knee Arthroplasty) relative to CY 2008, which we believe is attributable to a low volume of services being performed by a small number of providers. As we have stated in the past, some fluctuation in relative costs from year to year is to be expected in a prospective payment system for low volume device-dependent APCs such as APC 0681, for which the median cost increased approximately 37 percent from CY 2007 to CY 2008. Table 3 lists the APCs for which we are proposing to use our standard device-dependent APC ratesetting methodology for CY 2009. We refer readers to Addendum A to this proposed rule for the proposed payment rates for these APCs. Table 3.—Proposed CY 2009 Device-Dependent APCs APC Status indicator APC title 0039 S Level I Implantation of Neurostimulator. 0040 S Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve. 0061 S Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve. 0082 T Coronary or Non Coronary Atherectomy. 0083 T Coronary or Non Coronary Angioplasty and Percutaneous Valvuloplasty. 0084 S Level I Electrophysiologic Procedures. 0085 T Level II Electrophysiologic Procedures. 0086 T Level III Electrophysiologic Procedures. 0089 T Insertion/Replacement of Permanent Pacemaker and Electrodes. 0090 T Insertion/Replacement of Pacemaker Pulse Generator. 0104 T Transcatheter Placement of Intracoronary Stents. 0106 T Insertion/Replacement of Pacemaker Leads and/or Electrodes. 0107 T Insertion of Cardioverter-Defibrillator. 0108 T Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads. 0115 T Cannula/Access Device Procedures. 0202 T Level VII Female Reproductive Procedures. 0222 S Level II Implantation of Neurostimulator. 0225 S Implantation of Neurostimulator Electrodes, Cranial Nerve. 0227 T Implantation of Drug Infusion Device. 0229 T Transcatheter Placement of Intravascular Shunts. 0259 T Level VII ENT Procedures. 0293 T Level V Anterior Segment Eye Procedures. 0315 S Level III Implantation of Neurostimulator. 0384 T GI Procedures with Stents. 0385 S Level I Prosthetic Urological Procedures. 0386 S Level II Prosthetic Urological Procedures. 0418 T Insertion of Left Ventricular Pacing Elect. 0425 T Level II Arthroplasty with Prosthesis. 0427 T Level II Tube or Catheter Changes or Repositioning. 0622 T Level II Vascular Access Procedures. 0623 T Level III Vascular Access Procedures. 0648 T Level IV Breast Surgery. 0652 T Insertion of Intraperitoneal and Pleural Catheters. 0653 T Vascular Reconstruction/Fistula Repair with Device. 0654 T Insertion/Replacement of a permanent dual chamber pacemaker. 0655 T Insertion/Replacement/Conversion of a permanent dual chamber pacemaker. 0656 T Transcatheter Placement of Intracoronary Drug-Eluting Stents. 0674 T Prostate Cryoablation. 0680 S Insertion of Patient Activated Event Recorders. 0681 T Knee Arthroplasty.
(2)Blood and Blood Products Since the implementation of the OPPS in August 2000, separate payments have been made for blood and blood products through APCs rather than packaging them into payments for the procedures with which they are administered. Hospital payments for the costs of blood and blood products, as well as the costs of collecting, processing, and storing blood and blood products, are made through the OPPS payments for specific blood product APCs. For the CY 2009 OPPS, we are proposing to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs. This methodology has been our standard ratesetting methodology for blood and blood products since CY 2005. It was developed in response to data analysis indicating that there was a significant difference in CCRs for those hospitals with and without blood-specific cost centers, and past comments indicating that the former OPPS policy of defaulting to the overall hospital CCR for hospitals not reporting a blood-specific cost center often resulted in an underestimation of the true hospital costs for blood and blood products. Specifically, in order to address the difference in CCRs and to better reflect hospitals' costs, we are proposing to continue to simulate blood CCRs for each hospital that does not report a blood cost center by calculating the ratio of the blood-specific CCRs to hospitals' overall CCRs for those hospitals that do report costs and charges for blood cost centers. We would then apply this mean ratio to the overall CCRs of hospitals not reporting costs and charges for blood cost centers on their cost reports in order to simulate blood-specific CCRs for those hospitals. We calculated the proposed median costs upon which the proposed CY 2009 payment rates for blood and blood products are based using the actual blood-specific CCR for hospitals that reported costs and charges for a blood cost center and a hospital-specific simulated blood-specific CCR for hospitals that did not report costs and charges for a blood cost center. We continue to believe that the blood-specific CCR methodology better responds to the absence of a blood-specific CCR for a hospital than alternative methodologies, such as defaulting to the overall hospital CCR or applying an average blood-specific CCR across hospitals. Because this methodology takes into account the unique charging and cost accounting structure of each provider, we believe that it yields more accurate estimated costs for these products. We believe that continuing with this methodology in CY 2009 would result in median costs for blood and blood products that accurately reflect the relative estimated costs of these products for hospitals without blood cost centers, and, therefore, for these products in general. As discussed in section XIII.A.1. of this proposed rule, we are also proposing to create status indicator “R” (Blood and Blood Products), to denote blood and blood products for publication and payment purposes in CY 2009. We believe that it is necessary to create a status indicator that is specific to blood and blood products to facilitate development of blood product median costs under the blood-specific CCR methodology and to facilitate implementation of the reduced payments that would be made to hospitals that fail to report the hospital outpatient quality data, as discussed in section XVI.D.2. of this proposed rule. We refer readers to Addendum B to this proposed rule for the CY 2009 proposed payment rates for blood and blood products, which are identified with proposed status indicator “R.” For more detailed discussion of the blood-specific CCR methodology, we refer readers to the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full history of OPPS payment for blood and blood products, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807 through 66810).
(3)Single Allergy Tests We are proposing to continue with our methodology of differentiating single allergy tests (“per test”) from multiple allergy tests (“per visit”) by assigning these services to two different APCs to provide accurate payments for these tests in CY 2009. Multiple allergy tests are currently assigned to APC 0370 (Allergy Tests), with a median cost calculated based on the standard OPPS methodology. We provided billing guidance in CY 2006 in Program Transmittal 804 (issued on January 3, 2006) specifically clarifying that hospitals should report charges for the CPT codes that describe single allergy tests to reflect charges “per test” rather than “per visit” and should bill the appropriate number of units of these CPT codes to describe all of the tests provided. However, our CY 2007 claims data available for this CY 2009 proposed rule for APC 0381 do not reflect improved and more consistent hospital billing practices of “per test” for single allergy tests. The median cost of APC 0381, calculated for this proposed rule according to the standard single claims OPPS methodology, is approximately $51, significantly higher than the CY 2008 median cost of APC 0381 of approximately $17 calculated according to the “per unit” methodology, and greater than we would expect for these procedures that are to be reported “per test” with the appropriate number of units. Some claims for single allergy tests still appear to provide charges that represent a “per visit” charge, rather than a “per test” charge. Therefore, consistent with our payment policy for CYs 2006, 2007, and 2008, we are proposing to calculate a “per unit” median cost for APC 0381, based upon 520 claims containing multiple units or multiple occurrences of a single CPT code. The CY 2009 proposed median cost for APC 0381 using the “per unit” methodology is approximately $25. For a full discussion of this methodology, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66737).
(4)Echocardiography Services For the CY 2009 OPPS, we are proposing to continue the packaging of payment for all contrast agents into the payment for the associated imaging procedure, as we did in CY 2008. For echocardiography services, we are proposing to estimate median costs using the same methodology that we used to set medians for these services for CY 2008. In CY 2008, we finalized a policy to package payment for all contrast agents into the payment for the associated imaging procedure regardless of whether the contrast agent met the OPPS drug packaging threshold. Section 1833(t)(2)(G) of the Act requires us to create additional APC groups of services for procedures that use contrast agents that classify them separately from those procedures that do not utilize contrast agents. To reconcile this statutory provision with our final policy of packaging all contrast agents, for CY 2008, we calculated HCPCS-specific median costs for all separately payable echocardiography procedures that may be performed with contrast agents by isolating single and “pseudo” single claims with the following CPT codes where a contrast agent was also billed on the claim: 93303 (Transthoracic echocardiography for congenital cardiac anomalies; complete), 93304 (Transthoracic echocardiography for congenital cardiac anomalies; follow-up or limited study), 93307 (Echocardiography, transthoracic, real-time with image documentation
(2D)with or without M-mode recording; complete), 93308 (Echocardiography, transthoracic, real-time with image documentation
(2D)with or without M-mode recording; follow-up or limited study), 93312 ( Echocardiography, transesophageal, real time with image documentation
(2D)(with or without M-mode recording); including probe placement, image acquisition, interpretation and report), 93315 (Transesophageal echocardiography for congenital cardiac anomalies; including probe placement, image acquisition, interpretation and report), 93318 (Echocardiography, transesophageal
(TEE)for monitoring purposes, including probe placement, real time 2-dimensional image acquisition and interpretation leading to ongoing (continuous) assessment of (dynamically changing) cardiac pumping function and to therapeutic measures on an immediate time basis), and 93350 (Echocardiography, transthoracic, real-time with image documentation (2D), with or without M-mode recording, during rest and cardiovascular stress test using treadmill, bicycle exercise and/or pharmacologically induced stress, with interpretation and report). As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66644), our analysis indicated that all echocardiography procedures that may be performed with contrast agents are reasonably similar both clinically and in terms of resource use, as evidenced by similar HCPCS median costs. Pursuant to the statute, for CY 2008, we created APC 0128 (Echocardiogram With Contrast) to provide payment for echocardiography procedures that are performed with a contrast agent. In addition, as discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66644 through 66646), in order for hospitals to identify separately and receive appropriate payment for echocardiography procedures performed with contrast beginning in CY 2008, we created eight new HCPCS codes (C8921 through C8928) that corresponded to the related CPT echocardiography codes and assigned them to the newly created APC 0128. We instructed hospitals performing echocardiography procedures without contrast to continue to report the CPT codes and to report the new C-codes when performing echocardiography procedures with contrast or without contrast followed by with contrast. Claims data from CY 2008 are not yet available for ratesetting, so we do not yet have claims data specific to HCPCS codes C8921 through C8928 in order to determine the CY 2009 payment rate for APC 0128. Therefore, for CY 2009, we are proposing to again use the methodology that we used to set the CY 2008 payment rate for APC 0128 (72 FR 66645). That is, we isolate single and “pseudo” single claims in our database that include those CPT codes in the range of 93303 through 93350 as described above that correspond to the contrast studies described by HCPCS codes C8921 through C8928. For claims where one of these echocardiography procedures was billed with a contrast agent, we packaged the cost of the contrast agent into the cost of the echocardiography procedure and then calculated a median cost for APC 0128 using this subset of claims to determine the proposed median cost for APC 0128 of approximately $563. As in CY 2008, the HCPCS code-specific median costs for echocardiography procedures performed with contrast are all similar, and we continue to believe these services share sufficient similarity to be assigned to the same APC. For CY 2009, we also recalculated the median cost for APCs 0269 (Level II Echocardiogram Without Contrast Except Transesophageal); 0270 (Transesophageal Echocardiogram Without Contrast); and 0697 (Level I Echocardiogram Without Contrast Except Transesophageal), as we did in CY 2008 (72 FR 66645). We used claims for CPT codes 93303 through 93350 after removing claims from the ratesetting process that included contrast agents because these claims were used to set the median cost for APC 0128. We continue to believe that these echocardiography APC medians accurately reflect hospital costs when performing echocardiography procedures, both with and without contrast. In addition, we believe that this coding and payment methodology allows us to both adhere to the statutory requirement to create additional groups of services for procedures that use contrast agents and to continue packaged payment for contrast agents.
(5)Nuclear Medicine Services In CY 2008, we began packaging payment for diagnostic radiopharmaceuticals into the payment for the associated nuclear medicine procedure. (For a discussion regarding the distinction between diagnostic and therapeutic radiopharmaceuticals, we refer readers to the CY 2008 OPPS/ASC final rule at 72 FR 66636). Prior to the implementation of this policy, diagnostic radiopharmaceuticals were subject to the standard OPPS drug packaging methodology whereby payments are packaged when the estimated mean per day product costs fall at or below the annual packaging threshold for drugs, biologicals, and radiopharmaceuticals. Packaging costs into a single aggregate payment for a service, encounter, or episode of care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, packaging the costs of supportive items and services into the payment for the independent procedure or service with which they are associated encourages hospital efficiencies and also enables hospitals to manage their resources with maximum flexibility. All nuclear medicine procedures require the use of at least one radiopharmaceutical or other radiolabeled product, and there are only a small number of radiopharmaceuticals that may be appropriately billed with each diagnostic nuclear medicine procedure. For the OPPS, we distinguish diagnostic radiopharmaceuticals from therapeutic radiopharmaceuticals for payment purposes, and this distinction is recognized in the Level II HCPCS codes for diagnostic radiopharmaceuticals that include the term “diagnostic” along with a radiopharmaceutical in their HCPCS code descriptors. As we stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66635), we believe that our policy to package payment for diagnostic radiopharmaceuticals (other than those already packaged when their per day costs are below the packaging threshold for OPPS drugs, biologicals, and radiopharmaceuticals) is consistent with OPPS packaging principles, provides greater administrative simplicity for hospitals, and encourages hospitals to use the most clinically appropriate and cost efficient diagnostic radiopharmaceutical for each study. For more background on this policy, we refer readers to discussions in the CY 2008 OPPS/ASC proposed rule (72 FR 42667 through 42672) and the CY 2008 OPPS/ASC final rule with comment period (72 FR 66635 through 66641). We continue to believe that it is most appropriate to package payment for some radiopharmaceuticals, specifically diagnostic radiopharmaceuticals, into the payment for diagnostic nuclear medicine procedures, and we are proposing to continue to package payment for diagnostic radiopharmaceuticals into the payment for the associated nuclear medicine procedure for CY 2009 as described in section V.B.2.b. of this proposed rule. During the March 2008 APC Panel meeting, the APC Panel recommended that CMS continue to package payment for diagnostic radiopharmaceuticals for CY 2009. In addition, the APC Panel recommended that CMS present data at the first CY 2009 APC Panel meeting on usage and frequency, geographic distribution, and size and type of hospitals performing nuclear medicine studies using radioisotopes in order to ensure that access to diagnostic radiopharmaceuticals is preserved for Medicare beneficiaries. We are accepting both of these recommendations. For CY 2008 ratesetting, we used only claims for nuclear medicine procedures that contained a diagnostic radiopharmaceutical in calculating the median costs for APCs including nuclear medicine procedures (72 FR 66639). This is similar to the established methodology used for device-dependent APCs before claims reflecting the procedure-to-device edits were included in our claims data. For CY 2008 we also implemented claims processing edits (called procedure-to-radiopharmaceutical edits) requiring the presence of a radiopharmaceutical (or other radiolabeled product) HCPCS code when a separately payable nuclear medicine procedure is present on a claim. Similar to our practice regarding the procedure-to-device edits that have been in place for some time, we continually review comments and requests for changes related to these edits and, based on our review, may update the edit list during our quarterly update process if necessary. The radiopharmaceutical (and other radiolabeled product) and procedure HCPCS codes that are included in these edits can be viewed on the OPPS Web site at: *http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp.* The CY 2008 OPPS claims that are subject to the procedure-to-radiopharmaceutical edits will not be available for setting payment rates until CY 2010 and, therefore, are not yet available to set payment rates for CY 2009. Therefore, we are proposing to continue our established CY 2008 methodology for setting the payment rates for APCs that include nuclear medicine procedures for CY 2009. We used an updated list of radiolabeled products from the procedure-to-radiopharmaceutical edit file to identify single and “pseudo” single claims for nuclear medicine procedures that also included at least one eligible radiolabeled product. Using this subset of claims, we followed our standard OPPS ratesetting methodology, discussed in section II.A. of this proposed rule, to calculate median costs for nuclear medicine procedures and their associated APCs. We have identified those APCs containing nuclear medicine procedures that would be subject to this methodology under our CY 2009 proposal in Table 4 below. As in CY 2008, when we set APC median costs based on single and “pseudo” single claims that also included at least one radiolabeled product on our edit file, we observed an equivalent or higher median cost than that calculated from all single and “pseudo” single bills. We believe that this methodology appropriately ensures that the costs of diagnostic radiopharmaceuticals are included in the ratesetting process for these APCs. Table 4.—Proposed APCs Where Nuclear Medicine Procedures Are Assigned With Median Costs Calculated From Claims With an Associated Radiolabeled Product APC APC title 0307 Myocardial Positron Emission Tomography
(PET)imaging. 0308 Non-Myocardial Positron Emission Tomography
(PET)imaging. 0377 Level II Cardiac Imaging. 0378 Level II Pulmonary Imaging. 0389 Level I Non-Imaging Nuclear Medicine. 0390 Level I Endocrine Imaging. 0391 Level II Endocrine Imaging. 0392 Level II Non-imaging Nuclear Medicine. 0393 Hematologic Processing & Studies. 0394 Hepatobiliary Imaging. 0395 GI Tract Imaging. 0396 Bone Imaging. 0397 Vascular Imaging. 0398 Level I Cardiac Imaging. 0400 Hematopoietic Imaging. 0401 Level I Pulmonary Imaging. 0402 Level II Nervous System Imaging. 0403 Level I Nervous System Imaging. 0404 Renal and Genitourinary Studies. 0406 Level I Tumor/Infection Imaging. 0408 Level III Tumor/Infection Imaging. 0414 Level II Tumor/Infection Imaging.
(6)Hyperbaric Oxygen Therapy Since the implementation of OPPS in August 2000, the OPPS has recognized HCPCS code C1300 (Hyperbaric oxygen under pressure, full body chamber, per 30 minute interval) for hyperbaric oxygen therapy
(HBOT)provided in the hospital outpatient setting. In the CY 2005 final rule with comment period (69 FR 65758 through 65759), we finalized a “per unit” median cost calculation for APC 0659 (Hyperbaric Oxygen) using only claims with multiple units or multiple occurrences of HCPCS code C1300 because delivery of a typical HBOT service requires more than 30 minutes. We observed that claims with only a single occurrence of the code were anomalies, either because they reflected terminated sessions or because they were incorrectly coded with a single unit. In the same rule, we also established that HBOT would not generally be furnished with additional services that might be packaged under the standard OPPS APC median cost methodology. This enabled us to use claims with multiple units or multiple occurrences. Finally, we also used each hospital's overall CCR to estimate costs for HCPCS code C1300 from billed charges rather than the CCR for the respiratory therapy or other departmental cost centers. Comments on the CY 2005 proposed rule effectively demonstrated that hospitals report the costs and charges for HBOT in a wide variety of cost centers. Since CY 2005, we have used this methodology to estimate the median cost for HBOT. The median costs of HBOT using this methodology have been relatively stable for the last 5 years. For CY 2009, we are proposing to continue using the same methodology to estimate a “per unit” median cost for HCPCS code C1300 of approximately $103 using 71,866 claims with multiple units or multiple occurrences for this proposed rule.
(7)Payment for Ancillary Outpatient Services When Patient Expires (-CA Modifier) In the November 1, 2002 final rule with comment period (67 FR 66798), we discussed the creation of the new HCPCS-CA modifier to address situations where a procedure on the OPPS inpatient list must be performed to resuscitate or stabilize a patient (whose status is that of an outpatient) with an emergent, life-threatening condition, and the patient dies before being admitted as an inpatient. In Program Transmittal A-02-129, issued on January 3, 2003, we instructed hospitals on the use of this modifier. For a complete description of the history of the policy and development of the payment methodology for these services, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 68157 through 68158). For CY 2009, we are proposing to continue to use our established ratesetting methodology for calculating the median cost of APC 0375 (Ancillary Outpatient Services When Patient Expires), and we are proposing to continue to make one payment under APC 0375 for the services that meet the specific conditions for using modifier -CA. We would calculate the relative payment weight for APC 0375 by using all claims reporting a status indicator “C” procedure appended with the -CA modifier, using estimated costs from claims data for line-items with a HCPCS code assigned status indicator “G,” “H,” “K,” “N,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” and “X” and charges for packaged revenue codes without a HCPCS code. We continue to believe that this methodology results in the most appropriate aggregate median cost for the ancillary services provided in these unusual clinical situations. Also, we believe that hospitals are reporting the -CA modifier according to the policy initially established in CY 2003. The claims frequency for APC 0375 has been relatively stable over the past few years. Although the proposed median cost for APC 0375 is slightly lower for CY 2009 than for CY 2008, generally it has increased significantly in recent years. Variation in the median cost for APC 0375 is expected because of the small number of claims and because the specific cases are grouped by the presence of the -CA modifier appended to an inpatient procedure and not according to the standard APC criteria of clinical and resource homogeneity. Cost variation for APC 0375 from year to year is anticipated and acceptable so long as hospitals continue judicious reporting of the -CA modifier. Table 5 shows the number of claims and the median cost for APC 0375 from CY 2006 to CY 2008. For CY 2009, we are proposing a median cost for APC 0375 of approximately $4,762. Table 5.—Claims for Ancillary Outpatient Services When Patient Expires (-CA Modifier) for CYs 2006 Through 2008 Prospective payment year Number of claims Median cost ($) CY 2006 370 2,717 CY 2007 260 3,549 CY 2008 183 4,945 e. Proposed Calculation of Composite APC Criteria-Based Median Costs As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals to provide only necessary, high quality care and to provide that care as efficiently as possible. For CY 2008, we developed composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service. Bundling payment for multiple independent services into a single OPPS payment in this way enables hospitals to manage their resources with maximum flexibility by monitoring and adjusting the volume and efficiency of services themselves. An additional advantage to the composite APC model is that we can use data from correctly coded multiple procedure claims to calculate payment rates for the specified combinations of services, rather than relying upon single procedure claims which typically are low in volume and/or incorrectly coded. We refer readers to section II.A.4. of the CY 2008 OPPS/ASC final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR 66611 through 66614 and 66650 through 66652). We continue to consider the development and implementation of larger payment bundles, such as composite APCs, a long-term policy objective for the OPPS and continue to explore other areas where this payment model may be utilized. In developing this proposed rule, we followed the same methodology for identifying possible composite APCs as we did for CY 2008. Specifically, we examined the multiple procedure claims that we could not convert to single procedure claims to identify common combinations of services for which we have relatively few single procedure claims. We then performed a clinical assessment of the combinations that we identified to determine whether our findings were consistent with our understanding of the services furnished. In addition, consistent with our stated intention to involve the APC Panel in our future exploration of how we can develop encounter-based and episode-based payment groups (72 FR 66614), we also specifically explored a possible composite APC for radioimmunotherapy in response to a recommendation of the APC Panel from its September 2007 meeting. After performing claims analysis and clinical assessments as described above, and taking into consideration the recommendation of the APC Panel from its March 2008 meeting that we continue pursing a radioimmunotherapy composite APC, we are not proposing a composite APC payment for radioimmunotherapy for CY 2009, as discussed further in section V.B.4. of this proposed rule. However, we are proposing to expand the composite APC model to one new clinical area for CY 2009, multiple imaging services, as described in detail in section II.A.2.e.(5) of this proposed rule. We also are proposing to continue our established composite APC policies for extended assessment and management, low dose rate
(LDR)prostate brachytherapy, cardiac electrophysiologic evaluation and ablation, and mental health services for CY 2009, as discussed in sections II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), and II.A.2.e.(4), respectively, of this proposed rule.
(1)Extended Assessment and Management Composite APCs (APCs 8002 and 8003) For the CY 2009 OPPS we are proposing to continue to include composite APC 8002 (Level I Extended Assessment and Management Composite) and composite APC 8003 (Level II Extended Assessment and Management Composite) in the OPPS. In addition, we are proposing to include HCPCS code G0384 (Level 5 hospital emergency department visit provided in a type B emergency department) in the criteria that determine eligibility for payment for composite APC 8003. For CY 2008, we created these two new composite APCs to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur (an extended visit). In most circumstances, observation services are supportive and ancillary to the other services provided to a patient. In the circumstances when observation care is provided in conjunction with a high level visit or direct admission and is an integral part of a patient's extended encounter of care, payment is made for the entire care encounter through one of two composite APCs as appropriate. As defined for the CY 2008 OPPS, composite APC 8002 describes an encounter for care provided to a patient that includes a high level (Level 5) clinic visit or direct admission to observation in conjunction with observation services of substantial duration (72 FR 66648 through 66649). Composite APC 8003 describes an encounter for care provided to a patient that includes a high level (Level 4 or 5) emergency department visit or critical care services in conjunction with observation services of substantial duration. HCPCS code G0378 (Observation services, per hour) is assigned status indicator “N,” signifying that its payment is always packaged. As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66648 through 66649), the I/OCE evaluates every claim received to determine if payment through a composite APC is appropriate. If payment through a composite APC is inappropriate, the I/OCE, in conjunction with the PRICER, determines the appropriate status indicator, APC, and payment for every code on a claim. The specific criteria that must be met for the two extended assessment and management composite APCs to be paid are provided below in the description of the claims that were selected for the calculation of the proposed CY 2009 median costs for these composite APCs. The general composite APC logic and observation care reporting criteria have also been included in updates to the Claims Processing and Benefit Policy Manuals through Change Request 5916 (Program Transmittals 82 and 1145), dated February 8, 2008, and we are not proposing to change these criteria for the CY 2009 OPPS. When we created composite APCs 8002 and 8003 for CY 2008, we retained as general reporting requirements for all observation services those criteria related to physician order and evaluation; documentation; and observation beginning and ending time as listed in section XI. of the CY 2008 final rule with comment period (72 FR 66812). We are not proposing to change these reporting requirements for the CY 2009 OPPS. These are more general requirements that encourage hospitals to provide medically reasonable and necessary care and help to ensure the proper reporting of observation services on correctly coded hospital claims that reflect the full charges associated with all hospital resources utilized to provide the reported services. As noted in detail in sections IX.C and XI. of the CY 2008 OPPS/ASC final rule with comment period (72 FR 66802 through 66805 and 66814), we saw a normal and stable distribution of clinic and emergency department visit levels. We do not expect to see an increase in the proportion of visit claims for high level visits as a result of the new composite APCs adopted for CY 2008 and proposed for CY 2009. Similarly, we expect that hospitals will not purposely change their visit guidelines or otherwise upcode clinic and emergency department visits reported with observation care solely for the purpose of composite payment. As stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66648), we expect to carefully monitor any changes in billing practices on a service-specific and hospital-specific level to determine whether there is reason to request that Quality Improvement Organizations
(QIOs)review the quality of care furnished, or to request that Benefit Integrity contractors or other contractors review the claims against the medical record. However, we will not have claims available for analysis that reflect the new CY 2008 payment policy for the extended assessment and management composite APCs until the CY 2010 annual OPPS rulemaking cycle. At the March 2008 meeting of the APC Panel, we discussed with the Visits and Observation Subcommittee, as well as with the full APC Panel, the extended assessment and management composite APCs and observation-related data previously requested by the APC Panel at its September 2007 meeting. At its March 2008 meeting, the APC Panel recommended that CMS provide them with additional data related to the frequency and median cost for the extended assessment and management composite APCs and length-of-stay frequency distribution data for observation services, with additional detail at the 24-48 hour and greater than 48 hour levels. We are accepting those recommendations and will provide additional data as requested at the next APC Panel meeting in 2008. In addition, the APC Panel recommended continuation of the Visits and Observation Subcommittee's work. We also are accepting that recommendation. For CY 2009, we are proposing to continue the extended assessment and management composite APC payment methodology for APCs 8002 and 8003. As stated above, we are also proposing to continue the general reporting requirements for observation services reported with HCPCS code G0378. We continue to believe that the composite APCs 8002 and 8003 and the related policies provide the most appropriate means of paying for these services. We are proposing to calculate the median costs for APCs 8002 and 8003 using all single and “pseudo single” procedure claims for CY 2007 that meet the criteria for payment of each composite APC. Specifically, to calculate the proposed median costs for composite APCs 8002 and 8003, we selected single and “pseudo” single claims that met each of the following criteria: 1. Did not contain a HCPCS code to which we have assigned status indicator “T” with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By selecting these claims from single and “pseudo” single claims, we had already assured that they would not contain a code for a service with status indicator “T” on the same date of service.); 2. Contained 8 or more units of HCPCS code G0378; and 3. Contained one of the following codes: • In the case of composite APC 8002, HCPCS code G0379 (Direct admission of patient for hospital observation care) on the same date of service as G0378; or CPT code 99205 (Office or other outpatient visit for the evaluation and management of a new patient (Level 5)); or CPT code 99215 (Office or other outpatient visit for the evaluation and management of an established patient (Level 5)) provided on the same date of service or one day before the date of service for HCPCS code G0378. • In the case of composite APC 8003, CPT code 99284 (Emergency department visit for the evaluation and management of a patient (Level 4)); CPT code 99285 (Emergency department visit for the evaluation and management of a patient (Level 5)); CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes); or HCPCS code G0384 provided on the same date of service or one day before the date of service for HCPCS code G0378. (As discussed in detail below, we are proposing to add HCPCS code G0384 to the eligibility criteria for composite APC 8003 for CY 2009.) We applied the standard packaging and trimming rules to the claims before calculating the proposed median costs. The proposed CY 2009 median cost resulting from this process for composite APC 8002 is $364, which was calculated from 14,968 single and “pseudo” single bills that met the required criteria. The proposed median cost for composite APC 8003 is $670, which was calculated from 83,491 single and “pseudo” single bills that met the required criteria. This is the same methodology we used to calculate the medians for composite APCs 8002 and 8003 for the CY 2008 OPPS (72 FR 66649). As discussed in more detail in section IX.B. of this proposed rule, we are proposing to reassign HCPCS code G0384 from APC 0608 (Level 5 Hospital Clinic Visits) to APC 0616 (Level 5 Emergency Visits). Consistent with this change for CY 2009, we are also proposing to add HCPCS code G0384 to the eligibility criteria for payment of composite APC 8003. Because these visits are rare, we would not expect that adding HCPCS code G0384 to the eligibility criteria for payment for extended assessment and management composite APC 8003 would significantly increase the relative frequency of the Type B emergency department Level 5 visits reported using HCPCS code G0384. As discussed further in sections III.D and IX. of this proposed rule and consistent with our CY 2008 final policy, when calculating the median costs for the clinic, Type A emergency department visit, Type B emergency department visit, and critical care APCs (0604 through 0617 and 0626 through 0629), we would utilize our methodology that excludes those claims for visits that are eligible for payment through the two extended assessment and management composite APCs, that is APC 8002 or APC 8003. We believe that this approach would result in the most accurate cost estimates for APCs 0604 through 0617 and 0626 through 0629 for CY 2009. Also as discussed in section XIII.A.1. of this proposed rule, for CY 2009, we are proposing to replace current status indicator “Q” with three new separate status indicators: “Q1,” “Q2,” and “Q3.” We believe that this proposed change would make our policy more transparent to hospitals and would facilitate the use of status indicator-driven logic in our ratesetting calculations, and in hospital billing and accounting systems. Under this proposal, status indicator “Q3” would be assigned to all codes that may be paid through a composite APC based on composite-specific criteria or separately through single code APCs when the criteria are not met. Therefore, we are proposing that each of the direct admission, clinic, and emergency department visit codes that may be paid through composite APCs 8002 and 8003 be assigned status indicator “Q3” for CY 2009. We are proposing that HCPCS code G0378 would continue to be always packaged by assigning the HCPCS code status indicator “N,” its current status indicator under the CY 2008 OPPS. We are also proposing that the payment policy for separate payment of HCPCS code G0379 that was finalized for the CY 2008 OPPS (72 FR 66814 through 66815) would continue to apply for CY 2009 when the criteria for payment of this service through composite APC 8002 are not met. The criteria for payment of HCPCS code G0379 under either composite APC 8002, as part of the extended assessment and management composite service or APC 0604, as a separately payable individual service are:
(1)both HCPCS codes G0378 and G0379 are reported with the same date of service; and
(2)no service with a status indicator of “T” or “V” or Critical Care (APC 0617) is provided on the same date of service as HCPCS code G0379. If either of the above criteria is not met, HCPCS code G0379 is assigned status indicator “N” and its payment is packaged into the payment for other separately payable services provided in the same encounter. In summary, for CY 2009, we are proposing to continue the extended assessment and management composite APC payment methodology and the general reporting requirements for observation services reported with HCPCS code G0378. We are proposing to base the CY 2009 OPPS payment for composite APC 8002 on a median cost of $364 and to base the payment for composite APC 8003 on a median cost of $670. For CY 2009, we are also proposing to add HCPCS code G0384 to the eligibility criteria for payment of composite APC 8003. Furthermore, we are proposing to assign status indicator “Q3” to each of the visit codes that may be paid through the Level I and Level II extended assessment and management composite APCs.
(2)Low Dose Rate
(LDR)Prostate Brachytherapy Composite APC (APC 8001) LDR prostate brachytherapy is a treatment for prostate cancer in which needles or catheters are inserted into the prostate, followed by permanent implantation of radioactive sources into the prostate through the hollow needles or catheters. At least two CPT codes are used to report the composite treatment service because there are separate codes that describe placement of the needles/catheters and the application of the brachytherapy sources: CPT code 55875 (Transperineal placement of needles or catheters into prostate for interstitial radioelement application, with or without cystoscopy) and CPT code 77778 (Interstitial radiation source application; complex). Generally, the component services represented by both codes are provided in the same operative session in the same hospital on the same date of service to the Medicare beneficiary treated with LDR brachytherapy for prostate cancer. As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66653), OPPS payment rates for CPT code 77778, in particular, have fluctuated over the years. We were frequently informed by the public that reliance on single procedure claims to set the median costs for these services resulted in use of only incorrectly coded claims for LDR prostate brachytherapy because a correctly coded claim should include, for the same date of service, CPT codes for both needle/catheter placement and application of radiation sources, as well as separately coded imaging and radiation therapy planning services (that is, a multiple procedure claim). In order to base payment on claims for the most common clinical scenario, and to contribute to our goal of providing payment under the OPPS for a larger bundle of component services provided in a single hospital encounter, beginning in CY 2008 we provide a single payment for LDR prostate brachytherapy when the composite service, billed as CPT codes 55875 and 77778, is furnished in a single hospital encounter. We base the payment for composite APC 8001 (LDR Prostate Brachytherapy Composite) on the median cost derived from claims for the same date of service that contain both CPT codes 55875 and 77778 and that do not contain other separately paid codes that are not on the bypass list. In uncommon occurrences in which the services are billed individually, hospitals continue to receive separate payments for the individual services. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66652 through 66655) for a full history of OPPS payment for LDR prostate brachytherapy and a detailed description of how we developed the LDR prostate brachytherapy composite APC. For CY 2009, we are proposing to continue paying for LDR prostate brachytherapy services using the composite APC methodology proposed and implemented for CY 2008. That is, we are proposing to use CY 2007 claims on which both CPT codes 55875 and 77778 were billed on the same date of service with no other separately paid procedure codes (other than those on the bypass list) to calculate the payment rate for composite APC 8001. Consistent with our CY 2008 practice, we would not use the claims that meet these criteria in the calculation of the median costs for APCs 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and 0313 (Brachytherapy) to which HCPCS codes 55875 and 77778 are assigned respectively; median costs for APCs 0163 and 0313 would continue to be calculated using single procedure claims. As discussed in section XIII.A.1. of this proposed rule, we also are proposing to use new status indicator “Q3” (Codes that May be Paid Through a Composite APC), to denote HCPCS codes such as CPT codes 55875 and 77778 that may be paid through a composite APC for publication and payment purposes for CY 2009, rather than status indicator “Q” that is being used in CY 2008. We are proposing the status indicator change to facilitate identification of HCPCS codes that may be paid through composite APCs and to facilitate development of the composite APC median costs. We continue to believe that this composite APC contributes to our goal of creating hospital incentives for efficiency and cost containment, while providing hospitals with the most flexibility to manage their resources. We also continue to believe that data from claims reporting both services required for LDR prostate brachytherapy provide the most accurate median cost upon which to base the composite APC payment rate. Using partial year CY 2007 claims data available for the CY 2009 proposed rule, we were able to use 6,897 claims that contained both CPT code 77778 and 55875 to calculate the median cost upon which the CY 2009 proposed payment for composite APC 8001 is based. The proposed median cost for composite APC 8001 for CY 2009 is approximately $3,509. This is an increase compared to the CY 2008 OPPS/ASC final rule with comment period in which we calculated a final median cost for this composite APC of approximately $3,391 based on a full year of CY 2006 claims data. The CY 2009 proposed composite APC median is slightly less than $3,581, the sum of the proposed median costs for APCs 0163 (Level IV Cystourethroscopy and other Genitourinary Procedures) and 0651 (Complex Interstitial Radiation Source Application) ($2,388 + $1,193), the APCs to which CPT codes 77778 and 55875 map if one service is billed on a claim without the other. We believe that the proposed median cost for composite APC 8001 of approximately $3,509, which is calculated from claims we believe to be correctly coded, would result in a reasonable and appropriate payment rate for this service in CY 2009.
(3)Cardiac Electrophysiologic Evaluation and Ablation Composite APC (APC 8000) Cardiac electrophysiologic evaluation and ablation services frequently are performed in varying combinations with one another during a single episode of care in the HOPD. Therefore, correctly coded claims for these services often include multiple codes for component services that are reported with different CPT codes and that, prior to CY 2008, were always paid separately through different APCs (specifically, APC 0085 (Level II Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm Focus), and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)). As a result, there would never be many single bills for cardiac electrophysiologic evaluation and ablation services, and those that are reported as single bills would often represent atypical cases or incorrectly coded claims. As described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66655 through 66659), the APC Panel and the public expressed persistent concerns regarding the limited and reportedly unrepresentative single bills available for use in calculating the median cost for these services according to our standard OPPS methodology. Effective January 1, 2008, we established APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite) to pay for a composite service made up of at least one specified electrophysiologic evaluation service and one electrophysiologic ablation service. Calculating a composite APC for these services allowed us to utilize many more claims than were available to establish the individual APC median costs for these services, and we also saw this composite APC as an opportunity to advance our stated goal of promoting hospital efficiency through larger payment bundles. In order to calculate the median cost upon which the payment rate for composite APC 8000 is based, we used multiple procedure claims that contained at least one CPT code from group A for evaluation services and at least one CPT code from group B for ablation services reported on the same date of service on an individual claim. We refer readers to Table 6 for identification of the CPT codes that are assigned to groups A and B. For a full discussion of how we identified the group A and group B procedures and established the CY 2008 payment rate for the cardiac electrophysiologic evaluation and ablation composite APC, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66655 through 66659). Where a service in group A is furnished on a date of service that is different from the date of service for a code in group B for the same beneficiary, payments are made under the appropriate single procedure APCs and the composite APC does not apply. For CY 2009, we are proposing to continue paying for cardiac electrophysiologic evaluation and ablation services using the composite APC methodology established for CY 2008. Consistent with our CY 2008 practice, we would not use the claims that meet these criteria in the calculation of the median costs for APCs 0085 (Level II Electrophysiologic Procedures) and 0086 (Level III Electrophysiologic Procedures), to which the HCPCS codes in both groups A and B for composite APC 8000 are otherwise assigned. Median costs for APCs 0085 and 0086 would continue to be calculated using single procedure claims. As discussed in section XIII.A.1. of this proposed rule, we also are proposing to use new status indicator “Q3” (Codes that May be Paid Through a Composite APC) to denote HCPCS codes such as the cardiac electrophysiologic evaluation and ablation CPT codes that may be paid through a composite APC for publication and payment purposes for CY 2009, rather than the status indicator “Q” that is being used in CY 2008. We continue to believe that the composite APC for cardiac electrophysiologic evaluation and ablation services is the most efficient and effective way to use the claims data for the majority of these services and best represents the hospital resources associated with performing the common combinations of these services that are clinically typical. Further, this approach creates incentives for efficiency by providing a single payment for a larger bundle of major procedures when they are performed together, in contrast to continued separate payment for each of the individual procedures. Using partial year CY 2007 claims data available for this proposed rule, we were able to use 5,603 claims containing a combination of group A and group B codes and calculated a proposed median cost of approximately $9,174 for composite APC 8000. This is an increase compared to the CY 2008 OPPS/ASC final rule with comment period in which we calculated a final median cost for this composite APC of approximately $8,438 based on a full year of CY 2006 claims data. We believe that the proposed median cost of $9,174 calculated from a high volume of correctly coded multiple procedure claims results in an accurate and appropriate proposed payment for cardiac electrophysiologic evaluation and ablation services when at least one evaluation service is furnished during the same clinical encounter as at least one ablation service. Table 6 below lists the groups of procedures upon which we are proposing to base composite APC 8000 for CY 2009. Table 6.—Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which We Base Composite APC 8000 Codes used in combinations: At least one in Group A and one in Group B HCPCS code Proposed single code CY 2009 APC Proposed CY 2009 SI (composite) Group A Electrophysiology evaluation 93619 0085 Q3 Electrophysiology evaluation 93620 0085 Q3 Group B Ablate heart dysrhythm focus 93650 0085 Q3 Ablate heart dysrhythm focus 93651 0086 Q3 Ablate heart dysrhythm focus 93652 0086 Q3
(4)Mental Health Services Composite APC (APC 0034) For the CY 2009 OPPS, we are proposing to continue our longstanding policy of limiting the aggregate payment for specified less intensive mental health services furnished on the same date to the payment for a day of partial hospitalization, which we consider to be the most resource intensive of all outpatient mental health treatment. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18455) for the initial discussion of this longstanding policy. We continue to believe that the costs associated with administering a partial hospitalization program represent the most resource intensive of all outpatient mental health treatment, and we do not believe that we should pay more for a day of individual mental health services under the OPPS than the partial hospitalization per diem payment. For CY 2009, as discussed further in section X.B. of this proposed rule, we are proposing to create two new APCs, 0172 (Level I Partial Hospitalization (3 services)) and 0173 (Level II Partial Hospitalization (4 or more services)), to replace APC 0033 (Partial Hospitalization), which we are proposing to delete for CY 2009. In summary, when a community mental health center
(CMHC)or hospital provides three units of partial hospitalization services and meets all other partial hospitalization payment criteria, the CMHC or hospital would be paid through APC 0172. When the CMHC or hospital provides four or more units of partial hospitalization services and meets all other partial hospitalization payment criteria, the hospital would be paid through APC 0173. For CY 2009, we are proposing to set the payment rate for mental health composite APC 0034 at the same rate as APC 0173, which is the maximum partial hospitalization per diem payment. We believe this APC payment rate would provide the most appropriate payment for composite APC 0034, taking into consideration the intensity of the mental health services and the differences in the HCPCS codes for mental health services that could be paid through this composite APC compared with the HCPCS codes that could be paid through partial hospitalization APC 0173. Through the I/OCE, when the payment for specified mental health services provided by one hospital to a single beneficiary on one date of service based on the payment rates associated with the APCs for the individual services would exceed the maximum per diem partial hospitalization payment [listed as APC 0173 (Level II Partial Hospitalization (4 or more services))], those specified mental health services would be assigned to APC 0034 (Mental Health Services Composite), which has the same payment rate as APC 0173, and the hospital would be paid one unit of APC 0034. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66651), we clarified that this longstanding policy regarding payment of APC 0034 for combinations of independent mental health services provided in a single hospital encounter resembles the payment policy for composite APCs that we finalized for LDR prostate brachytherapy and cardiac electrophysiologic evaluation and ablation services for CY 2008. Similar to the logic for those two composite APCs, the I/OCE currently determines, and we are proposing for CY 2009 that it would continue to determine, whether to pay these specified mental health services individually or to make a single payment at the same rate as the APC 0173 per diem rate for partial hospitalization for all of the specified mental health services furnished on that date of service. However, we note that this established policy for payment of APC 0034 differs from the payment policies for the LDR prostate brachytherapy and cardiac electrophysiologic evaluation and ablation composite APCs because APC 0034 is only paid if the sum of the individual payment rates for the specified mental health services provided on one date of service exceeds the APC 0034 payment rate. For CY 2008 (72 FR 66651), we changed the status indicator to “Q” for the HCPCS codes that describe the specified mental health services to which APC 0034 applies because those codes are conditionally packaged when the sum of the payment rates for the single code APCs to which they are assigned exceeds the per diem payment rate for partial hospitalization. For CY 2009, we are proposing to change the status indicator from “Q” (Packaged Services Subject to Separate Payment under OPPS Payment Criteria) to “Q3,” (Codes that May be Paid Through a Composite APC), for those HCPCS codes that describe the specified mental health services to which APC 0034 applies. This is consistent with our proposal to change the status indicator from “Q” to “Q3” for all HCPCS codes that may be paid through composite APCs, in order to further refine our identification of the different types of conditionally packaged HCPCS codes that were previously all assigned the same status indicator “Q” under the OPPS. We are proposing to apply this status indicator policy to the HCPCS codes that are assigned to composite APC 0034 in Addendum M to this proposed rule. We are also proposing to change the status indicator from “P” (Partial Hospitalization) to “S” (Significant Procedure, Not Discounted when Multiple), for APC 0034. Although APC 0034 has been historically assigned status indicator “P” under the OPPS, this APC provides payment for mental health services that are furnished in an HOPD outside of a partial hospitalization program. This proposed status indicator change should have no practical implications for hospitals from a billing or payment perspective. Rather, we believe that it is more appropriate to assign status indicator “S” to an APC that describes mental health services that are provided outside of a partial hospitalization program. We refer readers to section XIII.A. of this proposed rule for a complete discussion of status indicators and our proposed status indicator changes for CY 2009. In summary, we are not proposing a change to the longstanding payment policy under which the OPPS pays one unit of APC 0034 in cases in which the total payments for specified mental health services provided on the same date of service would otherwise exceed the payment rate for APC 0173. However, we are proposing to change the status indicator to “Q3” for the HCPCS codes for the mental health services to which this policy applies, consistent with our belief that payment for these services should be packaged into a single payment made at the same rate as a day of partial hospitalization unless the sum of the individual payments for these codes would be less than the payment for composite APC 0034.
(5)Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) Under current OPPS policy, hospitals receive a full APC payment for each imaging service on a claim, regardless of how many procedures are performed during a single session using the same imaging modality or whether the procedures are performed on contiguous body areas. In response to a 2005 MedPAC recommendation to reduce the technical component payment for multiple imaging services performed on contiguous body areas, CMS proposed a payment reduction policy for multiple imaging procedures performed on contiguous body areas in both the CY 2006 MPFS proposed rule (70 FR 45849 through 45851) and the CY 2006 OPPS proposed rule (70 FR 42748 through 42751). In the March 2005 MedPAC report entitled, “Report to the Congress: Medicare Payment Policy,” MedPAC concluded that Medicare's physician's office payment rates for imaging services were based on each service being provided independently and that the rates did not account for efficiencies that may be gained when multiple studies using the same imaging modality are performed in the same session. In both the CY 2006 MPFS proposed rule (70 FR 45849) and the CY 2006 OPPS proposed rule (70 FR 42751), we suggested that although each imaging procedure entails the use of hospital resources, including certain staff, equipment, and supplies, some of those resource costs are not incurred twice when the procedures are performed in the same session and thus, should not be paid as if they were incurred twice. Specifically, for CY 2006, for both the MPFS and the OPPS, we proposed to apply a 50-percent reduction in the payment for certain second and subsequent imaging procedures performed during the same session, similar to the longstanding OPPS policy of reducing payments for certain second and subsequent surgical procedures performed during the same operative session. We developed the 50-percent reduction estimate using MPFS input data to estimate the practice expense resources associated with equipment time and indirect costs that would not occur for the second and subsequent procedures. We proposed that the reduction would apply only to individual services within 11 designated imaging families, which were comprised of procedures utilizing similar modalities across contiguous body areas and developed based on MPFS billing data. The imaging modalities included in the proposal were ultrasound, computed tomography (CT), computed tomographic angiography (CTA), magnetic resonance imaging (MRI), and magnetic resonance angiography (MRA). Prior to making the proposal for the OPPS, we confirmed that the CY 2004 OPPS claims for the CY 2006 OPPS update demonstrated comparable clustering of imaging procedures by modality and within family. The OPPS and MPFS imaging services provided across families would not be subject to the reduction policy as proposed for CY 2006. The proposed 11 families of imaging services were as follows: • Ultrasound (Chest/Abdomen/Pelvis-Non-Obstetrical) • CT and CTA (Chest/Thorax/Abd/Pelvis) • CT and CTA (Head/Brain/Orbit/Maxillofacial/Neck) • MRI and MRA (Chest/Abd/Pelvis) • MRI and MRA (Head/Brain/Neck) • MRI and MRA (Spine) • CT (Spine) • MRI and MRA (Lower Extremities) • CT and CTA (Lower Extremities) • MR and MRI (Upper Extremities and Joints) • CT and CTA (Upper Extremities) In response to the multiple imaging payment reduction policy proposed for the CY 2006 OPPS (70 FR 68707 through 68708), several commenters requested that we postpone implementation until we performed further analyses and were able to find more substantial, hospital-based data to support the 50-percent payment reduction rather than base the policy on MPFS data. Commenters argued that, unlike a relative value unit
(RVU)estimate of the total resources associated with a single service for the MPFS, the OPPS cost-based methodology already incorporates the efficiencies of performing multiple procedures during the same session and that median cost estimates for single procedures reflect these savings. Specifically, an imaging CCR consists of the labor and allocated capital and overhead costs for all imaging provided in a department specified by each hospital on its cost report, divided by the total charges for all imaging services provided. In short, commenters stated that because the OPPS cost estimates used for setting the OPPS payment rates for imaging services already reflect costs for a department in general, the CCR used to adjust charges to costs currently incorporated savings from the imaging efficiencies associated with multiple procedures provided in a single session. By applying this CCR to every charge on a claim, commenters noted that CMS averages multiple imaging efficiencies for all imaging services across all service costs estimated with the departmental CCR. At its August 2005 meeting, the APC Panel heard this and other arguments and recommended that CMS postpone implementation of the policy for a year in order to gather more data on the impact of the proposed changes. In the CY 2006 OPPS final rule with comment period (70 FR 68516), we acknowledged that, based on our analysis of how hospitals report charges and costs for diagnostic radiology services, it may be correct that the median costs from hospital claims data for the imaging services in the 11 families proposed for the reduction policy already reflect reduced median costs based, in part, on hospitals' provision of multiple imaging services in a single session. However, we expressed concern that the marginal effect of imaging efficiencies on a given CCR may be negligible, thereby underestimating the impact of multiple imaging efficiencies, especially where hospitals reported all diagnostic radiology services in one cost center and did not split the costs and charges for advanced imaging with CT, MRI, or ultrasound into separate cost centers. Because efficiencies are inherent in our cost methodology, our analysis did not provide a definitive answer regarding how much, on average, the OPPS median costs for single imaging services in the 11 families are reduced due to existing hospital efficiencies related to multiple services provided in a single session. Accordingly, we did not implement a multiple imaging payment reduction policy for the OPPS in CY 2006 (a modified MPFS multiple imaging payment reduction policy was implemented with a 25-percent reduction policy for certain second and subsequent imaging services for CY 2006, and that same reduction policy currently remains in effect under the MPFS). In the CY 2006 OPPS final rule with comment period (70 FR 68707 through 68708), we stated that, depending upon the results of future analyses, we might revisit this issue and propose revisions to the structure of our payment rates for imaging procedures in order to ensure that those rates properly reflect the relative costs of initial and subsequent imaging procedures. Since publication of the CY 2006 OPPS final rule with comment period, MedPAC has encouraged us to continue our analyses in order to improve payment accuracy for imaging services under the OPPS, including considering adopting a multiple procedure payment reduction policy. In preparation for the CY 2009 OPPS proposed rule, we revisited the issue of how we could improve the accuracy of OPPS payment for multiple imaging services and incorporate the lower marginal cost for conducting second and subsequent imaging procedures in the same imaging session. As already noted, for CY 2008, we developed a composite APC methodology to provide a single payment for two or more major independent services that are typically performed together during a single operative session and that result in the provision of a complete service (72 FR 66650 through 66652). The composite APCs for LDR prostate brachytherapy services and cardiac electrophysiologic evaluation and ablation services discussed in sections II.A.2.e.(2) and (3), respectively, of this proposed rule are classic examples. Providing one payment for an entire session encourages hospitals to closely evaluate the resources they use for all components of the composite service in order to improve their payment relative to the costs of performing the composite service. We decided to explore capturing efficiencies for multiple imaging procedures through a composite APC payment methodology when a hospital provides more than one imaging procedure using the same modality during a single session. We began by reexamining the 11 imaging families of HCPCS codes for contiguous body areas involving a single imaging modality that we had proposed for CY 2006 and that are currently in use under the MPFS for the multiple imaging procedure payment reduction policy. We based this code-specific analysis on the HCPCS codes recognized under the OPPS for the same services that are included in the 11 CY 2008 MPFS imaging families, and in addition, we incorporated the 10 HCPCS codes that are proposed for inclusion in these 11 families for the CY 2009 MPFS. We collapsed the 11 MPFS imaging families into 3 OPPS imaging families according to their modality—1 for ultrasound, 1 for CT and CTA, and 1 for MRI and MRA services. These larger OPPS imaging families generally correspond to the larger APC groups of services paid under OPPS relative to the service-specific payment under the MPFS. We believe that these larger OPPS imaging families are appropriate because eliminating the contiguous body area concept that is central to the MPFS imaging families should not significantly limit potential efficiencies in an imaging session. For example, we would not expect second and subsequent imaging services of the same modality involving noncontiguous body areas to require duplicate facility services such as greeting the patient, providing education and obtaining consent, retrieving prior exams, setting up an intravenous infusion, and preparing and cleaning the room, any more than second and subsequent imaging procedures of the same modality on contiguous body areas. The contiguous body area concept was a component of MedPAC's recommendation for reducing physician payment, but we believe it is less appropriate for a single, session-based OPPS composite imaging payment. In addition, using these collapsed OPPS families would add only 12 percent additional claims to those eligible for composite payment relative to using the 11 MPFS imaging families, suggesting that under the OPPS, multiple imaging claims are within the same imaging modality and involve contiguous body areas the vast majority of the time. Nevertheless, the three OPPS imaging families would allow us to capture additional claims for payment under an imaging composite payment methodology. Another unique aspect of imaging services for OPPS ratesetting, in general, is their inclusion on our bypass list and contribution to creating “pseudo” single claims, particularly those services that are specifically performed without the administration of contrast. Our creation of “pseudo” single claims from multiple procedure claims is discussed in section II.A.1.b. of this proposed rule. In beginning to model these potential multiple imaging composite APCs, we noted that there would be overlap between the bypass list and noncontrast imaging HCPCS codes that are included in the three OPPS imaging families. The bypass process removes any line-item for a bypass HCPCS code, irrespective of units, from multiple procedure claims. The line-item information is used to make at least one “pseudo” single bill and the line-items remaining on the claim are split by date and reassessed for single bill status. To model the median costs for the potential multiple imaging composite APCs, we removed any HCPCS codes in the OPPS imaging families that overlap with codes on our bypass list to avoid splitting claims with multiple units or multiple occurrences of codes in an OPPS imaging family into new “pseudo” single claims. The imaging HCPCS codes that we removed from the bypass list for purposes of calculating proposed multiple imaging composite APC median costs appear in Table 7 below. (We refer readers to section II.A.1.b. of this proposed rule for further discussion of how we treat claims with HCPCS codes in the OPPS imaging families that are also on the bypass list.) We integrated the identification of imaging composite “single session” claims, that is, claims with multiple imaging procedures within the same family on the same date of service, into the creation of “pseudo” single claims to ensure that claims were split in the “pseudo” single process into accurate reflections of either a composite “single session” imaging service or a standard sole imaging service resource cost. Like all single bills, the new composite “single session” claims were for the same date of service and contained no other separately paid services in order to isolate the session imaging costs. Our last step after processing all claims through the “pseudo” single process was to make line-items for HCPCS codes in the OPPS imaging families remaining on multiple procedure claims with one unit of the imaging HCPCS code and no other imaging services in the families into “pseudo” single bills for use in calculating the median costs for sole imaging services. Table 7.—Proposed OPPS Imaging Family Services Overlapping With HCPCS Codes on the Proposed CY 2009 Bypass List Family 1—Ultrasound 76700 Us exam, abdom, complete. 76705 Echo exam of abdomen. 76770 Us exam abdo back wall, comp. 76775 Us exam abdo back wall, lim. Family 1—Ultrasound 76776 Us exam k transpl w/doppler. 76856 Us exam, pelvic, complete. 76870 Us exam, scrotum. 76857 Us exam, pelvic, limited. Family 2—CT and CTA With and Without Contrast 70450 Ct head/brain w/o dye. 70480 Ct orbit/ear/fossa w/o dye. 70486 Ct maxillofacial w/o dye. 70490 Ct soft tissue neck w/o dye. 71250 Ct thorax w/o dye. 72125 Ct neck spine w/o dye. 72128 Ct chest spine w/o dye. 72131 Ct lumbar spine w/o dye. 72192 Ct pelvis w/o dye. 73200 Ct upper extremity w/o dye. 73700 Ct lower extremity w/o dye. 74150 Ct abdomen w/o dye. Family 3—MRI and MRA With and Without Contrast 70336 Magnetic image, jaw joint. 70544 Mr angiography head w/o dye. 70551 Mri brain w/o dye. 72141 Mri neck spine w/o dye. 72146 Mri chest spine w/o dye. 72148 Mri lumbar spine w/o dye. 73218 Mri upper extremity w/o dye. Family 3—MRI and MRA With and Without Contrast 73221 Mri joint upr extrem w/o dye. Family 3—MRI and MRA With and Without Contrast 73718 Mri lower extremity w/o dye. 73721 Mri jnt of lwr extre w/o dye. One final requirement of our assessment of multiple imaging composite APCs was our expansion of the OPPS families for the three modalities—ultrasound, CT and CTA, and MRI and MRA—into five composite APCs to accommodate the statutory requirement in section 1833(t)(2)(G) of the Act, that the OPPS provide payment for imaging services provided with contrast and without contrast through separate payment groups. Ultrasound studies do not utilize contrast and thus this family constituted a single composite APC. However, we had to split the families for CT and CTA, and MRI and MRA, into two separate composite APCs each to reflect whether the procedures were performed with or without contrast. We examined the HCPCS codes on our “single session” claims, and if the claim had at least one HCPCS code that was performed with contrast, we classified the “single session” bill as “with contrast.” We then recalculated the median costs for the standard (sole service) imaging APCs based on single and “pseudo” single bills and the imaging composite APC median costs based on appropriate “single session” bills with multiple imaging procedures. We were able to identify 1.7 million “single session” claims out of an estimated 4 million potential composite cases from our ratesetting claims database, or almost half of all eligible claims, to calculate median costs for the 5 OPPS multiple imaging composite APCs. We used 8 million single and “pseudo” single claims to set the medians for the standard (sole service) APCs for the same imaging procedures. We specifically note that the proposed CY 2009 payment rates for multiple imaging services provided during the same session and within the same OPPS imaging family are based entirely on median costs derived empirically from OPPS claims and Medicare cost report data. In general, we found that the per service median cost for each of the multiple imaging procedures performed during a single session, and reflected in the composite APC median costs, was modestly less than the sole service median cost when only one imaging service was performed during a single session, as reflected in the median cost of the standard (sole service) imaging APCs (that is, those imaging services that would not have qualified for payment through a multiple imaging composite APC under the proposed composite methodology). However, we also noticed that the proposed CY 2009 median costs for the standard (sole service) imaging APCs increased slightly compared to the median costs that we would calculate using the current OPPS imaging service payment policy. These variations in median costs are consistent with our expectations. Because the OPPS cost-based payment weight methodology estimates a standard cost per imaging procedure for each hospital, these results suggest that the imaging composite “single session” claims disproportionately represent services furnished by more efficient providers that frequently perform more than one imaging procedure during a single session. The lower cost claims also may include more providers that appropriately report costs and charges for nonstandard cost centers for advanced imaging on their cost reports. In light of these findings, we determined that a proposal to revise our methodology for paying for multiple imaging procedures is warranted because the current OPPS policy of providing a full APC payment for each imaging service on a claim, regardless of how many procedures are performed during a single session using the same imaging modality, neither reflects nor promotes the efficiencies hospitals can achieve when they perform multiple imaging procedures during a single session, as seen in the claims data. Therefore, we are proposing to utilize the three OPPS imaging families discussed above, incorporating statutory requirements to differentiate OPPS payment for imaging services provided with contrast and without contrast as required by section 1833(t)(2)(G) of the Act, to create five multiple imaging composite APCs for payment in CY 2009. The proposed APCs are: APC 8004 (Ultrasound Composite); APC 8005 (CT and CTA without Contrast Composite); APC 8006 ( CT and CTA with Contrast Composite); APC 8007 (MRI and MRA without Contrast Composite); and APC 8008 (MRI and MRA with Contrast Composite). We calculated the proposed median costs for these APCs using CY 2007 claims data by isolating “single session” claims with more than one imaging service within a family as discussed above. Unlike our CY 2006 proposal where we would have applied a 50-percent payment reduction for second and subsequent imaging procedures comparable to the proposed MPFS policy, the CY 2009 OPPS proposal would calculate the composite APC payment amounts empirically from estimated costs on claims for multiple imaging services provided in a single session. This proposed composite methodology for multiple imaging services parallels the payment methodologies that we are proposing for other composite APCs under the CY 2009 OPPS. Table 8 below presents the HCPCS codes comprising the three OPPS imaging families and five composite APCs that would be created under this proposal for CY 2009, along with the proposed median costs upon which the payment rates for these composite APCs would be based. The HCPCS codes included in Table 8 are assigned status indicator “Q3” in Addendum B to this proposed rule to identify their status as potentially payable through a composite APC. Their composite APC assignments are identified in Addendum M to this proposed rule. To implement this proposed policy, we would provide one composite APC payment each time a hospital bills more than one procedure described by the HCPCS codes in one OPPS imaging family displayed in Table 8 below on a single date of service. If the hospital performs a procedure without contrast during the same session as at least one other procedure with contrast using the same imaging modality, then the hospital would receive payment for the “with contrast” composite APC. A single imaging procedure, or imaging procedures reported with HCPCS codes assigned to different OPPS imaging families, would be paid according to the standard OPPS methodology through the standard (sole service) imaging APCs to which they are proposed for assignment in CY 2009. We are proposing that hospitals would continue to use the same HCPCS codes to report imaging services, and that the I/OCE would determine when combinations of imaging procedures would qualify for composite APC payment or would map to standard APCs for payment. We would make a single payment for those imaging services that qualify for composite APC payment, as well as the packaged services furnished on the same date of service. The proposed composite APCs would have status indicators of “S,” signifying that payment for the APC would not be reduced when appearing on the same claim with other significant procedures. Table 8.—Proposed OPPS Imaging Families and Multiple Imaging Procedure Composite APCs Family 1—Ultrasound APC 8004 (Ultrasound Composite) Proposed CY 2009 Median Cost = $194.14 76604 Us exam, chest. 76700 Us exam, abdom, complete. 76705 Echo exam of abdomen. 76770 Us exam abdo back wall, comp. 76775 Us exam abdo back wall, lim. 76776 Us exam k transpl w/Doppler. 76831 Echo exam, uterus. 76856 Us exam, pelvic, complete. 76870 Us exam, scrotum. 76857 Us exam, pelvic, limited. Family 2—CT and CTA With and Without Contrast APC 8005 (CT and CTA without Contrast Composite) * Proposed CY 2009 Median Cost = $422.98 0067T Ct colonography;dx. 70450 Ct head/brain w/o dye. 70480 Ct orbit/ear/fossa w/o dye. 70486 Ct maxillofacial w/o dye. 70490 Ct soft tissue neck w/o dye. 71250 Ct thorax w/o dye. 72125 Ct neck spine w/o dye. Family 2—CT and CTA With and Without Contrast APC 8005 (CT and CTA without Contrast Composite) * Proposed CY 2009 Median Cost = $422.98 72128 Ct chest spine w/o dye. 72131 Ct lumbar spine w/o dye. 72192 Ct pelvis w/o dye. 73200 Ct upper extremity w/o dye. 73700 Ct lower extremity w/o dye. 74150 Ct abdomen w/o dye. APC 8006 (CT and CTA with Contrast Composite) Proposed CY 2009 Median Cost = $639.09 70487 Ct maxillofacial w/dye. 70460 Ct head/brain w/dye. 70470 Ct head/brain w/o & w/dye. 70481 Ct orbit/ear/fossa w/dye. 70482 Ct orbit/ear/fossa w/o&w/dye. 70488 Ct maxillofacial w/o & w/dye. 70491 Ct soft tissue neck w/dye. 70492 Ct sft tsue nck w/o & w/dye. 70496 Ct angiography, head. 70498 Ct angiography, neck. 71260 Ct thorax w/dye. 71270 Ct thorax w/o & w/dye. 71275 Ct angiography, chest. 72126 Ct neck spine w/dye. 72127 Ct neck spine w/o & w/dye. 72129 Ct chest spine w/dye. 72130 Ct chest spine w/o & w/dye. 72132 Ct lumbar spine w/dye. 72133 Ct lumbar spine w/o & w/dye. 72191 Ct angiograph pelv w/o&w/dye. 72193 Ct pelvis w/dye. 72194 Ct pelvis w/o & w/dye. 73201 Ct upper extremity w/dye. 73202 Ct uppr extremity w/o&w/dye. 73206 Ct angio upr extrm w/o&w/dye. Family 2—CT and CTA With and Without Contrast APC 8006 (CT and CTA with Contrast Composite) Proposed CY 2009 Median Cost = $639.09 73701 Ct lower extremity w/dye. 73702 Ct lwr extremity w/o&w/dye. 73706 Ct angio lwr extr w/o&w/dye. 74160 Ct abdomen w/dye. 74170 Ct abdomen w/o & w/dye. 74175 Ct angio abdom w/o & w/dye. 75635 Ct angio abdominal arteries. * If a “without contrast” CT or CTA procedure is performed during the same session as a “with contrast” CT or CTA procedure, the I/OCE will assign APC 8006 rather than APC 8005. Family 3—MRI and MRA With and Without Contrast APC 8007 (MRI and MRA without Contrast Composite) * Proposed CY 2009 Median Cost = $724.66 70336 Magnetic image, jaw joint. 70540 Mri orbit/face/neck w/o dye. 70544 Mr angiography head w/o dye. 70547 Mr angiography neck w/o dye. 70551 Mri brain w/o dye. 70554 Fmri brain by tech. 71550 Mri chest w/o dye. 72141 Mri neck spine w/o dye. 72146 Mri chest spine w/o dye. 72148 Mri lumbar spine w/o dye. 72195 Mri pelvis w/o dye. 73218 Mri upper extremity w/o dye. 73221 Mri joint upr extrem w/o dye. 73718 Mri lower extremity w/o dye. 73721 Mri jnt of lwr extre w/o dye. 74181 Mri abdomen w/o dye. 75557 Cardiac mri for morph. 75559 Cardiac mri w/stress img. C8901 MRA w/o cont, abd. Family 3—MRI and MRA With and Without Contrast APC 8007 (MRI and MRA without Contrast Composite) * Proposed CY 2009 Median Cost = $724.66 C8904 MRI w/o cont, breast, uni. C8907 MRI w/o cont, breast, bi. C8910 MRA w/o cont, chest. C8913 MRA w/o cont, lwr ext. C8919 MRA w/o cont, pelvis. APC 8008 (MRI and MRA with Contrast Composite) Proposed CY 2009 Median Cost = $1,002.72 70549 Mr angiograph neck w/o&w/dye. 70542 Mri orbit/face/neck w/dye. 70543 Mri orbt/fac/nck w/o & w/dye. 70545 Mr angiography head w/dye. 70546 Mr angiograph head w/o&w/dye. APC 8008 (MRI and MRA with Contrast Composite) Proposed CY 2009 Median Cost = $1,002.72 70548 Mr angiography neck w/dye. 70552 Mri brain w/dye. 70553 Mri brain w/o & w/dye. 71551 Mri chest w/dye. 71552 Mri chest w/o & w/dye. 72142 Mri neck spine w/dye. 72147 Mri chest spine w/dye. 72149 Mri lumbar spine w/dye. 72156 Mri neck spine w/o & w/dye. 72157 Mri chest spine w/o & w/dye. 72158 Mri lumbar spine w/o & w/dye. 72196 Mri pelvis w/dye. 72197 Mri pelvis w/o & w/dye. 73219 Mri upper extremity w/dye. 73220 Mri uppr extremity w/o&w/dye. 73222 Mri joint upr extrem w/dye. 73223 Mri joint upr extr w/o&w/dye. 73719 Mri lower extremity w/dye. 73720 Mri lwr extremity w/o&w/dye. 73722 Mri joint of lwr extr w/dye. Family 3—MRI and MRA With and Without Contrast APC 8008 (MRI and MRA with Contrast Composite) Proposed CY 2009 Median Cost = $1,002.72 73723 Mri joint lwr extr w/o&w/dye. 74182 Mri abdomen w/dye. 74183 Mri abdomen w/o & w/dye. 75561 Cardiac mri for morph w/dye. 75563 Card mri w/stress img & dye. C8900 MRA w/cont, abd. C8902 MRA w/o fol w/cont, abd. C8903 MRI w/cont, breast, uni. C8905 MRI w/o fol w/cont, brst, un. C8906 MRI w/cont, breast, bi. C8908 MRI w/o fol w/cont, breast. C8909 MRA w/cont, chest. C8911 MRA w/o fol w/cont, chest. C8912 MRA w/cont, lwr ext. C8914 MRA w/o fol w/cont, lwr ext. APC 8008 (MRI and MRA with Contrast Composite) Proposed CY 2009 Median Cost = $1,002.72 C8918 MRA w/cont, pelvis. C8920 MRA w/o fol w/cont, pelvis. * If a “without contrast” MRI or MRA procedure is performed during the same session as a “with contrast” MRI or MRA procedure, the I/OCE will assign APC 8008 rather than 8007. 3. Proposed Calculation of OPPS Scaled Payment Weights Using the APC median costs discussed in sections II.A.1. and 2. of this proposed rule, we calculated the proposed relative payment weights for each APC for CY 2009 shown in Addenda A and B to this proposed rule. In years prior to CY 2007, we standardized all the relative payment weights to APC 0601 (Mid Level Clinic Visit) because mid-level clinic visits were among the most frequently performed services in the hospital outpatient setting. We assigned APC 0601 a relative payment weight of 1.00 and divided the median cost for each APC by the median cost for APC 0601 to derive the relative payment weight for each APC. Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all of the relative payment weights to APC 0606 (Level 3 Clinic Visits) because we deleted APC 0601 as part of the reconfiguration of the visit APCs. We selected APC 0606 as the base because APC 0606 was the middle level clinic visit APC (that is, Level 3 of five levels). We had historically used the median cost of the middle level clinic visit APC (that is APC 0601 through CY 2006) to calculate unscaled weights because mid-level clinic visits were among the most frequently performed services in the hospital outpatient setting. Therefore, for CY 2009, to maintain consistency in using a median for calculating unscaled weights representing the median cost of some of the most frequently provided services, we are proposing to continue to use the median cost of the mid-level clinic visit APC, proposed APC 0606, to calculate unscaled weights. Following our standard methodology, but using the proposed CY 2009 median cost for APC 0606, for CY 2009 we assigned APC 0606 a relative payment weight of 1.00 and divided the median cost of each APC by the proposed median cost for APC 0606 to derive the unscaled relative payment weight for each APC. The choice of the APC on which to base the relative weights for all other APCs does not affect the payments made under the OPPS because we scale the weights for budget neutrality. Section 1833(t)(9)(B) of the Act requires that APC reclassification and recalibration changes, wage index changes, and other adjustments be made in a manner that assures that aggregate payments under the OPPS for CY 2009 are neither greater than nor less than the aggregate payments that would have been made without the changes. To comply with this requirement concerning the APC changes, we compared aggregate payments using the CY 2008 relative weights to aggregate payments using the CY 2009 proposed relative weights. Again this year, we included payments to CMHCs in our comparison. Based on this comparison, we adjusted the relative weights for purposes of budget neutrality. The unscaled relative payment weights were adjusted by a weight scaler of 1.3354 for budget neutrality. In addition to adjusting for increases and decreases in weight due to the recalibration of APC medians, the scaler also accounts for any change in the base, other than changes in volume which are not a factor in the weight scaler. The proposed relative payment weights listed in Addenda A and B to this proposed rule incorporate the recalibration adjustments discussed in sections II.A.1. and 2. of this proposed rule. Section 1833(t)(14)(H) of the Act, as added by section 621(a)(1) of Pub. L. 108-173, states that, “Additional expenditures resulting from this paragraph shall not be taken into account in establishing the conversion factor, weighting and other adjustment factors for 2004 and 2005 under paragraph
(9)but shall be taken into account for subsequent years.” Section 1833(t)(14) of the Act provides the payment rates for certain “specified covered outpatient drugs.” Therefore, the cost of those specified covered outpatient drugs (as discussed in section V. of this proposed rule) is included in the budget neutrality calculations for the CY 2009 OPPS. 4. Proposed Changes to Packaged Services a. Background The OPPS, like other prospective payment systems, relies on the concept of averaging, where the payment may be more or less than the estimated costs of providing a service or package of services for a particular patient, but with the exception of outlier cases, is adequate to ensure access to appropriate care. Packaging and bundling payment for multiple interrelated services into a single payment create incentives for providers to furnish services in the most efficient way by enabling hospitals to manage their resources with maximum flexibility, thereby encouraging long-term cost containment. For example, where there are a variety of supplies that could be used to furnish a service, some of which are more expensive than others, packaging encourages hospitals to use the least expensive item that meets the patient's needs, rather than to routinely use a more expensive item. Packaging also encourages hospitals to negotiate carefully with manufacturers and suppliers to reduce the purchase price of items and services or to explore alternative group purchasing arrangements, thereby encouraging the most economical health care. Similarly, packaging encourages hospitals to establish protocols that ensure that necessary services are furnished, while carefully scrutinizing the services ordered by practitioners to maximize the efficient use of hospital resources. Finally, packaging payments into larger payment bundles promotes the stability of payment for services over time. Packaging and bundling also may reduce the importance of refining service-specific payment because there is more opportunity for hospitals to average payment across higher cost cases requiring many ancillary services and lower cost cases requiring fewer ancillary services. Decisions about packaging and bundling payment involve a balance between ensuring some separate payment for individual services and establishing incentives for efficiency through larger units of payment. Over the past several years of the OPPS, greater unpackaging of payment has occurred simultaneously with continued growth in OPPS expenditures as a result of increasing volumes of individual services. In an attempt to address this increase in volume of services, in the CY 2008 OPPS/ASC final rule with comment period, we finalized additional packaging for the CY 2008 OPPS, which included the establishment of four new composite APCs for CY 2008, specifically APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite), APC 8001 (LDR Prostate Brachytherapy Composite), APC 8002 (Level I Extended Assessment & Management Composite), and APC 8003 (Level II Extended Assessment & Management Composite) (72 FR 66650 through 66659). HCPCS codes that may be paid through a composite APC if certain composite-specific criteria are met or otherwise may be paid separately are assigned status indicator “Q” for CY 2008, and we consider them to be conditionally packaged. We discuss composite APCs in more detail in section II.A.2.e. of this proposed rule. In addition, in the CY 2008 OPPS/ASC final rule with comment period, (72 FR 66610 through 66659), we adopted the packaging of payment for items and services in the seven categories listed below into the payment for the primary diagnostic or therapeutic modality to which we believe these items and services are typically ancillary and supportive. The seven categories are: Guidance services, image processing services, intraoperative services, imaging supervision and interpretation services, diagnostic radiopharmaceuticals, contrast media, and observation services. We specifically chose these categories of HCPCS codes for packaging because we believe that the items and services described by the codes in these categories are the HCPCS codes that are typically ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are an integral part of the primary service they support. We finalized our assignment of status indicator “N” to those HCPCS codes that we believe are always integral to the performance of the primary modality, so we always package their costs into the costs of the separately paid primary services with which they are billed. Services assigned status indicator “N” in CY 2008 are unconditionally packaged. We also finalized our assignment of status indicator “Q” to those HCPCS codes that we believe are typically integral to the performance of the primary modality and, in such cases, we package payment for their costs into the costs of the separately paid primary services with which they are usually billed. An “STVX-packaged code” describes a HCPCS code whose payment is packaged when one or more separately paid primary services are furnished in the hospital outpatient encounter. A “T-packaged code” describes a code whose payment is packaged when one or more separately paid surgical procedures are provided during the hospital encounter. “STVX-packaged codes” and “T-packaged codes” are paid separately in those uncommon cases when they do not meet their respective criteria for packaged payment. “STVX-packaged codes” and “T-packaged HCPCS codes” assigned status indicator “Q” in CY 2008 are conditionally packaged. We use the term “dependent service” to refer to the HCPCS codes that represent services that are typically ancillary and supportive to a primary diagnostic or therapeutic modality. We use the term “independent service” to refer to the HCPCS codes that represent the primary therapeutic or diagnostic modality into which we package payment for the dependent service. We note that, in future years as we consider the development of larger payment groups that more broadly reflect services provided in an encounter or episode of care, it is possible that we might propose to bundle payment for a service that we now refer to as “independent.” An example of a CY 2008 change in the OPPS packaging status for a dependent HCPCS code that is ancillary and supportive is CPT code 61795 (Stereotactic computer-assisted volumetric (navigational) procedure, intracranial, extracranial, or spinal (List separately in addition to code for primary procedure)). CPT code 61795 was assigned separate payment in CY 2007 but its payment is packaged during CY 2008. This service is only performed during the course of a surgical procedure. Several of the surgical procedures that we would expect to be reported in association with CPT code 61795 are assigned to APC 0075 (Level V Endoscopy Upper Airway) for CY 2008. We consider the stereotactic guidance service to be an ancillary and supportive service that may be performed only in the same operative session as a procedure that could otherwise be performed independently of the stereotactic guidance service. During its March 2008 meeting, the APC Panel recommended that CMS report to the APC Panel at its first CY 2009 meeting the impact of packaging on the net payments for patient care. We will take this recommendation into consideration and determine which data we can provide at the first CY 2009 APC Panel meeting that would best respond to this recommendation. The APC Panel also recommended that CMS present data at the first CY 2009 APC Panel meeting on usage and frequency, geographic distribution, and size and type of hospitals performing nuclear medicine examinations and using radioisotopes to ensure that access to these services is preserved for Medicare beneficiaries. This recommendation is discussed in more detail in section V.B.2.b. of this proposed rule. Hospitals include charges for packaged services on their claims, and the costs associated with those packaged services are then added to the costs of separately payable procedures on the same claims in establishing payment rates for the separately payable services. We encourage hospitals to report all HCPCS codes that describe packaged services that were provided, unless CPT or CMS provide other guidance. If a HCPCS code is not reported when a packaged service is provided, it can be challenging to track utilization patterns and resource costs. For CY 2009, we are proposing to further refine our identification of the different types of conditionally packaged HCPCS codes that were previously all assigned status indicator “Q” (Packaged Services Subject to Separate Payment under OPPS Payment Criteria) under the OPPS. We are proposing to create and assign status indicators “Q1” / (“STVX-Packaged Codes”), “Q2” (“T-Packaged Codes”), or “Q3” (Codes that may be paid through a composite APC) to each conditionally packaged HCPCS code. We refer readers to section XIII.A.1. of this proposed rule for a complete discussion of status indicators and our proposed status indicator changes for CY 2009. While most conditionally packaged HCPCS codes are assigned to only one of the conditionally packaged categories described above, for CY 2009, we are proposing to assign one particular HCPCS code to two conditionally packaged categories. Specifically, we are proposing to treat CPT code 75635 (Computed tomographic angiography, abdominal aorta and bilateral iliofemoral lower extremity runoff, with contrast material(s), including noncontrast images, if performed, and image postprocessing) as both a “T-packaged code” and a component of composite APC 8006 (CT and CTA with Contrast Composite). We are proposing to assign this code status indicator “Q2” in Addendum B and “Q3” in Addendum M, to signify its dual treatment. For CY 2009, we are proposing to first assess whether CPT code 75635 would be packaged or separately payable, based on its status as a “T-packaged code.” If the service reported with CPT code 75635 would be separately payable due to the absence of another procedure on the claim with status indicator “T” for the same date of service, the code would then be assessed in the context of any other relevant imaging services reported on the claim for the same date of service to determine whether payment for CPT code 75635 under composite APC 8006 would be appropriate. If the criteria for payment of the code under composite APC 8006 are not met, then CPT code 75635 would be separately paid based on the proposed APC 0662 (CT Angiography) and its corresponding proposed payment rate displayed in Addendum B to this proposed rule. b. Service-Specific Packaging Issues
(1)Packaged Services Addressed by APC Panel Recommendations The Packaging Subcommittee of the APC Panel was established to review all packaged HCPCS codes. In deciding whether to package a service or pay for a code separately, we have historically considered a variety of factors, including whether the service is normally provided separately or in conjunction with other services; how likely it is for the costs of the packaged code to be appropriately mapped to the separately payable codes with which it was performed; and whether the expected cost of the service is relatively low. As discussed in section II.A.4.a. of this proposed rule regarding our packaging approach for CY 2008, we established packaging criteria that apply to seven categories of codes whose payments are packaged. Four of the APC Panel's packaging recommendations from its March 2008 meeting reference codes that are included in the seven categories of services that we packaged for CY 2008. For these four recommendations, we specifically applied the packaging considerations that apply to those seven categories of codes in determining whether a code should be proposed as packaged or separately payable for CY 2009. Specifically, we determined whether a service is a dependent service falling into one of the seven specified categories that is always or almost always provided integral to an independent service. For those two APC Panel recommendations that do not fit into any of the seven categories of services that were part of the CY 2008 packaging approach, we applied the packaging criteria noted above that were historically used under the OPPS. Moreover, we took into consideration our interest in possibly expanding the size of payment groups for component services to provide encounter-based or episode-of-care-based payment in the future in order to encourage hospital efficiency and provide hospitals with maximal flexibility to manage their resources. The Packaging Subcommittee reviewed the packaging status of numerous HCPCS codes and reported its findings to the APC Panel at its March 2008 meeting. The APC Panel accepted the report of the Packaging Subcommittee, heard several presentations on certain packaged services, discussed the deliberations of the Packaging Subcommittee, and recommended that— 1. CMS provide additional data to support packaging radiation oncology guidance services for review by the Data Subcommittee at the next APC Panel meeting. 2. CPT code 36592 (Collection of blood specimen using established central or peripheral catheter, venous, not otherwise specified) be treated as an “STVX-packaged code” for CY 2009 and assigned to the same APC as CPT code 36591 (Collection of blood specimen from a completely implantable venous access device) until adequate data are collected that would enable CMS to determine its own payment rate. 3. HCPCS code A4306 (Disposable drug delivery system, flow rate of less than 50 mL per hour) remain packaged for CY 2009. 4. CPT code 74305 (Cholangiography and/or pancreatography; through existing catheter, radiological supervision and interpretation) be treated as a “T-packaged code” for CY 2009 and that CMS consider assigning this code to APC 0263 (Level I Miscellaneous Radiology Procedures). 5. CMS reinstate separate payment for the following intravascular ultrasound and intracardiac echocardiography codes: CPT codes 37250 (Intravascular ultrasound (non-coronary vessel) during diagnostic evaluation and/or therapeutic intervention; initial vessel); 37251 (Intravascular ultrasound (non-coronary vessel) during diagnostic evaluation and/or therapeutic intervention; each additional vessel); 92978 (Intravascular ultrasound (coronary vessel or graft) during diagnostic evaluation and/or therapeutic intervention including imaging supervision, interpretation and report; initial vessel); 92979 (Intravascular ultrasound (coronary vessel or graft) during diagnostic evaluation and/or therapeutic intervention including imaging supervision, interpretation and report; each additional vessel); and 93662 (Intracardiac echocardiography during therapeutic/diagnostic intervention, including imaging supervision and interpretation). 6. CMS continue to package diagnostic radiopharmaceuticals for CY 2009. 7. The Packaging Subcommittee continue its work. We address each of these recommendations in turn in the discussion that follows. Recommendation 1 In response to the APC Panel's recommendation, we are adopting the recommendation and will provide data related to radiation oncology guidance services to the Data Subcommittee at the next APC Panel meeting. For CY 2009, we are proposing to maintain the packaged status of radiation oncology guidance services. These services are ancillary and dependent in relation to the radiation therapy services with which they are most commonly furnished. Consistent with the principles of a prospective payment system, in some cases payment in an individual case exceeds the average cost, and in other cases payment is less than the average cost, but on balance, payment should approximate the relative cost of the average case. While we are aware that some of the radiation oncology guidance codes describe relatively new technologies, we do not believe that beneficiary access to care would be harmed by packaging payment for radiation oncology guidance services. We believe that packaging will create incentives for hospitals and their physician partners to work together to establish appropriate protocols that will eliminate unnecessary services where they exist and institutionalize approaches to providing necessary services more efficiently. Therefore, we see no basis for treating radiation oncology services differently from other guidance services that are ancillary and dependent to the procedures they facilitate. Recommendation 2 For CY 2009, we are adopting the APC Panel recommendation and proposing to treat CPT code 36592 (Collection of blood specimen using established central or peripheral catheter, venous, not otherwise specified) as an “STVX-packaged code” and assigning it to APC 0624 (Phlebotomy and Minor Vascular Access Device Procedures), the same APC to which we are proposing to assign CPT 36591 code (Collection of blood specimen from a completely implantable venous access device). CPT code 36592 became effective January 1, 2008, and was assigned interim status indicator “N” in the CY 2008 OPPS/ASC final rule with comment period. Several members of the public requested that we change the status of this code from unconditionally packaged to conditionally packaged, thereby paying it identically to CPT code 36591. CPT code 36591 also became effective January 1, 2008, and was assigned interim status indicator “Q” with treatment as an “STVX-packaged code” and assignment to APC 0624. CPT code 36591 was a direct replacement for CPT code 36540, which was deleted effective January 1, 2008, but was an “STVX-packaged code” with assignment to APC 0624 for CY 2007. These members of the public stated that the resource costs associated with drawing blood from an established central or peripheral catheter were almost identical to the resources associated with drawing blood from an implanted venous access device. We agree that the resource costs associated with CPT code 36592 are likely similar to the resource costs associated with CPT code 36591. When cost data for CPT code 36592 are available for the CY 2010 OPPS annual update, we will reevaluate whether assignment to APC 0624 continues to be appropriate. In summary, for CY 2009, we are proposing to change the packaged status of CPT code 36592 from unconditionally packaged to conditionally packaged, as an “STVX-packaged code,” which is parallel to the proposed treatment of CPT code 36591. This service would be paid separately when it is provided in an encounter without a service assigned status indicator “S,” “T,” “V,” or “X.” In all other circumstances, its payment would be packaged. As noted above, for CY 2009, we are proposing to further refine our identification of the different types of conditionally packaged HCPCS codes that were previously all assigned status indicator “Q” (Packaged Services Subject to Separate Payment under OPPS Payment Criteria) under the OPPS. Therefore, we are proposing to assign status indicator”Q1” to CPT code 36592 for CY 2009, which indicates that it is an “STVX-packaged code.” We refer readers to section XIII.A.1. for a complete discussion of status indicators and our proposed status indicator changes for CY 2009. We note that we expect hospitals to follow the CPT guidance related to CPT codes 36591 and 36592 regarding when these services should be appropriately reported. Recommendation 3 For CY 2009, we are adopting the APC Panel's recommendation and proposing to maintain the packaged status of HCPCS code A4306 (Disposable drug delivery system, flow rate of less than 50 mL per hour). HCPCS code A4306 describes a disposable drug delivery system with a flow rate of less than 50 mL per hour. Beginning in CY 2007, HCPCS code A4306 is payable under the OPPS with status indicator “N,” indicating that its payment is unconditionally packaged. We packaged this code because it is considered a supply, and under the OPPS it is standard to package payment for all supplies, including implantable and non-implantable supplies, into payment for the procedures in which the supplies are used. In March 2007, we first discussed this code with the APC Panel. A manufacturer noted in a presentation during the March 2007 APC Panel meeting that there is a particular disposable drug delivery system that is reported with HCPCS code A4306 that is specifically used to treat postoperative pain. The manufacturer requested that this code be moved to its own APC for CY 2008 so that the service could receive separate payment. During its September 2007 meeting, the APC Panel recommended that this code remain packaged for CY 2008 and asked CMS to present additional data to the APC Panel when available. During the APC Panel's March 2008 meeting, we provided to the Packaging Subcommittee additional cost data related to this code. Our CY 2007 proposed rule claims data indicate that HCPCS code A4306 was billed on OPPS claims approximately 2,400 times, yielding a line-item median cost of approximately $4. The individual costs for this supply range from $4 per unit to $2,056 per unit. The Packaging Subcommittee suggested that this code may not always be correctly reported by hospitals as the data also show that this code was frequently billed together with computed tomography
(CT)scans of various regions of the body, without surgical procedures on the same date of service. The APC Panel speculated that this code may be currently reported when other types of drug delivery devices are utilized for nonsurgical procedures or for purposes other than the treatment of postoperative pain. It was also noted that hospitals may actually be appropriately reporting HCPCS code A4306, which may be used to describe supplies used for purposes other than postoperative pain relief. In summary, because HCPCS code A4306 represents a supply and payment of supplies is packaged under the OPPS according to longstanding policy, we are proposing to maintain the unconditionally packaged status of HCPCS code A4306 for CY 2009. Recommendation 4 For CY 2009, we are adopting the APC Panel's recommendation and proposing to treat CPT code 74305 (Cholangiography and/or pancreatography; through existing catheter, radiological supervision and interpretation) as a “T-packaged code” and assign it to APC 0263 (Level I Miscellaneous Radiology Procedures). Effective January 1, 2008, CPT code 74305 is unconditionally packaged and falls into the imaging supervision and interpretation category of codes that we created as part of the CY 2008 packaging approach. Several members of the public recently noted that CPT code 74305 may sometimes be provided in a single hospital encounter with CPT code 47505 (Injection procedure for cholangiography through an existing catheter (eg, percutaneous transepatic or T-tube)), which is unconditionally packaged itself, when these are the only two services reported on a claim. In the case where only these two services were performed, the hospital would receive no separate payment. Our claims data indicate that CPT code 74305 is infrequently provided without any other separately payable services on the same date of service. Therefore, for CY 2009, we are proposing to change the packaged status of CPT code 74305 from unconditionally packaged to conditionally packaged, as a “T-packaged code,” which is parallel to the treatment of many other conditionally packaged imaging supervision and interpretation codes. Hospitals would receive separate payment for this service when it appears on a claim without a surgical procedure. The payment for this service would be packaged into payment for a status indicator “T” surgical procedure when it appears on the same date as a surgical procedure. Hospitals that furnish this imaging supervision and interpretation service on the same date as an independent surgical procedure assigned status indicator “T” must bill both services on the same claim. As noted above, for CY 2009, we are proposing to further refine our identification of the different types of conditionally packaged HCPCS codes that were previously all assigned status indicator “Q” (Packaged Services Subject to Separate Payment under OPPS Payment Criteria) under the OPPS. Therefore, we are proposing to assign status indicator “Q2” to CPT code 74305 for CY 2009, which indicates that it is a “T-packaged code.” We refer readers to section XIII.A.1. for a complete discussion of status indicators and our proposed status indicator changes for CY 2009. In summary, for CY 2009, we are proposing to change the status indicator for CPT code 74305 from “N” to “Q2,” with assignment to APC 0263 (Level I Miscellaneous Radiology Procedures) when it would be separately paid. Recommendation 5 For CY 2009, we are proposing to maintain the packaged status of CPT codes 37250 (Intravascular ultrasound (non-coronary vessel) during diagnostic evaluation and/or therapeutic intervention; initial vessel); 37251 (Intravascular ultrasound (non-coronary vessel) during diagnostic evaluation and/or therapeutic intervention; each additional vessel); 92978 (Intravascular ultrasound (coronary vessel or graft) during diagnostic evaluation and/or therapeutic intervention including imaging supervision, interpretation and report; initial vessel); 92979 (Intravascular ultrasound (coronary vessel or graft) during diagnostic evaluation and/or therapeutic intervention including imaging supervision, interpretation and report; each additional vessel); and 93662 (Intracardiac echocardiography during therapeutic/diagnostic intervention, including imaging supervision and interpretation). We are not adopting the APC Panel's recommendation to pay separately for these intraoperative intravascular ultrasound
(IVUS)and intracardiac echocardiography
(ICE)services for CY 2009. These services were newly packaged for CY 2008 because they were members of the intraoperative category of services that were included in the CY 2008 packaging approach. The intraoperative category includes those codes that are reported for supportive dependent diagnostic testing or other minor procedures performed during surgical or other independent procedures. Because these intraoperative IVUS and ICE services support the performance of an independent procedure and they are provided in the same operative session as the independent procedure, we packaged their payment into the OPPS payment for the independent procedure performed. We believe these IVUS and ICE services are always integral to and dependent upon the independent services that they support and, therefore, we believe their payment would be appropriately packaged into the independent procedure. A presenter at the March 2008 APC Panel meeting requested separate payment for these services, noting that they are high cost and provided with relatively low frequency compared to the services they typically accompany. We continue to believe that these services are ancillary and dependent in relation to the independent cardiac and vascular procedures with which they are most commonly furnished. We note that resource cost was not a factor we considered when deciding to package intraoperative services. Packaging payment for items and services that are directly related to performing a procedure, even when those packaged items and services have variable resource costs or different frequencies of use in relationship to one another or to the independent services into which their payment is packaged, has been a principle of the OPPS since the inception of that payment system. For example, once an implantable device is no longer eligible for device pass-through payment, our standard policy is to package the payment for the device into the payment for the procedures with which the device was reported. These former pass-through devices may be high or low cost in relationship to the other costs of the associated surgical procedures, or the devices may be implanted in a large or small proportion of those surgical procedures, but the device payment is nevertheless packaged. We do not believe that the fact that a procedure may be performed with assorted technologies of varying resource costs is a sufficient reason to pay separately for a particular technology that is clearly ancillary and dependent in relationship to independent associated procedures. We acknowledge that the costs associated with packaged services may contribute more or less to the median cost of the independent service, depending on how often the dependent service is billed with the independent service. Consistent with the principles of a prospective payment system, in some cases payment in an individual case exceeds the average cost, and in other cases payment is less than the average cost, but on balance, payment should approximate the relative cost of the average case. While we understand that these services represent technologies that are not commonly used in most institutions, we do not believe that beneficiary access to care would be harmed by packaging payment for IVUS and ICE services. We note that IVUS and ICE services are existing, established technologies and that hospitals have provided some of these services in the HOPD since the implementation of the OPPS in CY 2000. We believe that packaging will create incentives for hospitals and their physician partners to work together to establish appropriate protocols that will eliminate unnecessary services where they exist and institutionalize approaches to providing necessary services more efficiently. Therefore, we see no basis for treating IVUS and ICE services differently from other intraoperative services that are ancillary and dependent to the procedure they facilitate. In summary, we are proposing to maintain the unconditionally packaged status of CPT codes 37250, 37251, 92978, 92979, and 93662 for CY 2009. Recommendation 6 For CY 2009, we are adopting the APC Panel recommendation and proposing to maintain the packaged status of diagnostic radiopharmaceuticals. This recommendation is discussed in detail in section V.B.2.b. of this proposed rule. Recommendation 7 In response to the APC Panel's recommendation for the Packaging Subcommittee to remain active until the next APC Panel meeting, we note that the APC Panel Packaging Subcommittee remains active, and additional issues and new data concerning the packaging status of codes will be shared for its consideration as information becomes available. We continue to encourage submission of common clinical scenarios involving currently packaged HCPCS codes to the Packaging Subcommittee for its ongoing review, and we also encourage recommendations of specific services or procedures whose payment would be most appropriately packaged under the OPPS. Additional detailed suggestions for the Packaging Subcommittee should be submitted by e-mail to *APCPanel@cms.hhs.gov* with Packaging Subcommittee in the subject line.
