A. Proposed Recalibration of APC Relative Payment Weights

1. Database Construction

a. Database Source and Methodology

Section 1833(t)(9)(A) of the Act requires that the Secretary review not less often than annually and revise the relative payment weights for APCs. 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.

For the CY 2015 OPPS, we are proposing to recalibrate the APC relative payment weights for services furnished on or after January 1, 2015, and before January 1, 2016 (CY 2015), using the same basic methodology that we described in the CY 2014 OPPS/ASC final rule with comment period. That is, we are proposing to recalibrate the relative payment weights for each APC based on claims and cost report data for hospital outpatient department (HOPD) services, using the most recent available data to construct a database for calculating APC group weights. Therefore, for the purpose of recalibrating the proposed APC relative payment weights for CY 2015, we used approximately 149 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for hospital outpatient department services furnished on or after January 1, 2013, and before January 1, 2014. For exact counts of claims used, we refer readers to the claims accounting narrative under supporting documentation for this CY 2015 OPPS/ASC proposed rule on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

Of the approximately 149 million final action claims for services provided in hospital outpatient settings used to calculate the CY 2015 OPPS payment rates for this proposed rule, approximately 119 million claims were 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 approximately 119 million claims, approximately 5 million claims 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). From the remaining approximately 114 million claims, we created approximately 94 million single records, of which approximately 46 million were “pseudo” single or “single session” claims (created from approximately 21 million multiple procedure claims using the process we discuss later in this section). Approximately 1 million claims were trimmed out on cost or units in excess of ± 3 standard deviations from the geometric mean, yielding approximately 94 million single bills for ratesetting. As described in section II.A.2. of this proposed rule, our data development process is designed with the goal of using appropriate cost information in setting the APC relative payment weights. The bypass process is described in section II.A.1.b. of this proposed rule. This section discusses how we develop “pseudo” single procedure claims (as defined below), with the intention of using more appropriate data from the available claims. In some cases, the bypass process allows us to use some portion of the submitted claim for cost estimation purposes, while the remaining information on the claim continues to be unusable. Consistent with the goal of using appropriate information in our data development process, we only use claims (or portions of each claim) that are appropriate for ratesetting purposes.

The proposed APC relative weights and payments for CY 2015 in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) were calculated using claims from CY 2013 that were processed through December 31, 2013. While prior to CY 2013 we historically based the payments on median hospital costs for services in the APC groups, beginning with the CY 2013 OPPS, we established the cost-based relative payment weights for the OPPS using geometric mean costs, as discussed in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271). For the CY 2015 OPPS, we are proposing to use this same methodology, basing payments on geometric mean costs. Under this methodology, we select claims for services paid under the OPPS and match 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 relative costs underpinning the APC relative payment weights and the CY 2015 payment rates.

b. Proposed Use of Single and Multiple Procedure Claims

For CY 2015, in general, we are proposing to continue to use single procedure claims to set the costs on which the APC relative payment weights are based. We generally use single procedure claims to set the estimated costs for APCs because we believe that the OPPS relative weights on which payment rates are based should be derived from the costs of furnishing one unit of one procedure and because, in many circumstances, we are unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service.

It is generally 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 are proposing to continue to use date of service stratification and a list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims. 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 procedure claims from claims that were submitted as multiple procedure claims spanning multiple dates of service, or claims that 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 procedure claims. The history of our use of a bypass list to generate “pseudo” single procedure claims is well documented, most recently in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74849 through 74851). In addition, for CY 2008 (72 FR 66614 through 66664), we increased packaging and created the first composite APCs, and continued those policies through CY 2014. Increased packaging and creation of composite APCs also increased the number of bills that we were able to use for ratesetting by enabling us to use claims that contained multiple major procedures that previously would not have been usable. Further, for CY 2009, we expanded the composite APC model to one additional clinical area, multiple imaging services (73 FR 68559 through 68569), which also increased the number of bills we were able to use in developing the OPPS relative weights on which payments are based. We have continued the composite APCs for multiple imaging services through CY 2014, and we are proposing to continue this policy for CY 2015. We refer readers to section II.A.2.f. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74910 through 74925) for a discussion of the use of claims in modeling the costs for composite APCs and to section II.A.3. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925 through 74948) for a discussion of our packaging policies for CY 2014. In addition, we are proposing to establish additional packaging policies for the CY 2015 OPPS, as discussed in section II.A.3. of this proposed rule.