(2)IVIG Preadministration-Related Services We are proposing to package payment for HCPCS code G0332 (Services for intravenous infusion of immunoglobulin prior to administration (this service is to be billed in conjunction with administration of immunoglobulin)) for CY 2009. Immune globulin is a complicated biological product that is developed from human plasma obtained from human plasma donors. Its purification is a complex process that occurs along a very long timeline and, therefore, only a small number of manufacturers provide commercially available products. In past years, there have been issues reported with the supply of intravenous immune globulin
(IVIG)due to numerous factors, including decreased manufacturing capacity, increased usage, more sophisticated processing steps, and low demand for byproducts from IVIG fractionation. Under the OPPS, the current CY 2008 payment methodology for IVIG treatments consists of three components, which include payment for the drug itself (described by a HCPCS J-code), administration of the IVIG product (described by one or more CPT codes), and the preadministration-related services (HCPCS code G0332). The CY 2009 proposed OPPS payment rates for IVIG products are established based on the Part B ASP drug methodology, as discussed further in section V.B.3. of this proposed rule. Under the OPPS, payment is made separately for the administration of IVIG and those services are reported using the CPT code for the first hour and, as needed, additional hour CPT infusion codes. The CY 2009 proposed OPPS payments for drug administration services are discussed in section VIII.B. of this proposed rule. As explained in detail in the CY 2006 OPPS, CY 2007 OPPS/ASC, and CY 2008 OPPS/ASC final rules with comment period (70 FR 68648 to 68650, 71 FR 68092 to 68093, and 72 FR 66697 to 66698, respectively), we temporarily paid separately for the IVIG preadministration-related services in CY 2006 through CY 2008 because of reported instability in the IVIG marketplace due, in part, to the implementation of the new ASP payment methodology for IVIG drugs. Under the CY 2006 and CY 2007 OPPS, HCPCS code G0332 was assigned to New Technology APC 1502 (New Technology—Level II ($50-$100)), with a payment rate of $75. For CY 2008, HCPCS code G0332 was reassigned to APC 0430 (Drug Preadministration-Related Services), with a payment rate of approximately $38 set prospectively based on robust CY 2006 claims data for this code. In addition, a separate payment for HCPCS code G0332 has been made under the MPFS during the same time period, CY 2006 to CY 2008. We specifically indicated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66697 through 66698) that we would consider packaging payment for HCPCS code G0332 in future years and that we intended to reevaluate the appropriateness of separate payment for IVIG preadministration-related services for the CY 2009 OPPS rulemaking cycle, especially as we explore the potential for greater packaging under the OPPS. We note that the Office of the Inspector General's (OIG's) study on the availability and pricing of IVIG published in a report in April 2007 entitled, “Intravenous Immune Globulin: Medicare Payment and Availability (OEI-03-05-00404),” found that for the third quarter of CY 2006, just over half of the IVIG sales to hospitals and physicians were at prices below Medicare payment amounts. Relative to the previous three quarters, this represented a substantial increase in the percentage of sales with prices below Medicare amounts. We have reviewed national claims data for IVIG drug utilization, as well as utilization of the preadministration-related services HCPCS code. These data show modest increases in the utilization of IVIG drugs and the preadministration-related services code, which suggest that IVIG pricing and access may be improving. IVIG preadministration-related services are dependent services that are always provided in conjunction with other separately payable services, such as drug administration services, and thus are well suited for packaging into the payment for the separately payable services that they usually accompany. The recent findings of the OIG report suggest that stability in the IVIG market had improved in late CY 2006. No other comprehensive studies have been presented to indicate continued instability in market conditions or systematic problems with patient access. In addition, beginning July 1, 2007, six new HCPCS codes for specific IVIG products were adopted to implement separate payment for these products, contributing to generally increased payments for IVIG products and, we believe, improved market stability. Therefore, consistent with our OPPS payment policy for the facility resources expended to prepare for the administration of all other drugs and biologicals under the OPPS, we now believe that payment for the hospital resources required to locate and obtain the appropriate IVIG products and to schedule patients' infusions should be made through the OPPS payment for the associated drug administration services. Furthermore, the cost data that we have gathered for the services described by HCPCS code G0332 since CY 2006, including the line-item median cost for the code of approximately $38 from CY 2007 claims data, indicate that the cost of the services is relatively low. Therefore, because HCPCS code G0332 meets our historical criteria for packaged payment, because we paid separately for these services on a temporary basis only, and because we believe that the reported transient market conditions that led us to adopt the separate payment for IVIG preadministration-related services have improved, we now believe that packaged payment is more appropriate for the CY 2009 OPPS, consistent with our ongoing efforts to expand the size of the OPPS payment bundles. Therefore, we are proposing to assign status indicator “N” to HCPCS code G0332 for CY 2009. We will continue to work with stakeholders of the IVIG industry to understand their concerns regarding the pricing of IVIG and Medicare beneficiary access to this important therapy. The treatment of these services under the MPFS will be addressed separately in the CY 2009 MPFS proposed rule. B. Proposed Conversion Factor Update Section 1833(t)(3)(C)(ii) of the Act requires us to update the conversion factor used to determine payment rates under the OPPS on an annual basis. Section 1833(t)(3)(C)(iv) of the Act provides that, for CY 2009, the update is equal to the hospital inpatient market basket percentage increase applicable to hospital discharges under section 1886(b)(3)(B)(iii) of the Act. The proposed hospital market basket increase for FY 2009 published in the IPPS proposed rule on April 30, 2008 is 3.0 percent (73 FR 23708). To set the proposed OPPS conversion factor for CY 2009, we increased the CY 2008 conversion factor of $63.694, as specified in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66677), by 3.0 percent. Hospitals that fail to meet the reporting requirements of the Hospital Outpatient Quality Data Reporting (HOP QDRP) program are subject to a reduction of 2.0 percentage points from the market basket update to the conversion factor. For a complete discussion of the HOP QDRP program, we refer readers to section XVI. of this proposed rule. In accordance with section 1833(t)(9)(B) of the Act, we further adjust the conversion factor annually to ensure that any revisions we are proposing to our updates for a revised wage index and rural adjustment are made on a budget neutral basis. We calculated an overall budget neutrality factor of 1.0010 for wage index changes by comparing total payments from our simulation model using the FY 2009 IPPS proposed wage index values to those payments using the current (FY 2008) IPPS wage index values. For CY 2009, we are not proposing a change to our rural adjustment policy. Therefore, the budget neutrality factor for the rural adjustment is 1.000. For CY 2009, in this proposed rule, we estimate that allowed pass-through spending for both drugs and biologicals and devices would equal approximately $19 million, which represents 0.07 percent of total projected OPPS spending for CY 2009. Therefore, the conversion factor was also adjusted by the difference between the 0.09 percent pass-through dollars set aside for CY 2008 and the 0.07 percent estimate for CY 2009 pass-through spending. Finally, proposed payments for outliers remain at 1.0 percent of total OPPS payments for CY 2009. The proposed market basket increase update factor of 3.0 percent for CY 2009, the required wage index budget neutrality adjustment of approximately 1.0010, and the proposed adjustment of 0.02 percent of projected OPPS spending for the difference in the pass-through set aside result in a proposed full market basket conversion factor for CY 2009 of $65.684. To calculate the CY 2009 reduced market basket conversion factor for those hospitals that fail to meet the requirements of the HOP QDRP for the full CY 2009 payment update, we made all other adjustments discussed above, but used a reduced market basket increase update factor of 1.0 percent. This results in a proposed reduced market basket conversion factor for CY 2009 of $64.409. C. Proposed Wage Index Changes Section 1833(t)(2)(D) of the Act requires the Secretary to determine a wage adjustment factor to adjust, for geographic wage differences, the portion of the OPPS payment rate, which includes the copayment standardized amount, that is attributable to labor and labor-related cost. This adjustment must be made in a budget neutral manner and budget neutrality is discussed in section II.B. of this proposed rule. The OPPS labor-related share is 60 percent of the national OPPS payment. This labor-related share is based on a regression analysis that determined that approximately 60 percent of the costs of services paid under the OPPS were attributable to wage costs. We confirmed that this labor-related share for outpatient services is still appropriate during our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, we are not proposing to revise this policy for the CY 2009 OPPS. We refer readers to section II.G. of this proposed rule for a description and example of how the wage index for a particular hospital is used to determine the payment for the hospital. As discussed in section II.A.2.c. of this proposed rule, for estimating national median APC costs, we standardize 60 percent of estimated claims costs for geographic area wage variation using the same FY 2009 pre-reclassified wage indices that the IPPS uses to standardize costs. This standardization process removes the effects of differences in area wage levels from the determination of a national unadjusted OPPS payment rate and the copayment amount. As published in the original OPPS April 7, 2000 final rule with comment period (65 FR 18545), the OPPS has consistently adopted the final IPPS wage indices as the wage indices for adjusting the OPPS standard payment amounts for labor market differences. Thus, the wage index that applies to a particular acute short-stay hospital under the IPPS will also apply to that hospital under the OPPS. As initially explained in the September 8, 1998 OPPS proposed rule, we believed and continue to believe that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually. Therefore, in accordance with our established policy, we are proposing to use the final FY 2009 version of the IPPS wage indices used to pay IPPS hospitals to adjust the CY 2009 OPPS payment rates and copayment amounts for geographic differences in labor cost for all providers that participate in the OPPS, including providers that are not paid under the IPPS (referred to in this section as “non-IPPS” providers). We note that the proposed FY 2009 IPPS wage indices continue to reflect a number of adjustments implemented over the past few years, including revised Office of Management and Budget
(OMB)standards for defining geographic statistical areas (Core Based Statistical Areas or CBSAs), reclassification to different geographic areas, rural floor provisions and the accompanying budget neutrality adjustment, an adjustment for out-migration labor patterns, an adjustment for occupational mix, and a policy for allocating hourly wage data among campuses of multicampus hospital systems that cross CBSAs. In addition, our proposed changes to the FY 2009 IPPS wage index also included a revision of the reclassification average hourly wage comparison criteria and a state-level rural floor and imputed floor budget neutrality adjustment applied to the wage index. We refer readers to the FY 2009 IPPS proposed rule (73 FR 23617 through 23639) for a detailed discussion of these proposed changes to the wage index. In addition, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65842 through 65844) and subsequent OPPS rules for a detailed discussion of the history of these wage index adjustments as applied under the OPPS. The IPPS wage index that we are proposing to adopt includes all reclassifications that are approved by the Medicare Geographic Classification Review Board (MGCRB) for FY 2009. We note that reclassifications under section 508 of Pub. L. 108-173 were extended by section 106(a) of the MIEA-TRHCA and were set to terminate September 30, 2007. However, section 117(a)(1) of the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007 (Pub. L. 110-173) further extended geographic reclassifications under section 508 until September 30, 2008. In addition, section 117(a)(2) of the MMSEA extended certain special exception reclassifications as well. On February 22, 2008, we published a notice in the **Federal Register** (73 FR 9807) that indicated how we are implementing section 117(a) of the MMSEA under the IPPS. We also issued a joint signature memorandum on January 28, 2008, that explained how section 117 of the MMSEA would apply to the OPPS. As we stated in that memorandum, while most of the reclassifications extended by the MMSEA would expire September 30, 2008, for both the IPPS and the OPPS (with OPPS hospitals reverting to a previous reclassification or home area wage index from October 1, 2008, to December 31, 2008), special exception wage indices for certain hospitals would be extended through December 31, 2008, under the OPPS in order to give these hospitals the special exception wage index under the OPPS for the same time period as under the IPPS. Because the MMSEA provisions expire in 2008, and are not applicable to FY 2009, we are not making any proposals related to those provisions for the OPPS wage index for CY 2009. For purposes of the OPPS, we are proposing to continue our policy in CY 2009 to allow non-IPPS hospitals paid under the OPPS to qualify for the out-migration adjustment if they are located in a section 505 out-migration county. We note that because non-IPPS hospitals cannot reclassify, they are eligible for the out-migration wage adjustment. Table 4J published in the Addendum to the FY 2009 IPPS proposed rule identifies counties eligible for the out-migration adjustment and providers receiving the adjustment. As we have done in prior years, we are reprinting the Table 4J, as Addendum L to this proposed rule, with the addition of non-IPPS hospitals that would receive the section 505 out-migration adjustment under the CY 2009 OPPS. As stated earlier in this section, we continue to believe that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. Therefore, we are proposing to use the final FY 2009 IPPS wage indices for calculating the OPPS payments in CY 2009. With the exception of the out-migration wage adjustment table (Addendum L to this proposed rule), which includes non-IPPS hospitals paid under the OPPS, we are not reprinting the proposed FY 2009 IPPS wage indices referenced in this discussion of the wage index. We refer readers to the CMS Web site for the OPPS at: *http://www.cms.hhs.gov/providers/hopps* . At this link, the reader will find a link to the proposed FY 2009 IPPS wage indices tables. D. Proposed Statewide Average Default CCRs CMS uses CCRs to determine outlier payments, payments for pass-through devices, and monthly interim transitional corridor payments under the OPPS. Some hospitals do not have a CCR because there is no cost report available. For these hospitals, CMS uses the statewide average default CCRs to determine the payments mentioned above until a hospital's Medicare contractor is able to calculate the hospital's actual CCR from its most recently submitted Medicare cost report. These hospitals include, but are not limited to, hospitals that are new, have not accepted assignment of an existing hospital's provider agreement, and have not yet submitted a cost report. CMS also uses the statewide average default CCRs to determine payments for hospitals that appear to have a biased CCR, that is, the CCR falls outside predetermined floor and ceiling thresholds for a valid CCR, or for hospitals whose most recent cost report reflects an all-inclusive rate status (Section 10.11, Chapter 4, Medicare Claims Processing Manual Pub. 100-04). In this proposed rule, we are proposing to update the default ratios for CY 2009 using the most recent cost report data, and we are proposing to codify our policies for using the default ratios for hospitals that do not have a CCR for outlier payments specifically. We refer readers to section II.F. of this proposed rule where we discuss this proposal for default CCRs as part of our broader proposal to implement an outlier reconciliation process similar to that implemented under the IPPS. For CY 2009, we used our standard methodology of calculating the statewide default CCRs using the same hospital overall CCRs that we use to adjust charges to costs on claims data. Table 9 lists the proposed CY 2009 default urban and rural CCRs by State and compares them to last year's default CCRs. These CCRs are the ratio of total costs to total charges from each provider's most recently submitted cost report, for those cost centers relevant to outpatient services weighted by Medicare Part B charges. We also adjusted ratios from submitted cost reports to reflect final settled status by applying the differential between settled to submitted costs and charges from the most recent pair of final settled and submitted cost reports. We then weighted each hospital's CCR by claims volume corresponding to the year of the majority of cost reports used to calculate the overall CCR. We refer readers to section II.E. of the CY 2008 OPPS/ASC final rule with comment period (72 FR 66680 through 66682) and prior OPPS rules for a more detailed discussion of our established methodology for calculating the statewide average default CCRs, including the hospitals used in our calculations and trimming criteria. For this proposed rule, approximately 38 percent of the submitted cost reports represented data for cost reporting periods ending in CY 2005 and 60 percent were for cost reporting periods ending in CY 2006. Table 9 lists the proposed CY 2009 default urban and rural CCRs by State and compares them to last year's default CCRs. For Maryland, we used an overall weighted average CCR for all hospitals in the nation as a substitute for Maryland CCRs. Few providers in Maryland are eligible to receive payment under the OPPS, which limits the data available to calculate an accurate and representative CCR. In general, observed changes between CY 2008 and CY 2009 are modest and the few significant changes are associated with a small number of hospitals. The national urban and rural CCRs observed for Maryland changed by less than 1 percent. Table 9.—Proposed CY 2009 Statewide Average CCRs State Urban/rural Proposed CY 2009 default CCR Previous default CCR (CY 2008 OPPS final rule) ALASKA RURAL 0.562 0.537 ALASKA URBAN 0.351 0.351 ALABAMA RURAL 0.223 0.228 ALABAMA URBAN 0.210 0.213 ARKANSAS RURAL 0.258 0.266 ARKANSAS URBAN 0.276 0.270 ARIZONA RURAL 0.269 0.264 ARIZONA URBAN 0.232 0.232 CALIFORNIA RURAL 0.223 0.232 CALIFORNIA URBAN 0.221 0.218 COLORADO RURAL 0.355 0.355 COLORADO URBAN 0.251 0.254 CONNECTICUT RURAL 0.394 0.391 CONNECTICUT URBAN 0.337 0.339 DISTRICT OF COLUMBIA URBAN 0.329 0.346 DELAWARE RURAL 0.298 0.302 DELAWARE URBAN 0.368 0.400 FLORIDA RURAL 0.212 0.219 FLORIDA URBAN 0.194 0.198 GEORGIA RURAL 0.273 0.279 GEORGIA URBAN 0.262 0.269 HAWAII RURAL 0.371 0.373 HAWAII URBAN 0.345 0.317 IOWA RURAL 0.346 0.349 IOWA URBAN 0.317 0.325 IDAHO RURAL 0.434 0.445 IDAHO URBAN 0.419 0.414 ILLINOIS RURAL 0.286 0.286 ILLINOIS URBAN 0.272 0.271 INDIANA RURAL 0.306 0.313 INDIANA URBAN 0.299 0.301 KANSAS RURAL 0.317 0.318 KANSAS URBAN 0.241 0.240 KENTUCKY RURAL 0.240 0.244 KENTUCKY URBAN 0.264 0.262 LOUISIANA RURAL 0.280 0.271 LOUISIANA URBAN 0.268 0.277 MARYLAND RURAL 0.307 0.308 MARYLAND URBAN 0.283 0.284 MASSACHUSETTS URBAN 0.342 0.338 MAINE RURAL 0.445 0.433 MAINE URBAN 0.425 0.424 MICHIGAN RURAL 0.326 0.331 MICHIGAN URBAN 0.328 0.318 MINNESOTA RURAL 0.497 0.499 MINNESOTA URBAN 0.340 0.342 MISSOURI RURAL 0.277 0.289 MISSOURI URBAN 0.282 0.292 MISSISSIPPI RURAL 0.265 0.267 MISSISSIPPI URBAN 0.216 0.217 MONTANA RURAL 0.444 0.453 MONTANA URBAN 0.452 0.450 NORTH CAROLINA RURAL 0.284 0.286 NORTH CAROLINA URBAN 0.305 0.321 NORTH DAKOTA RURAL 0.363 0.379 NORTH DAKOTA URBAN 0.357 0.378 NEBRASKA RURAL 0.345 0.347 NEBRASKA URBAN 0.292 0.290 NEW HAMPSHIRE RURAL 0.374 0.375 NEW HAMPSHIRE URBAN 0.311 0.337 NEW JERSEY URBAN 0.272 0.276 NEW MEXICO RURAL 0.270 0.275 NEW MEXICO URBAN 0.344 0.353 NEVADA RURAL 0.311 0.329 NEVADA URBAN 0.200 0.200 NEW YORK RURAL 0.414 0.417 NEW YORK URBAN 0.396 0.402 OHIO RURAL 0.359 0.354 OHIO URBAN 0.263 0.268 OKLAHOMA RURAL 0.279 0.288 OKLAHOMA URBAN 0.241 0.245 OREGON RURAL 0.320 0.321 OREGON URBAN 0.374 0.366 PENNSYLVANIA RURAL 0.285 0.298 PENNSYLVANIA URBAN 0.232 0.241 PUERTO RICO URBAN 0.514 0.474 RHODE ISLAND URBAN 0.295 0.308 SOUTH CAROLINA RURAL 0.260 0.258 SOUTH CAROLINA URBAN 0.245 0.244 SOUTH DAKOTA RURAL 0.333 0.334 SOUTH DAKOTA URBAN 0.269 0.289 TENNESSEE RURAL 0.253 0.256 TENNESSEE URBAN 0.229 0.241 TEXAS RURAL 0.268 0.271 TEXAS URBAN 0.246 0.242 UTAH RURAL 0.417 0.416 UTAH URBAN 0.433 0.406 VIRGINIA RURAL 0.268 0.268 VIRGINIA URBAN 0.275 0.275 VERMONT RURAL 0.409 0.416 VERMONT URBAN 0.408 0.340 WASHINGTON RURAL 0.357 0.358 WASHINGTON URBAN 0.360 0.368 WISCONSIN RURAL 0.399 0.384 WISCONSIN URBAN 0.357 0.362 WEST VIRGINIA RURAL 0.295 0.298 WEST VIRGINIA URBAN 0.361 0.360 WYOMING RURAL 0.421 0.449 WYOMING URBAN 0.333 0.351 E. Proposed OPPS Payment to Certain Rural Hospitals 1. Hold Harmless Transitional Payment Changes Made by Pub. L. 109-171
(DRA)When the OPPS was implemented, every provider was eligible to receive an additional payment adjustment (called either transitional corridor payment or transitional outpatient payment) if the payments it received for covered outpatient department
(OPD)services under the OPPS were less than the payments it would have received for the same services under the prior reasonable cost-based system. Section 1833(t)(7) of the Act provides that the transitional corridor payments are temporary payments for most providers to ease their transition from the prior reasonable cost-based payment system to the OPPS system. There are two exceptions, cancer hospitals and children's hospitals, to this provision and those hospitals receive the transitional corridor payments on a permanent basis. Section 1833(t)(7)(D)(i) of the Act originally provided for transitional corridor payments to rural hospitals with 100 or fewer beds for covered OPD services furnished before January 1, 2004. However, section 411 of Pub. L. 108-173 amended section 1833(t)(7)(D)(i) of the Act to extend these payments through December 31, 2005, for rural hospitals with 100 or fewer beds. Section 411 also extended the transitional corridor payments to sole community hospitals
(SCHs)located in rural areas for services furnished during the period that begins with the provider's first cost reporting period beginning on or after January 1, 2004, and ended on December 31, 2005. Accordingly, the authority for making transitional corridor payments under section 1833(t)(7)(D)(i) of the Act, as amended by section 411 of Pub. L. 108-173, for rural hospitals having 100 or fewer beds and SCHs located in rural areas expired on December 31, 2005. Section 5105 of Pub. L. 109-171 reinstituted the hold harmless transitional outpatient payments
(TOPs)for covered OPD services furnished on or after January 1, 2006, and before January 1, 2009, for rural hospitals having 100 or fewer beds that are not SCHs. When the OPPS payment is less than the payment the provider would have received under the previous reasonable cost-based system, the amount of payment is increased by 95 percent of the amount of the difference between the two payment systems for CY 2006, by 90 percent of the amount of that difference for CY 2007, and by 85 percent of the amount of that difference for CY 2008. For CY 2006, we implemented section 5105 of Pub. L. 109-171 through Transmittal 877, issued on February 24, 2006. We did not specifically address whether TOPs apply to essential access community hospitals (EACHs), which are considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Accordingly, under the statute, EACHs are treated as SCHs. Therefore, we believed and continue to believe that EACHs are not currently eligible for TOPs under Pub. L. 109-171. However, they are eligible for the adjustment for rural SCHs. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68228), we updated § 419.70(d) to reflect the requirements of Pub. L. 109-171. Effective for services provided on or after January 1, 2009, rural hospitals having 100 or fewer beds that are not SCHs will no longer be eligible for hold harmless TOPs, in accordance with section 5105 of Pub. L. 109-171. 2. Proposed Adjustment for Rural SCHs Implemented in CY 2006 Related to Pub. L. 108-173
(MMA)In the CY 2006 OPPS final rule with comment period (70 FR 68556), we finalized a payment increase for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding drugs, biologicals, brachytherapy seeds, and services paid under pass-through payment policy in accordance with section 1833(t)(13)(B) of the Act, as added by section 411 of Pub. L. 108-173. Section 411 gave the Secretary the authority to make an adjustment to OPPS payments for rural hospitals, effective January 1, 2006, if justified by a study of the difference in costs by APC between hospitals in rural and urban areas. Our analysis showed a difference in costs for rural SCHs. Therefore, we implemented a payment adjustment for only those hospitals beginning January 1, 2006. In CY 2007, we became aware that we did not specifically address whether the adjustment applies to EACHs, which are considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68227), for purposes of receiving this rural adjustment, we revised § 419.43(g) to clarify that EACHs are also eligible to receive the rural SCH adjustment, assuming these entities otherwise meet the rural adjustment criteria. Currently, fewer than 10 hospitals are classified as EACHs and as of CY 1998, under section 4201(c) of Pub. L. 105-33, a hospital can no longer become newly classified as an EACH. This adjustment for rural SCHs is budget neutral and applied before calculating outliers and copayment. As stated in the CY 2006 OPPS final rule with comment period (70 FR 68560), we would not reestablish the adjustment amount on an annual basis, but we note that we may review the adjustment in the future and, if appropriate, would revise the adjustment. For CY 2009, we are proposing to continue our current policy of a budget neutral 7.1 percent payment increase for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding drugs, biologicals, and services paid under the pass-through payment policy in accordance with section 1833(t)(13)(B) of the Act. This adjustment is in accordance with section 411 of the MMA, which gave the Secretary the authority to make an adjustment to OPPS payments for rural hospitals, if justified by a study of the difference in costs by APC between hospitals in rural and urban areas. Our past analysis showed a difference in costs only for rural SCHs, and we implemented a payment adjustment for those hospitals beginning January 1, 2006. For CY 2009, we also are proposing to continue to include brachytherapy sources in the group of services eligible for the 7.1 percent payment increase because we are proposing to pay them at prospective rates based on their median costs as calculated from historical claims data. We intend to reassess the 7.1 percent adjustment in the near future by examining differences between urban and rural hospitals' costs using updated claims, cost, and provider information. In that process, we will include brachytherapy sources in each hospital's mix of services. F. Proposed Hospital Outpatient Outlier Payments 1. Background Currently, the OPPS pays outlier payments on a service-by-service basis. For CY 2008, the outlier threshold is met when the cost of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus a $1,575 fixed-dollar threshold. We introduced a fixed-dollar threshold in CY 2005 in addition to the traditional multiple threshold in order to better target outliers to those high cost and complex procedures where a very costly service could present a hospital with significant financial loss. If a hospital meets both of these conditions, the multiple threshold and the fixed-dollar threshold, the outlier payment is calculated as 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment rate. This outlier payment has historically been considered a final payment by longstanding OPPS policy. It has been our policy for the past several years to report the actual amount of outlier payments as a percent of total spending in the claims being used to model the proposed OPPS. An accounting error for CY 2005, CY 2006, and CY 2007 inflated CMS' estimates of OPPS expenditures, which led us to underestimate outlier payment as a percentage of total OPPS spending in prior rules. Total OPPS expenditures have been revised downward, and we have accordingly revised our outlier payment estimates. We further note that the CY 2005 outlier payment estimate included in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010) has not changed based on revised spending estimates. However, we previously stated that CY 2006 outlier payment was equal to 1.1 percent of OPPS expenditures for CY 2006 (72 FR 66685), but based on our revised numbers, actual outlier payments are equal to approximately 1.3 percent of CY 2006 OPPS expenditures. Our current estimate of total outlier payments as a percent of total CY 2007 OPPS payment, using available CY 2007 claims and the revised OPPS expenditure estimate, is approximately 0.9 percent. For CY 2007, the estimated outlier payment was set at 1.0 percent of the total aggregated OPPS payments. Therefore, for CY 2007 we estimate that we paid approximately 0.1 percent less than the CY 2007 outlier target of 1.0 percent of total aggregated OPPS payments. We will update our estimate of CY 2007 outlier spending in the CY 2009 OPPS/ASC final rule with comment period. As explained in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66685), we set our projected target for aggregate outlier payments at 1.0 percent of aggregate total payments under the OPPS for CY 2008. The outlier thresholds were set so that estimated CY 2008 aggregate outlier payments would equal 1.0 percent of aggregate total payments under the OPPS. Using the same set of CY 2007 claims and CY 2008 payment rates, we currently estimate that outlier payments for CY 2008 would be approximately 0.8 percent of total CY 2008 OPPS payments. The difference between 1.0 percent and 0.8 percent is reflected in the regulatory impact analysis in section XXI.B. of this proposed rule. We note that we provide estimated CY 2009 outlier payments for hospitals and CMHCs with claims included in the claims data that we used to model impacts on the CMS Web site in the Hospital-Specific Impacts—Provider-Specific Data file on the CMS Web site at: *http://www.cms.hhs.gov/HospitalOutpatientPPS/* . 2. Proposed Outlier Calculation For CY 2009, we are proposing to continue our policy of setting aside 1.0 percent of aggregate total payments under the OPPS for outlier payments. We are proposing that a portion of that 1.0 percent, specifically 0.07 percent, would be allocated to CMHCs for partial hospitalization program outlier payments. This is the amount of estimated outlier payments that would result from the proposed CMHC outlier threshold of 3.40 times the CY 2009 PHP APC payment rates, as a proportion of all payments dedicated to outlier payments. For further discussion of CMHC outlier payments, we refer readers to section X.B.4. of this proposed rule. To ensure that estimated CY 2009 aggregate outlier payments would equal 1.0 percent of estimated aggregate total payments under the OPPS, we are proposing that the hospital outlier threshold be set so that outlier payments would be triggered when the cost of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus an $1,800 fixed-dollar threshold. This proposed threshold reflects the methodology discussed below, as well as proposed APC recalibration for CY 2009. We calculated the fixed-dollar threshold for this proposed rule using largely the same methodology as we did in CY 2008. For purposes of estimating outlier payments for this proposed rule, we used the CCRs available in the April 2008 update to the OPSF. The claims that we use to model each OPPS update lag by 2 years. For this proposed rule, we used CY 2007 claims to model the CY 2009 OPPS. In order to estimate CY 2009 hospital outlier payments for this proposed rule, we inflated the charges on the CY 2007 claims using the same inflation factor of 1.1204 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2009 IPPS proposed rule. For 1 year, the inflation factor is 1.0585. The methodology for determining this charge inflation factor was discussed in the FY 2009 IPPS proposed rule (73 FR 23710 through 23711). As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65845), we believe that the use of this charge inflation factor is appropriate for the OPPS because, with the exception of the routine service cost centers, hospitals use the same cost centers to capture costs and charges across inpatient and outpatient services. As noted in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68011), we are concerned that we may systematically overestimate the OPPS hospital outlier threshold if we did not apply a CCR inflation adjustment factor. Therefore, we are proposing to apply the same CCR inflation adjustment factor that we proposed to apply for the FY 2009 IPPS outlier calculation to the CCRs used to simulate the CY 2009 OPPS outlier payments that determined the fixed-dollar threshold. Specifically, for CY 2009, we are proposing to apply an adjustment of 0.9920 to the CCRs that are currently in the April 2008 OPSF to trend them forward from CY 2008 to CY 2009. The methodology for calculating this adjustment is discussed in the FY 2009 IPPS proposed rule (73 FR 23710 through 23711). Therefore, to model hospital outliers for this proposed rule, we applied the overall CCRs from the April 2008 OPSF file after adjustment (using the proposed CCR inflation adjustment factor of 0.9920 to approximate CY 2009 CCRs) to charges on CY 2007 claims that were adjusted (using the proposed charge inflation factor of 1.1204 to approximate CY 2009 charges). We simulated aggregated CY 2009 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple constant and assuming that outlier payment would continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2009 OPPS payments. We estimate that a proposed fixed-dollar threshold of $1,800, combined with the proposed multiple threshold of 1.75 times the APC payment rate, would allocate 1.0 percent of aggregated total OPPS payments to outlier payments. We are proposing to continue to make an outlier payment that equals 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment amount when both the 1.75 multiple threshold and the fixed-dollar $1,800 threshold are met. For CMHCs, if a CMHC's cost for partial hospitalization exceeds 3.40 times the payment rate for APC 0172 (Level I Partial Hospitalization (3 services)) or APC 0173 (Level II Partial Hospitalization (4 or more services)), the outlier payment is calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC payment rate. New section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary, in the form and manner required by the Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that will apply to certain outpatient items and services performed by hospitals that are required to report outpatient quality data and that fail to meet the HOP QDRP requirements. For hospitals that fail to meet the HOP QDRP quality data reporting requirements, we are proposing that the hospitals' costs would be compared to the reduced payments for purposes of outlier eligibility and payment calculation. We believe no changes in the regulation text would be necessary to implement this policy because using the reduced payment for these outlier eligibility and payment calculations is contemplated in the current regulations at § 419.43(d). This proposal conforms to current practice under the IPPS in this regard. Specifically, under the IPPS, for purposes of determining the hospital's eligibility for outlier payments, the hospital's estimated operating costs for a discharge are compared to the outlier cost threshold based on the hospital's actual DRG payment for the case. For more information on the HOP QDRP, we refer readers to section XVI. of this proposed rule. 3. Outlier Reconciliation As provided in section 1833(t)(5) of the Act, and described in the CY 2001 final rule with comment period (65 FR 18498), we initiated the use of a provider-specific overall CCR to estimate a hospital's or CMHC's costs from billed charges on a claim to determine whether a service's cost was significantly higher than the APC payment to qualify for outlier payment. Currently, these facility-specific overall CCRs are determined using the most recent settled or tentatively settled cost report for each facility. At the end of the cost reporting period, the hospital or CMHC submits a cost report to its Medicare contractor, who then calculates the overall CCR that is used to determine outlier payments for the facility. We believe the intent of the statute is that outlier payments would be made only in situations where the cost of a service provided is extraordinarily high. For example, under our existing outlier methodology, a hospital's billed current charges may be significantly higher than the charges included in the hospital's overall CCR that is used to calculate outlier payments, while the hospital's costs are more similar to the costs included in the overall CCR. In this case, the hospital's overall CCR used to calculate outlier payments is not representative of the hospital's current charge structure. The overall CCR applied to the hospital's billed charges would estimate an inappropriately high cost for the service, resulting in inappropriately high outlier payments. This is contrary to the goal of outlier payments, which are intended to reduce the hospital's financial risk associated with services that have especially high costs. The reverse could be true as well, if a hospital significantly lowered its current billed charges in relationship to its costs, which would result in inappropriately low outlier payments. For CY 2009, we are proposing to address vulnerabilities in the OPPS outlier payment system that lead to differences between billed charges and charges included in the overall CCR used to estimate cost. Our proposal would apply to all hospitals and CMHCs paid under the OPPS. The main vulnerability in the OPPS outlier payment system is the time lag between the CCRs from the latest settled cost report and current charges that create the potential for hospitals and CMHCs to set their own charges to exploit the delay in calculating new CCRs. A facility can increase its outlier payments during this time lag by increasing its charges significantly in relation to its cost increases. The time lag may lead to inappropriately high CCRs relative to billed charges that overestimate cost, and as a result, greater outlier payments. Therefore, we are taking steps to ensure that outlier payments appropriately account for financial risk when providing an extraordinarily costly and complex service, while only being made for services that legitimately qualify for the additional payment. We believe that some CMHCs may have historically increased and decreased their charges in response to Medicare outlier payment policies. The HHS Office of the Inspector General
(OIG)has published several reports that found that CMHCs took advantage of vulnerabilities in the outpatient outlier payment methodology by increasing their billed charges after their CCRs were established to garner greater outlier payments (DHHS OIG June 2007, A-07-06-0459, page 2). We discuss the OIG's most recent report and accompanying recommendations in section XIV.C. of this proposed rule. We similarly noted in the CY 2004 OPPS final rule with comment period (68 FR 63470) that some CMHCs manipulated their charges in order to inappropriately receive outlier payments. To address these vulnerabilities in the area of the OPPS outlier payment methodology, we are proposing to update our regulations to codify two existing longstanding OPPS policies, as discussed in further detail below. For the CY 2009 OPPS, we are also proposing to incorporate outlier policies comparable to those that have been included in several Medicare prospective payment systems, in particular the IPPS (68 FR 34494). Specifically, we are proposing to allow Medicare contractors to use a different CCR in certain circumstances to estimate costs, and we are proposing to require reconciliation of outlier payments in certain circumstances. We believe that all these proposed changes would address most of the current vulnerabilities present in the OPPS outlier payment system. First, we are proposing to update the regulations to codify two existing outlier policies. These policies are currently stated in Pub 100-04, Chapter 4, section 10.11.1 of the Internet-Only Manual, as updated via Transmittal 1445, Change Request 5946, dated February 8, 2008. To be consistent with our manual instructions, for CY 2009, we are proposing to revise 42 CFR 419.43 to add two new paragraphs (d)(5)(ii) and (d)(5)(iii). Specifically, we are proposing to add new paragraph (d)(5)(ii) to incorporate rules governing the overall ancillary CCR applied to processed claims and new paragraph (d)(5)(iii) to incorporate existing policy governing when a statewide average CCR may be used instead of an overall ancillary CCR. We note that use of a statewide average CCR in the specified cases is to ensure that the most appropriate CCR possible is used for outlier payment calculations. For purposes of this discussion and OPPS payment policy in general, we treat “overall CCR” and “overall ancillary CCR” as synonymous terms that refer to the overall CCR that is calculated based on cost report data, which for hospitals, pertains to a specific set of ancillary cost centers. We are proposing new § 419.43(d)(5)(ii) to specify use of the hospital's or CMHC's most recently updated overall CCR for purposes of calculating outlier payments. Our ability to identify true outlier cases depends on the accuracy of the CCRs. To the extent some facilities may be motivated to maximize outlier payments by taking advantage of the time lag in updating the CCRs, the payment system remains vulnerable to overpayments to individual hospitals or CMHCs. This proposed provision specifies that the overall CCR applied at the time a claim is processed is based on either the most recently settled or tentatively settled cost report, whichever is from the latest cost reporting period. We are also proposing new § 419.43(d)(5)(iii) to describe several circumstances in which a Medicare contractor may substitute a statewide average CCR for a hospital's or CMHC's CCR. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68006), we finalized this policy but inadvertently did not update our regulations. We refer readers to section II.D. of this proposed rule for a more detailed discussion of statewide average CCRs. In summary, Medicare contractors can use a statewide CCR for new hospitals or CMHCs that have not accepted assignment of the existing provider agreement and who have not yet submitted a cost report; for hospitals or CMHCs whose Medicare contractor is unable to obtain accurate data with which to calculate the overall ancillary CCR; and for facilities whose actual CCR is more than 3 standard deviations above the geometric mean of other overall CCRs. For CY 2009, we estimate this upper threshold to be 1.3. While this existing policy minimizes the use of CCRs that are significantly above the mean for cost estimation, facilities with CCRs that fall significantly below the mean would continue to have their actual CCRs utilized, instead of the statewide default CCR. We also are proposing to reevaluate the upper threshold and propose a new upper threshold, if appropriate, through rulemaking each year. These improvements somewhat mitigate, but do not fully eliminate, a hospital's or CMHC's ability to significantly increase its charges in relation to its cost increases each year, thereby receiving significant outlier payments because of the inflated CCR. Therefore, we also are proposing two new policies to more fully address the vulnerabilities described above. Specifically, we are proposing new § 419.43(d)(5)(i) that states that for hospital outpatient services performed on or after January 1, 2009, CMS may specify an alternative CCR or the facility may request an alternative CCR under certain circumstances. The alternative CCR in either case may be either higher or lower than the otherwise applicable CCR. In addition, we are proposing to allow a facility to request that its CCR be prospectively adjusted if the facility presents substantial evidence that the overall CCR that is currently used to calculate outlier payments is inaccurate. Such an alternative CCR may be appropriate if a facility's charges have increased at an excessive rate, relative to the rate of increase among other hospitals or CMHCs. CMS would have the authority to direct the Medicare contractor to calculate a CCR from the cost report that accounts for the increased charges. As explained in greater detail below, we are also proposing new § 419.43(d)(5)(iv) to allow Medicare contractors the administrative discretion to reconcile hospital or CMHC cost reports under certain circumstances. We are proposing to implement a reconciliation process similar to that implemented by the IPPS in FY 2003 (68 FR 34494). This proposed policy would subject certain outlier payments to reconciliation when a hospital or CMHC cost report is settled. While the existing policies described above partially address the vulnerabilities in the OPPS outlier payment system, the proposed reconciliation process would more fully ensure accurate outlier payments for those facilities whose CCRs fluctuate significantly, relative to the CCRs of other facilities. We are proposing that this reconciliation process would only apply to those services provided on or after January 1, 2009. We considered proposing that this reconciliation process would become effective beginning with services provided during the hospital's first cost reporting period beginning in CY 2009 but believe effectuating this policy based upon date of service would be less burdensome for hospitals. We are specifically soliciting public comment related to the effective date for the reconciliation process that would be most administratively feasible for hospitals and CMHCs. We note this reconciliation process would be done on a limited basis in order to ease the administrative burden on Medicare contractors, as well as to focus on those facilities that appear to have improperly manipulated their charges to receive excessive outlier payments. We are proposing to set reconciliation thresholds in the manual, reevaluate them annually, and modify them as necessary. Following current IPPS outlier policy, these thresholds would include a measure of acceptable percent change in a hospital's or CMHC's CCR and an amount of outlier payment involved. We are further proposing that when the cost report is settled, reconciliation of outlier payments would be based on the overall CCR calculated based on the ratio of costs and charges computed from the cost report at the time the cost report coinciding with the service dates is settled. Reconciling these outlier payments would ensure that the outlier payments made are appropriate and that final outlier payments reflect the most accurate cost data. Because reconciliation entails evaluating claims for outlier payments using a revised CCR, this process would not apply to services and items not otherwise subject to outlier payments, including items and services paid at charges reduced to cost. This reconciliation process would require recalculating outlier payments for individual claims. We understand that the aggregate change in a facility's outlier payments cannot be determined because changes in the CCR would affect the eligibility and amount of outlier payment. For example, if a CCR declined, some services may no longer qualify for any outlier payments while other services may qualify for lower outlier payments. Therefore, the only way to accurately determine the net effect of a decrease in an overall CCR on a facility's total outlier payments is to assess the impact on a claim-by-claim basis. At this time, CMS is developing a method for reexamining claims to calculate outlier payments using a revised CCR. Similar to the IPPS, we also are proposing to adjust the amount of final outlier payments determined during reconciliation for the time value of money. A second vulnerability remaining after reconciliation is related to the same issue of the ability of hospitals and CMHCs to manipulate the system by significantly increasing charges in the year the service is performed, and obtaining excessive outlier payments as a result. Even though under the proposal the excess money would be refunded at the time of reconciliation, the facility would have access to excess payments from the Medicare Trust Fund on a short-term basis. In cases of underpayment, the facility would not have had access to appropriate outlier payment for that time period. Accordingly, we believe it is necessary to adjust the amount of the final outlier payment to reflect the time value of the funds for that time period. Therefore, we are proposing to add section § 419.43(d)(6) to provide that when the cost report is settled, outlier payments would be subject to an adjustment to account for the value of the money for the time period in which the money was inappropriately held by the hospital or CMHC. This would also apply where outlier payments were underpaid. In those cases, the adjustment would result in additional payments to hospitals or CMHCs. Any adjustment would be made based on a widely available index to be established in advance by the Secretary, and would be applied from the midpoint of the cost reporting period to the date of reconciliation (or when additional payments are issued, in the case of underpayments). This adjustment to reflect the time value of a facility's outlier payments would ensure that the outlier payment finalized at the time its cost report is settled appropriately reflects the hospital's or CMHC's approximate marginal costs in excess of the APC payments for services, taking into consideration the applicable outlier thresholds. Despite the fact that each individual facility's outlier payments may be subject to adjustment when the cost report is settled, we continue to believe that the hospital multiple and fixed-dollar outlier thresholds should be based on projected payments using the latest available historical data, without retroactive adjustments, to ensure that actual outlier payments are equal to the target spending percentage of total anticipated hospital outpatient spending. The proposed reconciliation process and ability to change overall CCRs are intended only to adjust actual outlier payments so that they most closely reflect true costs rather than artificially inflated costs. These adjustments would be made irrespective of whether total outlier spending targets are met or not. We are not proposing to make any changes to the method that we use to calculate outlier thresholds for CY 2009. The multiple and fixed-dollar outlier thresholds are an important aspect of the prospective nature of the OPPS and key to their importance is their predictability and stability for the prospective payment year. The outlier payment policy is designed to alleviate any financial disincentive hospitals may have in providing any medically necessary care their patients may require, even to those patients who are very sick and would be likely more costly to treat. Preset and publicized OPPS outlier thresholds allow hospitals and CMHCs to approximate their Medicare payment for an individual patient while that patient is still in the hospital. Even though we are proposing to make outlier payments susceptible to a reconciliation based on the facility's actual CCRs during the contemporaneous cost reporting period, the facility should still be in a position to make this approximation. Hospitals and CMHCs have immediate access to the information needed to determine what their CCR will be for a specific time period when their cost report is settled. Even if the final CCR is likely to be different from the ratio used initially to process and pay the claim, hospitals and CMHCs not only have the information available to estimate their CCRs, but they also have the ability to control those CCRs, through the structure and levels of their charges. If we were to make retroactive adjustments to hospital outlier payments to ensure that we met total OPPS outlier spending targets, we would undermine the critical predictability aspect of the prospective nature of the OPPS. Making such an across-the-board adjustment would lead to either more or less outlier payments for all hospitals that would, therefore, be unable to immediately approximate the payment they would receive for especially costly services at the time those services were provided. We believe that it is neither necessary nor appropriate to make such an aggregate retroactive adjustment. For the corresponding proposed regulation text changes, we refer readers to § 419.43(d)(5) and § 419.43(d)(6) of this proposed rule. G. Proposed Calculation of an Adjusted Medicare Payment From the Proposed National Unadjusted Medicare Payment The basic methodology for determining prospective payment rates for HOPD services under the OPPS is set forth in existing regulations at § 419.31, § 419.32, § 419.43 and § 419.44. The payment rate for most services and procedures for which payment is made under the OPPS is the product of the conversion factor calculated in accordance with section II.B. of this proposed rule and the relative weight determined under section II.A. of this proposed rule. Therefore, the national unadjusted payment rate for most APCs contained in Addendum A to this proposed rule and for most HCPCS codes, to which separate payment under the OPPS has been assigned in Addendum B to this proposed rule, was calculated by multiplying the proposed CY 2009 scaled weight for the APC by the proposed CY 2009 conversion factor. We note that section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary, in the form and manner required by the Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that will apply to certain outpatient items and services provided by hospitals that are required to report outpatient quality data and that fail to meet the HOP QDRP requirements. For further discussion of the proposed payment reduction for hospitals that fail to meet the HOP QDRP data reporting requirements, we refer readers to section XVI.D. of this proposed rule. We demonstrate in the steps below how to determine the APC payment that would be made in a calendar year under the OPPS to a hospital that fulfills the HOP QDRP data reporting requirements and to a hospital that fails to meet the HOP QDRP data reporting requirements for a service that has any of the status indicator assignments: “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X” (as defined in Addendum D1 to this proposed rule), in a circumstance in which the multiple procedure discount does not apply and the procedure is not bilateral. Individual providers interested in calculating the proposed payment amount that they specifically would receive for a specific service from the proposed national unadjusted payment rates presented in Addenda A and B to this proposed rule, should follow the formulas presented in the following steps. For purposes of the payment calculations below, we refer to the national unadjusted payment rate for hospitals that meet their HOP QDRP reporting requirements as the “full” national unadjusted payment rate. We refer to the national unadjusted payment rate for hospitals that fail to meet their HOP QDRP reporting requirements as the “reduced” national unadjusted payment rate. The “reduced” national unadjusted payment rate is calculated by multiplying the proposed reporting ratio of 0.981 times the “full” national unadjusted payment rate. The national unadjusted payment rate used in the calculations below is either the “full” national unadjusted payment rate or the “reduced” national unadjusted payment rate, depending on whether the hospital met its HOP QDRP reporting requirements in order to receive the full CY 2009 OPPS increase factor. *Step 1* . Calculate 60 percent (the labor-related portion) of the national unadjusted payment rate. Since the initial implementation of the OPPS, we have used 60 percent to represent our estimate of that portion of costs attributable, on average, to labor. We refer readers to the April 7, 2000 final rule with comment period (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage. We confirmed that this labor-related share for hospital outpatient services is still appropriate during our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553). The formula below is a mathematical representation of Step 1 discussed above and identifies the labor-related portion of a specific payment rate for the specific service. *x − Labor-related portion of the national unadjusted payment rate* *x* = .60 * (national unadjusted payment rate) *Step 2* . Determine the wage index area in which the hospital is located and identify the wage index level that applies to the specific hospital. The wage index values assigned to each area reflect the new geographic statistical areas as a result of revised OMB standards (urban and rural) to which hospitals are assigned for FY 2009 under the IPPS, reclassifications through the Medicare Geographic Reclassification Review Board (MCGRB), section 1886(d)(8)(B) “Lugar” hospitals, and section 401 of Pub. L. 108-173. We note that the reclassifications of hospitals under the section 508 of Pub. L. 108-173 are scheduled to expire on September 30, 2008 and will not be applicable to FY 2009. The wage index values include the occupational mix adjustment described in section II.C. of this proposed rule that was developed for the proposed FY 2009 IPPS payment rates published in the **Federal Register** on April 30, 2008 (73 FR 23624 through 23632). *Step 3* . Adjust the wage index of hospitals located in certain qualifying counties that have a relatively high percentage of hospital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505 of Pub. L. 108-173. Addendum L to this proposed rule contains the qualifying counties and the proposed wage index increase developed for the FY 2009 IPPS and published in the FY 2009 IPPS proposed rule as Table 4J (73 FR 23810 through 23819). This step is to be followed only if the hospital has chosen not to accept reclassification under Step 2 above. *Step 4* . Multiply the applicable wage index determined under Steps 2 and 3 by the amount determined under Step 1 that represents the labor-related portion of the national unadjusted payment rate. The formula below is a mathematical representation of Step 4 discussed above and adjusts the labor-related portion of the national payment rate for the specific service by the wage index. *x* a *− Labor-related portion of the national unadjusted payment rate (wage adjusted)* *x* a = .60 * (national unadjusted payment rate) * applicable wage index. *Step 5* . Calculate 40 percent (the nonlabor-related portion) of the national unadjusted payment rate and add that amount to the resulting product of Step 4. The result is the wage index adjusted payment rate for the relevant wage index area. The formula below is a mathematical representation of Step 5 discussed above and calculates the remaining portion of the national payment rate, the amount not attributable to labor, and the adjusted payment for the specific service. *y − Nonlabor-related portion of the national unadjusted payment rate* *y* = .40 * (national unadjusted payment rate) Adjusted Medicare Payment = *y* + *x* a *Step 6* . If a provider is a SCH, as defined in the regulations at § 412.92, or an EACH, which is considered to be a SCH under section 1886(d)(5)(D)(iii)(III) of the Act, and located in a rural area, as defined in § 412.64(b), or is treated as being located in a rural area under § 412.103, multiply the wage index adjusted payment rate by 1.071 to calculate the total payment. The formula below is a mathematical representation of Step 6 discussed above and applies the rural adjustment for rural SCHs. Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment × 1.071 We have provided examples below of the calculation of both the full and reduced national unadjusted payment rates that will apply to certain outpatient items and services performed by hospitals that meet and that fail to meet the HOP QDRP requirements, using the steps outlined above. For purposes of this example, we will use a provider that is located in Brooklyn, New York that is assigned to CBSA 35644. This provider bills one service that is assigned to APC 0019 (Level I Excision/Biopsy). The proposed CY 2009 full national unadjusted payment rate for APC 0019 is $288.20. The reduced national unadjusted payment rate for a hospital that fails to meet the HOP QDRP requirements would be $282.72. This reduced rate is calculated by multiplying the reporting ratio of 0.981 by the full unadjusted payment rate for APC 0019. The FY 2009 wage index for a provider located in CBSA 35644 in New York is 1.3043. The labor portion of the proposed full national unadjusted payment is $225.54 (.60 × 288.20 × 1.3043). The labor portion of the reduced national unadjusted payment is $221.25 (.60 × 282.72 × 1.3043). The nonlabor portion of the proposed full national unadjusted payment is $115.28 (.40 × $288.20). The nonlabor portion of the reduced national unadjusted payment is $113.08 (.40 × $282.72). The sum of the labor and nonlabor portions of the proposed full national adjusted payment is $340.82 ($225.54 + $115.28). The sum of the reduced national adjusted payment is $334.33 ($221.25 + $113.08). H. Proposed Beneficiary Copayments 1. Background Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining copayment amounts to be paid by beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of the Act specifies that the Secretary must reduce the national unadjusted copayment amount for a covered OPD service (or group of such services) furnished in a year in a manner so that the effective copayment rate (determined on a national unadjusted basis) for that service in the year does not exceed a specified percentage. As specified in section 1833(t)(8)(C)(ii)(V) of the Act, for all services paid under the OPPS in CY 2009, and in calendar years thereafter, the percentage is 40 percent of the APC payment rate. Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered OPD service (or group of such services) furnished in a year, the national unadjusted copayment amount cannot be less than 20 percent of the OPD fee schedule amount. Sections 1834(d)(2)(C)(ii) and (d)(3)(C)(ii) of the Act further require that the copayment for screening flexible sigmoidoscopies and screening colonoscopies be equal to 25 percent of the payment amount. Since the beginning of the OPPS, we have applied the 25-percent copayment to screening flexible sigmoidoscopies and screening colonoscopies. 2. Proposed Copayment For CY 2009, we are proposing to determine copayment amounts for new and revised APCs using the same methodology that we implemented for CY 2004. We refer readers to the November 7, 2003 OPPS final rule with comment period (68 FR 63458). In addition, we are proposing to use the same rounding methodology implemented in CY 2008 in instances where the application of our standard copayment methodology would result in a copayment amount that is less than 20 percent and cannot be rounded, under standard rounding principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687).) The proposed national unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2009 are shown in Addendum A and Addendum B to this proposed rule. As discussed in section XVI.D. of this proposed rule, we are proposing that the Medicare beneficiary's minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies would equal the product of the reporting ratio and the national unadjusted copayment, or the product of the reporting ratio and the minimum unadjusted copayment, respectively, for the service. 3. Calculation of a Proposed Adjusted Copayment Amount for an APC Group Individuals interested in calculating their proposed national copayment liability for a given service provided by a hospital that met or failed to meet its HOP QDRP reporting requirements should follow the formulas presented in the following steps. *Step 1* . Calculate the beneficiary payment percentage for the APC by dividing the APC's national unadjusted copayment by its payment rate. For example, using APC 0019, $71.87 is 24.938 percent of the proposed full national unadjusted payment rate of $288.20. The formula below is a mathematical representation of Step 1 discussed above and calculates national copayment as a percentage of national payment for a given service. *b* = Beneficiary payment percentage *b* = national unadjusted copayment for APC/national unadjusted payment rate for APC *Step 2.* Calculate the appropriate wage-adjusted payment rate for the APC for the provider in question, as indicated in section II.G. of this proposed rule. Calculate the rural adjustment for eligible providers as indicated in section II.G. of this proposed rule. *Step 3.* Multiply the percentage calculated in Step 1 by the payment rate calculated in Step 2. The result is the wage-adjusted copayment amount for the APC. The formula below is a mathematical representation of Step 3 discussed above and applies the beneficiary percentage to the adjusted payment rate for a service calculated under II.G. above, with and without the rural adjustment, to calculate the proposed adjusted beneficiary copayment for a given service. Wage-adjusted copayment amount for the APC = Adjusted Medicare Payment * *b* Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted Medicare Payment * 1.071)* *b* *Step 4* . For a hospital that failed to meet its HOP QDRP reporting requirements, multiply the copayment calculated in Step 3 by the reporting ratio of 0.981. The proposed unadjusted copayments for services payable under the OPPS that would be effective January 1, 2009 are shown in Addenda A and B to this proposed rule. Please note that the proposed national unadjusted payment rates and copayment rates shown in Addenda A and B to this proposed rule reflect the full market basket conversion factor increase as discussed in section XVI.D. of this proposed rule. III. Proposed OPPS Ambulatory Payment Classification
(APC)Group Policies A. Proposed OPPS Treatment of New HCPCS and CPT Codes 1. Proposed Treatment of New HCPCS Codes Included in the April and July Quarterly OPPS Updates for CY 2008 During the April and July quarters of CY 2008, we created a total of 11 new Level II HCPCS codes that were not addressed in the CY 2008 OPPS/ASC final rule with comment period that updated the CY 2008 OPPS. For the April quarter of CY 2008, we recognized for separate payment a total of four new Level II HCPCS codes, specifically C9241 (Injection, doripenem, 10 mg); Q4096 (Injection, von willebrand factor complex, human, ristocetin cofactor (not otherwise specified), per i.u. VWF:RCO); Q4097 (Injection, immune globulin (Privigen), intravenous, non-lyophilized (e.g., liquid), 500 mg); and Q4098 (Injection, iron dextran, 50 mg). For the July quarter of CY 2008, we recognized a total of seven new Level II HCPCS codes, specifically C9242 (Injection, fosaprepitant, 1 mg); C9356 (Tendon, porous matrix of cross-linked collagen and glycosaminoglycan matrix (TenoGlide Tendon Protector Sheet), per square centimeter); C9357 (Dermal substitute, granulated cross-linked collagen and glycosaminoglycan matrix (Flowable Wound Matrix), 1 cc); C9358 (Dermal substitute, native, non-denatured collagen (SurgiMend Collagen Matrix), per 0.5 square centimeters); G0398 (Home sleep study test
(HST)w/type II portable monitor, unattended; minimum of 7 channels: EEG, EOG, EMG, ECG/heart rate, airflow, respiratory effort and oxygen saturation); G0399 (Home sleep test
(HST)with type III portable monitor, unattended; minimum of 4 channels: 2 respiratory movement/airflow, 1 ECG/heart rate and 1 oxygen saturation); and G0400 (Home sleep test
(HST)with type IV portable monitor, unattended; minimum of 3 channels). We designated the payment status of these codes and added them either through the April update (Transmittal 1487, Change Request 5999, dated April 8, 2008) or the July update of the CY 2008 OPPS. In this proposed rule, we are soliciting public comment on the status indicators, APC assignments, and payment rates of these codes, which are listed in Table 10 and Table 11 of this proposed rule. Because of the timing of this proposed rule, the codes implemented through the July 2008 OPPS update are not included in Addendum B to this proposed rule. We are proposing to assign these new HCPCS codes for CY 2009 to APCs with the proposed payment rates as displayed in Table 11 and incorporate them into Addendum B to our final rule with comment period for CY 2009, which is consistent with our annual APC updating policy. The HCPCS codes implemented through the April 2008 OPPS update and displayed in Table 10 are included in Addendum B to this proposed rule, where their proposed payment rates can also be found. Table 10.—New HCPCS Codes Implemented in April 2008 HCPCS code Long descriptor Proposed CY 2009 status indicator Proposed CY 2009 APC C9241 Injection, doripenem, 10 mg G 9241 Q4096 Injection, von willebrand factor complex, human, ristocetin cofactor (not otherwise specified), per i.u. VWF:RCO K 1213 Q4097 Injection, immune globulin (Privigen), intravenous, non-lyophilized (e.g., liquid), 500 mg K 1214 Q4098 Injection, iron dextran, 50 mg K 1215 Table 11.—New HCPCS Codes Implemented in July 2008 HCPCS code Long descriptor Proposed CY 2009 status indicator Proposed CY 2009 APC Proposed CY 2009 payment rate C9242 * Injection, fosaprepitant, 1 mg G 9242 $1.61 C9356 * Tendon, porous matrix of cross-linked collagen and glycosaminoglycan matrix (TenoGlide Tendon Protector Sheet), per square centimeter G 9356 16.92 C9357 * Dermal substitute, granulated cross-linked collagen and glycosaminoglycan matrix (Flowable Wound Matrix), 1 cc G 9357 883.33 C9358 * Dermal substitute, native, non-denatured collagen (SurgiMend Collagen Matrix), per 0.5 square centimeters G 9358 10.38 G0398 Home sleep study test
(HST)with type II portable monitor, unattended; minimum of 7 channels: EEG, EOG, EMG, ECG/heart rate, airflow, respiratory effort and oxygen saturation S 0213 152.52 G0399 Home sleep test
(HST)with type III portable monitor, unattended; minimum of 4 channels: 2 respiratory movement/airflow, 1 ECG/heart rate and 1 oxygen saturation S 0213 152.52 G0400 Home sleep test
(HST)with type IV portable monitor, unattended; minimum of 3 channels S 0213 152.52 * The drug payment rates displayed in Table 11 reflect the July 2008 ASP data. 2. Proposed Treatment of New Category I and III CPT Codes and Level II HCPCS Codes As has been our practice in the past, we implement new Category I and III CPT codes and new Level II HCPCS codes through program transmittals, which are released in the summer through the fall of each year for annual updating, effective January 1, in the final rule updating the OPPS for the following calendar year. These codes are flagged with comment indicator “NI” in Addendum B to the OPPS/ASC final rule with comment period to indicate that we are assigning them an interim payment status which is subject to public comment. Specifically, the status indicator, the APC assignment, or both, for all such codes flagged with comment indicator “NI” will be open to public comment in the CY 2009 OPPS/ASC final rule with comment period. We are proposing to continue this recognition and process for CY 2009. New Category I and III CPT codes, as well as new Level II HCPCS codes, effective January 1, 2009, will be listed in Addendum B to the CY 2009 OPPS/ASC final rule with comment period and designated using comment indicator “NI.” We will respond to all comments received concerning these codes in a subsequent final rule for the next calendar year's OPPS/ASC update. In addition, we are proposing to continue our policy of the last 3 years of recognizing new mid-year CPT codes, generally Category III CPT codes, that the American Medical Association
(AMA)releases in January for implementation the following July through the OPPS quarterly update process. Therefore, for CY 2009, we are proposing to include in Addendum B to the CY 2009 OPPS/ASC final rule with comment period the new Category III CPT codes released in January 2008 for implementation on July 1, 2008 (through the OPPS quarterly update process), and the new Category III codes released in July 2008 for implementation on January 1, 2009. However, only those new Category III CPT codes implemented effective January 1, 2009, will be flagged with comment indicator “NI” in Addendum B to the CY 2009 OPPS/ASC final rule with comment period, to indicate that we have assigned them an interim payment status which is subject to public comment. Category III CPT codes implemented in July 2008, which appear in Table 12 below, are subject to comment through this proposed rule, and we are proposing to finalize their status in the CY 2009 OPPS/ASC final rule with comment period. TABLE 12.—Category III CPT Codes Implemented in July 2008 CPT code Long descriptor Proposed CY 2009 status indicator Proposed CY 2009 APC 0188T Remote real-time interactive videoconferenced critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes M Not applicable. 0189T Remote real-time interactive videoconferenced critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 minutes M Not applicable. 0190T Placement of intraocular radiation source applicator T 0237. 0191T Insertion of anterior segment aqueous drainage device, without extraocular reservoir; internal approach T 0234. 0192T Insertion of anterior segment aqueous drainage device, without extraocular reservoir; external approach T 0234. B. Proposed OPPS Changes—Variations Within APCs 1. Background Section 1833(t)(2)(A) of the Act requires the Secretary to develop a classification system for covered hospital outpatient services. Section 1833(t)(2)(B) of the Act provides that this classification system may be composed of groups of services, so that services within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we developed a grouping classification system, referred to as APCs, as set forth in § 419.31 of the regulations. We use Level I and Level II HCPCS codes and descriptors to identify and group the services within each APC. The APCs are organized such that each group is homogeneous both clinically and in terms of resource use. Using this classification system, we have established distinct groups of similar services, as well as medical visits. We also have developed separate APC groups for certain medical devices, drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy devices. We have packaged into payment for each procedure or service within an APC group the costs associated with those items or services that are directly related to and supportive of performing the main independent procedures or furnishing the services. Therefore, we do not make separate payment for these packaged items or services. For example, packaged items and services include:
(1)Use of an operating, treatment, or procedure room;
(2)use of a recovery room;
(3)observation services;
(4)anesthesia;
(5)medical/surgical supplies;
(6)pharmaceuticals (other than those for which separate payment may be allowed under the provisions discussed in section V. of this proposed rule);
(7)incidental services such as venipuncture; and
(8)guidance services, image processing services, intraoperative services, imaging supervision and interpretation services, diagnostic radiopharmaceuticals, and contrast media. Further discussion of packaged services is included in section II.A.4. of this proposed rule. In CY 2008, we implemented composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service. Under current CY 2008 OPPS policy, we provide composite APC payment for certain extended assessment and management services, low dose rate prostate brachytherapy, cardiac electrophysiologic evaluation and ablation, and mental health services. We also are proposing for CY 2009 a composite APC payment methodology for multiple imaging services. Further discussion of composite APCs is included in section II.A.2.e. of this proposed rule. Under the OPPS, we generally pay for hospital outpatient services on a rate-per-service basis, where the service may be reported with one or more HCPCS codes. Payment varies according to the APC group to which the independent service or combination of services is assigned. Each APC weight represents the hospital median cost of the services included in that APC relative to the hospital median cost of the services included in APC 0606 (Level 3 Hospital Clinic Visits). The APC weights are scaled to APC 0606 because it is the middle level clinic visit APC (that is, where the level 3 clinic visit CPT code of five levels of clinic visits is assigned), and because middle level clinic visits are among the most frequently furnished services in the hospital outpatient setting. Section 1833(t)(9)(A) of the Act requires the Secretary to review the components of the OPPS not less than annually and to revise the groups and relative payment weights and make other adjustments to take into account changes in medical practice, changes in technology, and the addition of new services, new cost data, and other relevant information and factors. Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of the BBRA, also requires the Secretary, beginning in CY 2001, to consult with an outside panel of experts to review the APC groups and the relative payment weights (the APC Panel recommendations for specific services for the CY 2009 OPPS and our responses to them are discussed in the relevant specific sections throughout this proposed rule). Finally, section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median cost, or mean cost as elected by the Secretary, for an item or service in the group is more than 2 times greater than the lowest median cost for an item or service within the same group (referred to as the “2 times rule”). We use the median cost of the item or service in implementing this provision. The statute authorizes the Secretary to make exceptions to the 2 times rule in unusual cases, such as low-volume items and services. 2. Application of the 2 Times Rule In accordance with section 1833(t)(2) of the Act and § 419.31 of the regulations, we annually review the items and services within an APC group to determine, with respect to comparability of the use of resources, if the median cost of the highest cost item or service within an APC group is more than 2 times greater than the median of the lowest cost item or service within that same group (“2 times rule”). We are proposing to make exceptions to this limit on the variation of costs within each APC group in unusual cases such as low-volume items and services. During the APC Panel's March 2008 meeting, we presented median cost and utilization data for services furnished during the period of January 1, 2007 through September 30, 2007, about which we had concerns or about which the public had raised concerns regarding their APC assignments, status indicator assignments, or payment rates. The discussions of most service-specific issues, the APC Panel recommendations, if any, and our proposals for CY 2009 are contained principally in sections III.C. and III.D. of this proposed rule. In addition to the assignment of specific services to APCs that we discussed with the APC Panel, we also identified APCs with 2 times violations that were not specifically discussed with the APC Panel but for which we are proposing changes to their HCPCS codes' APC assignments in Addendum B to this proposed rule. In these cases, to eliminate a 2 times violation or to improve clinical and resource homogeneity, we are proposing to reassign the codes to APCs that contain services that are similar with regard to both their clinical and resource characteristics. We also are proposing to rename existing APCs, discontinue existing APCs, or create new clinical APCs to complement proposed HCPCS code reassignments. In many cases, the proposed HCPCS code reassignments and associated APC reconfigurations for CY 2009 included in this proposed rule are related to changes in median costs of services that are observed in the CY 2007 claims data newly available for CY 2009 ratesetting. We also are proposing changes to the status indicators for some codes that are not specifically and separately discussed in this proposed rule. In these cases, we are proposing to change the status indicators for some codes because we believe that another status indicator would more accurately describe their payment status from an OPPS perspective based on the policies that we are proposing for CY 2009 or because we are proposing new status indicators to differentiate a related group of services from other services that previously shared the same status indicator. Addendum B to this proposed rule identifies with comment indicator “CH” those HCPCS codes for which we are proposing a change to the APC assignment or status indicator as assigned in the April 2008 Addendum B update (via Transmittal 1487, Change Request 5999, dated April 8, 2008). HCPCS codes with proposed CY 2009 changes in status indicator assignments from “Q” to “Q1,” from “Q” to “Q2,” or from “Q” to “Q3” are an exception to this identification practice because they are not flagged with comment indicator “CH” in Addendum B to this proposed rule. These proposed changes in status indicators are to facilitate policy transparency and operational logic rather than reflect changes in OPPS payment policy for these services, hence we believe that identifying these HCPCS codes with “CH” could be confusing to the public. 3. Proposed Exceptions to the 2 Times Rule As discussed earlier, we may make exceptions to the 2 times limit on the variation of costs within each APC group in unusual cases such as low-volume items and services. Taking into account the APC changes that we are proposing for CY 2009 based on the APC Panel recommendations discussed mainly in sections III.C. and III.D. of this proposed rule, the other proposed changes to status indicators and APC assignments as identified in Addendum B to this proposed rule, and the use of CY 2007 claims data to calculate the median costs of procedures classified in the APCs, we reviewed all the APCs to determine which APCs would not satisfy the 2 times rule. We used the following criteria to decide whether to propose exceptions to the 2 times rule for affected APCs: • Resource homogeneity • Clinical homogeneity • Hospital outpatient setting • Frequency of service (volume) • Opportunity for upcoding and code fragments. For a detailed discussion of these criteria, we refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18457). Table 13 below lists the APCs that we are proposing to exempt from the 2 times rule for CY 2009 based on the criteria cited above. For cases in which a recommendation by the APC Panel appeared to result in or allow a violation of the 2 times rule, we generally accepted the APC Panel's recommendation because those recommendations were based on explicit consideration of resource use, clinical homogeneity, hospital specialization, and the quality of the CY 2007 claims data used to determine the APC payment rates that we are proposing for CY 2009. The median costs for hospital outpatient services for these and all other APCs that were used in the development of this proposed rule can be found on the CMS Web site at: *http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp* . Table 13.—Proposed APC Exceptions to the 2 Times Rule for CY 2009 APC APC title 0060 Manipulation Therapy. 0080 Diagnostic Cardiac Catheterization. 0093 Vascular Reconstruction/Fistula Repair without Device. 0105 Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices. 0141 Level I Upper GI Procedures. 0245 Level I Cataract Procedures without IOL Insert. 0303 Treatment Device Construction. 0330 Dental Procedures. 0409 Red Blood Cell Tests. 0426 Level II Strapping and Cast Application. 0432 Health and Behavior Services. 0604 Level 1 Hospital Clinic Visits. C. New Technology APCs 1. Background In the November 30, 2001 final rule (66 FR 59903), we finalized changes to the time period a service was eligible for payment under a New Technology APC. Beginning in CY 2002, we retain services within New Technology APC groups until we gather sufficient claims data to enable us to assign the service to a clinically appropriate APC. This policy allows us to move a service from a New Technology APC in less than 2 years if sufficient data are available. It also allows us to retain a service in a New Technology APC for more than 2 years if sufficient data upon which to base a decision for reassignment have not been collected. We note that the cost bands for New Technology APCs range from $0 to $50 in increments of $10, from $50 to $100 in increments of $50, from $100 through $2,000 in increments of $100, and from $2,000 through $10,000 in increments of $500. These increments, which are in two parallel sets of New Technology APCs, one with status indicator “S” and the other with status indicator “T,” allow us to price new technology services more appropriately and consistently. 2. Proposed Movement of Procedures from New Technology APCs to Clinical APCs As we explained in the November 30, 2001 final rule (66 FR 59897), we generally keep a procedure in the New Technology APC to which it is initially assigned until we have collected data sufficient to enable us to move the procedure to a clinically appropriate APC. However, in cases where we find that our original New Technology APC assignment was based on inaccurate or inadequate information, or where the New Technology APCs are restructured, we may, based on more recent resource utilization information (including claims data) or the availability of refined New Technology APC cost bands, reassign the procedure or service to a different New Technology APC that most appropriately reflects its cost. Consistent with our current policy, for CY 2009 we are proposing to retain services within New Technology APC groups until we gather sufficient claims data to enable us to assign the service to a clinically appropriate APC. The flexibility associated with this policy allows us to move a service from a New Technology APC in less than 2 years if sufficient data are available. It also allows us to retain a service in a New Technology APC for more than 2 years if sufficient hospital claims data upon which to base a decision for reassignment have not been collected. HCPCS codes C9725 (Placement of endorectal intracavitary applicator for high intensity brachytherapy), C9726 (Placement and removal (if performed) of applicator into breast for radiation therapy), and C9727 (Insertion of implants into the soft palate; minimum of three implants), which are presented below in Table 14 of this proposed rule, represent services assigned to New Technology APCs for CY 2008 for which we believe we have sufficient claims data to propose their reassignment to clinically appropriate APCs for CY 2009. These 3 procedures have been assigned to their New Technology APCs for at least 3 years, thereby providing us with sufficient data from at least 2 years of hospital claims upon which to base our proposed reassignments. In addition, these three procedures are clinically similar to other services currently paid through clinical APCs under the OPPS and for which we have substantial claims data regarding hospital costs. Therefore, for CY 2009, we are proposing to reassign these procedures to clinically appropriate APCs, applying their CY 2007 claims data to develop their clinical APC median costs upon which payments would be based. These procedures and their proposed APC assignments are displayed in Table 14 below. HCPCS code C9723 (Dynamic infrared blood perfusion imaging (diri)) was assigned to New Technology APC 1502 (New Technology—Level II ($50-$100)) when it was implemented in April 2005. However, based on our claims data for the past 3 years, which have shown no utilization for this code, we are proposing to delete HCPCS code C9723 on December 31, 2008. Table 14.—Proposed CY 2009 APC Reassignments of New Technology Procedures to Clinical APCs HCPCS code Short descriptor CY 2008 SI CY 2008 APC Proposed CY 2009 APC Proposed CY 2009 SI C9725 Placement of endorectal intracavitary applicator for high intensity brachytherapy S 1507 0164 T C9726 Placement and removal (if performed) of applicator into breast for radiation therapy S 1508 0028 T C9727 Insertion of implants into the soft palate; minimum of three implants S 1510 0252 T D. Proposed OPPS APC-Specific Policies 1. Trauma Response Associated With Hospital Critical Care Services (APC 0618) In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68133 through 68134), we discussed the creation of HCPCS code G0390 (Trauma response team activation associated with hospital critical care service), which became effective January 1, 2007. HCPCS code G0390 is reported by hospitals when providing critical care services in association with trauma response team activation. HCPCS code G0390 has been assigned to APC 0618 (Trauma Response with Critical Care) since CY 2007, with payment rates of approximately $495 and $330, for CYs 2007 and 2008, respectively. The creation of HCPCS code G0390 enables us to pay differentially for critical care when trauma response team activation is associated with critical care services and when there is no trauma response team activation. We instructed hospitals to continue to report CPT codes 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) and 99292 (Critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 minutes (List separately in addition to code for primary service)) for critical care services when they also report HCPCS code G0390. For CY 2007 and CY 2008, we calculated the median cost for APC 0617 (Critical Care) to which CPT code 99291 is assigned using the subset of single claims for CPT code 99291 that did not include charges under revenue code 068x, the trauma revenue code, reported on the same day. We established the median cost for APC 0618 (Trauma Response with Critical Care) by calculating the difference in median costs between the two subsets of single claims for CPT code 99291 representing the reporting of critical care services with and without revenue code 068x charges reported on the same day. For a complete description of the history of the policy and development of the payment methodology for these services, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 68133 through 68134). We provided billing guidance in CY 2006 in Transmittal 1139, Change Request 5438, issued on December 22, 2006, specifically clarifying when it would be appropriate to report HCPCS code G0390. The I/OCE logic only accepts HCPCS code G0390 when it is reported with revenue code 068x and CPT code 99291 on the same claim and on the same date of service. For CY 2009, we are proposing a median cost for APC 0617 of approximately $488 and a median cost for APC 0618 of approximately $989. For CY 2009 OPPS ratesetting, we are using claims data from CY 2007 that also include claims for HCPCS code G0390, as CY 2007 is the initial year that we established OPPS payment for HCPCS code G0390. We are proposing to use the line-item median cost for HCPCS code G0390 in the CY 2007 claims to set the median cost for APC 0618, as HCPCS code G0390 is the only code assigned to that APC. As discussed in section II.A.1.b. of this proposed rule, we are proposing to add HCPCS code G0390 to the CY 2009 bypass list to isolate the line-item cost for HCPCS code G0390 and ensure that the critical care claims for CPT code 99291 that are reported with HCPCS code G0390 are available to set the medians for APC 0617 and composite APC 8003. The costs of packaged revenue code charges and HCPCS codes for services with status indicator “N” on a claim with HCPCS code G0390 would be associated with CPT code 99291 for ratesetting, if the claim for CPT code 99291 is a single or “pseudo” single bill. For APC 0617, we are proposing to calculate the median cost using our standard methodology that excludes those single claims for critical care services that are eligible for payment through the Level II extended assessment and management composite APC, that is APC 8003, as described in section II.A.2.e.(1) of this proposed rule. We believe that these proposed refinements in median cost calculations would result in more accurate cost estimates and payments for APCs 0617 and 0618 for CY 2009. 2. Suprachoroidal Delivery of Pharmacologic Agent (APC 0236) CPT code 0186T (Suprachoroidal delivery of pharmacologic agent (does not include supply of medication)) is a new code for CY 2008. It was released on the AMA CPT Web site on July 1, 2007, and implemented on January 1, 2008. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66997), we assigned this code to APC 0236 (Level II Posterior Segment Eye Procedures) with a CY 2008 payment rate of approximately $1,161. We also assigned this code comment indicator “NI” in Addendum B to the CY 2008 OPPS/ASC final rule with comment period to indicate that it is a new code for CY 2008 with an interim payment status subject to public comment following publication of that rule. As has been our practice in the past, we implement new HCPCS codes in the OPPS/ASC final rule with comment period, at which time we invite public comment on our interim treatment of the new codes. We subsequently respond to those comments in the final rule with comment period for the following year’s OPPS update. In its March 2008 presentation to the APC Panel, a presenter requested the reassignment of CPT code 0186T from APC 0236 to APC 0237 (Level III Posterior Segment Eye Procedures), which has a CY 2008 payment rate of approximately $1,774. The presenter indicated that CPT code 0186T is analogous to CPT code 67027 (Implantation of intravitreal drug delivery system (e.g., ganciclovir implant), includes concomitant removal of vitreous), which is assigned to APC 0672 (Level IV Posterior Segment Eye Procedures) with a CY 2008 payment rate of about $2,370. Although the presenter stated that both procedures share similar clinical characteristics and resource costs, the presenter believed that CPT code 0186T would be most appropriately assigned to APC 0237 based on the procedure's estimated hospital cost. The APC Panel noted that because the CPT code is new and there are no claims data for this procedure, the APC Panel would not make a specific CY 2009 APC assignment recommendation to CMS at this time. However, the APC Panel recommended that CMS share with the APC Panel the claims data for CPT code 0186T at the first CY 2009 APC Panel meeting, and that CMS reevaluate the assignment of CPT code 0186T to APC 0236 on the basis of those data. We are accepting the recommendation of the APC Panel and will provide the initial OPPS claims data available for this CPT code, based on CY 2008 claims data, for the first CY 2009 APC Panel meeting. These data will not be available until the CY 2010 OPPS update rulemaking cycle. Under the OPPS, we generally assign a new Category III CPT code to an APC if we believe that the procedure, if covered, would be appropriate for separate payment under the OPPS. A specific assignment to a clinical APC where HCPCS codes with comparable clinical and resource characteristics also reside is based on a variety of types of information including, but not limited to: Advice from our medical advisors, information from specialty societies, review of resource costs for related services from historical hospital claims data, consideration of the clinical similarity of the service to existing procedures, and review of any other information available to us. Based upon our further review and analysis of the clinical characteristics and resource costs associated with CPT code 0186T, we agree with the presenter that the most appropriate CY 2009 APC assignment for this procedure is APC 0237. We believe that the other procedures also assigned to APC 0237 are similar to the procedure described by CPT code 0186T. Therefore, for CY 2009, we are proposing to reassign CPT code 0186T from APC 0236 to APC 0237, which has a proposed median cost of approximately $1,447. We also note that because CPT code 0186T describes a specific drug administration service, the drug itself would be separately reported under the appropriate Level II HCPCS drug code. 3. Closed Treatment of Fracture of Finger/Toe/Trunk (APC 0043) We received a comment to the CY 2008 OPPS/ASC proposed rule on the variety of procedures assigned to APC 0043 (Closed Treatment Fracture Finger/Toe/Trunk). The commenter did not agree with the placement of various procedures in APC 0043 as many of the procedures vary in resource costs. In particular, the commenter asserted that the costs associated with finger treatments, hip dislocations, and spinal fractures vary significantly, and further stated that the costs of treating spinal fractures are significantly greater than the costs associated with finger or toe fractures. The commenter also expressed concern that grouping all of the approximately 150 procedures in one clinical APC violated the 2 times rule, and that continuing to exempt APC 0043 from the 2 times rule was not appropriate. The commenter recommended that CMS pay appropriately for these procedures, and stated that this could be achieved by dividing the procedures currently assigned to APC 0043 into several APCs. However, the commenter did not make any specific recommendations regarding alternative APC configurations. Because APC 0043 contains so many different fracture treatment procedures with low volume, we were concerned that any restructuring for CY 2008 without the benefit of public comment could result in the reconfiguration of APCs that did not reflect improved clinical and resource homogeneity over the proposed configuration. Therefore, we did not reconfigure APC 0043 for CY 2008, and we finalized a payment rate for APC 0043 of about $113. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66723), we stated that we agreed with the commenter that grouping all of the closed fracture treatment procedures in one APC may not accurately distinguish the more expensive from the less resource-intensive fracture treatment procedures. However, we also explained that we found that there were only 13 procedures that were significant procedures with the frequency necessary to assess the APC's alignment with the 2 times rule. The other procedures were all very low volume and, therefore, not significant procedures for purposes of evaluating the APC with respect to the 2 times rule. We noted that APC 0043 has been exempted from the 2 times rule for the past 7 years under the OPPS, and we had not previously received public comments regarding the structure of this APC. In that same rule (72 FR 66723) we specifically invited public recommendations on potential alternative APC configurations for the services currently assigned to APC 0043 for the CY 2009 APC review process. We received no public comments on this APC issue. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66723), we also stated that we would bring this APC issue to the attention of the APC Panel at its March 2008 meeting and requested input as to how to most appropriately categorize the procedures in APC 0043. Based on the updated CY 2007 hospital outpatient claims data available for the March 2008 APC Panel meeting, we presented a possible reconfiguration of APC 0043 for the APC Panel's consideration. In particular, the potential reconfiguration reviewed and discussed by the APC Panel would delete APC 0043 and replace it with three new APCs, configured based on the hospital resource data from the CY 2007 claims data, as well as the clinical characteristics of the procedures currently assigned to APC 0043. The APC Panel recommended that CMS adopt the approach that CMS described to the APC Panel to reconfigure APC 0043 into three new APCs, and we are accepting the APC Panel's recommendation for CY 2009. Therefore, for CY 2009, we are proposing three new APCs to replace APC 0043, with proposed configurations as displayed in Table 15 below. Based on these configurations, proposed new APC 0129 (Level I Closed Treatment Fracture Finger/Toe/Trunk) has a proposed APC median cost of approximately $104, with the HCPCS code-specific median costs of the significant procedures ranging from approximately $74 to $124. Proposed new APC 0138 (Level II Closed Treatment Fracture Finger/Toe/Trunk) has a proposed APC median cost of approximately $397, with only one significant procedure with a HCPCS code-specific median cost of approximately $399. Proposed new APC 0139 (Level III Closed Treatment Fracture Finger/Toe/Trunk) has a proposed APC median cost of approximately $1,340, with only one significant volume HCPCS code whose median cost is approximately $1,574. While all three proposed APCs contain many procedures that are very low in volume, this reconfiguration reflects an attempt to realign the procedures previously assigned to APC 0043 based on their clinical characteristics and resource costs into APC groups that are more homogeneous. Therefore, for CY 2009, we are proposing to reconfigure APC 0043 by deleting APC 0043 and reassigning the HCPCS codes previously assigned to APC 0043 to proposed new APCs 0129, 0138, and 0139. Table 15.—Proposed New APCs for Closed Treatment Fracture of Finger/Toe/Trunk Proposed CY 2009 new APC HCPCS code SI Short descriptor Proposed CY 2009 APC median cost 0129 21800 T Treatment of rib fracture $103.52 21820 T Treat sternum fracture 22305 T Treat spine process fracture 23500 T Treat clavicle fracture 23540 T Treat clavicle dislocation 23570 T Treat shoulder blade fx 23600 T Treat humerus fracture 23620 T Treat humerus fracture 23650 T Treat shoulder dislocation 23675 T Treat dislocation/fracture 23929 T Shoulder surgery procedure 24500 T Treat humerus fracture 24505 T Treat humerus fracture 24530 T Treat humerus fracture 24560 T Treat humerus fracture 24565 T Treat humerus fracture 24576 T Treat humerus fracture 24600 T Treat elbow dislocation 24640 T Treat elbow dislocation 24650 T Treat radius fracture 24670 T Treat ulnar fracture 24675 T Treat ulnar fracture 24999 T Upper arm/elbow surgery 25500 T Treat fracture of radius 25530 T Treat fracture of ulna 25535 T Treat fracture of ulna 25560 T Treat fracture radius & ulna 25600 T Treat fracture radius/ulna 25622 T Treat wrist bone fracture 25630 T Treat wrist bone fracture 25650 T Treat wrist bone fracture 25660 T Treat wrist dislocation 25675 T Treat wrist dislocation 25680 T Treat wrist fracture 25999 T Forearm or wrist surgery 26600 T Treat metacarpal fracture 26605 T Treat metacarpal fracture 26641 T Treat thumb dislocation 26670 T Treat hand dislocation 26700 T Treat knuckle dislocation 26705 T Treat knuckle dislocation 26720 T Treat finger fracture, each 26725 T Treat finger fracture, each 26740 T Treat finger fracture, each 26742 T Treat finger fracture, each 26750 T Treat finger fracture, each 26755 T Treat finger fracture, each 26770 T Treat finger dislocation 26989 T Hand/finger surgery 27193 T Treat pelvic ring fracture 27200 T Treat tail bone fracture 27220 T Treat hip socket fracture 27230 T Treat thigh fracture 27250 T Treat hip dislocation 27256 T Treat hip dislocation 27265 T Treat hip dislocation 27267 T Cltx thigh fx 27299 T Pelvis/hip joint surgery 27501 T Treatment of thigh fracture 27503 T Treatment of thigh fracture 27508 T Treatment of thigh fracture 27516 T Treat thigh fx growth plate 27517 T Treat thigh fx growth plate 27520 T Treat kneecap fracture 27530 T Treat knee fracture 27538 T Treat knee fracture(s) 27550 T Treat knee dislocation 27560 T Treat kneecap dislocation 27599 T Leg surgery procedure 27750 T Treatment of tibia fracture 27760 T Cltx medial ankle fx 27767 T Cltx post ankle fx 27768 T Cltx post ankle fx w/mnpj 27780 T Treatment of fibula fracture 27786 T Treatment of ankle fracture 27788 T Treatment of ankle fracture 27808 T Treatment of ankle fracture 27816 T Treatment of ankle fracture 27824 T Treat lower leg fracture 27830 T Treat lower leg dislocation 27899 T Leg/ankle surgery procedure 28400 T Treatment of heel fracture 28430 T Treatment of ankle fracture 28435 T Treatment of ankle fracture 28450 T Treat midfoot fracture, each 28455 T Treat midfoot fracture, each 28470 T Treat metatarsal fracture 28475 T Treat metatarsal fracture 28490 T Treat big toe fracture 28495 T Treat big toe fracture 28510 T Treatment of toe fracture 28515 T Treatment of toe fracture 28530 T Treat sesamoid bone fracture 28540 T Treat foot dislocation 28600 T Treat foot dislocation 28605 T Treat foot dislocation 28630 T Treat toe dislocation 28660 T Treat toe dislocation 28899 T Foot/toes surgery procedure 0138 20660 T Apply, rem fixation device 397.39 22310 T Treat spine fracture 23520 T Treat clavicle dislocation 23525 T Treat clavicle dislocation 23545 T Treat clavicle dislocation 23575 T Treat shoulder blade fx 23665 T Treat dislocation/fracture 24535 T Treat humerus fracture 24577 T Treat humerus fracture 24655 T Treat radius fracture 25505 T Treat fracture of radius 25520 T Treat fracture of radius 25565 T Treat fracture radius & ulna 25605 T Treat fracture radius/ulna 25624 T Treat wrist bone fracture 25635 T Treat wrist bone fracture 26340 T Manipulate finger w/anesth 26645 T Treat thumb fracture 26675 T Treat hand dislocation 27238 T Treat thigh fracture 27246 T Treat thigh fracture 27500 T Treatment of thigh fracture 27510 T Treatment of thigh fracture 27810 T Treatment of ankle fracture 27818 T Treatment of ankle fracture 27840 T Treat ankle dislocation 28570 T Treat foot dislocation 0139 22315 T Treat spine fracture 1,339.53 23505 T Treat clavicle fracture 23605 T Treat humerus fracture 23625 T Treat humerus fracture 24620 T Treat elbow fracture 25259 T Manipulate wrist w/anesthes 25690 T Treat wrist dislocation 26607 T Treat metacarpal fracture 26706 T Pin knuckle dislocation 27502 T Treatment of thigh fracture 27532 T Treat knee fracture 27752 T Treatment of tibia fracture 27762 T Cltx med ankle fx w/mnpj 27781 T Treatment of fibula fracture 27825 T Treat lower leg fracture 27831 T Treat lower leg dislocation 28405 T Treatment of heel fracture 28575 T Treat foot dislocation 4. Individual Psychotherapy (APCs 0322 and 0323) APC 0323 (Extended Individual Psychotherapy) had a 2 times rule violation for CYs 2007 and 2008, and was exempted from the 2 times rule during those years. APC 0323 would continue to have a 2 times rule violation in CY 2009 if its configuration is not adjusted. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739), we agreed to review APC 0323 at the next APC Panel meeting and seek the APC Panel's guidance in reconfiguring this APC for CY 2009. It was brought to our attention that a handful of CPT codes describe psychotherapy services that could be appropriately provided and reported as part of a partial hospitalization program, but would not otherwise be appropriately reported by a HOPD for those psychotherapy services. Specifically, the category heading in the 2008 CPT book specifies that the CPT codes listed in Table 16 below are to be reported for services provided in an “inpatient hospital, partial hospital, or residential care facility.” These CPT codes have been assigned to APCs 0322 (Brief Individual Psychotherapy) and 0323 since the implementation of the OPPS. Table 16.—Inpatient Hospital, Partial Hospital, or Residential Care Facility Psychotherapy Codes CPT code Long descriptor 90816 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 20 to 30 minutes face-to-face with the patient; 90817 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 20 to 30 minutes face-to-face with the patient; with medical evaluation and management services. 90818 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 45 to 50 minutes face-to-face with the patient; 90819 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 45 to 50 minutes face-to-face with the patient; with medical evaluation and management. 90821 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 75 to 80 minutes face-to-face with the patient; 90822 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an inpatient hospital, partial hospital or residential care setting, approximately 75 to 80 minutes face-to-face with the patient; with medical evaluation and management services. 90823 Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an inpatient hospital, partial hospital or residential care setting, approximately 20 to 30 minutes face-to-face with the patient; 90824 Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an inpatient hospital, partial hospital or residential care setting, approximately 20 to 30 minutes face-to-face with the patient; with medical evaluation and management services. 