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 2015 OPPS. This methodology enabled us to create, for this proposed rule, approximately 46 million “pseudo” single procedure claims, including multiple imaging composite “single session” bills (we refer readers to section II.A.2.f.(5) of this proposed rule for further discussion), to add to the approximately 48 million “natural” single procedure claims.

For CY 2015, we are proposing to bypass 227 HCPCS codes that are identified in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site). Since the inception of the bypass list, which is the list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims, we have calculated the percent of “natural” single bills that contained packaging for each HCPCS code and the amount of packaging on each “natural” single bill for each code. Each year, we generally retain the codes on the previous year’s bypass list and use the updated year’s data (for CY 2015, data available for the March 10, 2014 meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2013 claims processed through September 30, 2013, and CY 2012 claims data processed through June 30, 2013, used to model the payment rates for CY 2014) to determine whether it would be appropriate to add additional codes to the previous year’s bypass list. For CY 2015, we are proposing to continue to bypass all of the HCPCS codes on the CY 2014 OPPS bypass list, with the exception of HCPCS codes that we are proposing to delete for CY 2015, which are listed in Table 1 of this proposed rule. We also are proposing to remove HCPCS codes that are not separately paid under the OPPS because the purpose of the bypass list is to obtain more data for those codes relevant to ratesetting. Some of the codes we are proposing to remove from the CY 2015 bypass list are affected by the CY 2015 proposed packaging policy, discussed in section II.A.3. of this proposed rule. In addition, we are proposing to add to the bypass list for CY 2015 HCPCS codes not on the CY 2014 bypass list that, using either the CY 2014 final rule data (CY 2012 claims) or the March 10, 2014 Panel data (first 9 months of CY 2013 claims), met the empirical criteria for the bypass list that are summarized below. Finally, to remain consistent with the CY 2015 proposal to continue to develop OPPS relative payment weights based on geometric mean costs, we also are proposing that the packaged cost criterion continue to be based on the geometric mean cost. The entire list proposed for CY 2015 (including the codes that remain on the bypass list from prior years) is open to public comment in this CY 2015 OPPS/ASC proposed rule. Because we must make some assumptions about packaging in the multiple procedure claims in order to assess a HCPCS code for addition to the bypass list, we assumed that the representation of packaging on “natural” single procedure claims for any given code is comparable to packaging for that code in the multiple procedure claims. The proposed criteria for the bypass list are:

• There are 100 or more “natural” single procedure claims for the code. This number of single procedure claims ensures that observed outcomes are sufficiently representative of packaging that might occur in the multiple claims.
• Five percent or fewer of the “natural” single procedure claims for the code have packaged costs on that single procedure claim for the code. This criterion results in limiting the amount of packaging being redistributed to the separately payable procedures 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 geometric mean cost of packaging observed in the “natural” single procedure claims is equal to or less than $55. This criterion also limits the amount of error in redistributed costs. During the assessment of claims against the bypass criteria, we do not know the dollar value of the packaged cost that should be appropriately attributed to the other procedures on the claim. Therefore, ensuring that redistributed costs associated with a bypass code are small in amount and volume protects the validity of cost estimates for low cost services billed with the bypassed service.

We note that, as we did for CY 2014, we are proposing to continue to establish the CY 2015 OPPS relative payment weights based on geometric mean costs. To remain consistent in the metric used for identifying cost patterns, we are proposing to use the geometric mean cost of packaging to identify potential codes to add to the bypass list.

In response to public comments on the CY 2010 OPPS/ASC proposed rule requesting that the packaged cost threshold be updated, we considered whether it would be appropriate to update the $50 packaged cost threshold for inflation when examining potential bypass list additions. As discussed in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60328), the real value of this packaged cost threshold criterion has declined due to inflation, making the packaged cost threshold more restrictive over time when considering additions to the bypass list. Therefore, adjusting the threshold by the market basket increase would prevent continuing decline in the threshold’s real value. Based on the same rationale described for the CY 2014 OPPS/ASC final rule with comment period (78 FR 74838), we are proposing for CY 2015 to continue to update the packaged cost threshold by the market basket increase. By applying the final CY 2014 market basket increase of 1.7 percent to the prior nonrounded dollar threshold of $54.73 (78 FR 74838), we determined that the threshold remains for CY 2015 at $55 ($55.66 rounded to $55, the nearest $5 increment). Therefore, we are proposing to set the geometric mean packaged cost threshold on the CY 2013 claims at $55 for a code to be considered for addition to the CY 2015 OPPS bypass list.