90826 Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an inpatient hospital, partial hospital or residential care setting, approximately 45 to 50 minutes face-to-face with the patient; 90827 Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an inpatient hospital, partial hospital or residential care setting, approximately 45 to 50 minutes face-to-face with the patient; with medical evaluation and management services. 90828 Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an inpatient hospital, partial hospital or residential care setting, approximately 75 to 80 minutes face-to-face with the patient; 90829 Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an inpatient hospital, partial hospital or residential care setting, approximately 75 to 80 minutes face-to-face with the patient; with medical evaluation and management services. The 2008 CPT book also includes a parallel set of CPT codes whose category heading in the CPT book specifies that these codes are to be reported for services provided in the office or other outpatient facilities. These CPT codes are listed in Table 17. These CPT codes have also been assigned to APCs 0322 and 0323 since the implementation of the OPPS. Table 17.—Office or Other Outpatient Facility Psychotherapy Codes CPT code Long descriptor 90804 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an office or outpatient facility, approximately 20 to 30 minutes face-to-face with the patient; 90805 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an office or outpatient facility, approximately 20 to 30 minutes face-to-face with the patient; with medical evaluation and management services. 90806 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an office or outpatient facility, approximately 45 to 50 minutes face-to-face with the patient; 90807 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an office or outpatient facility, approximately 45 to 50 minutes face-to-face with the patient; with medical evaluation and management. 90808 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an office or outpatient facility, approximately 75 to 80 minutes face-to-face with the patient; 90809 Individual psychotherapy, insight oriented, behavior modifying and/or supportive, in an office or outpatient facility, approximately 75 to 80 minutes face-to-face with the patient; with medical evaluation and management services. 90810 Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an office or outpatient facility, approximately 20 to 30 minutes face-to-face with the patient; 90811 Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an office or outpatient facility, approximately 20 to 30 minutes face-to-face with the patient; with medical evaluation and management services. 90812 Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an office or outpatient facility, approximately 45 to 50 minutes face-to-face with the patient; 90813 Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an office or outpatient facility, approximately 45 to 50 minutes face-to-face with the patient; with medical evaluation and management services. 90814 Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an office or outpatient facility, approximately 75 to 80 minutes face-to-face with the patient; 90815 Individual psychotherapy, interactive, using play equipment, physical devices, language interpreter, or other mechanisms of non-verbal communication, in an office or outpatient facility, approximately 75 to 80 minutes face-to-face with the patient; with medical evaluation and management services. Our CY 2007 claims data for this proposed rule (excluding all claims for partial hospitalization services) include approximately 10,000 OPPS claims for CPT codes 90816 through 90829, compared with approximately 500,000 claims for CPT codes 90804 through 90815. We are unclear as to what HOPD services these claims for CPT codes 90816 through 90829 represent and believe that these may be miscoded claims. We do not believe that CPT codes 90816 through 90829 could be appropriately reported for hospital outpatient services that are not part of a partial hospitalization program. Therefore, for CY 2009, we are proposing to assign status indicator “P” to CPT codes 90816 through 90829, indicating that these services may be billed appropriately and paid under the OPPS only when they are part of a partial hospitalization program. Partial hospitalization services are not included in our ratesetting process for nonpartial hospitalization OPPS services. Under this proposal, hospitals would continue to report CPT codes 90804 through 90815 for individual psychotherapy services provided in the HOPD that are not part of partial hospitalization services, consistent with CPT instructions. We recalculated the median costs for APCs 0322 and 0323, after assigning status indicator “P” to CPT codes 90816 through 90829. As partial hospitalization services only, the claims data for these codes would only be considered for ratesetting with respect to partial hospitalization services paid through the two proposed CY 2009 partial hospitalization APCs, specifically APC 0172 (Level I Partial Hospitalization (3 services)) and APC 0173 (Level II Partial Hospitalization (4 or more services)), and no historical hospital claims data would continue to map to APCs 0322 and 0323. We refer readers to section X.B. of this proposed rule for a complete discussion of the proposed CY 2009 partial hospitalization payment policy. The CY 2009 proposed median costs for APCs 0322 and 0323 are approximately $88 and $108, respectively. This new configuration for APC 0323 eliminates the longstanding 2 times violation for this APC, although the median cost remains approximately the same as it was for CYs 2007 and 2008. During its March 2008 APC Panel meeting, the APC Panel recommended that CMS restructure APC 0323 as described above, and that a similar restructuring be considered for APC 0322. For CY 2009, we are adopting the APC Panel's recommendation and, therefore, we are proposing to assign status indicator “P” to CPT codes 90816 through 90829. 5. Implant Injection for Vesicoureteral Reflex (APC 0162) Following publication of the CY 2008 OPPS/ASC final rule with comment period, several members of the public contacted us to express their concerns regarding decreased access to and inadequate payment for CPT code 52327 (Cystourethroscopy, including ureteral catheterization, with subureteric injection of implant material). The CY 2008 OPPS payment for this procedure, which is assigned to APC 0162 (Level III Cystourethroscopy and other Genitourinary Procedures), is approximately $1,578. This procedure is primarily performed on pediatric patients to correct an anatomical defect that causes urine to reflux back to the kidneys (vesicoureteral reflux disease or VUR). From the perspective of these stakeholders, the assignment of this procedure to APC 0162 provides inadequate payment to cover the hospital's cost for the procedure, which they asserted requires expensive implant material. Specifically, they stated that the currently available CPT and Level II HCPCS coding lacks the specificity needed to properly account for the cost of the ureteral implant, resulting in inadequate payment for this procedure. In addition to receiving several letters on this subject, we also met with several stakeholders about the concerns of pediatric urologists regarding decreased access to and inadequate payment for performance of this procedure. At the March 2008 APC Panel meeting, a presenter requested that the APC Panel recommend reassignment of CPT code 52327 from APC 0162 to APC 0385 (Level I Prosthetic Urological Procedures), which has a CY 2008 payment rate of approximately $5,327. The presenter indicated that while CPT code 52327 is clinically similar to other procedures assigned to APC 0162, it is not similar in terms of resource utilization. The presenter stated that CPT code 52327 is the only procedure assigned to APC 0162 that uses a high cost implant, yet it is paid the same as procedures that do not. The APC Panel recommended that CMS consider reassigning CPT code 52327 to a more appropriate APC. Based upon our further review and analysis of the clinical characteristics and resource costs associated with the procedure, we are accepting the APC Panel's recommendation and proposing to reassign CPT code 52327 to APC 0163 (Level IV Cystourethroscopy and other Genitourinary Procedures) for CY 2009. The median cost of CPT code 52327 is approximately $2,030 based on 246 single claims available for this proposed rule. The proposed median cost of APC 0163 is approximately $2,388, and the median costs of significant procedures in this APC range from approximately $1,951 to $2,526. A number of the procedures assigned to APC 0163 are clinically similar to CPT code 52327, involving the use of a cystoscope and the implantation of devices. Based on our review of its clinical and resource characteristics, we believe the most appropriate CY 2009 APC assignment for CPT code 52327 is APC 0163. Therefore, for CY 2009, we are proposing to reassign CPT code 52327 from APC 0162 to APC 0163, with a proposed median cost of approximately $2,388. IV. Proposed OPPS Payment for Devices A. Pass-Through Payments for Devices 1. Expiration of Transitional Pass-Through Payments for Certain Devices a. Background Section 1833(t)(6)(B)(iii) of the Act requires that, under the OPPS, a category of devices be eligible for transitional pass-through payments for at least 2, but not more than 3, years. This period begins with the first date on which a transitional pass-through payment is made for any medical device that is described by the category. We may establish a new device category for pass-through payment in any quarter. Under our established policy, we base the expiration dates for the category codes on the date on which a category was first eligible for pass-through payment. We propose and finalize the dates for expiration of pass-through payments for device categories as part of the OPPS annual update. Two currently eligible categories, C1821 (Interspinous process distraction device (implantable)) and L8690 (Auditory osseointegrated device, includes all internal and external components), were established for pass-through payment as of January 1, 2007. These two device categories will be eligible for pass-through payment for 2 years through December 31, 2008. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66751), we finalized our policy to expire these two categories from pass-through device payment after December 31, 2008. We also have an established policy to package the costs of the devices no longer eligible for pass-through payments into the costs of the procedures with which the devices are reported in the claims data used to set the payment rates (67 FR 66763). Brachytherapy sources, which are now separately paid in accordance with section 1833(t)(2)(H) of the Act, are an exception to this established policy. b. Proposed Policy For CY 2009, we are implementing the final decisions that we discussed in the CY 2008 OPPS/ASC final rule with comment period that finalizes the expiration date of pass-through status for device categories C1821 and L8690. Therefore, as of January 1, 2009, we will discontinue pass-through payment for device category codes C1821 and L8690. In accordance with our established policy, we will package the costs of the devices assigned to these device categories into the costs of the procedures with which the devices were billed in CY 2007, the year of hospital claims data used for this OPPS update. We currently have no established device categories eligible for pass-through payment that are continuing into CY 2009. We continue to evaluate applications for devices pass-through payment on an ongoing basis. We may establish a new device category in any quarter, and we will advise the public of our decision to establish a new device category in a subsequent quarter in CY 2008 through the transmittal that implements the OPPS update for the applicable quarter. We would then propose an expiration date for such new categories in future OPPS annual updates. 2. Proposed Provisions for Reducing Transitional Pass-Through Payments To Offset Costs Packaged Into APC Groups a. Background We have an established policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of the associated devices that are eligible for pass-through payments (66 FR 59904). We deduct from the pass-through payments for identified device categories eligible for pass-through payments an amount that reflects the portion of the APC payment amount that we determine is associated with the cost of the device, defined as the APC offset amount, as required by section 1833(t)(6)(D)(ii) of the Act. We have consistently employed an established methodology to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of an associated device eligible for pass-through payment, using claims data from the period used for the most recent recalibration of the APC rates (72 FR 66751 through 66752). We establish and update the applicable APC offset amounts for eligible pass-through device categories through the transmittals that implement the quarterly OPPS updates. b. Proposed Policy We are proposing to continue our established policies for calculating and setting the APC offset amounts for each device category eligible for pass-through payment. We are also proposing to continue to review each new device category on a case-by-case basis, to determine whether device costs associated with the new category are packaged into the existing APC structure. If device costs packaged into the existing APC structure are associated with the new category, we would deduct the APC offset amount from the pass-through payment for the device category. B. Proposed Adjustment to OPPS Payment for Partial or Full Credit Devices 1. Background In recent years there have been several field actions and recalls as a result of implantable device failures. In many of these cases, the manufacturers have offered devices without cost to the hospital or with credit for the device being replaced if the patient required a more expensive device. In order to ensure that payment rates for procedures involving devices reflect only the full costs of those devices, our standard rate-setting methodology for device-dependent APCs uses only claims that contain the correct device code for the procedure, do not contain token charges, and do contain the “FB” modifier signifying that the device was furnished without cost or with a full credit. To ensure equitable payment when the hospital receives a device without cost or with full credit, in CY 2007 we implemented a policy to reduce the payment for specified device-dependent APCs by the estimated portion of the APC payment attributable to device costs (that is, the device offset) when the hospital receives a specified device at no cost or with full credit. Hospitals are instructed to report such full credit/no cost cases using the “FB” modifier on the line with the procedure code in which the free device is used. In cases in which the device is furnished without cost, the hospital is to report a token device charge of less than $1.01. In cases in which the device being inserted is an upgrade (either of the same type of device or to a different type of device) with a full credit for the device being replaced, the hospital is to report as the device charge the difference between its usual charge for the replacement device being implanted and its usual charge for the replaced device for which it received full credit. In CY 2008, we expanded this payment adjustment policy to include cases in which hospitals receive partial credits of 50 percent or more of the cost of a specified device. Hospitals are instructed to append the “FC” modifier to the procedure code that reports the service provided to furnish the device when they receive a partial credit of 50 percent or more of the cost of the new device. In CY 2008, OPPS payment for the implantation procedure is reduced by 100 percent of the device offset for full credit/no cost cases when both a specified device code is present on the claim and the procedure code maps to a specified APC. Payment for the implantation procedure is reduced by 50 percent of the device offset for partial credit cases when both a specified device code is present on the claim and the procedure code maps to a specified APC. Beneficiary copayment is based on the reduced payment amount when either the “FB” or “FC” modifier is billed and the procedure and device codes appear on the lists of procedures and devices to which this policy applies. We refer readers to the CY 2008 OPPS/ASC final rule with comment period for more background information on the “FB” and “FC” payment adjustment policy (72 FR 66743 through 66749). 2. Proposed APCs and Devices Subject to the Adjustment Policy For CY 2009, we are proposing to continue the policy of reducing OPPS payment by 100 percent of the device offset amount when a hospital furnishes a specified device without cost or with a full credit and by 50 percent of the device offset amount when the hospital receives partial credit in the amount of 50 percent or more of the cost for the device. Because the APC payments for the related services are specifically constructed to ensure that the full cost of the device is included in the payment, we continue to believe that it is appropriate to reduce the APC payment in cases in which the hospital receives a device without cost, with full credit, or with partial credit, in order to provide equitable payment in these cases (we refer readers to section II.A.2.d.(1) of this proposed rule for a description of our standard ratesetting methodology for device-dependent APCs). Moreover, the payment for these devices comprises a large part of the APC payment on which the beneficiary copayment is based, and we continue to believe it is equitable that the beneficiary cost sharing reflect the reduced costs in these cases. We also are proposing to continue using the three criteria established in the CY 2007 OPPS/ASC final rule with comment period for determining the APCs to which this policy applies (71 FR 68072 through 68077). Specifically,
(1)all procedures assigned to the selected APCs must require implantable devices that would be reported if device insertion procedures were performed,
(2)the required devices must be surgically inserted or implanted devices that remain in the patient's body after the conclusion of the procedures (at least temporarily), and
(3)the device offset amount must be significant, which for purposes of this policy is defined as exceeding 40 percent of the APC cost. We also are proposing to continue to restrict the devices to which the APC payment adjustment would apply to a specific set of costly devices to ensure that the adjustment would not be triggered by the implantation of an inexpensive device whose cost would not constitute a significant proportion of the total payment rate for an APC. We continue to believe that these criteria are appropriate because free devices and credits are likely to be associated with particular cases only when the device must be reported on the claim and is of a type that is implanted and remains in the body when the beneficiary leaves the hospital. We believe that the reduction in payment is appropriate only when the cost of the device is a significant part of the total cost of the APC into which the device cost is packaged, and that the 40 percent threshold is a reasonable definition of a significant cost. We examined the offset amounts calculated from the CY 2009 proposed rule data and the clinical characteristics of APCs to determine whether the APCs to which the full credit/no cost and partial credit device adjustment policy applies in CY 2008 continue to meet the criteria for CY 2009, and to determine whether other APCs to which the policy does not apply in CY 2008 would meet the criteria for CY 2009. Table 18 below lists the proposed APCs to which the payment reduction policy for full credit/no cost and partial credit devices would apply in CY 2009 and displays the proposed payment reduction percentages for both full credit/no cost and partial credit circumstances. Table 19 lists the proposed devices to which this policy would apply in CY 2009. As reflected in the tables, we are proposing to add APC 0425 (Level II Arthroplasty or Implantation with Prosthesis) and APC 0648 (Level IV Breast Surgery) and their associated devices that would not otherwise be on the device list for CY 2009 because the device offset percentages for these two APCs are above the 40 percent threshold based on the CY 2007 claims data available for the proposed rule. We also are proposing to remove APC 0106 (Insertion/Replacement of Pacemaker Leads and/or Electrodes) and device HCPCS codes associated only with procedures assigned to this APC because the proposed device offset percentage for that APC is less than 40 percent. We will update the lists of APCs and devices to which the full credit/no cost and partial credit device adjustment policy would apply in CY 2009 based on the final CY 2007 claims data available for the CY 2009 OPPS/ASC final rule with comment period. Table 18.—Proposed APC Adjustments in Cases of Devices Furnished at No Cost or With Full or Partial Credit APC SI APC title Proposed CY 2009 reduction for full credit case (percent) Proposed CY 2009 reduction for partial credit case (percent) 0039 S Level I Implantation of Neurostimulator 83 42 0040 S Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve 56 28 0061 S Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve 61 30 0089 T Insertion/Replacement of Permanent Pacemaker and Electrodes 72 36 0090 T Insertion/Replacement of Pacemaker Pulse Generator 73 36 0107 T Insertion of Cardioverter-Defibrillator 89 44 0108 T Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads 88 44 0222 S Level II Implantation of Neurostimulator 84 42 0225 S Implantation of Neurostimulator Electrodes, Cranial Nerve 61 30 0227 T Implantation of Drug Infusion Device 81 40 0259 T Level VII ENT Procedures 83 42 0315 S Level III Implantation of Neurostimulator 88 44 0385 S Level I Prosthetic Urological Procedures 57 29 0386 S Level II Prosthetic Urological Procedures 64 32 0418 T Insertion of Left Ventricular Pacing Elect 70 35 0425 T Level II Arthroplasty or Implantation with Prosthesis 46 23 0648 T Level IV Breast Surgery 41 21 0654 T Insertion/Replacement of a permanent dual chamber pacemaker 77 38 0655 T Insertion/Replacement/Conversion of a permanent dual chamber pacemaker 75 37 0680 S Insertion of Patient Activated Event Recorders 71 35 0681 T Knee Arthroplasty 74 37 Table 19.—Proposed Devices for Which the “FB” or “FC” Modifier Must Be Reported With the Procedure Code When Furnished at No Cost or With Full or Partial Credit Device HCPCS code Short descriptor C1721 AICD, dual chamber. C1722 AICD, single chamber. C1728 Cath, brachytx seed adm. C1764 Event recorder, cardiac. C1767 Generator, neurostim, imp. C1771 Rep dev, urinary, w/sling. C1772 Infusion pump, programmable. C1776 Joint device (implantable). C1778 Lead, neurostimulator. C1779 Lead, pmkr, transvenous VDD. C1785 Pmkr, dual, rate-resp. C1786 Pmkr, single, rate-resp. C1789 Prosthesis, breast, imp. C1813 Prosthesis, penile, inflatab. C1815 Pros, urinary sph, imp. C1820 Generator, neuro rechg bat sys. C1881 Dialysis access system. C1882 AICD, other than sing/dual. C1891 Infusion pump, non-prog, perm. C1897 Lead, neurostim, test kit. C1898 Lead, pmkr, other than trans. C1900 Lead coronary venous. C2619 Pmkr, dual, non rate-resp. C2620 Pmkr, single, non rate-resp. C2621 Pmkr, other than sing/dual. C2622 Prosthesis, penile, non-inf. C2626 Infusion pump, non-prog, temp. C2631 Rep dev, urinary, w/o sling. L8600 Implant breast silicone/eq. L8614 Cochlear device/system. L8690 Aud osseo dev, int/ext comp. V. Proposed OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals A. Proposed OPPS Transitional Pass-Through Payment for Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals 1. Background Section 1833(t)(6) of the Act provides for temporary additional payments or “transitional pass-through payments” for certain drugs and biological agents. As originally enacted by the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act
(BBRA)of 1999 (Pub. L. 106-113), this provision requires the Secretary to make additional payments to hospitals for current orphan drugs, as designated under section 526 of the Federal Food, Drug, and Cosmetic Act (Pub. L. 107-186); current drugs and biological agents and brachytherapy sources used for the treatment of cancer; and current radiopharmaceutical drugs and biological products. For those drugs and biological agents referred to as “current,” the transitional pass-through payment began on the first date the hospital OPPS was implemented (before enactment of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
(BIPA)of 2000 (Pub. L. 106-554), on December 21, 2000). Transitional pass-through payments are also provided for certain “new” drugs and biological agents that were not being paid for as an HOPD service as of December 31, 1996, and whose cost is “not insignificant” in relation to the OPPS payments for the procedures or services associated with the new drug or biological. For pass-through payment purposes, radiopharmaceuticals are included as “drugs.” Under the statute, transitional pass-through payments can be made for at least 2 years but not more than 3 years. Proposed CY 2009 pass-through drugs and biologicals and their APCs are assigned status indicator “G” as indicated in Addenda A and B to this proposed rule. Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through payment amount, in the case of a drug or biological, is the amount by which the amount determined under section 1842(o) of the Act (or, if the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary) for the drug or biological exceeds the portion of the otherwise applicable Medicare OPD fee schedule that the Secretary determines is associated with the drug or biological. This methodology for determining the pass-through payment amount is set forth in § 419.64 of the regulations, which specifies that the pass-through payment equals the amount determined under section 1842(o) of the Act minus the portion of the APC payment that CMS determines is associated with the drug or biological. Section 1847A of the Act, as added by section 303(c) of Pub. L. 108-173, establishes the use of the average sales price
(ASP)methodology as the basis for payment for drugs and biologicals described in section 1842(o)(1)(C) of the Act that are furnished on or after January 1, 2005. The ASP methodology, as applied under the OPPS, uses several sources of data as a basis for payment, including the ASP, wholesale acquisition cost (WAC), and average wholesale price (AWP). In this proposed rule, the term “ASP methodology” and “ASP-based” are inclusive of all data sources and methodologies described therein. Additional information on the ASP methodology can be found on the CMS Web site at: *http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/01_overview.asp#TopOfPage.* As noted above, section 1833(t)(6)(D)(i) of the Act also states that if a drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, the payment rate is equal to the average price for the drug or biological for all competitive acquisition areas and the year established as calculated and adjusted by the Secretary. Section 1847B of the Act, as added by section 303(d) of Pub. L. 108-173, establishes the payment methodology for Medicare Part B drugs and biologicals under the competitive acquisition program (CAP). The Part B drug CAP was implemented July 1, 2006, and includes approximately 190 of the most common Part B drugs provided in the physician's office setting. The list of drugs and biologicals covered under the Part B drug CAP, their associated payment rates, and the Part B drug CAP pricing methodology can be found on the CMS Web site at: *http://www.cms.hhs.gov/CompetitiveAcquisforBios.* For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through payment amount for drugs and biologicals to be zero based on our interpretation that the “otherwise applicable Medicare OPD fee schedule” amount was equivalent to the amount to be paid for pass-through drugs and biologicals under section 1842(o) of the Act (or section 1847B of the Act, if the drug or biological is covered under a competitive acquisition contract). We concluded for those years that the resulting difference between these two rates would be zero. For CY 2008, we estimated the OPPS pass-through payment amount for drugs and biologicals to be $6.6 million. Our proposed OPPS pass-through payment estimate for drugs and biologicals in CY 2009 is $8.9 million, which is discussed in section VI.B. of this proposed rule. The pass-through application and review process for drugs and biologicals is explained on the CMS Web site at: *http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp.* 2. Proposed Drugs and Biologicals With Expiring Pass-Through Status in CY 2008 Section 1833(t)(6)(C)(i) of the Act specifies that the duration of transitional pass-through payments for drugs and biologicals must be no less than 2 years and no longer than 3 years. We are proposing that the pass-through status of 15 drugs and biologicals expire on December 31, 2008, as listed in Table 20 below. Our standard methodology for providing payment for drugs and biologicals with expiring pass-through status in an upcoming calendar year is to determine the product's estimated per day cost and compare it with the OPPS drug packaging threshold for that calendar year (proposed at $60 for CY 2009). If the estimated per day cost is less than or equal to the applicable OPPS drug packaging threshold, we would package payment for the drug or biological into the payment for the associated procedure in the upcoming calendar year. If the estimated per day cost is greater than the OPPS drug packaging threshold, we would provide separate payment at the applicable relative ASP-based payment amount (proposed at ASP + 4 percent for CY 2009). For drugs and biologicals that are currently covered under the CAP, we are proposing to use the payment rates calculated under that program that are in effect as of April 1, 2008, for purposes of packaging decisions and for Addenda A and B to this proposed rule. We are proposing to update these payment rates for purposes of the CY 2009 OPPS/ASC final rule with comment period. Three of the products with expiring pass-through status for CY 2009 are biologicals that are solely surgically implanted according to their Food and Drug Administration-approved indications. These products are described by HCPCS codes C9352 (Microporous collagen implantable tube (Neuragen Nerve Guide), per centimeter length); C9353 (Microporous collagen implantable slit tube (NeuraWrap Nerve Protector), per centimeter length); and J7348 (Dermal (substitute) tissue of nonhuman origin, with or without other bioengineered or processed elements, without metabolically active elements (Tissuemend), per square centimeter). The methodology of calculating a product's estimated per day cost and comparing it to the annual OPPS drug packaging threshold has been used to determine the packaging status of all drugs and biologicals under the OPPS (except for our exemption for 5HT3 anti-emetics), including injectable products paid for under the OPPS as biologicals (such as intraarticular sodium hyaluronate products). However, we believe that the three products described above with expiring pass-through status for CY 2009 differ from other biologicals paid under the OPPS in that they specifically function as surgically implanted devices. Both implantable devices under the OPPS and these three biologicals with expiring pass-through status are always surgically inserted or implanted (including through a surgical incision or a natural orifice). Furthermore, in some cases these implantable biologicals can substitute for implantable nonbiologic devices (such as for synthetic nerve conduits or synthetic mesh used in tendon repair). To date, for other nonpass-through biologicals paid under the OPPS which may sometimes be used as implantable devices, we have instructed hospitals, via Transmittal 1336, Change Request 5718, dated September 14, 2007, to not separately bill for the HCPCS codes for the products when using these items as implantable devices (including as a scaffold or an alternative to human or nonhuman connective tissue or mesh used in a graft) during surgical procedures. In such cases, we consider payment for the biological used as an implantable device in a specific clinical case to be included in payment for the surgical procedure. As we established in the CY 2003 OPPS final rule with comment period (67 FR 66763), when the pass-through payment period for an implantable device ends, it is standard OPPS policy to package payment for the implantable device into payment for its associated surgical procedure. We consider nonpass-through implantable devices to be integral and supportive items and services for which packaged payment is most appropriate. According to our regulations at § 419.2(b), as a prospective payment system, the OPPS establishes a national payment rate 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 including, but not limited to, implantable prosthetics, implantable durable medical equipment, and medical and surgical supplies. Therefore, when the period of device pass-through payment ends, we package the costs of the devices no longer eligible for pass-through payment into the costs of the procedures with which the devices were reported in the claims data used to set the payment rates for the upcoming calendar year. We believe this policy to package payment for implantable devices that are integral to the performance of separately paid procedures should also apply to payment for implantable biologicals without pass-through status, when those biologicals function as implantable devices. As stated above, implantable biologicals may be used in place of other implantable nonbiologic devices whose costs are already accounted for in the associated procedural APC payments for surgical procedures. If we were to provide separate payment for these implantable biologicals without pass-through status, we would potentially be providing duplicate device payment, both through the packaged nonbiologic device cost included in the surgical procedure's payment and separate biological payment. We see no basis for treating implantable biological and nonbiologic devices without pass-through status differently for OPPS payment purposes, because both are integral to and supportive of the separately paid surgical procedures in which either may be used. Therefore, for CY 2009, we are proposing to package payment for any biological without pass-through status that is surgically inserted or implanted (through a surgical incision or a natural orifice) into the payment for the associated surgical procedure. As a result of this proposed methodology, HCPCS codes C9352, C9353 and J7348 would be packaged and assigned status indicator “N” for CY 2009. In addition, any new biologicals without pass-through status that are surgically inserted or implanted (through a surgical incision or a natural orifice) would be packaged beginning in CY 2009. Moreover, for nonpass-through biologicals which may sometimes be used as implantable devices, we would continue to instruct hospitals to not bill separately for the HCPCS codes for the products when used as implantable devices. This reporting would ensure that the costs of these products that may be, but are not always, used as implanted biologicals are appropriately packaged into payment for the associated implantation procedures. Table 20.—Proposed Drugs and Biologicals for Which Pass-Through Status Would Expire December 31, 2008 CY 2009 HCPCS code CY 2008 HCPCS code CY 2008 descriptor Proposed CY 2009 SI Proposed CY 2009 APC C9352 C9352 Neuragen nerve guide, per cm N C9353 C9353 Neurawrap nerve protector, cm N J0129 J0129* Abatacept injection K 9230 J0348 J0348 Anadulafungin injection K 0760 J0894 J0894* Decitabine injection K 9231 J1740 J1740* Ibandronate sodium injection K 9229 J1743 J1743 Idursulfase injection K 9232 J2248 J2248 Micafungin sodium injection K 9227 J2323 J2323* Natalizumab injection K 9126 J2778 J2778* Ranibizumab injection K 9233 J3243 J3243 Tigecycline injection K 9228 J3473 J3473 Hyaluronidase recombinant N J7348 J7348 Tissuemend tissue N J7349 J7349 Primatrix tissue K 1141 J9303 J9303 Panitumumab injection K 9235 * Indicates that the drug was paid at a rate determined by the Part B drug CAP methodology while identified as pass-through under the OPPS. 3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2009 We are proposing to continue pass-through status in CY 2009 for 16 drugs and biologicals. These items, which were approved for pass-through status between April 1, 2007 and July 1, 2008, are listed in Table 21. The APCs and HCPCS codes for these proposed drugs and biologicals listed in Table 21 are assigned status indicator “G” in Addenda A and B to this proposed rule. Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through payment for pass-through drugs and biologicals (the pass-through payment amount) as the difference between the amount authorized under section 1842(o) of the Act (or, if the drug or biological is covered under a CAP under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary) and the portion of the otherwise applicable fee schedule amount that the Secretary determines is associated with the drug or biological. Given our CY 2009, proposal to provide payment for nonpass-through separately payable drugs and biologicals at ASP+4 percent as described further in section V.B.3. of this proposed rule, we believe it would be consistent with the statute to provide payment for drugs and biologicals with pass-through status that are not part of the Part B drug CAP at a rate of ASP+6 percent, the amount authorized under section 1842(o) of the Act, rather than ASP+4 percent that would be the otherwise applicable fee schedule portion associated with the drug or biological. The difference between ASP+4 percent and ASP+6 percent, therefore, would be the CY 2009 pass-through payment amount for these drugs and biologicals. Thus, for CY 2009, we are proposing to pay for pass-through drugs and biologicals that are not part of the Part B drug CAP at ASP+6 percent, equivalent to the rate these drugs and biologicals would receive in the physician's office setting in CY 2009. Section 1842(o) of the Act also states that if a drug or biological is covered under the CAP under section 1847B of the Act, the payment rate is equal to the average price for the drug or biological for all competitive acquisition areas and year established as calculated and adjusted by the Secretary. For CY 2009, we are proposing to provide payment for drugs and biologicals with pass-through status that are offered under the Part B drug CAP at a rate equal to the Part B drug CAP rate. Therefore, considering ASP+4 percent to be the otherwise applicable fee schedule portion associated with these drugs or biologicals, the difference between the Part B drug CAP rate and ASP+4 percent would be the pass-through payment amount for these drugs and biologicals. HCPCS codes that are offered under the CAP program as of April 1, 2008 are identified in Table 21 below with an asterisk. In section V.B.5. of this proposed rule, we discuss our proposal to make separate payment in CY 2009 for new drugs and biologicals with a HCPCS code but without hospital claims data, consistent with the provisions of section 1842(o) of the Act, at a rate that is equivalent to the payment they would receive in a physician's office setting (or under section 1847B of the Act, if the drug or biological is covered under a competitive acquisition contract) only if we have received a pass-through application for the item and pass-through status has been subsequently granted. Otherwise, we are proposing to pay ASP+4 percent for these products in CY 2009. In addition, we are proposing to update pass-through payment rates on a quarterly basis on our Web site during CY 2009 if later quarter ASP submissions (or more recent WAC or AWP information, as applicable) indicate that adjustments to the payment rates for these pass-through drugs and biologicals are necessary. If a drug or biological that has been granted pass-through status for CY 2009 becomes covered under the Part B drug CAP, we are proposing to make the appropriate adjustments to the payment rates for these drugs and biologicals on a quarterly basis. In CY 2009, we are proposing to provide payment for diagnostic and therapeutic radiopharmaceuticals that are granted pass-through status based on the ASP methodology. As stated above, for purposes of pass-through payment, we consider radiopharmaceuticals to be drugs under the OPPS and, therefore, if a diagnostic or therapeutic radiopharmaceutical receives pass-through status during CY 2009, we are proposing to follow the standard ASP methodology to determine its pass-through payment rate under the OPPS. If ASP information is available, the payment rate would be equivalent to the payment rate that drugs receive under section 1842(o) of the Act, that is, ASP+6 percent. If ASP data are not available for a radiopharmaceutical, we are proposing to base the pass-through payment on the product's WAC. If WAC information is also not available, we are proposing to provide payment for the pass-through radiopharmaceutical at 95 percent of its most recent AWP. Table 21.—Proposed Drugs and Biologicals With Continuing Pass-Through Status in CY 2009 CY 2008 HCPCS code CY 2009 HCPCS code Short descriptor Proposed CY 2009 SI Proposed CY 2009 APC C9238 C9238 Inj, levetiracetam G 9238 C9239 C9239 Inj, temsirolimus G 1168 C9240* C9240 Injection, ixabepilone G 9240 C9241 C9241 Injection, doripenem G 9241 C9242 C9242 Injection, fosaprepitant G 9242 C9354 C9354 Veritas collagen matrix, cm2 G 9354 C9355 C9355 Neuromatrix nerve cuff, cm G 9355 C9356 C9356 TenoGlide Tendon Prot, cm2 G 9356 C9357 C9357 Flowable Wound Matrix, 1 cc G 9357 C9358 C9358 SurgiMend, 0.5 cm2 G 9358 J1300 J1300 Eculizumab injection G 9236 J1571 J1571 HepaGam B IM Injection G 0946 J1573 J1573 Hepagam B intravenous, inj G 9356 J3488* J3488 Reclast injection G 0951 J9226 J9226 Supprelin LA implant G 1142 J9261 J9261 Nelarabine injection G 0825 * Indicates that the drug was paid at a rate determined by the Part B drug CAP methodology while identified as pass-through under the OPPS. 4. Proposed Reduction of Transitional Pass-Through Payments for Diagnostic Radiopharmaceuticals To Offset Costs Packaged Into APC Groups Prior to CY 2008, certain diagnostic radiopharmaceuticals were paid separately under the OPPS if their mean per day costs were greater than the applicable year's drug packaging threshold. In CY 2008 (72 FR 66768), we packaged payment for all nonpass-through diagnostic radiopharmaceuticals as ancillary and supportive items and services. Specifically, we packaged payment for all nonpass-through diagnostic radiopharmaceuticals, including those products that would not otherwise have been packaged based solely on the CY 2008 drug packaging threshold, into payment for their associated nuclear medicine procedures. We are proposing to continue to package payment in CY 2009 for all nonpass-through diagnostic radiopharmaceuticals as discussed in section V.B.2.b. of this proposed rule. As previously noted, for OPPS pass-through payment purposes, radiopharmaceuticals are considered to be “drugs.” As described above, section 1833(t)(6)(D)(i) of the Act specifies that the transitional pass-through payment amount for pass-through drugs and biologicals is the difference between the amount paid under section 1842(o) or the Part B drug CAP rate and the otherwise applicable OPPS payment amount. Furthermore, transitional pass-through payments for drugs, biologicals, and radiopharmaceuticals under the OPPS are made for a period of at least 2 but not more than 3 years. There are currently no radiopharmaceuticals with pass-through status under the OPPS. For new pass-through radiopharmaceuticals with no ASP information or CAP rate, our proposed CY 2009 payment methodology is discussed in section V.A.3. of this proposed rule. According to this proposal and consistent with our CY 2008 final policy (72 FR 66755), new pass-through diagnostic radiopharmaceuticals without ASP information would be paid based on WAC or, if WAC is not available, based on 95 percent of the product's most recently published AWP. As described in section IV.A.2.a. of this proposed rule regarding pass-through device payment, we have consistently employed an established methodology to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of an associated device eligible for pass-through payment (the APC device offset amount) to avoid duplicate payment for the device portion of a procedure. This calculation uses calendar year claims data from the period used for the most recent recalibration of the APC payment rates (72 FR 66751 through 66752). We evaluate new pass-through device categories individually to determine if there are device costs packaged into the associated procedural APC payment rate from predecessor devices that resemble the new pass-through device category, suggesting that a device offset amount would be appropriate. On an ongoing basis, through the quarterly transmittals that implement the quarterly OPPS updates, we establish the applicable APC device offset amount, if any, in the same quarter as the eligible pass-through device category is first established. We update device offset amounts annually for eligible pass-through device categories when we recalibrate APC payment rates. We note that we initially implemented the device offset policy in CY 2001 only for pacemakers and neurostimulators but subsequently expanded the offset to other pass-through devices with costs from predecessor devices packaged into the existing APC structure beginning in CY 2002. Since April 2002, we have applied a uniform reduction, the APC device offset amount for the associated procedure, to payment for each of the devices receiving transitional pass-through payments furnished on or after April 1, 2002, and for which we have determined that the pass-through device resembles packaged predecessor devices. Because of our proposed CY 2009 packaging policy for diagnostic radiopharmaceuticals, we believe that a payment offset policy, as discussed previously for implantable devices, is now appropriate for diagnostic radiopharmaceuticals approved for pass-through payment status. An APC radiopharmaceutical offset amount would allow us to avoid duplicate payment for the diagnostic radiopharmaceutical portion of a nuclear medicine procedure by providing a diagnostic radiopharmaceutical pass-through payment that represents the difference between the payment rate for the diagnostic radiopharmaceutical and the packaged radiopharmaceutical cost included in the procedural APC payment for the nuclear medicine procedure. The otherwise applicable OPPS payment amount for the diagnostic radiopharmaceutical would roughly be the median cost of the predecessor diagnostic radiopharmaceuticals that is packaged into the payment for the nuclear medicine procedure. This APC radiopharmaceutical offset amount, similar to the longstanding device offset policy for payment of implantable devices with pass-through status, would be calculated based on a percentage of the APC payment for a nuclear medicine procedure attributable to the costs of packaged diagnostic radiopharmaceuticals, as reflected in the most recent complete year of hospital outpatient claims data. Beginning in CY 2009, we are proposing to review each new pass-through diagnostic radiopharmaceutical on a case-by-case basis, to determine whether radiopharmaceutical costs associated with predecessors of the new product are packaged into the existing APC structure for those nuclear medicine procedures with which the new radiopharmaceutical would be used. This proposed methodology is consistent with our current policy for new device categories. Because of the nature of diagnostic radiopharmaceuticals and the small number of nuclear medicine procedures to which they are typically closely linked, we believe that we would usually find costs for predecessor diagnostic radiopharmaceuticals packaged into the existing APC payment for the nuclear medicine procedures associated with the new product. In these cases, we would deduct the uniform, applicable APC radiopharmaceutical offset amount for the associated nuclear medicine procedure, calculated as described below, from the pass-through payment for the diagnostic radiopharmaceutical. We are proposing to establish the pertinent APC radiopharmaceutical offset amounts for newly eligible pass-through diagnostic radiopharmaceuticals quarterly through the transmittals that implement the quarterly OPPS updates and update these offset amounts annually, as needed. Not all CY 2007 OPPS claims for nuclear medicine procedures include radiolabeled products because radiopharmaceutical claims processing edits were implemented beginning in CY 2008. These claims processing edits require that a radiolabeled product be included on all claims for nuclear medicine procedures to ensure that we capture the full costs of the packaged diagnostic radiopharmaceuticals used for the procedures in future ratesetting. Because our most recent claims data do not yet reflect the results of these edits, we are proposing to use only those claims that pass the radiopharmaceutical edits to set rates for nuclear medicine procedures in CY 2009 as discussed in section II.A.2.d.(5) of this proposed rule. We are proposing to use the same claims to calculate the APC radiopharmaceutical offset amounts. Specifically, we would calculate the APC radiopharmaceutical offset fraction as: 1 minus (the cost from single procedure claims in the APC that pass the radiopharmaceutical edits after removing the costs for packaged diagnostic radiopharmaceuticals divided by the cost from single procedure claims in the APC that pass the radiopharmaceutical edits). To determine the actual APC offset amount, we would then multiply the resulting fraction by the CY 2009 APC payment amount for the procedure with which the new diagnostic radiopharmaceutical is used and, accordingly, reduce the transitional pass-through payment for the diagnostic radiopharmaceutical with pass-through status by this amount. Table 22 displays the APCs to which nuclear medicine procedures are proposed for assignment in CY 2009 and for which we would expect that an APC radiopharmaceutical offset could be applicable in the case of new diagnostic radiopharmaceuticals with pass-through status. Table 22.—APCs to Which Nuclear Medicine Procedures Are Proposed for CY 2009 Assignment APC APC title 0307 Myocardial Positron Emission Tomography
(PET)imaging. 0308 Non-Myocardial Positron Emission Tomography
(PET)imaging. 0377 Level II Cardiac Imaging. 0378 Level II Pulmonary Imaging. 0389 Level I Non-imaging Nuclear Medicine. 0390 Level I Endocrine Imaging. 0391 Level II Endocrine Imaging. 0392 Level II Non-imaging Nuclear Medicine. 0393 Hematologic Processing & Studies. 0394 Hepatobiliary Imaging. 0395 GI Tract Imaging. 0396 Bone Imaging. 0397 Vascular Imaging. 0398 Level I Cardiac Imaging. 0400 Hematopoietic Imaging. 0401 Level I Pulmonary Imaging. 0402 Level II Nervous System Imaging. 0403 Level I Nervous System Imaging. 0404 Renal and Genitourinary Studies. 0406 Level I Tumor/Infection Imaging. 0408 Level III Tumor/Infection Imaging. 0414 Level II Tumor/Infection Imaging. B. Proposed OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals Without Pass-Through Status 1. Background Under the CY 2008 OPPS, we currently pay for drugs, biologicals, and radiopharmaceuticals that do not have pass-through status in one of two ways: Packaged payment into the payment for the associated service or separate payment (individual APCs). We explained in the April 7, 2000, OPPS final rule with comment period (65 FR 18450) that we generally package the cost of drugs and radiopharmaceuticals into the APC payment rate for the procedure or treatment with which the products are usually furnished. Hospitals do not receive separate payment from Medicare for packaged items and supplies, and hospitals may not bill beneficiaries separately for any packaged items and supplies whose costs are recognized and paid within the national OPPS payment rate for the associated procedure or service. (Program Memorandum Transmittal A-01-133, issued on November 20, 2001, explains in greater detail the rules regarding separate payment for packaged services.) Packaging costs into a single aggregate payment for a service, procedure, or episode of care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, packaging the costs of items and services into the payment for the primary procedure or service with which they are associated encourages hospital efficiencies and also enables hospitals to manage their resources with maximum flexibility. Section 1833(t)(16)(B) of the Act, as added by section 621(a)(2) of Pub. L. 108-173, sets the threshold for establishing separate APCs for drugs and biologicals at $50 per administration for CYs 2005 and 2006. Therefore, for CYs 2005 and 2006, we paid separately for drugs, biologicals, and radiopharmaceuticals whose per day cost exceeded $50 and packaged the costs of drugs, biologicals, and radiopharmaceuticals whose per day cost was equal to or less than $50 into the procedures with which they were billed. For CY 2007, the packaging threshold for drugs, biologicals, and radiopharmaceuticals that were not new and did not have pass-through status was established at $55. For CY 2008, the packaging threshold for drugs, biologicals, and radiopharmaceuticals that are not new and do not have pass-through status was established at $60. The methodology used to establish the $55 threshold for CY 2007, the $60 threshold for CY 2008, and our proposed approach for CY 2009 are discussed in more detail in section V.B.2. of this proposed rule. In addition, since CY 2005, we have provided an exemption to this packaging determination for oral and injectable 5HT3 anti-emetic products. We discuss in section V.B.2. of this proposed rule our proposed CY 2009 payment policy for these anti-emetic products. 2. Proposed Criteria for Packaging Payment for Drugs, Biologicals and Radiopharmaceuticals a. Drugs, Biologicals, and Therapeutic Radiopharmaceuticals As indicated above, in accordance with section 1833(t)(16)(B) of the Act, the threshold for establishing separate APCs for payment of drugs and biologicals was set to $50 per administration during CYs 2005 and 2006. In CY 2007, we used the fourth quarter moving average Producer Price Index
(PPI)levels for prescription preparations to trend the $50 threshold forward from the third quarter of CY 2005 (when the Pub. L. 108-173 mandated threshold became effective) to the third quarter of CY 2007. We then rounded the resulting dollar amount to the nearest $5 increment in order to determine the CY 2007 threshold amount of $55. Using the same methodology as that used in CY 2007 (which is discussed in more detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085 through 68086)), for CY 2008 we set the packaging threshold for establishing separate APCs for drugs and biologicals at $60. Following the CY 2007 methodology for CY 2009, we used updated fourth quarter moving average PPI levels to trend the $50 threshold forward from the third quarter of CY 2005 to the third quarter of CY 2009 and again rounded the resulting dollar amount ($61.25) to the nearest $5 increment, which yielded a figure of $60. In performing this calculation, we used the most up-to-date forecasted, quarterly PPI estimates from CMS' Office of the Actuary (OACT). As actual inflation for past quarters replaced forecasted amounts, the PPI estimates for prior quarters have been revised (compared with those used in the CY 2007 OPPS/ASC final rule with comment period) and have been incorporated into our calculation. Based on the calculations described above, we are proposing a packaging threshold for CY 2009 of $60. As stated in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68086), we believe that packaging certain items is a fundamental component of a prospective payment system, that packaging these items does not lead to beneficiary access issues and does not create a problematic site of service differential, that the packaging threshold is reasonable based on the initial establishment in law of a $50 threshold for the CY 2005 OPPS, that updating the $50 threshold is consistent with industry and government practices, and that the PPI for prescription preparations is an appropriate mechanism to gauge Part B drug inflation. During the March 2008 APC Panel meeting, the APC Panel made a recommendation supporting CMS' current methodology of adjusting the threshold dollar amount for packaging drugs and biologicals on the basis of the PPI for prescription drugs. We are adopting the APC Panel's recommendation, and we are proposing to continue this methodology for updating the drug packaging threshold for CY 2009. To determine their CY 2009 proposed packaging status, we calculated the per day cost of all drugs, biologicals, and therapeutic radiopharmaceuticals that had a HCPCS code in CY 2007 and were paid (via packaged or separate payment) under the OPPS using claims data from January 1, 2007, to December 31, 2007. In order to calculate the per day costs for drugs, biologicals, and therapeutic radiopharmaceuticals to determine their packaging status in CY 2009, we are proposing to use the methodology that was described in detail in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final rule with comment period (70 FR 68636 through 70 FR 68638). To calculate the proposed CY 2009 per day costs, we used an estimated payment rate for each drug and biological of ASP+4 percent (which is the payment rate we are proposing for separately payable drugs and biologicals in CY 2009, as discussed in more detail in section V.B.3.b. of this proposed rule). We used the manufacturer submitted ASP data from the fourth quarter of CY 2007 (data that were used for payment purposes in the physician's office setting, effective April 1, 2008) to determine the proposed per day cost. As is our standard methodology, we are proposing to use payment rates based on the ASP data from the fourth quarter of CY 2007 for budget neutrality estimates, packaging determinations, impact analyses, and completion of Addenda A and B to this proposed rule because these are the most recent data available for use at the time of development of this proposed rule. These data are also the basis for drug payments in the physician's office setting, effective April 1, 2008. For items that did not have an ASP-based payment rate, we used their mean unit cost derived from the CY 2007 hospital claims data to determine their per day cost. We packaged items with a per day cost less than or equal to $60 and identified items with a per day cost greater than $60 as separately payable. Consistent with our past practice, we crosswalked historical OPPS claims data from the CY 2007 HCPCS codes that were reported to the CY 2008 HCPCS codes that we display in Addendum B to this proposed rule for payment in CY 2009. Our policy during previous cycles of the OPPS has been to use updated ASP and claims data to make final determinations of the packaging status of drugs, biologicals, and radiopharmaceuticals for the final rule with comment period. We note that it is also our policy to make an annual packaging determination only when we develop the OPPS/ASC final rule for the update year. Only items that are identified as separately payable in the final rule would be subject to quarterly updates. For our calculation of per day costs of drugs, biologicals, and therapeutic radiopharmaceuticals in the CY 2009 OPPS/ASC final rule with comment period, we are proposing to use ASP data from the first quarter of CY 2008, which is the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective July 1, 2008, along with updated hospital claims data from CY 2007. We note that we would also use these data for budget neutrality estimates and impact analyses for the CY 2009 OPPS/ASC final rule with comment period. Payment rates for separately payable drugs and biologicals included in Addenda A and B to that final rule with comment period would be based on ASP data from the second quarter of CY 2008, which are the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective October 1, 2008. These rates would then be updated in the January 2009 OPPS update, based on the most recent ASP data to be used for physician's office and OPPS payment as of January 1, 2009. Consequently, the packaging status for drugs, biologicals, and therapeutic radiopharmaceuticals in the CY 2009 OPPS/ASC final rule with comment period using the updated data may be different from their packaging status determined based on the data used for this proposed rule. Under such circumstances, we are proposing to apply the following policies to these drugs, biologicals, and therapeutic radiopharmaceuticals whose relationship to the proposed $60 threshold changes based on the final updated data: • Drugs, biologicals, and therapeutic radiopharmaceuticals that were paid separately in CY 2008, proposed for separate payment in CY 2009, and have per day costs equal to or less than $60 based on the updated ASPs and hospital claims data used for the CY 2009 final rule with comment period, would continue to receive separate payment in CY 2009. • Drugs, biologicals, and therapeutic radiopharmaceuticals that were packaged in CY 2008 and that were proposed for separate payment in CY 2009, and have per day costs equal to or less than $60 based on the updated ASPs and hospital claims data used for the CY 2009 final rule with comment period, would remain packaged in CY 2009. • Drugs, biologicals, and therapeutic radiopharmaceuticals for which we proposed packaged payment in CY 2009, but have per day costs greater than $60 based on the updated ASPs and hospital claims data used for the CY 2009 final rule with comment period, would receive separate payment in CY 2009. For CY 2009, we are also proposing to continue exempting the oral and injectable forms of 5HT3 anti-emetic products from packaging, thereby making separate payment for all of the 5HT3 anti-emetic products. As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65779 through 65780), it is our understanding that chemotherapy is very difficult for many patients to tolerate, as the side effects are often debilitating. In order for Medicare beneficiaries to achieve the maximum therapeutic benefit from chemotherapy and other therapies with side effects of nausea and vomiting, anti-emetic use is often an integral part of the treatment regimen. We believe that we should continue to ensure that Medicare payment rules do not impede a beneficiary's access to the particular anti-emetic that is most effective for him or her as determined by the beneficiary and his or her physician. Table 23.—Proposed Anti-Emetics to Exempt From CY 2009 OPPS Drug Packaging Threshold HCPCS code Short descriptor J1260 Dolasetron mesylate. J1626 Granisetron HCl injection. J2405 Ondansetron hcl injection. J2469 Palonosetron HCl. Q0166 Granisetron HCl 1 mg oral. Q0179 Ondansetron HCl 8 mg oral. Q0180 Dolasetron mesylate oral. b. Proposed Payment for Diagnostic Radiopharmaceuticals and Contrast Agents As established in the CY 2008 final rule with comment period (72 FR 66766 through 66768), we began packaging payment for all diagnostic radiopharmaceuticals and contrast agents into the payment for the associated procedure, regardless of their per day costs. Packaging costs into a single aggregate payment for a service, encounter, or episode-of-care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, packaging the costs of items and services into the payment for the primary procedure or service with which they are associated encourages hospital efficiencies and also enables hospitals to manage their resources with maximum flexibility. Prior to CY 2008, we noted that the proportion of drugs, biologicals, and radiopharmaceuticals that were separately paid under the OPPS had increased in recent years, a pattern that we also observed for procedural services under the OPPS. Our final CY 2008 policy that packaged payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents regardless of their per day costs contributed significantly to expanding the size of the OPPS payment bundles and is consistent with the principles of a prospective payment system. During the March 2008 meeting of the APC Panel, the APC Panel recommended that CMS continue to package payment for diagnostic radiopharmaceuticals for CY 2009. We are accepting this recommendation and, therefore, for CY 2009, we are proposing to continue packaging payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents regardless of their per day costs for the reasons discussed below. As we established in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66768), we identify diagnostic radiopharmaceuticals specifically as those Level II HCPCS codes that include the term “diagnostic” along with a radiopharmaceutical in their long code descriptors. We continue to believe that our proposal to continue to treat diagnostic radiopharmaceuticals and contrast agents differently from other specified covered outpatient drugs (SCODs) is appropriate for several reasons. First, the statutory requirement that we must pay separately for drugs and biologicals for which the per day cost exceeds $50 under section 1833(t)(16)(B) of the Act has expired. Therefore, we are not restricted in the extent to which we can package payment for SCODs and other drugs, nor are we required to treat all classes of drugs in the same manner with regard to whether they are packaged or separately paid. We have used this flexibility to make different packaging determinations with regard to specific anti-emetic drugs. Second, diagnostic radiopharmaceuticals and contrast agents function effectively as supplies that enable the provision of an independent service. More specifically, contrast agents are always provided in support of a diagnostic or therapeutic procedure that involves imaging, and diagnostic radiopharmaceuticals are always provided in support of a diagnostic nuclear medicine procedure. This is different from many other SCODs, such as therapeutic radiopharmaceuticals, where the therapeutic radiopharmaceutical itself is the primary therapeutic modality. Given the inherent function of contrast agents and diagnostic radiopharmaceuticals as supportive to the performance of an independent procedure, we continue to view the packaging of payment for contrast agents and diagnostic radiopharmaceuticals as a logical expansion of packaging for SCODs. As we consider the possibility of moving to additional encounter-based and episode-based payment in future years, we may consider additional options for packaging more SCODs in the future. Third, section 1833(t)(14)(A)(iii) of the Act requires that payment for SCODs be set prospectively based on a measure of average hospital acquisition cost. We believe our claims data offer an acceptable proxy for average hospital acquisition cost and associated handling and preparation costs for radiopharmaceuticals. We believe that hospitals have adapted to the CY 2006 coding changes for radiopharmaceuticals and responded to our instructions to include charges for radiopharmaceutical handling in their charges for the radiopharmaceutical products. We have relied on mean unit costs derived from our claims data as one proxy for average acquisition cost and pharmacy overhead, and we use these data to determine the packaging status for SCODs. In the case of contrast agents, while we have ASP data that could be a proxy for average hospital acquisition cost and associated handling and preparation costs, payment for almost all contrast agents would be packaged under the OPPS for CY 2009 based on the proposed CY 2009 OPPS $60 per day packaging threshold. Therefore, we believe it would be appropriate to continue to package payment for all contrast agents for CY 2009, to provide accurate payment for the associated tests and procedures using an approach that promotes hospital efficiency. In summary, we view diagnostic radiopharmaceuticals and contrast agents as ancillary and supportive of the diagnostic tests and therapeutic procedures in which they are used. In light of our authority to make different packaging determinations and the improved reporting of hospital charges for radiopharmaceutical handling in the CY 2007 claims data, we are proposing to continue packaging payment for all contrast agents and diagnostic radiopharmaceuticals regardless of their per day costs for CY 2009. For more information on how we are proposing to set CY 2009 payment rates for nuclear medicine procedures in which diagnostic radiopharmaceuticals are used and echocardiography services provided with and without contrast agents, we refer readers to sections II.A.2.d.(5) and (4), respectively, of this proposed rule. During the March 2008 APC Panel meeting, the APC Panel also recommended that CMS present data at the first CY 2009 APC Panel meeting on usage and frequency, geographic distribution, and size and type of hospitals performing nuclear medicine studies using radioisotopes in order to ensure that access is preserved for Medicare beneficiaries. We are accepting this recommendation and will present information to the APC Panel at its first CY 2009 meeting when initial claims data from CY 2008 will be available. 3. Proposed Payment for Drugs and Biologicals Without Pass-Through Status That Are Not Packaged a. Payment for Specified Covered Outpatient Drugs (SCODs) Section 1833(t)(14) of the Act, as added by section 621(a)(1) of Pub. L. 108-173, requires special classification of certain separately paid radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a “specified covered outpatient drug” is a covered outpatient drug, as defined in section 1927(k)(2) of the Act, for which a separate APC has been established and that either is a radiopharmaceutical agent or is a drug or biological for which payment was made on a pass-through basis on or before December 31, 2002. Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and biologicals are designated as exceptions and are not included in the definition of “specified covered outpatient drugs,” known as SCODs. These exceptions are— • A drug or biological for which payment is first made on or after January 1, 2003, under the transitional pass-through payment provision in section 1833(t)(6) of the Act. • A drug or biological for which a temporary HCPCS code has not been assigned. • During CYs 2004 and 2005, an orphan drug (as designated by the Secretary). Section 1833(t)(14)(A)(iii) of the Act, as added by section 621(a)(1) of Pub. L. 108-173, requires that payment for SCODs in CY 2006 and subsequent years be equal to the average acquisition cost for the drug for that year as determined by the Secretary, subject to any adjustment for overhead costs and taking into account the hospital acquisition cost survey data collected by the Government Accountability Office
(GAO)in CYs 2004 and 2005. If hospital acquisition cost data are not available, the law requires that payment be equal to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as necessary. In the CY 2006 OPPS proposed rule (70 FR 42728), we discussed the CY 2005 report by MedPAC regarding pharmacy overhead costs in HOPDs and summarized the findings of that study: • Handling costs for drugs, biologicals, and radiopharmaceuticals administered in the HOPD are not insignificant; • Little information is available about the magnitude of pharmacy overhead costs; • Hospitals set charges for drugs, biologicals, and radiopharmaceuticals at levels that reflected their respective handling costs; and • Hospitals vary considerably in their likelihood of providing services which utilize drugs, biologicals, or radiopharmaceuticals with different handling costs. As a result of these findings, MedPAC developed seven drug categories for pharmacy and nuclear medicine handling costs based on the estimated level of hospital resources used to prepare the products. Associated with these categories were two recommendations for accurate payment of pharmacy overhead under the OPPS. 1. CMS should establish separate, budget neutral payments to cover the costs hospitals incur for handling separately payable drugs, biologicals and radiopharmaceuticals. 2. CMS should define a set of handling fee APCs that group drugs, biologicals, and radiopharmaceuticals based on attributes of the products that affect handling costs; CMS should instruct hospitals to submit charges for these APCs and base payment rates for the handling fee APCs on submitted charges reduced to costs. In assigning drugs to the seven categories, MedPAC considered additional characteristics that contribute to differential pharmacy handling costs, such as radioactivity, toxicity, mode of administration, and the need for special handling. While MedPAC was able to include information on a variety of drugs with many of these characteristics, hospitals participating in MedPAC's research were not able to provide sufficient cost information regarding the handling of outpatient radiopharmaceuticals for MedPAC to make a recommendation about overhead categories for these products. In response to the MedPAC findings, in the CY 2006 OPPS proposed rule (70 FR 42729), we discussed our belief that because of the varied handling resources required to prepare different forms of drugs, it would be impossible to exclusively and appropriately assign a drug to a certain overhead category that would apply to all hospital outpatient uses of the drug. Therefore, our CY 2006 OPPS proposal included a proposal to establish three distinct Level II HCPCS C-codes and three corresponding APCs for drug handling categories to differentiate overhead costs for drugs and biologicals. We also proposed:
(1)To combine several overhead categories recommended by MedPAC according to Table 24, as shown below;
(2)to establish three drug handling categories, as we believed that larger groups would minimize the number of drugs that may fit into more than one category and would lessen any undesirable payment policy incentives to utilize particular forms of drugs or specific preparation methods;
(3)to collect hospital charges for these C-codes for 2 years; and
(4)to ultimately base payment for the corresponding drug handling APCs on CY 2006 claims data available for the CY 2008 OPPS. Both the MedPAC categories and the CY 2006 proposed categories are identified in Table 24 below. Table 24.—Drug Overhead Category Groupings Discussed in the CY 2006 OPPS Proposed Rule MedPAC drug overhead category Description Proposed CY 2006 drug overhead category Category 1 Orals (oral tablets, capsules, solutions) Category 1. Category 2 Injection/Sterile Preparation (draw up a drug for administration) Category 2. Category 3 Single IV Solution/Sterile Preparation (adding a drug or drugs to a sterile IV solution) or Controlled Substances Category 2. Category 4 Compounded/Reconstituted IV Preparations (requiring calculations performed correctly and then compounded correctly) Category 2. Category 5 Specialty IV or Agents requiring special handling in order to preserve their therapeutic value or Cytotoxic Agents, oral (chemotherapeutic, teratogenic, or toxic) requiring personal protective equipment
(PPE)Category 3. Category 6 Cytotoxic Agents (chemotherapeutic, teratogenic, or toxic) in all formulations except oral requiring PPE Category 3. Category 7 Radiopharmaceutical: Basic and Complex Diagnostic Agents, PET Agents, Therapeutic Agents, and Radioimmunoconjugates In the CY 2006 OPPS final rule with comment period (70 FR 68659 through 68665), we discussed the public comments we received on our proposal regarding pharmacy overhead. The overwhelming majority of commenters did not support our proposal and urged us not to finalize this policy, as it would be administratively burdensome for hospitals. Therefore, we did not finalize this proposal for CY 2006. As we noted in the CY 2006 OPPS final rule with comment period (70 FR 68640), findings from a MedPAC survey of hospital charging practices indicated that hospitals set charges for drugs, biologicals, and radiopharmaceuticals high enough to reflect their pharmacy handling costs as well as their acquisition costs. After considering all public comments received, in the CY 2006 OPPS final rule with comment period (70 FR 68642), we established a policy to provide a combined payment rate of ASP+6 percent for both the hospital's drug and biological acquisition costs and associated pharmacy overhead costs, as this was the equivalent average ASP-based amount to the aggregate cost from CY 2004 hospital claims data for separately payable drugs under the OPPS. We acknowledged the limitations of this methodology, namely that pharmacy overhead costs of specific drugs and biologicals are not directly related to their specific acquisition costs. We also solicited additional comments on future options for ways to identify and provide an alternative payment methodology for pharmacy overhead costs under the OPPS. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68091), we proposed and finalized a policy that provided a single payment of ASP+6 percent for the hospital's acquisition cost for the drug or biological and all associated pharmacy overhead and handling costs. The ASP+6 percent rate was higher than the equivalent average ASP-based amount calculated from claims of ASP+4 percent, but we adopted this methodology for stability while we continued to examine the issue of the costs of pharmacy overhead in the HOPD. We continued to meet with interested pharmacy stakeholders regarding the various issues related to hospital charging practices and how these practices would affect our potential proposals for payment of drugs and pharmacy overhead under the OPPS. Many comments from the hospital industry reiterated that hospitals do not attach a specific pharmacy overhead charge to a particular drug. In particular, a more expensive drug with high pharmacy overhead costs does not commonly result in a sufficiently high hospital charge for the drug to account for all of the associated drug acquisition and pharmacy overhead costs. We have been told that hospitals frequently allocate a relatively greater pharmacy overhead charge to the single hospital charge for less expensive drugs to counterbalance the lesser charge for pharmacy overhead for more expensive drugs with high pharmacy overhead costs. Therefore, the pharmacy overhead costs of one drug may be distributed among charges for many drugs. This practice of unequally distributing pharmacy overhead charges among all drugs provided by the hospital pharmacy makes the single CCR for cost center 5600 (Drugs Charged to Patients) applied for OPPS cost estimation of drugs through the revenue code-to-cost center crosswalk result in less accurate costs for individual drugs. The result is that the charges and estimated costs for less expensive drugs shoulder a higher burden of pharmacy overhead costs as compared to the charges and estimated costs for more expensive drugs. Commenters have suggested that our OPPS methodology of applying a single CCR for the cost estimation of all drugs unfairly reduces payment amounts for separately payable expensive drugs, as the actual CCR varies widely across drugs. The concerns surrounding the impact on payment accuracy of differential hospital charging practices for pharmacy overhead costs resemble the concerns regarding charge compression that have been raised for expensive implantable devices over the past several years of the OPPS (72 FR 66599 through 66602). In general, differential hospital markup policies related to the cost of an item lead to overestimating the cost of inexpensive items and underestimating the cost of expensive items when a single CCR is applied to charges on claims. In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to ongoing discussions with interested parties, we proposed to continue our methodology of providing a combined payment rate for drug and biological acquisition and pharmacy overhead costs. We also proposed to instruct hospitals to remove the pharmacy overhead charge for both packaged and separately paid drugs and biologicals from the charge for the drug or biological and report the pharmacy overhead charge on an uncoded revenue code line on the claim. We believed that this would provide us with an avenue for collecting pharmacy handling cost data specific to drugs in order to package the overhead costs of these items into the associated procedures, most likely drug administration services. We believed that this methodology of reporting pharmacy overhead costs on an uncoded revenue center line would increase the accuracy of pharmacy overhead payments for drugs and biologicals as it would package the overhead cost for similar drugs into the commonly associated separately payable services, for example, by packaging the pharmacy overhead cost for a chemotherapy drug with the cost of the chemotherapy drug administration service also included on the claim. Similar to the public response to our CY 2006 pharmacy overhead proposal, the overwhelming majority of commenters did not support our CY 2008 proposal and urged us to not finalize this policy (72 FR 66761). While MedPAC supported the proposal for improving the accuracy of drug payment by incorporating variability in pharmacy overhead costs, most other commenters cited the increased hospital burden that would be associated with manipulating accounting systems and making manual calculations, along with concerns about making these changes to their billing operations while continuing to set charges for particular services that were the same for all payers. After hearing concerns about the burden of establishing a unique pharmacy overhead charge for every drug, at its September 2007 meeting, the APC Panel recommended that hospitals not be required to separately report charges for pharmacy overhead and handling and that payment for overhead be included as part of drug payment. The APC Panel also recommended that CMS continue to evaluate alternative methods to standardize the capture of pharmacy overhead costs in a manner that is simple to implement at the organizational level (72 FR 66761). Because of these concerns, we did not finalize the proposal to instruct hospitals to separately report pharmacy overhead charges for CY 2008. Instead, in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66763), we finalized a policy of providing payment for separately payable drugs and biologicals and their pharmacy overhead at ASP+5 percent as a transition from their CY 2007 payment of ASP+6 percent to payment based on the equivalent average ASP-based payment rate calculated from hospital claims, which was ASP+3 percent for the CY 2008 OPPS/ASC final rule with comment period. Hospitals continued to include charges for pharmacy overhead costs in the line-item charges for the associated drugs reported on claims. b. Proposed Payment Policy The provision in section 1833(t)(14)(A)(iii) of the Act, as described above, continues to be applicable to determining payments for SCODs for CY 2009. This provision requires that, in CY 2009, payment for SCODs be equal to the average acquisition cost for the drug for that year as determined by the Secretary, subject to any adjustment for overhead costs and taking into account the hospital acquisition cost survey data collected by the GAO in CYs 2004 and 2005. If hospital acquisition cost data are not available, the law requires that payment be equal to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as necessary. In addition, section 1833(t)(14)(E)(ii) authorizes the Secretary to adjust APC weights for SCODs to take into account the MedPAC report relating to overhead and related expenses, such as pharmacy services and handling costs. During this past year, we have met with a variety of stakeholders regarding different proposals for collecting pharmacy overhead cost information for setting OPPS payment rates. One such proposal was endorsed by several stakeholders during the March 2008 APC Panel meeting. Presenters to the APC Panel explained that CMS' methodology of using a single CCR to determine the acquisition and pharmacy overhead cost for all drugs attributes a greater relative share of pharmacy overhead cost to the lower-priced packaged drugs and a lower relative share of pharmacy overhead cost to the more expensive, separately payable drugs. Because the OPPS packages payment for drugs and biologicals with an estimated per day cost of $60 or less and estimates the equivalent average ASP-based amount based only on the costs of separately payable drugs, some pharmacy overhead cost that should be associated with separately payable drugs is being packaged into payment for the procedures that are performed with lower cost packaged drugs. This stakeholder proposal suggested that CMS recalculate the equivalent average ASP-based amount based on the costs of packaged and separately payable drugs with HCPCS codes, rather than on our current methodology of calculating an ASP-based amount solely from claims data for separately payable drugs. CMS would then use this equivalent average ASP-based amount (or the physician's office payment rate of ASP+6 percent) to represent the acquisition and pharmacy overhead cost of all packaged drugs and would substitute this figure for the costs of packaged drugs in ratesetting for their associated procedures. The pool of money under the budget neutral OPPS that would result from this methodology that would package lower drug costs with associated procedures than our current methodology could then be distributed to OPPS payment in a number of ways, such as increasing the combined acquisition and overhead cost payment for separately payable drugs to a higher average ASP-based amount and/or providing separate payment for pharmacy overhead costs for either all drugs or only separately payable drugs based on a flat add-on rate or on tiers of pharmacy service complexity. The stakeholders presented APC median cost estimates demonstrating that their recommendation would significantly impact drug payment rates but would only change the majority of APC median costs by less than 2 percent. At its March 2008 meeting, the APC Panel recommended that CMS work with stakeholders to further develop recommendations on the validity of this methodology and conduct an impact analysis, with consideration for CY 2009 rulemaking. Because CMS would redistribute pharmacy overhead cost when modeling payment rates for ratesetting, the suggested methodology would be administratively simple for hospitals. This approach also would refine the existing OPPS methodology for estimating pharmacy overhead cost in a budget neutral manner, without redistributing money from the payment for nondrug components of other services to payment for drugs. However, we also believe that substituting an average ASP-based amount (or the physician's office payment rate of ASP+6 percent) on claims for purposes of packaging drug costs into associated procedures would be a highly significant change to our established methodology. It is our longstanding policy to accept hospital charge data as it is reported on claims, in order to capture variability in hospitals' unique charges that is specific to each hospital's charging structure, as well as other potential efficiencies. The stakeholder recommendation would eliminate the expected variability in hospitals' costs of drugs that are packaged into their associated procedures. While we appreciate the thoughtful approach to OPPS payment for pharmacy overhead costs as described above, we believe there are several issues to be seriously considered before we could potentially propose the adoption of such a methodology including, but not limited to, its implications for how we would more generally estimate the costs of items packaged into a primary service. We package payment under the OPPS for the costs of many items and services other than relatively inexpensive drugs that are integral to separately payable primary services. In addition, it is not clear to us what approach for redistributing pharmacy overhead dollars would be most accurate and operationally feasible for CMS. We specifically invite public comment on this potential approach for estimating pharmacy overhead costs and redistributing pharmacy overhead payment under the OPPS. Recently, RTI completed its evaluation of the OPPS cost-based weight methodology in general, and charge compression in particular. Pharmacy stakeholders have already noted that accurately estimating pharmacy overhead cost is intimately related to the CCR used to estimate costs from claims' charges. As discussed above, hospitals have informed us that they redistribute the cost of pharmacy overhead from expensive to inexpensive drugs when setting charges for drugs. RTI determined that hospitals billing a greater percent of drug charges under revenue code 0636 (Drugs requiring detail coding) out of all revenue codes related to drugs had a significantly higher CCR for cost center 5600 (Drugs Charged to Patients). “These findings are consistent with the a priori expectation that providers tend to use lower markup rates on these relatively expensive items, as compared with other items in their CCR group.” (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008). RTI, in its March 2007 report, noted that hospitals billing a greater percent of drug charges under revenue code 0258 (IV solutions) out of all revenue codes related to drugs had a significantly lower CCR for cost center 5600. In the short term, RTI recommends that CMS adopt regression-adjusted CCRs under the OPPS for drugs requiring detail coding (reported under revenue code 0636) and for IV solutions (reported under revenue code 0258) for purposes of estimating median costs. To eliminate the need for simulated CCRs in the longer term, RTI recommends that CMS create a new standard cost center on the cost report for drugs requiring detail coding (reported under revenue code 0636) to mitigate charge compression by acquiring more specific CCRs (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008.). RTI's recommendations provide other alternatives to the recent pharmacy stakeholder recommended approach described above for improving the cost estimation of the acquisition and pharmacy overhead costs of drugs under the OPPS. As discussed further in section II.A.1.c. of this proposed rule and consistent with our proposal for the FY 2009 IPPS, we are not proposing to adopt regression-based CCRs for cost estimation in any area of the CY 2009 OPPS, including drugs requiring detail coding and IV solutions. Instead, we believe that RTI's empirical findings would appropriately be addressed through concrete steps to improve the quality of accounting information used to estimate future costs from drug charges. Cognizant of public comments on past proposals, we also believe that this should be done in a manner that is fairly simple for hospitals to implement. For CY 2009, we are proposing to continue our policy of making a combined payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals at an equivalent average ASP-based amount calculated based on our standard methodology of estimating drug costs from claims. Using updated data for this proposed rule, after determining the proposed CY 2009 packaging status of drugs and biologicals, we estimated the aggregate cost of all drugs and biologicals (excluding therapeutic radiopharmaceuticals for which no ASP data are currently available) that would be separately payable in CY 2009 based on mean costs from hospital claims data and calculated the equivalent average ASP-based payment rate that would equate to the aggregate reported hospital cost. The results of our analysis indicate that setting the payment rates for drugs and biologicals that would be separately payable in CY 2009 based on hospital costs would be equivalent to providing payment, on average, at ASP+4 percent. Therefore, we are proposing to pay for separately payable drugs and biologicals under the CY 2009 OPPS at ASP+4 percent because we believe that this is the best currently available proxy for average hospital acquisition cost and associated pharmacy overhead costs. In addition, we are also proposing to break the single standard cost center 5600 into two standard cost centers, Drugs with High Overhead Cost Charged to Patients and Drugs with Low Overhead Cost Charged to Patients, to reduce the reallocation of pharmacy overhead cost from expensive to inexpensive drugs and biologicals when setting an equivalent average ASP-based payment amount in the future. This proposal is consistent with RTI's recommendation for creating a new cost center whose CCR would be used to adjust charges to costs for drugs requiring detail coding. We note, however, that while improved CCRs would more accurately estimate the ASP-based amount for combined drug and pharmacy overhead payment, they would not capture within HCPCS code variability in pharmacy handling costs resulting from different methods of drug preparation used by hospitals. As discussed above, we believe that improved and more precise cost reporting is the best way to improve the accuracy of all cost-based payment weights, including relative weights for the IPPS MS-DRGs. Because both the IPPS and the OPPS rely on cost-based weights derived, in part, from data on the Medicare hospital cost report form, public comment on this proposed change to the cost report to break the single standard cost center 5600 into two standard cost centers should address any impact on both the inpatient and outpatient payment systems. This proposal would not affect OPPS cost estimation for radiopharmaceuticals for several reasons. First, we would not expect the costs and charges for radiopharmaceuticals to be assigned to cost center 5600. Rather cost center 4300 (Radioisotope) is more appropriate for these items. Second, our claims data demonstrate that some hospitals continue to bill radiopharmaceuticals under revenue code 0636, contrary to UB-04 instructions (Official UB04 Data Specifications Manual, AHA 2007, p. 127) specifically noting that radiopharmaceuticals should be billed under revenue codes 0343 (Diagnostic Radiopharmaceuticals) and 0344 (Therapeutic Radiopharmaceuticals). We believe that billing radiopharmaceuticals under revenue code 0636 could be a result of dated CMS' guidance regarding billing radiopharmaceuticals under revenue code 0636. On April 8, 2008, we deleted this guidance from our Claims Processing Manual through administrative issuance (Transmittal 1487, Change Request 5999). Finally, RTI did not observe evidence of differential mark-up in cost center 4300 (for hospitals reporting the cost center) for products reported under revenue codes 0343 and 0344 (RTI report, “Refining Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment Weights,” July 2008). In the FY 2009 IPPS proposed rule (73 FR 23544 through 23546), we proposed creating two cost centers, specifically
(1)Medical Supplies Charged to Patients and
(2)Implantable Devices Charged to Patients, to replace the current cost center Supplies Charged to Patients as part of our initiative to revise and update the Medicare hospital cost report form. We noted that we were only proposing one additional cost center in order to proceed cautiously with changes to the Medicare cost report in order to avoid unintended consequences for hospitals paid on a cost basis and to limit hospitals' administrative burden associated with adapting to new cost reporting forms and instructions. We remain committed to moving cautiously but recognize the need for a judicious number of additional cost centers in specific areas, including drugs and biologicals. As with the items reported in the cost center Supplies Charged to Patients, items reported in Drugs Charged to Patients demonstrate significant variability in the costs of included items. We noted in the FY 2009 IPPS proposed rule (73 FR 23546 through 23547) that we are updating the cost report form to eliminate outdated requirements in conjunction with the PRA, and that we plan to propose actual changes to the cost reporting form, the attending cost reporting software, and the cost report instructions in Chapter 36 of the Medicare Provider Reimbursement Manual (PRM), Part II. We anticipate proposing these revisions shortly. If we were to adopt as final our proposal to create one cost center for Drugs with High Overhead Cost Charged to Patients and one cost center for Drugs with Low Overhead Cost Charged to Patients in the CY 2009 OPPS/ASC final rule with comment period, the cost report forms and instructions would reflect those changes. We expect the revised cost report may be available for hospitals to use when submitting cost reports during FY 2009, that is, for cost reporting periods beginning after October 1, 2008, and we expect that we would be able to use some of these data for setting drug payment rates for a future OPPS update, generally 2 to 3 years from implementation of the new cost report form. Currently, to estimate the cost of separately payable drugs and biologicals for purposes of establishing the equivalent average ASP-based amount, we estimate costs from charges billed with UB-04 drug revenue codes 025X (Pharmacy) and 063X (Drugs Require Specific ID) using the CCR for cost center 5600. Our current revenue code-to-cost center crosswalk is available on the CMS Web site: ( *http://www.cms.hhs.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage* ). As part of our effort to isolate the costs and charges for drugs with high and low pharmacy overhead costs respectively, as proposed, we would instruct hospitals to report the charges for drugs and biologicals qualifying for the Drugs with High Overhead Cost Charged to Patients cost center under revenue code 0636 and all other drugs and biologicals under other appropriate drug revenue codes. It is current practice for hospitals to bill only outpatient drug and biological charges with revenue code 0636. Payment for inpatient hospital services through DRGs does not require detailed HCPCS coding for drugs and biologicals. More importantly, CMS claims processing systems currently allow only HCPCS codes for blood clotting factors to be reported with revenue code 0636 on inpatient claims. Under our CY 2009 proposal, we would instruct hospitals to report charges for drugs and biologicals meeting the criteria for the proposed Drugs with High Overhead Costs Charged to Patients cost center under revenue code 0636 for both inpatient and outpatient claims. CMS would need to change its claims processing systems and, because revenue code 0636 requires all charges to be reported in association with HCPCS codes, this approach would require hospitals to report HCPCS codes for drug charges under revenue code 0636 on inpatient claims. We believe that consistent billing of drugs and biologicals across inpatient and outpatient settings in the same hospital would be more appropriate than current practice, in order to refine our cost estimation for drugs with high and low pharmacy overhead costs. Continuing to exclude inpatient hospital charges for drugs and biologicals with high overhead costs from being reported under revenue code 0636 would leave some averaging of high and low pharmacy overhead costs under other pharmacy revenue codes, especially revenue code series 025X that we would map to the proposed new cost center Drugs with Low Overhead Costs Charged to Patients. As a result, there would be no improvement in the accuracy of MS-DRG weights based on the two new cost centers that we are proposing to create. However, we specifically invite public comment on how a CMS requirement to report certain drug and biological charges under revenue code 0636 on hospital inpatient claims would impact hospitals. There are several ways we could define these new cost centers for purposes of hospital reporting. First, we could adopt the assumptions behind RTI's empirical findings and require that hospitals simply report the costs and charges associated with revenue code 0636 in the proposed new cost center Drugs with High Overhead Costs Charged to Patients. This approach would require hospitals to report charges and costs for all other drugs in the proposed new cost center Drugs with Low Overhead Costs Charged to Patients. We believe this approach would be administratively simple for hospitals to implement because it would easily align revenue code and cost center relationships and would not require hospitals to otherwise categorize drugs or estimate a unique pharmacy overhead cost for each drug. Notwithstanding our requirement for hospitals to report, consistent with CPT and CMS instructions, all services described by HCPCS codes provided in an encounter, to the extent that hospitals report HCPCS codes for drugs that are not packaged, this approach might isolate costs and charges for drugs that are separately paid under the OPPS for purposes of more accurately estimating their costs. While we believe that RTI's findings suggest an increase in the CCR for adjustment of drug charges to costs would result from isolating the costs and charges for drugs billed under revenue code 0636, one limitation of this approach is that it would not fully mitigate the disproportionate allocation of pharmacy overhead cost reflected in differential markup. Although clearly an improvement in accuracy over current cost estimation, it is likely that significant variability in markup and overhead cost for drugs currently billed under revenue code 0636 would remain in the proposed new cost center CCR for Drugs with High Overhead Costs Charged to Patients. Second, we could set a cost threshold for drug acquisition and pharmacy overhead cost for purposes of including costs and charges for the drug in one of the two proposed new cost centers. If we were to implement this methodology, we potentially could set the threshold at the OPPS drug packaging threshold, which is proposed to be $60 for CY 2009. This would clearly identify those drugs that would be billed in each cost center because all drug and biological HCPCS codes would be assigned either separately payable or packaged status under the CY 2009 OPPS. However, we believe that using the OPPS drug packaging threshold may be too low, and probably does not identify a cost point that would maximize cost differences between drugs with relatively high pharmacy overhead costs and drugs with relatively low pharmacy overhead costs. This approach has the benefit of considering cost, which appears largely to determine the amount of markup for pharmacy overhead costs a hospital incorporates into drug charges. Although some high cost drugs may have low pharmacy overhead costs, in general this alternative may do a better job of improving cost estimates for drugs with high pharmacy overhead costs through the use of more specific CCRs than the first alternative discussed, a cost center that would include all drugs currently billed under revenue code 0636. On the other hand, we are uncertain as to how we would identify the most appropriate cost threshold amount, or the manner and frequency with which we would update the threshold. More importantly, we are concerned that identifying the unique acquisition and overhead cost for each drug could impose a comparable administrative burden as other prior proposals. Third, we could also set a cost threshold for pharmacy overhead specifically to define high versus low overhead cost for purposes of reporting costs and charges for drugs in the two new cost centers. This alternative would require hospitals to identify the cost of pharmacy overhead for every drug in order to assign it to a cost center. This approach would most accurately isolate drugs with high and low overhead costs, respectively. The resulting CCRs, therefore, would better estimate the average acquisition and overhead cost for these drugs. On the other hand, as with the second alternative, we are uncertain as to how we would identify the most appropriate pharmacy cost threshold amount, or the manner and frequency with which we would update the threshold. Further, this approach could also impose a significant hospital administrative burden, comparable to the burden identified by commenters regarding other prior proposals. A fourth approach would be to instruct hospitals to assign those drugs they administer in the OPPS to the two proposed new cost centers according to the categories discussed in the CY 2006 final rule with comment period and presented in Table 24 above. Under this methodology, drugs falling in CMS categories 1 and 2 would be billed under revenue codes 025X or 063X (other than 0636) and captured on the cost report in the proposed new cost center Drugs with Low Overhead Cost Charged to Patients, while drugs falling in CMS category 3 would be billed under revenue code 0636 and reported in the proposed new cost center Drugs with High Overhead Cost Charged to Patients. CMS would provide some examples in the cost report instructions of appropriate drugs for each category. We are aware that some pharmacy stakeholders have already categorized drug and biological HCPCS codes into the three CMS pharmacy overhead categories that were proposed for CY 2006. Because pharmacy overhead costs may vary depending on the preparation of a specific product at an individual hospital and hospital accounting also varies, the same drug could appear in a different cost center across hospitals. However, we do not believe it would be necessary for hospitals to assign exactly the same drugs to each of the two proposed new cost centers, as long as hospitals' assessment of the pharmacy overhead cost category is consistent with their billing of these drugs under revenue codes 063X (other than 0636) and 025X or 0636 and the inclusion of these drugs in the associated cost centers. Prospectively, the OPPS cost estimation methodology would use the CCR calculated for the proposed new cost center Drugs with High Overhead Cost Charged to Patients to adjust drug charges billed under revenue code 0636 to cost and the CCR calculated for the proposed new cost center Drugs with Low Overhead Cost Charged to Patients to adjust drug charges billed under revenue codes 025X and 063X (other than 0636) to cost for determining drug acquisition and pharmacy overhead costs. We believe that this fourth approach would best estimate a CCR for drugs with high pharmacy overhead cost and relatively low markup as reflected in hospitals' charges. Because the number of drugs in pharmacy overhead category three would be limited based on the specific category description, this approach should more accurately address the limited markup for very expensive drugs with high pharmacy overhead costs, where charges do not reflect the hospitals' pharmacy overhead costs for those drugs. We also believe that hospitals would find this alternative easier to implement than any policy requiring hospitals to identify a unique total acquisition and overhead cost or a specific pharmacy overhead cost for each drug for purposes of assigning the drug's costs and charges to one of the two proposed new cost centers. However, we realize that there would still be some additional administrative burden for hospitals that have not yet determined the appropriate pharmacy overhead category for each of their drugs, and that they would need to educate their billing staff, to modify their chargemasters, and to adapt other billing software. In summary, we are proposing to pay for the combined average acquisition and pharmacy overhead cost of separately payable drugs and biologicals at ASP+4 percent under the CY 2009 OPPS. In addition, we are proposing to create two new cost centers when we revise the Medicare hospital cost report form, specifically Drugs with High Overhead Cost Charged to Patients and Drugs with Low Overhead Cost Charged to Patients. We expect that CCRs from these proposed new cost centers would be available in 2 to 3 years to refine OPPS drug cost estimates by accounting for differential hospital markup practices for drugs with high and low pharmacy overhead costs. We specifically invite public comment on the policy and operational benefits, challenges, and concerns that may be associated with these proposals, specifically as they relate to our proposed approach to distinguishing between drugs and biologicals for purposes of inclusion in the two proposed new cost centers and the other alternatives discussed above. c. Proposed Payment for Blood Clotting Factors For CY 2008, we are providing payment for blood clotting factors under the OPPS at ASP+5 percent, plus an additional payment for the furnishing fee that is also a part of the payment for blood clotting factors furnished in physicians' offices under Medicare Part B. The CY 2008 updated furnishing fee increased by 4.0 percent to $0.158 per unit. For CY 2009, we are proposing to pay for blood clotting factors at ASP+4 percent, consistent with our proposed payment policy for other nonpass-through separately payable drugs and biologicals, and to continue our policy for payment of the furnishing fee using an updated amount for CY 2009. Because the furnishing fee update is based on the percentage increase in the Consumer Price Index
(CPI)for medical care for the 12-month period ending with June of the previous year and the Bureau of Labor Statistics releases the applicable CPI data after the MPFS and OPPS/ASC proposed rules are published, we are not able to include the actual updated furnishing fee in this proposed rule. Therefore, in accordance with our policy as finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), we will announce the actual figure for the percent change in the applicable CPI and the updated furnishing fee calculated based on that figure through applicable program instructions and posting on the CMS Web site at: *http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/* . 4. Proposed Payment for Therapeutic Radiopharmaceuticals a. Background Section 303(h) of Pub. L. 108-173 exempted radiopharmaceuticals from ASP pricing in the physician's office setting. Beginning in the CY 2005 OPPS final rule with comment period, we have exempted radiopharmaceutical manufacturers from reporting ASP data for payment purposes under the OPPS. (For more information, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65811) and the CY 2006 OPPS final rule with comment period (70 FR 68655).) Consequently, we did not have ASP data for radiopharmaceuticals for consideration for previous years' OPPS ratesetting. In accordance with section 1833(t)(14)(B)(i)(I) of the Act, we have classified radiopharmaceuticals under the OPPS as SCODs. As such, we have paid for radiopharmaceuticals at average acquisition cost as determined by the Secretary and subject to any adjustment for overhead costs. Radiopharmaceuticals are also subject to the policies affecting all similarly classified OPPS drugs and biologicals, such as pass-through payment for diagnostic and therapeutic radiopharmaceuticals and individual packaging determinations for therapeutic radiopharmaceuticals, discussed earlier in this proposed rule. For CYs 2006 and 2007, we used mean unit cost data from hospital claims to determine each radiopharmaceutical's packaging status and implemented a temporary policy to pay for separately payable radiopharmaceuticals based on the hospital's charge for each radiopharmaceutical adjusted to cost using the hospital's overall CCR. In addition, in the CY 2006 final rule with comment period (70 FR 68654), we instructed hospitals to include charges for radiopharmaceutical handling in their charges for the radiopharmaceutical products so these costs would be reflected in the CY 2008 ratesetting process. We note that this continues to be our expectation, and we believe that the charges for radiopharmaceuticals in the CY 2007 claims data that we are using for this proposed rule reflect both the acquisition cost of the radiopharmaceutical and its associated overhead. The methodology of providing separate payment based on the individual hospital's overall CCR for CYs 2006 and 2007 was finalized as an interim proxy for average acquisition cost because of the unique circumstances associated with providing radiopharmaceutical products to Medicare beneficiaries. The single OPPS payment represented Medicare payment for both the acquisition cost of the radiopharmaceutical and its associated handling costs. During the CY 2006 and CY 2007 rulemaking processes, we encouraged hospitals and radiopharmaceutical stakeholders to assist us in developing a viable long-term prospective payment methodology for these products under the OPPS. As reiterated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66766), we were pleased to note that we had many discussions with interested parties regarding the availability and limitations of radiopharmaceutical cost data. In considering payment options for therapeutic radiopharmaceuticals for CY 2008, we examined several alternatives which we discussed in our CY 2008 OPPS/ASC proposed rule (72 FR 42738 through 42739) and CY 2008 OPPS/ASC final rule with comment period (72 FR 66769 through 66770). (We refer readers to these rules for a full discussion of all of the options that we considered.) After considering the options and all public comments, we finalized a CY 2008 methodology to provide a prospective payment for therapeutic radiopharmaceuticals (defined as those Level II HCPCS codes that include the term “therapeutic” along with a radiopharmaceutical in their long code descriptors) using mean costs derived from the CY 2006 claims data, where the costs are determined using our standard methodology of applying hospital-specific departmental CCRs to radiopharmaceutical charges, defaulting to hospital-specific overall CCRs only if appropriate departmental CCRs are unavailable (72 FR 66772). We additionally finalized a policy to package payment for all diagnostic radiopharmaceuticals (defined as Level II HCPCS codes that include the term “diagnostic” along with a radiopharmaceutical in their long code descriptors) for CY 2008. As discussed in the CY 2008 OPPS/ASC proposed rule (72 FR 42739), we believed that adopting prospective payment based on historical hospital claims data was appropriate because it served as our most accurate available proxy for the average hospital acquisition cost of separately payable therapeutic radiopharmaceuticals. In addition, we noted that we have found that our general prospective payment methodology based on historical hospital claims data results in more consistent, predictable, and equitable payment amounts across hospitals and likely provides incentives to hospitals for efficiently and economically providing these outpatient services. Prior to implementation of our finalized CY 2008 methodology of providing a prospective payment for therapeutic radiopharmaceuticals, section 106(b) of the MMSEA was enacted on December 29, 2007, that provided payment for therapeutic radiopharmaceuticals based on individual hospital charges adjusted to cost. Therefore, hospitals continue to receive payment for therapeutic radiopharmaceuticals by applying the hospital-specific overall CCR to each hospital's charge for a therapeutic radiopharmaceutical from January 1, 2008 through June 30, 2008. Thereafter, the OPPS provides payment for separately payable therapeutic radiopharmaceuticals on a prospective basis, with payment rates based upon mean costs from hospital claims data as set forth in the CY 2008 OPPS/ASC final rule with comment period, unless otherwise required by law. b. Proposed Payment Policy Since the start of the temporary cost-based payment methodology for radiopharmaceuticals in CY 2006, we have met with several interested parties on a number of occasions regarding payment under the OPPS for radiopharmaceuticals and have received numerous different suggestions from these stakeholders regarding payment methodologies that we could employ for future use under the OPPS. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66771), we solicited comments requesting interested parties to provide information related to if and how the existing ASP methodology could be used to establish payment for specific therapeutic radiopharmaceuticals under the OPPS. We received several responses to our request for comments. Similar to the recommendations we received during the CY 2008 OPPS/ASC proposed rule comment period (72 FR 66770), we received several suggestions regarding the establishment of an OPPS-specific methodology for radiopharmaceutical payment that would be similar to the ASP methodology, without following the established ASP procedures referenced at 1847A of the Act and implemented through rulemaking. Some commenters recommended using external data submitted by a variety of sources other than manufacturers. Along this line, commenters suggested gathering information from nuclear pharmacies using methodologies with a variety of names such as Nuclear Pharmacy Calculated Invoiced Price (Averaged)
(CIP)and Calculated Pharmacy Sales Price (CPSP). Other commenters recommended that CMS base payment for certain radiopharmaceuticals on manufacturer-reported ASP. As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66771), a ratesetting approach based on external data would be administratively burdensome for us because we would be required to collect, process, and review external information to ensure that it was valid, reliable, and representative of a diverse group of hospitals so that it could be used to establish rates for all hospitals. However, we specifically requested additional comments regarding the use of the existing ASP reporting structure for therapeutic radiopharmaceuticals as this established methodology is already used for payment of other drugs provided in the hospital outpatient setting (72 FR 66771). While we received several recommendations from commenters on the CY 2008 OPPS/ASC final rule with comment period regarding payment of therapeutic radiopharmaceuticals based on estimated costs provided by manufacturers or other parties, we believe that the use of external data for payment of therapeutic radiopharmaceuticals should only be adopted if those external data are subject to the same well-established regulatory framework as the ASP data currently used for payment of separately payable drugs and biologicals under the OPPS. We have previously indicated that nondevice external data used for setting payment rates should be publicly available and representative of a diverse group of hospitals both by location and type, while it should also identify its data sources. We do not believe that external therapeutic radiopharmaceutical cost data voluntarily provided outside of the established ASP methodology, either by manufacturers or nuclear pharmacies, would generally satisfy these criteria that are minimum standards for setting OPPS payment rates. Another commenter on the CY 2008 OPPS/ASC final rule with comment period recommended that CMS identify the therapeutic radiopharmaceutical used for Zevalin therapy (A9543 (Yttrium Y-90 ibritumomab tiuxetan, therapeutic, per treatment dose, up to 40 millicuries)) as a biological for payment purposes, instead of treating it as a radiopharmaceutical. As discussed in the CY 2003 OPPS final rule with comment period (67 FR 66757), Zevalin treatment consists of a radioactive isotope that is delivered to its target tissue by a monoclonal antibody. At that time, we explained that because of the specific requirements associated with delivery of radioactive isotope therapy, any product containing a therapeutic radioisotope, including Y-90 Zevalin, would be considered to be covered and paid under the category of benefits described under section 1861(s)(4) of the Act for radioactive isotope therapy. We stated that we would not consider therapeutic radiopharmaceuticals to be drugs as described in section 1861(t) and, therefore, the OPPS payment methodology for separately payable drugs and biologicals would not be applicable to payment for Y-90 Zevalin. We continue to believe that the most appropriate Medicare benefit category for Y-90 Zevalin is provided in section 1861(s)(4) of the Act because this product is a specific radioactive isotope therapy. Therefore, the CY 2009 OPPS proposal for nonpass-through payment of separately payable biologicals that is described in section V.B.3.b. of this proposed rule would not apply to payment for Y-90 Zevalin. As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66770), at its September 2007 meeting, the APC Panel recommended that CMS create a composite APC for Bexxar or related therapies and present it for the APC Panel's consideration at the next APC Panel meeting. We accepted this recommendation and modeled a radioimmunotherapy
(RIT)composite APC for both Bexxar and Zevalin therapies using our final rule CY 2008 claims database. We discussed this analysis with the APC Panel at its March 2008 meeting. To perform this analysis for the APC Panel, we first identified all claims that had an occurrence of a case-defining therapeutic radiopharmaceutical HCPCS code used for a RIT treatment: A9545 (Iodine I-131 tositumomab, therapeutic, per treatment dose) and A9543 (Yttrium Y-90 ibritumomab tiuxetan, therapeutic, per treatment dose, up to 40 millicuries). We then identified what we considered to be the HCPCS codes for services and products associated with RIT, based on information from the manufacturers and suggestions from CMS medical advisors and identified associated claims (using beneficiary health insurance claim
(HIC)numbers) to develop the total median cost for a RIT composite APC. We note that very few hospitals billed all of the HCPCS codes for an individual beneficiary that we expected to be reported for a case of RIT treatment. We used this “HIC-linked” file consisting of all associated claims for each beneficiary from one hospital that we considered to be part of a single case of RIT treatment to develop a composite APC cost estimate for a course of RIT treatment, where a case required:
(1)HCPCS code A9545 or A9543;
(2)an HCPCS code for either nonradiolabeled tositumomab (G3001 (Administration or supply of tositumomab, 450 mg)) or rituximab (J9310 (Rituximab, 100 mg)) (which would also indicate the start of a RIT case);
(3)a HCPCS code for the corresponding diagnostic radiopharmaceutical (A9544 (Iodine I-131 tositumomab, diagnostic, per study dose) or A9542 (Indium In-111, ibritumomab tiuxetan, diagnostic, per study dose, up to 5 millicuries)); and
(4)at least one instance of a diagnostic imaging service (CPT code 78804 (Radiopharmaceutical localization of tumor or distribution of radiopharmaceutical agent(s); whole body, requiring two or more days imaging)) prior to the administration of the therapeutic radiopharmaceutical. In addition, in order to further define the case for an estimate of a composite APC cost, we did not include the costs of services occurring on dates before the provision of the nonradiolabeled tositumomab or rituximab or after the administration of the therapeutic radiopharmaceutical. Other services we expected to be reported for a case, such as CPT code 79403 (Radiopharmaceutical therapy, radiolabeled monoclonal antibody by intravenous infusion) and CPT code 77300 (Basic radiation dosimetry calculation, central axis depth dose calculation, TDF, NSD, gap calculation, off axis factor, tissue inhomogeneity factors, calculation of non-ionizing radiation surface and depth dose, as required during course of treatment, only when prescribed by the treating physician), were considered optional and, although they were not required in order to determine the RIT case, the costs of these associated services were included when we established the median cost of the RIT composite APC. We determined that the median cost for the RIT composite APC, including required and optional additional services directly related to the RIT treatment, would be approximately $19,000. This figure represents, at a minimum, the estimated cost of the nonradiolabeled tositumomab (or rituximab), the diagnostic radiopharmaceutical, the therapeutic radiopharmaceutical, and the imaging, based on costs from hospital claims data. Upon review of this study, the APC Panel, at its March 2008 meeting, recommended that CMS pursue a RIT composite APC that uses existing claims and stakeholder data to establish appropriate payment rates for RIT protocols. In addition, the APC Panel recommended that CMS provide specific guidance to hospitals on appropriate billing for RIT under a composite APC methodology. We are not accepting these recommendations of the APC Panel. First, we do not believe it would be appropriate to incorporate external data into a composite APC methodology, when composite APC median costs for a comprehensive service that the composite APC describes are based upon reported hospital costs on claims as described in section II.A.2.e. of this proposed rule. As we have hospital costs from CY 2007 claims for the services that would be paid through a RIT composite APC, we would have no reason to use external stakeholder data instead of reported hospital costs for ratesetting for such an APC. In addition, as the APC Panel alluded to in its second recommendation regarding billing guidance to hospitals, our claims analysis demonstrated that, according to hospital claims data, apparently few patients actually received all the component services associated with RIT treatment from a single hospital, or many RIT treatments were incorrectly reported by hospitals. A composite APC payment provides more accurate payment for a set of major services with only limited variation from hospital to hospital or from case to case and relies on correctly coded claims for the comprehensive service to develop the composite cost, whereas RIT treatment does not appear to have these characteristics. Stakeholders have confirmed that a proportion of patients receiving a diagnostic radiopharmaceutical and imaging in preparation for RIT treatment do not go on to receive the therapeutic radiopharmaceutical for a variety of specific clinical reasons. Furthermore, the whole course of RIT treatment may occur over a several week period, and the challenges associated with instructing hospitals to report component services in a timely fashion that would allow the I/OCE to determine whether a composite payment would be appropriate are significant. Therefore, we believe it would be premature to propose payment of a composite APC for RIT treatment for CY 2009. We received comments on the CY 2008 OPPS/ASC final rule with comment period from certain radiopharmaceutical manufacturers who indicated that the standard ASP methodology could be used for payment of certain therapeutic radiopharmaceutical products. Specifically, these manufacturers expressed interest in providing ASP for their therapeutic radiopharmaceutical products as a basis for payment under the OPPS. We appreciate the willingness of these manufacturers to provide ASP data, but we recognize that payment based on the ASP methodology may not be possible for all therapeutic radiopharmaceuticals if manufacturers are unable or unwilling to voluntarily submit ASP data. Therefore, we are proposing the following payment methodology for therapeutic radiopharmaceuticals under the CY 2009 OPPS. For therapeutic radiopharmaceuticals where ASP information is submitted through the established ASP process by all manufacturers of the specific therapeutic radiopharmaceutical, we would provide payment for the average acquisition and associated handling costs of the therapeutic radiopharmaceutical at the same relative ASP-based amount (proposed at ASP+4 percent for CY 2009) that we would pay for separately payable drugs and biologicals in CY 2009 under the OPPS. If sufficient ASP information is not submitted or appropriately certified by the manufacturer for a given calendar year quarter, then for that quarter we are proposing that the OPPS would provide a prospective payment based on the mean cost from hospital claims data as displayed in Table 25 below, as this was the methodology finalized in the CY 2008 OPPS/ASC final rule with comment period. Further, we are proposing to continue the methodology, as discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66772), of eliminating claims from providers who consistently (more than 2 times) reported charges in the CY 2007 claims data that were less than $100 when converted to costs for HCPCS codes A9543 and A9545 as part of the usual ratesetting process. We believe that this would mitigate the effects of using incorrectly coded claims from several providers in our standard ratesetting methodology which calculates the mean costs for these two products from the claims available for the update year. Because we do not have ASP data for therapeutic radiopharmaceuticals that were used for payment in April 2008, the proposed payment rates included in Addenda A and B to this proposed rule are based on mean costs from historical hospital claims data available for this proposed rule. Under our proposal that initially looks to ASP data to establish the payment rates for separately payable therapeutic radiopharmaceuticals, beginning in CY 2009, we would update the payment rates for therapeutic radiopharmaceuticals quarterly as new ASP data become available, just as we would update the payment rates for separately payable drugs and biologicals under the OPPS. We are proposing to allow manufacturers to submit ASP information for any separately payable therapeutic radiopharmaceutical for payment purposes under the OPPS. However, we are not proposing to compel manufacturers to submit ASP information. The ASP data submitted would need to be provided for a patient-specific dose, or patient-ready form, of the therapeutic radiopharmaceutical in order to properly calculate the ASP amount for a given HCPCS code. In addition, in those instances where there is more than one manufacturer of a particular therapeutic radiopharmaceutical, we note that all manufacturers would need to submit ASP information in order for payment to be made on an ASP basis. We are specifically requesting public comment on the development of a crosswalk, similar to the NDC/HCPCS crosswalk for separately payable drugs and biologicals posted on the CMS Web site at: *http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/01a_2008aspfiles.asp* , for use for therapeutic radiopharmaceuticals. We believe that the use of ASP information for OPPS payment would provide an opportunity to improve payment accuracy for these products by applying an established methodology that has already been successfully implemented under the OPPS for other separately payable drugs and biologicals. As is the case with other drugs and biologicals subject to ASP reporting, in order for a therapeutic radiopharmaceutical to receive payment based on ASP beginning January 1, 2009, we would need to receive ASP information from the manufacturer in October 2008 that would reflect therapeutic radiopharmaceutical sales in the third quarter of CY 2008 (July 1, 2008 through September 30, 2008). These data would not be available for publication in the CY 2009 OPPS/ASC final rule with comment period but would be included in the January 2009 OPPS quarterly release that would update the payment rates for separately payable drugs, biologicals, and therapeutic radiopharmaceuticals based on the most recent ASP data, consistent with our customary practice over the past 3 years when we have used the ASP methodology for payment of separately payable drugs and biologicals under the OPPS. In addition, we would need to receive information from radiopharmaceutical manufacturers that would allow us to calculate a unit dose cost estimate based on the applicable HCPCS code for the therapeutic radiopharmaceutical. We realize that not all therapeutic radiopharmaceutical manufacturers may be willing or able to submit ASP information for a variety of reasons. We are proposing to provide payment at the ASP rate if ASP information is available for a given calendar year quarter or, if ASP information is not available, we are proposing to provide payment based on the most recent hospital mean unit cost data that we have available. We believe that both methodologies represent an appropriate and adequate proxy for average hospital acquisition cost and associated handling costs for these products. Therefore, if ASP information for the appropriate period of sales related to payment in any CY 2009 quarter is not available, we would rely on the CY 2007 mean unit cost data derived from hospital claims to set the payment rates for therapeutic radiopharmaceuticals. We note that this is not the usual OPPS process that relies on alternative data sources, such as WAC or AWP, when ASP information is temporarily unavailable, prior to defaulting to the mean unit cost from hospital claims data. We are proposing this methodology specifically for therapeutic radiopharmaceuticals whereby we would immediately default to the mean unit cost from hospital claims if sufficient ASP data were not available because we are not proposing to require therapeutic radiopharmaceutical manufacturers to report ASP data at this time. We do not believe that WAC or AWP is an appropriate proxy for OPPS payment for average therapeutic radiopharmaceutical acquisition cost and associated handling costs when manufacturers are not required to submit ASP data and, therefore, payment based on WAC or AWP could continue for the full calendar year. Similar to the ASP process already in place for drugs and biologicals, we are proposing to update ASP data for therapeutic radiopharmaceuticals through our quarterly process as updates become available. In addition, we are proposing to assess the availability of ASP data for therapeutic radiopharmaceuticals quarterly, and if ASP data become available midyear, we would transition at the next available quarter to ASP-based payment. For example, if ASP data are not available for the quarter beginning January 2009 (that is, ASP information reflective of third quarter CY 2008 sales are not submitted in October 2008), then the next opportunity to begin payment based on ASP data for a therapeutic radiopharmaceutical would be April 2009 if ASP data reflective of fourth quarter CY 2008 sales were submitted in January 2009. Table 25.—Proposed CY 2009 Separately Payable Therapeutic Radiopharmaceuticals HCPCS code Short descriptor Proposed CY 2009 APC Proposed CY 2009 SI Proposed CY 2009 payment rate based on mean cost from claims A9517 I131 iodide cap, rx 1064 K $514.52 A9530 I131 iodide sol, rx 1150 K 424.97 A9543 Y90 ibritumomab, rx 1643 K 15,159.66 A9545 I131 tositumomab, rx 1645 K 10,554.47 A9563 P32 Na phosphate 1675 K 164.98 A9564 P32 chromic phosphate 1676 K 560.36 A9600 Sr89 strontium 0701 K 1,308.96 A9605 Sm 153 lexidronm 0702 K 2,655.52 5. Proposed Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals With HCPCS Codes, but Without OPPS Hospital Claims Data Pub. L. 108-173 does not address the OPPS payment in CY 2005 and after for drugs, biologicals, and radiopharmaceuticals that have assigned HCPCS codes, but that do not have a reference AWP or approval for payment as pass-through drugs or biologicals. Because there is no statutory provision that dictated payment for such drugs and biologicals in CY 2005, and because we had no hospital claims data to use in establishing a payment rate for them, we investigated several payment options for CY 2005 and discussed them in detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 through 65799). For CYs 2005 to 2007, we implemented a policy to provide separate payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS codes, but which did not have pass-through status, at a rate that was equivalent to the payment they received in the physician's office setting, established in accordance with the ASP methodology. For CY 2008, we finalized a policy to provide payment for new drugs and biologicals with HCPCS codes but which do not have pass-through status and are without OPPS hospital claims data, at ASP+5 percent, consistent with the final OPPS payment methodology for other separately payable drugs and biologicals. We are proposing to continue this methodology for CY 2009. Therefore, for CY 2009, we are proposing to provide payment for new drugs and biologicals with HCPCS codes, but which do not have pass-through status and are without OPPS hospital claims data, at ASP+4 percent, consistent with the CY 2009 proposed payment methodology for other separately payable nonpass-through drugs and biologicals. It is our belief that this policy ensures that new nonpass-through drugs and biologicals are treated like other drugs and biologicals under the OPPS, unless they are granted pass-through status. Only if they are pass-through drugs and biologicals would they receive a different payment for CY 2009, generally equivalent to the payment these drugs and biologicals would receive in the physician's office setting, consistent with the requirements of the statute. We are proposing to continue packaging payment for all new nonpass-through diagnostic radiopharmaceuticals in CY 2009. In accordance with the ASP methodology, in the absence of ASP data, we are proposing, for CY 2009, to continue the policy we implemented beginning in CY 2005 of using the WAC for the product to establish the initial payment rate for new nonpass-through drugs and biologicals with HCPCS codes, but which are without OPPS claims data. However, we note that if the WAC is also unavailable, we would make payment at 95 percent of the product's most recent AWP. We are also proposing to assign status indicator “K” to HCPCS codes for new drugs and biologicals for which we have not received a pass-through application. We further note that with respect to new items for which we do not have ASP data, once their ASP data become available in later quarter submissions, their payment rates under the OPPS would be adjusted so that the rates are based on the ASP methodology and set to the finalized ASP-based amount (proposed for CY 2009 at ASP+4 percent) for items that have not been granted pass-through status. For CY 2009, we also are proposing to base payment for new therapeutic radiopharmaceuticals with HCPCS codes as of January 1, 2009, but which do not have pass-through status, on the WACs for these products if ASP data for these therapeutic radiopharmaceuticals are not available. If the WACs are also unavailable, we would make payment for new therapeutic radiopharmaceuticals at 95 percent of their most recent AWPs because we would not have mean costs from hospital claims data upon which to base payment. Analogous to new drugs and biologicals, we are proposing to assign status indicator “K” to HCPCS codes for new therapeutic radiopharmaceuticals for which we have not received a pass-through application. Consistent with other ASP-based payments, for CY 2009, we are proposing to make any appropriate adjustments to the payment amounts for new drugs and biologicals in the CY 2009 OPPS/ASC final rule with comment period and also on a quarterly basis on our Web site during CY 2009 if later quarter ASP submissions (or more recent WACs or AWPs) indicate that adjustments to the payment rates for these drugs and biologicals are necessary. The payment rates for new therapeutic radiopharmaceuticals would also be adjusted accordingly. We note, the new CY 2009 HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals are not available at the time of development of this proposed rule; however, they will be included in the CY 2009 OPPS/ASC final rule with comment period where they will be assigned comment indicator “NI” to reflect that their interim final OPPS treatment is open to comment in the CY 2009 OPPS/ASC final rule with comment period. There are several nonpass-through drugs and biologicals that were payable in CY 2007 and/or CY 2008 for which we do not have any CY 2007 hospital claims data. In order to determine the packaging status of these items for CY 2009, we calculated an estimate of the per day cost of each of these items by multiplying the payment rate for each product based on ASP+4 percent, similar to other nonpass-through drugs and biologicals paid separately under the OPPS, by an estimated average number of units of each product that would typically be furnished to a patient during one administration in the hospital outpatient setting. We are proposing to package items for which we estimate the per administration cost to be less than or equal to $60, which is the general packaging threshold that we are proposing for drugs, biologicals, and therapeutic radiopharmaceuticals in CY 2009. We are proposing to pay separately for items with an estimated per administration cost greater than $60 (with the exception of diagnostic radiopharmaceuticals and contrast agents which we are proposing to continue to package regardless of cost, as discussed in more detail in section V.B.2.b. of this proposed rule) in CY 2009. We are proposing that the CY 2009 payment for separately payable items without CY 2007 claims data would be based on ASP+4 percent, similar to other separately payable nonpass-through drugs and biologicals under the OPPS. In accordance with the ASP methodology used in the physician's office setting, in the absence of ASP data, we would use the WAC for the product to establish the initial payment rate. However, we note that if the WAC is also unavailable, we would make payment at 95 percent of the most recent AWP available. Table 26 lists all of the nonpass-through drugs and biologicals without available CY 2007 claims data to which these policies would apply in CY 2009. Table 26.—Drugs and Biologicals Without CY 2007 Claims Data HCPCS code Short descriptor Proposed ASP-based payment rate Estimated average number of units per administration Proposed CY 2009 SI Proposed CY 2009 APC C9237 Inj, lanreotide acetate $23.90 90 K 9237 J0400 Aripiprazole injection 39 N J1573 Hepagam B intravenous, inj 47.43 8 K 1138 J2724 Protein C concentrate 11.96 630 K 1139 J3355 Urofollitropin, 75 iu 48.25 2 K 1741 Q4096 VWF complex, not Humate-P 0.64 6825 K 1213 Q4097 Inj IVIG Privigen 500 mg 33.54 84 K 1214 In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66776), we began recognizing, for OPPS payment purposes, multiple HCPCS codes indicating different dosages for covered Part B drugs. In general, prior to CY 2008, the OPPS recognized the lowest available administrative dose of a drug if multiple HCPCS codes existed for the drug; for the remainder of the doses, the HCPCS codes were assigned status indicator “B” indicating that another code existed for OPPS purposes. For example, if drug X has 2 HCPCS codes, 1 for a 1 ml dose and a second for a 5 ml dose, prior to CY 2008, the OPPS would have assigned a payable status indicator to the 1 ml dose and status indicator “B” to the 5 ml dose. Hospitals were then responsible for billing the appropriate number of units for the 1 ml dose in order to receive payment for the drug under the OPPS. As these HCPCS codes were previously unrecognized under the OPPS prior to CY 2008, we do not have claims data to determine their appropriate packaging status for CY 2009. For the CY 2008 OPPS/ASC final rule with comment period (72 FR 66775), we implemented a policy that assigned the status indicator of the previously recognized HCPCS code to the associated newly recognized code(s). For CY 2009, we are again proposing to continue to use this methodology. Table 27 below shows the CY 2007 unrecognized HCPCS code, the CY 2007 status indicator for the unrecognized HCPCS code, the CY 2008 short descriptor for the unrecognized HCPCS code, the associated recognized CY 2007 HCPCS code, and the proposed status indicator for the newly recognized code. As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66775), we believe that this approach is the most appropriate and reasonable way to implement this change in HCPCS code recognition under the OPPS without impacting payment. However, once claims data are available for these previously unrecognized HCPCS codes, we would determine the packaging status and resulting status indicator for each HCPCS code according to the general code-specific methodology for determining a code's packaging status for a given update year. As we stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66775), we plan to closely follow our claims data to ensure that our annual packaging determinations for the different HCPCS codes describing the same drug do not create inappropriate payment incentives for hospitals to report certain HCPCS codes instead of others. Table 27.—HCPCS Codes Unrecognized in CY 2007, Associated Recognized HCPCS Codes, and Proposed Status Indicators for CY 2009 HCPCS codes not recognized in CY 2007 CY 2007 SI CY 2008 short descriptor Associated HCPCS recognized in CY 2007 Proposed CY 2009 SI for HCPCS code newly recognized in CY 2008 J1470 B Gamma globulin 2 CC inj J1460 K J1480 B Gamma globulin 3 CC inj J1460 K J1490 B Gamma globulin 4 CC inj J1460 K J1500 B Gamma globulin 5 CC inj J1460 K J1510 B Gamma globulin 6 CC inj J1460 K J1520 B Gamma globulin 7 CC inj J1460 K J1530 B Gamma globulin 8 CC inj J1460 K J1540 B Gamma globulin 9 CC inj J1460 K J1550 B Gamma globulin 10 CC inj J1460 K J1560 B Gamma globulin > 10 CC inj J1460 K J8521 B Capecitabine, oral, 500 MG J8520 K J9062 B Cisplatin 50 MG injection J9060 N J9080 B Cyclophosphamide 200 MG inj J9070 N J9090 B Cyclophosphamide 500 MG inj J9070 N J9091 B Cyclophosphamide 1.0 Grm inj J9070 N J9092 B Cyclophosphamide 2.0 Grm inj J9070 N J9094 B Cyclophosphamide lyophilized J9093 N J9095 B Cyclophosphamide lyophilized J9093 N J9096 B Cyclophosphamide lyophilized J9093 N J9097 B Cyclophosphamide lyophilized J9093 N J9110 B Cytarabine hcl 500 MG inj J9100 N J9140 B Dacarbazine 200 MG inj J9130 N J9182 B Etoposide 100 MG inj J9181 N J9260 B Methotrexate sodium inj J9250 N J9290 B Mitomycin 20 MG inj J9280 N J9291 B Mitomycin 40 MG inj J9280 N J9375 B Vincristine sulfate 2 MG inj J9370 N J9380 B Vincristine sulfate 5 MG inj J9370 N Finally, there are 8 drugs and biologicals, shown in Table 28 below, that were payable in CY 2007 for which we lack CY 2007 claims data and for which we are unable to determine the per day cost based on the ASP methodology. As we are unable to determine the packaging status and subsequent payment rates, if applicable, for these drugs and biologicals for CY 2009 based on the ASP methodology or claims data, we are proposing to package payment for these drugs and biologicals in CY 2009. Table 28.—Drugs and Biologicals Without Information on per Day Cost That Are Proposed for Packaging in CY 2009 HCPCS code Short descriptor Proposed CY 2009 SI 90393 Vaccina ig, im N 90581 Anthrax vaccine, sc N J0350 Injection anistreplase 30 u N J0395 Arbutamine HCl injection N J1452 Intraocular Fomivirsen na N J2670 Totazoline hcl injection N J3530 Nasal vaccine inhalation N Q0174 Thiethylperazine maleate 10 mg N VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices A. Background Section 1833(t)(6)(E) of the Act limits the total projected amount of transitional pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of devices for a given year to an “applicable percentage” of projected total Medicare and beneficiary payments under the hospital OPPS. For a year before CY 2004, the applicable percentage was 2.5 percent; for CY 2004 and subsequent years, we specify the applicable percentage up to 2.0 percent. If we estimate before the beginning of the calendar year that the total amount of pass-through payments in that year would exceed the applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a uniform reduction in the amount of each of the transitional pass-through payments made in that year to ensure that the limit is not exceeded. We make an estimate of pass-through spending to determine not only whether payments exceed the applicable percentage, but also to determine the appropriate reduction to the conversion factor for the projected level of pass-through spending in the following year. For devices, developing an estimate of pass-through spending in CY 2009 entails estimating spending for two groups of items. The first group of items consists of device categories that were recently made eligible for pass-through payment and that would continue to be eligible for pass-through payment in CY 2009. The CY 2008 OPPS/ASC final rule with comment period (72 FR 66778) describes the methodology we have used in previous years to develop the pass-through spending estimate for known device categories continuing into the applicable update year. The second group contains items that we know are newly eligible, or project would be newly eligible, for device pass-through payment in the remainder of CY 2008 or beginning in CY 2009. The sum of the CY 2009 pass-through estimates for these two groups of device categories would equal the total CY 2009 pass-through spending estimate for device categories with pass-through status. For drugs and biologicals, section 1833(t)(6)(D)(i) of the Act establishes the pass-through payment amount for drugs and biologicals eligible for pass-through payment as the amount by which the amount authorized under section 1842(o) of the Act (or, if the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary) exceeds the portion of the otherwise applicable fee schedule amount that the Secretary determines is associated with the drug or biological. Because we are proposing to pay for nonpass-through separately payable drugs and biologicals under the CY 2009 OPPS at ASP+4 percent, which represents the otherwise applicable fee schedule amount associated with a pass-through drug or biological, and we would pay for pass-through drugs and biologicals at ASP+6 percent or the Part B drug CAP rate, if applicable, our estimate of drug and biological pass-through payment for CY 2009 is not zero. Similar to estimates for devices, the first group of drugs and biologicals requiring a pass-through payment estimate consists of those products that were recently made eligible for pass-through payment and that would continue to be eligible for pass-through payment in CY 2009. The second group contains drugs and biologicals that we know are newly eligible, or project would be newly eligible, beginning in CY 2009. The sum of the CY 2009 pass-through estimates for these two groups of drugs and biologicals would equal the total CY 2009 pass-through spending estimate for drugs and biologicals with pass-through status. B. Proposed Estimate of Pass-Through Spending We are proposing to set the applicable percentage limit at 2.0 percent of the total OPPS projected payments for CY 2009, consistent with our OPPS policy from CY 2004 through CY 2008. As discussed in section IV.A. of this proposed rule, there are currently no known device categories receiving pass-through payment in CY 2008 that would continue for payment during CY 2009. Therefore, there are no device categories in the first group, that is, device categories recently made eligible for pass-through payment and continuing into CY 2009, and the estimate for this group is $0. In estimating CY 2009 pass-through spending for device categories in the second group (that is, device categories that we know at the time of the development of this proposed rule would be newly eligible for pass-through payment in CY 2009 (of which there are none), additional device categories that we estimate could be approved for pass-through status subsequent to the development of this proposed rule and before January 1, 2009, and contingent projections for new categories in the second through fourth quarters of CY 2009), we are proposing to use the general methodology described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66778), while also taking into account recent OPPS experience in approving new pass-through device categories. The estimate of CY 2009 pass-through spending for this second group is $10.0 million. Employing our established methodology that the estimate of pass-through device spending in CY 2009 incorporates CY 2009 estimates of pass-through spending for known device categories continuing in CY 2009, those first effective January 1, 2009, and those device categories projected to be approved during subsequent quarters of CY 2008 and CY 2009, our proposed total pass-through estimate for device categories for CY 2009 is $10.0 million. To estimate CY 2009 pass-through spending for drugs and biologicals in the first group, specifically those drugs and biologicals recently made eligible for pass-through payment and continuing into CY 2009, we are proposing to utilize the most recent Medicare physician's office data regarding their utilization, information provided in the respective pass-through applications, historical hospital claims data, pharmaceutical industry information, and clinical information regarding the drugs or biologicals, in order to project the CY 2009 OPPS utilization of the products. For the known drugs and biologicals that would continue on pass-through status in CY 2009, we then estimate the total pass-through payment amount as the difference between ASP+6 percent or the Part B drug CAP rate, as applicable, and ASP+4 percent, aggregated across the projected CY 2009 OPPS utilization of these products. If payment for the drug or biological would be packaged if the product were not paid separately because of its pass-through status, we include in the pass-through estimate the full payment for the drug or biological at ASP+6 percent. Based on these analyses, we are proposing the estimated pass-through spending attributable to the first group (that is, the known drugs and biologicals continuing with pass-through eligibility in CY 2009) described above to be about $3.4 million for CY 2009. This $3.4 million estimate of CY 2009 pass-through spending for the first group of pass-through drugs and biologicals reflects the current pass-through drugs and biologicals that are continuing on pass-through status into CY 2009, which are displayed in Table 21 in section V.A.3. of this proposed rule. To estimate CY 2009 pass-through spending for drugs and biologicals in the second group (that is, drugs and biologicals that we know at the time of development of this proposed rule would be newly eligible for pass-through payment in CY 2009 (of which there are none), additional drugs and biologicals that we estimate could be approved for pass-through status subsequent to the development of this proposed rule and before January 1, 2009, and projections for new drugs and biologicals that could be initially eligible for pass-through payment in the second through fourth quarters of CY 2009), we are proposing to use utilization estimates from applicants, pharmaceutical industry data, and clinical information as the basis for pass-through spending estimates for these drugs and biologicals for CY 2009, while also considering the most recent OPPS experience in approving new pass-through drugs and biologicals. Based on these analyses, we are proposing the estimated pass-through spending attributable to this second group of drugs and biologicals to be about $5.5 million for CY 2009. In the CY 2005 OPPS final rule with comment period (69 FR 65810), we indicated that we are accepting pass-through applications for new radiopharmaceuticals that are assigned a HCPCS code on or after January 1, 2005. (Prior to this date, radiopharmaceuticals were not included in the category of drugs paid under the OPPS, and, therefore, were not eligible for pass-through status.) There are no radiopharmaceuticals that are eligible for pass-through payment at the time of publication of this proposed rule. In addition, we have no information identifying new radiopharmaceuticals to which a HCPCS code might be assigned on or after January 1, 2009, for which pass-through payment status would be sought. We also have no historical data regarding payment for new radiopharmaceuticals with pass-through status under the methodology that we specified for the CY 2005 OPPS or the CY 2009 methodology that we are proposing as discussed in section V.A.3. of this proposed rule. However, we do not believe that pass-through spending for new radiopharmaceuticals in CY 2009 would be significant enough to materially affect our estimate of total pass-through spending in CY 2009. Therefore, we are not including radiopharmaceuticals in our proposed estimate of pass-through spending for CY 2009. We discuss the proposed methodology for determining the CY 2009 payment amount for new therapeutic radiopharmaceuticals without pass-through status in section V.B.5. of this proposed rule. We discuss our proposal to package payment for all new diagnostic radiopharmaceuticals without pass-through status in CY 2009 in section V.B.2.b. of this proposed rule. In accordance with the comprehensive methodology described above, we estimate that total pass-through spending for the device categories and the drugs and biologicals that are continuing for pass-through payment into CY 2009 and those devices, drugs, biologicals, and radiopharmaceuticals that first become eligible for pass-through status subsequent to this proposed rule in CY 2008 or during CY 2009 would approximate $18.9 million, which represents 0.07 percent of total OPPS projected payments for CY 2009. Because we estimate that pass-through spending in CY 2009 would not amount to 2.0 percent of total projected OPPS CY 2009 spending, we are proposing to return 1.93 percent of the pass-through pool to adjust the conversion factor, as we discuss in section II.B. of this proposed rule. VII. Proposed OPPS Payment for Brachytherapy Sources A. Background Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) of Public Law 108-173, mandated the creation of separate groups of covered OPD services that classify brachytherapy devices separately from other services or groups of services. The additional groups must reflect the number, isotope, and radioactive intensity of the devices of brachytherapy furnished, including separate groups for palladium-103 and iodine-125 devices. Section 1833(t)(16)(C) of the Act, as added by section 621(b)(1) of Public Law 108-173, established payment for devices of brachytherapy consisting of a seed or seeds (or radioactive source) based on a hospital's charges for the service, adjusted to cost. The period of payment under this provision is for brachytherapy sources furnished from January 1, 2004, through December 31, 2006. Under section 1833(t)(16)(C) of the Act, charges for the brachytherapy devices may not be used in determining any outlier payments under the OPPS for that period of payment. Consistent with our practice under the OPPS to exclude items paid at cost from budget neutrality consideration, these items were excluded from budget neutrality for that time period as well. Section 621(b)(3) of Pub. L. 108-173 required the GAO to conduct a study to determine appropriate payment amounts for devices of brachytherapy, and to submit a report on its study to the Congress and the Secretary, including recommendations on the appropriate payments for such devices. This report was due to Congress and to the Secretary no later than January 1, 2005. The GAO's final report, “Medicare Outpatient Payments: Rates for Certain Radioactive Sources Used in Brachytherapy Could Be Set Prospectively” (GAO-06-635), was published on July 24, 2006. We summarized and discussed the report's findings and recommendations in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68103 through 68105). The GAO report principally recommended that we use OPPS historical claims data to determine prospective payment rates for two of the most frequently used brachytherapy sources, iodine-125 and palladium-103, and also recommended that we consider using claims data for the third source studied, high dose rate
(HDR)iridium-192. In our CY 2007 annual OPPS rulemaking, we proposed and finalized a policy of prospective payment based on median costs for the 11 brachytherapy sources for which we had claims data. We based the prospective payment rates on median costs for each source from our CY 2005 claims data (71 FR 68102 through 71 FR 68114). Subsequent to publication of the CY 2007 OPPS/ASC final rule with comment period, section 107(a) of the MIEA-TRHCA amended section 1833(t)(16)(C) of the Act by extending the payment period for brachytherapy sources based on a hospital's charges adjusted to cost for 1 additional year, through December 31, 2007. Therefore, we continued to pay for brachytherapy sources on charges adjusted to cost for CY 2007. Section 107(b)(1) of the MIEA-TRHCA amended section 1833(t)(2)(H) of the Act by adding a requirement for the establishment of separate payment groups for “stranded and non-stranded” brachytherapy devices beginning July 1, 2007. Section 107(b)(2) of the MIEA-TRHCA authorized the Secretary to implement this new requirement by “program instruction or otherwise.” This new requirement is in addition to the requirement for separate payment groups based on the number, isotope, and radioactive intensity of brachytherapy devices that was previously established by section 1833(t)(2)(H) of the Act. We note that commenters who responded to the CY 2007 proposed rule asserted that stranded sources, which they described as embedded into the stranded suture material and separated within the strand by material of an absorbable nature at specified intervals, had greater production costs than non-stranded sources (71 FR 68113 through 68114). As a result of the statutory requirement to create separate groups for stranded and non-stranded sources as of July 1, 2007, we established several coding changes via program transmittal, effective July 1, 2007 (Transmittal 1259, dated June 1, 2007). Based upon comments on our CY 2007 proposed rule and industry input, we were aware of three sources available in stranded and non-stranded forms at that time: iodine-125; palladium-103; and cesium-131 (72 FR 42746). We created six new HCPCS codes to differentiate the stranded and non-stranded versions of iodine, palladium and cesium sources. The first partial year claims data for separately coded stranded and non-stranded iodine, palladium, and cesium sources are now available in the CY 2007 claims data that we are using for CY 2009 ratesetting for brachytherapy sources included in this proposed rule. In Transmittal 1259, we indicated that if we receive information that any of the other sources now designated as non-stranded are marketed as a stranded source, we would create a code for the stranded source. We also established two “Not Otherwise Specified”
(NOS)codes for billing stranded and non-stranded sources that are not yet known to us and for which we do not have source-specific codes, that is, C2698 (Brachytherapy source, stranded, not otherwise specified, per source) for stranded NOS sources, or C2699 (Brachytherapy source, non-stranded, not otherwise specified, per source) for non-stranded NOS sources. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66783 through 66784), we again finalized prospective payment for brachytherapy sources, beginning in CY 2008, with payment rates determined using the CY 2006 claims-based costs per source for each brachytherapy source. Consistent with our policy regarding APC payments made on a prospective basis, we finalized our policy in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66686) to subject the cost of brachytherapy sources to the outlier provision of section 1833(t)(5) of the Act, and to also subject brachytherapy source payment weights to scaling for purposes of budget neutrality. Therefore, brachytherapy sources could receive outlier payments if the costs of furnishing brachytherapy sources met the criteria for outlier payment. In addition, as noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66683), implementation of prospective payment for brachytherapy sources provides opportunities for hospitals to receive additional payments under certain circumstances through the 7.1 percent rural SCH adjustment. We proposed and finalized a policy for CY 2008 to pay the two NOS codes, C2698 and C2699, based on a rate equal to the lowest stranded or non-stranded prospective payment rate for such sources, respectively, on a per source basis (as opposed, for example, to per mci). We reasoned that this payment methodology for NOS sources would provide payment to a hospital for new sources, while encouraging interested parties to quickly bring new sources to our attention so specific coding and payment could be established (72 FR 66785). After we finalized our proposal to pay for brachytherapy sources in CY 2008 based on median costs, section 106(a) of the MMSEA extended the charges adjusted to cost payment methodology for an additional 6 months, through June 30, 2008. On January 18, 2008, we issued Transmittal R1417CP to indicate how we are implementing this provision. At this time, the prospective payment rates for brachytherapy sources finalized in the CY 2008 OPPS/ASC final rule with comment period will become effective July 1, 2008. Status indicator “H” (defined in the CY 2008 OPPS/final rule with comment period as “Pass-Through Device Categories. Separate cost-based pass-through payment; not subject to copayment.”) is currently assigned to brachytherapy sources through June 30, 2008, for claims processing purposes, although a beneficiary copayment is being applied to payment for these sources. We finalized a policy in the CY 2008 OPPS/ASC final rule with comment period to assign status indicator “K” (defined as “Nonpass-Through Drugs and Biologicals; Therapeutic Radiopharmaceuticals; Brachytherapy Sources; Blood and Blood Products. Paid under OPPS; separate APC payment.”) to all brachytherapy source APCs because the sources would be paid based on prospective payment. The definition of status indicator “K” was initially changed for CY 2007 to accommodate prospective payment for brachytherapy sources and this change was continued for CY 2008 (72 FR 66785). Brachytherapy source APCs will be assigned status indicator “K” beginning July 1 through December 31, 2008. For CY 2008, we also adopted the policy we established in the CY 2007 OPPS/ASC final rule with comment period (which was superseded by section 107 of the MIEA-TRHCA) regarding payment for new brachytherapy sources for which we have no claims data. We assign future new HCPCS codes for new brachytherapy sources to their own APCs, with prospective payment rates set based on our consideration of external data and other relevant information regarding the expected costs of the sources to hospitals (72 FR 66785). When section 106(a) of the MMSEA extended the charges adjusted to cost payment methodology for brachytherapy sources through June 30, 2008, this policy was not implemented as of January 1, 2008. We anticipate implementing this policy as of July 1, 2008. At its March 2008 meeting, the APC Panel recommended that CMS use median cost data to pay for brachytherapy sources in CY 2009, as presented by the CMS staff and reviewed by the APC Panel Data Subcommittee. B. Proposed OPPS Payment Policy As we have stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66780), we believe that adopting prospective payment for brachytherapy sources would be appropriate for a number of reasons. The general OPPS payment methodology is a prospective payment system using median costs based on claims data to set the relative payment weights for hospital outpatient services. This prospective payment methodology would result in more consistent, predictable, and equitable payment amounts per source across hospitals by eliminating some of the extremely high and low payment amounts resulting from payment based on hospitals' charges adjusted to cost. Prospective payment would also provide hospitals with incentives for efficiency in the provision of brachytherapy services to Medicare beneficiaries. Moreover, this approach is consistent with our payment methodology for the vast majority of items and services paid under the OPPS. Indeed, section 1833(t)(2)(C) of the Act requires us to establish prospective payment rates for the OPPS system based on median costs (or mean costs if elected by the Secretary). Only pass-through devices continue to be paid at charges adjusted to cost for all of CY 2008, while brachytherapy sources and therapeutic radiopharmaceuticals are paid at charges adjusted to cost for the first 6 months of CY 2008. We are proposing to use CY 2007 claims data for setting the CY 2009 rates for brachytherapy sources, as we are proposing for most other items and services that will be paid under the CY 2009 OPPS, using our standard OPPS ratesetting methodology. We believe that we have sufficiently robust CY 2007 claims data for all payable brachytherapy sources, including stranded and non-stranded iodine, palladium, and cesium sources. As indicated earlier, at the March 2008 APC Panel meeting, the APC Panel Data Subcommittee reviewed the CY 2007 claims data for brachytherapy sources and the APC Panel recommended using the median cost data for CY 2009 rates. We are accepting the APC Panel's recommendation, which is consistent with our proposal. We are proposing to pay for the stranded and non-stranded NOS codes, C2698 and C2699, based on a rate equal to the lowest stranded or non-stranded prospective payment rate for such sources, respectively, on a per source basis (as opposed, for example, to per mci). This proposed payment methodology for NOS sources would provide payment to a hospital for new sources, while encouraging interested parties to quickly bring new sources to our attention so specific coding and payment could be established. We are proposing to establish new status indicator “U” (Brachytherapy Sources. Paid under OPPS; separate APC payment) for brachytherapy sources as of January 1, 2009. Status indicator “H” is currently used for the periods when brachytherapy sources are paid based on the charges adjusted to cost payment methodology, while status indicator “K” is used for brachytherapy source payment as of July 1, 2008 through December 31, 2008, in accordance with the policy we finalized in the CY 2008 OPPS/ASC final rule with comment period. Status indicator “K” currently encompasses nonpass-through drugs and biologicals, therapeutic radiopharmaceuticals, brachytherapy sources, and blood and blood products. Assigning status indicator “K” to several types of items and services with potentially differing payment policies has added unnecessary complexity to our operations. In addition, in CY 2009 we are implementing section 1833(t)(17)(A) of the Act that specifies payment to hospitals based on a reduced conversion factor when those hospitals fail to submit timely hospital outpatient quality data as required. Therefore, to facilitate implementation of this payment change and streamline operations, we are proposing to assign new status indicator “U” to brachytherapy source HCPCS codes beginning in CY 2009. We are, therefore, proposing to pay for brachytherapy sources at prospective rates based on their source-specific median costs for CY 2009. The separately payable brachytherapy source codes, descriptors, APCs, approximate median costs, and status indicators are presented in Table 29. TABLE 29.—Proposed Separately Payable Brachytherapy Sources for CY 2009 HCPCS code Long descriptor Proposed CY 2009 APC Proposed CY 2009 median cost Proposed CY 2009 status indicator A9527 Iodine I-125, sodium iodide solution, therapeutic, per millicurie 2632 $36 U C1716 Brachytherapy source, non-stranded, Gold-198, per source 1716 34 U C1717 Brachytherapy source, non-stranded, High Dose Rate Iridium-192, per source 1717 212 U C1719 Brachytherapy source, non-stranded, Non-High Dose Rate Iridium-192, per source 1719 65 U C2616 Brachytherapy source, non-stranded, Yttrium-90, per source 2616 13,426 U C2634 Brachytherapy source, non-stranded, High Activity, Iodine-125, greater than 1.01 mCi (NIST), per source 2634 43 U C2635 Brachytherapy source, non-stranded, High Activity, Palladium-103, greater than 2.2 mCi (NIST), per source 2635 27 U C2636 Brachytherapy linear source, non-stranded, Palladium-103, per 1MM 2636 60 U C2638 Brachytherapy source, stranded, Iodine-125, per source 2638 40 U C2639 Brachytherapy source, non-stranded, Iodine-125, per source 2639 36 U C2640 Brachytherapy source, stranded, Palladium-103, per source 2640 66 U C2641 Brachytherapy source, non-stranded, Palladium-103, per source 2641 63 U C2642 Brachytherapy source, stranded, Cesium-131, per source 2642 100 U C2643 Brachytherapy source, non-stranded, Cesium-131, per source 2643 59 U C2698 Brachytherapy source, stranded, not otherwise specified, per source 2698 40 U C2699 Brachytherapy source, non-stranded, not otherwise specified, per source 2699 27 U In addition, in CY 2009, we are proposing to continue the policy we established in the CY 2007 OPPS/ASC final rule with comment period (which was superseded by section 107 of the MIEA-TRHCA) regarding payment for new brachytherapy sources for which we have no claims data. In accordance with that policy, we would assign future new HCPCS codes for new brachytherapy sources to their own APCs, with prospective payment rates set based on our consideration of external data and other relevant information regarding the expected costs of the sources to hospitals. We continue to invite hospitals and other parties to submit recommendations to us for new HCPCS codes to describe new sources consisting of a radioactive isotope, including a detailed rationale to support recommended new sources. Such recommendations should be directed to the Division of Outpatient Care, Mail Stop C4-05-17, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244. We will continue to add new brachytherapy source codes and descriptors to our systems for payment on a quarterly basis. VIII. Proposed OPPS Payment for Drug Administration Services A. Background In CY 2005, in response to the recommendations made by commenters and the hospital industry, OPPS transitioned to the use of CPT codes for drug administration services. These CPT codes allowed specific reporting of services regarding the number of hours for an infusion and provided consistency in coding between Medicare and other payers. (For a discussion regarding coding and payment for drug administration services prior to CY 2005, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66787).) While hospitals began adopting CPT codes for outpatient drug administration services in CY 2005, physicians paid under the MPFS were using HCPCS G-codes in CY 2005 to report office-based drug administration services. These G-codes were developed in anticipation of substantial revisions to the drug administration CPT codes by the CPT Editorial Panel that were expected for CY 2006. In CY 2006, as anticipated, the CPT Editorial Panel revised its coding structure for drug administration services, incorporating new concepts such as initial, sequential, and concurrent services into a structure that previously distinguished services based on type of administration (chemotherapy/nonchemotherapy), method of administration (injection/infusion/push), and for infusion services, first hour and additional hours. For CY 2006, we implemented the CY 2006 drug administration CPT codes that did not reflect the concepts of initial, sequential, and concurrent services under the OPPS, and we created HCPCS C-codes that generally paralleled the CY 2005 CPT codes for reporting these other services. For CY 2007, as a result of comments on our proposed rule and feedback from the hospital community and the APC Panel, we implemented the full set of CPT codes, including codes incorporating the concepts of initial, sequential, and concurrent. In addition, the CY 2007 update process offered us the first opportunity to consider data gathered from the use of CY 2005 CPT codes for purposes of ratesetting. For CY 2007, we used CY 2005 claims data to implement a six-level APC structure for drug administration services. This six-level APC structure for drug administration services was continued in CY 2008. B. Proposed Coding and Payment for Drug Administration Services The CY 2009 ratesetting process affords us the first opportunity to examine hospital claims data for the full set of CPT codes that reflect the concepts of initial, concurrent, and sequential services. We performed our standard annual OPPS review of the clinical and resource characteristics of the drug administration HCPCS codes assigned to APCs 0436 (Level I Drug Administration), 0437 (Level II Drug Administration), 0438 (Level III Drug Administration), 0439 (Level IV Drug Administration), 0440 (Level V Drug Administration), and 0441 (Level VI Drug Administration) for CY 2008 based on the CY 2007 claims data available for this proposed rule. Under the CY 2008 APC configurations for drug administration services, we observed several 2 times violations among the 6 APCs. Therefore, we are proposing to reconfigure the drug administration APCs for CY 2009 to improve the clinical and resource homogeneity of the APCs. (We refer readers to section III.B. of this proposed rule for further discussion of the 2 times rule.) As a result of our hospital cost analysis and detailed clinical review, we are proposing a five-level APC structure for CY 2009 drug administration services to more appropriately reflect their resource utilization in APCs that also group clinically similar services. These APCs generally demonstrate the clinically expected and actually observed comparative relationships between the median costs of different types of drug administration services, including initial and additional services, chemotherapy and other diagnostic, prophylactic, or therapeutic services, injections and infusions, and simple and complex methods of drug administration. We do not believe that six drug administration APCs continue to be necessary to pay appropriately for drug administration services based on the significant clinical and resource differences among services. Instead, we believe that the proposed five-level APC structure for CY 2009, displayed in Table 30 below, is the more appropriate structure based on hospital claims data for the full range of CPT drug administration codes. We presented a potential four-level drug administration APC structure to the APC Panel during the March 2008 APC Panel meeting. After reviewing the data, the APC Panel recommended that CMS not implement this configuration until more data are available and that CMS provide the APC Panel with a crosswalk analysis of the data. We appreciate the recommendation of the APC Panel. We are accepting this recommendation, and we are not proposing to implement a four-level APC structure for drug administration services in CY 2009. We last reconfigured the drug administration APCs for CY 2007 when we first had 1 year of claims data reflecting the costs of predecessor drug administration CPT codes. Therefore, in parallel fashion we believe it is appropriate to propose to reconfigure the drug administration APCs for CY 2009 when we first have a year of hospital claims data for the full range of CPT codes. Our prior assignments of CPT codes without data were based only on estimates of hospital resource costs, and our usual practice is to closely examine the APC assignments of all HCPCS codes once we have actual claims data. We note that, for most of the drug administration services, we have thousands of single bills available for ratesetting from the claims submitted by thousands of hospitals, increasing our confidence in the accuracy and stability of the claims data. In addition, our bypass code methodology as described in section II.A.1.b. of this proposed rule, which specifically incorporates packaged costs into the costs of the initial drug administration service and not into the additional drug administration services provided in the same hospital encounter, ensures that the single claims used for ratesetting represent a large proportion of total hospital claims for most drug administration services. Therefore, we believe that this proposed five-level drug administration APC structure would be most appropriate after examination of the robust set of drug administration claims available for CY 2009 ratesetting because the proposed structure would result in payment groups with greater clinical and resource homogeneity. In addition, we do not believe that a crosswalk analysis of the cost data would be pertinent because, for a number of the CPT codes, our APC assignments prior to CY 2009 were based only on our estimates of their expected costs, and not based on hospitals' actual costs for services reported according to the current CPT code descriptors and guidelines. We believe that the proposed five-level drug administration APC structure presented below in Table 30 accurately refines the drug administration APCs based on updated and comprehensive hospital claims data. Therefore, we are proposing to implement the APC structure displayed in Table 30 below for CY 2009. In addition to adopting this drug administration APC structure for payment of services, we are proposing to continue the use of drug administration CPT codes for OPPS reporting in CY 2009. As described earlier, APC reconfiguration is a regular part of the annual OPPS update in response to our assessment of the most recent hospital claims data. Although changes to the APC assignments of HCPCS codes, including the drug administration CPT codes, affect hospital payment for services, they do not require any coding changes by hospitals. Table 30.—Proposed CY 2009 Drug Administration APCs Proposed CY 2009 APC Proposed CY 2009 APC median cost HCPCS code Long descriptor 0436 $24.98 90471 Immunization administration (includes percutaneous, intradermal, subcutaneous, or intramuscular injections); one vaccine (single or combination vaccine/toxoid). 90472 Immunization administration (includes percutaneous, intradermal, subcutaneous, or intramuscular injections); each additional vaccine (single or combination vaccine/toxoid)(List separately in addition to code for primary procedure). 90473 Immunization administration by intranasal or oral route; one vaccine (single or combination vaccine/toxoid). 90474 Immunization administration by intranasal or oral route; each additional vaccine (single or combination vaccine/toxoid) (List separately in addition to code for primary procedure). 90761 Intravenous infusion, hydration; each additional hour (List separately in addition to code for primary procedure). 90766 Intravenous infusion, for therapy, prophylaxis, or diagnosis (specify substance or drug); each additional hour (List separately in addition to code for primary procedure). 90771 Subcutaneous infusion for therapy or prophylaxis (specify substance or drug); additional pump set-up with establishment of new subcutaneous infusion site(s) (List separately in addition to code for primary procedure). 90772 Therapeutic, prophylactic or diagnostic injection (specify substance or drug); subcutaneous or intramuscular. 90779 Unlisted therapeutic, prophylactic or diagnostic intravenous or intra-arterial injection or infusion. 95115 Professional services for allergen immunotherapy not including provision of allergenic extracts; single injection. 95117 Professional services for allergen immunotherapy not including provision of allergenic extracts; two or more injections. 95145 Professional services for the supervision of preparation and provision of antigens for allergen immunotherapy (specify number of doses); single stinging insect venom. 95165 Professional services for the supervision of preparation and provision of antigens for allergen immunotherapy; single or multiple antigens (specify number of doses). 95170 Professional services for the supervision of preparation and provision of antigens for allergen immunotherapy; whole body extract of biting insect or other arthropod (specify number of doses). 96549 Unlisted chemotherapy procedure. G0008 Administration of influenza virus vaccine. G0009 Administration of pneumococcal vaccine. 90767 Intravenous infusion, for therapy, prophylaxis, or diagnosis (specify substance or drug); additional sequential infusion, up to 1 hour (List separately in addition to code for primary procedure). 90770 Subcutaneous infusion for therapy or prophylaxis (specify substance or drug); each additional hour (List separately in addition to code for primary procedure) 90773 Therapeutic, prophylactic or diagnostic injection (specify substance or drug); intra-arterial. 90774 Therapeutic, prophylactic or diagnostic injection (specify substance or drug); intravenous push, single or initial substance/drug. 0437 $36.59 90775 Therapeutic, prophylactic or diagnostic injection (specify substance or drug); each additional sequential intravenous push of a new substance/drug (List separately in addition to code for primary procedure). 95144 Professional services for the supervision of preparation and provision of antigens for allergen immunotherapy, single dose vial(s) (specify number of vials). 95148 Professional services for the supervision of preparation and provision of antigens for allergen immunotherapy (specify number of doses); four single stinging insect venoms. 96401 Chemotherapy administration, subcutaneous or intramuscular; non-hormonal anti-neoplastic. 96402 Chemotherapy administration, subcutaneous or intramuscular; hormonal anti-neoplastic. 96405 Chemotherapy administration; intralesional, up to and including 7 lesions. 96415 Chemotherapy administration, intravenous infusion technique; each additional hour (List separately in addition to code for primary procedure). 0438 $74.19 90760 Intravenous infusion, hydration; initial, 31 minutes to 1 hour. 90769 Subcutaneous infusion for therapy or prophylaxis (specify substance or drug); initial, up to one hour, including pump set-up and establishment of subcutaneous infusion site(s). 95146 Professional services for the supervision of preparation and provision of antigens for allergen immunotherapy (specify number of doses); two single stinging insect venoms. 95147 Professional services for the supervision of preparation and provision of antigens for allergen immunotherapy (specify number of doses); three single stinging insect venoms. 96406 Chemotherapy administration; intralesional, more than 7 lesions. 96411 Chemotherapy administration; intravenous, push technique, each additional substance/drug (List separately in addition to code for primary procedure). 96417 Chemotherapy administration, intravenous infusion technique; each additional sequential infusion (different substance/drug), up to 1 hour (List separately in addition to code for primary procedure). 96423 Chemotherapy administration, intra-arterial; infusion technique, each additional hour (List separately in addition to code for primary procedure). 90765 Intravenous infusion, for therapy, prophylaxis, or diagnosis (specify substance or drug); initial, up to 1 hour. 95149 Professional services for the supervision of preparation and provision of antigens for allergen immunotherapy (specify number of doses); five single stinging insect venoms. 0439 $126.58 96409 Chemotherapy administration; intravenous, push technique, single or initial substance/drug. 96420 Chemotherapy administration, intra-arterial; push technique. 96522 Refilling and maintenance of implantable pump or reservoir for drug delivery, systemic (e.g., intravenous, intra-arterial). 96542 Chemotherapy injection, subarachnoid or intraventricular via subcutaneous reservoir, single or multiple agents. 0440 $190.72 95990 Refilling and maintenance of implantable pump or reservoir for drug delivery, spinal (intrathecal, epidural) or brain (intraventricular). 95991 Refilling and maintenance of implantable pump or reservoir for drug delivery, spinal (intrathecal, epidural) or brain (intraventricular); administered by a physician. 96413 Chemotherapy administration, intravenous infusion technique; up to 1 hour, single or initial substance/drug. 96416 Chemotherapy administration, intravenous infusion technique; initiation of prolonged chemotherapy infusion (more than 8 hours), requiring use of a portable or implantable pump. 96422 Chemotherapy administration, intra-arterial; infusion technique, up to one hour. 96425 Chemotherapy administration, intra-arterial; infusion technique, initiation of prolonged infusion (more than 8 hours), requiring the sue of a portable or implantable pump. 96440 Chemotherapy administration into pleural cavity, requiring and including thoracentesis. 96445 Chemotherapy administration into peritoneal cavity, requiring and including peritoneocentesis. 96450 Chemotherapy administration, into CNS (eg, intrathecal), requiring and including spinal puncture. 96521 Refilling and maintenance of portable pump. C8957 Intravenous infusion for therapy/diagnosis; initiation of prolonged infusion (more than eight hours), requiring use of portable or implantable pump. IX. Proposed OPPS Payment for Hospital Outpatient Visits A. Background Currently, hospitals report visit HCPCS codes to describe three types of OPPS services: clinic visits, emergency department visits, and critical care services. CPT indicates that office or other outpatient visit codes are used to report evaluation and management (E/M) services provided in the physician's office or in an outpatient or other ambulatory facility. For OPPS purposes, we refer to these as clinic visit codes. CPT also indicates that emergency department visit codes are used to report E/M services provided in the emergency department, which is defined as an “organized hospital-based facility for the provision of unscheduled episodic services to patients who present for immediate medical attention. The facility must be available 24 hours a day.” For OPPS purposes, we refer to these as emergency department visit codes that specifically apply to the reporting of visits to Type A emergency departments. Furthermore, for CY 2007 we established five new Level II HCPCS codes to report visits to Type B emergency departments (defined as dedicated emergency departments that incur Emergency Medical Treatment and Labor Act (EMTALA) of 1986 (Pub. L. 99-272) obligations but that do not meet the Type A emergency department definition, as described in more detail below). These new Level II HCPCS codes were developed because there were no CPT codes at that time that fully described services provided in this type of facility. CPT defines critical care services to be reported with critical care CPT codes as the “direct delivery by a physician(s) of medical care for a critically ill or critically injured patient.” Under the OPPS, in Transmittal 1139, Change Request 5438, dated December 22, 2006, we have stated that the time that can be reported as critical care is the time spent by a physician and/or hospital staff engaged in active face-to-face critical care of a critically ill or critically injured patient. We also established HCPCS code G0390 (Trauma response team associated with hospital critical care service) in CY 2007 for the reporting of a trauma response in association with critical care services. We refer readers to section III.D.1. of this proposed rule for further discussion of payment for a trauma response associated with hospital critical care services. Currently, CMS instructs hospitals to report the CY 2008 CPT codes that describe new and established clinic visits, Type A emergency department visits, and critical care services, and the six Level II HCPCS codes to report Type B emergency department visits and trauma activation provided in association with critical care services. These codes are listed below in Table 31. We are not proposing to change the visit HCPCS codes that hospitals report for CY 2009. Table 31.—CY 2008 CPT E/M and Level II HCPCS Codes Used To Report Clinic and Emergency Department Visits and Critical Care Services HCPCS Code Descriptor Clinic Visit HCPCS Codes 99201 Office or other outpatient visit for the evaluation and management of a new patient (Level 1). 99202 Office or other outpatient visit for the evaluation and management of a new patient (Level 2). 99203 Office or other outpatient visit for the evaluation and management of a new patient (Level 3). 99204 Office or other outpatient visit for the evaluation and management of a new patient (Level 4). 99205 Office or other outpatient visit for the evaluation and management of a new patient (Level 5). 99211 Office or other outpatient visit for the evaluation and management of an established patient (Level 1). 99212 Office or other outpatient visit for the evaluation and management of an established patient (Level 2). 99213 Office or other outpatient visit for the evaluation and management of an established patient (Level 3). 99214 Office or other outpatient visit for the evaluation and management of an established patient (Level 4). 99215 Office or other outpatient visit for the evaluation and management of an established patient (Level 5). Emergency Department Visit HCPCS Codes 99281 Emergency department visit for the evaluation and management of a patient (Level 1). 99282 Emergency department visit for the evaluation and management of a patient (Level 2). 99283 Emergency department visit for the evaluation and management of a patient (Level 3). 99284 Emergency department visit for the evaluation and management of a patient (Level 4). 99285 Emergency department visit for the evaluation and management of a patient (Level 5). G0380 Type B emergency department visit (Level 1). G0381 Type B emergency department visit (Level 2). G0382 Type B emergency department visit (Level 3). G0383 Type B emergency department visit (Level 4). G0384 Type B emergency department visit (Level 5). Critical Care Services HCPCS Codes 99291 Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes. 99292 Critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 minutes. G0390 Trauma response associated with hospital critical care service. The majority of CPT code descriptors are applicable to both physician and facility resources associated with specific services. However, we have acknowledged from the beginning of the OPPS that we believe that CPT E/M codes were defined to reflect the activities of physicians and do not necessarily fully describe the range and mix of services provided by hospitals during visits of clinic or emergency department patients or critical care encounters. While awaiting the development of a national set of facility-specific codes and guidelines, we have advised hospitals that each hospital's internal guidelines that determine the levels of clinic and emergency department visits to be reported should follow the intent of the CPT code descriptors, in that the guidelines should be designed to reasonably relate the intensity of hospital resources to the different levels of effort represented by the codes. During its March 2008 APC Panel meeting, the APC Panel recommended that CMS provide, for review by the Visits and Observation Subcommittee at the next CY 2008 APC Panel meeting:
(1)Frequency and median cost data on new and established patient clinic visits and Type A and Type B emergency department visits;
(2)data on CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) and APC 617 (Critical Care); and
(3)frequency and median cost data on the extended assessment and management composite APCs (that is, APCs 8002 and 8003). We are adopting all three of these recommendations and will provide frequency and cost data related to these services at the next CY 2008 APC Panel meeting. The complete discussion related to visits is provided below. A complete discussion related to the extended assessment and management composite APCs can be found in section II.A.2.e.(1) of this proposed rule. B. Proposed Policies for Hospital Outpatient Visits 1. Clinic Visits: New and Established Patient Visits CPT defines an established patient as “one who has received professional services from the physician or another physician of the same specialty who belongs to the same group practice, within the past 3 years.” To apply this definition to hospital clinic visits, we stated in the April 7, 2000 OPPS final rule with comment period (65 FR 18451), that the meanings of “new” and “established” pertain to whether or not the patient already has a hospital medical record number. If the patient has a hospital medical record that was created within the past 3 years, that patient is considered an established patient to the hospital. The same patient could be “new” to the physician but an “established” patient to the hospital. The opposite could be true if the physician has a longstanding relationship with the patient, in which case the patient would be an “established” patient with respect to the physician and a “new” patient with respect to the hospital. Our resource cost data continue to show that new patient visits are consistently more costly than established patient visits of the same level. Since the implementation of the OPPS, we have received very few comments related to the definitions of new and established patient visits. However, during the past year, we have heard from several provider groups that hospitals cannot easily distinguish between new and established patients for purposes of correctly reporting clinic visits under the OPPS, based on the definition above. We considered several options for refining the definitions of new and established patients as they would apply under the CY 2009 OPPS in order to reduce hospitals' administrative burden associated with reporting appropriate clinic visit CPT codes. We considered proposing to eliminate the distinction between new and established patient visits under the OPPS, as had previously been recommended by the APC Panel for CY 2008. We considered instructing hospitals to bill all visits as established patient visits and the hospital would determine the appropriate code level based on the resources expended during the visit. However, because hospital claims data continue to show significant cost differences between new and established patient visits, we believe it is most appropriate to continue to recognize the CPT codes for both new and established patient visits and, in some cases, provide differential payment for new and established patient visits of the same level. In addition, we continue to believe it is important that CPT codes be reported consistent with their code descriptors, and some patients will always be new to the hospital, regardless of any potential refinement in the definition of “new” for reporting clinical visits under the OPPS. Therefore, we are not proposing this approach for CY 2009. Another alternative we considered was proposing to define an established patient as a patient who already had a hospital medical record number at the hospital where he or she is currently receiving services, regardless of when this medical record was created. Several commenters to the CY 2008 OPPS/ASC proposed rule preferred this distinction rather than the current policy, which requires hospitals to determine if the patient's hospital medical record was created within the past 3 years (72 FR 66793). However, one commenter noted an extreme example in which a patient who was born at a hospital and assigned a medical record number would always be considered an established patient to that hospital, even if the patient was not treated again at that hospital until decades later. We continue to believe it is appropriate to include a time limit when determining whether a patient is new or established from the hospital's perspective because we would expect that care of a patient who was not treated at the hospital for several years prior to a visit could require significantly greater hospital resources than care for a patient who was recently treated at the hospital. Therefore, we are not proposing this alternative for CY 2009. We considered proposing to modify the new and established patient definitions for reporting clinic visits under the OPPS so they would pertain to whether or not the patient was registered in a specific hospital clinic within the past 3 years. However, we believe this approach could be problematic because we do not believe that every clinic has clear administrative boundaries that define whether the patient was previously seen in that particular clinic. For example, a hospital-based clinic may have several locations, including on-campus and off-campus sites, or a specific area of the hospital may house two or more specialty clinics that treat disparate types of clinical conditions. We considered and are not proposing to adopt the three alternatives described above, for CY 2009, but are instead proposing to modify the definitions of “new” and “established” patients as they apply to hospital outpatient visits. Specifically, the meanings of “new” and “established” would pertain to whether or not the patient was registered as an inpatient or outpatient of the hospital within the past 3 years. Under this proposal, hospitals would not need to determine the specific clinic where the patient was previously treated because the proposed approach would not rely upon when the medical record was initially created but rather, would depend upon whether the individual had been registered as a hospital inpatient or outpatient within the previous 3 years. Hospitals would also not need to determine when the medical record was initially created. If the patient were registered as an inpatient or outpatient of the hospital within the past 3 years, that patient would be considered an “established” patient to the hospital. If a patient were registered as an outpatient in a hospital's off-campus provider-based clinic or emergency department within the past 3 years, that patient would still be an “established” patient to the hospital for an on-campus or off-campus clinic visit even if the medical record was initially created by the hospital prior to the past 3 years. Consistent with past policy, the same patient could be “new” to the physician but an “established” patient to the hospital. The opposite could be true if the physician has a longstanding relationship with the patient, in which case the patient would be an “established” patient with respect to the physician and a “new” patient with respect to the hospital. We believe that our proposed refinement of the new and established patient definitions for reporting visits under the OPPS would be administratively straightforward for hospitals to apply, while continuing to capture differences in hospital resources required to provide new and established patient clinic visits. Furthermore, we believe that costs from historical hospital claims data for services reported under the past OPPS interpretation of new and established patient visits could simply be crosswalked to the expected costs of the corresponding visit level reported under our proposed framework, thereby providing appropriate payment for new and established clinic visits of all five levels until CY 2009 claims data reflecting the refined definitions would be available for CY 2011 ratesetting. We would expect only minimal cost differences for clinic visits if these new definitions were finalized for CY 2009. In summary, for CY 2009, we are proposing to modify the definitions of new and established patient visits as they relate to reporting hospital outpatient visits under the OPPS. We welcome public comment related to the proposed definitions of new and established patient visits under the OPPS. For CY 2009, we are proposing to continue our usual policy of calculating median costs for clinic visits under the OPPS using historical hospital claims data. As discussed further in section II.A.2.e.(1) of this proposed rule and consistent with our CY 2008 policy, when calculating the median costs for the clinic visit APCs (0604 through 0608), we would utilize our methodology that excludes those claims for visits that are eligible for payment through the extended assessment and management composite APC 8002 (Level I Extended Assessment and Management Composite). We believe that this approach would result in the most accurate cost estimates for APCs 0604 through 0608 for CY 2009. 2. Emergency Department Visits As described in section IX.A. of this proposed rule, CPT defines an emergency department as “an organized hospital-based facility for the provision of unscheduled episodic services to patients who present for immediate medical attention. The facility must be available 24 hours a day.” Prior to CY 2007, under the OPPS we restricted the billing of emergency department CPT codes to services furnished at facilities that met this CPT definition. Facilities open less than 24 hours a day should not have reported the emergency department CPT codes for visits. Sections 1866(a)(1)(I), 1866(a)(1)(N), and 1867 of the Act impose specific obligations on Medicare-participating hospitals and CAHs that offer emergency services. These obligations concern individuals who come to a hospital's dedicated emergency department and request examination or treatment for medical conditions, and apply to all of these individuals, regardless of whether or not they are beneficiaries of any program under the Act. Section 1867(h) of the Act specifically prohibits a delay in providing required screening or stabilization services in order to inquire about the individual's payment method or insurance status. Section 1867(d) of the Act provides for the imposition of civil monetary penalties on hospitals and physicians responsible for failing to meet the provisions listed above. These provisions, taken together, are frequently referred to as the EMTALA provisions. Section 489.24 of the EMTALA regulations defines “dedicated emergency department” as any department or facility of the hospital, regardless of whether it is located on or off the main hospital campus, that meets at least one of the following requirements:
(1)It is licensed by the State in which it is located under applicable State law as an emergency room or emergency department;
(2)It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment; or
(3)During the calendar year immediately preceding the calendar year in which a determination under the regulations is being made, based on a representative sample of patient visits that occurred during that calendar year, it provides at least one-third of all of its outpatient visits for the treatment of emergency medical conditions on an urgent basis without requiring a previously scheduled appointment. In the CY 2008 OPPS/ASC proposed rule (72 FR 42756), we reiterated our belief that every emergency department that meets the CPT definition of emergency department also qualifies as a dedicated emergency department under EMTALA. However, we indicated that we were aware that there are some departments or facilities of hospitals that meet the definition of a dedicated emergency department under the EMTALA regulations, but that do not meet the more restrictive CPT definition of an emergency department. For example, a hospital department or facility that meets the definition of a dedicated emergency department may not be available 24 hours a day, 7 days a week. Nevertheless, hospitals with such departments or facilities incur EMTALA obligations with respect to an individual who presents to the department and requests, or has requested on his or her behalf, examination or treatment for an emergency medical condition. However, because they did not meet the CPT requirements for reporting emergency visit E/M codes, prior to CY 2007, these facilities were required to bill clinic visit codes for the services they furnished under the OPPS. We had no way to distinguish in our hospital claims data the costs of visits provided in dedicated emergency departments that did not meet the CPT definition of emergency department from the costs of clinic visits. Prior to CY 2007, some hospitals requested that they be permitted to bill emergency department visit codes under the OPPS for services furnished in a facility that met the CPT definition for reporting emergency department visit E/M codes, except that the facility was not available 24 hours a day. These hospitals believed that their resource costs for visits were more similar to those of emergency departments that met the CPT definition than they were to the resource costs of clinics. Representatives of such facilities argued that emergency department visit payments would be more appropriate, on the grounds that their facilities treated patients with emergency conditions whose costs exceeded the resources reflected in the clinic visit APC payments, even though these emergency departments were not available 24 hours per day. In addition, these hospital representatives indicated that their facilities had EMTALA obligations and should, therefore, be able to receive emergency department visit payments. While these emergency departments may have provided a broader range and intensity of hospital services, and required significant resources to assure their availability and capabilities in comparison with typical hospital outpatient clinics, the fact that they did not operate with all capabilities full-time suggested that hospital resources associated with visits to emergency departments or facilities available less than 24 hours a day might not be as great as the resources associated with emergency departments or facilities that were available 24 hours a day, and that fully met the CPT definition. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68132), we finalized the definition of Type A emergency departments to distinguish them from Type B emergency departments. A Type A emergency department must be available to provide services 24 hours a day, 7 days a week, and meet one or both of the following requirements related to the EMTALA definition of a dedicated emergency department, specifically:
(1)It is licensed by the State in which it is located under the applicable State law as an emergency room or emergency department; or