• The code is not a code for an unlisted service. Unlisted codes do not describe a specific service, and thus their costs would not be appropriate for bypass list purposes.

In addition, we are proposing to continue to include on the bypass list HCPCS codes that CMS medical advisors believe have minimal associated packaging based on their clinical assessment of the complete CY 2015 OPPS proposal. Some of these codes were identified by CMS medical advisors and some were identified in prior years by commenters with specialized knowledge of the packaging associated with specific services. We also are proposing to continue to include certain HCPCS codes on the bypass list in order to purposefully direct the assignment of packaged costs to a companion code where services always appear together and where there would otherwise be few single procedure claims available for ratesetting. For example, we have previously discussed our reasoning for adding HCPCS code G0390 (Trauma response team associated with hospital critical care service) to the bypass list (73 FR 68513).

As a result of the multiple imaging composite APCs that we established in CY 2009, the program logic for creating “pseudo” single procedure claims from bypassed codes that are also members of multiple imaging composite APCs changed. When creating the set of “pseudo” single procedure claims, claims that contain “overlap bypass codes” (those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs) were identified first. These HCPCS codes were then processed to create multiple imaging composite “single session” 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” were retained on the bypass list because, at the end of the “pseudo” single processing logic, we reassessed the claims without suppression of the “overlap bypass codes” under our longstanding “pseudo” single process to determine whether we could convert additional claims to “pseudo” single procedure claims. (We refer readers to section II.A.2.b. of this proposed rule for further discussion of the treatment of “overlap bypass codes.”) This process also created multiple imaging composite “single session” bills that could be used for calculating composite APC costs. “Overlap bypass codes” that are members of the proposed multiple imaging composite APCs are identified by asterisks (*) in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site).

Addendum N to this proposed rule (which is available via the Internet on the CMS Web site) includes the proposed list of bypass codes for CY 2015. The proposed list of bypass codes contains codes that were reported on claims for services in CY 2013 and, therefore, includes codes that were in effect in CY 2013 and used for billing but were deleted for CY 2014. We retained these deleted bypass codes on the proposed CY 2015 bypass list because these codes existed in CY 2013 and were covered OPD services in that period, and CY 2013 claims data are used to calculate CY 2015 payment rates. Keeping these deleted bypass codes on the bypass list potentially allows us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap bypass codes” that were members of the proposed multiple imaging composite APCs are identified by asterisks (*) in the third column of Addendum N to this proposed rule. HCPCS codes that we are proposing to add for CY 2015 are identified by asterisks (*) in the fourth column of Addendum N.

Table 1 below contains the list of codes that we are proposing to remove from the CY 2015 bypass list because these codes were either deleted from the HCPCS before CY 2013 (and therefore were not covered OPD services in CY 2013) or are not separately payable codes under the proposed CY 2015 OPPS because these codes are not used for ratesetting through the bypass process. The list of codes proposed for removal from the bypass list includes those that would be affected by the proposed CY 2015 OPPS packaging policy described in section II.A.3. of this proposed rule.

c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)

For CY 2015, we are proposing to continue to use the hospital-specific overall ancillary and departmental cost-to-charge ratios (CCRs) to convert charges to estimated costs through application of a revenue code-to-cost center crosswalk. To calculate the APC costs on which the proposed CY 2015 APC payment rates are based, we calculated hospital-specific overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we had CY 2013 claims data by comparing these claims data to the most recently available hospital cost reports, which, in most cases, are from CY 2012. For the CY 2015 OPPS proposed rates, we used the set of claims processed during CY 2013. 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.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

To ensure the completeness of the revenue code-to-cost center crosswalk, we reviewed changes to the list of revenue codes for CY 2013 (the year of claims data we used to calculate the proposed CY 2015 OPPS payment rates) and found that the National Uniform Billing Committee (NUBC) did not add any new revenue codes to the NUBC 2013 Data Specifications Manual.

In accordance with our longstanding policy, 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. For a discussion of the hospital-specific overall ancillary CCR calculation, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 67983 through 67985). The calculation of blood costs is a longstanding exception (since the CY 2005 OPPS) to this general methodology for calculation of CCRs used for converting charges to costs on each claim. This exception is discussed in detail in the CY 2007 OPPS/ASC final rule with comment period and discussed further in section II.A.2.d.(2) of this proposed rule.