(2)It is held out to the public (by name, posted signs, advertising, or other means) as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment. For CY 2007 (71 FR 68140), we assigned the five CPT E/M emergency department visit codes for services provided in Type A emergency departments to the five newly created Emergency Visit APCs, specifically 0609 (Level 1 Emergency Visits), 0613 (Level 2 Emergency Visits), 0614 (Level 3 Emergency Visits), 0615 (Level 4 Emergency Visits), and 0616 (Level 5 Emergency Visits). We defined a Type B emergency department as any dedicated emergency department that incurred EMTALA obligations under § 489.24 of the EMTALA regulations but that did not meet the Type A emergency department definition. To determine whether visits to Type B emergency departments have different resource costs than visits to either clinics or Type A emergency departments, in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68132), we finalized a set of five G-codes for use by hospitals to report visits to all entities that meet the definition of a dedicated emergency department under the EMTALA regulations in § 489.24, but that are not Type A emergency departments. These codes are called “Type B emergency department visit codes.” In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68132), we explained that these new G-codes would serve as a vehicle to capture median cost and resource differences among visits provided by Type A emergency departments, Type B emergency departments, and clinics. For CYs 2007 and 2008, we assigned the five new Type B emergency department visit codes for services provided in a Type B emergency department to the five Clinic Visit APCs, specifically 0604 (Level 1 Hospital Clinic Visits), 0605 (Level 2 Hospital Clinic Visits), 0606 (Level 3 Hospital Clinic Visits), 0607 (Level 4 Hospital Clinic Visits), and 0608 (Level 5 Hospital Clinic Visits). This payment policy for Type B emergency department visits was similar to our previous policy, which required that services furnished in emergency departments that had an EMTALA obligation but did not meet the CPT definition of emergency department be reported using CPT clinic visit E/M codes, resulting in payments based upon clinic visit APCs. While maintaining the same payment policy for Type B emergency department visits in CYs 2007 and 2008, we believe the reporting of specific G-codes for emergency department visits provided in Type B emergency departments would permit us to specifically collect and analyze the hospital resource costs of visits to these facilities in order to determine if in the future a proposal for an alternative payment policy might be warranted. We expected hospitals to adjust their charges appropriately to reflect differences in Type A and Type B emergency department visit costs. We noted that the OPPS rulemaking cycle for CY 2009 would be the first year that we would have cost data for these new Type B emergency department HCPCS codes available for analysis. We now have CY 2007 cost data for CY 2009 ratesetting for the Type B emergency department HCPCS codes G0380 through G0384. Based on these data, 342 hospitals billed at least one Type B emergency department visit code in CY 2007, with a total frequency of visits provided in Type B emergency departments of approximately 200,000. All except 2 of the 342 hospitals reporting Type B emergency department visits in CY 2007 also reported Type A emergency department visits. Overall, many more hospitals (approximately 2,911 total hospitals) reported Type A emergency department visits than Type B emergency department visits. For comparison purposes, the total frequency of visits provided in hospital outpatient clinics and Type A emergency departments is approximately 14.5 million and 10.3 million, respectively. The median costs for the Type B emergency department visit HCPCS codes, as compared to the clinic visit and Type A emergency visit APC median costs, are shown in Table 32 below. Table 32.—Comparison of Median Costs for Clinic Visit APCs, Type B Emergency Department Visit HCPCS Codes, and Type A Emergency Visit APCs Visit level Clinic visit APCs Type B emergency department visit HCPCS code Type A emergency visit APCs Level 1 $55 $48 $54 Level 2 68 65 87 Level 3 88 92 136 Level 4 117 156 219 Level 5 155 326 325 The median costs of the lowest level visit are similar across all settings, including clinic and Type A and B emergency departments. Visit levels 2 and 3 share similar resource costs in the clinic and Type B emergency department settings, while visits provided in Type A emergency departments have higher estimated resource costs at these levels. The level 4 clinic visit APC is less resource intensive than the level 4 Type B emergency department visit, which is similarly less resource intensive than the level 4 Type A emergency department visit. The Type A and B emergency department level 5 visit median costs are similar to each other and significantly exceed the level 5 clinic visit cost. We performed additional data analyses in preparation for this proposed rule to gather more information for our proposal for payment of Type B emergency department visits. This included studying the emergency department visit charges and costs of hospitals that billed Type B emergency department visits, analyzing the cost data for various subsets of hospitals that billed the Type B emergency department visit codes, and comparing visit cost data for hospitals that did and did not bill Type B emergency department visit codes. Hospitals that reported both Type A and Type B emergency department visits billed lower charges for Type B emergency department visits than Type A emergency department visits, presumably reflecting the lower costs for Type B emergency department visits. Moreover, hospitals that billed both Type A and Type B emergency department visits also had lower costs for Type B emergency department visits than Type A emergency department visits at all levels except for the level 5 Type B emergency department visit. The Type A emergency department visit costs for hospitals that billed both Type A and Type B emergency department visits resemble the Type A emergency department visit costs of hospitals that billed only Type A emergency department visits and did not bill any Type B emergency department visits. We also determined that the majority of Type B emergency department visits were reported under an emergency department revenue code. In summary, our further analyses confirmed that the median costs of Type B emergency department visits are less than the median costs of Type A emergency department visits for all but the level 5 visit, and that the observed differences are not attributable to provider-level differences in the visit costs of the different groups of hospitals reporting Type A and Type B emergency department visits. In other words, the median costs from CY 2007 hospital claims represent real differences in the hospital resource costs for the same level of visit in a Type A or Type B emergency department. As noted earlier, the CY 2007 claims data are the first year of claims data that include providers' cost data for the Type B emergency department visits. We will perform additional analyses to monitor patterns of billing and costs of these services throughout the CY 2009 rulemaking cycle, and in preparation for the CY 2010 rulemaking cycle, as additional cost data become available. We shared preliminary cost and frequency data with the Visits and Observation Subcommittee of the APC Panel and the full APC Panel during its March 2008 meeting. The APC Panel recommended that CMS continue to pay levels 1, 2, and 3 Type B emergency department visits at the corresponding clinic visit levels. The APC Panel also recommended that CMS consider using the clinic visit level 5 APC as the basis of payment for the level 4 Type B emergency department visit and the level 5 Type A emergency department visit APC as the basis of payment for the level 5 Type B emergency department visit. Given the limited data presently available for Type B emergency department visits, the APC Panel also recommended that CMS reconsider payment adjustments as more claims data become available. In general, the APC Panel's recommended configuration would pay appropriately for each level of Type B emergency department visit, based on the resource costs of Type B emergency department visits that are reflected in claims data. In accordance with the APC Panel's assessment, we are proposing to pay for Type B emergency department visits in CY 2009 consistent with their median costs, although we are not fully adopting the APC Panel's recommended payment configuration. Specifically, we are proposing to pay levels 1, 2, 3, and 4 Type B emergency department visits through four levels of newly created APCs, 0626 (Level 1 Type B Emergency Visits), 0627 (Level 2 Type B Emergency Visits), 0628 (Level 3 Type B Emergency Visits), and 0629 (Level 4 Type B Emergency Visits). We are proposing to assign HCPCS codes G0380, G0381, G0382, and G0383, the levels 1, 2, 3, and 4 Type B emergency department visit Level II HCPCS codes, to APCs 0626, 0627, 0628, and 0629, respectively, for CY 2009. These HCPCS codes would be the only HCPCS codes assigned to these newly created APCs. Furthermore, to distinguish these new APCs from the APCs for levels 1, 2, 3, and 4 Type A emergency visits, we are proposing to modify the titles of the current APCs for these visits to incorporate Type A in their names. Therefore, their proposed revised titles would be: APC 0609, Level 1 Type A Emergency Visits; APC 0613, Level 2 Type A Emergency Visits; APC 0614, Level 3 Type A Emergency Visits; and APC 0615, Level 4 Type A Emergency Visits. Finally, we are proposing to map the level 5 Type B emergency department visit code, HCPCS code G0384, to APC 0616 (Level 5 Emergency Visits), which is the same APC that contains CPT code 99285, the level 5 Type A emergency department visit code. Consistent with the APC Panel recommendation, the level 5 Type B emergency department visit payment rate would be the same as the level 5 Type A emergency department visit payment rate, based upon the similar median costs for these visits. For this highest level of emergency department visits, the costs of these relatively uncommon visits to Type A and Type B emergency departments are comparable, reflecting the considerable hospital resources required to care for these sick patients in both settings. Table 33 below displays the proposed APC median costs for each level of Type B emergency department visit, under our proposed CY 2009 configuration. We believe the CY 2009 proposed assignments of the levels 1 through 4 Type B emergency department visits to their own new clinical APCs, and the proposed assignment of the level 5 Type B emergency department visit to APC 0616, would pay appropriately for all levels of Type B emergency department visits, taking into consideration the hospital costs for these visits. As more cost data become available and hospitals gain additional experience with reporting visits to Type B emergency departments, we would continue to regularly reevaluate patterns of Type A and Type B emergency visit reporting at varying levels of disaggregation below the national level to ensure that hospitals continue to bill appropriately and differentially for these services. In addition, according to our usual practice, we would examine trends in cost data over time and consider alternative emergency department visit APC configurations in the future if updated data indicate that changes to the proposed payment structure for CY 2009 should be considered. Table 33.—Proposed CY 2009 Type B Emergency Department Visit APC Assignments and Median Costs Type B emergency department visit level Proposed CY 2009 APC assignment Proposed CY 2009 APC median cost Level 1 0626 $48 Level 2 0627 65 Level 3 0628 92 Level 4 0629 156 Level 5 0616 325 For the CY 2009 OPPS, we are also proposing to include HCPCS code G0384 in the criteria that determine eligibility for payment of composite APC 8003 (Level II Extended Assessment and Management Composite). We refer the readers to section II.A.2.e.(1) of this proposed rule for further discussion related to the extended assessment and management composite APCs. As discussed in detail in sections II.A.2.e.(1) and III.D.1. of this proposed rule and consistent with our CY 2008 practice, when calculating the median costs for the Type A and Type B emergency visit APCs (0609 through 0616 and 0626 through 0629), we would utilize our methodology that excludes those claims for visits that are eligible for payment through the extended assessment and management composite APC 8003. We believe that this approach would result in the most accurate cost estimates for APCs 0609 through 0616 and 0626 through 0629 for CY 2009. 3. Visit Reporting Guidelines As described in section IX.A. of this proposed rule, since April 7, 2000, we have instructed hospitals to report facility resources for clinic and emergency department hospital outpatient visits using the CPT E/M codes and to develop internal hospital guidelines for reporting the appropriate visit level. As noted in detail in sections IX.C. of the CY 2008 OPPS/ASC final rule with comment period (72 FR 66802 through 66805), we observed a normal and stable distribution of clinic and emergency department visit levels in hospital claims over the past several years. The data indicated that hospitals, on average, were billing all five levels of visit codes with varying frequency, in a consistent pattern over time. Overall, both the clinic and emergency department visit distributions indicated that hospitals were billing consistently over time and in a manner that distinguished between visit levels, resulting in relatively normal distributions nationally for the OPPS, as well as for specific classes of hospitals. The results of these analyses were generally consistent with our understanding of the clinical and resource characteristics of different levels of hospital outpatient clinic and emergency department visits. In the CY 2008 OPPS/ASC proposed rule (72 FR 42764 through 42765), we specifically invited public comment as to whether a pressing need for national guidelines continued at this point in the maturation of the OPPS, or if the current system where hospitals create and apply their own internal guidelines to report visits was currently more practical and appropriately flexible for hospitals. We explained that although we have reiterated our goal since CY 2000 of creating national guidelines, this complex undertaking for these important and common hospital services was proving more challenging than we initially thought as we received new and expanded information from the public on current hospital reporting practices that led to appropriate payment for the hospital resources associated with clinic and emergency department visits. We believed that many hospitals had worked diligently and carefully to develop and implement their own internal guidelines that reflected the scope and types of services they provided throughout the hospital outpatient system. Based on public comments, as well as our own knowledge of how clinics operate, it seemed unlikely that one set of straightforward national guidelines could apply to the reporting of visits in all hospitals and specialty clinics. In addition, the stable distribution of clinic and emergency department visits reported under the OPPS over the past several years indicated that hospitals, both nationally in the aggregate and grouped by specific hospital classes, were generally billing in an appropriate and consistent manner as we would expect in a system that accurately distinguished among different levels of service based on the associated hospital resources. Therefore, we did not propose to implement national visit guidelines for clinic or emergency department visits for CY 2008. Since publication of the CY 2008 OPPS/ASC final rule with comment period, we have once again examined the distribution of clinic and Type A emergency department visit levels based upon updated CY 2007 claims data available for this proposed rule and confirmed that we continue to observe a normal and stable distribution of clinic and emergency department visit levels in hospital claims. We continue to believe that, based on the use of their own internal guidelines, hospitals are generally billing in an appropriate and consistent manner that distinguishes among different levels of visits based on their required hospital resources. As a result of our updated analyses, we are proposing that hospitals should continue to report visits during CY 2009 according to their own internal hospital guidelines. In the absence of national guidelines, we would continue to regularly reevaluate patterns of hospital outpatient visit reporting at varying levels of disaggregation below the national level to ensure that hospitals continue to bill appropriately and differentially for these services. We do not expect to see an increase in the proportion of visit claims for high level visits as a result of the new extended assessment and management composite APCs 8002 and 8003 adopted for CY 2008 and proposed for CY 2009. Similarly, we expect that hospitals will not purposely change their visit guidelines or otherwise upcode clinic and emergency department visits reported with observation care solely for the purpose of composite APC payment. As stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66648), we expect to carefully monitor any changes in billing practices on a service-specific and hospital-specific level to determine whether there is reason to request that QIOs review the quality of care furnished, or to request that Benefit Integrity contractors or other contractors review the claims against the medical record. In addition, we note our continued expectation that hospitals' internal guidelines would comport with the principles listed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66805). We encourage hospitals with more specific questions related to the creation of internal guidelines to contact their local fiscal intermediary or Medicare Administrative Contractor (MAC). We appreciate all of the comments we have received in the past from the public on visit guidelines, and we encourage continued submission of comments throughout the year that would assist us and other stakeholders interested in the development of national guidelines. Until national guidelines are established, hospitals should continue using their own internal guidelines to determine the appropriate reporting of different levels of clinic and emergency department visits. While we understand the interest of some hospitals in our moving quickly to promulgate national guidelines that would ensure standardized reporting of hospital outpatient visit levels, we believe that the issues and concerns identified both by us and others that may arise are important and require serious consideration prior to the implementation of national guidelines. Because of our commitment to provide hospitals with 6 to 12 months' notice prior to implementation of national guidelines, we would not implement national guidelines prior to CY 2010. Our goal is to ensure that OPPS national or hospital-specific visit guidelines continue to facilitate consistent and accurate reporting of hospital outpatient visits in a manner that is resource-based and supportive of appropriate OPPS payments for the efficient and effective provision of visits in hospital outpatient settings. X. Proposed Payment for Partial Hospitalization Services A. Background Partial hospitalization is an intensive outpatient program of psychiatric services provided to patients as an alternative to inpatient psychiatric care for beneficiaries who have an acute mental illness. Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the authority to designate the hospital outpatient department services to be covered under the OPPS. The Medicare regulations at § 419.21(c) that implement this provision specify that payments under the OPPS will be made for partial hospitalization services furnished by CMHCs as well as those furnished to hospital outpatients. Section 1833(t)(2)(C) of the Act requires that we establish relative payment weights based on median (or mean, at the election of the Secretary) hospital costs determined by 1996 claims data and data from the most recent available cost reports. Because a day of care is the unit that defines the structure and scheduling of partial hospitalization services, we established a per diem payment methodology for the PHP APC, effective for services furnished on or after August 1, 2000 (65 FR 18452). Historically, the median per diem cost for CMHCs greatly exceeded the median per diem cost for hospital-based PHPs and fluctuated significantly from year to year, while the median per diem cost for hospital-based PHPs remained relatively constant ($200-$225). We believe that CMHCs may have increased and decreased their charges in response to Medicare payment policies. As discussed in more detail in section X.B. of this proposed rule and in the CY 2004 OPPS final rule with comment period (68 FR 63470), we also believe that some CMHCs manipulated their charges in order to inappropriately receive outlier payments. In the CY 2005 OPPS update, the CMHC median per diem cost was $310, the hospital-based PHP median per diem cost was $215, and the combined CMHC and hospital-based median per diem cost was $289, a reduction in median cost from previous years. We believed the reduction indicated that the use of updated CCRs had accounted for the previous increase in CMHC charges and represented a more accurate estimate of CMHC per diem costs for PHP. For the CY 2006 OPPS final rule with comment period, the median per diem cost for CMHCs dropped to $154, while the median per diem cost for hospital-based PHPs was $201. We believed that a combination of reduced charges and slightly lower CCRs for CMHCs resulted in a significant decline in the CMHC median per diem cost between CY 2003 and CY 2004. The CY 2006 OPPS updated combined hospital-based and CMHC median per diem cost was $161, a decrease of 44 percent compared to the CY 2005 combined median per diem amount. Due to concern that this amount may not cover the cost for PHPs, as stated in the CY 2006 OPPS final rule with comment period (70 FR 68548 and 68549), we applied a 15-percent reduction to the combined hospital-based and CMHC median per diem cost to establish the CY 2006 PHP APC. (We refer readers to the CY 2006 OPPS final rule with comment period for a full discussion of how we established the CY 2006 PHP rate (70 FR 68548).) In that rule, we stated our belief that a reduction in the CY 2005 median per diem cost would strike an appropriate balance between using the best available data and providing adequate payment for a program that often spans 5-6 hours a day. We stated that 15 percent was an appropriate reduction because it recognized decreases in median per diem costs in both the hospital data and the CMHC data, and also reduced the risk of any adverse impact on access to these services that might result from a large single-year rate reduction. However, we adopted this policy as a transitional measure, and stated in the CY 2006 OPPS final rule with comment period that we would continue to monitor CMHC costs and charges for these services and work with CMHCs to improve their reporting so that payments could be calculated based on better empirical data (70 FR 68548). To apply this methodology for CY 2006, we reduced the CY 2005 combined unscaled hospital-based and CMHC median per diem cost of $289 by 15 percent, resulting in a combined median per diem cost of $245.65 for CY 2006. For the CY 2007 OPPS/ASC final rule with comment period, we analyzed hospital and CMHC PHP claims for services furnished between January 1, 2005, and December 31, 2005, and used the most currently available CCRs to estimate costs. The median per diem cost for CMHCs was $173, while the median per diem cost for hospital-based PHPs was $190. The combined hospital-based and CMHC median per diem cost would have been $175 for CY 2007. Rather than allowing the PHP per diem rate to drop to this level, we proposed to reduce the PHP median cost by 15 percent, similar to the methodology used for the CY 2006 update. However, after considering all public comments received concerning the proposed CY 2007 PHP per diem rate and results obtained using more current data, we modified our proposal. We made a 5-percent reduction to the CY 2006 median per diem rate to provide a transitional path to the per diem cost indicated by the data. This approach accounted for the downward direction of the data and addressed concerns raised by commenters about the magnitude of another 15-percent reduction in 1 year. Thus, to calculate the CY 2007 APC PHP per diem cost, we reduced $245.65 (the CY 2005 combined hospital-based and CMHC median per diem cost of $289 reduced by 15 percent) by 5 percent, which resulted in a combined per diem cost of $233.37. For the CY 2008 OPPS/ASC final rule with comment period, we analyzed 12 months of current data for hospital-based PHP claims (condition code 41) and CMHC PHP claims for PHP services furnished between January 1, 2006, and December 31, 2006. We also used the most currently available CCRs to estimate costs for a day of PHP services. The median per diem cost for CMHCs was $172, while the median per diem cost for hospital-based PHPs was $177. The combined median per diem cost, which is computed from both hospital-based and CMHC PHP data was $172. For the past 3 years, we have been concerned that we did not have sufficient evidence to support using the median per diem cost produced by the most current year's PHP data. As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66671), after extensive data analysis we now believe the data reflect the level of cost for the type of services that are being provided. This analysis included an examination of revenue-to-cost center mapping, refinements to the per diem methodology, and an in-depth analysis of the number of units of services per day. (We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66671 through 66675) for a detailed discussion of the data analysis.) Thus, for CY 2008, we proposed and finalized two refinements to the methodology for computing the PHP median; however, these refinements did not appreciably impact the median per diem cost. We remapped the 10 revenue codes to the most appropriate cost centers and computed the median using a per day methodology (as described below). As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66671), after extensive analysis, we now believe the data reflected the level of cost for the type of services that are being provided. We continued to observe a clear downward trend in the CY 2006 data used to develop the CY 2008 OPPS/ASC final rule with comment period. Thus, for CY 2008, we refined our methodology for computing PHP per diem costs. We developed an alternate method to determine median cost by computing a separate per diem cost for each day rather than for each bill. Under this method, we computed a cost separately for each day of PHP care. When there are multiple days of care entered on a claim, a unique cost is computed for each day of care. We only assigned costs for line items on days when a payment is made. All of these costs were then arrayed from lowest to highest and the middle value of the array would be the median per diem cost. A complete discussion of the refined method of computing the PHP median cost can be found in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66672). Because partial hospitalization is provided in lieu of inpatient care, it should be a highly structured and clinically-intensive program, usually lasting most of the day. Our goal is to improve the level of service furnished in a PHP day. For CY 2008, we were concerned that the proposed decrease in PHP payment may not reflect the mix and quantity of services that should be provided under such an intensive program. In an effort to ensure access to this needed service to vulnerable populations, we mitigated the proposed reduction to 50 percent of the difference between the CY 2007 APC amount ($233) and the computed amount based on the PHP data ($172), resulting in an APC median cost of $203 for CY 2008. As stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66673), we believe this payment amount would give the providers an opportunity to increase the intensity of their programs and maintain partial hospitalization as part of the continuum of mental health care. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66673), we reiterated our expectation that hospitals and CMHCs will provide a comprehensive program consistent with the statutory intent. We also indicated that we intend to explore changes to our regulations and claims processing systems in order to deny payment for low intensity days and we specifically invited public comment on the most appropriate threshold. We received no public comments on this issue. B. Proposed PHP APC Update In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66672 through 66674), we presented our analysis of the number of units of service provided in a day of care, as a possible explanation for the low per diem cost for PHP. Both hospital-based and CMHC PHPs had a significant number of days where fewer than 4 units of service were provided. As noted in the CY 2008 OPPS/ASC final rule with comment period, review of CY 2006 data showed that 64 percent of the CMHC days were days where fewer than 4 units of service were provided, and 31 percent of the hospital-based PHP days were days where fewer than 4 units of service were provided (72 FR 66672). We have updated this analysis using CY 2007 claims and found that the results and trends have continued. In fact, there are even more days with less than four services provided in CMHCs, but there were fewer days with less than 4 units of service provided in hospital-based PHPs compared to the CY 2006 data. Using CY 2007 claims, 73 percent of CMHC days have fewer than 4 units of service, and 28 percent of hospital-based PHP days have fewer than 4 units of service. Based on these updated findings, we computed median per diem costs in the following three categories:
(1)All days;
(2)Days with 3 units of service; and
(3)Days with 4 units or more. These updated median per diem costs were computed separately for CMHCs and hospital-based PHPs and are shown in the table below: CMHCs Hospital-based PHPs Combined All Days $145 $177 $146 Days with 3 units 139 151 140 Days with 4 units or more 171 205 174 Using CY 2007 data and our refined methodology for computing PHP per diem costs adopted in our CY 2008 OPPS/ASC final rule with comment period (72 FR 66672), the median per diem cost calculated from all claims is $146. The data indicate that CMHCs provide far fewer days with 4 or more units of service and that CMHC median per diem cost ($145) is substantially lower than the comparable data from hospital-based PHPs ($177). Medians for claims containing 4 or more units of service are $205 for hospital-based PHPs and $174 for all PHP claims regardless of site of service. Medians for claims containing 3 units of service are $139 for CMHCs, $151 for hospital-based PHPs, and $140 for all PHP claims regardless of site of service. As we stated in our CY 2008 OPPS/ASC final rule with comment period (72 FR 66672), it was never our intention that days with three services represented the number of services provided in a typical day. Our intention was to cover days that consisted of only three services in certain limited circumstances. For example, we note there are days when a patient is transitioning towards discharge (or days when a patient who is transitioning at the beginning of his or her PHP stay). Another example of when it may be appropriate for a program to provide only three services in a day is when a patient is required to leave the PHP early for the day due to an unexpected medical appointment. Therefore, we recognize there may be limited circumstances when it is appropriate for PHPs to receive payment for days when only three services are provided. However, we believe that programs that provide four or more services should be paid an amount that recognizes that they have provided a more intensive day of care. A higher rate for more intensive days is consistent with our goal that hospitals and CMHCs provide a comprehensive program in keeping with the statutory intent. Accordingly, as there are circumstances when three services provided may be appropriate, but to reflect our general belief that the data trend that four or more services more appropriately indicated the comprehensive nature of PHP services, for CY 2009, we are proposing to create two separate APC payment rates for PHP: one for days with three services and one for days with four or more services. We are proposing to create two new APCs for PHP as follows: Proposed APC Group title Proposed per diem rate 0172 Level I Partial Hospitalization (3 services) $140 0173 Level II Partial Hospitalization (4 or more services) 174 For APC 0172, we are proposing to use the median per diem cost for CMHC and hospital-based PHP days with 3 units of services ($140). For APC 00173, we are proposing to use the median per diem cost for CMHC and hospital-based PHP days with 4 or more units of service ($174). As noted previously, these proposed payment rates are derived from both PHP-based and CMHC-based claims, and represent the median cost of providing PHP services for the unit of services described. We believe that $140 is an appropriate payment rate for less intensive days because it is derived from both hospital-based PHP and CMHC claims data using all days with three services. We believe that $174 is an appropriate payment rate for more intensive days because it is derived from both hospital-based PHP and CMHC claims data, using all days with four or more services. We believe that creating a rate specific to days with three services is consistent with our proposal to require CMHCs and hospital-based PHPs to provide a minimum of 3 units of service per day in order to receive payment as discussed below in section X.C.1. of this proposed rule. Our proposal to use two separate PHP rates provides a lower payment for days with only three services, while not penalizing programs that provide four or more services by excluding days with three services in the computation of APC 0173. We believe our proposal appropriately balances our concern that a PHP program is an intensive program and should generally consist of five to six services provided, with the realization that there may nonetheless be appropriate circumstances where three services may be provided. C. Proposed Policy Changes 1. Proposal to Deny Payment for Low Intensity Days In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66673), we reiterated our expectation that hospitals and CMHCs will provide a comprehensive program consistent with the statutory intent. We also indicated that we intend to explore changes to our regulations and claims processing systems in order to deny payment for low intensity days and we specifically invited public comment on the most appropriate threshold. We received no public comments on this subject. Our analysis of claims data indicates that CMHCs (and to a lesser extent hospital-based PHPs) are furnishing a substantial number of low unit days. We consider providing only one or two services to be a low unit day. Although we currently consider the acceptable minimum number of PHP services required in a PHP day to be three, it was never our intention that three or fewer services should represent the number of services to be provided in a typical PHP day. PHP is furnished in lieu of an inpatient psychiatric hospitalization and is intended to be more intensive than a half-day program. We believe the typical PHP day should include five to six services with a break for lunch. As indicated in section X.B. above, we are proposing two PHP per diem rates that reflect the level of care provided. In conjunction with and to conform to our proposed CY 2009 PHP per diem rates that account for a minimum of 3 units of service provided, we also are proposing changes to the existing PHP logic portion of the I/OCE to require that CMHCs and hospital-based PHPs provide a minimum of three services per day in order to receive PHP payment. Currently, the PHP logic portion of the I/OCE results in a “suspension of claim for medical review” for claims with fewer than three services provided in a day. For CY 2009, we are proposing to deny payment for any PHP claims for days when fewer than three therapeutic services are provided. We believe that three services should be the minimum number of services allowed in a PHP day because a day with one or two services does not meet the statutory intent of a PHP program. Three services are a minimum threshold that permits unforeseen circumstances, such as medical appointments, while allowing payment, but still maintains the integrity of a comprehensive program. As noted previously, we also believe that a day where a patient receives only three services should only occur under certain circumstances. As we explained in section X.B. of this proposed rule, an example of when it may be appropriate to bill only three services a day would be when a patient might need to leave early for a medical appointment and, therefore, would be unable to complete a full day of PHP treatment. However, PHP programs that provide three services in a day should be the exception, as we expect PHP programs to generally provide a more intensive day of services as PHP is a more comprehensive program than three services. CMS will be observing trends and assessing this proposed two payment rate approach in its continued review to protect the integrity of the PHP program. 2. Proposal to Strengthen PHP Patient Eligibility Criteria As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66671), we established the current PHP payment rate of $203. As part of our ongoing review of ensuring the most appropriate payment is made for these intensive, service-oriented programs, we also explored changes that could enhance and strengthen the integrity of the PHP benefit overall. As part of this review, we looked at existing instructions to providers, including current regulations, manuals, and other guidance. We are proposing to codify existing policy regarding PHP patient eligibility as we believe it will help strengthen the integrity of the PHP benefit by conforming our regulations to our longstanding policy and making available the general program requirements in one regulatory section. These requirements are currently stated in the Medicare Benefit Policy Manual, Pub. 100-02, Chapter 6, section 70.3, available on the CMS Web site at: *http://www.cms.hhs.gov/manuals/Downloads/bp102c06.pdf* ) and in Transmittal 10, Change Request 3298, dated May 7, 2004, but not codified. The regulatory text changes that we are proposing are intended to strengthen PHP requirements by adding the existing patient eligibility conditions to the existing PHP regulations, and do not reflect a change in policy. Specifically, we are proposing to revise 42 CFR 410.43 to add a reference to current regulations at § 424.24(e) that requires that PHP services are furnished pursuant to a physician certification and plan of care. While the requirements at § 424.24(e) are not new, we believe the addition of this reference to § 410.43 will provide a more complete description of our expectations for PHP programs in § 410.43. We also are proposing to revise 42 CFR 410.43 to add the following patient eligibility criteria. We are proposing to state that partial hospitalization programs are intended for patients who—
(1)Require 20 hours per week of therapeutic services;
(2)Are likely to benefit from a coordinated program of services and require more than isolated sessions of outpatient treatment;
(3)Do not require 24-hour care;
(4)Have an adequate support system while not actively engaged in the program;
(5)Have a mental health diagnosis;
(6)Are not judged to be dangerous to self or others; and
(7)Have the cognitive and emotional ability to participate in the active treatment process and can tolerate the intensity of the partial hospitalization program. We would like to generally note that partial hospitalization is the level of intervention that falls between inpatient hospitalization and episodic treatment in the continuum of care for the mentally ill. While we require a patient to have a mental health diagnosis, we caution that the diagnosis in itself is not the sole determining factor for coverage. Because partial hospitalization is provided in lieu of inpatient care, it should be a highly structured and clinically-intensive program. Our goal is to improve the level of service furnished in a PHP day, while also ensuring that the partial hospitalization benefit is being utilized by the appropriate population. For example, a PHP candidate should be able to tolerate a day of PHP and benefit from the intense treatment provided in the program. In addition, for the program to be fully beneficial, a PHP participant should have a strong support system outside of the PHP program helping to ensure success. Moreover, the safety of all PHP patients is extremely important and, therefore, all PHP participants should be able to live safely in the community, and not be a danger to self or others. For these reasons, it has been our longstanding policy that these criteria are vital in determining the patient's eligibility to participate in a PHP and believe it necessary to propose to codify the above list of basic patient eligibility requirements in § 410.43. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66673), we reiterated our expectation that hospitals and CMHCs will provide a comprehensive program consistent with the statutory intent. We believe the addition of these requirements to the regulations helps provide a clear and consistent description of our expectations for PHP programs and would strengthen the integrity of the PHP benefit by noting such in the PHP regulations. 3. Proposed Partial Hospitalization Coding Update As part of our ongoing evaluation of partial hospitalization codes, we are proposing several coding changes. We identified several CPT codes that we believe are inappropriate for billing PHP claims. Upon further study and after consultation with CMS medical advisors, we are proposing to eliminate use of the following three CPT codes for billing PHP claims: 90846 (Family psychotherapy (without the patient present)), 90849 (Multi-family group psychotherapy), and 90899 (Unlisted psychiatric service or procedure). While these three CPT codes constitute 0.157 percent of the total PHP claims for CY 2006, we believe there are similar and more appropriate HCPCS codes to use to bill for these services. We specifically request public comment on our proposed elimination of these three CPT codes from use in the PHP benefit. Our review of the claims data associated with CPT code 90846 found that this code accounts for approximately 0.004 percent of the total services billed on PHP claims in CY 2006. We also believe that CPT code 90846 is not an appropriate code for the PHP benefit, because it excludes the beneficiary. Rather, we believe that another available PHP code CPT code 90847 (Family psychotherapy (conjoint psychotherapy with patient present)), which is currently a billable PHP code, is the more appropriate CPT code to use to bill for family psychotherapy services because it requires the presence of the patient as part of the family psychotherapy session. In addition, our review of the CY 2006 claims data associated with CPT code 90849 found that this code accounts for approximately 0.058 percent of the total services billed on PHP claims in CY 2006. We also believe that the intended use of this code, which is for the reporting of multiple family group therapy sessions, is not appropriate for our use under PHP because PHP care is centered on the beneficiary. As stated earlier, we believe that CPT code 90847 is the more appropriate code to use for PHP payment of family psychotherapy services, because it provides for the conduct of individualized family psychotherapy with the patient present. Therefore, for CY 2009, we are proposing to eliminate CPT code 90849 for use as a PHP code. In addition, evaluation of the CY 2006 claims data found that CPT code 90899 accounted for approximately 0.095 percent of total services billed on PHP claims. Upon closer examination, we found that CPT code 90899 is predominantly used to bill for patient education services. This is an unlisted CPT procedure code and such CPT unlisted procedure codes are used to report unlisted psychiatric procedures that are not accurately described by any other, more specific CPT codes. Because of our concerns about the type of services that may be billed using an unlisted CPT code and because a more appropriate code is currently available that better describes the patient education services for which PHP payment may be made, we are proposing to eliminate PHP payment for CPT code 90899 in CY 2009, and are proposing to replace CPT code 90899 with HCPCS code G0177 (Patient Education and Training). We further note that eliminating unlisted CPT procedure codes is consistent with how other payment systems currently treat such codes, in that more specific coding is preferred over general coding. In addition, we are proposing to eliminate two group therapy CPT codes currently used in a PHP setting, 90853 (Group psychotherapy other than of a multiple-family group) and 90857 (Interactive group psychotherapy), and replace them with two new parallel timed HCPCS G-codes: GXXX1 (Group psychotherapy other than of a multiple-family group, in a partial hospitalization setting, approximately 45 to 50 minutes) and GXXX2 (Interactive group psychotherapy, in a partial hospitalization setting, approximately 45 to 50 minutes). As most of the current PHP codes already include time estimates, we believe in order to maintain consistency with the existing HCPCS codes used in PHP, the group therapy codes should likewise include a time descriptor. We believe the time of 45 to 50 minutes for a group therapy session is reasonable as it approximately reflects the timing of group sessions in current clinical practices. Therefore, we are proposing the two new timed HCPCS G-codes for PHP group therapies: GXXX1 and GXXX2. We note that both CPT code 90853 and 90857 may still be used in a non-PHP setting. The table of billable PHP revenue and HCPCS codes originally published in the April 7, 2000 OPPS final rule with comment period (65 FR 18454) was updated and published in Transmittal 1487, Change Request 5999, dated April 8, 2008, and is currently located in, the Medicare Claims Processing Manual, Pub. 100-04, Chapter 4, section 260.1, which is available on the CMS Web site at: *http://www.cms.hhs.gov/manuals/downloads/clm104c04.pdf* . Table 34 below displays the revised list of billable PHP revenue codes and HCPCS codes shown in Transmittal 1487. This table also includes the five CPT codes that we are proposing to eliminate for CY 2009 and the two new HCPCS G-codes we are proposing to add for CY 2009. The five CPT codes that we are proposing to eliminate are shown in the HCPCS code column with a line struck through each code. The two new HCPCS G-codes that we are proposing are shown in the HCPCS code column, in the row with revenue code 0915 (Group Therapy). EP18JY08.672 D. Proposed Separate Threshold for Outlier Payments to CMHCs In the November 7, 2003 final rule with comment period (68 FR 63469), we indicated that, given the difference in PHP charges between hospitals and CMHCs, we did not believe it was appropriate to make outlier payments to CMHCs using the outlier percentage target amount and threshold established for hospitals. There was a significant difference in the amount of outlier payments made to hospitals and CMHCs for PHP. In addition, further analysis indicated that using the same OPPS outlier threshold for both hospitals and CMHCs did not limit outlier payments to high cost cases and resulted in excessive outlier payments to CMHCs. Therefore, beginning in CY 2004, we established a separate outlier threshold for CMHCs. For CYs 2004 and 2005, we designated a portion of the estimated 2.0 percent outlier target amount specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS in each of those years, excluding outlier payments. For CY 2006, we set the estimated outlier target at 1.0 percent and allocated a portion of that 1.0 percent, an amount equal to 0.6 percent (or 0.006 percent of total OPPS payments), to CMHCs for PHP outliers. For CY 2007, we set the estimated outlier target at 1.0 percent and allocated a portion of that 1.0 percent, an amount equal to 0.15 percent of outlier payments (or 0.0015 percent of total OPPS payments), to CMHCs for PHP outliers. For CY 2008, we set the estimated outlier target at 1.0 percent and allocated a portion of that 1.0 percent, an amount equal to 0.02 percent of outlier payments (or 0.0002 percent of total OPPS payments), to CMHCs for PHP outliers. The CY 2008 CMHC outlier threshold is met when the cost of furnishing services by a CMHC exceeds 3.40 times the PHP APC payment amount. The CY 2008 OPPS outlier payment percentage is 50 percent of the amount of costs in excess of the threshold. The separate outlier threshold for CMHCs became effective January 1, 2004, and has resulted in more commensurate outlier payments. In CY 2004, the separate outlier threshold for CMHCs resulted in $1.8 million in outlier payments to CMHCs. In CY 2005, the separate outlier threshold for CMHCs resulted in $0.5 million in outlier payments to CMHCs. In contrast, in CY 2003, more than $30 million was paid to CMHCs in outlier payments. We believe this difference in outlier payments indicates that the separate outlier threshold for CMHCs has been successful in keeping outlier payments to CMHCs in line with the percentage of OPPS payments made to CMHCs. As noted in section II.F. of this proposed rule, for CY 2009, we are proposing to continue our policy of setting aside 1.0 percent of the aggregate total payments under the OPPS for outlier payments. We are proposing that a portion of that 1.0 percent, an amount equal to 0.07 percent of outlier payments (or 0.0007 percent of total OPPS payments), would be allocated to CMHCs for PHP outliers. As discussed in section II.F. of this proposed rule, we again are proposing to set a dollar threshold in addition to an APC multiplier threshold for OPPS outlier payments. However, because the PHP APC is the only APC for which CMHCs may receive payment under the OPPS, we would not expect to redirect outlier payments by imposing a dollar threshold. Therefore, we are not proposing to set a dollar threshold for CMHC outliers. As noted above, we are proposing to set the outlier threshold for CMHCs for CY 2009 at 3.40 times the APC payment amount and the CY 2009 outlier payment percentage applicable to costs in excess of the threshold at 50 percent. XI. Proposed Procedures That Will Be Paid Only as Inpatient Procedures A. Background Section 1833(t)(1)(B)(i) of the Act gives the Secretary broad authority to determine the services to be covered and paid for under the OPPS. Before implementation of the OPPS in August 2000, Medicare paid reasonable costs for services provided in the outpatient department. The claims submitted were subject to medical review by the fiscal intermediaries to determine the appropriateness of providing certain services in the outpatient setting. We did not specify in regulations those services that were appropriate to provide only in the inpatient setting and that, therefore, should be payable only when provided in that setting. In the April 7, 2000 final rule with comment period (65 FR 18455), we identified procedures that are typically provided only in an inpatient setting and, therefore, would not be paid by Medicare under the OPPS. These procedures comprise what is referred to as the “inpatient list.” The inpatient list specifies those services that are only paid when provided in an inpatient setting because of the nature of the procedure, the need for at least 24 hours of postoperative recovery time or monitoring before the patient can be safely discharged, or the underlying physical condition of the patient. As we discussed in that rule and in the November 30, 2001 final rule (66 FR 59856), we may use any of the following criteria when reviewing procedures to determine whether or not they should be moved from the inpatient list and assigned to an APC group for payment under the OPPS: • Most outpatient departments are equipped to provide the services to the Medicare population. • The simplest procedure described by the code may be performed in most outpatient departments. • The procedure is related to codes that we have already removed from the inpatient list. In the November 1, 2002 final rule with comment period (67 FR 66741), we added the following criteria for use in reviewing procedures to determine whether they should be removed from the inpatient list and assigned to an APC group for payment under the OPPS: • We have determined that the procedure is being performed in numerous hospitals on an outpatient basis; or • We have determined that the procedure can be appropriately and safely performed in an ASC, and is on the list of approved ASC procedures or has been proposed by us for addition to the ASC list. We believe that these additional criteria help us to identify procedures that are appropriate for removal from the inpatient list. The list of codes that we are proposing to be paid by Medicare in CY 2009 only as inpatient procedures is included as Addendum E to this proposed rule. B. Proposed Changes to the Inpatient List For the CY 2009 OPPS, we used the same methodology as described in the November 15, 2004 final rule with comment period (69 FR 65835) to identify a subset of procedures currently on the inpatient list that are being performed a significant amount of the time on an outpatient basis. These procedures were then clinically reviewed for possible removal from the inpatient list. We solicited the APC Panel's input at its March 2008 meeting on the appropriateness of removing the following six CPT codes from the CY 2009 OPPS inpatient list: 21172 (Reconstruction superior-lateral orbital rim and lower forehead, advancement or alteration, with or without grafts (includes obtaining autografts)); 21386 (Open treatment of orbital floor blowout fracture; periorbital approach); 21387 (Open treatment of orbital floor blowout fracture; combined approach); 27479 (Arrest, epiphyseal, any method (e.g., epiphysiodesis); combined distal femur, proximal tibia and fibula); 54535 (Orchiectomy, radical, for tumor; with abdominal exploration); and 61850 (Twist drill or burr hole(s) for implantation of neurostimulator electrodes, cortical). In addition to presenting to the APC Panel the six candidate procedures that we believed could be appropriate for removal from the inpatient list for CY 2009, we also presented utilization data for two procedures, specifically CPT code 64818 (Sympathectomy, lumbar) and CPT code 20660 (Application of cranial tongs caliper, or stereotactic frame, including removal (separate procedure)) that were discussed as possible procedures for removal from the inpatient list during the March 2007 APC Panel meeting. At that meeting, the APC Panel recommended that we obtain additional utilization data for these two procedures for its consideration at a subsequent meeting. Following discussion, the APC Panel recommended that CMS remove from the inpatient list four of the six procedures (presented as candidates for removal from the list), specifically CPT codes 21172, 21386, 21387, and 27479, and one of the two codes for which additional utilization data were presented, specifically CPT code 20660. The APC Panel also recommended that CMS seek input from relevant physician specialty groups on the removal of two of the six procedures (presented to them as possible candidates for removal from the inpatient list), CPT codes 54535 and 61850. The APC Panel made no recommendation regarding removal of CPT code 64818 from the inpatient list after review of the additional data presented. For CY 2009, we are proposing to remove all of the codes except for CPT code 64818 from the inpatient list that were presented to the APC Panel as candidates for removal during its March 2008 meeting and, as recommended by the APC Panel, are specifically soliciting public comment on the proposed removal of CPT codes 54535 and 61850 from the inpatient list. In addition to the procedures discussed at the APC Panel's March 2008 meeting, we also reviewed and are proposing to remove three procedures from the inpatient list that were requested for removal during the comment period on the CY 2008 OPPS/ASC proposed rule. We believe that these procedures are appropriate for removal from the inpatient list and are soliciting public comment on our proposal to remove these three procedures: CPT codes 27886 (Amputation, leg, through tibia and fibula; reamputation); 43420 (Closure of esophagostomy or fistula; cervical approach); and 50727 (Revision of urinary-cutaneous anastomosis (any type urostomy)). Furthermore, during the March 2008 meeting of the APC Panel, a meeting attendee requested removal of several CPT codes from the inpatient list. That verbal request was followed by a letter in which the stakeholder requested that we remove five other procedures from the inpatient list for CY 2009. These procedures are: CPT code 50580 (Renal endoscopy through nephrotomy or pyelotomy, with or without irrigation, instillation, or ureteropyelography, exclusive of radiologic service; with removal of foreign body or calculus); CPT code 51845 (Abdomino-vaginal vesical neck suspension, with or without endoscopic control (e.g., Stamey, Raz, modified Pereyra); CPT code 51860 (Cystorrhaphy, suture of bladder wound, injury or rupture; simple); CPT code 54332 (One stage proximal penile or penoscrotal hypospadias repair requiring extensive dissection to correct chordee and urethroplasty by use of skin graft tube and/or island flap); and CPT code 54336 (One stage perineal hypospadias repair requiring extensive dissection to correct chordee and urethroplasty by use of skin graft tube and/or island flap). Based on our utilization data and clinical review, we are proposing to remove one of these procedures from the inpatient list, specifically CPT code 54332, and note that effective January 1, 2008, CPT code 50580 was removed from the inpatient list and assigned to APC 0161. Consistent with our established policy for removing procedures from the inpatient list, we rely on recommendations from the public and the APC Panel, combined with our utilization data and review by CMS medical advisors, to determine which procedures are candidates for removal. We believe that our policy of proposing the procedures for removal and soliciting comments from the public, which includes physician specialty societies, is the most appropriate process to receive input from the public on this issue. Rather than solicit approval from a select group (for example, specific physician specialty societies), we believe that solicitation of comments from all interested parties is more consistent with meeting our obligation to the public regarding outpatient services provided by hospitals. Therefore, we are accepting both recommendations of the APC Panel from its March 2008 meeting regarding the inpatient list, including
(1)proposing to remove the five specific procedures the APC Panel recommended for removal (CPT codes 21172, 21386, 21387, 27479, and 20660) and
(2)seeking input from relevant professional societies regarding our CY 2009 proposal to remove from the inpatient list CPT codes 54535 and 61850. The utilization data and clinical review findings for the 11 procedures we are proposing to remove from the inpatient list for CY 2009 support our proposal. Therefore, we are proposing that 11 procedures be removed from the OPPS inpatient list for CY 2009 and be assigned to clinically appropriate APCs, as shown in Table 35 below. Table 35.—Proposed HCPCS Codes for Removal From Inpatient List and Their Proposed APC Assignments for CY 2009 HCPCS code Long descriptor Proposed CY 2009 APC Proposed CY 2009 status indicator 20660 Application of cranial tongs caliper, or stereotactic frame, including removal (separate procedure) 0138 T 21172 Reconstruction superior-lateral orbital rim and lower forehead, advancement or alteration, with or without grafts (includes obtaining autografts) 0256 T 21386 Open treatment of orbital floor blowout fracture; periorbital approach 0256 T 21387 Open treatment of orbital floor blowout fracture; combined approach 0256 T 27479 Arrest, epiphyseal, any method (e.g., epiphysiodesis); combined distal femur proximal tibia and fibula 0050 T 27886 Amputation, leg, through tibia and fibula; reamputation 0049 T 43420 Closure of esophagostomy or fistula; cervical approach 0254 T 50727 Revision of urinary-cutaneous anastomosis (any type urostomy) 0165 T 54332 One stage proximal penile or penoscrotal hypospadias repair requiring extensive dissection to correct chordee and urethroplasty by use of skin graft tube and/or island flap 0181 T 54535 Orchiectomy, radical, for tumor; with abdominal exploration 0181 T 61850 Twist drill or burr hole(s) for implantation of neurostimulator electrodes, cortical 0061 S XII. OPPS Nonrecurring Technical and Policy Clarifications A. Physician Supervision of HOPD Services 1. Background The following discussion is a restatement and clarification of the requirements for physician supervision of therapeutic hospital outpatient services. We have received many questions related to physician supervision in hospitals and provider-based departments of hospitals in response to recent changes to the Medicare Benefit Policy Manual, Pub.100-2, issued via Transmittal 82, Change Request 5496, dated February 8, 2008. That change request updated the Medicare Benefit Policy Manual, Chapter 6, sections 20 through 20.6 and 70.5 to clarify existing OPPS policy. The change request incorporated a citation and reference language from 42 CFR 410.27(f) into the text of the manual for the first time since the regulatory language was finalized in the April 7, 2000 OPPS final rule with comment period (65 FR 18524 through 18526). We believe that the updated manual language drew renewed attention to the longstanding OPPS policy on physician supervision. Based on the number and scope of the questions raised to us, and varying interpretations of the existing policy that stakeholders have described, we are including this discussion in this proposed rule to provide up-to-date clarification of the existing policy that may resolve some of the questions brought to our attention. Section 1861(s)(2)(C) of the Act authorizes payment for diagnostic services, which are furnished to a hospital outpatient for the purpose of diagnostic study. We have further defined the requirements for diagnostic services furnished to hospital outpatients, including requirements for physician supervision of diagnostic services, in §§ 410.28 and 410.32. Section 410.28(e) states that Medicare Part B will make payment for diagnostic services furnished at provider-based departments of hospitals “only when the diagnostic services are furnished under the appropriate level of physician supervision specified by CMS in accordance with the definitions in §§ 410.32(b)(3)(i), (b)(3)(ii), and (b)(3)(iii).” In addition, in the April 7, 2000 OPPS final rule with comment period (65 FR 18526), we stated that our model for the requirement was the requirement for physician supervision of diagnostic tests payable under the MPFS that was set forth in the CY 1998 MPFS final rule (62 FR 59048) that was published in the **Federal Register** on October 31, 1998. We also explained with respect to the supervision requirements for individual diagnostic tests that we intended to instruct hospitals and fiscal intermediaries to use the MPFS as a guide pending issuance of updated requirements. For diagnostic services not listed in the MPFS, we stated that fiscal intermediaries, in consultation with their medical directors, would define appropriate supervision levels in order to determine whether claims for these services are reasonable and necessary. We have not subsequently issued new requirements for the physician supervision of diagnostic tests in provider-based departments of hospitals. Instead, we have continued to follow the supervision requirements for individual diagnostic tests as listed each year in the updates to the MPFS. Section 1861(s)(2)(B) of the Act authorizes payment for hospital services “incident to physicians' services rendered to outpatients.” We have further defined the requirements for outpatient hospital therapeutic services and supplies “incident to” a physician's service in § 410.27. More specifically, § 410.27(f) states, “Services furnished at a department of a provider, as defined in § 413.65(a)(2) of this subchapter, that has provider-based status in relation to a hospital under § 413.65 of this subchapter, must be under the direct supervision of a physician. ‘Direct supervision' means the physician must be present and on the premises of the location and immediately available to furnish assistance and direction throughout the performance of the procedure. It does not mean that the physician must be present in the room when the procedure is performed.” This language makes no distinction between on-campus and off-campus provider-based departments. However, in the preamble of the April 7, 2000 OPPS final rule with comment period (68 FR 18525), we further discussed the requirement for physician supervision and the finalization of the proposed regulation text. In that discussion, we stated that the language of § 410.27(f) “applies to services furnished at an entity that is located off the campus of a hospital that we designate as having provider-based status as a department of a hospital in accordance with § 413.65.” We also stated that for services furnished in a department of a hospital that is located on the campus of a hospital, “we assume the direct supervision requirement to be met as we explain in section 3112.4(a) of the Intermediary Manual.” We went on to add that “we assume the physician supervision requirement is met on hospital premises because staff physicians would always be nearby within the hospital.” Based on questions received recently, we are concerned that some stakeholders may have misunderstood our use of the term “assume” in the April 7, 2000 OPPS final rule with comment period, believing that our statement meant that we do not require any supervision in the hospital or in an on-campus provider-based department for therapeutic OPPS services, or that we only require general supervision for those services. This is not the case. It is our expectation that hospital outpatient therapeutic services are provided under the direct supervision of physicians in the hospital and in all provider-based departments of the hospital, specifically both on-campus and off-campus departments of the hospital. The expectation that a physician would always be nearby predates the OPPS and is related to the statutory authority for payment of hospital outpatient services—that Medicare makes payment for hospital outpatient services “incident to” the services of physicians in the treatment of patients as described in section 1861(s)(2)(B) of the Act. Longstanding hospital outpatient policy language states that, “the services and supplies must be furnished as an integral though incidental part of the physicians' professional services in the course of treatment of an illness or injury.” We refer readers to § 410.27(a) and to the Medicare Benefit Policy Manual, Pub. 100-2, Chapter 6, section 20.5.1, for further description of hospital outpatient services incident to a physician's service. The Medicare Benefit Policy Manual also states in Chapter 6, section 20.5.1, that services and supplies must be furnished on a physician's order and delivered under physician supervision. However, the manual indicates further that each occasion of a service by a nonphysician does not need also be the occasion of the actual rendition of a personal professional service by the physician responsible for the care of the patient. Nevertheless, as stipulated in that same section of the manual “during any course of treatment rendered by auxiliary personnel, the physician must personally see the patient periodically and sufficiently often enough to assess the course of treatment and the patient's progress and, where necessary, to change the treatment regimen.” The expectation that a physician would always be nearby also dates back to a time when inpatient hospital services provided in a single hospital building represented the majority of hospital payments by Medicare. Since that time, advances in medical technology, changes in the patterns of healthcare delivery, and changes in the organizational structure of hospitals have led to the development of extensive hospital campuses, sometimes spanning several city blocks, as well as off-campus and satellite provider-based campuses at different locations. In the April 7, 2000 OPPS final rule with comment period (65 FR 18525), we described the focus of the direct physician supervision requirement on off-campus provider-based departments. We will continue to emphasize the physician supervision requirement for off-campus provider-based departments. However, we note that if there were problems with outpatient care in a hospital or in an on-campus provider-based department where direct supervision was not in place (that is, the expectation of direct physician supervision was not met), we would consider that to be a concern. We want to ensure that OPPS payment is made for high quality hospital outpatient services provided to beneficiaries in a safe and effective manner and consistent with Medicare requirements. The definition of direct supervision in § 410.27(f) requires that the physician must be present and on the premises of the location and immediately available to furnish assistance and direction throughout the performance of the procedure. In the April 7, 2000 OPPS final rule with comment period (65 FR 18525), we define “on the premises of the location” by stating “ * * * a physician must be present on the premises of the entity accorded status as a department of the hospital and therefore, immediately available to furnish assistance and direction for as long as patients are being treated at the site.” We also stated that this does not mean that the physician must be physically in the room where a procedure or service is furnished. Although we have not further defined the term “immediately available” for this specific context, the lack of timely physician response to a problem in the HOPD would represent a quality concern from our perspective that hospitals should consider in structuring their provision of services in ways that meet the direct physician supervision requirement for HOPD services. 2. Summary In summary, direct physician supervision is the standard set forth in the April 7, 2000 OPPS final rule with comment period for supervision of hospital outpatient therapeutic services covered and paid by Medicare in hospitals and provider-based departments of hospitals. While we have emphasized and will continue to emphasize the direct supervision requirement for off-campus provider-based departments, we are reiterating our expectation of direct physician supervision of all hospital outpatient therapeutic services, regardless of their on-campus or off-campus location. Appropriate supervision is a key aspect of the delivery of safe and high quality hospital outpatient services that are paid based on the statutory authority of the OPPS. B. Reporting of Pathology Services for Prostate Saturation Biopsy Prostate saturation biopsy is a technique currently described by Category III CPT code 0137T (Biopsy, prostate, needle, saturation sampling for prostate mapping). Typically this service entails obtaining 40 to 80 core samples from the prostate under general anesthesia. Currently the samples are reviewed by a pathologist, and the pathology service is reported with CPT code 88305 (Level IV—Surgical pathology, gross and microscopic examination). Since the beginning of the OPPS, Medicare has paid for the gross and microscopic pathology examination of prostate biopsy specimens using CPT code 88305. This CPT code has been paid separately under the OPPS and assigned to APC 0343 (Level III Pathology) with status indicator “X” since August 2000. For CY 2008, CPT code 88305 is assigned to APC 0343 with a payment rate of approximately $33. In view of the large number of samples that are taken from a single body organ during prostate saturation biopsy and that must undergo gross and microscopic examination by a pathologist, for CY 2009, we are proposing to recognize four new more specific Level II HCPCS G-codes under the OPPS for these pathology services, consistent with the CY 2009 proposal for the MPFS. The proposed HCPCS codes are: GXXX1 (Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, 1-20 specimens); GXXX2 (Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling 21-40 specimens); GXXX3 (Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, 41-60 specimens); and GXXX4 (Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, greater than 60 specimens). We believe the descriptors of these proposed HCPCS G-codes more specifically reflect the characteristics of prostate saturation biopsy pathology services so that reporting would result in more accurate cost data for OPPS ratesetting and, ultimately, more appropriate payment. CPT code 88305 would continue to be recognized under the OPPS for those surgical pathology services unrelated to prostate needle saturation biopsy sampling. Consistent with the proposed CY 2009 APC assignment for CPT code 88305, we are proposing to assign these four new HCPCS G-codes to APC 0343, with a proposed APC median cost of approximately $35. We are specifically interested in public comment on the appropriateness of recognizing these proposed new HCPCS G-codes under the OPPS and their proposed APC assignments, specifically with regard to the expected hospital resources required for the preparation of the biopsy specimens that would be reported with the proposed new HCPCS G-codes and the extent to which those resources necessary to provide a single unit of each proposed new HCPCS G-code would differ from the resources required to provide a single unit of CPT code 88305 for a conventional prostate needle biopsy specimen. XIII. Proposed OPPS Payment Status and Comment Indicators A. Proposed OPPS Payment Status Indicator Definitions The OPPS payment status indicators
(SIs)that we assign to HCPCS codes and APCs play an important role in determining payment for services under the OPPS. They indicate whether a service represented by a HCPCS code is payable under the OPPS or another payment system and also whether particular OPPS policies apply to the code. Our proposed CY 2009 status indicator assignments for APCs and HCPCS codes are shown in Addendum A and Addendum B, respectively, to this proposed rule. We are proposing to use the status indicators and definitions that are listed in Addendum D1 to this proposed rule, which we discuss below in greater detail. 1. Proposed Payment Status Indicators To Designate Services That Are Paid Under the OPPS Indicator Item/code/service OPPS payment status G Pass-Through Drugs and Biologicals
(1)Paid under OPPS; separate APC payment. H Pass-Through Device Categories Separate cost-based pass-through payment; not subject to copayment. K
(1)Non-Pass-Through Drugs and Biologicals
(1)Paid under OPPS; separate APC payment.
(2)Therapeutic Radiopharmaceuticals
(2)Paid under OPPS; separate APC payment. N Items and Services Packaged into APC Rates Paid under OPPS; payment is packaged into payment for other services. Therefore, there is no separate APC payment. P Partial Hospitalization Paid under OPPS; per diem APC payment. Q1 STVX-Packaged Codes Paid under OPPS; Addendum B displays APC assignments when services are separately payable.
(1)Packaged APC payment if billed on the same date of service as a HCPCS code assigned status indicator “S,” “T,” “V,” or “X.”
(2)In all other circumstances, payment is made through a separate APC payment. Q2 T-Packaged Codes Paid under OPPS; Addendum B displays APC assignments when services are separately payable.
(1)Packaged APC payment if billed on the same date of service as a HCPCS code assigned status indicator “T.”
(2)In all other circumstances, payment is made through a separate APC payment. Q3 Codes that may be paid through a composite APC Paid under OPPS; Addendum B displays APC assignments when services are separately payable. Addendum M displays composite APC assignments when codes are paid through a composite APC.
(1)Composite APC payment based on OPPS composite-specific payment criteria. Payment is packaged into a single payment for specific combinations of service.
(2)In all other circumstances, payment is made through a separate APC payment or packaged into payment for other services. R Blood and Blood Products Paid under OPPS; separate APC payment. S Significant Procedure, Not Discounted when Multiple Paid under OPPS; separate APC payment. T Significant Procedure, Multiple Reduction Applies Paid under OPPS; separate APC payment. U Brachytherapy Sources Paid under OPPS; separate APC payment. V Clinic or Emergency Department Visit Paid under OPPS; separate APC payment. X Ancillary Services Paid under OPPS; separate APC payment. For CY 2009, we are proposing to replace current status indicator “Q” with three new separate status indicators: “Q1,” “Q2,” and “Q3.” We are proposing that status indicator “Q1” would be assigned to all “STVX-packaged codes;” status indicator “Q2” would be assigned to all “T-packaged codes;” and status indicator “Q3” would be assigned to all codes that may be paid through a composite APC based on composite-specific criteria or separately through single code APCs when the criteria are not met. We note that a commenter to the CY 2008 OPPS/ ASC proposed rule requested that we assign a distinct status indicator to services that may be subject to a composite APC methodology because the commenter believed that the composite payment policy differed significantly from the policies for payment of “T-packaged” and “STVX-packaged codes” (72 FR 66824). Therefore, we believe that this proposed change to establish new status indicators “Q1,” “Q2,” and “Q3” would make our policies more transparent to hospitals and would facilitate the use of status indicator-driven logic in our ratesetting calculations, and in hospital billing and accounting systems. For CY 2009, we are proposing to use new payment status indicator “R” for all blood and blood product APCs and to use new payment status indicator “U” for all brachytherapy source APCs. Nonpass-through drugs and biologicals which do not require a conversion factor to calculate their payment rates would continue to be assigned status indicator “K.” We are proposing to create these new status indicators for blood and blood products and for brachytherapy sources to facilitate implementation of the reduced market basket conversion factor that would apply to payments to hospitals that are required to report quality data but that fail to meet the established quality reporting standards. This is necessary because we are proposing to continue our final CY 2008 policies of setting prospective payment rates for brachytherapy sources and blood and blood products calculated as the product of scaled relative weights and the conversion factor and, therefore, blood and blood products and brachytherapy sources, but no other services that are currently assigned status indicator “K” would be subject to the reduced conversion factor. We refer readers to section XVI. of this proposed rule for discussion of the requirements of the hospital outpatient quality data reporting program and the reduced market basket conversion factor that would apply to payment for specific services when hospitals for which reporting is required fail to meet the reporting standards. 2. Proposed Payment Status Indicators To Designate Services That Are Paid Under a Payment System Other Than the OPPS We are proposing no changes to the status indicators as listed below for the CY 2009 OPPS. Indicator Item/code/service OPPS payment status A Services furnished to a hospital outpatient that are paid under a fee schedule or payment system other than OPPS, for example: • Ambulance Services Not paid under OPPS. Paid by fiscal intermediaries/MACs under a fee schedule or payment system other than OPPS. • Clinical Diagnostic Laboratory Services Not subject to deductible or coinsurance. • Non-Implantable Prosthetic and Orthotic Devices • EPO for ESRD Patients • Physical, Occupational, and Speech Therapy • Routine Dialysis Services for ESRD Patients Provided in a Certified Dialysis Unit of a Hospital • Diagnostic Mammography • Screening Mammography. Not subject to deductible. C Inpatient Procedures Not paid under OPPS. Admit patient. Bill as inpatient. F Corneal Tissue Acquisition; Certain CRNA Services; and Hepatitis B Vaccines Not paid under OPPS. Paid at reasonable cost. L Influenza Vaccine; Pneumococcal Pneumonia Vaccine Not paid under OPPS. Paid at reasonable cost; not subject to deductible or coinsurance. M Items and Services Not Billable to the Fiscal Intermediary/MAC Not paid under OPPS. Y Non-Implantable Durable Medical Equipment Not paid under OPPS. All institutional providers other than home health agencies bill to DMERC. 3. Proposed Payment Status Indicators To Designate Services That Are Not Recognized Under the OPPS But That May Be Recognized by Other Institutional Providers We are proposing no changes to the status indicators as listed below for the CY 2009 OPPS. Indicator Item/code/service OPPS payment status B Codes that are not recognized by OPPS when submitted on an outpatient hospital Part B bill type (12x and13x) Not paid under OPPS. • May be paid by fiscal intermediaries/MACs when submitted on a different bill type, for example, 75x (CORF), but not paid under OPPS. • An alternate code that is recognized by OPPS when submitted on an outpatient hospital Part B bill type (12x and 13x) may be available. 4. Proposed Payment Status Indicators To Designate Services That Are Not Payable by Medicare We are proposing no changes to the status indicators as listed below for the CY 2009 OPPS. Indicator Item/code/service OPPS payment status D Discontinued Codes Not paid under OPPS or any other Medicare payment system. E Items, Codes, and Services: • That are not covered by Medicare based on statutory exclusion Not paid under OPPS or any other Medicare payment system. • That are not covered by Medicare for reasons other than statutory exclusion • That are not recognized by Medicare but for which an alternate code for the same item or service may be available • For which separate payment is not provided by Medicare. To address providers' broader interests and to make the published Addendum B more convenient for public use, we are displaying in Addendum B to this proposed rule all active HCPCS codes for CY 2009 that describe items and services that are:
(1)Payable under the OPPS;
(2)paid under a payment system other than the OPPS;
(3)not recognized under the OPPS but that may be recognized by other institutional providers; and
(4)not payable by Medicare. The universe of CY 2009 status indicators that we are proposing for these items and services are listed in the tables above. Addendum B, with a complete listing of HCPCS codes that includes their proposed payment status indicators and proposed APC assignments for CY 2009, is available electronically on the CMS Web site under supporting documentation for this proposed rule at: *http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage.* B. Proposed Comment Indicator Definitions For the CY 2009 OPPS, we are proposing to continue use of the two comment indicators that are in effect for the CY 2008 OPPS. These two comment indicators are listed below. • “CH”—Active HCPCS codes in current and next calendar year; status indicator and/or APC assignment have changed or active HCPCS code that will be discontinued at the end of the current calendar year. • “NI”—New code, interim APC assignment; Comments will be accepted on the interim APC assignment for the new code. We are proposing to use the “CH” indicator in the CY 2009 OPPS/ASC final rule with comment period to indicate HCPCS codes for which the status indicator or APC assignments, or both, would change in CY 2009 compared to their assignment as of December 31, 2008. We are using the “CH” indicator in this proposed rule to call attention to proposed changes in the payment status indicator and/or APC assignment for HCPCS codes for CY 2009. In this proposed rule, the “CH” indicator is appended to HCPCS codes for which we are proposing changes in the payment status indicator and/or APC assignment for CY 2009 compared to their assignment as of June 30, 2008. We believe that using the “CH” indicator in this proposed rule would facilitate the public's review of the changes that we are proposing to make final in CY 2009. The use of the comment indicator “CH” in association with a composite APC indicates that the configuration of the composite APC is proposed for change in this proposed rule. “STVX-packaged codes,” “T-packaged codes,” and other HCPCS codes that could be paid through a composite APC with proposed CY 2009 changes in status indicator assignments from “Q” to “Q1,” from “Q” to “Q2,” and from “Q” to Q3,” as well as HCPCS codes for blood and blood products and for brachytherapy sources with proposed CY 2009 changes in status indicator assignments from “K” to “R” and from “K” to “U,” respectively, are not flagged with comment indicator “CH” in Addendum B to this proposed rule. These proposed changes in status indicators are to facilitate policy transparency and operational logic rather than to reflect changes in OPPS payment policy for these services, so we believe that identifying these HCPCS codes with “CH” could be confusing to the public. We are proposing to continue our policy of using comment indicator “NI” in the OPPS/ASC final rule with comment period. We are proposing that only HCPCS codes with comment indicator “NI” in the CY 2009 OPPS/ASC final rule with comment period would be subject to comment at that time. We are proposing that HCPCS codes that do not appear with comment indicator “NI” in the CY 2009 OPPS/ASC final rule with comment period would not be open to public comment, unless we specifically request additional comments at that time. The disposition of HCPCS codes that appear in the CY 2009 OPPS/ASC final rule with comment period to which comment indicator “NI” is not appended will have been open to public comment as a result of this proposed rule. The two comment indicators that we are proposing to continue using in CY 2009 and their definitions are listed in Addendum D2 to this proposed rule. XIV. OPPS Policy and Payment Recommendations A. Medicare Payment Advisory Commission (MedPAC) Recommendations MedPAC was established under section 1805 of the Act to advise the U.S. Congress on issues affecting the Medicare program. As required under the statute, MedPAC submits reports to Congress not later than March and June of each year that present its Medicare payment policy recommendations. The following section describes recent recommendations relevant to the OPPS that have been made by MedPAC. 1. March 2008 Report The March 2008 MedPAC “Report to Congress: Medicare Payment Policy” included the following recommendation relating specifically to the Medicare hospital OPPS: *Recommendation 2A-1:* The Congress should increase payment rates for the acute inpatient and outpatient prospective payment systems in 2009 by the projected rate of increase in the hospital market basket index, concurrent with implementation of a quality incentive payment program. *CMS Response:* We are proposing to increase payment rates for the CY 2009 OPPS by the projected rate of increase in the hospital market basket through adjustment of the full CY 2009 conversion factor. Simultaneously, we are proposing to implement, effective for CY 2009, the reduction in the annual update factor by 2.0 percentage points for hospitals that are defined under section 1886(d)(1)(B) of the Act and that do not meet the hospital outpatient quality data reporting required by section 1833(t)(17) of the Act, as added by section 109(a) of the MIEA-TRHCA. Specifically, we are proposing to calculate two conversion factors, a full conversion factor based on the full hospital market basket increase and a reduced conversion factor that reflects the 2.0 percentage point reduction to the market basket. Our proposed update of the conversion factor and our proposed adoption and implementation of the reduced conversion factor that would apply to hospitals that fail their quality reporting requirements for the CY 2009 OPPS are discussed in detail in section XVI.D.2. of this proposed rule. This full MedPAC report can be downloaded from MedPAC's Web site at: *http://www.medpac.gov/documents/Mar08_EntireReport.pdf.* 2. June 2007 Report In its June 2007 “Report to the Congress: Promoting Greater Efficiency in Medicare,” MedPAC included analysis and recommendations on alternatives to the current method for computing the IPPS wage index for FY 2009. (We refer readers to Chapter 6 of the June 2007 MedPAC report to Congress.) In accordance with our established policy, under the OPPS we adopt the IPPS wage indices to adjust the OPPS standard payment amounts for labor market differences. Therefore, MedPAC's analysis and recommendations have implications for the CY 2009 OPPS. We have considered MedPAC's recommendations and analysis in making a proposal to revise the IPPS wage indices in the FY 2009 IPPS proposed rule (73 FR 23617 through 23623), as required by section 106(b)(2) of the MIEA-TRHCA. We discuss our proposed application of changes to the IPPS wage index for the CY 2009 OPPS in section II.C. of this proposed rule. This full MedPAC report can be downloaded from MedPAC's Web site at *http://www.medpac.gov/document/Jun07_EntireReport.pdf.* B. APC Panel Recommendations Recommendations made by the APC Panel at its March 2008 meeting are discussed in sections of this proposed rule that correspond to topics addressed by the APC Panel. The report and recommendations from the APC Panel's March 5-6, 2008 meeting are available on the CMS Web site at: *http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.* C. OIG Recommendations The mission of the OIG, as mandated by Public Law 95-452, as amended, is to protect the integrity of the U.S. Department of Health and Human Services
(HHS)programs, as well as the health and welfare of beneficiaries served by those programs. This statutory mission is carried out through a nationwide network of audits, investigations, and inspections. In June 2007 the OIG released a report, entitled “Impact of Not Retroactively Adjusting Outpatient Outlier Payments,” that described the OIG's research into sources of error in CMHC outlier payments. The OIG report included the following two recommendations relating specifically to the hospital OPPS under which payment is made for outpatient services provided by CMHCs. *Recommendation 1:* The OIG recommended that CMS require adjustments of outpatient outlier payments at final cost report settlement, retroactive to the beginning of the cost report period. *CMS Response:* We have been proactive in addressing this issue for partial hospitalization prospective payment by designating a unique outlier threshold for CMHCs beginning in CY 2004. As discussed in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68002 through 68003), differences in total CMHC outlier payments between CY 2004 and CY 2005 demonstrate that designating a separate threshold has successfully restrained CMHC outlier payments. Moreover, until the CY 2005 implementation of a fixed dollar outlier threshold for most other hospital outpatient services that concentrates outlier payments on costly and complex services, we did not believe it would be cost-effective to pursue adjustments of outlier payments for all of the OPPS. However, in addition to the unique outlier threshold for CMHCs that we have recently adopted to address excessive CMHC outlier payments, we are proposing to provide for reconciliation of outlier payments under the OPPS at final cost report settlement as recommended by the OIG, beginning in CY 2009. We discuss our rationale for proposing to reconcile outlier payments in more detail in section II.F. of this proposed rule. *Recommendation 2:* The OIG recommended that CMS require retroactive adjustments of outpatient outlier payments when an error caused by the fiscal intermediary or provider is identified after the cost report is settled. *CMS Response:* We note that the OIG's findings were based largely on information from the OPPS' early implementation period, between CY 2000 and CY 2003. We believe we have taken several steps since that time in order to improve the accuracy and frequency of the Medicare contractors' CCR calculations, including updating our instructions, increasing the frequency of calculation, and conducting an annual review of CMHC CCRs. However, in light of this OIG recommendation, for the CY 2009 OPPS we are also proposing to provide for reconciliation of outlier payments under the OPPS. We discuss our rationale for proposing to reconcile outlier payments in more detail in section II.F. of this proposed rule. XV. Proposed Update of the Revised Ambulatory Surgical Center Payment System A. Background 1. Legislative Authority for the ASC Payment System Section 1832(a)(2)(F)(i) of the Act provides that benefits under Medicare Part B include payment for facility services furnished in connection with surgical procedures specified by the Secretary that are performed in an 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 set forth in 42 CFR part 416, subpart B and subpart C of our regulations. The regulations at 42 CFR part 416, subpart B describe the general conditions and requirements for ASCs, and the regulations at subpart C explain the specific conditions for coverage for ASCs. 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 new technology intraocular lenses (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). Section 626(b) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Public Law 108-173, added section 1833(i)(2)(D) to the Act, which required the Secretary to implement a revised ASC payment system to be effective not later than January 1, 2008. Section 626(c) of the MMA amended section 1833(a)(1) of the Act to require that, beginning with implementation of the revised ASC payment system, payment for surgical procedures furnished in ASCs shall be 80 percent of the lesser of the actual charge for the services or the amount determined by the Secretary under the revised payment system. 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 payment amounts for surgical procedures in ASCs. Section 1833(i)(2)(E) of the Act provides that if the standard overhead amount under section 1833(i)(2)(A) of the Act for an ASC facility service for such surgical procedures, without application of any geographic adjustment, exceeds the Medicare payment amount under the hospital 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 applied to surgical procedures furnished in ASCs on or after January 1, 2007, but before the effective date of the revised ASC payment system (that is, January 1, 2008). Section 109(b) of the Medicare Improvements and Extension Act of 2006 of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA), Public Law 109-432, amended section 1833(i) of the Act, in part, by adding a new clause
(iv)to paragraph (2)(D) and by also adding paragraph (7)(A), which authorize the Secretary to require ASCs to submit data on quality measures and to reduce the annual update by 2 percentage points for an ASC that fails to submit data as required by the Secretary on selected quality measures. Section 109(b) of the MIEA-TRHCA also amended section 1833(i) of the Act by adding new paragraph (7)(B), which requires that certain quality of care reporting requirements mandated for hospitals paid under the OPPS, according to section 109(a) of the MIEA-TRHCA, be applied in a similar manner to ASCs unless otherwise specified by the Secretary. For a detailed discussion of the legislative history related to ASCs, we refer readers to the June 12, 1998 proposed rule (63 FR 32291 through 32292). 2. Prior Rulemaking On August 2, 2007, we published in the **Federal Register** (72 FR 42470) the final rule for the revised ASC payment system, effective January 1, 2008. We revised our criteria for identifying surgical procedures that are eligible for Medicare payment when furnished in ASCs and adopted the method we would use to set payment rates for ASC covered surgical procedures and covered ancillary services furnished in association with those covered surgical procedures beginning in CY 2008. In that final rule, we also established a policy for updating on an annual calendar year basis the ASC conversion factor, the relative payment weights and APC assignments, the ASC payment rates, and the list of procedures for which Medicare would not make an ASC payment. We also established a policy for treating new and revised HCPCS and CPT codes under the ASC payment system. This policy is consistent with the OPPS to the extent possible (72 FR 42533). In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66827), we updated and finalized the CY 2008 ASC rates and lists of covered surgical procedures and covered ancillary services. We also made regulatory changes to 42 CFR parts 411, 414, and 416 related to our final policies to provide payments to physicians who perform noncovered ASC procedures in ASCs based on the facility practice expense
(PE)relative value units (RVUs), to exclude covered ancillary radiology services and covered ancillary drugs and biologicals from the categories of designated health services
(DHS)that are subject to the physician self-referral prohibition, and to reduce ASC payments for surgical procedures when the ASC receives full or partial credit toward the cost of the implantable device. 3. Policies Governing Changes to the Lists of Codes and Payment Rates for ASC Covered Surgical Procedures and Covered Ancillary Services The August 2, 2007, final rule established our policies for determining which procedures are ASC covered surgical procedures and covered ancillary services. Under §§ 416.2 and 416.166, subject to certain exclusions, covered surgical procedures are surgical procedures that are separately paid under the OPPS, that would not be expected to pose a significant risk to beneficiary safety when performed in an ASC, and that would not be expected to require an overnight stay. We defined surgical procedures as those described by Category I CPT codes in the surgical range from 10000 through 69999, as well as those Category III CPT codes and Level II HCPCS codes that crosswalk or are clinically similar to ASC covered surgical procedures (72 FR 42478). In the August 2, 2007, final rule, we also established our policy to make separate ASC payments for the following ancillary services, for which separate payment is made under the OPPS, when they are provided integral to ASC covered surgical procedures: Brachytherapy sources; certain implantable items that have pass-through status under the OPPS; certain items and services that we designate as contractor-priced, including, but not limited to, procurement of corneal tissue; certain drugs and biologicals; and certain radiology services. These covered ancillary services are specified in § 416.164(b) and are eligible for separate ASC payment (72 FR 42495). Payment for ancillary services that are not paid separately under the ASC payment system is packaged into the ASC payment for the covered surgical procedure. The full CY 2008 lists of ASC covered surgical procedures and covered ancillary services are included in Addendum AA and BB, respectively, to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66945 through 66993 and 67165 through 67188). We update the lists of, and payment rates for, covered surgical procedures and covered ancillary services, in conjunction with the annual proposed and final rulemaking process to update the OPPS and ASC payment system (§ 416.173; 72 FR 42535). In addition, because we base ASC payment policies for covered surgical procedures, drugs, biologicals, and certain other covered ancillary services on the OPPS payment policies, we also provide quarterly updates for ASC services throughout the year (January, April, July, and October), just as we do for the OPPS. The updates are to implement newly created Level II HCPCS codes and Category III CPT codes for ASC payment and to update the payment rates for separately paid drugs and biologicals based on the most recently submitted ASP data. In our annual updates to the ASC list of, and payment rates for, covered surgical procedures and covered ancillary services we undertake a review of excluded surgical procedures, new procedures, and procedures for which there is revised coding, to identify any that we believe meet the criteria for designation as ASC covered surgical procedures or covered ancillary services. Updating the lists of covered surgical procedures and covered ancillary services, as well as their payment rates, in association with the annual OPPS rulemaking cycle is particularly important because the OPPS relative payment weights and, in some cases, payment rates, are used as the basis for the payment of covered surgical procedures and covered ancillary services under the revised ASC payment system. This joint update process ensures that the ASC updates occur in a regular, predictable, and timely manner. B. Proposed Treatment of New Codes 1. Proposed Treatment of New Category I and III CPT Codes and Level II HCPCS Codes We finalized a policy in the August 2, 2007, final rule to evaluate each year all new Category I and Category III CPT codes and Level II HCPCS codes that describe surgical procedures to make preliminary determinations in the annual OPPS/ASC final rule with comment period regarding whether or not they meet the criteria for payment in the ASC setting and, if so, whether they are office-based procedures (72 FR 42533). In addition, we identify new codes as ASC covered ancillary services based upon the final payment policies of the revised ASC payment system. New HCPCS codes that are released in the summer through the fall of each year, to be effective January 1, are included in the final rule updating the ASC payment system for the following calendar year. These new codes are flagged with comment indicator “NI” in Addenda AA and BB to the OPPS/ASC final rule with comment period to indicate that we are assigning them an interim status which is subject to public comment on that final rule. These interim determinations must be made in the OPPS/ASC final rule with comment period because, in general, the new HCPCS codes and their descriptors for the upcoming calendar year are not available at the time of development of the OPPS/ASC proposed rule. The interim payment indicators assigned to the new codes under the revised ASC payment system are subject to comment in that final rule. We will respond to those comments in the OPPS/ASC update final rule with comment period for the following calendar year. We are proposing to continue this recognition process for CY 2009. In addition, we are proposing to continue our policy of implementing through the ASC quarterly update process new mid-year CPT codes, generally Category III CPT codes, that the AMA releases in January to become effective the following July. Therefore, we are proposing to include in Addenda AA or BB, as appropriate, to the CY 2009 OPPS/ASC final rule with comment period the new Category III CPT codes released in January 2008 for implementation on July 1, 2008 (through the ASC quarterly update process), that we identify as ASC covered services. Similarly, we are proposing to include in Addenda AA and BB to that final rule any new Category III CPT codes that the AMA releases in July 2008 to be effective on January 1, 2009, that we identify as ASC covered services. However, only those new Category III CPT codes implemented effective January 1, 2009, will be designated by comment indicator “NI” in the Addenda to the CY 2009 OPPS/ASC final rule with comment period, to indicate that we have assigned them an interim payment status which is subject to public comment. The Category III CPT codes implemented in July 2008 for ASC payment, which appear in Table 36 below, are subject to comment through this proposed rule, and we are proposing to finalize their payment indicators in the CY 2009 OPPS/ASC final rule with comment period. We are proposing to assign payment indicator “G2” (Non office-based surgical procedure added in CY 2008 or later; payment based on OPPS relative payment weight) to each of these three new codes. Because of the timing of this proposed rule, these codes are not listed in Addendum AA to this proposed rule although they will be included in Addendum AA to the CY 2009 OPPS/ASC final rule with comment period. Table 36.—New Category III CPT Codes Implemented in July 2008 for ASC Payment HCPCS code Long descriptor Proposed CY 2009 ASC payment indicator Proposed CY 2009 ASC payment 0190T Placement of intraocular radiation source applicator G2 $890.60 0191T Insertion of anterior segment aqueous drainage device, without extraocular reservoir; internal approach G2 968.22 0192T Insertion of anterior segment aqueous drainage device, without extraocular reservoir; external approach G2 968.22 2. Proposed Treatment of New Level II HCPCS Codes Implemented in April and July 2008 New Level II HCPCS codes may describe covered surgical procedures or covered ancillary services. All new Level II HCPCS codes implemented in April and July 2008 for ASCs describe covered ancillary services. During the second quarter of CY 2008, we added to the list of covered ancillary services a total of four new Level II HCPCS codes for drugs and biologicals because they are eligible for separate payment under the OPPS. Those HCPCS codes are: C9241 (Injection, doripenem, 10 mg); Q4096 (Injection, von willebrand factor complex, human, ristocetin cofactor (not otherwise specified), per i.u. VWF.RCO); Q4097 (Injection, immune globulin (Privigen), intravenous, non-lyophilized ((e.g., liquid), 500 mg); and Q4098 (Injection, iron dextran, 50 mg). Similarly, for the third quarter of CY 2008, we added a total of four new Level II HCPCS codes to the list of ASC covered ancillary services for drugs and biologicals because they are eligible for separate payment under the OPPS. Those HCPCS codes are: C9242 (Injection, fosaprepitant, 1 mg); C9356 (Tendon, porous matrix of cross-linked collagen and glycosaminoglycan matrix ((TenoGlide Tendon Protector Sheet), per square centimeter); C9357 (Dermal substitute, granulated cross-linked collagen and glycosaminoglycan matrix ((Flowable Wound Matrix), 1 cc); and C9358 (Dermal substitute, native, non-denatured collagen ((SurgiMend Collagen Matrix), per 0.5 square centimeters). We assigned the payment indicator “K2” (Drugs and biologicals paid separately when provided integral to a surgical procedure on ASC list; payment based on OPPS rate) for all of these new Level II HCPCS codes and added them to the list of covered ancillary services either through the April update (Transmittal 1488, Change Request 5994, dated April 9, 2008) or the July update of the CY 2008 ASC payment system. In this CY 2009 OPPS/ASC proposed rule, we are soliciting public comment on the proposed ASC payment indicators and payment rates for these codes, as listed in Tables 37 and 38. The codes listed in Table 37 also are included in Addendum BB of this proposed rule. These HCPCS codes are paid in ASCs beginning in April and July 2008, respectively, based on the ASC rates posted for the appropriate calendar quarter on the CMS Web site at: *http://www.cms.hhs.gov/ASCPayment/.* However, because of the timing of this proposed rule, the codes implemented by the July 2008 ASC update and their proposed CY 2009 payment rates (based on July 2008 ASP data) that are displayed in Table 38 are not included in Addendum BB to this proposed rule. We are proposing to include the new HCPCS codes displayed in Tables 37 and 38 and, for the codes in Table 37, in Addendum BB to the list of covered ancillary services and to incorporate all of them into Addendum BB to our final rule with comment period for CY 2009, consistent with our annual update policy. Table 37.—New Level II HCPCS Codes Implemented in April 2008 HCPCS code Long descriptor Proposed CY 2009 ASC payment indicator C9241 Injection, doripenem, 10 mg K2 Q4096 Injection, von willebrand factor complex, human, ristocetin cofactor (not otherwise specified), per i.u. VWF:RCO K2 Q4097 Injection, immune globulin (Privigen), intravenous, non-lyophilized (e.g., liquid), 500 mg K2 Q4098 Injection, iron dextran, 50 mg K2 Table 38.—New Level II HCPCS Codes Implemented in July 2008 HCPCS code Long descriptor Proposed CY 2009 ASC payment indicator Proposed CY 2009 ASC payment C9242* Injection, fosaprepitant, 1 mg K2 $1.61 C9356* Tendon, porous matrix of cross-linked collagen and glycosaminoglycan matrix (TenoGlide Tendon Protector Sheet), per square centimeter K2 16.92 C9357* Dermal substitute, granulated cross-linked collagen and glycosaminoglycan matrix (Flowable Wound Matrix), 1 cc K2 883.33 C9358* Dermal substitute, native, non-denatured collagen (SurgiMend Collagen Matrix), per 0.5 square centimeters K2 10.38 * The payment rates displayed in Table 38 reflect the July 2008 ASP data. C. Proposed Update to the Lists of ASC Covered Surgical Procedures and Covered Ancillary Services 1. Covered Surgical Procedures a. Proposed Additions to the List of ASC Covered Surgical Procedures We are proposing to update the ASC list of covered surgical procedures by adding nine procedures to the list. Three of the nine procedures, specifically CPT code 0190T (Placement of intraocular radiation source applicator), CPT code 0191T (Insertion of anterior segment aqueous drainage device, without extraocular reservoir; internal approach), and CPT code 0192T (Insertion of anterior segment aqueous drainage device, without extraocular reservoir; external approach) are new Category III CPT codes that became effective July 1, 2008, and were implemented in the July 2008 ASC update. The other six procedures were excluded from the ASC list for CY 2008 because we believed they did not meet the definition of a covered surgical procedure based on our expectation that they would pose a significant safety risk to Medicare beneficiaries or would require an overnight stay if performed in ASCs. During our annual review of excluded codes in which we used most recent utilization data, we identified the following six procedures that we believe should no longer be excluded from the ASC list: CPT code 31293 (Nasal/sinus endoscopy, surgical; with medial orbital wall and inferior orbital wall decompression); CPT code 34490 (Thrombectomy, direct or with catheter; axillary and subclavian vein, by arm incision); CPT code 36455 (Exchange transfusion, blood; other than newborn); CPT code 49324 (Laparoscopy, surgical; with drainage of lymphocele to peritoneal cavity); CPT code 49325 (Laparoscopy, surgical; with revision of previously placed intraperitoneal cannula or catheter, with removal of intraluminal obstructive material if performed); and CPT code 49326 (Laparoscopy, surgical; with omentopexy (omental tacking procedure)). The nine codes that we are proposing to add to the ASC list of covered surgical procedures and their proposed CY 2009 payment indicator “G2” (Non office-based surgical procedure added in CY 2008 or later; payment based on OPPS relative payment weight) are displayed in Table 39, below. Table 39.—Proposed New ASC Covered Surgical Procedures for CY 2009 HCPCS code Short descriptor Proposed CY 2009 ASC payment indicator 31293 Nasal/sinus endoscopy, surg G2 34490 Removal of vein clot G2 36455 Bl exchange/transfuse non-nb G2 49324 Lap insertion perm ip cath G2 49325 Lap insertion perm ip cath G2 49326 Lap w/omentopexy add-on G2 0190T Place intraoc radiation src G2 0191T Insert ant segment drain int G2 0192T Insert ant segment drain ext G2 b. Covered Surgical Procedures Designated as Office-Based
(1)Background In the August 2, 2007 final rule, we finalized our policy to designate as “office-based” those procedures that are added to the ASC list of covered surgical procedures in CY 2008 or later years that we determine are usually performed in physicians' offices based on consideration of the most recent available volume and utilization data for each individual procedure code (that is, performed more than 50 percent of the time in physicians' offices) and/or, if appropriate, the clinical characteristics, utilization, and volume of related codes. In that rule, we also finalized our policy to exempt all procedures on the CY 2007 ASC list from application of the office-based classification (72 FR 42512). In the August 2, 2007 final rule, we identified a list of procedures as office-based after taking into account the most recently available CY 2005 volume and utilization data for each individual procedure or group of related procedures. We believed that the resulting list accurately reflected Medicare practice patterns and that the procedures were of similar complexity. In Addendum AA to that final rule, each of the office-based procedures was identified by payment indicator “P2” (Office-based surgical procedure added to ASC list in CY 2008 or later with MPFS nonfacility PE RVUs; payment based on OPPS relative payment weight); “P3” (Office-based surgical procedure added to ASC list in CY 2008 or later with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE RVUs); or “R2” (Office-based surgical procedure added to ASC list in CY 2008 or later without MPFS nonfacility PE RVUs; payment based on OPPS relative payment weight), depending on whether we estimated it would be paid according to the standard ASC payment methodology based on its OPPS relative payment weight or at the MPFS nonfacility PE RVU amount. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66840 through 66841), we finalized the temporary office-based designations of 4 procedures, while newly designating 19 procedures as permanently office-based. In addition, we designated 3 procedures coded by CPT codes that were new for CY 2008 as temporarily office-based on an interim final basis. Those 3 temporary designations for the new CY 2008 CPT codes were open to comment during the 60-day comment period for the CY 2008 OPPS/ASC final rule with comment period. We indicated that we would respond to public comments on those designations in the OPPS/ASC final rule with comment period for CY 2009.
(2)Proposed Changes to Covered Surgical Procedures Designated as Office-Based for CY 2009 In developing this proposed rule, we followed our final policy to annually review and update the surgical procedures for which ASC payment is made and to identify new procedures that may be appropriate for ASC payment, including their potential designation as office-based. We reviewed the CY 2007 utilization data and clinical characteristics for all those surgical procedures newly added for ASC payment in CY 2008 that were assigned payment indicator “G2” in the CY 2008 OPPS/ASC final rule with comment period. As a result of that review, we identified the following 5 procedures that we are proposing to newly designate as office-based procedures for CY 2009: CPT code 0084T (Insertion of a temporary prostatic urethral stent); CPT code 36515 (Therapeutic apheresis; with extracorporeal immunoadsorption and plasma reinfusion); CPT code 36516 (Therapeutic apheresis; with extracorporeal selective adsorption or selective filtration and plasma reinfusion); CPT code 65436 (Removal of corneal epithelium; with application of chelating agent (e.g., EDTA)); and CPT code 67505 (Retrobulbar injection; alcohol). Of those, we are proposing to make the office-based designation of CPT code 0084T temporary because we do not have adequate data upon which to base a permanent designation. We are proposing to make permanent office-based designations for the remaining four procedures. The codes that we are newly proposing as office-based are displayed in Table 40. Table 40.—CY 2009 Proposed New Designations of ASC Covered Surgical Procedures as Office-Based HCPCS code Short descriptor CY 2008 ASC payment indicator Proposed CY 2009 ASC payment indicator 0084T Temp prostate urethral stent G2 R2* 36515 Apheresis, adsorp/reinfuse G2 P2 36516 Apheresis, selective G2 P2 65436 Curette/treat cornea G2 P3 67505 Inject/treat eye socket G2 P3 * Denotes temporary payment indicator. Furthermore, we reviewed CY 2007 utilization information for the seven procedures with temporary office-based designations for CY 2008. Of those procedures, we are proposing to make permanent the office-based designation for CPT code 28890 (Extracorporeal shock wave, high energy, performed by a physician, requiring anesthesia other than local, including ultrasound guidance, involving the plantar fascia). In response to comments on the CY 2008 OPPS/ASC proposed rule, in the CY 2008 OPPS/ASC final rule with comment period, we made the office-based designation for CPT code 28890 temporary rather than permanent as was proposed (72 FR 66839 through 66840). Although the CY 2006 utilization data available for development of the CY 2008 OPPS/ASC final rule with comment period showed that the service was provided more than 70 percent of the time in the physician's office setting, we were persuaded by commenters that providers may have been using CPT code 28890, which was new for CY 2006, erroneously to report less intensive extracorporeal shock wave procedures that would be more frequently performed in the physician's office. Our review of the CY 2007 data continues to support our designation of this procedure as office-based and thus, we believe it is appropriate at this time to propose to make that designation permanent for CY 2009. We are not proposing to make permanent the office-based designations for the 6 other procedures for which the CY 2008 designations are temporary. For those procedures, we do not believe that the currently available utilization data provide an adequate basis for proposing permanent office-based designations. The procedures with temporary office-based status for the CY 2008 ASC payment system that we are proposing to continue to temporarily designate as office-based procedures for CY 2009 are displayed in Table 40A, below. In our review of these codes, we also determined that it would be consistent for the office-based assignment of HCPCS code C9728 (Placement of interstitial device(s) for radiation therapy/surgery guidance (e.g., fiducial markers, dosimeter), other than prostate (any approach), single or multiple) to be temporary. This procedure is paid under the CY 2008 ASC payment system as an office-based procedure but is analogous to CPT code 55876 (Placement of interstitial device(s) for radiation therapy guidance (e.g., fiducial markers, dosimeter), prostate (via needle, any approach), single or multiple), for which we are proposing to maintain the temporary office-based payment indicator for CY 2009. Therefore, we also are proposing to assign a temporary office-based payment indicator to HCPCS code C9728 for CY 2009. All procedures for which the proposed office-based designation for CY 2009 is temporary are indicated by an asterisk in Addendum AA to this proposed rule. Table 40A.—CY 2008 Office-Based Procedures for Which Their Proposed CY 2009 Designation Is Temporarily Office-Based HCPCS code Short descriptor Proposed CY 2009 ASC payment indicator 0099T Implant corneal ring R2* 0124T Conjunctival drug placement R2* 21073 Mnpj of tmj w/anesth P3* 55876 Place rt device/marker, pros P3* 67229 Tr retinal les preterm inf R2* 68816 Probe nl duct w/balloon P3* C9728 Place device/marker, non pro R2* * Denotes temporary office-based payment indicator. c. Covered Surgical Procedures Designated as Device-Intensive
(1)Background As discussed in the August 2, 2007 final rule (72 FR 42503 through 42508), we adopted a modified payment methodology for calculating the ASC payment rates for covered surgical procedures that are assigned to the subset of OPPS device-dependent APCs with a device offset percentage greater than 50 percent under the OPPS, in order to ensure that payment for the procedure is adequate to provide packaged payment for the high-cost implantable devices used in those procedures. We assigned payment indicators “H8” (Device-intensive procedure on ASC list in CY 2007; paid at adjusted rate) and “J8” (Device-intensive procedure added to ASC list in CY 2008 or later; paid at adjusted rate) to identify the procedures that were eligible for ASC payment calculated according to the modified methodology, depending on whether the procedure was included on the ASC list of covered surgical procedures prior to CY 2008 and therefore, subject to transitional payment as discussed in section XV.D.1.b. of this proposed rule. The 45 “device-intensive” procedures for which the modified rate calculation methodology applies in CY 2008 are displayed in Table 56 and in Addendum AA to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66843 and 66945 through 66993).
(2)Proposed Changes to List of Covered Surgical Procedures Designated as Device-Intensive for CY 2009 We are proposing to update the ASC list of covered surgical procedures that are eligible for payment according to the modified methodology for CY 2009 consistent with the proposed update to the device-dependent APCs under the OPPS that reflects the proposed APC assignments of procedures, designation of APCs as device-dependent, and APC device offset percentages based on CY 2007 claims data. OPPS device-dependent APCs are discussed further in section II.A.2.d.(1) of this proposed rule. The ASC covered surgical procedures that we are proposing to designate as device-intensive and that would be subject to the device-intensive procedure payment methodology are listed in Table 41 below. The HCPCS code, the HCPCS code short descriptor, the proposed payment indicator, the proposed CY 2009 OPPS APC assignment, and the proposed CY 2009 OPPS APC device offset percentage are also listed in Table 41. Each proposed device-intensive procedure is assigned payment indicator “H8” or “J8,” depending on whether it is subject to transitional payment, and all of these codes are included in Addendum AA to this proposed rule. Table 41.—ASC Covered Surgical Procedures Proposed for Designation as Device-Intensive for CY 2009 HCPCS code Short descriptor Proposed CY 2009 ASC payment indicator Proposed CY 2009 OPPS APC OPPS APC title Proposed CY 2009 device- dependent APC offset percentage 27446 Revision of knee joint J8 0681 Knee Arthroplasty 74 33206 Insertion of heart pacemaker J8 0089 Insertion/Replacement of Permanent Pacemaker and Electrodes 72 33207 Insertion of heart pacemaker J8 0089 Insertion/Replacement of Permanent Pacemaker and Electrodes 72 33208 Insertion of heart pacemaker J8 0655 Insertion/Replacement/Conversion of a permanent dual chamber pacemaker 75 33212 Insertion of pulse generator H8 0090 Insertion/Replacement of Pacemaker Pulse Generator 73 33213 Insertion of pulse generator H8 0654 Insertion/Replacement of a permanent dual chamber pacemaker 77 33214 Upgrade of pacemaker system J8 0655 Insertion/Replacement/Conversion of a permanent dual chamber pacemaker 75 33224 Insert pacing lead & connect J8 0418 Insertion of Left Ventricular Pacing Elect. 70 33225 Lventric pacing lead add-on J8 0418 Insertion of Left Ventricular Pacing Elect. 70 33240 Insert pulse generator J8 0107 Insertion of Cardioverter-Defibrillator 89 33249 Eltrd/insert pace-defib J8 0108 Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads 88 33282 Implant pat-active ht record J8 0680 Insertion of Patient Activated Event Recorders 71 53440 Male sling procedure H8 0385 Level I Prosthetic Urological Procedures 57 53444 Insert tandem cuff H8 0385 Level I Prosthetic Urological Procedures 57 53445 Insert uro/ves nck sphincter H8 0386 Level II Prosthetic Urological Procedures 64 53447 Remove/replace ur sphincter H8 0386 Level II Prosthetic Urological Procedures 64 54400 Insert semi-rigid prosthesis H8 0385 Level I Prosthetic Urological Procedures 57 54401 Insert self-contd prosthesis H8 0386 Level II Prosthetic Urological Procedures 64 54405 Insert multi-comp penis pros H8 0386 Level II Prosthetic Urological Procedures 64 54410 Remove/replace penis prosth H8 0386 Level II Prosthetic Urological Procedures 64 54416 Remv/repl penis contain pros H8 0386 Level II Prosthetic Urological Procedures 64 55873 Cryoablate prostate H8 0674 Prostate Cryoablation 59 61885 Insrt/redo neurostim 1 array H8 0039 Level I Implantation of Neurostimulator 83 61886 Implant neurostim arrays H8 0315 Level III Implantation of Neurostimulator 88 62361 Implant spine infusion pump H8 0227 Implantation of Drug Infusion Device 81 62362 Implant spine infusion pump H8 0227 Implantation of Drug Infusion Device 81 63650 Implant neuroelectrodes H8 0040 Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve 56 63655 Implant neuroelectrodes J8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr 61 63685 Insrt/redo spine n generator H8 0222 Level II Implantation of Neurostimulator 84 64553 Implant neuroelectrodes H8 0225 Implantation of Neurostimulator Electrodes, Cranial Nerve 61 64555 Implant neuroelectrodes J8 0040 Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve 56 64560 Implant neuroelectrodes J8 0040 Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve 56 64561 Implant neuroelectrodes H8 0040 Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve 56 64565 Implant neuroelectrodes J8 0040 Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve 56 64573 Implant neuroelectrodes H8 0225 Implantation of Neurostimulator Electrodes, Cranial Nerve 61 64575 Implant neuroelectrodes H8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr 61 64577 Implant neuroelectrodes H8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr 61 64580 Implant neuroelectrodes H8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr 61 64581 Implant neuroelectrodes H8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr 61 64590 Insrt/redo pn/gastr stimul H8 0039 Level I Implantation of Neurostimulator 83 65770 Revise cornea with implant H8 0293 Level V Anterior Segment Eye Procedures 68 69930 Implant cochlear device H8 0259 Level VII ENT Procedures 83 2. Covered Ancillary Services We are proposing to update the ASC list of covered ancillary services to reflect the services' proposed separate payment status under the CY 2009 OPPS. Maintaining consistency with the OPPS may result in proposed changes to ASC payment indicators because some covered ancillary services that are paid separately under the revised ASC payment system in CY 2008 are proposed for packaged status under the OPPS for CY 2009. Comment indicator “CH,” as discussed in section XV.F. of this proposed rule, is used in Addendum BB to this proposed rule to indicate covered ancillary services for which we are proposing a change in the ASC payment indicator that reflects, for example, our proposal to package payment for the service under the CY 2009 ASC payment system consistent with its proposed treatment under the CY 2009 OPPS. Except for the Level II HCPCS code listed in Table 38 of this proposed rule, all covered ancillary services and their proposed payment indicators for CY 2009 are included in Addendum BB to this proposed rule. D. Proposed ASC Payment for Covered Surgical Procedures and Covered Ancillary Services 1. Proposed Payment for Covered Surgical Procedures a. Background Our final payment policy for covered surgical procedures under the revised ASC payment system is described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66828 through 66831). In that rule, we updated the CY 2008 rates for covered surgical procedures with payment indicators of “A2,” “G2,” “H8,” and “J8” using CY 2006 data, consistent with the CY 2008 OPPS update. We also updated the payment amounts for office-based procedures (payment indicators “P2,” “P3,” and “R2”) using the most recent available MPFS and OPPS data. We compared the estimated CY 2008 rate for each of the office-based procedures calculated according to the standard methodology of the revised ASC payment system to the MPFS nonfacility PE RVU amount to determine which was the lower payment amount that, therefore, would be the rate for payment of the procedure according to the final policy of the revised ASC payment system. See § 416.171(d). Subsequent to publication of that rule, the Congress enacted the Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 110-173. That law required changes to the rates paid under the MPFS for the first 6 months of CY 2008, and therefore, the ASC rates for some office-based procedures were also affected. We revised the CY 2008 ASC payment rates and made them available by posting them to the CMS Web site at: *http://www.cms.hhs.gov/ASCPayment/* . b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for CY 2009 We are proposing CY 2009 payment rates for procedures with payment indicator “G2” that are calculated according to the standard methodology of multiplying the proposed CY 2009 ASC relative payment weight for the procedure by the proposed CY 2009 ASC conversion factor (72 FR 42492 through 42493). Also, according to our established policy, we are proposing CY 2009 payments for procedures subject to the transitional payment methodology (payment indicators “A2” and “H8”) using a blend of 50 percent of the proposed CY 2009 ASC rate calculated according to the standard or device-intensive methodology, respectively, and 50 percent of the CY 2007 ASC payment rate (72 FR 42519). We are proposing payment rates for office-based procedures (payment indicators “P2,” “P3,” and “R2”) and device-intensive procedures (payment indicators “J8” and “H8”) calculated according to our established policies (72 FR 42504 and 42511). Thus, we are proposing to update the payment amounts for device-intensive procedures based on the CY 2009 OPPS proposal that reflects updated OPPS claims data and to make payment for office-based procedures at the lesser of the proposed CY 2009 MPFS nonfacility PE RVU amount or the CY 2009 ASC payment amount calculated according to the standard methodology. Similarly, ASC payment rates for the device-intensive procedures would be based on the proposed updated CY 2009 OPPS device-offset amounts as displayed in Table 41 above. c. Proposed Adjustment to ASC Payments for Partial or Full Device Credit Under § 416.179, our ASC policies with regard to payment for costly devices implanted in ASCs at no cost or with full or partial credit are fully consistent with the OPPS policies. The proposed CY 2009 OPPS APCs and devices subject to the adjustment policy are discussed in section IV.B.2. of this proposed rule. The ASC policies include adoption of the OPPS policy for reduced payment to providers when a device is furnished without cost or with full credit for the cost of the device for those ASC covered surgical procedures that are assigned to APCs under the OPPS to which this policy applies. According to that policy, payment to the ASC is reduced by the device offset amount that we estimate represents the cost of the device when the necessary device is furnished without cost to the ASC or with a full credit for the cost of the new device (72 FR 42504). We provide the same amount of payment reduction based on the device offset amount in ASCs that would apply under the OPPS under the same circumstances. Specifically, when a procedure that is listed in Table 42 of this proposed rule is performed in an ASC and the case involves implantation of a no cost or full credit device listed in Table 43, the ASC must report the HCPCS “FB” modifier on the line with the covered surgical procedure code to indicate that an implantable device in Table 43 was furnished without cost. When the “FB” modifier is reported with a procedure code that is listed in Table 42, the contractor reduces the ASC payment by the amount of payment that is attributed to the device when the ASC payment rate is calculated. The reduction of ASC payment in this circumstance is necessary to pay appropriately for the covered surgical procedure being furnished by the ASC. Consistent with the OPPS policy, we also adopted an ASC payment policy for certain procedures involving partial credit for a specified device. Specifically, we reduce the payment for implantation procedures listed in Table 42 by one-half of the device offset amount that would be applied if a device were provided at no cost or with full credit, if the credit to the ASC is 50 percent or more of the device cost (72 FR 66846). ASCs must append the modifier “FC” to the code for the surgical procedure when the facility receives a partial credit of 50 percent or more of the cost of a device listed in Table 43 when used in a surgical procedure listed in Table 42. In order to report that they received a partial credit of 50 percent or more of the cost of a device, ASCs have the option of either:
(1)Submitting the claim for the device implantation procedure to their Medicare contractor after the procedure's performance but prior to manufacturer acknowledgment of credit for the device, and subsequently contacting the contractor regarding a claims adjustment once the credit determination is made; or
(2)holding the claim for the device implantation procedure until a determination is made by the manufacturer on the partial credit and submitting the claim with the “FC” modifier appended to the implantation procedure HCPCS code if the partial credit is 50 percent or more of the cost of the device. Beneficiary coinsurance is based on the reduced payment amount. Consistent with the OPPS, we are proposing to update the list of device-intensive procedures that would be subject to the full and partial credit payment reduction policies for CY 2009. Table 42 displays the ASC covered implantation procedures and their payment indicators that we are proposing would be subject to the full and partial device credit policies for CY 2009. Specifically, when a procedure that is listed in Table 42 below is performed in an ASC and the case involves implantation of a no cost or full credit device or a device for which the ASC received at least a 50 percent partial credit that is listed in Table 43, the ASC must report the HCPCS “FB” or “FC” modifier, as appropriate, on the line with the covered surgical procedure code. The procedures listed in Table 42 are those ASC covered device-intensive procedures assigned to APCs under the OPPS to which the policy applies. We are not proposing to apply this policy to the procedures and devices associated with APCs 0425 (Level II Arthroplasty or Implantation with Prosthesis) and 0648 (Level IV Breast Surgery), which are proposed for inclusion in the OPPS full and partial credit payment reduction policy for CY 2009, because ASC covered procedures assigned to these two APCs under the OPPS do not qualify for payment as ASC covered device-intensive surgical procedures (that is, their estimated device offset percentages are less than 50 percent). Table 42.—Proposed CY 2009 Adjustments to Payments for ASC Covered Surgical Procedures in Cases of Devices Reported at No Cost or With Full or Partial Credit HCPCS code Short descriptor Proposed CY 2009 ASC payment indicator Proposed CY 2009 OPPS APC OPPS APC title Proposed CY 2009 OPPS full offset percentage Proposed CY 2009 OPPS partial offset percentage 27446 Revision of knee joint J8 0681 Knee Arthroplasty 74 37 33206 Insertion of heart pacemaker J8 0089 Insertion/Replacement of Permanent Pacemaker and Electrodes 72 36 33207 Insertion of heart pacemaker J8 0089 Insertion/Replacement of Permanent Pacemaker and Electrodes 72 36 33208 Insertion of heart pacemaker J8 0655 Insertion/Replacement/Conversion of a permanent dual chamber pacemaker 75 37 33212 Insertion of pulse generator H8 0090 Insertion/Replacement of Pacemaker Pulse Generator 73 36 33213 Insertion of pulse generator H8 0654 Insertion/Replacement of a permanent dual chamber pacemaker 77 38 33214 Upgrade of pacemaker system J8 0655 Insertion/Replacement/Conversion of a permanent dual chamber pacemaker 75 37 33224 Insert pacing lead & connect J8 0418 Insertion of Left Ventricular Pacing Elect 70 35 33225 Lventric pacing lead add-on J8 0418 Insertion of Left Ventricular Pacing Elect 70 35 33240 Insert pulse generator J8 0107 Insertion of Cardioverter-Defibrillator 89 44 33249 Eltrd/insert pace-defib J8 0108 Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads 88 44 33282 Implant pat-active ht record J8 0680 Insertion of Patient Activated Event Recorders 71 35 53440 Male sling procedure H8 0385 Level I Prosthetic Urological Procedures 57 29 53444 Insert tandem cuff H8 0385 Level I Prosthetic Urological Procedures 57 29 53445 Insert uro/ves nck sphincter H8 0386 Level II Prosthetic Urological Procedures 64 32 53447 Remove/replace ur sphincter H8 0386 Level II Prosthetic Urological Procedures 64 32 54400 Insert semi-rigid prosthesis H8 0385 Level I Prosthetic Urological Procedures 57 29 54401 Insert self-contd prosthesis H8 0386 Level II Prosthetic Urological Procedures 64 32 54405 Insert multi-comp penis pros H8 0386 Level II Prosthetic Urological Procedures 64 32 54410 Remove/replace penis prosth H8 0386 Level II Prosthetic Urological Procedures 64 32 54416 Remv/repl penis contain pros H8 0386 Level II Prosthetic Urological Procedures 64 32 61885 Insrt/redo neurostim 1 array H8 0039 Level I Implantation of Neurostimulator 83 42 61886 Implant neurostim arrays H8 0315 Level III Implantation of Neurostimulator 88 44 62361 Implant spine infusion pump H8 0227 Implantation of Drug Infusion Device 81 40 62362 Implant spine infusion pump H8 0227 Implantation of Drug Infusion Device 81 40 63650 Implant neuroelectrodes H8 0040 Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve 56 28 63655 Implant neuroelectrodes J8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr 61 30 63685 Insrt/redo spine n generator H8 0222 Level II Implantation of Neurostimulator 84 42 64553 Implant neuroelectrodes H8 0225 Implantation of Neurostimulator Electrodes, Cranial Nerve 61 30 64555 Implant neuroelectrodes J8 0040 Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve 56 28 64560 Implant neuroelectrodes J8 0040 Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve 56 28 64561 Implant neuroelectrodes H8 0040 Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve 56 28 64565 Implant neuroelectrodes J8 0040 Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve 56 28 64573 Implant neuroelectrodes H8 0225 Implantation of Neurostimulator Electrodes, Cranial Nerve 61 30 64575 Implant neuroelectrodes H8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr 61 30 64577 Implant neuroelectrodes H8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr 61 30 64580 Implant neuroelectrodes H8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr 61 30 64581 Implant neuroelectrodes H8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr 61 30 64590 Insrt/redo pn/gastr stimul H8 0039 Level I Implantation of Neurostimulator 83 42 69930 Implant cochlear device H8 0259 Level VII ENT Procedures 83 42 Table 43.—Proposed Devices for Which the “FB” or “FC” Modifier Must Be Reported With the Procedure Code When Furnished at No Cost or With Full or Partial Credit Device HCPCS code Short descriptor C1721 AICD, dual chamber. C1722 AICD, single chamber. C1764 Event recorder, cardiac. C1767 Generator, neurostim, imp. C1771 Rep dev, urinary, w/sling. C1772 Infusion pump, programmable. C1776 Joint device (implantable). C1778 Lead, neurostimulator. C1779 Lead, pmkr, transvenous VDD. C1785 Pmkr, dual, rate-resp. C1786 Pmkr, single, rate-resp. C1813 Prosthesis, penile, inflatab. C1815 Pros, urinary sph, imp. C1820 Generator, neuro rechg bat sys. C1881 Dialysis access system. C1882 AICD, other than sing/dual. C1891 Infusion pump, non-prog, perm. C1897 Lead, neurostim, test kit. C1898 Lead, pmkr, other than trans. C1900 Lead coronary venous. C2619 Pmkr, dual, non rate-resp. C2620 Pmkr, single, non rate-resp. C2621 Pmkr, other than sing/dual. C2622 Prosthesis, penile, non-inf. C2626 Infusion pump, non-prog, temp. C2631 Rep dev, urinary, w/o sling. L8614 Cochlear device/system. 2. Proposed Payment for Covered Ancillary Services a. Background Our final CY 2008 payment policies under the revised ASC payment system for covered ancillary services vary according to the particular type of service and its payment policy under the OPPS. Our overall policy provides separate ASC payment for certain ancillary services integrally related to the provision of ASC covered surgical procedures that are paid separately under the OPPS and provides packaged ASC payment for other ancillary services that are packaged under the OPPS. Thus, we established a final policy to align ASC payment bundles with those under the OPPS (72 FR 42495). Our ASC payment policies provide separate payment for drugs and biologicals that are separately paid under the OPPS at the OPPS rates, while we pay for separately payable radiology services at the lower of the MPFS nonfacility PE RVU (or technical component) amount or the rate calculated according to the standard ASC payment methodology (72 FR 42497). In all cases, these services must be provided integral to the performance of ASC covered surgical procedures for which the ASC bills Medicare. As noted in section XV.D.1.a. of this proposed rule, changes were made to the MPFS payment rates for the period of January 1, 2008 through June 30, 2008 as a result of the enactment of the Medicare, Medicaid, and SCHIP Extension Act of 2007. In addition to changing the ASC payment rates for some office-based procedures, those changes also affected the ASC rates for some covered ancillary radiology services for the first 6 months of CY 2008. ASC payment policy for brachytherapy sources generally mirrors the payment policy under the OPPS. We finalized our policy to pay for brachytherapy sources applied in ASCs at the same prospective rates that were adopted under the OPPS or, if the OPPS rates were unavailable, at contractor-priced rates in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66832). Subsequent to publication of that rule, section 106 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 mandated that, for the period January 1, 2008 through June 30, 2008, brachytherapy sources be paid under the OPPS at charges adjusted to cost. Therefore, because our final overall ASC payment policy requires payment for brachytherapy sources at contractor-priced rates if prospective OPPS rates are not available (72 FR 42499), we paid ASCs at contractor-priced rates for brachytherapy sources provided in ASCs for this period of time. Beginning July 1, 2008, brachytherapy sources applied in ASCs are paid at the same prospectively set rates that were finalized in the CY 2008 OPPS/ASC final rule with comment period, unless Congress specifies another payment methodology. Other separately paid covered ancillary services in ASCs, specifically corneal tissue acquisition and device categories with OPPS pass-through status, do not have prospectively established ASC payment rates according to the final policies of the revised ASC payment system (72 FR 42502 and 42509). Under the revised ASC payment system, corneal tissue acquisition is paid based on the invoiced costs for acquiring the corneal tissue for transplantation. As discussed in section IV.A.1. of this proposed rule, new pass-through device categories may be established on a quarterly basis, but currently there are no OPPS device pass-through categories that would continue for OPPS pass-through payment (and, correspondingly, separate ASC payment) in CY 2009. b. Proposed Payment for Covered Ancillary Services for CY 2009 For CY 2009, we are proposing to update the ASC payment rates and make changes to payment indicators as necessary in order to maintain alignment between the OPPS and ASC payment systems regarding the packaged or separately payable status of services and the proposed CY 2009 OPPS and ASC payment rates. The proposed CY 2009 OPPS payment methodologies for separately payable drugs and biologicals and brachytherapy sources are discussed in sections V. and VII. of this proposed rule, respectively, and the CY 2009 ASC payment rates for those services are proposed to equal the proposed CY 2009 OPPS rates. In Addendum BB, we indicate whether the proposed CY 2009 payment rate for radiology services is based on the MPFS PE RVU amount or the standard ASC payment calculation. Thus, the proposed CY 2009 payment indicator for a covered radiology service may differ from its CY 2008 payment indicator based on packaging changes under the OPPS or the comparison of the CY 2009 proposed MPFS nonfacility PE RVU amount to the CY 2009 ASC payment rate calculated according to the standard methodology. Services that we are proposing to pay based on the standard ASC rate methodology are assigned payment indicator “Z2” (Radiology service paid separately when provided integral to a surgical procedure on ASC list; payment based on OPPS relative payment weight) and those for which payment is based on the MPFS PE RVU amount are assigned payment indicator “Z3” (Radiology service paid separately when provided integral to a surgical procedure on ASC list; payment based on MPFS nonfacility PE RVUs). Covered ancillary services and their proposed payment indicators are listed in Addendum BB to this proposed rule. E. New Technology Intraocular Lenses 1. Background In the CY 2007 OPPS/ASC final rule with comment period, we finalized our proposal to update and streamline the process for reviewing applications to establish new active classes of new technology intraocular lenses (NTIOLs) and for recognizing new candidate intraocular lenses
(IOLs)inserted during or subsequent to cataract extraction as belonging to a new technology intraocular lens (NTIOL) class that is qualified for a payment adjustment (71 FR 68176) Specifically, we established the following process: • We will announce annually in the **Federal Register** document that proposes the update of ASC payment rates for the following calendar year, a list of all requests to establish new NTIOL classes accepted for review during the calendar year in which the proposal is published and the deadline for submission of public comments regarding those requests. The deadline for receipt of public comments will be 30 days following publication of the list of requests. • In the **Federal Register** document that finalizes the update of ASC payment rates for the following calendar year, we will— + Provide a list of determinations made as a result of our review of all new class requests and public comments; and + Publish the deadline for submitting requests for review of an application for a new NTIOL class in the following calendar year. In determining whether a lens belongs to a new class of NTIOLs and whether the ASC payment amount for insertion of that lens in conjunction with cataract surgery is appropriate, we expect that the insertion of the candidate IOL would result in significantly improved clinical outcomes compared to currently available IOLs. In addition, to establish a new NTIOL class, the candidate lens must be distinguishable from lenses already approved as members of active or expired classes of NTIOLs that share a predominant characteristic associated with improved clinical outcomes that was identified for each class. Furthermore, in the CY OPPS/ASC 2007 final rule with comment period, we finalized our proposal to base our determinations on consideration of the following factors (71 FR 68177): • The IOL must have been approved by the FDA and claims of specific clinical benefits and/or lens characteristics with established clinical relevance in comparison with currently available IOLs must have been approved by the FDA for use in labeling and advertising. • The IOL is not described by an active or expired NTIOL class; that is, it does not share the predominant, class-defining characteristic associated with improved clinical outcomes with designated members of an active or expired NTIOL class. • Evidence demonstrates that use of the IOL results in measurable, clinically meaningful, improved outcomes in comparison with use of currently available IOLs. According to the statute, and consistent with previous examples provided by CMS, superior outcomes that would be considered include the following: + Reduced risk of intraoperative or postoperative complication or trauma; + Accelerated postoperative recovery; + Reduced induced astigmatism; + Improved postoperative visual acuity; + More stable postoperative vision; + Other comparable clinical advantages, such as— ++ Reduced dependence on other eyewear (for example, spectacles, contact lenses, and reading glasses); ++ Decreased rate of subsequent diagnostic or therapeutic interventions, such as the need for YAG laser treatment; ++ Decreased incidence of subsequent IOL exchange; ++ Decreased blurred vision, glare, other quantifiable symptom or vision deficiency. For a request to be considered complete, we require submission of the information that is found in the guidance document entitled “Application Process and Information Requirements for Requests for a New Class of New Technology Intraocular Lens (NTIOL)” posted on the CMS Web site at: *http://www.cms.hhs.gov/ASCPayment/05_NTIOLs.asp* . As stated in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68180), there are three possible outcomes from our review of a request for establishment of a new NTIOL class. As appropriate, for each completed request for consideration of a candidate IOL into a new class that is received by the established deadline, one of the following determinations would be announced annually in the final rule updating the ASC payment rates for the next calendar year: • The request for a payment adjustment is approved for the candidate IOL for 5 full years as a member of a new NTIOL class described by a new HCPCS code. • The request for a payment adjustment is approved for the candidate IOL for the balance of time remaining as a member of an active NTIOL class. • The request for a payment adjustment is not approved. We also discussed our plan to summarize briefly in the final rule the evidence that was reviewed, the public comments, and the basis for our determinations in consideration of applications for establishment of a new NTIOL class. We established that when a new NTIOL class is created, we would identify the predominant characteristic of NTIOLs in that class that sets them apart from other IOLs (including those previously approved as members of other expired or active NTIOL classes) and that is associated with improved clinical outcomes. The date of implementation of a payment adjustment in the case of approval of an IOL as a member of a new NTIOL class would be set prospectively as of 30 days after publication of the ASC payment update final rule, consistent with the statutory requirement. 2. NTIOL Application Process for Payment Adjustment In CY 2007, we posted an updated guidance document to the CMS Web site to provide process and information requirements for applications requesting a review of the appropriateness of the payment amount for insertion of an IOL to ensure that the ASC payment for covered surgical procedures includes payment that is reasonable and related to the cost of acquiring a lens that is approved as belonging to a new class of NTIOLs. This guidance document can be accessed on the CMS Web site at: *http://www.cms.hhs.gov/ASCPayment/downloads/NTIOLprocess* . We note that we have also issued a guidance document entitled “Revised Process for Recognizing Intraocular Lenses Furnished by Ambulatory Surgery Centers
(ASCs)as Belonging to an Active Subset of New Technology Intraocular Lenses (NTIOLs).” This guidance document can be accessed on the CMS Web site at: *http://www.cms.hhs.gov/ASCPayment/Downloads/Request_for_inclusion_in_current_NTIOL_subset.pdf* . This second guidance document provides specific details regarding requests for recognition of IOLs as belonging to an existing, active NTIOL class, the review process, and information required for a request to review. Currently, there is one active NTIOL class whose defining characteristic is the reduction of spherical aberration. CMS accepts requests throughout the year to review the appropriateness of recognizing an IOL as a member of an active class of NTIOLs. That is, review of candidate lenses for membership in an existing, active NTIOL class is ongoing and not limited to the annual review process that applies to the establishment of new NTIOL classes. We ordinarily complete the review of such a request within 90 days of receipt, and upon completion of our review, we notify the requestor of our determination and post on the CMS Web site notification of a lens newly approved for a payment adjustment as an NTIOL belonging to an active NTIOL class when furnished in an ASC. 3. Classes of NTIOLs Approved and New Requests for Payment Adjustment a. Background Since implementation of the process for adjustment of payment amounts for NTIOLs that was established in the June 16, 1999 **Federal Register** , we have approved three classes of NTIOLs, as shown in the following table, with the associated qualifying IOLs to date: NTIOL class HCPCS code $50 approved for services furnished on or after NTIOL characteristic IOLs eligible for adjustment 1 Q1001 May 18, 2000, through May 18, 2005 Multifocal Allergan AMO Array Multifocal lens, model SA40N. 2 Q1002 May 18, 2000, through May 18, 2005 Reduction in Preexisting Astigmatism STAAR Surgical Elastic Ultraviolet-Absorbing Silicone Posterior Chamber IOL with Toric Optic, models AA4203T, AA4203TF, and AA4203TL. 3 Q1003 February 27, 2006, through February 26, 2011 Reduced Spherical Aberration Advanced Medical Optics
(AMO)Tecnis® IOL models Z9000, Z9001, Z9002, ZA9003, AR40xEM and Tecnis® 1-Piece model ZCB00; Alcon Acrysof® IQ Model SN60WF and Acrysert Delivery System model SN60WS; Bausch & Lomb Sofport AO models LI61AOV, and LI61AOV; STAAR Affinity Collamer model CQ2015A. b. Request To Establish New NTIOL Class for CY 2009 and Deadline for Public Comment As discussed below and explained in the guidance document on the CMS Web site, a request for review for a new class of NTIOLs for CY 2009 must have been submitted to CMS by March 14, 2008, the due date published in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66855). We received one request for review of the appropriateness of the ASC payment amount for insertion of a candidate IOL as a member of a new class of NTIOLs for CY 2009 by the March 14, 2008 due date. A summary of this request follows. *Requestor:* Rayner Surgical, Inc. *Manufacturer:* Rayner Intraocular Lenses Limited. *Lens Model Number:* C-flex IOL, Model Number 570C. *Summary of the Request:* Rayner Surgical, Inc. (Rayner) submitted a request for CMS to determine that its C-flex Model 570C intraocular lens meets the criteria for recognition as an NTIOL and to concurrently establish a new class of NTIOLs, with this lens as a member. As part of its request, Rayner submitted descriptive information about the candidate IOL as outlined in the guidance document that we make available on the CMS Web site for the establishment of a new class of NTIOLs, as well as information regarding approval of the candidate IOL by the U.S. Food and Drug Administration (FDA). This information included the approved labeling for the candidate lens, a summary of the IOL's safety and effectiveness, a copy of the FDA's approval notification, and instructions for its use. In addition, Rayner also submitted several peer-reviewed articles in support of its claim that the design features and hydrophilic properties of the candidate lens would reduce silicone oil adhesion and silicone oil-induced opacification. We note that we have previously considered other candidate IOLs for which ASC payment review was requested on the basis of their hydrophilic characteristics or their associated reduction in cellular deposits. We discussed these lenses in the December 20, 1999 and May 3, 2000 NTIOL proposed and final rules published in the **Federal Register** (FR 64 71148 through 71149 and 65 FR 25738 through 25740, respectively). In its CY 2009 request, Rayner asserts that the design features and hydrophilic properties of the candidate lens would reduce silicone oil adhesion and silicone oil-induced opacification problems associated with FDA-approved IOL materials currently marketed in the United States. Rayner states that silicone oil is widely used as a tamponade in vitreoretinal surgery, and that silicone oil-induced opacification of an IOL, through adherence of the oil to the IOL surface, is a well-known surgical complication. Rayner also states that at present, there are no active or expired NTIOL classes that describe IOLs similar to its IOL. We established in the CY 2007 OPPS/ASC final rule with comment period that when reviewing a request for recognition of an IOL as an NTIOL and a concurrent request to establish a new class of NTIOLs, we would base our determination on consideration of the three major criteria that are outlined in the discussion above. We have begun our review of Rayner's request to recognize its C-flex IOL as an NTIOL and concurrently establish a new class of NTIOLs. We are soliciting comments on this candidate IOL with respect to the established NTIOL criteria as discussed above. First, for an IOL to be recognized as an NTIOL we require that the IOL must have been approved by the FDA and claims of specific clinical benefits and/or lens characteristics with established clinical relevance in comparison with currently available IOLs must have been approved by the FDA for use in labeling and advertising. We note that FDA approval for the candidate lens was granted in May of 2007 and in its request, Rayner provided FDA approval documentation, including a copy of the FDA's approval notification, the FDA's summary of the IOL's safety and effectiveness, and the labeling approved by the FDA. The approved label for the Rayner C-flex states, “The hydrophilic nature of the Rayacryl material and the design features of the Rayner C-Flex lens reduce the problems of silicone oil adhesion and silicone oil opacification.” The FDA label does not otherwise reference specific clinical benefits or lens characteristics with established clinical relevance in comparison with currently available IOLs. Although the labeling reference to reduced “problems” could imply clinical relevance and clinical benefits of the lens, the label does not indicate the specific clinical benefits associated with the lens. We are interested in public comments on the specific clinical benefits and/or lens characteristics with established clinical relevance in comparison with currently available IOLs that may be associated with the silicone adherence and silicone oil-induced opacification reducing characteristics of this candidate lens. Second, we also require that the candidate IOL not be described by an active or expired NTIOL class, that is, it does not share the predominant, class-defining characteristic associated with improved clinical outcomes with designated members of an active or expired NTIOL class. As noted in the table above regarding active and expired NTIOL classes, since implementation of the NTIOL review process that was established in the June 16, 1999 **Federal Register** , we have approved three classes of NTIOLs: Multifocal and Reduction in Preexisting Astigmatism classes, both of which were created in 2000 and expired in 2005, and the currently active Reduced Spherical Aberration class, which was created in 2006 and will expire in 2011. The class-defining characteristic specific to IOLs that are members of these classes is evident in the name assigned to the class. For example, IOLs recognized as members of the reduced spherical aberration class are characterized by their aspheric design that results in reduced spherical aberration. Please refer to the table above for information about the NTIOL classes that have been created since the implementation of the review process. Based on this information, the candidate lens may not be described by an active or expired NTIOL class. Its proposed class-defining characteristic and associated clinical benefits that were described in the submitted request, specifically the hydrophilic nature of the Rayacryl material and the design features of the C-flex lens to reduce problems with silicone oil adhesion and silicone oil-induced opacification, may not be similar to the class-defining characteristics and associated benefits of the two expired NTIOL classes, the Multifocal and Reduction in Preexisting Astigmatism classes, or to the class-defining characteristic and associated benefits of the currently active Reduced Spherical Aberration class. We welcome public comments that address whether the proposed class-defining characteristic and associated clinical benefits of the candidate Rayner IOL are described by the expired or currently active NTIOL classes. Third, our NTIOL evaluation criteria also require that an applicant submit evidence that demonstrates use of the IOL results in measurable, clinically meaningful, improved outcomes in comparison with use of currently available IOLs. We note that in the CY 2007 OPPS/ASC final rule with comment period, we sought comments as to what constitutes currently available IOLs for purposes of such comparisons, and we received several comments in response to our solicitation (71 FR 68178). We agreed with commenters that we should remain flexible with respect to our view of “currently available lenses” for purposes of reviewing NTIOL requests, in order to allow for consideration of technological advances in lenses over time. For purposes of reviewing this request to establish a new NTIOL class for CY 2009, we believe that foldable, spherical, monofocal IOLs made of acrylic, silicone, or polymethylmethacrylate materials represent the currently available lenses against which the candidate NTIOL to establish a new class should be compared. The Rayner request asserts that the hydrophilic material of the candidate lens with respect to silicone oil adhesion makes the lens a novel IOL in the U.S. market. We are seeking public comment on our view of “currently available lenses” for the purposes of this CY 2009 review. We reviewed the four peer-reviewed articles submitted by Rayner with the request, specifically three bench studies of silicone oil coverage of various IOL materials and a single series of three clinical case histories where silicone oil adhesion was documented. The literature did not clearly provide information regarding the clinical benefit to patients who received the candidate lens in conjunction with cataract removal surgery compared to patients receiving currently available IOLs. As stated in the Rayner request, the potential benefits of the candidate lens would apply only to individuals undergoing vitreoretinal surgery, in which silicone oil was used as a tamponade at some time after insertion of the intraocular lens. The size and composition of this population that could potentially benefit is unclear, and it is also unclear how often and what other alternative tamponade materials may be employed in the U.S. relative to silicone oil. We welcome public comments and relevant data specifically addressing whether use of the Rayner C-flex IOL results in measurable, clinically meaningful, improved outcomes in comparison with use of currently available IOLs. In accordance with our established NTIOL review process, we are seeking public comments on all of the review criteria for establishing a new NTIOL class with the characteristic of reduced silicone oil-induced opacification based on the request for the Rayner C-flex IOL Model 570C lens. All comments on this request must be received by August 18, 2008. The announcement of CMS' determination regarding this request will appear in the CY 2009 OPPS/ASC final rule with comment period. If a determination of membership of the candidate lens in a new or currently active NTIOL class is made, this determination will be effective 30 days following the date that the final rule is published in the **Federal Register** . 4. Proposed Payment Adjustment The current payment adjustment for a 5-year period from the implementation date of a new NTIOL class is $50. In the CY 2007 OPPS/ASC final rule with comment period, we revised § 416.200(a) through
(c)to clarify how the IOL payment adjustment will be made and how an NTIOL will be paid after expiration of the payment adjustment, as well as made minor editorial changes to § 416.200(d). For CY 2008, we did not revise the current payment adjustment amount, and we are not proposing to revise the payment adjustment amount for CY 2009 in light of our very short experience with the revised ASC payment system, implemented initially on January 1, 2008. 5. Proposed ASC Payment for Insertion of IOLs In accordance with the final policies of the revised ASC payment system, for CY 2009 payment for IOL insertion procedures will be established according to the standard payment methodology of the revised payment system, which multiples the ASC conversion factor by the ASC payment weight for the surgical procedure to implant the IOL. CY 2009 ASC payment for the cost of a conventional lens will be packaged into the payment for the associated covered surgical procedures performed by the ASC. The proposed CY 2009 ASC payment rates for IOL insertion procedures are included in Table 44. Table 44.—Insertion of IOL Procedures and Their Proposed CY 2009 ASC Payment Rates HCPCS code Long descriptor Proposed CY 2009 ASC payment 66983 Intracapsular cataract extraction with insertion of intraocular lens prosthesis (one stage procedure) $961.91 66984 Extracapsular cataract removal with insertion of intraocular lens prosthesis (one stage procedure), manual or mechanical technique (e.g., irrigation and aspiration or phacoemulsification) 961.91 66985 Insertion of intraocular lens prosthesis (secondary implant), not associated with concurrent cataract removal 890.22 66986 Exchange of intraocular lens 890.22 F. Proposed ASC Payment and Comment Indicators 1. Background In addition to the payment indicators that we introduced in the August 2, 2007 final rule, we also created final comment indicators for the ASC payment system in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66855). We created Addendum DD1 to define ASC payment indicators that we use in Addenda AA and BB to provide payment information regarding covered surgical procedures and covered ancillary services, respectively, under the revised ASC payment system. The ASC payment indicators in Addendum DD1 are intended to capture policy-relevant characteristics of HCPCS codes that may receive packaged or separate payment in ASCs, including: Their ASC payment status prior to CY 2008; their designation as device-intensive or office-based and the corresponding ASC payment methodology; and their classification as separately payable radiology services, brachytherapy sources, OPPS pass-through devices, corneal tissue acquisition services, drugs or biologicals, or NTIOLs. We also created Addendum DD2 that lists the ASC comment indicators. The ASC comment indicators used in Addenda AA and BB to the final rule with comment period will serve to identify, for the revised ASC payment system, the status of a specific HCPCS code and its payment indicator with respect to the timeframe when comments will be accepted. The comment indicator “NI” will be used in the final rule to indicate new HCPCS codes for which the interim payment indicator assigned is subject to comment. The “CH” comment indicator is used in Addenda AA and BB to this CY 2009 proposed rule to indicate that: A new payment indicator (in comparison with the indicator for the CY 2008 ASC April quarterly update) is proposed for assignment to an active HCPCS code for the next calendar year; an active HCPCS code is proposed for addition to the list of procedures or services payable in ASCs; or an active HCPCS code is proposed for deletion at the end of the current calendar year. The “CH” comment indicators that are published in the final rule with comment period are provided to alert readers that a change has been made from one calendar year to the next, but do not indicate that the change is subject to comment. The full definitions of the comment indicators are provided in Addendum DD2 to this proposed rule. 2. Proposed ASC Payment and Comment Indicators We are proposing to revise the definition of one ASC payment indicator for CY 2009. We are proposing that the definition of payment indicator “F4” would be changed from “Corneal tissue acquisition; paid at reasonable cost” to “Corneal tissue acquisition, hepatitis B vaccine; paid at reasonable cost” for CY 2009 as displayed in Addendum DD1 to this proposed rule. While we did not include hepatitis B vaccine HCPCS codes in Addendum BB to the CY 2008 OPPS/ASC final rule with comment period, we consider these vaccines to be separately payable drugs under the OPPS, and the revised ASC payment system policy provides the same payment for covered ancillary drugs and biologicals as would be made under the OPPS (72 FR 42501). Under the OPPS, these hepatitis B vaccines are proposed for CY 2009 payment at reasonable cost and, therefore, for the ASC payment system, we are proposing to include hepatitis B vaccines in the payment indicator definition of “F4” for CY 2009. G. Calculation of the ASC Conversion Factor and ASC Payment Rates 1. Background In the August 2, 2007 final rule, we made final our proposal to base ASC relative payment weights and payment rates under the revised ASC payment system on APC groups and relative payment weights (72 FR 42493). Consistent with that policy and the requirement at section 1833(i)(2)(D)(ii) of the Act that the revised payment system be implemented so that it would be budget neutral, the initial ASC conversion factor (CY 2008) was calculated so that estimated total Medicare payments under the revised ASC payment system in the first year would be budget neutral to estimated total Medicare payments under the existing (CY 2007) ASC payment system. That is, application of the ASC conversion factor was designed to result in aggregate expenditures under the revised ASC payment system in CY 2008 equal to aggregate expenditures that would have occurred in CY 2008 in the absence of the revised system, taking into consideration the cap on payments in CY 2007 as required under section 1833(i)(2)(E) of the Act (72 FR 42521 through 42522). We note that we consider the term “expenditures” in the context of the budget neutrality requirement under section 1833(i)(2)(D)(ii) of the Act to mean expenditures from the Medicare Part B Trust Fund. We do not consider expenditures to include beneficiary coinsurance and copayments. This distinction was important for the CY 2008 ASC budget neutrality model that considered payments across hospital outpatient, ASC, and MPFS payment systems. However, because coinsurance is almost always 20 percent for ASC services, this interpretation of expenditures has minimal impact for subsequent budget neutrality adjustments calculated within the revised ASC payment system. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 through 66858), we set out a step-by-step illustration of the final budget neutrality adjustment calculation based on the methodology finalized in the August 2, 2007 final rule (72 FR 42521 through 42531) and as applied to updated data available for the CY 2008 OPPS/ASC final rule with comment period. The application of that methodology to the data available for the CY 2008 OPPS/ASC final rule with comment period resulted in a budget neutrality adjustment of 0.65. For CY 2008, we adopted the OPPS relative payment weights for most services as the ASC relative payment weights and, consistent with the final policy, we calculated the CY 2008 ASC payment rates by multiplying the ASC relative payment weights by the CY 2008 ASC conversion factor of $41.401. For covered office-based surgical procedures and covered ancillary radiology services, the final policy is to set the relative payment weights so that the national unadjusted ASC payment rate does not exceed the MPFS unadjusted nonfacility PE RVU amount. Further, as discussed in section XV.F. of this proposed rule, in addition to the standard payment methodology, we also adopted several other alternative payment methods for specific types of services (for example, device-intensive procedures). Beginning in CY 2008, Medicare accounts for geographic wage variation in labor cost when calculating individual ASC payments by applying the pre-floor and pre-reclassified hospital wage index values that CMS calculates for payment and updated Core Based Statistical Areas (CBSAs) issued by the Office of Management and Budget in June 2003. This is the same wage index that is used to adjust for geographic differences in labor costs in all Medicare payment systems except the IPPS and the OPPS. As discussed in the August 2, 2007 final rule (72 FR 42518), the revised ASC payment system accounts for geographic wage variation when calculating individual ASC payments by applying the pre-floor and pre-reclassified hospital wage index to the labor-related portion, which is 50 percent of the ASC payment amount. We note that as part of our review of the hospital wage index, in accordance with section 106(b)(1) of the MIEA-TRHCA, CMS has initiated a research contract that will evaluate the application of the hospital wage index in non-inpatient settings (73 FR 23618). For further information, see the discussion in the FY 2009 IPPS proposed rule. 2. Proposed Policy Regarding Calculation of the ASC Payment Rates a. Updating the ASC Relative Payment Weights for CY 2009 and Future Years We update the ASC relative payment weights in the revised ASC payment system each year using the national OPPS relative payment weights (and MPFS nonfacility PE RVU amounts, as applicable) for that same calendar year and uniformly scale the ASC relative payment weights for each update year to make them budget neutral (72 FR 42531 through 42532). Consistent with our established policy, we are proposing to scale the CY 2009 relative payment weights for ASCs according to the following method. Holding ASC utilization and the mix of services constant from CY 2007, for CY 2009, we would compare the total payment weight using the CY 2008 ASC relative payment weights under the 75/25 blend (of the CY 2007 payment rate and the revised ASC payment rate) with the total payment weight using the CY 2009 ASC relative payment weights under the 50/50 blend (of the CY 2007 ASC payment rate and the revised ASC payment rate) to take into account the changes in the OPPS relative payment weights between CY 2008 and CY 2009. We would use the ratio of CY 2008 to CY 2009 total payment weight (the weight scaler) to scale the ASC relative payment weights for CY 2009. The proposed ASC scaler is 0.9753 and scaling of ASC relative payment weights would apply to covered surgical procedures and covered ancillary radiology services whose ASC payment rates are based on OPPS relative payment weights. Scaling would not apply in the case of ASC payment for separately payable covered ancillary services that have a predetermined national payment amount (that is, their national ASC payment amounts are not based on OPPS relative payment weights), such as drugs and biologicals or brachytherapy sources that are separately paid under the OPPS or services that are contractor-priced or paid at reasonable cost in ASCs. Any service with a predetermined national payment amount would be included in the ASC budget neutrality comparison, but scaling of the ASC relative payment weights would not apply to those services. The ASC payment weights for those services without predetermined national payment amounts (that is, those services with national payment amounts that would be based on OPPS relative payment weights if a payment limitation did not apply) would be scaled to eliminate any difference in the total payment weight between the current year and the update year. The proposed weight scaler used to model ASC fully implemented rates in order to reflect our estimate of rates if there was no transition for CY 2009 is equal to 0.9412. This scaler was applied to all payment weights subject to scaling, in order to estimate the fully implemented payment rates for CY 2009 without the transition, for purposes of the ASC impact analysis discussed in section XXI.D. of this proposed rule. For any given year's ratesetting, we typically use the most recent full calendar year of claims data to model budget neutrality adjustments. We currently have 95 percent of CY 2007 ASC claims data available for this proposed rule. These claims do not include new covered surgical procedures and covered ancillary services under the revised ASC payment system that were first payable in ASCs in CY 2008 and only contain data for ASC services billed in CY 2007 that were eligible to receive payment under the previous ASC payment system. We do not have sufficiently robust CY 2008 ASC claims data upon which to base the CY 2009 ASC payment system update. Therefore, for CY 2009 budget neutrality adjustments, we assume that there would be no significant change in the weight scaler or wage adjustment attributable to new covered surgical and covered ancillary services. To create an analytic file to support calculation of the weight scaler and budget neutrality adjustment for the wage index (discussed below), we summarized available CY 2007 ASC claims by provider and by HCPCS code. We defined a unique supplier identifier solely for the purpose of identifying unique providers within the CY 2007 claims data. We used the provider zip code reported on the claim to associate state, county, and CBSA with each ASC. This file, available to the public as a supporting data file for this proposed rule, is posted on the CMS Web site at: *http://www.cms.hhs.gov/ASCPayment/01_Overview.asp#TopOfPage.* b. Updating the ASC Conversion Factor Under the OPPS, we typically apply a budget neutrality adjustment for provider-level changes, most notably a change in the wage index for the upcoming year, to the conversion factor. For the CY 2009 ASC payment system, we are proposing to calculate and apply the pre-floor and pre-reclassified hospital wage index that is used for ASC payment adjustment to the ASC conversion factor, just as the OPPS wage index adjustment is calculated and applied to the OPPS conversion factor. For CY 2009, we calculated this proposed adjustment for the revised ASC payment system by using the most recent CY 2007 claims data available and estimating the difference in total payment that would be created by introducing the CY 2009 pre-floor and pre-reclassified hospital wage index. Specifically, holding CY 2007 ASC utilization and service-mix and CY 2009 national payment rates after application of the weight scaler constant, we calculated the total adjusted payment using the CY 2008 pre-floor and pre-reclassified hospital wage index and a total adjusted payment using the proposed CY 2009 pre-floor and pre-reclassified hospital wage index. We used the 50-percent labor that we finalized for the revised ASC payment system in CY 2008 for both total adjusted payment calculations. We then compared the total adjusted payment calculated with the CY 2008 pre-floor and pre-reclassified hospital wage index to the total adjusted payment calculated with the proposed CY 2009 pre-floor and pre-reclassified hospital wage index and applied the resulting ratio of 0.9996 (the ASC wage index budget neutrality adjustment) to the CY 2008 ASC conversion factor to calculate the CY 2009 ASC conversion factor. Section 1833(i)(2)(C) of the Act requires that, if the Secretary has not updated the ASC payment amounts in a calendar year after CY 2009, the payment amounts shall be increased by the percentage increase in the Consumer Price Index for All Urban Consumer (CPI-U) as estimated by the Secretary for the 12-month period ending with the midpoint of the year involved. Therefore, as discussed in the August 2, 2007 final rule, we adopted a final policy to update the ASC conversion factor using the CPI-U in order to adjust ASC payment rates for inflation (72 FR 42518 through 42519). We will implement the annual updates through an adjustment to the conversion factor under the revised ASC payment system beginning in CY 2010 when the statutory requirement for a zero update no longer applies. Therefore, for CY 2009, we are only proposing to update the ASC conversion factor with the budget neutrality adjustment due to the revised CY 2009 pre-floor and pre-reclassified hospital wage index, resulting in a proposed CY 2009 ASC conversion factor of $41.384, which is the product of $41.401 multiplied by 0.9996. 3. Display of Proposed ASC Payment Rates Addenda AA and BB to this proposed rule display the proposed updated ASC payment rates for CY 2009 for covered surgical procedures and covered ancillary services, respectively. These addenda contain several types of information related to the proposed CY 2009 payment rates. Specifically, in Addendum AA, the column titled “Subject to Multiple Procedure Discounting” indicates whether a surgical procedure would be subject to the multiple procedure payment reduction policy. As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66829 through 66830), most covered surgical procedures are subject to a 50-percent reduction in the ASC payment for the lower-paying procedure when more than one procedure is performed in a single operative session. Display of the comment indicator “CH” in the column titled “Comment Indicator” indicates a proposed change in payment policy for the item or service, including identifying new or discontinued HCPCS codes, designating items or services newly proposed for payment under the ASC payment system, and identifying items or services with a proposed change in the ASC payment indicator for CY 2009. The column titled “CY 2009 Second Year Transition Payment Weight” is the relative transition payment weight for the service. CY 2009 is the second year of a 4-year transition to ASC payment rates calculated according to the standard methodology of the revised ASC payment system. As proposed, the CY 2009 ASC payment rates for the covered surgical procedures subject to transitional payment (payment indicators “A2” and “H8” in Addendum AA) are based on a blend of 50 percent of the CY 2007 ASC payment weight for the procedure and 50 percent of the proposed CY 2009 fully implemented ASC weight before scaling for budget neutrality, calculated according to the standard methodology. The payment weights for all covered surgical procedures and covered ancillary radiology services whose ASC payment rates are based on OPPS relative payment weights are scaled for budget neutrality. Thus, scaling was not applied for the device portion of the device-intensive procedures, services that are paid at the MPFS nonfacility PE RVU amount, separately payable covered ancillary services that have a predetermined national payment amount, such as drugs, biologicals, and brachytherapy sources that are separately paid under the OPPS or services that are contractor-priced or paid at reasonable cost in ASCs. To derive the proposed CY 2009 payment rate displayed in the “CY 2009 Second Year Transition Payment” column, each ASC payment weight in the “CY 2009 Second Year Transition Payment Weight” column is multiplied by the proposed CY 2009 ASC conversion factor of $41.384, that includes a budget neutrality adjustment for changes in the wage index. Items and services with a predetermined national payment amount, such as separately payable drugs and biologicals displayed in Addendum BB to this proposed rule, may not show a relative payment weight. The “CY 2009 Second Year Transition Payment” column displays the proposed CY 2009 national unadjusted ASC payment rates for all items and services. The proposed CY 2009 ASC payment rates for separately payable drugs and biologicals are based on ASP data used for payment in physicians' offices in April 2008. XVI. Reporting Quality Data for Annual Payment Rate Updates A. Background 1. Reporting Hospital Outpatient Quality Data for Annual Payment Update Section 109(a) of the MIEA-TRHCA (Pub. L. 109-432) amended section 1833(t) of the Act by adding a new subsection
(17)that affects the payment rate update applicable to OPPS payments for services furnished by hospitals in outpatient settings on or after January 1, 2009. Section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary in the form and manner required by the Secretary under section 1833(t)(17)(B) of the Act will incur a reduction in their annual payment update factor by 2.0 percentage points. Section 1833(t)(17)(B) of the Act requires that hospitals submit quality data in a form and manner, and at a time that the Secretary specifies. Sections 1833(t)(17)(C)(i) and
(ii)of the Act require the Secretary to develop measures appropriate for the measurement of the quality of care (including medication errors) furnished by hospitals in outpatient settings and that these measures reflect consensus among affected parties and, to the extent feasible and practicable, include measures set forth by one or more national consensus building entities. The Secretary is not prevented from selecting measures that are the same as (or a subset of) the measures for which data are required to be submitted under section 1886(b)(3)(B)(viii) of the Act for the IPPS Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program. Section 1833(t)(17)(D) of the Act gives the Secretary the authority to replace measures or indicators as appropriate, such as when all hospitals are effectively in compliance or when the measures or indicators have been subsequently shown not to represent the best clinical practice. Section 1833(t)(17)(E) of the Act requires the Secretary to establish procedures for making data submitted available to the public. Such procedures must give hospitals the opportunity to review data before these data are released. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68189), we indicated our intent to establish an OPPS payment program modeled after the current IPPS RHQDAPU program. We stated our belief that the quality of hospital outpatient services would be most appropriately and fairly rewarded through the reporting of quality measures developed specifically for application in the hospital outpatient setting. We agreed that assessment of hospital outpatient performance would ultimately be most appropriately based on reporting of hospital outpatient measures developed specifically for this purpose. We stated our intent to implement the full OPPS payment rate update beginning in CY 2009 based upon hospital reporting of quality data beginning in CY 2008, using effective measures of the quality of hospital outpatient care that have been carefully developed and evaluated, and endorsed as appropriate, with significant input from stakeholders. The amendments to the Act made by section 109(a) of the MIEA-TRHCA are consistent with our intent and direction outlined in the CY 2007 OPPS/ASC final rule with comment period. Under these amendments, we were statutorily required to establish a program under which hospitals would report data on the quality of hospital outpatient care using standardized measures of care in order to receive the full annual update to the OPPS payment rate, effective for payments beginning in CY 2009. We refer to the program established under these amendments as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP). In reviewing the measures currently available for care in the hospital outpatient settings, we continue to believe that it would be most appropriate and desirable to use measures that specifically apply to the hospital outpatient setting. In other words, we do not believe that we should simply, without further analysis, adopt the IPPS RHQDAPU program measures as the measures for the HOP QDRP. Nonetheless, we note that section 1833(t)(17)(C)(ii) of the Act allows the Secretary to “[select] measures that are the same as (or a subset of) the measures for which data are required to be submitted” under the IPPS RHQDAPU program. We invite comment on whether we should select for the HOP QDRP some or all measures from the current RHQDAPU program measure set that apply to the outpatient setting. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66860), we established a separate reporting program, and adopted quality measures that were deemed appropriate for measuring hospital outpatient quality of care that reflected consensus among affected parties, and were set forth by one or more national consensus building entities. 2. Reporting ASC Quality Data for Annual Payment Update Section 109(b) of the MIEA-TRHCA amended section 1833(i) of the Act by adding new sections 1833(i)(2)(D)(iv) and 1833(i)(7) to the Act. These amendments may affect ASC payments for services furnished in ASC settings on or after January 1, 2009. Section 1833(i)(2)(D)(iv) of the Act authorizes the Secretary to implement the revised payment system for services furnished in ASCs (established under section 1833(i)(2)(D) of the Act), “so as to provide for a reduction in any annual payment increase for failure to report on quality measures * * *.” Section 1833(i)(7)(A) of the Act authorizes the Secretary to provide that any ASC that fails to report data required for the quality measures selected by the Secretary in the form and manner required by the Secretary under section 1833(i)(7) of the Act will incur a reduction in any annual payment update of 2.0 percentage points. Section 1833(i)(7)(A) of the Act also specifies that a reduction for one year cannot be taken into account in computing the ASC update for a subsequent calendar year. Section 1833(i)(7)(B) of the Act provides that, “except as the Secretary may otherwise provide,” the hospital outpatient quality data provisions of section 1833(t)(17)(B) through
(E)of the Act, summarized above, shall apply to ASCs. We did not implement an ASC quality reporting program for CY 2008 (72 FR 66875). We refer readers to section XVI.H. of this proposed rule for a discussion of our proposal to implement ASC quality data reporting in a later rulemaking. B. Hospital Outpatient Quality Measures for CY 2009 For the CY 2009 annual payment update, we required HOP QDRP reporting using 7 quality measures—5 Emergency Department measures plus 2 Perioperative Care measures. These measures address care provided to a large number of adult patients in hospital outpatient settings, across a diverse set of conditions, and were selected for the initial set of HOP QDRP measures based on their relevance as a set to all hospital outpatient departments. The five Emergency Department measures capture the quality of outpatient care in hospital emergency departments (EDs), specifically for those adult patients with acute myocardial infarction
(AMI)who are treated and then transferred to another facility for further care. These patients receive many of the same interventions as patients who are evaluated and admitted at the same facility. Three of these five measures are currently reported under the IPPS RHQDAPU program, and are published on the Hospital Compare Web site at: *http://www.HospitalCompare.hhs.gov* . Transferred AMI patients are currently not included in the calculation of the inpatient AMI measures because of differences in data collection and reporting for this patient group. The processes of care encompassed by these measures address care on arrival, the promptness of interventions, and discharge care for patients presenting to a hospital with an AMI. In addition to the five ED-AMI measures, we required reporting of two measures related to surgical care improvement. These two surgical care improvement measures derived from the Physician Quality Reporting Initiative
(PQRI)are directly related to interventions provided in the outpatient setting. Specifically, in order for hospitals to receive the full OPPS payment update for services furnished in CY 2009, in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66860) we required that subsection
(d)hospitals paid under the OPPS submit data on the following 7 measures as designated below, effective with hospital outpatient services furnished on or after April 1, 2008: Quality Measure ED-AMI-1—Aspirin at Arrival. ED-AMI-2—Median Time to Fibrinolysis. ED-AMI-3—Fibrinolytic Therapy Received within 30 Minutes of Arrival. ED-AMI-4—Median Time to Electrocardiogram (ECG). ED-AMI-5: Median Time to Transfer for Primary PCI. PQRI #20: Perioperative Care: Timing of Antibiotic Prophylaxis. PQRI #21: Perioperative Care: Selection of Perioperative Antibiotic. C. Proposed Quality Measures for CY 2010 and Subsequent Calendar Years and Proposed Process to Update Measures 1. Proposed Quality Measures for CY 2010 Payment Determinations For CY 2010, we are proposing to require continued submission of data on the existing 7 measures discussed above and to adopt 4 imaging measures. We propose to designate the existing 7 measures as follows: CY 2009 Quality Measures With Proposed CY 2010 Designations Current designation Proposed quality measure designation ED-AMI-2 OP-1: Median Time to Fibrinolysis. ED-AMI-3 OP-2: Fibrinolytic Therapy Received Within 30 Minutes. ED-AMI-5 OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention. ED-AMI-1 OP-4: Aspirin at Arrival. ED-AMI-4 OP-5: Median Time to ECG. PQRI #20 OP-6: Timing of Antibiotic Prophylaxis. PQRI #21 OP-7: Prophylactic Antibiotic Selection for Surgical Patients. The 4 imaging measures that we are proposing to adopt beginning with the CY 2010 payment determination are claims-based measures that CMS can calculate using Medicare Part B claims data without imposing on hospitals the burden of additional chart abstraction. For purposes of the CY 2010 payment determination, CMS will calculate these measures using CY 2008 Medicare administrative claims data. The proposed imaging measures are based on clinical evidence that, we believe, promote efficient and high quality patient care. MedPAC has expressed concern about potential overuse of imaging services based upon the rapid growth in the volume of usage over the last 5 years. Because of growing concerns regarding overuse of imaging services, CMS has developed and is now proposing 4 imaging measures which measure high quality, efficient use of services for the outpatient setting. Efficiency has been identified as an important area of development by the Institute of Medicine (IOM). Proposed Additional Quality Measures for CY 2010 Topic Measure Imaging Efficiency OP-8: MRI Lumbar Spine for Low Back Pain. OP-9: Mammography Follow-up Rates. OP-10: Abdomen CT—Use of Contrast Material: • OP-10: CT Abdomen—Use of Contrast Material. • OP-10a: CT Abdomen—Use of Contrast Material excluding calculi of the kidneys, ureter, and/or urinary tract. • OP-10b: CT Abdomen—Use of Contrast Material for diagnosis of calculi in the kidneys, ureter, and/or urinary tract. OP-11: Thorax CT—Use of Contrast Material. We invite public comment on these 4 proposed imaging measures which have been submitted to the NQF for consideration. The NQF is one example of a voluntary consensus building entity, thus, meeting the requirement to include measures set forth by one or more such entities for use in HOP QDRP reporting as stipulated in section 1833(t)(17)(C)(i) of the Act. While we are required under section 1833(t)(17)(C)(i) of the Act to develop measures appropriate for the measurement of the quality of care furnished by hospitals in hospital outpatient settings, it is also our intent to consider, when developing these measures, whether they can be “harmonized” with measures that can be or are already adopted in the context of comparable inpatient and ambulatory care. In other words, it is CMS' intent to harmonize measures that assess the care that is given across settings and providers and to use the same measure specifications based on clinical evidence and guidelines for the care being assessed regardless of provider and setting. The goal of harmonization is to assure that comparable care in different settings can be evaluated in similar ways, which further assures that quality measurement can focus more on the needs of a patient with a particular condition than on the specific program or policy attributes of the setting in which the care is provided. 2. Proposed Process for Updating Measures Although we adopt measures through the rulemaking process, we are proposing to establish a sub-regulatory process that will allow us to update the technical specifications that we use to calculate those measures when we believe such updates are warranted based on scientific evidence and guidance from a consensus building entity such as the NQF. We believe that the establishment of such a sub-regulatory process is necessary so that the HOP QDRP measures are calculated based on the most up-to-date scientific and consensus standards. We also recognize that neither scientific advances nor updates to measure specifications made by a consensus building entity are linked to the timing of regulatory actions. An example of changes that would prompt us to update a measure would be a change in antibiotic selection and/or timing (see measures with proposed designations of OP-6 and OP-7) based on updated clinical guidelines or best practices. Therefore, we are proposing that when a consensus building entity such as the NQF updates the measure specifications for a measure that we have adopted for the HOP QDRP program, we will update our measure specifications for that measure accordingly. We will provide notification of the measure specification updates on the QualityNet Web site, *http://www.qualitynet.org,* and in the CMS Hospital Outpatient Quality Measures Specifications Manual (Specifications Manual) no less than three months before any changes become effective for purposes of reporting under the HOP QDRP. We are inviting public comments on this proposal. 3. Possible New Quality Measures for CY 2011 and Subsequent Calendar Years We are seeking comment on possible new quality measures for CY 2011 and subsequent calendar years. The following table contains a list of 18 measures included within 9 measure sets from which additional quality measures could be selected for inclusion in the HOP QDRP. This table includes measures and measure sets that are part of clinical topics for which we currently do not require quality measure data reporting, such as cancer. We note that we sought comment on some of these measures in the CY 2008 OPPS/ASC proposed rule. We are seeking public comment on the measures and measure sets that are listed below as well as on any possible critical gaps or missing measures or measure sets. We specifically request input concerning the following: • Which of the measures or measure sets should be included in the HOP QDRP for CY 2011 or subsequent calendar years? • What challenges for data collection and reporting are posed by the identified measures and measure sets? • What improvements could be made to data collection or reporting that might offset or otherwise address those challenges? We are soliciting public comment on the following measure sets and measures for consideration in CY 2011 and subsequent calendar years. Measures Under Consideration for CY 2011 and Subsequent Calendar Years Topic Measure Cancer 1. Radiation Therapy is Administered within 1 Year of Diagnosis for Women Under Age 70 Receiving Breast Conserving Surgery for Breast Cancer.* 2. Adjuvant Chemotherapy is Considered or Administered within 4 Months of Surgery to Patients Under Age 80 with AJCC III Colon Cancer.* 3. Adjuvant Hormonal Therapy for Patients with Breast Cancer.* 4. Needle Biopsy to Establish Diagnosis of Cancer Precedes Surgical Excision/Resection.* ED Throughput 5. Median Time from ED Arrival to ED Departure for Discharged ED Patients. Diabetes 6. Low Density Lipoprotein Control in Type 1 or 2 Diabetes Mellitus.* 7. High Blood Pressure Control in Type 1 or 2 Diabetes Mellitus.* Falls 8. Screening for Fall Risk.* Depression 9. Antidepressant Medication During Acute Phase for Patients with New Episode of Major Depression.* Stroke & Rehabilitation 10. Computed Tomography
(CT)or Magnetic Resonance Imaging
(MRI)Reports.* 11. Carotid Imaging Reports.* Osteo 12. Communication with the Physician Managing Ongoing Care Post Fracture.* 13. Screening or Therapy for Women Aged 65 Years and Older.* 14. Pharmacologic Therapy.* 15. Management Following a Fracture.* Medication Reconciliation 16. Medication Reconciliation.* Respiratory 17. Asthma Pharmacological Therapy.* 18. Assessment of Mental Status for Community Acquired Pneumonia.* * One of the 30 measures included as “under consideration” in the CY 2008 OPPS/ASC proposed rule. We welcome suggestions regarding other additional measures and topics relevant to the hospital outpatient setting that we could use to further develop the measure set, and are particularly interested in receiving comments on potential HOP QDRP measures that could be used to measure the quality of care in other settings (such as hospital inpatient, physician office, and emergency care settings) and, thus, contribute to improved coordination and harmonization of high quality patient care. D. Proposed Payment Reduction for Hospitals That Fail To Meet the HOP QDRP Requirements for the CY 2009 Payment Update 1. Background Section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary, in the form and manner required by the Secretary under section 1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to their OPD fee schedule increase factor, that is, the annual payment update factor. Section 1833(t)(17)(A)(ii) of the Act specifies that any reduction would apply only to the payment year involved and would not be taken into account in computing the applicable OPD fee schedule increase factor for a subsequent payment year. This section discusses how the proposed payment reduction for failure to meet the administrative, data collection and submission requirements of the HOP QDRP will affect the CY 2009 payment update applicable to OPPS payments for HOPD services furnished by the hospitals defined under section 1886(d)(1)(B) of the Act to which the program applies. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that will apply to certain outpatient items and services provided by hospitals that are required to report outpatient quality data and that fail to meet the HOP QDRP requirements. All other hospitals paid under the CY 2009 OPPS will receive the full OPPS payment update without the reduction. 2. Proposed Reduction of OPPS Payments for Hospitals That Fail To Meet the HOP QDRP CY 2009 Payment Update Requirements a. Calculation of Reduced National Unadjusted Payment Rates The national unadjusted payment rates for many services paid under the OPPS equal the product of the OPPS conversion factor and the scaled relative weight for the APC to which the service is assigned. The OPPS conversion factor is updated annually by the OPD fee schedule increase factor. The conversion factor is used to calculate the OPPS payment rate for services with the following status indicators (listed in Addendum B to this proposed rule): “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X.” We are proposing that payment for all services assigned the status indicators listed above would be subject to the reduction of the national unadjusted payment rates for applicable hospitals, with the exception of services assigned to New Technology APCs. While services assigned to New Technology APCs, specifically APCs 1491 (New Technology-Level IA ($0-$10)) through 1574 (New Technology-Level XXXVII ($9,500-$10,000)), are assigned status indicator “S” or “T,” the payment rates for New Technology APCs are set at the mid-point of a cost band increment, rather than based on the product of the OPPS conversion factor and relative payment weight. Therefore, we are proposing to exclude services assigned to New Technology APCs from the list of services that are subject to the reduced national unadjusted payment rates because the OPD fee schedule increase factor is not used to update the payment rates for these APCs. The conversion factor is also not used to calculate the OPPS payment rates for separately payable services that are assigned status indicators other than status indicators “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X.” These services include separately payable drugs and biologicals, separately payable therapeutic radiopharmaceuticals, pass-through drugs and devices that are paid at charges adjusted to cost, and a few other specific services that receive cost-based payment. As a result, we are also proposing that the OPPS payment rates for these services would not be reduced because the payment rates for these services are not calculated using the conversion factor and, therefore, the payment rates for these services are not updated by the OPD fee schedule increase factor. The OPD fee schedule increase factor, or market basket update, is an input into the OPPS conversion factor, which is used to calculate OPPS payment rates. To implement the requirement to reduce the market basket update for hospitals that fail to meet reporting requirements, we are proposing that, effective for services paid under the CY 2009 OPPS, CMS would calculate two conversion factors: A full market basket conversion factor (that is, the full conversion factor) and a reduced market basket conversion factor (that is, the reduced conversion factor). It is necessary to calculate a reduced market basket conversion factor for hospitals that fail to meet reporting requirements as section 1833(t)(17)(A)(i) of the Act requires a reduction of 2.0 percentage points from the market basket update for those hospitals. (We implemented this statutory requirement in regulations at 42 CFR 419.43(h).) For a complete discussion of the calculation of the OPPS conversion factor, we refer readers to section II.B. of this proposed rule. Therefore, we are proposing to calculate a reduction ratio by dividing the reduced conversion factor by the full conversion factor. We refer to this reduction ratio as the “reporting ratio” to indicate that it applies to payment for hospitals that fail to meet their reporting requirements. Beginning January 1, 2009, the PRICER will calculate reduced national unadjusted payment rates that will be used as a basis for paying hospitals that fail to meet the requirements of the HOP QDRP by multiplying the national unadjusted payment rates by the reporting ratio. This will result in reduced national unadjusted payment rates that are mathematically equivalent to the reduced national unadjusted payment rates that would result if we multiplied the scaled OPPS relative weights by the reduced conversion factor. For CY 2009, we are proposing a reporting ratio of 0.981, calculated by dividing the reduced conversion factor of $64.409 by the full conversion factor of $65.684. As stated above, the use of the reporting ratio is mathematically equivalent to the creation and application of a reduced conversion factor to the OPPS payment weights. To determine the proposed reduced national unadjusted payment rates that would apply to hospitals that fail to meet their quality reporting requirements for the CY 2009 OPPS, we would multiply the proposed full national unadjusted payment rate in Addendum B to this proposed rule by the proposed reporting ratio of 0.981. For example, CPT code 11401 (Excision, benign lesion including margins, except skin tag (unless listed elsewhere) trunk, arms or legs; excised diameter 0.6 to 1.0 cm), is assigned to APC 0019, with a proposed national unadjusted payment rate of $288.20. Where a hospital fails to meet the requirements of the HOP QDRP for the CY 2009 payment update, the reduced national unadjusted payment rate for that hospital would be $282.72 (the reporting ratio of 0.981 multiplied by the full national unadjusted payment rate for CPT code 11401). b. Calculation of Reduced Minimum Unadjusted and National Unadjusted Beneficiary Copayments Under the OPPS, we have two levels of Medicare beneficiary copayment for many services: the minimum unadjusted copayment and the national unadjusted copayment. The minimum unadjusted copayment is always 20 percent of the national unadjusted payment rate for each separately payable service. The national unadjusted copayment is determined based on the historic coinsurance rate for the services assigned to the APC. Where the national unadjusted copayment is blank for an item or service listed in Addendum B to this proposed rule, the national unadjusted copayment is equal to the minimum unadjusted copayment. In general, under our longstanding copayment policy, the coinsurance percentage (the ratio of the copayment to the service payment) for a particular service may decline over time to a minimum of 20 percent but will never increase. This is consistent with the statute's intent that eventually all services paid under the OPPS would be subject to a 20 percent coinsurance percentage. We refer readers to section 1833(t)(3)(B)(ii) of the Act for the specific statutory language. For additional background on the standard OPPS copayment calculation, we refer readers to the CY 2004 OPPS final rule with comment period (68 FR 63458 through 63459). For hospitals that receive the reduced OPPS payment for failure to meet the HOP QDRP requirements, we believe that it is both equitable and appropriate that a reduction in the payment for a service should result in proportionately reduced copayment liability for beneficiaries. Similarly, we believe that it would be inequitable to the beneficiary and in conflict with the intent of the law (section 1833(t)(3)(B)(ii) of the Act) and our longstanding policy (68 FR 63458 through 63459) if the coinsurance percentage of the total payment for certain OPPS services to which reduced national unadjusted payment rates apply was to increase as a result of using the reduced conversion factor to calculate these reduced national unadjusted payment rates. Therefore, we are proposing that the Medicare beneficiary's minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies would each equal the product of the reporting ratio and the national unadjusted copayment or the minimum unadjusted copayment, as applicable, for the service, under the authority of section 1833(t)(2)(E) of the Act, which authorizes the Secretary to “establish, in a budget neutral manner, * * * adjustments as determined to be necessary to ensure equitable payments” under the OPPS. We considered calculating the national unadjusted copayments and the minimum unadjusted copayments based on the reduced national unadjusted payment rates, using our standard copayment methodology. We found that in many cases the beneficiary's copayment amount would remain the same as calculated based on the full national unadjusted payment rate, although the total reduced national unadjusted payment rate would decline because of the reduction to the conversion factor. Therefore, in these cases, the ratio of the copayment to the total payment (the coinsurance percentage) would increase rather than decrease if we were to calculate copayments based on the reduced national unadjusted payment rates. For example, in the case of APC 0019 (Level I Excision/Biopsy), the full national unadjusted payment rate for CY 2008 is $274.13 and the national unadjusted copayment is $71.87 or 26 percent of the full national unadjusted payment rate for the APC. If the reduction were in effect for CY 2008, the reduced national unadjusted payment rate would be $268.65, but the national unadjusted copayment, if calculated under the standard rules, would continue to be $71.87, which represents 27 percent of the reduced national unadjusted payment rate. We believe that the increased coinsurance percentage that results from this methodology is contradictory to the intent of the statute that the coinsurance percentage would never increase and is also contradictory to our copayment rules that are intended to gradually reduce the percentage of the payment attributed to copayments until the national unadjusted copayment is equal to the minimum unadjusted copayment for all services. To avoid this inconsistent result, we are proposing to apply the reporting ratio to the national unadjusted copayment and the minimum unadjusted copayment to calculate the national unadjusted copayments that would apply to each APC for hospitals that receive the reduced CY 2009 OPPS payment update. This application of the reporting ratio would be to the national unadjusted and minimum unadjusted copayments as calculated according to § 419.41, prior to any adjustment for hospitals' failure to meet the quality reporting standards according to § 419.43(h). Beneficiaries and secondary payers would thereby share in the reduction of payments to these hospitals. We believe that applying this copayment calculation methodology for those hospitals that fail to meet the HOP QDRP requirements allows us to appropriately set the national unadjusted copayments for the reduced OPPS national unadjusted payment rates and is most consistent with the eventual establishment of 20 percent of the payment rate as the uniform coinsurance percentage for all services under the OPPS. We are proposing to make changes to §§ 419.41, 419.42, and 419.43 in this proposed rule to reflect this policy. c. Treatment of Other Payment Adjustments We are proposing that all other applicable adjustments to the OPPS national unadjusted payment rates would apply in those cases when the OPD fee schedule increase factor is reduced for hospitals that fail to meet the requirements of the HOP QDRP. For example, the following standard adjustments would apply to the reduced national unadjusted payment rates: The wage index adjustment, the multiple procedure adjustment, the interrupted procedure adjustment, the rural sole community hospital adjustment, and the adjustment for devices furnished with full or partial credit or without cost. We believe that these adjustments continue to be equally applicable to payments for hospitals that do not meet the HOP QDRP requirements. Similarly, we are proposing that outlier payments would continue to be made when the criteria are met. For hospitals that fail to meet the quality data reporting requirements, we are proposing that the hospitals' costs would be compared to the reduced payments for purposes of outlier eligibility and payment calculation. We believe no changes in the regulation text would be necessary to implement this policy because using the reduced payment for these outlier eligibility and payment calculations is contemplated in the current regulations at § 419.43(d). This proposal conforms to current practice under the IPPS in this regard. Specifically, under the IPPS, for purposes of determining the hospital's eligibility for outlier payments, the hospital's estimated operating costs for a discharge are compared to the outlier cost threshold based on the hospital's actual DRG payment for the case. For a complete discussion of the OPPS outlier calculation and eligibility criteria, we refer readers to section II.F. of this proposed rule. E. Requirements for HOP Quality Data Reporting for CY 2010 and Subsequent Calendar Years In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66869), we stated that in order to participate in the HOP QDRP for CY 2009 and subsequent calendar years, hospitals must meet administrative, data collection and submission, and data validation requirements. Hospitals that do not meet the requirements of the HOP QDRP, as well as hospitals not participating in the program and hospitals that withdraw from the program, will not receive the full OPPS payment rate update. Instead, in accordance with section 1833(t)(17)(A) of the Act, those hospitals would receive a reduction of 2.0 percentage points in their updates for the affected payment year. For payment determinations affecting the CY 2010 payment update, we are proposing to implement the requirements listed below. Most of these requirements are the same as the requirements we implemented for the CY 2009 payment determination. 1. Administrative Requirements To participate in the HOP QDRP, several administrative steps must be completed. These steps require the hospital to: • Identify a QualityNet administrator who follows the registration process and submits the information to the appropriate CMS designated contractor. All CMS designated contractors will be identified on the QualityNet Web site. The same person may be the QualityNet administrator for both the IPPS RHQDAPU program and the OPPS HOP QDRP. This designation must be kept current and must be done, regardless of whether the hospital submits data directly to the CMS designated contractor or uses a vendor for transmission of data. • Register with QualityNet regardless of the method used for data submission. • Complete the Notice of Participation form if one has not been completed or if a hospital has previously submitted a withdrawal form. We remind hospitals that they do not need to submit another Notice of Participation form if they have already done so and they have not withdrawn from participation. At this time, the participation form for the HOP QDRP is separate from the IPPS RHQDAPU program and completing a Notice of Participation form for each program is required. Agreeing to participate includes acknowledging that the data submitted to the CMS designated contractor will be submitted to CMS and may also be shared with a different CMS contractor or contractors supporting the implementation of the HOP QDRP program. For HOP QDRP decisions affecting CY 2010 payment determinations, hospitals that share the same Medicare Provider Number (MPN), now known as the CMS Certification Number
(CCN)must complete a single Notice of Participation form. Hospitals with a newly acquired CCN and hospitals that are not participating in the CY 2009 HOP QDRP must send a completed paper copy of the Notice of Participation form to the appropriate CMS designated contractor in order to participate in the CY 2010 HOP QDRP. Hospitals with a newly acquired CCN must submit a Notice of Participation form no later than 30 days after receiving their new provider CCN. Hospitals that did not participate or withdrew from participation in the CY 2009 HOP QDRP must submit a Notice of Participation form by January 31, 2009 in order to participate in the CY 2010 HOP QDRP. We are proposing for CY 2011 to implement an on-line registration form and eliminate the paper form. We invite public comment on this proposed change. Hospitals with newly acquired CCNs, as well as hospitals that are not participating in the CY 2009 HOP QDRP, that do not properly submit a Notice of Participation form for CY 2010 as described above will be deemed as non-participatory, will not be able to submit data to the OPPS Clinical Warehouse, and will be deemed as not meeting reporting requirements under the HOP QDRP for CY 2010. Hospitals that have previously completed a Notice of Participation form and subsequently wish to terminate participation in the HOP QDRP must submit a withdrawal form. 2. Data Collection and Submission Requirements We are proposing that, to be eligible for the full OPPS payment update in CY 2010, hospitals must: • Collect data required for the CY 2010 measure set that will be finalized in the CY 2009 OPPS/ASC final rule and that will be published and maintained in the Specifications Manual that can be found at: *http://www.qualitynet.org.* It will not be necessary to submit data for all eligible cases for some measures if sufficient eligible case thresholds are met. Instead, for those measures where a hospital has a sufficiently large number of cases, the hospital will be allowed to sample cases and submit data for these sampled cases rather than submitting data from all eligible cases. This sampling scheme will be set out in the Specifications Manual at least 4 months in advance of required data collection. In addition, in order to reduce the burden on hospitals that treat a low number of patients who meet the submission requirements for a particular quality measure, we are proposing that beginning with services furnished on or after January 1, 2009, hospitals that have five or fewer claims (both Medicare and non-Medicare) for any measure included in a measure topic in a quarter will not be required to submit patient level data for the entire measure topic for that quarter. However, the hospital would still be required to submit its aggregate measure population and sample size counts for the applicable measure topic as part of its quarterly data submission. • Submit the data according to the data submission schedule that will be available on the QualityNet Web site. HOP QDRP data will continue to be submitted through the QualityNet secure Web site ( *https://www.qualitynet.org* ). This Web site meets or exceeds all current Health Insurance Portability and Accountability Act requirements. Submission deadlines will be four months after the last day of each calendar quarter for measures finalized in the CY 2009 OPPS/ASC final rule. Thus, for example, the submission deadline for data for services occurring during the first calendar quarter of 2009 (January-March 2009) will be August 1, 2009, and the submission deadline for the second calendar quarter of 2009 (April-June 2009) will be November 1, 2009. • Submit data to the OPPS Clinical Warehouse using either the CMS Abstraction and Reporting Tool for Outpatient Department measures (CART-OPD) or the tool of a third-party vendor that meets the measure specification requirements for data transmission to QualityNet. Hospitals must submit quality data through the QualityNet Web site to the OPPS Clinical Warehouse; a CMS-designated contractor will submit OPPS Clinical Warehouse data to CMS. Under current implementation, OPPS Clinical Warehouse data are not considered QIO data. However, it is possible that the information in the OPPS Clinical Warehouse may at some point be considered QIO information. If this occurs, OPPS Clinical Warehouse data may become subject to the stringent QIO confidentiality regulations in 42 CFR part 480. Hospitals are to submit data under the HOP QDRP on outpatient episodes of care to which the required measures apply. For the purposes of the HOP QDRP, an outpatient episode of care is defined as care provided to a patient who has not been admitted as an inpatient but who is registered on the hospital's medical records as an outpatient and receives services (rather than supplies alone) directly from the hospital. Every effort will be made to assure that data elements common to both inpatient and outpatient settings are defined consistently (such as “time of arrival”). To be accepted by the CMS designated contractor, submissions would, at a minimum, need to be timely, complete, and accurate. Data are considered to have been “timely” when data are submitted prior to the reporting deadline and have passed all CMS designated contractor edits. A “complete” submission is determined based on sampling criteria that will be published and maintained in the Specifications Manual to be found on the Web site at *http://www.qualitynet.org* , and must correspond to both the aggregate number of cases submitted by a hospital and the number of Medicare claims it submits for payment. To be considered “accurate,” submissions must pass validation, if applicable. • Submit the aggregate numbers of outpatient episodes of care which are eligible for submission under the HOP QDRP. These aggregated numbers of outpatient episodes would represent the number of outpatient episodes of care in the universe eligible for data reporting under the HOP QDRP. We plan to use the aggregate population and sample size data to assess data submission completeness and adherence to sampling requirements for Medicare and non-Medicare patients. 3. HOP QDRP Validation Requirements a. Proposed Data Validation Requirements for CY 2010 Validation, as discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66871), is intended to provide assurance of the accuracy of the hospital abstracted data. A data validation requirement was not implemented for purposes of the CY 2009 annual payment update. We are now proposing to implement validation requirements that will apply beginning with the CY 2010 payment determinations. Specifically, we propose to randomly select per year, 50 patient episodes of care that a hospital successfully submitted to the OPPS Clinical Warehouse for the relevant time period and validate those data by requesting that the hospital send the supporting medical record documentation that corresponds to each selected episode to a CMS contractor within 30 calendar days of the date of the request. The CMS contractor will then independently reabstract quality measure data elements from those records, compare the reabstracted data to the data originally submitted by the hospital, and provide feedback to each hospital on the results of the reabstraction. We propose to validate data reported beginning with January 2009 episodes of care to be used toward CY 2010 payment determinations. Unlike the IPPS RHQDAPU program, where we validate data for each participating hospital each quarter (for a total of 20 cases per year), we are proposing not to validate data submitted by every hospital participating in the HOP QDRP every year. Instead, we are proposing to validate data from 800 randomly selected hospitals (approximately 20 percent of all participating HOP QDRP hospitals) each year. In other words, only 800 participating HOP QDRP hospitals will have their data validated each year. However, we note that because the 800 hospitals will be selected randomly, every HOP QDRP participating hospital will be eligible each year for validation selection. We believe that the approach of validating a larger number of cases per hospital will produce a more reliable estimate of whether that hospital's data has been submitted accurately and will provide more reliable estimates of measure level data. For calculation of a hospital's validation score, we propose that percent agreement for each calculated clinical measure rather than for the individual data elements would be calculated. Due to the contingent nature of data elements comprising quality measures, a mismatch of a few data elements can result in the elimination of subsequent data elements from the data abstraction process. Thus, while the quality measure calculation can match, a low validation score based upon level of data element match can occur. Calculating match rates at the quality measure level obviates the issue of low validation scores at the data element level and also validates the data as they are publicly reported, that is, at the measure level. To receive the full OPPS payment rate update, the hospital must pass our validation requirement of a minimum of 80 percent reliability, based upon our validation process, for the designated time periods. In addition, an upper bound of 95 percent confidence interval to measure accuracy will be used. The methodology to be used for calculating the confidence intervals under the HOP QDRP will be the methodology currently utilized for the IPPS RHQDAPU program. We anticipate estimating the percent reliability based upon a review of submitted documentation and then calculating the upper 95 percent confidence limit for that estimate. If that upper limit is above the required 80 percent reliability threshold, we will consider the hospital's data “validated” for payment update purposes for CY 2010. We intend to use the design specific estimate of the variance for the confidence interval calculation, which, in this case, is a single stage cluster sample, with unequal cluster sizes. (For reference, see Cochran, William G.