For the CCR calculation process, we used the same general approach that we used in developing the final APC rates for CY 2007 and thereafter, using the revised CCR calculation that 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 hospitals that filed outpatient claims in CY 2013 before determining whether the CCRs for such hospitals were valid.

We then calculated the CCRs for each cost center and the overall ancillary CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Hospital Cost Report Information System (HCRIS). We used the most recent available cost report data, which, in most cases, were from cost reports with cost reporting periods beginning in CY 2012. For this proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate costs for the proposed CY 2015 OPPS payment rates. If the most recently 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 ancillary CCR, and we then adjusted the most recent available submitted, but not settled, cost report using that ratio. We then calculated both an overall ancillary CCR and cost center-specific CCRs for each hospital. We used the overall ancillary CCR referenced above for all purposes that require use of an overall ancillary CCR. We are proposing to continue this longstanding methodology for the calculation of costs for CY 2015.

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 may reflect some aggregation bias, undervaluing high-cost items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR, is applied to items of widely varying costs in the same cost center. This issue was evaluated in a report by the Research Triangle Institute, International (RTI). The RTI final 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_200807_Final.pdf. For a complete discussion of the RTI recommendations, public comments, and our responses, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 68527).

We addressed the RTI finding that there was aggregation bias in both the IPPS and the OPPS cost estimation of expensive and inexpensive medical supplies in the FY 2009 IPPS final rule (73 FR 48458 through 45467). Specifically, we created one cost center for “Medical Supplies Charged to Patients” and one cost center for “Implantable Devices Charged to Patients,” essentially splitting the then current cost center for “Medical Supplies Charged to Patients” into one cost center for low-cost medical supplies and another cost center for high-cost implantable devices in order to mitigate some of the effects of charge compression. In determining the items that should be reported in these respective cost centers, we adopted commenters’ recommendations that hospitals should use revenue codes established by the AHA’s NUBC to determine the items that should be reported in the “Medical Supplies Charged to Patients” and the “Implantable Devices Charged to Patients” cost centers. For a complete discussion of the rationale for the creation of the new cost center for “Implantable Devices Charged to Patients,” a summary of public comments received, and our responses to those public comments, we refer readers to the FY 2009 IPPS final rule.

The cost center for “Implantable Devices Charged to Patients” has been available for use for cost reporting periods beginning on or after May 1, 2009. In the CY 2013 OPPS/ASC final rule with comment period, we determined that a significant volume of hospitals were utilizing the “Implantable Devices Charged to Patients” cost center. Because a sufficient amount of data from which to generate a meaningful analysis was available, we established in the CY 2013 OPPS/ASC final rule with comment period a policy to create a distinct CCR using the “Implantable Devices Charged to Patients” cost center (77 FR 68225). We retained this policy for the CY 2014 OPPS and are proposing to continue this practice for the CY 2015 OPPS.

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create new standard cost centers for “Computed Tomography (CT),” “Magnetic Resonance Imaging (MRI),” and “Cardiac Catheterization,” and to require that hospitals report the costs and charges for these services under these new cost centers on the revised Medicare cost report Form CMS 2552-10. As we discussed in the FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI also found that the costs and charges of CT scans, MRIs, and cardiac catheterization differ significantly from the costs and charges of other services included in the standard associated cost center. RTI concluded that both the IPPS and the OPPS relative payment weights would better estimate the costs of those services if CMS were to add standard costs centers for CT scans, MRIs, and cardiac catheterization in order for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the cost from charges on claims data. We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more detailed discussion on the reasons for the creation of standard cost centers for CT scans, MRIs, and cardiac catheterization. The new standard cost centers for CT scans, MRIs, and cardiac catheterization were effective for cost report periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10.

Using the December 2013 HCRIS update which we used to estimate costs in the CY 2015 OPPS ratesetting process, we were able to calculate a valid implantable device CCR for 2,895 hospitals, a valid MRI CCR for 1,886 hospitals, a valid CT scan CCR for 1,976 hospitals, and a valid Cardiac Catheterization CCR for 1,364 hospitals.

In our CY 2014 OPPS/ASC proposed rule discussion (78 FR 43549), we noted that, for CY 2014, the estimated changes in geometric mean estimated APC cost of using data from the new standard cost centers for CT scans and MRIs appeared consistent with RTI’s analysis of cost report and claims data in the July 2008 final report (pages 5 and 6). RTI concluded that “in hospitals that aggregate data for CT scanning, MRI, or nuclear medicine services with the standard line for Diagnostic Radiology, costs for these services all appear substantially overstated, while the costs for plain films, ultrasound and other imaging procedures are correspondingly understated.” We also noted that there were limited additional impacts in the implantable device-related APCs from adopting the new cost report Form CMS 2552-10 because we had used data from the standard cost center for implantable medical devices beginning in CY 2013 OPPS ratesetting, as discussed above.