(1977)Sampling Techniques, John Wiley & Sons, New York, chapter 3, section 3.12.) Each sampled medical record is considered as a cluster for variance estimation purposes, as documentation and abstraction errors are believed to be clustered within specific medical records. We solicit comment on this validation methodology, and believe that this approach is a reliable process that is suitable for the HOP QDRP. We also note that we are considering whether to propose a similar approach for the RHQDAPU program in future years. CMS continues to study approaches to improve its quality data reporting program, and aligning the RHQDAPU program and HOP QDRP validation approaches in the future is one possible area of improvement. b. Alternative Data Validation Approaches for CY 2011 We are also soliciting comments on three alternative validation methodologies. We are considering whether we could apply one of these methodologies to validate data as part of our CY 2011 payment determination. The first alternative approach would be to validate data from all participating HOP QDRP hospitals, as is currently done under the RHQDAPU program. Under this approach, data validation would be done on a random sample of 5 records per quarter (20 records per year) per hospital. A second alternative approach would be to select targeted hospitals based on criteria designed to measure whether the data being reported by them raises a concern regarding their accuracy. We welcome suggestions for criteria to be used for targeting hospitals for validation. Either percent agreement at the clinical measure level or the data element level (currently used for the RHQDAPU program) could be calculated for the validation score. Because few data have been collected under the HOP QDRP at this point, we are considering this approach for possible use in future years. A third alternative approach would involve some combination of the two approaches discussed above. F. Publication of HOP QDRP Data Section 1833(t)(17)(E) of the Act requires that the Secretary establish procedures to make data collected under this program available to the public and to report quality measures of process, structure, outcome, patients' perspectives of care, efficiency, and costs of care that relate to services furnished in outpatient settings in hospitals on the CMS Web site. We intend to make the information collected under the HOP QDRP public in CY 2010 by posting it on the CMS Web site. Participating hospitals will be granted the opportunity to review this information as we have recorded it before the information is published. CMS requires hospitals to sign and submit a Notice of Participation form in order to participate in the HOP QDRP. Hospitals signing this form agree that they will allow CMS to publicly report the quality measures as required by the HOP QDRP. All hospitals have a unique CCN, whereas a single hospital may have multiple National Provider Identifiers (NPI), another CMS identifier. We propose for CY 2010 that hospitals sharing the same CCN must combine data collection and submission across their multiple campuses for all clinical measures for public reporting purposes. We also propose to publish quality data by CCN under the HOP QDRP; however, we will note on our Web site where the publicly reported measures combine results from two or more hospitals. This approach is consistent with the approach taken under the IPPS RHQDAPU program. G. Proposed HOP QDRP Reconsideration and Appeals Procedures When the IPPS RHQDAPU program was initially implemented, it did not include a reconsideration submission process for hospitals. Subsequently, we received many requests for reconsideration of those payment decisions, and as a result established a process by which participating hospitals would submit requests for reconsideration. We anticipate similar concerns with the HOP QDRP and in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66875), we stated our intent to implement for the HOP QDRP a reconsideration process modeled after the reconsideration process we implemented for the IPPS RHQDAPU program. We are therefore proposing a mandatory reconsideration and appeals process that will apply to the CY 2010 payment decisions. In order to receive reconsideration of a CY 2010 payment decision, the hospitals must— • Submit to CMS, via QualityNet, a Reconsideration Request form that will be made available on the QualityNet Web site. This form shall contain the following information: ○ Hospital Medicare ID number known as the CCN. ○ Hospital Name. ○ CMS-identified reason for failure (as provided in any CMS notification of failure to the hospital). ○ Hospital basis for requesting reconsideration. This must identify the hospital's specific reason(s) for believing it met the HOP QDRP program requirements and should receive a full annual payment update. ○ CEO contact information, including name, e-mail address, telephone number, and mailing address (must include physical address, not just a post office box). ○ A copy of all material that the hospital submitted to CMS in order to receive the full payment update for the year that is the subject of the reconsideration request. Such material would include, but not be limited to, the applicable Notice of Participation form, quality measure data that the hospital submitted, and data that the hospital submitted in response to a validation request. ○ QualityNet System Administrator contact information, including name, e-mail address, telephone number, and mailing address (must include physical address, not just the post office box). ○ The request must be signed by the hospital's CEO. • Following receipt of a request for reconsideration, CMS will— ○ Provide an e-mail acknowledgement, using the contact information provided in the reconsideration request, to the CEO and the QualityNet Administrator notifying them that the hospital's request has been received. ○ Provide a formal response to the hospital CEO, using the contact information provided in the reconsideration request, notifying the hospital of the outcome of the reconsideration process. If a hospital is dissatisfied with the result of a HOP QDRP reconsideration decision, the hospital may file a claim under 42 CFR part 405, subpart R
(PRRB)appeal. H. Reporting of ASC Quality Data As discussed above, section 109(b) of the MIEA-TRHCA amended section 1833(i) of the Act by redesignating clause
(iv)as clause (v), adding section 1833(i)(2)(D)(iv) to the Act, and adding section 1833(i)(7) to the Act. These amendments authorize the Secretary to require ASCs to submit data on quality measures and to reduce the annual payment update in a year by 2.0 percentage points for ASCs that fail to do so. These provisions permit, but do not require, the Secretary to require ASCs to submit such data and to reduce any annual increase for non-compliant ASCs. In the CY 2008 OPPS/ASC final rule with comment period, we indicated that we intended to implement the provisions of section 109(b) of the MIEA-TRHCA in a future rulemaking (72 FR 66875). While we believe that promoting high quality care in the ASC setting through quality reporting is highly desirable and fully in line with our efforts under other payment systems, we believed that the transition to the revised payment system in CY 2008 posed such a significant challenge to ASCs that it would be most appropriate to allow some experience with the revised payment system before introducing other new requirements. We believed that implementation of quality reporting in CY 2008 would require systems changes and other accommodations by ASCs, facilities which do not have prior experience with quality reporting as hospitals already have for inpatient quality measures, at a time when they are implementing a significantly revised payment system. We believed that our CY 2008 decision to implement quality reporting for HOPDs prior to establishing quality reporting for ASCs would allow time for ASCs to adjust to the changes in payment and case-mix that are anticipated under the revised payment system. We would also gain experience with quality measurement in the ambulatory setting in order to identify the most appropriate measures for quality reporting in ASCs prior to the introduction of the requirement in ASCs. We continue to believe that promoting high quality care in the ASC setting through quality reporting is highly desirable and fully in line with our efforts under other payment systems. However, we continue to have the concerns outlined above for CY 2009 and, therefore, we intend to implement the provisions of section 109(b) of the MIEA-TRHCA in a future rulemaking. We invite public comment on this deferral of quality data reporting for ASCs and invite suggestions for quality measures geared toward the services provided by ASCs. We also seek comment on potential reporting mechanisms for ASC quality data, including electronic submission of these data. XVII. Healthcare-Associated Conditions A. Background In its landmark 1999 report “To Err is Human: Building a Safer Health System,” the Institute of Medicine found that medical errors, particularly hospital-acquired conditions (referred to as HACs in the FY 2008 IPPS proposed and final rules and the FY 2009 IPPS proposed rule) caused by medical errors, are a leading cause of morbidity and mortality in the United States. The report noted that the number of Americans who die each year as a result of medical errors that occur in hospitals may be as high as 98,000. The cost burden of hospital-acquired conditions is also high. Total national costs of these errors due to lost productivity, disability, and health care costs were estimated at $17 billion to $29 billion. 1 In 2000, the CDC estimated that hospital-acquired infections added nearly $5 billion to U.S. health care costs every year. 2 A 2007 study found that, in 2002, 1.7 million hospital-acquired infections were associated with 99,000 deaths. 3 Research has also shown that hospitals are not following recommended guidelines to avoid preventable hospital-acquired infections. A 2007 Leapfrog Group survey of 1,256 hospitals found that 87 percent of those hospitals do not follow recommendations to prevent many of the most common hospital-acquired infections. 4 1 Institute of Medicine: To Err Is Human: Building a Safer Health System, November 1999. Available at: *http://www.iom.edu/Object.File/Master/4/117/ToErr-8pager.pdf* . 2 Centers for Disease Control and Prevention: Press Release, March 2000. Available at: *http://www.cdc.gov/od/oc/media/pressrel/r2k0306b.htm* . 3 Klevens et al. Estimating Health Care-Associated Infections and Deaths in U.S. Hospitals, 2002. Public Health Reports. March-April 2007. Volume 122. 4 2007 Leapfrog Group Hospital Survey. The Leapfrog Group 2007. Available at: *http://www.leapfroggroup.org/media/file/Leapfrog_hospital_acquired_infections_release.pdf* . As one approach to combating hospital-acquired conditions in 2005 Congress authorized CMS to adjust Medicare IPPS hospital payments to encourage the prevention of these conditions. Section 1886(d)(4)(D) of the Act (as added by section 5001(c) of the Deficit Reduction Act
(DRA)of 2005, Pub. L. 109-171) required the Secretary to select by October 1, 2007, at least two conditions that are:
(1)High cost, high volume, or both;
(2)assigned to a higher paying DRG when present as a secondary diagnosis; and
(3)could reasonably have been prevented through the application of evidence-based guidelines. Beginning October 1, 2008, Medicare cannot assign an inpatient discharge that includes the selected conditions to a higher-paying MS-DRG unless these conditions were present on admission. Beginning October 1, 2007, CMS required hospitals to begin submitting information on Medicare hospital claims specifying whether diagnoses were present on admission (POA). In the FY 2008 IPPS final rule with comment (72 FR 47202 through 47218), eight conditions were selected for the hospital-acquired conditions payment provision. In the FY 2009 IPPS proposed rule (73 FR 23547 through 23562), 10 additional conditions are proposed for the hospital-acquired conditions payment provision. The preventable hospital-acquired conditions payment provision at section 1886(d)(4)(D) of the Act is part of an array of Medicare value-based purchasing
(VBP)tools that CMS is using to promote increased quality and efficiency of care. Those tools include measuring performance, using payment incentives, publicly reporting performance results, applying national and local coverage policy decisions, enforcing conditions of participation, and providing direct support for providers through QIO activities. CMS' application of VBP tools through various initiatives is transforming Medicare from a passive payer to an active purchaser of higher-value health care services. CMS is applying these strategies across the continuum of care for Medicare beneficiaries. B. Broadening the Concept of the IPPS Hospital-Acquired Conditions Payment Provision to the OPPS The principle of Medicare not paying more for the preventable hospital-acquired conditions during inpatient stays paid under the IPPS could be applied more broadly to other Medicare payment systems for conditions that occur or result from care in other settings. Other potential settings of care include HOPDs, ASCs, SNFs, home health care, end-stage renal disease
(ESRD)facilities, and physicians' practices; therefore, we will refer to conditions that occur in settings other than the inpatient hospital setting as “healthcare-associated conditions.” The implementation would be different for each setting, as each Medicare payment system is different, and the reasonable preventability through the application of evidence-based guidelines would vary for candidate conditions across the various care settings. However, alignment of incentives across settings of care is an important goal for all of CMS' VBP initiatives, including the hospital-acquired conditions payment provision. The risks of preventable medical errors leading to the occurrence of healthcare-associated conditions is likely high in the outpatient setting, given the substantially larger number of encounters and exposures that occur in those settings. For example, studies indicate that 400,000 preventable drug-related injuries occur each year in hospitals. Roughly 530,000 preventable drug-related injuries occur each year among Medicare beneficiaries in outpatient clinics. 5 These statistics clearly point to the significant magnitude of the problem of healthcare-associated conditions in outpatient settings. Indeed, we would have no reason to believe that medical errors would be less common in the outpatient setting than the hospital inpatient setting and, as increasingly more health care services are delivered in outpatient settings, we would expect the occurrence of healthcare-associated conditions stemming from outpatient care to grow directly as a result of this shift in sites of service. 5 Asplen, P., Wolcott, J., Bootman, J.L., Cronenwett, L.R. (editors): Preventing Medication Errors: Quality Chasm Series, The National Academy Press, 2007. Available at: *http://www.nap.edu/catalog.php?record_id=11623* . The HOPD, where a broad array of services covered and paid under the OPPS are provided, could be another setting for Medicare to extend the concept of not paying more for preventable healthcare-associated conditions that occur as a result of care provided during an encounter. Hospitals provide a range of services under the OPPS that may overlap or precede the inpatient activities of the hospital, including many surgical procedures and diagnostic tests that are commonly performed on both hospital inpatients and outpatients. Similarly, individuals who are eventually admitted as hospital inpatients often initiate their hospital encounter in the HOPD, where they receive clinic or emergency department visits or observation care that precede their ultimate hospital admission. In addition, like the IPPS, under the authority of section 1833(t)(17) of the Act (as amended by section 109(a) of the MIEA-TRHCA), the OPPS is also subject to the “pay-for-reporting” provision that affects the hospital annual payment update. Under this authority, hospitals report quality data for specified performance measures related to hospital outpatient services under the HOP QDRP. Hospitals that fail to meet the reporting requirements established by CMS for the payment update year receive a reduced payment update that is applicable to OPPS payments for most services furnished by hospitals in outpatient settings in the succeeding year. The HOP QDRP is further discussed in section XVI. of this proposed rule. We note that we are not proposing new Medicare policy in this discussion of healthcare-associated conditions as they relate to the OPPS. Instead, we are seeking public comments on options and considerations, including statutory authority, related to extending the IPPS hospital-acquired conditions payment provision for hospitals to the OPPS. We understand that there would be challenges in expanding the IPPS provision to other settings paid under different Medicare payment systems, and we are seeking public comments that present ideas and models for extending the principle behind the IPPS provision to the OPPS. To stimulate reflection and creativity, we present discussion in the following areas: • Criteria for possible candidate OPPS conditions • Collaboration process • Potential OPPS healthcare-associated conditions • OPPS infrastructure and payment for encounters resulting in healthcare-associated conditions 1. Criteria for Possible Candidate OPPS Conditions We have applied the following statutory criteria to the analysis of candidate inpatient conditions for the IPPS hospital-acquired conditions payment provision: • Cost or Volume—Medicare data must support that the selected inpatient conditions are high cost, high volume, or both. • Complicating Conditions
(CC)or Major Complication Conditions (MCC)—Selected inpatient conditions must be represented by ICD-9-CM diagnosis codes that clearly identify the condition, are designated as a CC or an MCC, and result in the assignment of the case to an MS-DRG that has a higher payment when the code is reported as a secondary diagnosis. That is, selected inpatient conditions must be a CC or an MCC that would, in the absence of this provision, result in assignment to a higher paying MS-DRG. • Evidence-Based Guidelines—Selected inpatient conditions must be reasonably presentable through the application of evidence-based guidelines. By reviewing guidelines developed by professional organizations, academic institutions, and other entities such as the Healthcare Infection Control Practices Advisory Committee (HICPAC), we evaluated whether guidelines are available that hospitals should follow to prevent the condition from occurring in the hospital. • Reasonably Preventable—Selected inpatient conditions must be reasonably preventable through the application of evidence-based guidelines. We are seeking public comment on the applicability of these criteria to the selection of candidate healthcare-associated conditions for the OPPS. Specifically, we are interested in comments on the definition of reasonably preventable in the HOPD setting. Additionally, there are significant infrastructure differences between the IPPS and the OPPS (discussed further in section XVII.V.4. below). OPPS payment is determined by assignment of HCPCS codes for items and services to APCs that represent groups of services that share clinical and resource characteristics. APC assignments for related services are determined by the similarities between the clinical aspects of services and their hospital costs from claims data, rather than by patient-specific clinical parameters such as level of severity or comorbidities. In some cases, there are multiple related levels of APCs for specific types of services defined by distinct HCPCS codes (for examples, APCs 0203 through 0207 for Levels I, II, III, and IV Nerve Injections) based on increasing hospital resource requirements, but, in other cases, there is only a single level APC to which all related HCPCS codes are assigned (for example, APC 0283 for Computed Tomography with Contrast). As explained below in more detail, under the OPPS—unlike the IPPS—payment generally depends on the package of services provided rather than severity of illness. Thus, as higher severity of illness does not directly affect payment under the OPPS as it does under the IPPS, it is not as straightforward as not recognizing the healthcare-associated condition when determining how not to pay a hospital for its higher costs in the OPPS when a preventable adverse event occurs as a result of treatment. We are interested in public comments generally and specifically those that would help answer the following questions: • Are there examples within the context of the reporting of ICD-9-CM codes for diagnoses and HCPCS codes for services on OPPS claims that could be used to identify where a higher payment for a hospital outpatient encounter would result from a medical error? • Are there examples of evidence-based guidelines related to the prevention of high volume or high cost conditions, or both, that are sufficiently rigorous to permit selection of healthcare-associated conditions that could reasonably have been prevented in the HOPD setting? • What other criteria should be considered in the selection of healthcare-associated conditions for the OPPS? 2. Collaboration Process CMS has worked with public health and infectious disease experts from the Centers for Disease Control and Prevention
(CDC)to select hospital-acquired conditions, including infections, that meet the statutory criteria under section 1886(d)(4)(D) of the Act for application in the hospital inpatient setting. CMS and CDC have also collaborated to develop the process for submission of a present on admission
(POA)indicator on the inpatient claim for each diagnosis. We would expect to continue our collaboration with CDC to examine the relevance and applicability of a POA indicator in the HOPD setting, and also to utilize their expertise in chronic diseases in the selection of candidate healthcare-associated conditions for the OPPS. In addition, we would expect to seek collaboration with the Agency for Healthcare Research and Quality
(AHRQ)to utilize its expertise in patient safety. We would also expect to seek collaboration with other Federal agencies and with medical specialty societies. We are soliciting public comment regarding a collaborative process for the identification of candidate healthcare-associated conditions for hospital outpatient services and a mechanism for public input from stakeholders. 3. Potential OPPS Healthcare-Associated Conditions The FY 2008 IPPS final rule with comment period (72 FR 47202 through 47218) provides a detailed analysis supporting the hospital-acquired conditions selected for application under the IPPS for FY 2008. We believe that only a small number of the hospital-acquired conditions adopted in the FY 2008 IPPS final rule with comment period could potentially be applicable to the OPPS. These include: • Object left in during surgery; • Air embolism; • Blood incompatibility; and • Falls and trauma fractures, dislocations, intracranial injuries, crushing injuries, and burns. The characteristics of these conditions are such that they would be relatively straightforward to incorporate in an OPPS healthcare-associated conditions payment provision. For example, these events would likely occur and be coded in the timeframe of an OPPS encounter reported on a single claim and determination of the occurrence of these events would probably not require sequential evaluation of claims over time. We are seeking public comment on the potential for considering these conditions as healthcare-associated conditions for the HOPD. Also, we are soliciting public comment on which of the hospital-acquired conditions proposed in the FY 2009 IPPS proposed rule (73 FR 23554 through 23555) might be considered for the OPPS. For reasons cited above, we believe only a small number of the proposed conditions (for example, iatrogenic pneumothorax) might be considered for the OPPS. We understand that this short list of possible candidate conditions for the OPPS is weighted toward surgical procedures. However, surgical procedures account for a large proportion (about 33 percent) of total OPPS spending. Overall, surgical procedures, together with imaging, separately payable drugs, and clinic visits, account for approximately 80 percent of OPPS spending. We acknowledge that reporting even this short list of healthcare-associated conditions as a secondary diagnosis on a claim in order to attribute their occurrence to the HOPD encounter might present problems for hospitals, particularly for the conditions resulting from trauma or falls. Consequently, we are also seeking comment on whether or not we could assume that these conditions reported as secondary diagnoses on OPPS claims would have developed during the encounter or whether the reporting of POA indicator information should be required under the OPPS (and perhaps under every Medicare payment system) because POA data increase the utility of claims for analyzing the characteristics of a clinical encounter. More generally, we recognize that patients may be cared for by different providers across settings and that the provider caring for certain types of complicating conditions may not have provided the health care services that led to the healthcare-associated condition. Therefore, we welcome broad public comment on the approaches and challenges related to the appropriate attribution of different types of healthcare-associated conditions encountered in the HOPD. Ultimately, payment policy for healthcare-associated conditions under the OPPS should fully address the broad range of clinical services in the HOPD where preventable healthcare-associated conditions may harm Medicare beneficiaries. Therefore, we are seeking public comment on additional candidate conditions that could have applicability to the OPPS, beyond those mentioned above that would be extensions from the IPPS final or proposed hospital-acquired conditions. We are particularly interested in recommendations of preventable healthcare-associated conditions that are likely to occur with frequency in the HOPD (and other outpatient settings) and that may be associated with significant harm, such as adverse drug events related to medication errors or other complications of care for which we either currently have no diagnosis codes or where correct coding for such occurrences has not been clearly defined. The CDC has been interested in further developing and expanding strategies to improve the External Cause-of-Injury coding (E-codes). A recent CDC Workgroup report discussed the importance and value of using high-quality E-coding. 6 Workgroup recommendations included enhancing the completeness and accuracy of E-coding and making E-coded data more useful for injury surveillance and prevention activities (including medical errors) at the local, State, and Federal levels. E-coding may represent a mechanism for coding clarity for preventable healthcare-associated conditions such as adverse drug events related to medication errors. In addition, we are seeking public comment on how to account for patient-specific risk factors that increase the likelihood of the occurrence of healthcare-associated conditions. 6 Centers for Disease Control and Prevention: Morbidity and Mortality Weekly Report, March 28, 2008, Vol. 57, No. RR-1. Available at: *http://cdc.gov/mmwr/mmwr_rr.html* . 4. OPPS Infrastructure and Payment for Encounters Resulting in Healthcare-Associated Conditions The OPPS infrastructure is a prospective payment system based on relative costs from hospital claims for services assigned to APC groups, where there is an individual payment rate that is specific to each APC. Each APC contains HCPCS codes for items or services that are clinically similar and that have comparable resource costs. In most cases, an APC payment is made for each unit of each separately payable HCPCS code through the code's assigned APC. For a single hospital outpatient clinical encounter in which a patient receives services described by several HCPCS codes with individual APC assignments (for example, emergency department visit, first hour of therapeutic intravenous infusion, chest x-ray, and electrocardiogram), the hospital would receive multiple APC payments for that encounter. This payment approach is altogether different from the MS-DRG-based IPPS, which groups the services provided to an inpatient into an assigned MS-DRG for which a single payment for the inpatient case is made. Under the MS-DRGs that took effect in FY 2008, there are currently 258 sets of MS-DRGs that are split into 2 or 3 subgroups based on the presence or absence of a CC or an MCC. (We refer readers to the FY 2008 IPPS final rule with comment period for a discussion of DRG reforms (72 FR 47141).) Prior to the October 1, 2008, effective date of the IPPS hospital-acquired conditions payment provision, if a condition acquired during a hospital stay was one of the conditions on the CC or MCC list, the hospital received a higher payment under the MS-DRGs. Beginning October 1, 2008, Medicare can no longer assign an inpatient hospital discharge to a higher paying MS-DRG if a selected hospital-acquired condition was not present on admission and no other CC or MCC that is not on the list of hospital-acquired conditions is present. That is, the case will be paid as though the secondary diagnosis (selected hospital-acquired condition) was not present, unless a nonselected secondary diagnosis that is a CC or an MCC is also present. Medicare will continue to assign a discharge to a higher paying MS-DRG if the selected condition was present on admission. As discussed previously, the OPPS currently has neither the infrastructure to identify POA indicator data nor the ability to stratify by CC or MCC for differential payment under the present APC payment methodology. OPPS claims report an “admitting diagnosis” which identifies the reason for the encounter prior to the establishment of the principal diagnosis, but the admitting diagnosis cannot be presumed to be equivalent to a diagnosis that is present on admission as reported on an inpatient claim. As a consequence, initial application of a healthcare-associated conditions payment policy under the OPPS might be limited in its scope of conditions as discussed above and in its options for payment adjustment. We welcome public comment on how necessary a POA indicator would be for the candidate conditions we have identified for potential use in the OPPS setting, and on how the OPPS infrastructure could be modified to allow for the incorporation of any POA information. We also seek recommendations regarding how hospital payment for a clinical encounter (which could include multiple individual APC payments) could be adjusted to reflect a derivative payment reduction similar to the CC/MCC MS-DRG adjustment for hospital-acquired conditions under the IPPS. Without a POA and risk stratification infrastructure for the OPPS, one approach to limiting OPPS payment for healthcare-associated conditions in the short term could be to pay for all services provided in the encounter that led to the healthcare-associated condition at the same reduced rate that would be paid to a hospital that failed to meet the quality reporting requirements. Currently, this would mean that the hospital payment for an encounter where a healthcare-associated condition resulted would be based on the OPPS conversion factor reduced by a 2 percentage point reduction to the market basket increase for the year. Alternatively, a flat case rate reduction percentage could be considered for all, or a subset, of services provided in the clinical encounter. This reduction could potentially be empirically derived from analyzing the costs of subsets of OPPS claims for Medicare beneficiaries with and without healthcare-associated conditions, or could possibly be developed through analysis of the IPPS payment relationship between MS-DRGs with the presence or absence of a CC or an MCC. Any reduction in OPPS payment should also be applied to the 20-percent beneficiary copayment requirement for the OPPS so that the beneficiary's cost sharing (which is paid for each service furnished) would not rise as a proportion of the total Medicare payment when the payment would be reduced. In contrast to the payment limitation approach used for the IPPS, we recognize that neither of the possible payment limitation approaches discussed above would specifically target the separate OPPS payment for those additional hospital services provided as a result of the healthcare-associated condition (as opposed to the payment for the services that initially brought the beneficiary to the HOPD). We note that the current OPPS payment structure sets a single payment rate for a service based on the APC median cost from all claims for services assigned to the APC, including cases with healthcare-associated conditions as well as cases without healthcare-associated conditions. Therefore, we believe it could be appropriate to reduce the single OPPS payment through one of the general payment limitation approaches described above for the OPPS because any additional costs of encounters resulting in healthcare-associated conditions would already be included in the base OPPS payment rates for most OPPS services. We are seeking public comment on these possibilities or other ways to use or adapt the current OPPS infrastructure for purposes of implementing a healthcare-associated conditions payment provision. A related application of the broad principle behind the IPPS hospital-acquired conditions payment provision could be accomplished through Medicare secondary payer policy by requiring the provider that failed to prevent the occurrence of a healthcare-associated condition in one setting to pay for all or part of the necessary followup care in a second setting. This would shield the Medicare program from paying for the downstream effects of a condition acquired in the first setting but treated in the second setting. This type of scenario would likely be common for certain healthcare-associated conditions related to HOPD care, given the relatively short lengths of stay for HOPD services. We are interested in public comments regarding this more general approach to extending beyond the inpatient setting the concept of not providing Medicare payment for healthcare-associated conditions, including the advantages and disadvantages of taking a payment system by payment system approach or of adopting the general principle of holding the provider that failed to prevent the occurrence of a condition in one setting responsible for payment of the followup care in any other setting. We emphasize that we are not proposing new Medicare policy in this discussion of extending the principle behind the IPPS hospital-acquired conditions payment provision to the OPPS. Rather, we are seeking public comment on this discussion of possible healthcare-associated conditions and the challenges associated with OPPS implementation of related payment policies. We look forward to continuing to work with stakeholders to improve the quality, safety, and value of health care. We view addressing the ongoing problem of preventable healthcare-associated conditions in outpatient settings, including the HOPD, as a key VBP strategy to sharpen the focus on such improvements beyond hospital inpatient care to those settings where the majority of Medicare beneficiaries receive most of their health care services. XVIII. Files Available to the Public Via the Internet A. Information in Addenda Related to the Proposed CY 2009 Hospital OPPS Addenda A and B to this proposed rule provide various data pertaining to the proposed CY 2009 payment for items and services under the OPPS. Addendum A, which includes a list of all APCs proposed to be payable under the OPPS, and Addendum B, which includes a list of all active HCPCS codes and their proposed CY 2009 OPPS payment status, are available to the public by clicking “Hospital Outpatient Regulations and Notices” on the CMS Web site at: *http://www.cms.hhs.gov/HospitalOutpatientPPS/* . For the convenience of the public, we are also including on the CMS Web site a table that displays the HCPCS data in Addendum B sorted by proposed APC assignment, identified as Addendum C. Addendum D1 defines the proposed payment status indicators that are used in Addenda A and B. Addendum D2 defines the proposed comment indicators that are used in Addendum B. Addendum E lists the proposed HCPCS codes that would only be payable as inpatient procedures and would not be payable under the OPPS. Addendum L contains the proposed out-migration wage adjustment for CY 2009. Addendum M lists the proposed HCPCS codes that would be members of a composite APC and identifies the composite APC to which they would be assigned. This addendum also identifies the status indicator for the code and a comment indicator if there is a proposed change in the code's status with regard to its membership in the composite APC. Each of the proposed HCPCS codes included in Addendum M has a single procedure payment APC, listed in Addendum B, to which it would be assigned when the criteria for assignment to the composite APC are not met. When the criteria for payment of the code through the composite APC are met, one unit of the composite APC payment is paid, thereby providing packaged payment for all services that are assigned to the composite APC according to the specific I/OCE logic that applies to the APC. We refer readers to the discussion of composite APCs in section II.A.2.e. of this proposed rule for a complete description of the composite APCs. These addenda and other supporting OPPS data files are available on the CMS Web site at: *http://www.cms.hhs.gov/HospitalOutpatientPPS/* . B. Information in Addenda Related to the Proposed CY 2009 ASC Payment System Addenda AA and BB to this proposed rule provide various data pertaining to the proposed CY 2009 payment for ASC covered surgical procedures and covered ancillary services for which ASCs may receive separate payment. Addendum AA lists the proposed ASC covered surgical procedures and the proposed CY 2009 ASC payment indicators and payment rates for each procedure. Addendum BB displays the proposed ASC covered ancillary services and their proposed CY 2009 payment indicators and payment rates. All proposed relative payment weights and payment rates for CY 2009 are a result of applying the revised ASC payment system methodology established in the final rule for the revised ASC payment system published in the **Federal Register** on August 2, 2007 (72 FR 42470 through 42548) to the proposed CY 2009 OPPS and MPFS ratesetting information. Addendum DD1 defines the proposed payment indicators that are used in Addenda AA and BB. Addendum DD2 defines the proposed comment indicators that are used in Addenda AA and BB. Addendum EE (available only on the Internet) lists the surgical procedures that we are proposing to exclude from Medicare payment if furnished in ASCs. The excluded procedures listed in Addendum EE are surgical procedures that would either be assigned to the OPPS inpatient list, would not be covered by Medicare, would be reported using a CPT unlisted code, or have been determined to pose a significant safety risk or are expected to require an overnight stay when performed in ASCs. These addenda and other supporting ASC data files are included on the CMS Web site at: *http://www.cms.hhs.gov/ASCPayment/* . The MPFS data files are located at: *http://www.cms.hhs.gov/PhysicianFeeSched/* . The links to all of the FY 2009 IPPS wage index related tables (that are proposed to be used for the CY 2009 OPPS) from the FY 2009 IPPS proposed rule (73 FR 23723 through 23886) are accessible on the CMS Web site at: *http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopofPage* . XIX. Collection of Information Requirements A. Legislative Requirement for Solicitation of Comments Under the Paperwork Reduction Act of 1995, we are required to provide 60-day notice in the **Federal Register** and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget
(OMB)for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995
(PRA)requires that we solicit comment on the following issues: • The need for the information collection and its usefulness in carrying out the proper functions of our agency. • The accuracy of our estimate of the information collection burden. • The quality, utility, and clarity of the information to be collected. • Recommendations to minimize the information collection burden on the affected public, including automated collection techniques. B. Associated Information Collections Not Specified in Regulatory Text This proposed rule makes reference to one associated information collection, HOP QDRP, that is not presented in the regulatory text. The following is a discussion of this collection: Section 419.43(h) requires hospitals, in order to qualify for the full annual update, to submit quality data to CMS, as specified by CMS. In this proposed rule, we are proposing the specific requirements related to the data that must be submitted for the update for CY 2010. The burden associated with this section is the time and effort associated with collecting and submitting the data, completing participating forms and submitting charts for chart audit validation. We estimate that there will be approximately 3,500 respondents per year. For hospitals to collect and submit the information on the required measures, we estimate it will take 30 minutes per sampled case. Further, based on an estimated 10 percent sample size and estimated populations of 2.5 to 5 million outpatient visits per measure, we estimate a total of 1,800,000 cases per year. In addition, we estimate that completing participation forms will require approximately 4 hours per hospital per year. We expect the burden for all of these hospitals to total 914,000 hours per year. For CY 2010, our proposed validation process requires a random sample of 800 participating hospitals to submit 50 charts on an annual basis. The burden associated with this requirement is the time and effort associated with collecting, copying, and submitting these charts. It will take approximately 20 hours per hospital to submit the 50 charts. There will be a total of approximately 40,000 charts (800 hospitals × 50 charts per hospital) submitted by the hospitals to CMS for a total burden of 16,000 hours. Therefore, the total burden for all hospitals would be 930,000 hours per year. We have submitted a copy of this proposed rule to OMB for its review of the information collection requirements described above. These requirements are not effective until they have been approved by OMB. C. Addresses for Submittal of Comments on ICRs If you comment on these information collection and recordkeeping requirements, please do either of the following: 1. Submit your comments electronically as specified in the ADDRESSES section of this proposed rule; or 2. Mail copies to the address specified in the ADDRESSES section of this proposed rule and to—Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10235, New Executive Office Building, Washington, DC 20503, *Attn:* Carolyn L. Raffaelli, CMS Desk Officer, CMS-1390-P, *e-mail: Carolyn_L._Raffaelli@omb.eop.gov,* Fax
(202)395-6974. XX. Response to Comments Because of the large number of public comments we normally receive on **Federal Register** documents, we are not able to acknowledge or respond to them individually. We will consider all comments we receive by the date and time specified in the DATES section of this proposed rule, and, when we proceed with a subsequent document(s), we will respond to those comments in the preamble to that document(s). XXI. Regulatory Impact Analysis A. Overall Impact We have examined the impacts of this proposed rule as required by Executive Order 12866 (September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act
(RFA)(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on Federalism, and the Congressional Review Act (5 U.S.C. 804(2)). 1. Executive Order 12866 Executive Order 12866 (as amended by Executive Order 13258) directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis
(RIA)must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). We estimate that the effects of the OPPS provisions that would be implemented by this proposed rule would result in expenditures exceeding $100 million in any 1 year. We estimate the total increase (from proposed changes in this proposed rule as well as enrollment, utilization, and case-mix changes) in expenditures under the OPPS for CY 2009 compared to CY 2008 to be approximately $1.8 billion. We estimate that the proposed update to the ASC payment system for CY 2009 (such as adding nine procedures to the ASC list of covered surgical procedures and designating five additional procedures as office-based) would have no net effect on Medicare expenditures in CY 2009 compared to the level of expenditures in CY 2008. A more detailed discussion of the effects of the proposed changes to the ASC payment system for CY 2009 is provided in section XXI.C. of this proposed rule. We estimate that this proposed rulemaking is “economically significant” as measured by the $100 million threshold, and hence also a major rule under the Congressional Review Act. Accordingly, we have prepared an initial Regulatory Impact Analysis that, to the best of our ability, presents the costs and benefits of the rulemaking. 2. Regulatory Flexibility Act
(RFA)The RFA requires agencies to analyze options for regulatory relief of small businesses if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals, other providers, ASCs, and other suppliers are considered to be small entities, either by being nonprofit organizations or by meeting the Small Business Administration
(SBA)definition of a small business (having revenues of $31.5 million or less in any 1 year). (For details on the latest standards for health care providers, we refer readers the SBA's Web site at: *http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf* (refer to the 620000 series). For purposes of the RFA, we have determined that most hospitals and most ASCs would be considered small entities according to the SBA size standards. Individuals and States are not included in the definition of a small entity. Therefore, the Secretary has determined that this proposed rule would have a significant impact on a substantial number of small entities. 3. Small Rural Hospitals In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we now define a small rural hospital as a hospital that is located outside of an urban area and has fewer than 100 beds. Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98-21) designated hospitals in certain New England counties as belonging to the adjacent urban areas. Thus, for OPPS purposes of this proposed rule, we continue to classify these hospitals as urban hospitals. We believe that the proposed changes to the OPPS in this proposed rule would affect both a substantial number of rural hospitals as well as other classes of hospitals and that the effects on some may be significant. The proposed changes to the ASC payment system for CY 2009 would have no effect on small rural hospitals. Therefore, the Secretary has determined that this proposed rule would have a significant impact on the operations of a substantial number of small rural hospitals. 4. Unfunded Mandates Section 202 of the Unfunded Mandates Reform Act of 1995
(UMRA)also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $130 million. This proposed rule will not mandate any requirements for State, local, or tribal government, nor will it affect private sector costs. 5. Federalism Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct costs on State and local governments, preempts State law, or otherwise has Federalism implications. We have examined the OPPS and ASC proposed provisions included in this proposed rule in accordance with Executive Order 13132, Federalism, and have determined that they would not have a substantial direct effect on State, local or tribal governments, preempt State law, or otherwise have a Federalism implication. As reflected in Table 45 below, we estimate that OPPS payments to governmental hospitals (including State and local governmental hospitals) would increase by 3.9 percent under this proposed rule. The proposed provisions related to payments to ASCs in CY 2009 would not affect payments to governmental hospitals. B. Effects of OPPS Changes in This Proposed Rule We are proposing to make several changes to the OPPS that are required by the statute. We are required under section 1833(t)(3)(C)(ii) of the Act to update annually the conversion factor used to determine the APC payment rates. We are also required under section 1833(t)(9)(A) of the Act to revise, not less often than annually, the wage index and other adjustments. In addition, we must review the clinical integrity of payment groups and weights at least annually. Accordingly, in this proposed rule, we are proposing to update the conversion factor and the wage index adjustment for hospital outpatient services furnished beginning January 1, 2009, as we discuss in sections II.B. and II.C., respectively, of this proposed rule. We also are proposing to revise the relative APC payment weights using claims data from January 1, 2007 through December 31, 2007 and updated cost report information. We are proposing to continue the payment adjustment for rural SCHs, including EACHs. We are proposing to remove two device categories, HCPCS code C1821 (Interspinous process distraction device (implantable)) and HCPCS code L8690 (Auditory osseointegrated device, includes all internal and external components), from pass-through payment status in CY 2009. Finally, we list the 15 drugs and biologicals in Table 20 of this proposed rule that we are proposing to remove from pass-through payment status for CY 2009. Under this proposed rule, the proposed update change to the conversion factor as provided by statute would increase total OPPS payments by 3.0 percent in CY 2009. The proposed changes to the APC weights, the proposed changes to the wage indices, and the proposed continuation of a payment adjustment for rural SCHs, including EACHs, would not increase OPPS payments because these proposed changes to the OPPS are budget neutral. However, these proposed updates do change the distribution of payments within the budget neutral system as shown in Table 45 below and described in more detail in this section. 1. Alternatives Considered Alternatives to the changes we are proposing to make and the reasons that we have chosen the options are discussed throughout this proposed rule. Some of the major issues discussed in this proposed rule and the options considered are discussed below. a. Alternatives Considered for Payment of Multiple Imaging Procedures We are proposing to revise our payment methodology for multiple imaging procedures performed during a single session using the same imaging modality by applying a composite APC payment methodology in CY 2009. We would provide one composite APC payment each time a hospital bills for second and subsequent procedures described by the HCPCS codes in one imaging family on a single date of service. As discussed in detail in section II.A.2.e.(5) of this proposed rule, we are proposing to utilize three imaging families of HCPCS codes based on imaging modality for purposes of this methodology (that is, Ultrasound, CT and CTA, and MRI and MRA). The proposed composite APC methodology for multiple imaging services would result in the creation of the following five new APCs due to the statutory requirement that we differentiate payment for OPPS imaging services provided with and without contrast: APC 8004 (Ultrasound Composite); APC 8005 (CT and CTA without Contrast Composite); APC 8006 (CT and CTA with Contrast Composite); APC 8007 (MRI and MRA without Contrast Composite); and APC 8008 (MRI and MRA with Contrast Composite). We considered three alternative CY 2009 payment options for imaging services under the OPPS. The first alternative we considered was to make no change to the current payment policy of providing hospitals a full APC payment for each imaging service on a claim, regardless of how many procedures are performed during a single session using the same imaging modality or whether the procedures are performed on contiguous body areas. We did not choose this alternative because we believe that continuing the current payment methodology would neither reflect nor promote the efficiencies hospitals can achieve when they perform multiple imaging procedures during a single session, as demonstrated in CY 2007 claims data and discussed in section II.A.2.e.(5) of this proposed rule. The second alternative we considered was to utilize the 11 families of imaging HCPCS codes applicable under the MPFS multiple imaging discount policy, distinct groups of codes which are based on imaging modality and contiguous body area, in the development of the multiple imaging composite APCs. We did not choose this alternative because, as we discuss in section II.A.2.e.(5) of this proposed rule, we believe that the large number of smaller MPFS families are neither appropriate nor necessary for the OPPS. These groups do not correspond to the larger APC groups of services paid under the OPPS in contrast to the service-specific payment under the MPFS, and would not reflect all efficiencies that may typically be gained in a single imaging session in the hospital outpatient setting of care. The third alternative we considered and are proposing for CY 2009 is to develop the multiple imaging composite APCs by collapsing the 11 MPFS imaging families into 3 imaging families based solely on imaging modality. We chose this alternative because we believe that the contiguous body area concept that is central to the MPFS imaging families is not necessary to capture potential efficiencies in a hospital outpatient imaging session. As discussed in section II.A.2.e.(5) of this proposed rule, we would not expect second and subsequent imaging services of the same modality involving noncontiguous body areas to require certain duplicate facility services. We believe that collapsing the 11 MPFS imaging families into 3 groups for purposes of the OPPS multiple imaging composite payment methodology most accurately reflects how these services are provided in the hospital outpatient setting of care and would most effectively encourage hospital efficiencies that could be achieved when multiple imaging procedures are performed during a single session. We also believe that deriving the proposed multiple imaging composite APCs from 3 collapsed imaging families, rather than the 11 MPFS imaging families, would enable us to maximize the use of multiple imaging claims for ratesetting. b. Alternatives Considered for the Proposed HOP QDRP Requirements for the CY 2009 Payment Update As discussed in section XVI.D.2. of this proposed rule, we are proposing to implement the payment provisions of section 109 of the MIEA-TRHCA, which amended section 1833(t) of the Act by adding a new subsection (17). In summary, new section 1833(t)(17)(A) of the Act requires that certain hospitals that fail to meet the HOP QDRP reporting requirements incur a 2.0 percentage point reduction to their OPD fee schedule increase factor, that is, the market basket update. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that will apply to certain outpatient items and services performed by hospitals that are required to report outpatient quality data and that fail to meet the HOP QDRP requirements. As described in detail in section XVI.D.2. of this proposed rule, we are proposing that, effective for services paid under the CY 2009 OPPS, we would calculate two conversion factors: A full market basket conversion factor (that is, the full CF) and a reduced market basket conversion factor (that is, the reduced CF). Therefore, we are proposing to calculate a “reporting ratio” which would apply to payment for hospitals that fail to meet their reporting requirements, by dividing the reduced CF by the full CF. Under the OPPS, we have two levels of Medicare beneficiary copayment for many separately paid services: The minimum unadjusted copayment and the national unadjusted copayment. The minimum unadjusted copayment is always 20 percent of the unadjusted national payment rate for each separately payable service. The national unadjusted copayment is determined based on the historic coinsurance rate for the services assigned to the APC. We considered two alternative policy options for the copayment calculation methodology for those hospitals that fail to meet the HOP QDRP requirements. The first alternative we considered was to calculate the national unadjusted copayments and the minimum unadjusted copayments based on the reduced national unadjusted payment amounts, using our standard copayment methodology. We found that in many cases the beneficiary copayment amount would remain the same as calculated based on the full national unadjusted payment rates, although the total reduced national unadjusted payment rate would decline because of the reduction to the conversion factor. Therefore, in these cases, the ratio of the copayment to the total payment (the coinsurance percentage) would increase rather than decrease if we were to calculate copayments based on the reduced national unadjusted payment rates. We did not choose this option because we believe that the increased coinsurance percentage that results from this methodology is contradictory to the intent of the statute that the coinsurance percentage should never increase and is also contradictory to our copayment rules that are intended to gradually reduce the percentage of the payment attributed to copayments until the copayment is equal to the minimum unadjusted copayment for all services. The second alternative we considered and are proposing is to apply the reporting ratio noted above to both the national unadjusted copayment and the minimum unadjusted copayment that would apply to each APC for hospitals that receive the reduced CY 2009 OPPS payment update. Beneficiaries and secondary payers would thereby not pay a higher coinsurance rate and would share in the reduction of payments to these hospitals. We believe that this alternative would allow us to appropriately set the national unadjusted copayments for the reduced OPPS national unadjusted payment rates and is most consistent with the eventual establishment of 20 percent of the payment rate as the uniform coinsurance percentage for all services under the OPPS. c. Alternatives Considered Regarding OPPS Cost Estimation for Relative Payment Weights Since the implementation of the OPPS, some commenters have raised concerns about potential bias in the OPPS cost-based weights due to “charge compression,” which is the practice of applying a lower charge markup to higher-cost services and a higher charge markup to lower-cost services. To explore this issue, in August 2006 we awarded a contract to RTI to study the effects of charge compression in calculating the IPPS relative weights, particularly with regard to the impact on inpatient DRG payments, and to consider methods to reduce the variation in the CCRs used to calculate costs for the IPPS relative weights across services within cost centers. Of specific note was analysis of a regression-based methodology estimating an average adjustment for CCRs by type of revenue code from an observed relationship between provider cost center CCRs and proportional billing of high and low cost services in the cost center. In August 2007, we expanded the RTI contract to determine whether the findings of the report were also applicable to the payment weights established under the OPPS and to more systematically explore cost estimation issues specific to the OPPS, including the revenue code-to-cost center crosswalk. We refer readers to section II.A.1.c. of this proposed rule for discussion of the issues and *http://www.rti.org* for the RTI findings and recommendations. The final RTI report describing its research findings was made available at about the time of the release of this proposed rule in July 2008. In this report, RTI made a number of recommendations for achieving more accurate estimates of cost for services paid under both the IPPS and the OPPS. This report also distinguished between two types of research findings and recommendations, that is, those pertaining to the accounting or cost report data itself and those related to statistical regression analysis. RTI made 11 recommendations to improve IPPS and OPPS cost estimation, including both short- and long-term accounting changes, and short-term regression-based and other statistical adjustments. For a detailed discussion of the RTI recommendations from the July 2008 report, we refer readers to section II.A.1.c. of this proposed rule. With respect to adopting the RTI recommendations, we considered three alternatives. The first alternative we considered was to propose no changes in response to the RTI findings and to accept none of the recommendations regarding cost estimation. We did not choose this alternative because we agree with RTI's findings that there are likely misassigned costs in the cost reports that could adversely affect the OPPS relative weights and that charge compression influences the OPPS payment weights. The second alternative we considered was to accept all of the RTI recommendations. We did not choose this alternative because of the magnitude and scope of impact on APC relative weights that would result from adopting all accounting and statistical changes in cost estimation that were recommended. Further, the numerous and substantial changes that RTI recommended have significantly complex interactions with one another and we believe that we should proceed cautiously in considering their adoption. In a budget neutral payment system, increases in payment for some services always result in reductions to payment for other services. We believe that any potential accounting and statistical changes in cost estimation are likely to result in significant shifts in payment within hospital departments and between hospitals and should be thoroughly assessed before we decide whether to propose changes beyond those we are proposing for CY 2009 as discussed below. The third alternative we considered and the one we are proposing in this OPPS rule is to break the single standard cost center 5600 into two proposed new standard cost centers: Drugs with High Overhead Cost Charged to Patients and Drugs with Low Overhead Cost Charged to Patients, to reduce the reallocation of pharmacy overhead cost from expensive to inexpensive drugs and biologicals when setting an equivalent average ASP-based payment amount in the future. This proposal is consistent with RTI's recommendation for creating a new cost center whose CCR would be used to adjust charges to costs for drugs requiring detail coding. We refer readers to section V.B.3. of this proposed rule for the discussion of the creation of the two proposed new cost centers and the potential approaches to distinguishing between the two groups of drugs and biologicals. We note that we made a similar proposal for the Medical Supplies Charged to Patients cost center in the FY 2009 IPPS proposed rule (73 FR 23546). We are proposing this alternative because we believe that it would lead to more accurate cost estimation for drugs and biologicals and their associated pharmacy overhead costs in a manner that is consistent with our current methodology for estimating costs under both the IPPS and the OPPS. The nature of cost report timing and changes in reporting charges would phase in the resulting changes to payment rates in such a way that the impact would be moderated compared to the effect of applying the regression adjustments to the current claims data. Therefore, this approach would ultimately provide more accurate payment for drugs and biologicals based on the costs of hospitals as reported to us and would also not introduce a high level of instability in the OPPS payment rates. Moreover, we would be able to complete a full assessment of the potential impact of all of the cost estimation changes recommended by RTI and to consider and analyze public comments on the numerous other recommendations before deciding whether or not to propose any of the other recommendations of the RTI study. 2. Limitations of Our Analysis The distributional impacts presented here are the projected effects of the proposed CY 2009 policy changes on various hospital groups. We post our hospital-specific estimated payments for CY 2009 with the other supporting documentation for this proposed rule. To view the hospital-specific estimates, we refer readers to the CMS Web site at: *http://www.cms.hhs.gov/HospitalOutpatientPPS/* . Select “regulations and notices” from the left side of the page and then select “CMS-1404-P” from the list of regulations and notices. The hospital-specific file layout and the hospital-specific file are listed with the other supporting documentation for this proposed rule. We show hospital-specific data only for hospitals whose claims were used for modeling the impacts shown in Table 45 below. We do not show proposed hospital-specific impacts for hospitals whose claims we were unable to use. We refer readers to section II.A.2. of this proposed rule for a discussion of the hospitals whose claims we do not use for ratesetting and impact purposes. We estimate the effects of the proposed individual policy changes by estimating payments per service, while holding all other payment policies constant. We use the best data available but do not attempt to predict behavioral responses to our proposed policy changes. In addition, we do not make adjustments for future changes in variables such as service volume, service-mix, or number of encounters. As we have done in previous rules, we are soliciting public comment and information about the anticipated effect of the proposed changes on hospitals and our methodology for estimating them. 3. Estimated Effects of This Proposed Rule on Hospitals Table 45 below shows the estimated impact of this proposed rule on hospitals. Historically, the first line of the impact table, which estimates the proposed change in payments to all hospitals, has always included cancer and children's hospitals, which are held harmless to their pre-BBA payment to cost ratio. We are also including CMHCs in the first line that includes all providers because we included CMHCs in our weight scaler estimate. We typically do not report a separate impact for CMHCs because they are paid for only one service, PHP, under the OPPS, and each CMHC can typically easily estimate the impact of the proposed changes by referencing payment for PHP services in Addendum A. Because we are proposing a CY 2009 policy change to PHP payment that is more complicated than a simple change in the payment rate, this year we present separate impacts for CMHCs in Table 45 and discuss the impact on CMHCs in section XXI.B.4. below. The estimated increase in the total payments made under the OPPS is limited by the increase to the conversion factor set under the methodology in the statute. The distributional impacts presented do not include assumptions about changes in volume and service-mix. The enactment of Pub. L. 108-173 on December 8, 2003 provided for the additional payment outside of the budget neutrality requirement for wage indices for specific hospitals reclassified under section 508. The MMSEA extended section 508 reclassifications through September 30, 2008. The amounts attributable to this reclassification are incorporated into the CY 2008 estimates but because section 508 expires in 2008, no additional payments under section 508 are considered for CY 2009 in this impact analysis. Table 45 shows the estimated redistribution of hospital and CMHC payments among providers as a result of proposed APC reconfiguration and recalibration; wage indices; the combined impact of the APC recalibration, wage effects, and the market basket update to the conversion factor; and, finally, estimated redistribution considering all proposed payments for CY 2009 relative to all payments for CY 2008, including the impact of changes in the outlier threshold and changes to the pass-through estimate. We did not model a budget neutrality adjustment for the rural adjustment for SCHs, including EACHs, because we are not proposing any changes to the policy for CY 2009. Because updates to the conversion factor, including the update of the market basket and the addition of money not dedicated to pass-through payment for CY 2009, are applied uniformly across services, observed redistributions of payments in the impact table for hospitals largely depend on the mix of services furnished by a hospital (for example, how the APCs for the hospital's most frequently furnished services would change), and the impact of the wage index changes on the hospital. However, total payments made under this system and the extent to which this proposed rule would redistribute money during implementation also would depend on changes in volume, practice patterns, and the mix of services billed between CY 2008 and CY 2009, which CMS cannot forecast. Overall, the proposed OPPS rates for CY 2009 would have a positive effect for providers paid under the OPPS, resulting in a 3.2 percent increase in Medicare payments. Removing cancer and children's hospitals because their payments are held harmless to the pre-BBA ratio between payment and cost, and CMHCs, suggests that proposed changes would result in a 3.6 percent increase in Medicare payments to all other hospitals, exclusive of transitional pass-through payments. To illustrate the impact of the proposed CY 2009 changes, our analysis begins with a baseline simulation model that uses the final CY 2008 weights, the FY 2008 final post-reclassification IPPS wage indices, and the final CY 2008 conversion factor. Column 2 in Table 45 shows the independent effect of proposed changes resulting from the reclassification of services among APC groups and the proposed recalibration of APC weights, based on 12 months of CY 2007 hospital OPPS claims data and more recent cost report data. We modeled the effect of proposed APC recalibration changes for CY 2009 by varying only the weights (the final CY 2008 weights versus the estimated proposed CY 2009 weights) and calculating the percent difference in payments. Column 2 also reflects the effect of proposed changes resulting from the APC reclassification and recalibration changes and any changes in multiple procedure discount patterns that occur as a result of the changes in the relative magnitude of proposed payment weights. Column 3 reflects the independent effects of updated wage indices, including proposed application of budget neutrality for the rural floor policy on a statewide basis. While we have included changes to the rural adjustment in this column in the past, we did not model a budget neutrality adjustment for the rural adjustment for SCHs, including EACHs, because we are proposing no changes to the policy for CY 2009. We modeled the independent effect of updating the wage index and the rural adjustment by varying only the wage index, using the proposed CY 2009 scaled weights and a CY 2008 conversion factor that included a budget neutrality adjustment for changes in wage effects and the rural adjustment between CY 2008 and CY 2009. Column 4 demonstrates the combined “budget neutral” impact of APC recalibration (that is, Column 2), the wage index update (that is, Column 3), as well as the impact of updating the conversion factor with the market basket update. We modeled the independent effect of the budget neutrality adjustments and the market basket update by using the weights and wage indices for each year, and using a CY 2008 conversion factor that included the market basket update and budget neutrality adjustments for differences in wages. Finally, Column 5 depicts the full impact of the CY 2009 proposed policies on each hospital group by including the effect of all the proposed changes for CY 2009 (including the APC reconfiguration and recalibration shown in Column 2) and comparing them to all estimated payments in CY 2008, including changes to the wage index under section 508 of Pub. L. 108-173 as extended by the MMSEA. Column 5 shows the combined budget neutral effects of Columns 2 through 4, plus the impact of the proposed change to the fixed outlier threshold from $1,575 to $1,800; the impact of expiring section 508 reclassification wage index increases; and the impact of reducing the estimate of the percentage of total OPPS payments dedicated to transitional pass-through payments. We estimate that these proposed cumulative changes would increase payments to all providers by 3.2 percent for CY 2009. We modeled the independent effect of all proposed changes in Column 5 using the final weights for CY 2008 and the proposed weights for CY 2009. We used the final conversion factor for CY 2008 of $63.694 and the proposed CY 2009 conversion factor of $65.684. Column 5 also contains simulated outlier payments for each year. We used the charge inflation factor used in the FY 2009 IPPS proposed rule of 5.84 percent (1.0585) to increase individual costs on the CY 2007 claims to reflect CY 2008 dollars, and we used the most recent overall CCR in the April 2008 Outpatient Provider-Specific File. Using the CY 2007 claims and a 5.84 percent charge inflation factor, we currently estimate that outlier payments for CY 2008, using a multiple threshold of 1.75 and a fixed-dollar threshold of $1,575, would be approximately 0.76 percent of total payments. Outlier payments of 0.76 percent appear in the CY 2008 comparison in Column 5. We used the same set of claims and a charge inflation factor of 12.04 percent (1.1204) and the CCRs in the April 2008 Outpatient Provider-Specific File, with an adjustment of 0.9920 to reflect relative changes in cost and charge inflation between CY 2007 and CY 2009, to model the proposed CY 2009 outliers at 1.0 percent of total payments using a multiple threshold of 1.75 and a fixed-dollar threshold of $1,800. Column 1: Total Number of Hospitals The first line in Column 1 in Table 45 shows the total number of providers (4,181), including cancer and children's hospitals and CMHCs for which we were able to use CY 2007 hospital outpatient claims to model CY 2008 and CY 2009 payments by classes of hospitals. We excluded all hospitals for which we could not accurately estimate CY 2008 or CY 2009 payment and entities that are not paid under the OPPS. The latter entities include CAHs, all-inclusive hospitals, and hospitals located in Guam, the U.S. Virgin Islands, Northern Mariana Islands, American Samoa, and the State of Maryland. This process is discussed in greater detail in section II.A. of this proposed rule. At this time, we are unable to calculate a disproportionate share
(DSH)variable for hospitals not participating in the IPPS. Hospitals for which we do not have a DSH variable are grouped separately and generally include psychiatric hospitals, rehabilitation hospitals, and LTCHs. We show the total number (3,902) of OPPS hospitals, excluding the hold-harmless cancer and children's hospitals, and CMHCs, on the second line of the table. We excluded cancer and children's hospitals because section 1833(t)(7)(D) of the Act permanently holds harmless cancer hospitals and children's hospitals to a proportion of their pre-BBA payment relative to their pre-BBA costs and, therefore, we removed them from our impact analyses. We show the isolated impact on 218 CMHCs in the last row of the impact table and discuss that impact separately below. Column 2: APC Changes Due to Reassignment and Recalibration This column shows the combined effects of proposed reconfiguration, recalibration, and other policies (such as composite payment for multiple imaging procedures performed on the same day, payment for drugs at ASP+4 percent, and changes in payment for PHP services). In many cases, the redistribution created by the reduction in the PHP payment offsets other recalibration losses. Specifically, the reduction in PHP payment is redistributed to hospitals and reflected in the 0.4 percent increase for the 3,902 hospitals that remain after excluding hospitals held harmless and CMHCs. Overall, these proposed changes would increase payments to urban hospitals by 0.4 percent. We estimate that large urban hospitals would see an increase of 0.4 percent and other urban hospitals would see a 0.5 percent increase in payments, all attributable to recalibration. Overall, rural hospitals would show a 0.5 percent increase as a result of proposed changes to the APC structure. With the money redistributed from PHP services, rural hospitals of all bed sizes would experience no change or would experience increases ranging from 0.4 to 0.7 percent. Among teaching hospitals, the largest observed impacts resulting from APC recalibration include an increase of 0.6 percent for major teaching hospitals and an increase of 0.4 percent for minor teaching hospitals. Classifying hospitals by type of ownership suggests that proprietary hospitals would see an increase of 0.3 percent, governmental hospitals would see an increase of 0.4 percent, and voluntary hospitals would see an increase of 0.5 percent. We note also that both low volume urban and rural hospitals with less than 5,000 lines and hospitals for which DSH payments are not available would experience decreases of 0.2 to 6.2 percent as a result of the decline in payment for PHP services and the proposed change in payment policy for PHP services from one per diem rate in CY 2008 to two per diem rates in CY 2009. Column 3: New Wage Indices and the Effect of the Rural Adjustment This column estimates the impact of applying the proposed FY 2009 IPPS wage indices for the CY 2009 OPPS. Overall, these proposed changes would not change the payments to urban or rural hospitals. Among teaching hospitals, the largest observed impact resulting from proposed changes to the wage indices is a decrease of 0.1 percent for major teaching hospitals in contrast to no change for minor teaching hospitals. Classifying hospitals by type of ownership suggests that proprietary hospitals would gain 0.1 percent, governmental hospitals would see an increase of 0.2 percent, and voluntary hospitals would experience no change. We estimate that the combination of updated wage data from FY 2005 cost reports and statewide application of rural floor budget neutrality redistributes payment among regions. Both rural and urban areas in New England and the Middle Atlantic states experience declines up to 2.0 percent. The Central regions (excluding the East North Central regions) and the Pacific regions of the country experience increases up to 0.5 percent. Change in Puerto Rico's wage data contributes to the decrease of 0.8 percent. Column 4: All Proposed Budget Neutrality Changes and Market Basket Update With the exception of urban hospitals with the lowest volume of services and hospitals not paid under the IPPS, including psychiatric hospitals, rehabilitation hospitals, and long term care hospitals (DSH not available), the addition of the proposed market basket update of 3.0 percent mitigates any negative impacts on proposed payments for CY 2009 created by the budget neutrality adjustments made in Columns 2 and 3. In general, all hospitals would see an increase of 3.4 percent, attributable to the proposed 3.0 percent market basket increase and the 0.4 percent increase in payment weight created by the reduction in payment for PHP services that is then redistributed to other services. Overall, these proposed changes would increase payments to urban hospitals by 3.4 percent. We estimate that large urban hospitals would see an increase of 3.3 percent and other urban hospitals would see a 3.6 percent increase. In contrast, small urban hospitals that bill fewer than 5,000 lines per year would experience a decrease in payment of 1.0 percent, largely as a result of the decrease in payment for PHP and mental health services appearing in Column 2. Overall, rural hospitals would show a 3.5 percent increase as a result of the proposed market basket update. Rural hospitals that bill less than 5,000 lines would see a 3.5 percent increase. Increases in payment due to the proposed wage index modestly offset the reduction in payment for PHP services in low volume rural hospitals. Rural hospitals that bill more than 5,000 lines would experience increases of 2.7 to 3.6 percent. Among teaching hospitals, the observed impacts resulting from the proposed market basket update include an increase of 3.4 percent for both major and minor teaching hospitals. Classifying hospitals by type of ownership suggests that proprietary hospitals would increase 3.3 percent, governmental hospitals would increase 3.6 percent, and voluntary hospitals would experience an increase of 3.4 percent. Column 5: All Proposed Changes for CY 2009 Column 5 compares all proposed changes for CY 2009 to final payment for CY 2008 and includes the expiring section 508 reclassification wage indices, the change in the outlier threshold, and the difference in pass-through estimates which are not included in the combined percentages shown in Column 4. Overall, we estimate that providers would see an increase of 3.2 percent under this proposed rule in CY 2009 relative to total spending in CY 2008. The projected 3.2 percent increase for all providers in Column 5 reflects the proposed 3.0 percent market basket increase, plus 0.02 percent for the proposed change in the pass-through estimate between CY 2008 and CY 2009, plus 0.24 percent for the difference in estimated outlier payments between CY 2008 (0.76 percent) and CY 2009 (1.0 percent), less 0.09 percent for the expired section 508 wage payments. When we exclude cancer and children's hospitals (which are held harmless to their pre-OPPS costs) and CMHCs, the gain would be 3.6 percent. The combined effect of all proposed changes for CY 2009 would increase payments to urban hospitals by 3.6 percent. We estimate that large urban hospitals would see a 3.5 percent increase, while “other” urban hospitals would experience an increase of 3.6 percent. Urban hospitals that bill less than 5,000 lines would experience a decrease of 1.0 percent. Overall, rural hospitals would show a 3.6 percent increase as a result of the combined effects of all proposed changes for CY 2009. Rural hospitals that bill less than 5,000 lines would experience an increase of 4.0 percent, which is greater than the 3.5 percent increase in Column 4. All rural hospitals that bill greater than 5,000 lines would experience increases ranging from 2.9 percent to 3.7 percent. Among teaching hospitals, the largest observed impacts resulting from the combined effects of all proposed changes include an increase of 3.9 percent for major teaching hospitals and an increase of 3.5 percent for minor teaching hospitals. Classifying hospitals by type of ownership suggests that proprietary hospitals would gain 3.4 percent, governmental hospitals would experience an increase of 3.9 percent, and voluntary hospitals would experience an increase of 3.5 percent. 4. Estimated Effects of This Proposed Rule on CMHCs The last row of the impact analysis in Table 45 demonstrates the impact on CMHCs. We modeled this impact assuming that CMHCs would continue to provide the same number of days of PHP care, with each day having either three services or four or more services, as seen in the CY 2007 claims data. Using these assumptions, there would be a 33.2 percent decrease in payments to CMHCs due to these proposed APC policy changes (shown in Column 2). Column 3 shows that the CY 2009 proposed wage index updates account for a small decrease in payments to CMHCs (0.2 percent). We note that all providers paid under the OPPS, including CMHCs, receive a 3.0 percent market basket increase (shown in Column 4). Combining this market basket increase, along with proposed changes in APC policy for CY 2009 and the CY 2009 wage index updates, the combined impact on CMHCs for CY 2009 is a 30.3 percent decrease. We anticipate that CMHCs would change their behavior in response to the CY 2009 proposed payment rates for PHP services, consistent with patient need. By providing one additional qualifying partial hospitalization service, CMHCs would qualify for payment of proposed APC 0173 (Level II Partial Hospitalization payment (4 or more services)), whose proposed payment rate is approximately $174, rather than proposed APC 0172 (Level I Partial Hospitalization payment rate (3 services)), whose proposed payment rate is approximately $140. This change in behavior would lessen the impact on CMHCs in CY 2009. Using the CY 2007 CMHC claims data, there are a large number of days provided by CMHCs with only 3 services furnished in a given day (nearly 1 million days billed by CMHCs were for 3 units of service). If CMHCs were to provide 1 additional service on 50 percent of those 1 million days with 3 services, we estimate that the impact on CY 2009 payment to CMHCs would be a 26.8 percent decrease rather than a 33.2 percent decrease (which is the decrease due to proposed APC changes, while keeping the number of days with 3 services the same as reflected in CY 2007 claims data). Continuing to use the assumption that 50 percent of CMHC days would qualify for the Level II PHP payment rate, we estimate that the combined impact including all changes (market basket increase, proposed changes in APC policy for CY 2009, and CY 2009 wage index updates), on CMHCs for CY 2009 would be approximately a 24.7 percent decrease in payment. We believe that CMHCs may provide additional services on days in excess of the 50 percent of current 3 service days assumed in the scenario described above, behavior which would further mitigate the estimated decrease in payments to CMHCs. Furthermore, we note that there are approximately 40,000 days billed by CMHCs in CY 2007 with only 1 or 2 PHP services. The impact analysis shown in Table 45 is modeled assuming that those days would not receive any payment, in accordance with our proposed policy to deny payment for days with less than three services. However, we anticipate that CMHCs would also change their behavior in response to our proposed policy to deny payment for days with less than three services, to the extent providing additional services is consistent with the plan of care established by each patient's physician. This change in behavior would mitigate modeled payment reductions to CMHCs because additional days would qualify for proposed new APC 0172. BILLING CODE 4120-01-P EP18JY08.668 EP18JY08.669 EP18JY08.670 BILLING CODE 4120-01-C 5. Estimated Effect of This Proposed Rule on Beneficiaries For services for which the beneficiary pays a copayment of 20 percent of the payment rate, the beneficiary share of payment would increase for services for which the OPPS payments would rise and would decrease for services for which the OPPS payments would fall. For example, for a service assigned to Level IV Needle Biopsy/Aspiration Except Bone Marrow (APC 0037) in the CY 2008 OPPS, the national unadjusted copayment was $228.76, and the minimum unadjusted copayment was $172.95. For CY 2009, the proposed national unadjusted copayment for APC 0037 is $228.76, the same national unadjusted copayment in effect for CY 2008. The proposed minimum unadjusted copayment for APC 0037 is $177.69, or 20 percent of the proposed national unadjusted payment rate for APC 0037 of $888.42 for CY 2009. The proposed minimum unadjusted copayment would rise because the proposed payment rate for APC 0037 would rise for CY 2009. In all cases, the statute limits beneficiary liability for copayment for a service to the inpatient hospital deductible for the applicable year. The CY 2009 inpatient deductible is not yet available. In order to better understand the impact of proposed changes in copayment on beneficiaries, we modeled the percent change in total copayment liability using CY 2007 claims. We estimate, using the claims of the 4,181 hospitals and CMHCs on which our modeling is based, that total beneficiary liability for copayments would decline as an overall percentage of total payments from 24.9 percent in CY 2008 to 23.1 percent in CY 2009. This estimated decline in beneficiary liability is a consequence of the APC recalibration and reconfiguration we are proposing for CY 2009. 6. Conclusion The proposed changes in this proposed rule would affect all classes of hospitals. Some classes of hospitals would experience significant gains and others less significant gains, but almost all classes of hospitals would experience positive updates in OPPS payments in CY 2009. Table 45 demonstrates the estimated distributional impact of the OPPS budget neutrality requirements that results in a 3.2 percent increase in payments for CY 2009, after considering all proposed changes to APC reconfiguration and recalibration, as well as the proposed market basket increase, wage index changes, estimated payment for outliers, and proposed changes to the pass-through payment estimate. The accompanying discussion, in combination with the rest of this proposed rule, constitutes a regulatory impact analysis. 7. Accounting Statement As required by OMB Circular A-4 (available at *http://www.whitehouse.gov/omb/circulars/a004a-4.pdf* ), in Table 46, we have prepared an accounting statement showing the CY 2009 estimated hospital OPPS incurred benefit impact associated with the proposed CY 2009 hospital outpatient market basket update shown in this proposed rule, based on the 2008 Trustees' Report baseline. All estimated impacts are classified as transfers. Table 46.—Accounting Statement: CY 2009 Estimated Hospital OPPS Incurred Benefit Impact Associated With the Proposed CY 2009 Hospital Outpatient Market Basket Update [In billions] Category Transfers Annualized Monetized Transfers $0.6. From Whom to Whom Federal Government to outpatient hospitals and other providers who received payment under the hospital OPPS. Total $0.6. C. Effects of Proposed ASC Payment System Changes in This Proposed Rule On August 2, 2007, we published in the **Federal Register** the final rule for the revised ASC payment system, effective January 1, 2008 (72 FR 42470). In that final rule, we: Adopted the methodologies to set payment rates for covered ASC services to implement the revised payment system so that it would be designed to result in budget neutrality as required by section 626 of Public Law 108-173; established that the OPPS relative payment weights would be the basis for payment and that we would update the system annually as part of the OPPS rulemaking cycle; and provided that the revised ASC payment rates would be phased in over four years. During the 4-year transition to full implementation of the revised ASC rates, payments for surgical procedures paid in ASCs in CY 2007 will be made using a blend of the CY 2007 ASC payment rate and the revised ASC payment rate for that calendar year. In CY 2009, we are proposing to pay ASCs using a 50/50 blend, in which payment would be calculated by adding 50 percent of the CY 2007 ASC rate for a surgical procedure on the CY 2007 ASC list of covered surgical procedures and 50 percent of the CY 2009 revised ASC rate for the same procedure. For CY 2010, we would transition the blend to a 25/75 blend of the CY 2007 ASC rate and the revised ASC payment rate. Beginning in CY 2011, we would pay ASCs for all covered surgical procedures, including those on the CY 2007 ASC list, at the full revised ASC payment rates. Payment for procedures that were not included on the ASC list of covered surgical procedures in CY 2007 are not subject to the transitional payment methodology. ASC payment rates are calculated by multiplying the ASC conversion factor by the ASC relative payment weight. As discussed fully in section XV. of this proposed rule, we set the CY 2009 proposed ASC relative payment weights by scaling unadjusted CY 2009 ASC relative payment weights by the ASC scaler of 0.9753. These weights take into consideration the 50/50 blend for the second year of transitional payment for certain services. If there were no transition, the scaler for CY 2009 fully implemented payment rates would be 0.9412. The estimated effects on payment rates during this transitional period are varied and are reflected in the estimated payments displayed in Tables 47 and 48 below. The proposed CY 2009 ASC conversion factor was calculated by adjusting the CY 2008 ASC conversion factor to account for changes in the pre-floor and pre-reclassified hospital wage indices between CY 2008 and CY 2009. Under section 1833(i)(2)(C)(iv) of the Act, there is no inflation update to the ASC conversion factor for CY 2009. The proposed CY 2009 ASC conversion factor is $41.384. 1. Alternatives Considered Alternatives to the changes we are making and the reasons that we have chosen the options are discussed throughout this proposed rule. a. Office-Based Procedures According to our final policy for the revised ASC payment system, we designate as office-based those procedures that are added to the ASC list of covered surgical procedures in CY 2008 or later years and that we determine are usually performed in physicians' offices based on consideration of the most recent available volume and utilization data for each individual procedure code and/or, if appropriate, the clinical characteristics, utilization, and volume of related codes. We establish payment for procedures designated as office-based at the lesser of the MPFS nonfacility PE RVU amount or the ASC rate developed according to the standard methodology of the revised ASC payment system. In developing this proposed rule, we reviewed the newly available CY 2007 utilization data for all surgical procedures added to the ASC list of covered surgical procedures in CY 2008 and for those procedures for which the office-based designation is temporary in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66840 through 66841). Based on that review, and as discussed in section XV.C.1.b. of this proposed rule, we are proposing to newly designate five surgical procedures as office-based, with four of those designations as permanent. We considered two alternatives in developing this policy. The first alternative we considered was to make no change to the procedure payment designations. This would mean that we would continue to pay for the five procedures we are proposing to designate as office-based at an ASC payment rate developed according to the standard methodology of the revised ASC payment system. We did not select this alternative because our analysis of data for these services and related procedures indicated that the five procedures we are proposing to designate as office-based could be considered to be usually performed in physicians' offices. Consistent with our final policy adopted in the August 2, 2007 revised ASC payment system final rule (72 FR 42509), we were concerned that if these services were not designated as office-based, their ASC payment could create financial incentives for the procedures to shift from physicians' offices to ASCs for reasons unrelated to clinical decisions regarding the most appropriate setting for surgical care. The second alternative we considered, and the alternative we selected, is to propose to designate five additional procedures added to the ASC list of covered surgical procedures in CY 2008 as office-based for CY 2009. We selected this alternative because our claims data indicate that these procedures could be considered to be usually performed in physicians' offices. We believe that designating these procedures as office-based, which results in the ASC payment rate for these procedures potentially being capped at the physician's office rate (that is, the MPFS nonfacility PE RVU amount), if applicable, is an appropriate step to ensure that Medicare payment policy does not create financial incentives for such procedures to shift unnecessarily from physicians' offices to ASCs, consistent with our final policy adopted in the August 2, 2007 revised ASC payment system final rule. b. Covered Surgical Procedures According to our final policy for the revised ASC payment system, we designate as covered surgical procedures all surgical procedures that we determine do not pose a significant risk to beneficiary safety or are not expected to require an overnight stay. In developing this proposed rule, we reviewed the clinical characteristics and newly available CY 2007 utilization data, if applicable, for all procedures reported by Category III CPT codes implemented July 1, 2008 and surgical procedures that were excluded from ASC payment for CY 2008. Based on that review, we identified nine surgical procedures that meet the criteria for inclusion on the ASC list of covered surgical procedures and we are proposing to add those procedures to the list for CY 2009 payment. We considered two alternatives in developing this policy. The first alternative we considered was to make no change to the ASC list of covered surgical procedures. We did not select this alternative because our analysis of data for these services and related procedures indicated that the nine procedures we are proposing to designate as covered surgical procedures for CY 2009 may be safely provided to beneficiaries in ASCs and are not expected to require an overnight stay. Consistent with our final policy, we were concerned that if these services were not designated as ASC covered surgical procedures, beneficiaries would lack access to these services in the most clinically appropriate setting. The second alternative we considered, and the alternative we selected, is to propose to designate nine additional procedures as ASC covered surgical procedures for CY 2009. We selected this alternative because our claims data indicate that these procedures do not pose a significant risk to beneficiary safety and are not expected to require an overnight stay, and thus they meet the criteria for inclusion on the list of ASC covered surgical procedures. We believe that adding these procedures to the list of covered surgical procedures is an appropriate step to ensure that beneficiary access to services is not limited unnecessarily. 2. Limitations of Our Analysis Presented here are the estimated effects of the proposed changes for CY 2009 on Medicare payment to ASCs. A key limitation of our analysis is our inability to predict changes in ASC service-mix between CY 2007 and CY 2009 with precision. The aggregate impacts displayed in Tables 47 and 48 below are based upon a methodology that assumes no changes in service-mix with respect to the CY 2007 ASC data used for this proposed rule. In addition, data on services that are newly payable under the revised ASC payment system are not yet reflected in the available claims data. We believe that the net effect on Medicare expenditures resulting from the CY 2009 changes will be negligible in the aggregate. However, such changes may have differential effects across surgical specialty groups as ASCs adjust to payment rates. We are unable to accurately project such changes at a disaggregated level. Clearly, individual ASCs will experience changes in payment that differ from the aggregated estimated impacts presented below. 3. Estimated Effects of This Proposed Rule on Payments to ASCs Some ASCs are multispecialty facilities that perform the gamut of surgical procedures, from excision of lesions to hernia repair to cataract extraction; others focus on a single specialty and perform only a limited range of surgical procedures, such as eye, digestive system, or orthopedic procedures. The combined effect on an individual ASC of the update to the CY 2009 payments will depend on a number of factors including, but not limited to, the mix of services the ASC provides, the volume of specific services provided by the ASC, the percentage of its patients who are Medicare beneficiaries, and the extent to which an ASC will choose to provide different services in the coming year. The following discussion presents tables that provide estimates of the impact of the proposed CY 2009 update to the revised ASC payment system on Medicare payments to ASCs, assuming the same mix of services as reflected in our CY 2007 claims data. Table 47 depicts the estimated aggregate percent change in payment by surgical specialty group and Table 48 shows a comparison of payment for procedures that we estimate would receive the most Medicare payment in CY 2008. Table 47 shows the expected effects on aggregate Medicare payments under the revised ASC payment system by surgical specialty group. We have aggregated the surgical HCPCS codes by specialty group and estimated the effect on aggregated payment for surgical specialty groups, considering separately the CY 2009 transitional rates and the fully implemented revised ASC payment rates that would apply in CY 2009 if there were no transition. The groups are sorted for display in descending order by estimated Medicare program payment to ASCs for CY 2008. The following is an explanation of the information presented in Table 47. • Column 1— *Surgical Specialty Group* indicates the surgical specialties into which ASC procedures are grouped. We used the CPT code range definitions and Level II HCPCS codes and Category III CPT codes, as appropriate, to account for all surgical procedures to which the Medicare program payments are attributed. • Column 2— *Estimated CY 2008 ASC Payments* were calculated using CY 2007 ASC utilization (the most recent full year of ASC utilization) and CY 2008 ASC payment rates. The surgical specialty groups are displayed in descending order based on estimated CY 2008 ASC payments. • Column 3— *Estimated CY 2009 Percent Change with Transition (50/50 Blend)* is the aggregate percentage increase or decrease, compared to CY 2008, in Medicare program payment to ASCs for each surgical specialty group that is attributable to proposed updates to the ASC payment rates for CY 2009 under the scaled, 50/50 blend of the CY 2007 ASC payment rate and the proposed CY 2009 revised ASC payment rate. • Column 4— *Estimated CY 2009 Percent Change without Transition (Fully Implemented)* is the aggregate percentage increase or decrease in Medicare program payment to ASCs for each surgical specialty group that is attributable to proposed updates to ASC payment rates for CY 2009 compared to CY 2008 if there were no transition period to the revised payment rates. We used a different relative payment weight scaler to model the estimated CY 2009 ASC payment effects as a result of ASC rates without the transition than we did for the proposed CY 2009 ASC payment rates with the transition. The percentages appearing in Column 4 are presented only as comparisons to the percentage changes under the transition policy in column 3. We are not proposing to eliminate or modify the transition that was finalized in the August 2, 2007 revised ASC payment system final rule (72 FR 42519). As seen in Table 47, the proposed update to ASC rates for CY 2009 is expected to result in small aggregate decreases in payment amounts for eye and ocular adnexa and nervous system procedures and somewhat greater decreases for digestive system procedures. As shown in column 4 in the table, those payment decreases would be expected to be greater in CY 2009 if there were no transitional payment for all three of those surgical specialty groups. Generally, for the surgical specialty groups that account for less ASC utilization and spending, the expected payment effects of the CY 2009 update are positive. ASC payments for procedures in those surgical specialties are expected to increase in CY 2009 with the 50/50 transitional payment rates and, in the absence of the transition, would be expected to increase even more. For instance, in the aggregate, integumentary system procedures are expected to increase by 7 percent under the proposed CY 2009 rates and by 19 percent if there were no transition. Similar effects are observed for genitourinary, cardiovascular, musculoskeletal, respiratory, and auditory system procedures as well. An estimated increase in aggregate payment for the specialty group does not mean that all procedures in the group would experience increased payment rates. For example, the estimated increased payments at the surgical specialty group level may be due to decreased payments for some of the most frequently provided procedures in the group and the moderating effect of the sometimes substantial payment increases for the less frequently performed procedures within the surgical specialty group. Table 47.—Estimated CY 2009 Impact of the Revised ASC Payment System on Estimated Aggregate CY 2009 Medicare Program Payments Under the 50/50 Transition Blend and Without a Transition, by Surgical Specialty Group Surgical specialty group Estimated CY 2008 ASC payments (in millions) Estimated CY 2009 percent change with transition (50/50 blend) Estimated CY 2009 percent change without transition (fully implemented)
(4)Eye and ocular adnexa $1,373 −1 −2 Digestive system 742 −6 −16 Nervous system 321 −3 −8 Musculoskeletal system 217 19 54 Integumentary system 87 7 19 Genitourinary system 86 11 29 Respiratory system 22 13 38 Cardiovascular system 14 16 45 Auditory system 5 18 46 Table 48 below shows the estimated impact of the proposed updates to the revised ASC payment system on aggregate ASC payments for selected procedures during CY 2009 with and without the transitional blended rate. The table displays 30 of the procedures estimated to be responsible for the greatest estimated CY 2008 aggregate Medicare payments to ASCs. The HCPCS codes are sorted in descending order by estimated program payment. • Column 1— *HCPCS code.* • Column 2— *Short Descriptor* of the HCPCS code. • Column 3— *Estimated CY 2008 ASC Payments* were calculated using CY 2007 ASC utilization (the most recent full year of ASC utilization) and the CY 2008 ASC payment rates. The estimated CY 2008 payments are expressed in millions of dollars. • Column 4— *CY 2009 Percent Change with Transition (50/50 Blend)* reflects the percent differences between the estimated ASC payment for CY 2008 and the estimated payment for CY 2009 based on the proposed update, incorporating a 50/50 blend of the CY 2007 ASC payment rate and the proposed CY 2009 revised ASC payment rate. • Column 5— *CY 2009 Percent Change without Transition (Fully Implemented)* reflects the percent differences between the estimated ASC payment for CY 2008 and the estimated payment for CY 2009 based on the proposed update if there were no transition period to the fully implemented revised payment rates. We used a different relative payment weight scaler to model the estimated CY 2009 ASC payment effects as a result of ASC rates without the transition than we did for the proposed CY 2009 ASC payment rates with the transition. The percentages appearing in Column 5 are presented as a comparison to the percentage changes under the transition policy in Column 4. We are not proposing to eliminate or modify the transition that was finalized in the August 2, 2007 revised ASC payment system final rule (72 FR 42519). As displayed in Table 48, 23 of the 30 procedures with the greatest estimated aggregate CY 2008 Medicare payment are included in the three surgical specialty groups that are estimated to account for the most Medicare payment in CY 2008, specifically eye and ocular adnexa, digestive system, and nervous system groups. Consistent with the estimated payment effects on the surgical specialty groups displayed in Table 47, the estimated effects of the proposed CY 2009 update on ASC payment for individual procedures in year 2 of the transition are varied. Aggregate ASC payments for many of the most frequently furnished ASC procedures are expected to decrease as the transition causes individual procedure payments to reflect relative ASC payment weights that are more closely aligned with the relativity of payments under the OPPS. The procedure for which the most Medicare ASC payment is estimated to be made in CY 2008 is the cataract removal procedure reported with CPT code 66984 (Extracapsular cataract removal with insertion of intraocular lens prosthesis (one stage procedure), manual or mechanical technique (e.g., irrigation and aspiration or phacoemulsification)). The proposed update to the ASC rates is expected to result in a 1 percent payment decrease for that procedure in CY 2009. The estimated payment effects on the four other high volume eye and ocular adnexa procedures included in that table are slightly positive and negative, but for CPT code 66821 (Discission of secondary membranous cataract (opacified posterior lens capsule and/or anterior hyaloid); laser surgery (e.g., YAG laser) (one or more stages)), the expected CY 2009 payment decrease is 10 percent, significantly greater than the decreases expected for any of the other eye and ocular adnexa procedures shown. The proposed transitional payment rates for 8 of the 9 digestive system procedures included in Table 48 are expected to decrease by 6 to 9 percent in CY 2009. Those estimated decreases are consistent with the estimated 6 percent reduction shown in Table 47 for the digestive system surgical specialty group. The 10 nervous system procedures for which the most Medicare payment is estimated to be made to ASCs in CY 2008 are included in Table 48. The proposed CY 2009 update is expected to result in 4 percent payment decreases for 5 of those procedures and result in even more substantial decreases, 19 percent and 22 percent respectively, for CPT code 64484 (Injection, anesthetic agent and /or steroid, transforaminal epidural; lumbar or sacral, each additional level) and CPT code 64476 (Injection, anesthetic agent and/or steroid, paravertebral facet joint or facet joint nerve; lumbar or sacral, each additional level). The other three nervous system procedures included in the table are expected to realize payment increases, especially CPT code 64721 (Neuroplasty and/or transposition; medial nerve at carpal tunnel) for which payment is estimated to increase by 13 percent in CY 2009. The estimated payment effects for most of the remaining procedures listed in Table 48 are positive. For example, the CY 2009 proposed transitional payment rate for CPT code 29826 (Arthroscopy, shoulder, distal claviculectomy (Mumford Procedure); decompression of subacromial space with partial acromioplasty, with or without coracoacromial release) is estimated to increase 45 percent over the CY 2008 transitional payment amount. BILLING CODE 4120-01-P EP18JY08.671 BILLING CODE 4120-01-C Over time, we believe that the ASC payment system has served as an incentive to ASCs to focus on providing procedures for which they determine Medicare payments will support ASCs' continued operation. We note that historically, the ASC payment rates for many of the most frequently performed procedures in ASCs were similar to the OPPS payment rates for the same procedures. Conversely, procedures with ASC payment rates that were substantially lower than the OPPS rates have been performed least often in ASCs. We believe the revised ASC payment system represents a major stride towards encouraging greater efficiency in ASCs and promoting a significant increase in the breadth of surgical procedures performed in ASCs because it distributes payments across the entire spectrum of covered surgical procedures based on a coherent system of relative payment weights that are related to the clinical and facility resource characteristics of those procedures. 4. Estimated Effects of This Proposed Rule on Beneficiaries We estimate that the proposed changes to the revised ASC payment system would be generally positive for beneficiaries with respect to the procedures newly proposed for addition to the ASC list of covered surgical procedures and for those proposed as office-based for CY 2009. First, except for screening colonoscopy and flexible sigmoidoscopy procedures, the ASC coinsurance rate for all procedures is 20 percent. This contrasts with procedures performed in HOPDs, where the beneficiary is responsible for copayments that range from 20 percent to 40 percent of the procedure payment. Second, ASC payment rates under the revised payment system are lower than payment rates for the same procedures under the OPPS, so the beneficiary coinsurance amount under the ASC payment system almost always would be less than the OPPS copayment amount for the same services. (The only exceptions would be when the ASC coinsurance amount exceeds the inpatient deducible. The statute requires that copayment amounts under the OPPS not exceed the inpatient deductible.) For those procedures newly proposed for addition to the ASC list of covered surgical procedures in CY 2009 that would migrate from the HOPD to the ASC, the beneficiary coinsurance amount would be less than the OPPS copayment amount. Furthermore, these proposed additions to the list would provide beneficiaries access to more surgical procedures in ASCs. Beneficiary coinsurance for services migrating from physicians' offices to ASCs may decrease or increase under the revised ASC payment system, depending on the particular service and the relative payment amounts for that service in the physician's office compared to the ASC. However, for those procedures newly proposed for designation as office-based in CY 2009, the beneficiary coinsurance amount would be no greater than the beneficiary coinsurance in the physician's office. In addition, as finalized in the August 2, 2007, revised ASC payment system final rule (72 FR 42520), in CY 2009, the second year of the 4 year transition to the ASC payment rates calculated according to the standard methodology of the revised ASC payment system, ASC payment rates for a number of commonly furnished ASC procedures would continue to be reduced, resulting in lower beneficiary coinsurance amounts for these ASC services in CY 2009. Continued migration of procedures currently on the list of ASC covered surgical procedures from the HOPD to the ASC would also reduce beneficiary liability for these services, for the two reasons described above with respect to the proposed new ASC covered services. 5. Conclusion The updates to the ASC payment system for CY 2009 will affect each of the approximately 5,300 ASCs currently approved for participation in the Medicare program. The effect on an individual ASC will depend on its mix of patients, the proportion of the ASC's patients that are Medicare beneficiaries, the degree to which the payments for the procedures offered by the ASC are changed under the revised payment system, and the degree to which the ASC chooses to provide a different set of procedures. Like the OPPS, the revised ASC payment system is designed to result in the same aggregate amount of Medicare expenditures in CY 2009 as was estimated to be made in CY 2008. We estimate that the update to the revised ASC payment system, including the addition of surgical procedures to the list of covered surgical procedures, that we are proposing for CY 2009 will have no net effect on Medicare expenditures compared to the estimated level of Medicare expenditures in CY 2008. 6. Accounting Statement As required by OMB Circular A-4 (available at *http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf* ), in Table 49 below, we have prepared an accounting statement showing the classification of the expenditures associated with the update to the CY 2009 revised ASC payment system, based on the provisions of this proposed rule. We estimate that Medicare payments to ASCs for CY 2009 will be about $3.884 billion. This table provides our best estimate of Medicare payments to providers and suppliers as a result of the proposed update to the CY 2009 revised ASC payment system, as presented in this proposed rule. All expenditures are classified as transfers. Table 49.—Accounting Statement: Classification of Estimated Expenditures From CY 2008 to CY 2009 as a Result of the CY 2009 Update to the Revised ASC Payment System Category Transfers Annualized Monetized Transfers $0 Million. From Whom to Whom Federal Government to Medicare Providers and Suppliers. Annualized Monetized Transfer $0 Million. From Whom to Whom Premium Payments from Beneficiaries to Federal Government. Total $0 Million D. Effects of Proposed Requirements for Hospital Reporting of Quality Data for Annual Hospital Payment Update In section XVII. of the CY 2008 OPPS/ASC final rule with comment period (72 FR 66871), we finalized our measures and requirements for reporting of quality data to CMS for services furnished in hospital outpatient settings under the CY 2009 HOP QDRP. The initial data submission for April to June 2008 services is due to the OPPS Clinical Warehouse by November 1, 2008 (72 FR 66871). CMS and its contractors will provide assistance to all affected hospitals that wish to submit data. In section XVI. of this proposed rule, we discuss our measures and requirements for reporting of quality data to CMS for services furnished in hospital outpatient settings under the CY 2010 HOP QDRP. We have no previous history under the HOP QDRP to indicate the percentage of hospitals that will submit quality data. However, for the initial data submission, in CY 2008, 98 percent of affected hospitals have pledged to participate. In addition, results from the RHQDAPU program indicate that over 98 percent of IPPS hospitals submitted quality data in the initial year of the program. We expect that affected hospitals will participate at approximately the same rate under the HOP QDRP. We have continued our efforts to ensure that our CMS contractors provide assistance to all affected hospitals that wish to submit data. Therefore, for purposes of this CY 2009 impact analysis, we have assumed that the 98 percent of affected hospitals that have pledged to participate will qualify for the full payment update factor for CY 2009. E. Executive Order 12866 In accordance with the provisions of Executive Order 12866, this proposed rule was reviewed by the OMB. List of Subjects 42 CFR Part 410 Health facilities, Health professions, Laboratories, Medicare, Rural areas, X-rays. 42 CFR Part 419 Hospitals, Medicare, Reporting and recordkeeping requirements. For reasons stated in the preamble of this proposed rule, the Centers for Medicare & Medicaid Services is proposing to amend 42 CFR Chapter IV as set forth below: PART 410—SUPPLEMENTARY MEDICAL INSURANCE
(SMI)BENEFITS 1. The authority citation for part 410 continues to read as follows: Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 2. Section 410.43 is amended by— a. Removing the word “and” at the end of paragraph (a)(2). b. Redesignating paragraph (a)(3) as paragraph (a)(4). c. Adding a new paragraph (a)(3). c. Adding a new paragraph (c). The additions read as follows: § 410.43 Partial hospitalization services: Conditions and exclusions.
(a)* * *
(3)Are furnished in accordance with a physician certification and plan of care as specified under § 424.24(e) of this chapter; and
(c)Partial hospitalization programs are intended for patients who—
(1)Require 20 hours per week of therapeutic services;
(2)Are likely to benefit from a coordinated program of services and require more than isolated sessions of outpatient treatment.
(3)Do not require 24-hour care;
(4)Have an adequate support system while not actively engaged in the program;
(5)Have a mental health diagnosis;
(6)Are not judged to be dangerous to self or others; and
(7)Have the cognitive and emotional ability to participate in the active treatment process and can tolerate the intensity of the partial hospitalization program. PART 419—PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES 3. The authority citation for part 419 continues to read as follows: Authority: Secs. 1102, 1833(t), and 1871 of the Social Security Act (42 U.S.C. 1302, 1395l(t), and 1395hh). 4. Section 419.41 is amended by revising paragraph (c)(4)(iv) to read as follows: § 419.41 Calculation of national beneficiary copayment amounts and national Medicare program payment amounts.
(c)* * *
(4)* * *
(iv)The copayment amount is computed as if the adjustment under §§ 419.43(d) and
(e)(and any adjustments made under § 419.43(f) in relation to these adjustments) and § 419.43(h) had not been paid. 5. Section 419.42 is amended by revising paragraph
(e)to read as follows: § 419.42 Hospital election to reduce insurance.
(e)In electing reduced coinsurance, a hospital may elect a copayment amount that is less than that year's wage-adjusted copayment amount for the group but not less than 20 percent of the APC payment rate as determined under § 419.32 or, in the case of payments calculated under § 419.43(h), not less than 20 percent of the APC payment rate as determined under § 419.43(h). 6. Section 419.43 is amended by— a. Adding new paragraphs (d)(5) and (d)(6). b. Adding a new paragraph (h)(4). The additions read as follows: § 419.43 Adjustments to national program payment and beneficiary copayment amounts.
(d)* * *
(5)*Reconciliation.* For hospital outpatient services (or groups of services) as defined in paragraph (d)(1) of this section performed on or after January 1, 2009—
(i)CMS may specify an alternative to the overall ancillary cost-to-charge ratio otherwise applicable under paragraph (d)(5)(ii) of this section. A hospital may also request that its Medicare contractor use a different (higher or lower) cost-to-charge ratio based on substantial evidence presented by the hospital. Such a request must be approved by the CMS.
(ii)The overall ancillary cost-to-charge ratio applied at the time a claim is processed is based on either the most recent settled cost report or the most recent tentative settled cost report, whichever is from the latest cost reporting period.
(iii)The Medicare contractor may use a statewide average cost-to-charge ratio if it is unable to determine an accurate overall ancillary cost-to-charge ratio for a hospital in one of the following circumstances:
(A)A new hospital that has not yet submitted its first Medicare cost report. (For purposes of this paragraph, a new hospital is defined as an entity that has not accepted assignment of an existing hospital's provider agreement in accordance with § 489.18 of this chapter.)
(B)A hospital whose overall ancillary cost-to-charge ratio is in excess of 3 standard deviations above the corresponding national geometric mean. This mean is recalculated annually by CMS and published in the annual notice of prospective payment rates issued in accordance with § 419.50(a).
(C)Any other hospital for whom accurate data to calculate an overall ancillary cost-to-charge ratio are not available to the Medicare contractor.
(iv)Any reconciliation of outlier payments will be based on an overall ancillary cost-to-charge ratio calculated based on a ratio of costs to charges computed from the relevant cost report and charge data determined at the time the cost report coinciding with the service is settled.
(6)*Time value of money.* Effective for services performed on or after January 1, 2009, at the time of any reconciliation under paragraph (d)(5)(iv) of this section, outlier payments may be adjusted to account for the time value of any underpayments or overpayments. Any adjustment will be based on a widely available index to be established in advance by CMS, and will be applied from the midpoint of the cost reporting period to the date of reconciliation.
(h)* * *
(4)*Beneficiary copayment.* The beneficiary copayment for services to which the adjustment to the conversion factor specified under paragraph (h)(1) of this section applies is the product of the national beneficiary copayment amount calculated under § 419.41 and the ratio of the adjusted conversion factor calculated under paragraph (h)(1) of this section divided by the conversion factor specified under § 419.32(b)(1). (Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance; and Program No. 93.774, Medicare—Supplementary Medical Insurance Program) (Catalog of Federal Domestic Assistance Program No. 93.778, Medical Assistance Program) Dated: June 26, 2008. Kerry Weems, Acting Administrator, Centers for Medicare & Medicaid Services. Dated: July 2, 2008. Michael O. Leavitt, Secretary. BILLING CODE 4120-01-P EP18JY08.000 EP18JY08.001 EP18JY08.002 EP18JY08.003 EP18JY08.004 EP18JY08.005 EP18JY08.006 EP18JY08.007 EP18JY08.008 EP18JY08.009 EP18JY08.010 EP18JY08.011 EP18JY08.012 EP18JY08.013 EP18JY08.014 EP18JY08.015 EP18JY08.016 EP18JY08.017 EP18JY08.018 EP18JY08.019 EP18JY08.020 EP18JY08.021 EP18JY08.022 EP18JY08.023 EP18JY08.024 EP18JY08.025 EP18JY08.026 EP18JY08.027 EP18JY08.028 EP18JY08.029 EP18JY08.030 EP18JY08.031 EP18JY08.032 EP18JY08.033 EP18JY08.034 EP18JY08.035 EP18JY08.036 EP18JY08.037 EP18JY08.038 EP18JY08.039 EP18JY08.040 EP18JY08.041 EP18JY08.042 EP18JY08.043 EP18JY08.044 EP18JY08.045 EP18JY08.046 EP18JY08.047 EP18JY08.048 EP18JY08.049 EP18JY08.050 EP18JY08.051 EP18JY08.052 EP18JY08.053 EP18JY08.054 EP18JY08.055 EP18JY08.056 EP18JY08.057 EP18JY08.058 EP18JY08.059 EP18JY08.060 EP18JY08.061 EP18JY08.062 EP18JY08.063 EP18JY08.064 EP18JY08.065 EP18JY08.066 EP18JY08.067 EP18JY08.068 EP18JY08.069 EP18JY08.070 EP18JY08.071 EP18JY08.072 EP18JY08.073 EP18JY08.074 EP18JY08.075 EP18JY08.076 EP18JY08.077 EP18JY08.078 EP18JY08.079 EP18JY08.080 EP18JY08.081 EP18JY08.082 EP18JY08.083 EP18JY08.084 EP18JY08.085 EP18JY08.086 EP18JY08.087 EP18JY08.088 EP18JY08.089 EP18JY08.090 EP18JY08.091 EP18JY08.092 EP18JY08.093 EP18JY08.094 EP18JY08.095 EP18JY08.096 EP18JY08.097 EP18JY08.098 EP18JY08.099 EP18JY08.100 EP18JY08.101 EP18JY08.102 EP18JY08.103 EP18JY08.104 EP18JY08.105 EP18JY08.106 EP18JY08.107 EP18JY08.108 EP18JY08.109 EP18JY08.110 EP18JY08.111 EP18JY08.112 EP18JY08.113 EP18JY08.114 EP18JY08.115 EP18JY08.116 EP18JY08.117 EP18JY08.118 EP18JY08.119 EP18JY08.120 EP18JY08.121 EP18JY08.122 EP18JY08.123 EP18JY08.124 EP18JY08.125 EP18JY08.126 EP18JY08.127 EP18JY08.128 EP18JY08.129 EP18JY08.130 EP18JY08.131 EP18JY08.132 EP18JY08.133 EP18JY08.134 EP18JY08.135 EP18JY08.136 EP18JY08.137 EP18JY08.138 EP18JY08.139 EP18JY08.140 EP18JY08.141 EP18JY08.142 EP18JY08.143 EP18JY08.144 EP18JY08.145 EP18JY08.146 EP18JY08.147 EP18JY08.148 EP18JY08.149 EP18JY08.150 EP18JY08.151 EP18JY08.152 EP18JY08.153 EP18JY08.154 EP18JY08.155 EP18JY08.156 EP18JY08.157 EP18JY08.158 EP18JY08.159 EP18JY08.160 EP18JY08.161 EP18JY08.162 EP18JY08.163 EP18JY08.164 EP18JY08.165 EP18JY08.166 EP18JY08.167 EP18JY08.168 EP18JY08.169 EP18JY08.170 EP18JY08.171 EP18JY08.172 EP18JY08.173 EP18JY08.174 EP18JY08.175 EP18JY08.176 EP18JY08.177 EP18JY08.178 EP18JY08.179 EP18JY08.180 EP18JY08.181 EP18JY08.182 EP18JY08.183 EP18JY08.184 EP18JY08.185 EP18JY08.186 EP18JY08.187 EP18JY08.188 EP18JY08.189 EP18JY08.190 EP18JY08.191 EP18JY08.192 EP18JY08.193 EP18JY08.194 EP18JY08.195 EP18JY08.196 EP18JY08.197 EP18JY08.198 EP18JY08.199 EP18JY08.200 EP18JY08.201 EP18JY08.202 EP18JY08.203 EP18JY08.204 EP18JY08.205 EP18JY08.206 EP18JY08.207 EP18JY08.208 EP18JY08.209 EP18JY08.210 EP18JY08.211 EP18JY08.212 EP18JY08.213 EP18JY08.214 EP18JY08.215 EP18JY08.216 EP18JY08.217 EP18JY08.218 EP18JY08.219 EP18JY08.220 EP18JY08.221 EP18JY08.222 EP18JY08.223 EP18JY08.224 EP18JY08.225 EP18JY08.226 EP18JY08.227 EP18JY08.228 EP18JY08.229 EP18JY08.230 EP18JY08.231 EP18JY08.232 EP18JY08.233 EP18JY08.234 EP18JY08.235 EP18JY08.236 EP18JY08.237 EP18JY08.238 EP18JY08.239 EP18JY08.240 EP18JY08.241 EP18JY08.242 EP18JY08.243 EP18JY08.244 EP18JY08.245 EP18JY08.246 EP18JY08.247 EP18JY08.248 EP18JY08.249 EP18JY08.250 EP18JY08.251 EP18JY08.252 EP18JY08.253 EP18JY08.254 EP18JY08.255 EP18JY08.256 EP18JY08.257 EP18JY08.258 EP18JY08.259 EP18JY08.260 EP18JY08.261 EP18JY08.262 EP18JY08.263 EP18JY08.264 EP18JY08.265 EP18JY08.266 EP18JY08.267 EP18JY08.268 EP18JY08.269 EP18JY08.270 EP18JY08.271 EP18JY08.272 EP18JY08.273 EP18JY08.274 EP18JY08.275 EP18JY08.276 EP18JY08.277 EP18JY08.278 EP18JY08.279 EP18JY08.280 EP18JY08.281 EP18JY08.282 EP18JY08.283 EP18JY08.284 EP18JY08.285 EP18JY08.286 EP18JY08.287 EP18JY08.288 EP18JY08.289 EP18JY08.290 EP18JY08.291 EP18JY08.292 EP18JY08.293 EP18JY08.294 EP18JY08.295 EP18JY08.296 EP18JY08.297 EP18JY08.298 EP18JY08.299 EP18JY08.300 EP18JY08.301 EP18JY08.302 EP18JY08.303 EP18JY08.304 EP18JY08.305 EP18JY08.306 EP18JY08.307 EP18JY08.308 EP18JY08.309 EP18JY08.310 EP18JY08.311 EP18JY08.312 EP18JY08.313 EP18JY08.314 EP18JY08.315 EP18JY08.316 EP18JY08.317 EP18JY08.318 EP18JY08.319 EP18JY08.320 EP18JY08.321 EP18JY08.322 EP18JY08.323 EP18JY08.324 EP18JY08.325 EP18JY08.326 EP18JY08.327 EP18JY08.328 EP18JY08.329 EP18JY08.330 EP18JY08.331 EP18JY08.332 EP18JY08.333 EP18JY08.334 EP18JY08.335 EP18JY08.336 EP18JY08.337 EP18JY08.338 EP18JY08.339 EP18JY08.340 EP18JY08.341 EP18JY08.342 EP18JY08.343 EP18JY08.344 EP18JY08.345 EP18JY08.346 EP18JY08.347 EP18JY08.348 EP18JY08.349 EP18JY08.350 EP18JY08.351 EP18JY08.352 EP18JY08.353 EP18JY08.354 EP18JY08.355 EP18JY08.356 EP18JY08.357 EP18JY08.358 EP18JY08.359 EP18JY08.360 EP18JY08.361 EP18JY08.362 EP18JY08.363 EP18JY08.364 EP18JY08.365 EP18JY08.366 EP18JY08.367 EP18JY08.368 EP18JY08.369 EP18JY08.370 EP18JY08.371 EP18JY08.372 EP18JY08.373 EP18JY08.374 EP18JY08.375 EP18JY08.376 EP18JY08.377 EP18JY08.378 EP18JY08.379 EP18JY08.380 EP18JY08.381 EP18JY08.382 EP18JY08.383 EP18JY08.384 EP18JY08.385 EP18JY08.386 EP18JY08.387 EP18JY08.388 EP18JY08.389 EP18JY08.390 EP18JY08.391 EP18JY08.392 EP18JY08.393 EP18JY08.394 EP18JY08.395 EP18JY08.396 EP18JY08.397 EP18JY08.398 EP18JY08.399 EP18JY08.400 EP18JY08.401 EP18JY08.402 EP18JY08.403 EP18JY08.404 EP18JY08.405 EP18JY08.406 EP18JY08.407 EP18JY08.408 EP18JY08.409 EP18JY08.410 EP18JY08.411 EP18JY08.412 EP18JY08.413 EP18JY08.414 EP18JY08.415 EP18JY08.416 EP18JY08.417 EP18JY08.418 EP18JY08.419 EP18JY08.420 EP18JY08.421 EP18JY08.422 EP18JY08.423 EP18JY08.424 EP18JY08.425 EP18JY08.426 EP18JY08.427 EP18JY08.428 EP18JY08.429 EP18JY08.430 EP18JY08.431 EP18JY08.432 EP18JY08.433 EP18JY08.434 EP18JY08.435 EP18JY08.436 EP18JY08.437 EP18JY08.438 EP18JY08.439 EP18JY08.440 EP18JY08.441 EP18JY08.442 EP18JY08.443 EP18JY08.444 EP18JY08.445 EP18JY08.446 EP18JY08.447 EP18JY08.448 EP18JY08.449 EP18JY08.450 EP18JY08.451 EP18JY08.452 EP18JY08.453 EP18JY08.454 EP18JY08.455 EP18JY08.456 EP18JY08.457 EP18JY08.458 EP18JY08.459 EP18JY08.460 EP18JY08.461 EP18JY08.462 EP18JY08.463 EP18JY08.464 EP18JY08.465 EP18JY08.466 EP18JY08.467 EP18JY08.468 EP18JY08.469 EP18JY08.470 EP18JY08.471 EP18JY08.472 EP18JY08.473 EP18JY08.474 EP18JY08.475 EP18JY08.476 EP18JY08.477 EP18JY08.478 EP18JY08.479 EP18JY08.480 EP18JY08.481 EP18JY08.482 EP18JY08.483 EP18JY08.484 EP18JY08.485 EP18JY08.486 EP18JY08.487 EP18JY08.488 EP18JY08.489 EP18JY08.490 EP18JY08.491 EP18JY08.492 EP18JY08.493 EP18JY08.494 EP18JY08.495 EP18JY08.496 EP18JY08.497 EP18JY08.498 EP18JY08.499 EP18JY08.500 EP18JY08.501 EP18JY08.502 EP18JY08.503 EP18JY08.504 EP18JY08.505 EP18JY08.506 EP18JY08.507 EP18JY08.508 EP18JY08.509 EP18JY08.510 EP18JY08.511 EP18JY08.512 EP18JY08.513 EP18JY08.514 EP18JY08.515 EP18JY08.516 EP18JY08.517 EP18JY08.518 EP18JY08.519 EP18JY08.520 EP18JY08.521 EP18JY08.522 EP18JY08.523 EP18JY08.524 EP18JY08.525 EP18JY08.526 EP18JY08.527 EP18JY08.528 EP18JY08.529 EP18JY08.530 EP18JY08.531 EP18JY08.532 EP18JY08.533 EP18JY08.534 EP18JY08.535 EP18JY08.536 EP18JY08.537 EP18JY08.538 EP18JY08.539 EP18JY08.540 EP18JY08.541 EP18JY08.542 EP18JY08.543 EP18JY08.544 EP18JY08.545 EP18JY08.546 EP18JY08.547 EP18JY08.548 EP18JY08.549 EP18JY08.550 EP18JY08.551 EP18JY08.552 EP18JY08.553 EP18JY08.554 EP18JY08.555 EP18JY08.556 EP18JY08.557 EP18JY08.558 EP18JY08.559 EP18JY08.560 EP18JY08.561 EP18JY08.562 EP18JY08.563 EP18JY08.564 EP18JY08.565 EP18JY08.566 EP18JY08.567 EP18JY08.568 EP18JY08.569 EP18JY08.570 EP18JY08.571 EP18JY08.572 EP18JY08.573 EP18JY08.574 EP18JY08.575 EP18JY08.576 EP18JY08.577 EP18JY08.578 EP18JY08.579 EP18JY08.580 EP18JY08.581 EP18JY08.582 EP18JY08.583 EP18JY08.584 EP18JY08.585 EP18JY08.586 EP18JY08.587 EP18JY08.588 EP18JY08.589 EP18JY08.590 EP18JY08.591 EP18JY08.592 EP18JY08.593 EP18JY08.594 EP18JY08.595 EP18JY08.596 EP18JY08.597 EP18JY08.598 EP18JY08.599 EP18JY08.600 EP18JY08.601 EP18JY08.602 EP18JY08.603 EP18JY08.604 EP18JY08.605 EP18JY08.606 EP18JY08.607 EP18JY08.608 EP18JY08.609 EP18JY08.610 EP18JY08.611 EP18JY08.612 EP18JY08.613 EP18JY08.614 EP18JY08.615 EP18JY08.616 EP18JY08.617 EP18JY08.618 EP18JY08.619 EP18JY08.620 EP18JY08.621 EP18JY08.622 EP18JY08.623 EP18JY08.624 EP18JY08.625 EP18JY08.626 EP18JY08.627 EP18JY08.628 EP18JY08.629 EP18JY08.630 EP18JY08.631 EP18JY08.632 EP18JY08.633 EP18JY08.634 EP18JY08.635 EP18JY08.636 EP18JY08.637 EP18JY08.638 EP18JY08.639 EP18JY08.640 EP18JY08.641 EP18JY08.642 EP18JY08.643 EP18JY08.644 EP18JY08.645 EP18JY08.646 EP18JY08.647 EP18JY08.648 EP18JY08.649 EP18JY08.650 EP18JY08.651 EP18JY08.652 EP18JY08.653 EP18JY08.654 EP18JY08.655 EP18JY08.656 EP18JY08.657 EP18JY08.658 EP18JY08.659 EP18JY08.660 EP18JY08.661 EP18JY08.662 EP18JY08.663 EP18JY08.664 [FR Doc. E8-15539 Filed 7-3-08; 12:00 pm] BILLING CODE 4120-01-C 73 139 Friday, July 18, 2008 Proposed Rules Part III Department of the Interior Bureau of Reclamation 43 CFR Part 429 Use of Bureau of Reclamation Land, Facilities, and Waterbodies; Proposed Rule DEPARTMENT OF THE INTERIOR Bureau of Reclamation 43 CFR Part 429 RIN 1006-AA51 Use of Bureau of Reclamation Land, Facilities, and Waterbodies AGENCY: Bureau of Reclamation, Interior. ACTION: Notice of proposed rulemaking. SUMMARY: The Bureau of Reclamation (Reclamation) proposes a rule on the use of Reclamation land, facilities, and waterbodies. The proposed rule addresses among other topics the cost recovery of fees for authorized uses involving the possession or occupancy of any portion of, and the extraction or disturbance of any natural resource from Reclamation land, facilities, and waterbodies; how to apply for a use authorization including what application forms to use; and what uses are prohibited and associated consequences. When finalized, the proposed rule will supersede the current rule which was originally published in 1983 and partially revised in April 2006. DATES: Submit comments by September 16, 2008. The dates of the informational meetings to be held regarding this proposed rule are listed in the SUPPLEMENTARY INFORMATION section of this proposed rule. ADDRESSES: You may submit comments, identified by the number 1006-AA51, by one of the following methods: — *Use the Federal rulemaking Web site: http://www.regulations.gov* and follow the instructions for submitting comments. Please use the docket identification number BOR-2008-0004 which has been assigned to this rule when submitting your comments to the rulemaking Web site. — *By mail to:* Bureau of Reclamation, Denver Federal Center, P.O. Box 25007, Denver, CO 80225-0007, Attention: Richard Rizzi, Mail Code: 84-53000. The locations of the informational meetings to be held regarding this proposed rule are listed in the SUPPLEMENTARY INFORMATION section of this proposed rule. FOR FURTHER INFORMATION CONTACT: Richard Rizzi, Mail Code: 84-53000; Bureau of Reclamation; P.O. Box 25007; Denver, CO 80225. Telephone:
(303)445-2900. SUPPLEMENTARY INFORMATION: I. Background The current rule, 43 CFR part 429, titled Procedure to Process and Recover the Value of Rights-of-Use and Administrative Costs Incurred In Permitting Such Use (current rule), established the procedures to recover administrative costs associated with processing “right-of-use” applications and the value of rights-of-use granted by Reclamation to applicants for the use of Reclamation land. Sections of the current rule were modified, in part, in 2006 to correlate with 43 CFR part 423, titled Public Conduct on Bureau of Reclamation Facilities, Lands, and Waterbodies. This proposed rule addresses activities involving the possession or occupancy of any portion of, and the extraction or disturbance of any natural resources from, Reclamation land, facilities, and waterbodies. Regulations addressing public access to Reclamation property and occasional public activities such as hiking, camping, boating, and hunting, and closures are contained in 43 CFR part 423. The demand for use of Reclamation land, facilities, and waterbodies for many different kinds of activities has increased dramatically since Reclamation began building Federal water supply, flood control, and hydropower projects over 100 years ago. With increased and varied uses has come confusion among the potential users of Reclamation land, facilities, and waterbodies about the process of applying for the various types of uses, the charges and fees associated with such uses, and other concerns. The current rule does not adequately address this confusion nor does it address prohibited and unauthorized uses of Reclamation's land, facilities, and waterbodies and associated penalties. The Independent Offices Appropriation Act
(IOAA)(31 U.S.C. 9701), September 13, 1982, as amended, sets forth Congress' intent that any use, permit, or similar thing of value provided by an agency is to be self-sustaining and that the IOAA authorizes agencies to prescribe rules establishing charges for such uses. The 1993 revision of the Office of Management and Budget
(OMB)Circular A-25 established Federal policy directing that administrative costs be recovered for Government services and fees for the use or sale of Government goods or resources also be charged. OMB Circular A-25 provides information on the scope and types of activities subject to use fees and the basis on which these fees are established. It also provides guidance for agencies in implementing such fees and charges. The use of Reclamation land, facilities, or waterbodies is a use of Government resources, and as such, the IOAA and OMB Circular A-25 direct Reclamation to recover the costs and fees associated with the use of these resources. Section 10 (43 U.S.C. 373) of the Reclamation Act of June 17, 1902, provides the Secretary of the Interior (Secretary) with the authority to issue rules as necessary for the purposes of carrying out the provisions of the Act. Section 10 (43 U.S.C. 387) of the Reclamation Project Act of 1939 provides the Secretary the authority, in his discretion, to grant leases, licenses, easements, and rights-of-way. These two Acts provide Reclamation with the general statutory authority to issue rules on authorizing or prohibiting uses of Reclamation land, facilities, and waterbodies. This proposed rule addresses:
(a)The possession or occupancy of any portion of, or the extraction or disturbance of any natural resource from, Reclamation land, facilities, and waterbodies;
(b)The procedures to follow when the proposed use involves a Reclamation easement;
(c)The procedures to apply for use of Reclamation land, facilities, and waterbodies that involves the possession or occupancy of any portion of, or the extraction or disturbance of any natural resource from, Reclamation land, facilities, or waterbodies;
(d)The criteria Reclamation will use to evaluate applications;
(e)Our statutory authority and the basis for charging application fees, recovering administrative costs, and collecting use fees associated with authorized uses;
(f)Conditions under which application fees, administrative costs, or use fees may be waived or reduced if determined appropriate by Reclamation or as currently listed in OMB Circular A-25;
(g)The required terms and conditions associated with use authorizations;
(h)Prohibited uses of Reclamation land, facilities, and waterbodies and how Reclamation will resolve unauthorized uses;
(i)The criteria Reclamation will use to evaluate existing authorizations for otherwise prohibited uses of Reclamation land, facilities, and waterbodies; and
(j)The decisions and appeals process applicable to actions taken under this part. II. Revision of Existing Rules On December 20, 1983, Reclamation published 43 CFR part 429 titled Procedure to Process and Recover the Value of Rights-of-Use and Administrative Costs Incurred in Permitting Such Use in the **Federal Register** at 48 FR 56223. Sections of this rule were revised on April 17, 2006, in the **Federal Register** at 71 FR 19802 to better correlate with 43 CFR part 423. The sections that were revised or added were § 429.1 Purpose, § 429.2 Definitions, § 429.3 Establishment of the value of rights-of-use, § 429.6 Applications for rights-of-use, § 429.12 Applicability, and § 429.13 General Restrictions. On July 18, 2007, we published a notice in the **Federal Register** at 72 FR 39530 announcing the availability of the proposed rule for a 90-day public comment period ending on October 16, 2007. We requested that comments be submitted by the public using one of the following methods: posting on the Federal rulemaking web site, through emailing, or mailing to the listed address. As a result of comments received, the proposed rule has been revised and is being provided to the public for further comment through this publication in the **Federal Register** . When the public comment period closes on this proposed rule, we will consider comments and incorporate them, where appropriate. The final rule will then be published in the **Federal Register** . That final rule, titled Use of Bureau of Reclamation Land, Facilities, and Waterbodies, will supersede the 1983 version and its 2006 modifications in their entirety. III. Informational Meetings Informational meetings regarding the proposed rule will be held in each of our five regions in the 17 western states. These meetings will be informational in nature only. Public comments offered at the meetings will not be recorded or accepted into the official record. You must submit your comments as instructed in the ADDRESSES section of this proposed rule. The dates, times, and locations of these meetings listed by Reclamation region follow: Pacific Northwest Region Moses Lake, Washington—Wednesday, July 30, 2008, 4 p.m., Big Bend Community College, 7662 Chanute Street NE. Boise, Idaho—Wednesday, August 20, 2008, 4 p.m., Boise Public Library, 715 South Capitol Boulevard. For further information regarding the meetings, please contact Diana Cross at telephone number 208-378-5020. Mid-Pacific Region Sacramento, California—Monday, August 18, 2008, 6 p.m., Federal Office Building, 2800 Cottage Way. For further information regarding the meeting, please contact Peter Lucero at telephone number
(916)978-5101. Lower Colorado Region Boulder City, Nevada—Tuesday, August 5, 2008, 2 p.m., Lower Colorado Regional Office, Mead Building. Phoenix, Arizona—Wednesday, August 6, 2008, 2 p.m., Phoenix Area Office, 6150 West Thunderbird Road. Yuma, Arizona—Thursday, August 7, 2008, 9 a.m., Quartermaster State Historic Park, 201 N. 4th Avenue. For further information regarding the meetings, please contact Robert Walsh at telephone number
(702)293-8421. Upper Colorado Region Grand Junction, Colorado—Wednesday, July 30, 1 p.m., Western Colorado Area Office, 2764 Compass Drive. Albuquerque, New Mexico—Tuesday, August 12, 2008, 1 p.m., Albuquerque Area Office, 555 Broadway NE. Salt Lake City, Utah—Monday, August 14, 2008, 1 p.m., Upper Colorado Regional Office, Bennett Federal Building, 125 South State Street. For further information regarding the meetings, please contact Barry Wirth at telephone number
(801)524-3774. Great Plains Region Malta, Montana—Wednesday, August 20, 2008, 7 p.m., Marian Hills Golf Course. Helena, Montana—Thursday, August 21, 2008, 7 p.m., Helena Regional Airport. For further information regarding the meetings, please contact Mark Andersen at telephone number
(406)247-7609. IV. Summary of Changes, Comments, and Responses This section of the preamble describes changes from the proposed rule published on July 18, 2007, and provides responses to the comments received on that proposed rule by section. Nearly 1,300 comments were submitted by the public during the 90-day comment period. Of those comments, approximately 95 percent related directly to § 429.32, which discusses how we will address existing uses that are otherwise prohibited. Comments received that are similar in nature have been categorized by subject. Comments and our responses on general issues not related to a specific section of the preamble or text of the proposed rule are arranged first. This section is followed by comments regarding the preamble of the previously proposed rule and our responses; and lastly, the changes we have made, comments received, and our responses related to specific sections of the text of the previously proposed rule. General Comments and Responses *Comment:* Support was expressed for the proposed changes to the current rule and would like to see more private exclusive use areas converted to public use areas. *Response:* Due to the overwhelming reaction received during the comment period, we have reconsidered this issue. *Comment:* Appreciation was expressed for the high quality recreation related services provided to the public by our non-Federal managing partners. *Response:* We will continue to work with our existing managing partners and seek out additional managing partners, when appropriate, to provide high quality recreation opportunities. *Comment:* It appears that the intent of the proposed rule is to phase out all private access to Reclamation waterbodies. This would have an adverse effect on recreational boating and fishing as a whole as well as on the economies of neighboring communities. Amend the rule to strongly favor recreational uses. *Response:* We do not intend to phase out the public's use of our waterbodies. Recreational use of these waterbodies will continue under this proposed rule. *Comment:* The current rule is adequate and there is no need for revision. *Response:* Although some adjustments were made in the revision that was published in 2006, additional revisions are needed to incorporate current Federal regulations and policies concerning the use of Federal land and cost recovery for those uses. *Comment:* Clarification is needed to describe which bodies of water or facilities will be subject to authorizations and fees. *Response:* All waterbodies and facilities that are directly managed by Reclamation are subject to the authorization requirements and fees specified in the current rule and will continue to be so under the provisions of the proposed rule. *Comment:* A number of commenters, including managing partners, expressed concern that they did not receive adequate notice regarding the proposed rule making. *Response:* We are providing a 60-day public comment period in conjunction with the publishing of this proposed rule and sending a copy of this proposed rule to each commenter who previously provided an address in a timely manner. Additionally, informational meetings as listed in the SUPPLEMENTARY INFORMATION section of this proposed rule are being conducted during the 60-day comment period. *Comment:* All water user organizations operating Reclamation projects under project operation and maintenance contracts should be specifically exempted from this proposed rule. *Response:* Under § 429.4(b)(5) of this proposed rule, operation and maintenance activities on Reclamation land, facilities, and waterbodies authorized by contracts with water user organizations or Reclamation contractors do not require a use authorization. *Comment:* Reclamation should be maximizing its return for the use of Reclamation lands, facilities, and waterbodies by charging fees appropriately. *Response:* The proposed rule will comply with OMB Circular A-25 which directs the recovery of administrative costs and use fees. *Comment:* Reclamation wants to eliminate all recreational and residential uses and replace them with grazing or agricultural permits at Nelson Reservoir in Montana. *Response:* Nelson Reservoir is known to provide valuable public recreational opportunities. We have no plans to eliminate all recreational and residential uses at Nelson Reservoir and replace them with grazing or agricultural permits. *Comment:* Specific requirements addressing riparian zone protection should be included in all grazing permits. *Response:* Terms required in all use authorizations issued by Reclamation are listed under § 429.28 of the proposed rule. Additional terms and conditions or requirements are determined on a case-by-case basis to meet local, environmental compliance, and other legal requirements as stated under § 429.29 of the proposed rule. *Comment:* It is unclear as to how this rule will affect non-Federal managing partners and their ability to continue to administer the Reclamation land and facilities that have been transferred to them at reservoirs for recreation and related purposes. *Response:* Paragraph 429.4(b) specifically excludes sites managed by non-Federal managing partners from the requirements associated with issuing recreational use authorizations that do not violate Subpart H of these regulations (e.g., allow for new private exclusive recreational or residential uses). Depending on the agreement between Reclamation and the non-Federal entity, the entity may also be authorized to issue use authorizations under Paragraph 429.5. *Comment:* The mandated placement of fencing between private property and the lakeshore at Lake Cascade, Idaho, will have a negative affect on adjacent homeowners and many people who recreate in the area. *Response:* Any operational or management plans for fencing at Lake Cascade, Idaho, are not mandated by or directly related to this proposed rule. Preamble Comments and Responses Only those sections of the preamble to the proposed rule that received comments are discussed in this section. IV. Procedural Requirements *Comment:* This section should include a meaningful analysis of Reclamation's intent for proposing Subpart H of the proposed rule. *Response:* The reason we are including Subpart H is because it is our responsibility to notify the public of uses that are prohibited on Reclamation land, facilities, and waterbodies; thus the primary purpose of Subpart H. Based on the comments received in 2007, we have revised our approach with regard to existing private exclusive recreational and residential use, while maintaining the prohibition on any new such uses. 1. Regulatory Planning and Review (Executive Order (E.O.) 12866) *Comment:* Under paragraph
(a)this is a significant rule which under E.O. 12866 will have an effect of $100 million or more on the economy due to additional financial burdens being placed on the public. *Response:* The proposed rule actually lessens some of the impacts placed on the economy. As an example, the application fee is reduced from $200 to $100 in the proposed rule. The total amount of fees and charges we annually collect for uses of Reclamation land, facilities, and waterbodies is well under $100 million. *Comment:* Paragraph
(b)states that this rule would not create a serious inconsistency or otherwise interfere with actions of another Federal agency. Other Federal agencies, however, seemingly continue to allow for private exclusive recreational or residential uses. *Response:* Each Federal agency has authorities, regulations, and policies that are unique to their mission and responsibilities and will necessarily result in differing practices for the management of lands and resources. How we address private exclusive recreational and residential uses has no impact on how other Federal agencies address that issue. 2. Regulatory Flexibility Act *Comment:* Because this rule expands use fees and authorizations to include navigable waterbodies and facilities, many associated small businesses will be required to submit reports to the agency to comply with the fee determining process. *Response:* The current rule requires that applicable use fees be paid for authorized uses of Reclamation waterbodies and facilities pursuant to OMB Circular A-25; the proposed rule does not expand on that requirement. Additionally, the proposed rule does not impose a reporting or recordkeeping requirement on small businesses. 3. Small Business Regulatory Enforcement Fairness Act *Comment:* The expansion of fees and cost recovery to facilities and waterbodies could result in increased costs or prices for consumers, individual industries, etc. *Response:* Section 429.1 of the current rule requires that applicable fees and cost recovery be assessed for the authorized use of Reclamation lands as well as facilities and waterbodies. The proposed rule does not expand on that requirement. 5. Takings (E.O. 12630 and E.O. 13406) *Comment:* Reclamation's determination that this proposed rule would have no implications for takings of private property rights is invalid. *Response:* This rule applies only to Reclamation land, facilities, and waterbodies. Any private personal property lawfully placed on Reclamation land, facilities, or waterbodies is there only by our permission through a use authorization. No real property rights are conveyed for Reclamation land, facilities, and waterbodies through such a use authorization. Additionally, Reclamation is not responsible for maintaining the value of private personal property, particularly when the authorized uses are not in compliance with the terms of the existing use authorization. 10. National Environmental Policy Act of 1969
(NEPA)*Comment:* This action does have a significant effect on the quality of the human environment because of the impacts it would have on development in major urban areas. There is a need for an environmental assessment or environmental impact statement pursuant to NEPA. *Response:* The proposed rulemaking is a categorically excluded action pursuant to Department of the Interior Departmental Manual 516, Chapter 2, Appendix 1, Exclusion 1.10. As applications for specific use authorizations are evaluated under the proposed rule, the appropriate Reclamation office will determine the type of NEPA analysis that is warranted for the specific use requested. 13. Clarity of This Regulation *Comment:* In general, the proposed rule is vague, confusing, and/or inconsistent in content. *Response:* Changes have been made to the previously proposed rule to clarify sections that were specifically identified by commenters as unclear. We have also made editorial changes to improve the readability of the proposed rule. Changes, Comments, and Responses Related to the Text of the Proposed Rule Subpart A—Purpose, Definitions, and Applicability *Comment:* The effects of §§ 429.3, 429.4, and 429.5 on non-Federal managing partners are not clear and appear to be contradictory. Section 429.3(d) states that grazing, farming, and other agricultural uses require an authorization under this part. Section 429.4(b), however, states that activities at sites managed by non-Federal managing partners under Public Law 89-72 do not require authorization under this part. Additionally, § 429.5 states that only Reclamation is authorized to issue use authorizations under this part. *Response:* Section 429.4(b) lists uses that are not subject to this proposed rule and specifically includes “recreational activities at sites managed by non-Federal managing partners under Public Law 89-72, titled Federal Water Project Recreation Act, July 9, 1965, as amended . * * *” Therefore §§ 429.3(d) and 429.5 would not apply to our non-Federal managing recreation partners for recreational related uses. *Section 429.1* This section describes the purpose of 43 CFR part 429. To be consistent with changes made at § 429.32, we added paragraph
(f)to this section that describes how we will address existing permitted uses which are otherwise prohibited, including the criteria for approval or denial of requests to renew or transfer these permits. The paragraphs following were appropriately renumbered. Minor editorial changes were made to this section as compared to the previously proposed rule. *Section 429.2* This section establishes the definitions for terms that are used in part 429. We made changes to this section as compared to the previously proposed rule by adding definitions for the following terms: *easement, managing partner, part 21 of this title and public needs.* We also broadened the definition of *water user organization.* *Comment:* The definition for private exclusive recreational or residential use is ambiguous and should more clearly explain what the extended period of time is that creates such a use. *Response:* The inclusion of a time component does create confusion and would wrongly imply that certain exclusive uses could be allowable for a limited time without a use authorization. We have now removed the reference to “extended periods of time.” Normal recreational activities, including camping for up to 14 days within a 30 day period, are specifically exempted by section 429.4(a). We have also provided examples of the most common instances of private exclusive recreational and residential use in the definition itself. *Comment:* The definitions in the proposed rule for *Reclamation land* and *Reclamation facility* should be amended to restore the words from the current rule under § 429.6. This change would limit the applicability of the proposed rule to those lands and facilities that are in the control and custody of Reclamation; and would recognize that although Reclamation lands continue to be owned by the United States, they are managed by and placed in the custodial control of the water user organizations with whom Reclamation holds contracts. *Response:* This proposed rule applies to all land and facilities under our jurisdiction. It is our responsibility to manage these lands in the best interest of the United States and in compliance with applicable Federal statutes, regulations, and policies. *Section 429.3* This section describes the types of uses of and activities on Reclamation land, facilities, and waterbodies that typically require a use authorization under part 429. We made only minor editorial changes to this section as compared to the previously proposed rule. It should be noted that part 5 of this title addresses some types of filming and photography on certain areas under the jurisdiction of the Department of the Interior. However, part 5 of this title is specific to other agencies within the Department of the Interior not including Reclamation. *Comment:* Section 429.4 is not needed since the uses that require authorization are listed in § 429.3. Only individuals who are seeking an authorization will be using this rule. *Response:* If there are common uses that do not require authorization, it is important that we notify the public in this proposed rule. *Section 429.4* This section lists the types of uses of and activities on Reclamation land, facilities, and waterbodies that do not require authorization under part 429. We made editorial changes to this section as compared to the previously proposed rule. *Comment:* Paragraph
(a)of this section states the types of activities that do not require authorization under this part which raises a concern regarding the well-being and safety of managing water user organization employees as they are performing their operation and maintenance duties on a daily basis. This paragraph seems to allow the general public access to all facilities. Such accessibility will not only increase operation and maintenance costs as a result of increased wear on roadways, but also dumping, vandalism, and opportunities for accidents. *Response:* Access to lands, facilities, and waterbodies under our jurisdiction is administered under 43 CFR part 423. Water user organizations should work through their local Reclamation office to establish closures for areas or facilities such as canals, laterals, or water pipelines that are unsafe or not appropriate for general public access as established under Subpart B of 43 CFR part 423. *Comment:* Paragraph (b)(5) of this section which suggests that Reclamation contracts for water supply or water operations do not require Reclamation authorization is directly contradictory to § 429.5 which states that water user associations have no authority to permit uses of Reclamation property. *Response:* Paragraph (b)(5) of this section states that Reclamation contracts for water supply or water operations do not require a use authorization. Under paragraph (b)(6) of this section water user associations are not required to obtain use authorizations for their contractual operation and maintenance activities on Reclamation land, facilities, or waterbodies. *Comment:* There is no need to list the uses that do not need authorization since we have listed those that do under § 429.3. *Response:* We have provided information in this section specifying what common uses do not require authorization for clarification and as notification to the general public and our managing partners. *Comment:* Clearly list what activities are authorized on Reclamation land. Be specific to water conveyance facilities. *Response:* We have listed uses requiring an authorization at § 429.3. These uses must be authorized when they are on Reclamation land, facilities, or waterbodies which includes water conveyance facilities. *Comment:* Clarify what activities managed by other Federal agencies or Interior bureaus are exempted from authorization under this part. *Response:* Activities managed by other Federal agencies on Reclamation land, facilities, or waterbodies must be covered by an agreement or authority as specified in paragraph
(b)of this section. For example, some recreation sites on Reclamation lands along the Colorado River are managed by the National Park Service through statutory authority. *Comment:* Differentiating between how lands are managed directly by Reclamation or by other Federal agencies or bureaus will create disparate treatment. *Response:* Each Federal agency has its own missions and authorities. These divergent missions and authorities will necessarily result in differing practices for the management of lands and resources. *Comment:* The 14-day limit for camping should be increased. *Response:* Reclamation's 14-day limit in any 30-day period is established under 43 CFR part 423.33(b). This proposed rule does not address that limitation. *Section 429.5* This section addresses who is authorized under part 429 to issue use authorizations. We have made changes to this section as compared to the previously proposed rule to state that recreation managing partners and water user organizations whose existing contracts with Reclamation allow them to do so may issue some limited use authorizations to third parties for activities on Reclamation land, facilities, and waterbodies provided those limited use authorizations meet the requirements listed in this section. It should be noted that all revenues collected for the use of Reclamation land, facilities, and waterbodies must be handled in compliance with all statutory, regulatory, and policy requirements. *Comment:* Water user organizations are specifically prohibited by this section from authorizing the use of project lands and as a result existing use authorization that they have issued may be nullified. *Response:* Water user organizations who have assumed responsibility for operation and maintenance of Reclamation land, facilities, or waterbodies pursuant to a contract with Reclamation may issue limited use authorizations to third parties for activities on Reclamation land, facilities, or waterbodies when all of the requirements listed in § 429.5 have been met. *Comment:* The proposed rule contradicts the terms of existing contracts between Reclamation and water user organizations for operation and maintenance of Reclamation projects. *Response:* Water user organizations who have assumed responsibility for operation and maintenance of Reclamation land, facilities, or waterbodies pursuant to a contract with Reclamation may issue limited use authorizations to third parties for activities on Reclamation land, facilities, or waterbodies when all of the requirements listed in § 429.5 have been met. *Comment:* The proposed rule would adversely affect water user organizations' ability to issue grazing permits and collect subsequent revenues from those permits creating a financial burden on the water user organizations and their farmers. *Response:* As noted above, we have made modifications that may allow for use authorizations to be issued by water user organizations. Financial issues can be impacted by project-specific laws, but in all cases revenues should be handled in accordance with all applicable statutes, regulations, and policies. *Section 429.6* This section details when water user organizations must approve Reclamation's use authorizations. This section has been changed compared to the previously proposed rule to reflect provisions found in section 10 of the Reclamation Project Act of 1939 (43 U.S.C. 387) and to express the need for compatibility between use authorizations and a managing water user organization's ability to operate and maintain the facilities for which they have contractual operation and maintenance responsibility. *Comment:* Retain the language in the current rule or add language to the proposed rule that clearly states that water user organizations will continue to be alerted to uses that might interfere with their operation and maintenance of Reclamation project lands. *Response:* We have made changes to this section to re-incorporate some of the language in the current rule and to more clearly express the need for compatibility between requested uses and water user organizations' ability to manage the facilities for which they have contractual operation and maintenance responsibility. Subpart B—Proposed Uses Involving Reclamation Easements *Section 429.7* This section discusses the use of land not owned by Reclamation, but where Reclamation holds easements. We have made changes to paragraphs (a), (b), and
(c)of this section compared to the previously proposed rule. These changes are intended to improve the clarity of this subpart and not to change its intent or purpose. *Comment:* Reclamation should be required to issue a consent document if the use does not unreasonably interfere with its easement. Doing so would increase the revenues being collected. *Response:* Reclamation lacks the authority to require users of private lands to pay use fees to Reclamation for the use of those private lands. When issuing a consent document is determined to be compatible with the intended project purposes for which the easement was obtained, all other appropriate and applicable fees are collected as required by regulation and policy. *Section 429.8* This section discusses whether fees are required for the use of Reclamation easements. We made only minor editorial changes to this section as compared to the previously proposed rule. We received no comments on this section. Subpart C—Requesting Authorizations To Use Reclamation Land, Facilities, and Waterbodies *Section 429.9* This section explains what you should do before filing an application. We made no changes to this section as compared to the previously proposed rule. We received no comments on this section. *Section 429.10* This section describes what application forms to use and how to determine which application form is appropriate to use. We made no changes to this section as compared to the previously proposed rule. We received no comments on this section. *Section 429.11* Where the use authorization application forms can be found is provided in this section. We made no changes to this section as compared to the previously proposed rule. *Comment:* The forms as currently drafted do not include enough specificity regarding the required information to be submitted with an application. The current rule at § 429.6 is clearer and more detailed in listing what is required. *Response:* This comment will be taken into consideration as we review Reclamation's Right-of Use Form 7-2540 for possible adjustments this year. *Section 429.12* The appropriate location for filing an application is listed in this section. We made no changes to this section as compared to the previously proposed rule. We received no comments on this section. *Section 429.13* This section tells how long the application review process will take. We made minor editorial changes to this section as compared to the previously proposed rule. *Comment:* Seven days should be an adequate amount of time to acknowledge receipt of an application and a determination to either accept or deny the request should be made within fourteen days. *Response:* While we will strive to respond to all applicants as quickly as possible, there are certain times of the year when the volume of applications exceeds our staff resources. Consequently we may not be able to respond within seven days. In order to meet the time frames suggested by this comment at such peak times, we would have to increase our staffing resources which would lead to higher fees for all applicants. We believe the approach we have selected is in the best interest of all parties. *Section 429.14* The criteria Reclamation will consider when reviewing applications is described in this section. We made minor editorial changes to this section for clarity. *Comment:* The criteria used in reviewing applications are too broad and cannot be applied fairly and impartially. *Response:* We review each use application as it is submitted on a case-by-case basis considering the criteria under § 429.14. As stated on the submitted application forms, we may request additional information as necessary to assist us in making a determination as to whether the proposed use of Reclamation land, facilities, or waterbodies is appropriate. *Comment:* Add an additional criterion that would require the proposed activity receive the consent of any affected water user organization. *Response:* Although we have not incorporated this comment into the criteria under § 429.14, we have made changes to § 429.6 to more specifically address this issue. *Section 429.15* This section discusses whether Reclamation is required to issue use authorizations. We changed this section by adding a statement to the affect that all use authorizations must meet required criteria prior to issuance. *Comment:* Reclamation should not have the authority to issue authorizations at its discretion. Reclamation should be required to have a justification for declining an application. *Response:* We issue use authorizations at our discretion in order to protect the interests of the United States, as all use authorizations must be compatible with the purposes for which the Reclamation managed lands are being administered. Subpart D—Application Fees and Administrative Costs *Section 429.16* The amount of the application fee and when to pay the fee is described in this section. We made minor editorial changes to this section as compared to the previously proposed rule. We received no comments on this section. *Section 429.17* This section explains under what circumstances administrative costs will be collected. We made no changes to this section as compared to the previously published rule. We received no comments on this section. *Section 429.18* This section explains when administrative costs will be due and payable. We made minor editorial changes to this section as compared to the previously published rule. *Comment:* The administrative costs associated with the application process are not well-defined. *Response:* Administrative costs are determined on a case-by-case basis depending on the staff time required to evaluate and process the application, and to monitor, and terminate the use authorization when necessary. The definition of *administrative costs* in § 429.2 provides a listing of the most common elements associated with administrative costs. In addition, § 429.20 provides that upon written request an explanation of the administrative costs for a particular application will be provided. *Section 429.19* This section describes what the process is when the initial estimate for administrative costs is insufficient. We made no changes to this section as compared to the previously published rule. We received no comments on this section. *Section 429.20* This section describes how to request a detailed explanation of the administrative costs. We made no changes to this section as compared to the previously published rule. We received no comments on this section. *Section 429.21* This section describes what occurs if the administrative costs are overpaid. We made minor editorial changes to this section as compared to the previously proposed rule. We received no comments on this section. *Section 429.22* This section discusses whether future administrative costs can be charged after a use authorization is issued by Reclamation. We made changes in paragraph
(b)of this section to more clearly state how use authorization holders will be notified of additional required fees and payments due. *Comment:* The language in this section is ambiguous and arbitrary because it does not provide businesses with a fair basis upon which to predict costs. Fees for monitoring costs and the adjustment of fees to meet current conditions could have adverse effects on existing operations. *Response:* We cannot anticipate all administrative type costs in the future. Thus, we must have the ability to collect additional administrative costs when necessary. Subpart E—Use Fees *Section 429.23* How Reclamation determines use fees is described in this section. We made no changes to this section as compared to the previously proposed rule. *Comment:* The valuation basis for determining fees is not adequately defined and should be more fully developed and researched. *Response:* The valuation process is established in our Directives and Standards, LND 05-01 Real Property Appraisal, which may be found on our Internet site. *Section 429.24* This section explains when use fees should be paid. We made minor editorial changes to this section as compared to the previously proposed rule. We received no comments on this section. *Section 429.25* This section describes the length of time allowed to both submit a use fee payment and accept the offered use authorization. We made minor editorial changes to this section as compared to the previously published rule. We received no comments on this section. Subpart F—Reductions or Waivers of Application Fees, Administrative Costs, and Use Fees *Section 429.26* This section describes under what conditions Reclamation may waive or reduce costs or fees. We made changes to paragraph
(a)of this section to better define how a determination for fee waiver or reduction is made. *Comment:* This section is confusing and arbitrary. The conditions under which a waiver can be granted are too broad and not well defined. Most applicants would qualify to apply for a waiver or a reduction in fees. *Response:* The table found under paragraph
(a)of this section specifically lists under what situations we may determine that it is appropriate to reduce or waive fees. *Comment:* No change should be made to the language in the current rule regarding fee waivers or reductions. *Response:* We are making changes to this section to comply with the Independent Offices Appropriation Act
(IOAA)(31 U.S.C. 9701), September 13, 1982, as amended and the 1993 revision of the Office of Management and Budget
(OMB)Circular A-25. The IOAA sets forth Congress' intent that any use, permit, or similar thing of value provided by an agency is to be self-sustaining and that agencies may prescribe rules establishing charges for such uses. OMB Circular A-25 established Federal policy which requires administrative costs be recovered for Government services, and fees for the use or sale of Government goods or resources also be charged. *Comment:* This section should be eliminated and no fee waivers should be allowed. *Response:* Under certain circumstances, fee waivers may be allowed under the current rule and section 6 of OMB Circular A-25. *Comment:* Allowing fee waivers or reductions would limit the revenues currently being generated and returned to Reclamation and in some instances water user organizations. *Response:* Section 6 of OMB Circular A-25 allows for a reduced fee or waiver under certain circumstances. Subpart G—Terms and Conditions of Use Authorizations *Section 429.27* This section describes the general information that is contained in each use authorization. We made no changes to this section as compared to the previously proposed rule. We received no comments on this section. *Section 429.28* Terms and conditions that apply to all use authorizations from Reclamation are outlined in this section. We made minor editorial changes in this section as compared to the previously proposed rule. *Comment:* We disagree with paragraph (a)(3) of this section which requires terms in every use authorization allowing Reclamation to unilaterally terminate a use authorization. *Response:* It is our responsibility to properly manage the land under our jurisdiction. On occasion we may need to terminate a use authorization and even do so unilaterally. However, such instances are rare and limited to very unusual circumstances which we have specified in this section. *Section 429.29* This section describes additional terms and conditions or requirements that will be included in a use authorization. We made minor editorial changes to this section as compared to the previously proposed rule. We received no comments on this section. *Section 429.30* This section explains whether a use authorization can be transferred or assigned to another individual or entity. We made minor editorial changes to this section as compared to the previously proposed rule. We received no comments on this section. Subpart H—Terms and Conditions of Use Authorizations *Section 429.31* This section describes what the prohibited uses are on Reclamation land, facilities, and waterbodies. We made minor editorial changes to this section as compared to the previously proposed rule. *Comment:* A state transportation agency opposes paragraph (b)(1)(v) of this section. The agency is concerned that this section will be in direct opposition to their policies and will deny property owners access to existing easements. *Response:* For property owners that currently have authorization to access their existing easements, this proposed rule does not include any changes. Those who are crossing Reclamation lands without authorization will need to follow the procedures to obtain authorization. The documentation of these access situations will benefit and protect all parties. *Section 429.32* How Reclamation will address existing uses which are otherwise prohibited is discussed in this section. We have revised the approach with regards to existing private exclusive recreational and residential uses that were not previously addressed by 43 CFR part 21. Specifically, under the July 2007 proposed rule such uses would have eventually had to be removed. Under the revised rule, such uses can remain if certain criteria are met, and they will be treated in a manner very similar to that outlined in 43 CFR part 21. Under § 429.32(b)(1), we have added additional criteria to which all existing authorized private exclusive recreational and residential uses of Reclamation land, facilities, and waterbodies, including those defined under 43 CFR part 21, are subject. The overall majority of comments received relate to this section of the proposed rule. Most of these commenters hold existing use authorizations for cabin sites or other recreational or residential uses, including boat docks, on Reclamation land, facilities, or waterbodies. *Comment:* Many commenters are concerned that their existing use authorizations for private exclusive recreational and residential uses will not be renewed upon expiration. *Response:* We will renew private exclusive recreational and residential use authorizations provided that the requirements of this proposed rule are met. Some cabin sites are also governed by 43 CFR part 21, and those regulations (which govern all Department of the Interior agencies, not just Reclamation) are not affected by this rulemaking; however, because the monitoring and enforcement procedures in this proposed rule are actually based on the existing rules in 43 CFR part 21, this dual regulatory coverage should have little practical impact. Such renewals will be for a period not to exceed 20 years and will be subject to periodic reviews that could potentially result in an early termination. *Comment:* Holders of existing use authorizations for private exclusive uses stated that they have invested a significant amount of money in improvements located on Reclamation land, facilities, or waterbodies, and do not want to lose that investment. *Response:* A use authorization for private exclusive recreational or residential use does not vest an interest in Reclamation land, facilities, or waterbodies with the holder of the use authorization. Any physical improvements made by the holder of the use authorization should be done so with the understanding that the ownership of the land, facilities, or waterbodies will continue to remain with the United States. *Comment:* The holders of use authorizations are better stewards of the land than Reclamation. They invest many hours in not only keeping their own authorized use area cleaned up, but also cleaning up adjacent areas. *Response:* We recognize that many holders of use authorizations are responsible caretakers. As the manager of those Federal lands, however, we have the ultimate responsibility for those Federal lands, and we must make certain that they are managed in the best interests of the United States. *Comment:* It is ambiguous and unclear as to when 43 CFR part 21 applies. Specifically list which segments of 43 CFR part 21 will be followed or specify that it will be followed in its entirety. *Response:* We have decided to use the requirements in 43 CFR part 21 to develop the requirements that will apply to all existing private exclusive recreational and residential use authorizations. This should result in consistent treatment of uses regardless of whether the part 21 regulations technically apply. For example, personal cabin sites were subject to the part 21 regulations if they were authorized directly by Reclamation, but similar sites were exempt from these regulations if the area was managed under a concession contract. Now, both types of sites will be subject to this proposed rule which mimics the procedures previously established in part 21. The cabin sites directly authorized by Reclamation remain under 43 CFR part 21 as well. *Comment:* Section 429.32(a) states that renewal requests for cabin sites administered under 43 CFR part 21 will be reviewed by the Commissioner and approved where appropriate. The term appropriate sends a foreboding message and is ambiguous. *Response:* The responsibility for renewing use authorizations for recreational or residential uses has been returned to the appropriate field office under this proposed rule. *Comment:* Clearly define under what rare exceptions waivers would be granted by the Commissioner for renewals of recreational or residential uses of Reclamation land. *Response:* The requirement for a waiver in order to renew an existing private exclusive recreational or residential use authorization has been removed from this proposed rule. *Comment:* Non-profit organizations that hold use authorizations for activities such as summer youth camps should not be subject to the same regulations and fee requirements as for-profit organizations. *Response:* Section 429.26(a) of the proposed rule and the table that follows describe under what circumstances we may determine that it is appropriate to reduce or waive fees. Item 5 of the table specifically applies to non-profit or educational entities when the use provides a general public benefit. *Comment:* If private boat docks are eliminated as a result of this proposed rule, public boat docks which are not always conveniently located and are over used will receive increased pressure. *Response:* Provided that existing authorized boat docks meet the requirements, this proposed rule would not prevent the use authorization from being renewed. *Section 429.33* This section describes the consequences for using Reclamation land, facilities, and waterbodies without authorization. We made changes to paragraphs (b), (e), and
(f)of this section for clarification purposes only. In addition, we added a new paragraph under
(b)to specify how the interest rate to be applied to the use fee for unauthorized uses will be determined. *Comment:* Existing commercial outfitters and/or concessionaires should have a preferential right of renewal for their authorizations. Other Federal agencies and Department of the Interior bureaus utilize this method. *Response:* Through Reclamation policies and directives, we have instituted a process of fair and open competition with regard to concession and similar contracts. *Comment:* There is no valid reason for capping the fees that can be collected for unauthorized use to 6 years. *Response:* We have removed the 6 year cap on collecting use fees for unauthorized uses of Reclamation land, facilities, and waterbodies. The applicable statute of limitations will be applied based on the circumstances associated with each unauthorized use. Subpart I—Decisions and Appeals *Comment:* The appeal process follows a path within the Department of the Interior. A fair appeal process would include a representative small group rather than a supervisor to supervisor system. *Response:* The appeals process includes a two tier approach. First a review by a Reclamation office other than the office that made the final determination. Next, if the appellant still disagrees with that decision, the matter can be reviewed by an outside agency should the appellant choose to pursue the issue. We believe this is a fair process. *Section 429.34* The decisionmaker for Reclamation's final determinations is listed in this section and provides when that decision will be effective. We made minor editorial changes to this section as compared to the previously proposed rule. We received no comments on this section. *Section 429.35* This section explains if and when an appeal can be made to a final determination. We made no changes to this section as compared to the previously proposed rule. We received no comments on this section. *Section 429.36* This section describes if and when a Commissioner's decision can be appealed. The process for and timeliness of such an appeal is also discussed in this section. We made minor editorial changes to this section as compared to the previously proposed rule. We received no comments on this section. *Section 429.37* This section discusses what happens to monies owed to the United States during an appeal process. We made minor editorial changes to this section as compared to the previously proposed rule. We received no comments on this section. V. Distribution Table The following table indicates each section of the original 1983 rule, as modified in 2006, and where each was incorporated into the proposed rule or not included as the case may be. Old section New section 429.1 429.1. 429.2(a)-(n) 429.2. 429.3(a) 429.23. 429.3(b) 429.33(a) and (c). 429.3(c) 429.33(a) and (b). 429.4 429.26. 429.5 Removed. 429.6 429.7(b); 429.12; and 429.14. 429.6(a) 429.10. 429.6(a)(1)-(3) Removed. Now contained in Application Forms. 429.6(b) 429.16; 429.20-429.22; and 429.26. 429.6(c)(1)-(4) 429.26. 429.6(d)(1)-(4) 429.13(a) and (b). 429.6(e) 429.19; 429.22. 429.6(f) 429.23-429.25. 429.6(g) Removed. See Preamble. 429.7(a) 429.27-429.30. 429.7(b) 429.6. 429.7(c) Removed. 429.7(d) 429.28(a)(3). 429.7(e) 429.28(a)(1). 429.7(f) Removed. 429.8 429.28(a)(2), (3), and (4). 429.9(a) 429.28(a)(1). 429.9(b) 429.28(b). 429.10(a) 429.34(a) and (b); 429.35(a), (b), and (c). 429.10(b) 429.36(a) and (b). 429.11 Removed. 429.12(a) 429.1; 429.3-429.6. 429.12(b) 429.4(a). 429.12(c) 429.26. 429.12(d) 429.4(g). 429.12(e) Removed. 429.13 429.1; 429.3. VI. Procedural Requirements 1. Regulatory Planning and Review (Executive Order (E.O.) 12866) OMB has determined that this rule is not a significant rule and has not reviewed this rule under the requirements of E.O. 12866. We have evaluated the impacts of this rule as required by E.O. 12866 and have determined that it is not a significant regulatory action. The results of our evaluation follow:
(a)This rule will not have an effect of $100 million or more on the economy. It would not adversely affect in any material way the economy, productivity, competition, jobs, environment, public health or safety, or State, local, and tribal governments or communities. The original rule covered only Reclamation lands. It was modified in 2006 to explicitly incorporate uses of Reclamation facilities and waterbodies. The proposed rule requires collecting an initial, nonrefundable deposit of $100 (referred to as the “application fee”), the recovery of additional administrative costs in excess of the initial application fee, and a fee for the use of Reclamation land. It should be noted that this rule reduces the initial application fee from $200 ($150 refundable under specific circumstances) to a nonrefundable $100 application fee. The rule does not change the requirement for full cost recovery of additional administrative costs in excess of the $100 nonrefundable application fee or the requirement to collect the fee for use of Reclamation land, facilities, and waterbodies. Like the current rule, this rule provides for waivers or reductions of costs and fees under unique circumstances as determined to be appropriate by us incompliance with OMB Circular A-25.
(b)This rule would not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency. Since this rule is specific to Reclamation land, facilities, and waterbodies, any impact on another agency would be minimal. Nevertheless, nothing in this rule precludes us from cooperating with other agencies on proposed actions that may impact or require the use of Reclamation's land, facilities, and waterbodies. An example of our working with other agencies is this rule's requirement to use Standard Form
(SF)299, Application for Transportation and Utility Systems and Facilities on Federal Lands, under E.O. 13327. The purpose of E.O. 13327 is to promote the efficient and economical use of America's real property assets. This proposed rule also requires the use of Form 7-2540, Bureau of Reclamation Right-of-Use Application Form, for all other requested uses.
(c)This rule does not alter the budgetary effects of entitlements, grants, user fees, concessions, loan programs, water contracts, management agreements, or the rights and obligations of their recipients.
(d)This rule does not raise any novel legal or policy issues. The recovery of administrative fees and charging of application and use fees are required by the IOAA, OMB Circular A-25, and the current rule. 2. Regulatory Flexibility Act The Department of the Interior (Interior) certifies that this document will not have a significant economic effect on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601, *et seq.* ). This rule does not impose a requirement for small businesses to report or keep records on any of the requirements contained in this rule. A small business's wish to apply to use Reclamation land, facilities, or waterbodies is strictly voluntary. One of the purposes of this rule is to provide small business applicants and others with the requirements they must follow when applying for such a use. An Initial Regulatory Flexibility Analysis is not required and, accordingly, a Small Entity Compliance Guide is not required. 3. Small Business Regulatory Enforcement Fairness Act This proposed rule is not a major rule under the Small Business Regulatory Enforcement Fairness Act (5 U.S.C. 804(2)). This rule:
(a)Does not have an annual effect on the economy of $100 million or more. There are no major changes in the costs or fees charged to applicants.
(b)Will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, local, or tribal government agencies, or geographic regions. It is anticipated that this rule will not result in significant increases in administrative costs or use fees for any one applicant, but it will clarify for the public the basis for determining such costs and fees.
(c)Does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of United States-based enterprises to compete with foreign-based enterprises. The cost to the private sector requesting use of Reclamation land, facilities, or waterbodies is a small fraction of a percent of an individual entity's total cost of doing business. Under this rule, such requests are made on a voluntary basis. 4. Unfunded Mandates Reform Act This proposed rule does not impose an unfunded mandate or a requirement to expend monies on the part of State, local, or tribal governments or communities, or the private sector of $100 million or more annually. This rule does not have a significant or unique effect on State, local, or tribal governments or communities, or the private sector. Requests from any of these entities to use Reclamation land, facilities, and waterbodies are strictly voluntary. If a requested use is authorized by Reclamation, the recovery of administrative costs and the payment of use fees associated with such use are required by law, OMB Circular, and regulation. There are provisions to allow a reduction or waiver of such costs and fees, at our discretion, when specific criteria are met. We are not imposing a duty, requirement, or mandate on State, local, or tribal governments or communities, or the private sector to request such uses. Thus, a statement containing information required by the Unfunded Mandates Reform Act (2 U.S.C. 1531 *et seq.* ) is not required. 5. Takings (E.O. 12630 and E.O. 13406) Under the criteria in E.O. 12630 and E.O. 13406, this proposed rule does not have any implications of takings of property rights. This rule sets forth the requirements for applying to use Reclamation land, facilities, and waterbodies. It also clarifies the basis for charging application and use fees, and for the recovery of administrative costs under the requirements of the IOAA and OMB Circular A-25. A Takings Implication Assessment is not required. 6. Federalism (E.O. 13132) Under the criteria in E.O. 13132, the rule does not have any federalism implications to warrant the preparation of a Federalism Assessment. The rule is not associated with, nor will it have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. A Federalism Assessment is not required. 7. Civil Justice Reform (E.O. 12988) This rule complies with the requirements of E.O. 12988. Specifically, this rule:
(a)Does not unduly burden the judicial system;
(b)Meets the criteria of section 3(a) requiring that all regulations be reviewed to eliminate errors and ambiguity and be written to minimize litigation; and
(c)Meets the criteria of section 3(b)(2) requiring that all regulations be written in clear language and contain clear legal standards. 8. Consultation With Indian Tribes (E.O. 13175) Under the criteria of E.O. 13175, Reclamation has evaluated this rule and determined that it would have no substantial effects on federally recognized Indian Tribes. This rule does not apply to land under the sovereign ownership of federally recognized Indian Tribes. 9. Paperwork Reduction Act This rule does require information collection from 10 or more applicants and a submission under the Paperwork Reduction Act
(PRA)is required. However, the information collection requirements associated with this rule have been previously submitted to OMB for review and have received approval under the requirements of the PRA. The SF 299, Application for Transportation and Utility Systems and Facilities on Federal Lands (used for access across our land, facilities, and waterbodies), was authorized by OMB No. 1004-0189, expiring on November 30, 2008. OMB also has approved the information collection in this rule (using the Bureau of Reclamation Right-of-Use Application Form 7-2540) and has assigned approval number 1006-0003, expiring on March 31, 2009. We estimate the burden associated with this latter information collection to be 2 hours per application. We use the information provided by applicants to determine the nature of the requested use and whether the requested use of our land, facilities, or waterbodies interferes with project operations or project security, or may create other issues. The information provided on the applications is also used to ensure, where appropriate and applicable, the technical and financial resources of the applicant are sufficient to complete the construction of the infrastructure or project. 10. National Environmental Policy Act of 1969 This rule does not constitute a major Federal action and would not have a significant effect on the quality of the human environment. Therefore, this rule does not require the preparation of an environmental assessment or environmental impact statement under the requirements of the National Environmental Policy Act of 1969 (42 U.S.C. 4321 *et seq.* ), and its regulations. 11. Information Quality Act In developing this rule, there was no need to conduct or use a study, experiment, or survey requiring peer review under the Information Quality Act (Pub. L. 106-554). 12. Effects on the Energy Supply (E.O. 13211) This rule is not a significant energy action under the definition in the E.O. 13211. A Statement of Energy Effects is not required. 13. Clarity of This Regulation We are required by E.O. 12866 and 12988, and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means each rule we publish must: —Be logically organized; —Use the active voice to address readers directly; —Use clear language rather than jargon; —Be divided into short sections and sentences; and —Use lists and tables wherever possible. If you feel we have not met these requirements, please send comments to Reclamation as instructed in the ADDRESSES section of this proposed rule. Please make your comments as specific as possible, referencing specific sections and how they could be improved. For example, “section XXX.XX could be more clearly written”, or “the first sentence in section XXX.XX(a) is too long”, or “the data in section XXX.XX should be placed in a table.” 14. Public Comments Before including your name, address, phone number, e-mail address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so. Informational meetings regarding the proposed rule are being hosted by Reclamation in each Region. The dates, times, and locations of these meetings are listed in the SUPPLEMENTARY INFORMATION section of this proposed rule. These meetings will be informational in nature only. Public comments will not be recorded or accepted into the official record at the meetings. In order to be considered, your comments must be submitted to Reclamation as instructed in the ADDRESSES section of this proposed rule. List of Subjects in 43 CFR Part 429 Administrative practice and procedures, Public lands, Reclamation, Recreation and recreation areas, and Land rights-of-way. Dated: July 14, 2008. Kameran L. Onley, Acting Assistant Secretary—Water and Science. For the reasons stated in the preamble, the Bureau of Reclamation proposes to revise 43 CFR part 429 as follows: PART 429—USE OF BUREAU OF RECLAMATION LAND, FACILITIES, AND WATERBODIES Subpart A—Purpose, Definitions, and Applicability Sec. 429.1 What is the purpose of this part? 429.2 What definitions are used in this part? 429.3 What types of uses are subject to the requirements and processes established under this part? 429.4 What types of uses are not subject to the requirements and processes established under this part? 429.5 Who is authorized to issue use authorizations under this part? 429.6 When must water user organizations also approve use authorizations? Subpart B—Proposed Uses Involving Reclamation Easements 429.7 Can I use land where Reclamation holds an easement? 429.8 Is there a fee for uses involving a Reclamation easement? Subpart C—Requesting Authorization to Use Reclamation Land, Facilities, and Waterbodies 429.9 What should I do before filing an application? 429.10 What application form should I use? 429.11 Where can I get the application forms? 429.12 Where do I file my application? 429.13 How long will the application review process take? 429.14 What criteria will Reclamation consider when reviewing applications? 429.15 Is Reclamation required to issue a use authorization? Subpart D—Application Fees and Administrative Costs 429.16 How much is the application fee and when should it be paid? 429.17 When will Reclamation collect administrative costs? 429.18 When do I have to pay the administrative costs? 429.19 What happens if the initial estimate for administrative costs is insufficient? 429.20 Can I get a detailed explanation of the administrative costs? 429.21 If I overpay Reclamation's administrative costs, can I get a refund? 429.22 Can Reclamation charge me additional administrative costs after I receive a use authorization? Subpart E—Use Fees 429.23 How does Reclamation determine use fees? 429.24 When should I pay my use fee? 429.25 How long do I have to submit my payment for the use fee and accept the offered use authorization? Subpart F—Reductions or Waivers of Application Fees, Administrative Costs, and Use Fees 429.26 When may Reclamation reduce or waive costs or fees? Subpart G—Terms and Conditions of Use Authorizations 429.27 What general information appears in use authorizations? 429.28 What terms and conditions apply to all use authorizations? 429.29 What other terms and conditions may be included in my use authorization? 429.30 May use authorizations be transferred or assigned to others? Subpart H—Prohibited and Unauthorized Uses of Reclamation Land, Facilities, and Waterbodies 429.31 What uses are prohibited on Reclamation land, facilities, and waterbodies? 429.32 How will Reclamation address currently authorized existing private exclusive recreational or residential uses? 429.33 What are the consequences for using Reclamation land, facilities, and waterbodies without authorization? Subpart I—Decisions and Appeals 429.34 Who is the decisionmaker for Reclamation's final determinations? 429.35 May I appeal Reclamation's final determination? 429.36 May I appeal the Commissioner's decision? 429.37 Does interest accrue on monies owed to the United States during my appeal process? Authority: 43 U.S.C. 373; 43 U.S.C. 373b, 43 U.S.C. 387; 43 CFR 21; Pub. Law 108-447, Title VIII; 31 U.S.C. 9701, as amended. Subpart A—Purpose, Definitions, and Applicability § 429.1 What is the purpose of this part? The purpose of this part is to notify the public that any possession or occupancy of any portion of, and the extraction or disturbance of any natural resources from Reclamation land, facilities, or waterbodies are prohibited without written authorization from Reclamation, unless excepted as listed in § 429.4. This part describes:
(a)How to apply to Reclamation for a use authorization to allow your activity on Reclamation land, facilities, and waterbodies;
(b)How Reclamation reviews and processes your application, including the criteria for approval or denial of your application;
(c)The requirement for collection of application and use fees and the recovery of administrative costs;
(d)How Reclamation determines and collects costs and fees;
(e)Prohibited uses on Reclamation land, facilities, and waterbodies;
(f)How Reclamation will address existing authorized uses which are otherwise prohibited, including the criteria for approval or denial of requests to renew these use authorizations;
(g)The process and penalties associated with resolution of unauthorized uses; and
(h)How to appeal an action or determination made under this part. § 429.2 What definitions are used in this part? The following definitions are used in this part: *Administrative costs* means all costs incurred by Reclamation in processing your application and all costs associated with evaluating, issuing, monitoring, and terminating your use authorization on Reclamation land, facilities, and waterbodies. Administrative costs are distinct and separate from application and use fees and typically include, but are not limited to:
(1)Determining the use fee;
(2)Evaluating and documenting environmental and cultural resources compliance;
(3)Performing engineering review;
(4)Preparation of the use authorization; and
(5)Personnel and indirect costs directly associated with these actions. *Applicant* means you as any person or entity (such as a private citizen, business, non-governmental organization, public entity, Indian tribe, or foreign government) who submits an application requesting use of Reclamation land, facilities, and waterbodies. *Application* means either Form 7-2540 or SF 299. The choice of application form is dependent on the type of use requested. *Application fee* means a $100 nonrefundable charge, which you must submit with your application to cover the costs of our initial review of your request. Application fees are distinct and separate from administrative costs and use fees. *Commissioner* means the senior executive of the Bureau of Reclamation, Department of the Interior. *Consent document* means a written agreement or notification listing conditions which will prevent unreasonable interference with our easement on non-Reclamation land. *Cultural resource* means any prehistoric, historic, architectural, sacred, or traditional cultural property and associated objects and documents that are of interest to archaeology, anthropology, history, or other associated disciplines. Cultural resources include archaeological resources, historic properties, traditional cultural properties, sacred sites, and cultural landscapes that are associated with human activity or occupation. *Easement* refers to an interest in land that consists of the right to use or control the land for a specific purpose, but does not constitute full ownership of the land. *Environmental compliance* means complying with the requirements of the National Environmental Policy Act; the Endangered Species Act; the Clean Water Act; the Clean Air Act; the Comprehensive Environmental Response, Compensation, and Liability Act; applicable regulations associated with these statutes; and other related laws and regulations. *Form 7-2540* means the Bureau of Reclamation Right-of-Use Application form required for all proposed uses of Reclamation land, facilities, and waterbodies, except those associated with construction and/or placement of transportation, communication, and utility systems and facilities. *Grantee* means you as the recipient or holder of a use authorization regardless of the contractual format. *Interior* means the United States Department of the Interior. *Managing Partner* means a Federal or non-Federal public entity that manages land, facilities, or waterbodies through a management agreement with Reclamation entered pursuant to the Federal Water Project Recreation Act, as amended. *Part 21 of this title* means Title 43 of the Code of Federal Regulations part 21, which is titled Occupancy of Cabin Sites on Public Conservation and Recreation Areas. *Part 423 of this chapter* means Title 43 of the Code of Federal Regulations part 423, which is titled Public Conduct on Bureau of Reclamation Facilities, Lands, and Waterbodies. *Possession or occupancy* and *possess or occupy* mean to control, use, or reside on Reclamation land, facilities, or waterbodies. *Private exclusive recreational or residential use* means any use that involves structures or other improvements used for recreational or residential purposes to the exclusion of public uses or which create the perception of such exclusion and are not associated with the official management of a Reclamation project. This includes, but is not limited to, boat docks, cabin sites and associated improvements (including those currently defined in part 21 of this title), residences, trailers, manufactured or mobile homes, structures, roads, or other improvements as determined by Reclamation. *Public Entity* means States, political subdivisions or agencies thereof; public and quasi-governmental authorities and agencies; and agencies of the Federal Government. *Public needs* mean the recreational requirements of the general public at areas where existing authorized private exclusive recreational or residential uses are present. *Reclamation* means the Bureau of Reclamation, United States Department of the Interior. *Reclamation facility* means any facility under our jurisdiction. The term includes, but is not limited to: Buildings, canals, dams, ditches, drains, fish and wildlife facilities, laterals, powerplants, pumping plants, recreation facilities, roads, switchyards, transmission and telecommunication lines, and warehouses. *Reclamation land* means any land under the jurisdiction of, or administered by, Reclamation and may include, but is not limited to:
(1)All land acquired by Reclamation through purchase, condemnation, exchange, or donation for Reclamation project and water related purposes;
(2)All land withdrawn by Reclamation from the public domain for Reclamation purposes; and
(3)All interests in land acquired by Reclamation, including easements and rights exercised by the United States under the 1890 Canal Act (43 U.S.C. 945). *Reclamation law* means the Reclamation Act of June 17, 1902 (32 Stat. 388, 43 U.S.C. 371, *et seq.* ), and all Acts which supplement or amend the 1902 Act. *Reclamation project* means any land, facilities, or waterbodies used for water supply, water delivery, flood control, hydropower, or other authorized purposes including fish, wildlife, and recreation administered by Reclamation under Federal laws. *Reclamation waterbodies* means any body of water situated on Reclamation land and under Reclamation jurisdiction. Examples of Reclamation waterbodies include, but are not limited to, reservoirs, lakes, and impoundments. *Regional Director* means any one of the five representatives of the Commissioner, or their delegates, who are responsible for managing their respective region's land, facilities, and waterbodies and for the decisions made under this part. *Standard Form
(SF)299* means the form titled Application for Transportation and Utility Systems and Facilities on Federal Lands used when requesting permission for construction and/or placement of transportation, communication, or utility systems and facilities. *Unauthorized use* means use of Reclamation land, facilities, and waterbodies without proper authorization. *Use authorization* means a document that defines the terms and conditions under which we will allow you to use Reclamation land, facilities, and waterbodies. Use authorizations can take the form of easements, leases, licenses, permits, and consent documents. This document is also referred to as a “right-of-use” in part 423 of this chapter. *Use fee* means the amount due to Reclamation for the use of Federal land, facilities, or waterbodies under our jurisdiction or control. Use fees are distinct and separate from application fees and administrative costs. *Valuation* means the method used to establish the fee for a use authorization by appraisal, waiver valuation, or other sound or generally accepted business practice. *Water User Organization* means any legal entity established under State law that has entered into a contract with the United States pursuant to the Federal reclamation laws. *We, us,* or *our* mean the Bureau of Reclamation. *You* or *I* mean an applicant, grantee, or unauthorized user. § 429.3 What types of uses are subject to the requirements and processes established under this part? Possession or occupancy of, or extraction or removal of natural resources from, Reclamation land, facilities, or waterbodies require a use authorization in accordance with this part. Typical uses of or activities on Reclamation land, facilities, or waterbodies regulated by this part include, but are not limited to:
(a)Commercial filming and photography;
(b)Commercial guiding and outfitting;
(c)Commercial or organized sporting events;
(d)Grazing, farming, and other agricultural uses;
(e)Infrastructure, such as transportation, telecommunications, utilities, and pipelines;
(f)Organized recreational activities, public gatherings, and other special events that involve the possession or occupancy of Reclamation lands;
(g)Removal of, or exploration for, sand, gravel, and other mineral resources;
(h)Timber harvesting, or removal of commercial forest products or other vegetative resources; and
(i)Any other uses deemed appropriate by Reclamation, subject to the exclusions listed in § 429.4. § 429.4 What types of uses are not subject to the requirements and processes established under this part?
(a)Individual, non-commercial use of Reclamation land, facilities, or waterbodies for occasional activities such as hiking, camping for periods of 14 days or less during any period of 30 consecutive days, sightseeing, picnicking, hunting, swimming, boating, and fishing, consistent with applicable laws, regulations and policies. Public conduct associated with these activities is governed by part 423 of this chapter;
(b)While not subject to other requirements and processes established under this part, the following types of uses must be in compliance with the requirements in Subpart H:
(1)Recreational activities at sites managed by non-Federal managing partners under Public Law 89-72, titled Federal Water Project Recreation Act, July 9, 1965;
(2)Activities managed by other Federal agencies or Interior bureaus by agreement or under other authority;
(3)Activities at sites directly managed by Reclamation where fees or fee schedules are established for general public recreation use;
(4)Uses authorized under concession contracts on Reclamation land, facilities, and waterbodies;
(5)Reclamation contracts for water supply or water operations;
(6)Authorized operation and maintenance activities on Reclamation land, facilities, and waterbodies undertaken by water user organizations, or their contractors, or by Reclamation contractors;
(7)Agreements and real property interests granted for the replacement or relocation of facilities, such as highways, railroads, telecommunication, or transmission lines or infrastructure governed by Section 14 of the Reclamation Project Act of August 4, 1939 (43 U.S.C. 389). Payments to equalize land values may still be required and administrative costs may still be recovered; and
(8)Activities specifically authorized under other Federal statutes or regulations. § 429.5 Who is authorized to issue use authorizations under this part? Unless otherwise provided by law or regulation, only Reclamation or another Federal agency acting for Reclamation under delegated authority is authorized to issue use authorizations that convey an interest in Reclamation land, facilities, or waterbodies. Recreation managing partners under the Federal Water Projects Recreation Act, 16 U.S.C. 4601, *et seq.,* and water user organizations who have assumed responsibility for operation and maintenance of Reclamation land, facilities, or waterbodies pursuant to a contract with Reclamation may issue limited use authorizations to third parties for activities on Reclamation land, facilities, or waterbodies when all of the following apply:
(a)The recreation managing partner or water user organization is authorized to do so under its contract with Reclamation;
(b)Such limited use authorizations do not convey ownership or other interest in the Federal real property;
(c)The uses authorized are not permanent or for an indefinite period;
(d)The limited use authorization does not provide for an automatic right of renewal at the third party's option;
(e)The limited use authorization is fully revocable at the discretion of Reclamation; and
(f)All revenues collected for the use of Reclamation land, facilities, and waterbodies are handled in compliance with all statutory, regulatory, and policy requirements. § 429.6 When must water user organizations also approve use authorizations?
(a)Use authorizations for easements and rights-of way for periods in excess of 25 years are also subject to approval from water user organizations under contract obligation for repayment of the project or division and for those water user organizations who have assumed responsibility for operation and maintenance. This requirement does not apply to any other type of use authorizations.
(b)At the discretion of the responsible Regional Director, concurrence for uses of less than 25 years may be requested of the appropriate water user organization. At a minimum, the appropriate water user organizations will be notified of all use authorizations prior to their issuance to avoid potential conflicts between the requested use authorization and the water user organizations' need to operate and maintain the facilities for which they have contractual responsibility. Subpart B—Proposed Uses Involving Reclamation Easements § 429.7 Can I use land where Reclamation holds an easement?
(a)To prevent conflicts where Reclamation holds an easement on land owned by others, you should submit an application for the proposed use. If after review of the application, Reclamation determines that your requested use would not unreasonably interfere with Reclamation's easement, a consent document may be issued to you. The consent document will contain the conditions with which you must comply to ensure that your use will not unreasonably interfere with Reclamation's use of its easement.
(b)In accordance with subpart C of this part, you should submit either SF 299 or Form 7-2540 to the local Reclamation office to request a consent document.
(c)If you are not the underlying landowner, you must also secure the permission of the landowner for your requested use of the area covered by Reclamation's easement. § 429.8 Is there a fee for uses involving a Reclamation easement? Reclamation will not charge a use fee for a consent document. However, depending upon the complexity of your requested use and issues associated with it, Reclamation may charge an application fee and administrative costs, unless waived in accordance with subpart F of this part. Subpart C—Requesting Authorization to Use Reclamation Land, Facilities, and Waterbodies § 429.9 What should I do before filing an application? Before filing an application, it is important that you contact the local Reclamation office to discuss your proposed use. This discussion can help expedite your application process. § 429.10 What application form should I use? You must use one of the following application forms depending on the nature of your requested use:
(a)Use SF 299 to request a use authorization for the placement, construction, and use of energy, transportation, water, or telecommunication systems and facilities on or across all Federal property including Reclamation land, facilities, or waterbodies. Examples of such uses are:
(1)Canals;
(2)Communication towers;
(3)Fiber-optics cable;
(4)Pipelines;
(5)Roads;
(6)Telephone lines; and
(7)Utilities and utility corridors.
(b)Use Form 7-2540 to request any other type of use authorization. Examples of such uses are:
(1)Commercial filming and photography;
(2)Commercial guiding and outfitting;
(3)Commercial or organized sporting events;
(4)Grazing, farming, and other agricultural uses;
(5)Organized recreational activities, public gatherings, and other special events;
(6)Removal of, or exploration for, sand, gravel, and other mineral materials;
(7)Timber harvesting, or removal of commercial forest products or other vegetative resources; and
(8)Any other uses deemed appropriate by Reclamation.
(c)Application forms may not be required where Reclamation solicits competitive bids. § 429.11 Where can I get the application forms? Both forms can be obtained from any Reclamation office or from our official internet Web site at *http://www.usbr.gov.* These forms contain specific instructions for application submission and describe information that you must furnish. However, when you submit either form to your local Reclamation office for review, the form must contain your original signature as the applicant. § 429.12 Where do I file my application? File your completed and signed application, including the $100 nonrefundable application fee, with the Reclamation office having jurisdiction over the land, facility, or waterbody associated with your request. Reclamation office locations may be found on *http://www.usbr.gov,* the official Reclamation internet Web site. § 429.13 How long will the application review process take?
(a)Reclamation will acknowledge in writing your completed and signed application and application fee within 30 calendar days of receipt. Reclamation may request additional information needed to process your application, such as legal land descriptions and detailed construction specifications.
(b)The processing time depends upon the complexity of your requested use, issues associated with it, and the need for additional information from you.
(c)Should your requested use be denied at any time during the review process, Reclamation will notify you in writing of the basis for the denial. § 429.14 What criteria will Reclamation consider when reviewing applications? Reclamation will consider the following criteria when reviewing applications:
(a)Compatibility with authorized project purposes, project operations, safety, and security;
(b)Environmental compliance;
(c)Compatibility with public interests;
(d)Conflicts with Federal policies and initiatives;
(e)Public health and safety;
(f)Availability of other reasonable alternatives; and
(g)Best interests of the United States § 429.15 Is Reclamation required to issue a use authorization? No. The issuance of a use authorization is at Reclamation's discretion. At a minimum, the criteria listed at § 429.14 must be considered prior to issuance of any use authorizations. Not all requests will be authorized. If issued, Reclamation will provide only the least estate, right, or possessory interest needed to accommodate the approved use. Subpart D—Application Fees and Administrative Costs § 429.16 How much is the application fee and when should it be paid? You must remit a nonrefundable application fee of $100 to cover costs associated with our initial review of your application, unless the payment is waived pursuant to subpart F of this part. This initial review will determine if your requested use is appropriate for consideration and not likely to interfere with Reclamation project purposes or operations. § 429.17 When will Reclamation collect administrative costs? Reclamation will collect, in advance, its administrative costs for processing your application, except as provided under subpart F of this part. § 429.18 When do I have to pay the administrative costs?
(a)Following the initial review, you will be notified in writing whether your application appears to be appropriate for further processing. At that time, Reclamation will give you an initial estimate of administrative costs required to continue processing your application.
(b)You must pay these initial, estimated administrative costs before Reclamation can continue to process your application, unless you are granted a waiver of administrative costs under subpart F of this part. If payment is not received within 90 days after the estimate is provided to you, Reclamation may close your file. If this occurs and you later wish to proceed, you must submit both a new application and another $100 nonrefundable application fee. § 429.19 What happens if the initial estimate for administrative costs is insufficient? If the initial estimate to cover Reclamation's administrative costs is found to be insufficient, Reclamation will notify you in writing of the additional amount needed. You must pay the amount requested before Reclamation will continue processing your application. § 429.20 Can I get a detailed explanation of the administrative costs? Yes, you are entitled to receive an explanation of all administrative costs relevant to your specific application. You must request this information in writing from the Reclamation office where you submitted your application. § 429.21 If I overpay Reclamation's administrative costs, can I get a refund? If, in reviewing your application, Reclamation uses all the monies you have paid, you will not receive a refund regardless of whether you receive a use authorization. If the money collected from you exceeds administrative costs, a refund of the excess amount will be made to you consistent with Reclamation's financial policies. § 429.22 Can Reclamation charge me additional administrative costs after I receive a use authorization?
(a)After you receive your use authorization, Reclamation may charge you for additional administrative costs incurred for activities such as:
(1)Monitoring your authorized use over time to ensure compliance with the terms and conditions of your use authorization; and
(2)Periodic analysis of your long-term use to adjust your use fee to reflect current conditions.
(b)If your additional payment is not received by Reclamation within 90 days after notification to you in writing of the additional administrative costs, Reclamation may take action to terminate your use authorization. Subpart E—Use Fees § 429.23 How does Reclamation determine use fees? The use fee is based on a valuation or by competitive bidding. Use fees may be adjusted as deemed appropriate by Reclamation to reflect current conditions, as provided in the use authorization. § 429.24 When should I pay my use fee?
(a)If Reclamation offers you a use authorization, you must pay the use fee in advance, unless you are granted a waiver under subpart F of this part.
(b)Your use authorization will clearly state the use fee. Should periodic payments apply, your use authorization will also describe when you should pay those periodic use fees. § 429.25 How long do I have to submit my payment for the use fee and accept the offered use authorization? You have 90 days to accept and return the use authorization and required fees, otherwise Reclamation may consider the offer to be rejected by you and your file may be closed. If this occurs and you later wish to proceed, you must submit a new application and another $100 nonrefundable application fee. You may not commence your use of Reclamation's land, facilities, or waterbodies until Reclamation has issued a use authorization to you. A use authorization will only be issued upon receipt by Reclamation of all required costs and fees, and the use authorization signed by you. Subpart F—Reductions or Waivers of Application Fees, Administrative Costs, and Use Fees § 429.26 When may Reclamation reduce or waive costs or fees?
(a)As determined appropriate by Reclamation and approved and documented by the applicable Regional Director, Reclamation may waive the application fee, or waive or reduce charges for administrative costs or the use fee as indicated by a ✓ in the following table: Situations where costs and fees may be reduced or waived Application fee Administrative costs Use fee
(1)The use is a courtesy to a foreign government or if comparable fees are set on a reciprocal basis with a foreign government ✓ ✓ ✓
(2)The use is so minor or short term that the cost of collecting fees is equal to or greater than the value of the use ✓ ✓ ✓
(3)The use will benefit the general public with no specific entity or group of beneficiaries readily identifiable ✓ ✓ ✓
(4)Applicant is a public entity or Indian tribe ✓ ✓ ✓
(5)Applicant is a non-profit or educational entity and the use provides a general public benefit ✓ ✓ ✓
(6)Applicant is a rural electric association or municipal utility or cooperative ✓ ✓ ✓
(7)The use directly supports United States' programs or projects ✓ ✓ ✓
(8)The use secures a reciprocal land use of equal or greater value to the United States ✓ ✓ ✓
(9)Applicant for a consent document is the underlying owner of the property subject to Reclamation's easement ✓ ✓ ( 1 )
(10)The use is issued under competitive bidding ✓ ✓ ( 2 ) 1 Not Applicable. 2 Set by Bid.
(b)When a statute, executive order, or court order authorizes the use and requires specific treatment of administrative cost recovery and collection of use fees associated with that use, that requirement will be followed by Reclamation. Subpart G—Terms and Conditions of Use Authorizations § 429.27 What general information appears in use authorizations? Each use authorization will contain:
(a)An adequate description of the land, facilities, or waterbodies where the use will occur;
(b)A description of the specific use being authorized together with applicable restrictions or conditions that must be adhered to;
(c)The conditions under which the use authorization may be renewed, terminated, amended, assigned or transferred, and/or have the use fee adjusted; and
(d)Primary points of contact and other terms and conditions. § 429.28 What terms and conditions apply to all use authorizations?
(a)By accepting a use authorization under this part, you agree to comply with and be bound by the following terms and conditions during all construction, operation, maintenance, use, and termination activities:
(1)The grantee agrees to indemnify the United States for, and hold the United States and all of its representatives harmless from, all damages resulting from suits, actions, or claims of any character brought on account of any injury to any person or property arising out of any act, omission, neglect, or misconduct in the manner or method of performing any construction, care, operation, maintenance, supervision, examination, inspection, or other activities of the grantee.
(2)The United States, acting through Reclamation, Department of the Interior, reserves rights to construct, operate, and maintain public works now or hereafter authorized by the Congress without liability for severance or other damage to the grantee's activities or facilities.
(3)Reclamation may, at any time and at no cost or liability to the United States, unilaterally terminate the use authorization if Reclamation determines that:
(i)The use has become incompatible with authorized project purposes or a higher public use is identified;
(ii)Termination is necessary for operational needs of the project; or
(iii)There has been a natural disaster, a national emergency, a need arising from security requirements, or an immediate and overriding threat to the public health and safety.
(4)Reclamation may, at any time and at no cost or liability to the United States, unilaterally terminate any use authorization if Reclamation determines that the grantee has failed to use the use authorization for its intended purpose. Further, failure to construct or use for any continuous 2-year period may constitute a presumption of abandonment of the requested use and cause termination of the use authorization.
(5)Reclamation may, at any time and at no cost or liability to the United States, unilaterally terminate any use authorization if the grantee fails to comply with all applicable Federal, State, and local laws, regulations, ordinances, or terms and conditions of any use authorization, or to obtain any required permits or authorizations
(b)The Regional Director may, upon advice of the Solicitor, modify these terms and conditions with respect to the contents of the use authorization to meet local and special conditions. § 429.29 What other terms and conditions may be included in my use authorization? Reclamation may include additional terms, conditions, or requirements that address environmental law compliance, the protection of cultural and natural resources, other interests of the United States, and local laws and regulations. § 429.30 May use authorizations be transferred or assigned to others? Your use authorization may not be transferred or assigned to others without prior written approval of Reclamation, unless specifically provided for in your use authorization. Should you wish to transfer or assign your use authorization to another individual or entity, you must contact the Reclamation office that issued your use authorization prior to taking such action. Subpart H—Prohibited and Unauthorized Uses of Reclamation Land, Facilities, and Waterbodies § 429.31 What uses are prohibited on Reclamation land, facilities, and waterbodies?
(a)Reclamation prohibits any use that would not comply with part 423 of this chapter.
(b)Reclamation prohibits any use that would result in new private exclusive recreational or residential use of Reclamation land, facilities, or waterbodies.
(1)Examples include, but are not limited to, the following:
(i)Cabins, mobile homes, residences, outbuildings, and related structures, and associated landscaping, patios, decks, and porches;
(ii)Boat houses, docks, moorings, piers, and launch ramps;
(iii)Floating structures or buildings, including moored vessels used as residences or unauthorized business sites;
(iv)Sites for such activities as hunting, fishing, camping, and picnicking (other than transitory uses allowed under part 423 of this chapter) that attempt to exclude general public access; and
(v)Access to private land, facilities, or structures when other reasonable alternative access is available or can be obtained.
(2)Buildings and structures used by concessionaires or managing partners to facilitate their operations or that are made available by them for the general, non-exclusive use of the public are not prohibited. Examples include, but are not limited to the following:
(i)Boat docks available for short-term use by the public;
(ii)Marina slips available for rent by the public;
(iii)Publicly available boat ramps;
(iv)Houseboats available for short-term rent by the public;
(v)Stores and restaurants;
(vi)Employee housing; and
(vii)Rental cabins, hotels, campgrounds, and other short-term lodging facilities. § 429.32 How will Reclamation address currently authorized existing private exclusive recreational or residential uses?
(a)The administration and potential renewal of use authorizations, existing as of January 1, 2008, for private exclusive recreational or residential uses of Reclamation land, facilities, and waterbodies, as defined in this part, will be administered in accordance with the following requirements. Renewal requests may only be approved when all criteria are met.
(1)Compatibility with authorized project purposes, project operations, safety, and security;
(2)Compatibility with public needs;
(3)Environmental compliance;
(4)Public health and safety; and
(5)Current in financial obligations to Reclamation.
(b)Reclamation will review all existing private exclusive recreational or residential uses for compliance with the required criteria at least once every 5 years. Reclamation will provide the holder of the use authorization with a written report of the results of the compliance review. The report will state whether the existing use meets the required criteria listed in this section and will list any deficiencies that can be corrected. A minimum of 90 days will be provided to make corrections identified in the report. Failure to correct the deficiencies within the time provided in the report will result in termination of the use authorization.
(c)A determination by Reclamation that existing private exclusive recreational or residential uses are not compatible with public needs, made under paragraph (a)(2) of this section, will only be finalized through a public process involving one or more public meetings. Examples of such public processes include resource management plan development, recreation demand analysis studies, and project feasibility studies. Determinations that existing private exclusive recreational or residential uses are not compatible with public needs will be published in the **Federal Register** . If a determination of incompatibility with public needs is made, affected use authorizations may be extended up to 5 years from the date of publication in the **Federal Register** if the Regional Director determines that such extension is necessary to the fair and efficient administration of this part.
(d)In addition to the periodic reviews described above, Reclamation will review the existing private exclusive recreational or residential uses for compliance with the required criteria at least 6 months prior to the expiration date of the existing use authorization. Reclamation will provide the holder of the use authorization with a written report of the results of the compliance review results. The report will state whether the existing use meets the required criteria under this section as applicable and will list any deficiencies that must be corrected prior to a renewal of the use authorization. A minimum of 90 days will be provided prior to the expiration of the permit to make corrections identified in the report.
(e)Any renewal of use authorizations for existing private exclusive recreational or residential uses of Reclamation land, facilities, and waterbodies will not exceed 20 year terms. Any such renewals will be subject to the periodic reviews described in subsection (b), and these reviews could potentially result in the termination of the use agreement prior to the end of the term of years.
(f)Upon non-renewal or termination of a use authorization for an existing private exclusive recreational or residential use of Reclamation land, facilities, and waterbodies, the grantee will remove any improvements from the site within 90 days from the date of termination or non-renewal of the use authorization. The grantee will return the property as near as possible to its original undisturbed condition. Any property not removed within 90 days may be removed by Reclamation at the expense of the prior grantee.
(g)Renewal decisions of use authorizations for existing private exclusive recreational or residential uses located on Reclamation land, facilities, and waterbodies will be made by the Regional Director.
(h)Requests for the renewal, transfer, extension, or reissuance of use authorizations for private exclusive recreational or residential uses that expired prior to the effective date of this part or are subsequently not renewed or terminated under the procedures of this section will be considered requests for uses prohibited under § 429.31 and will not be approved. Conversely, requests for the renewal, transfer, extension, or reissuance of use authorizations for private exclusive recreational or residential uses that were in existence on the effective date of these regulations and that are in compliance with all requirements of the applicable use authorization at the time a request is made will not be considered requests for uses prohibited under § 429.31, with transfers and assignments of such use authorizations being subject to the requirements of § 429.30.
(i)Unauthorized existing private exclusive recreational or residential uses will be administered under §§ 429.31 and 429.33 and part 423 of this chapter. § 429.33 What are the consequences for using Reclamation land, facilities, and waterbodies without authorization?
(a)Unauthorized use of Reclamation land, facilities, or waterbodies is a trespass against the United States. You may be subject to legal action including criminal prosecution if your actions violate part 423 of this chapter. A criminal conviction could result in a fine and/or imprisonment for up to 6 months in accordance with 43 U.S.C. 373b(b).
(b)Reclamation may seek to collect the following:
(1)All administrative costs incurred by Reclamation in resolving the unauthorized use;
(2)All costs of removing structures, materials, improvements, or any other real or personal property;
(3)All costs of rehabilitation of the land, facilities, or waterbodies as required by Reclamation.
(4)The use fee that would have applied had your use been authorized from the date your unauthorized use began;
(5)Interest accrued on the use fee from the date your unauthorized use began as specified in paragraph (b)(4) of this section; and
(6)The interest charge rate shall be the greater of either the rate prescribed quarterly in the **Federal Register** by the Department of the Treasury for application to overdue payments or the interest rate of 0.5 percent per month. The interest charge rate will be determined as of the due date and remain fixed for the duration of the delinquent period.
(c)As an unauthorized user, you will receive a written notice in which Reclamation will outline the steps you need to perform to cease your unauthorized use.
(d)If appropriate, you will receive a final determination letter detailing the applicable costs and fees, as set forth under paragraph
(b)of this section, which must be paid to Reclamation for your unauthorized use. Payment must be made within 30 days of receipt of this letter unless Reclamation extends this deadline in writing. Failure to make timely payment may result in administrative or legal action being taken against you.
(e)Reclamation may determine that issuing a use authorization to you for an existing unauthorized use is not appropriate; and may deny future use applications by you because of this behavior. As noted at § 429.15, use authorizations are always issued at Reclamation's discretion.
(f)If, however, your unauthorized use is deemed by Reclamation to be an unintentional mistake, consideration may be given to issuing a use authorization provided that you qualify and meet the criteria at § 429.14; and, in addition to the normal costs, you agree to pay the following:
(1)The use fee that would have been owed from the date your unauthorized use began; and
(2)Interest accrued on the use fee from the date your unauthorized use began as specified in paragraph (f)(1) of this section.
(g)Under no circumstances will your unauthorized use or payment of monies to the United States in association with an unauthorized use either:
(1)Create any legal interest or color of title against the United States; or
(2)Establish any right or preference to continue the unauthorized use. Subpart I—Decisions and Appeals § 429.34 Who is the decisionmaker for Reclamation's final determinations?
(a)The appropriate Reclamation Regional Director, or the Regional Director's designee, makes any final determinations associated with actions taken under this rule and will send that final determination in writing to you by mail.
(b)The Regional Director's final determination will take effect upon the date of the determination letter. § 429.35 May I appeal Reclamation's final determination?
(a)Yes, if you are directly affected by such a determination, you may appeal in writing to the Commissioner within 30 calendar days after the date of the Regional Director's determination letter.
(b)You have an additional 30 calendar days after the postmark of your written appeal to the Commissioner within which to submit any additional supporting information.
(c)The Regional Director's determination will remain in effect until the Commissioner has reviewed your appeal and provided you with that decision, unless you specifically request a stay and a stay is granted by the Commissioner. § 429.36 May I appeal the Commissioner's decision?
(a)Yes, you may appeal the Commissioner's decision by writing to the Director, Office of Hearing and Appeals (OHA), U.S. Department of the Interior, 801 North Quincy Street, Arlington, Virginia 22203.
(b)For an appeal to be timely, OHA must receive your appeal within 30 calendar days from the date of the Commissioner's decision. Rules that govern appeals to the OHA are found at part 4, subpart G, of this title. § 429.37 Does interest accrue on monies owed to the United States during my appeal process? Interest on any nonpayment or underpayment, as provided in § 429.33(b), continues to accrue during an appeal of a Regional Director's final determination, an appeal of the Commissioner's decision to OHA, or during judicial review of final agency action. [FR Doc. E8-16496 Filed 7-17-08; 8:45 am] BILLING CODE 4310-MN-P 73 139 Friday, July 18, 2008 Presidential Documents Part IV The President Notice of July 16, 2008—Continuation of the National Emergency With Respect to the Former Liberian Regime of Charles Taylor Title 3— The President Notice of July 16, 2008 Continuation of the National Emergency With Respect to the Former Liberian Regime of Charles Taylor On July 22, 2004, by Executive Order 13348, I declared a national emergency and ordered related measures, including the blocking of the property of certain persons connected to the former Liberian regime of Charles Taylor, pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701-1706). I took this action to deal with the unusual and extraordinary threat to the foreign policy of the United States constituted by the actions and policies of former Liberian President Charles Taylor and other persons, in particular their unlawful depletion of Liberian resources and their removal from Liberia and secreting of Liberian funds and property, which have undermined Liberia's transition to democracy and the orderly development of its political, administrative, and economic institutions and resources. I further noted that the Comprehensive Peace Agreement signed on August 18, 2003, and the related cease-fire had not yet been universally implemented throughout Liberia, and that the illicit trade in round logs and timber products was linked to the proliferation of and trafficking in illegal arms, which perpetuated the Liberian conflict and fueled and exacerbated other conflicts throughout West Africa. The actions and policies of Charles Taylor and others have left a legacy of destruction that continues to undermine Liberia's transformation and recovery. Because the actions and policies of these persons continue to pose an unusual and extraordinary threat to the foreign policy of the United States, the national emergency declared on July 22, 2004, and the measures adopted on that date to deal with that emergency, must continue in effect beyond July 22, 2008. Therefore, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)), I am continuing for 1 year the national emergency declared in Executive Order 13348. This notice shall be published in the **Federal Register** and transmitted to the Congress. GWBOLD.EPS THE WHITE HOUSE, July 16, 2008. [FR Doc. 08-1452 Filed 7-17-08; 9:27 am]
Connectionstraces to 39
Traces to 39 documents
U.S. Code
49 references not yet in our index
  • 17 CFR 240.19
  • 17 CFR 19
  • Pub. L. 91-575
  • 49 CFR 573
  • 49 CFR 1.50
  • 49 CFR 501.8
  • 49 CFR 1182.5
  • 49 CFR 365.413
  • 49 CFR 1182.2(a)(7)
  • 49 CFR 1182.8
  • 49 CFR 1182.6(c)
  • 31 CFR 1
  • 31 CFR 1.36
  • 12 CFR 3
  • 5 CFR 5.51
  • 12 CFR 4
  • Pub. L. 105-33
  • Pub. L. 106-113
  • Pub. L. 106-554
  • Pub. L. 109-171
  • Pub. L. 92-463
  • Pub. L. 104-191
  • Pub. L. 109-432
  • Pub. L. 108-173
  • Pub. L. 110-173
  • Pub. L. 97-248
  • 42 CFR 419
  • 42 CFR 419.43
  • Pub. L. 107-186
  • Pub. L. 99-272
  • 42 CFR 410.43
  • 42 CFR 410.27(f)
  • Pub. L. 95-452
  • 42 CFR 416
  • Pub. L. 103-432
  • 42 CFR 419.43(h)
  • 42 CFR 480
  • 42 CFR 405
  • Pub. L. 96-354
  • Pub. L. 104-4
+ 9 more
Citation graph
cites case law
Notices
Amendment 1
U.S.C.§ 78s
U.S.C.§ 78f
U.S.C.§ 552
C.F.R.§ 200.30-3
U.S.C.§ 78c
U.S.C.§ 78q–1
Stat.Public Law 99–468
U.S.C.§ 30118
U.S.C.§ 14303
Cite17 CFR 240.19
Cite17 CFR 19
Pub. L.Pub. L. 91-575
Cites 88 · showing 12Cited by 0 across 0 sources
★   the supreme law of the land   ★
Don't Tread on Me
E Pluribus Unum — out of many, one

"If you don't know your rights, you don't have any."

Marginalia · a citizen's law index
A research desk, not legal advice. Always read the cited source before relying on a summary.
Questions or an issue? support@self-law.org
disclaimerMarginalia is a research index, not a law firm. Nothing on this site is legal, tax, or financial advice and no attorney–client relationship is formed by using it. Statutes, regulations, and case law change; summaries, search results, AI output, and member posts may be incomplete, out of date, or wrong. Any interpretation drawn from material on this site should be validated by a licensed attorney in your jurisdiction before you act on it.