As we indicated in prior rulemaking (77 FR 68223 through 68225), once we determined that cost report data for the new standard cost centers were sufficiently available, we would analyze that data and, if appropriate, we would propose to use the distinct CCRs for new standard cost centers described above in the calculation of the OPPS relative payment weights. As stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43550), we have conducted our analysis and concluded that we should develop distinct CCRs for each of the new cost centers and use them in ratesetting. Therefore, we began in the CY 2014 OPPS, and are proposing to continue for the CY 2015 OPPS, to calculate the OPPS relative payment weights using distinct CCRs for cardiac catheterization, CT scan, MRI, and implantable medical devices. Section XXIII. of this proposed rule includes the impacts of calculating the proposed CY 2015 OPPS relative payment weights using these new standard cost centers.

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74847), we finalized a policy to remove claims from providers that use a cost allocation method of “square feet” to calculate CCRs used to estimate costs associated with the CT and MRI APCs. This change allows hospitals additional time to use one of the more accurate cost allocation methods, and thereby improve the accuracy of the CCRs on which the OPPS relative payment weights are developed. As part of this transitional policy to estimate the CT and MRI APC relative payment weights using only cost data from providers that do not use “square feet” as the cost allocation statistic, we stated in the CY 2014 OPPS/ASC final rule with comment period that we will sunset this policy in 4 years once the updated cost report data become available for ratesetting purposes. We stated that we believe that 4 years is sufficient time for hospitals that have not done so to transition to a more accurate cost allocation method and for the related data to be available for ratesetting purposes. Therefore, in CY 2018, we will estimate the CT and MRI APC relative payment weights using cost data from all providers, regardless of the cost allocation statistic employed.

In summary, we are proposing to continue using data from the “Implantable Devices Charged to Patients” and “Cardiac Catheterization” cost centers to create distinct CCRs for use in calculating the OPPS relative payment weights for the CY 2015 OPPS. For the “Magnetic Resonance Imaging (MRI)” and “Computed Tomography (CT) Scan” APCs identified in Table 3 of this proposed rule, we are proposing to continue our policy of removing claims from cost modeling for those providers using “square feet” as the cost allocation statistic for the CY 2015 OPPS.

2. Proposed Data Development Process and Calculation of Costs Used for Ratesetting

In this section of this proposed rule, we discuss the use of claims to calculate the proposed OPPS payment rates for CY 2015. The Hospital OPPS page on the CMS Web site on which this proposed rule is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an accounting of claims used in the development of the proposed payment rates. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below in this section we discuss the file of claims that comprises the data set that is available for purchase under a CMS data use agreement. The CMS Web site, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, includes information about purchasing the “OPPS Limited Data Set,” which now includes the additional variables previously available only in the OPPS Identifiable Data Set, including ICD-9-CM diagnosis codes and revenue code payment amounts. This file is derived from the CY 2013 claims that were used to calculate the proposed payment rates for the CY 2015 OPPS.

In the history of the OPPS, we have traditionally established the scaled relative weights on which payments are based using APC median costs, which is a process described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74188). However, as discussed in more detail in section II.A.2.f. of the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271), we finalized the use of geometric mean costs to calculate the relative weights on which the CY 2013 OPPS payment rates were based. While this policy changed the cost metric on which the relative payments are based, the data process in general remained the same, under the methodologies that we used to obtain appropriate claims data and accurate cost information in determining estimated service cost. For CY 2015, we are proposing to continue to use geometric mean costs to calculate the relative weights on which the proposed CY 2015 OPPS payments rates are based.

We used the methodology described in sections II.A.2.a. through II.A.2.f. of this proposed rule to calculate the costs we used to establish the proposed relative weights used in calculating the proposed OPPS payment rates for CY 2015 shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). We refer readers to section II.A.4. of this proposed rule for a discussion of the conversion of APC costs to scaled payment weights.

a. Claims Preparation

For this proposed rule, we used the CY 2013 hospital outpatient claims processed through December 31, 2013, to calculate the geometric mean costs of APCs that underpin the proposed relative payment weights for CY 2015. To begin the calculation of the proposed relative payment weights for CY 2015, we pulled all claims for outpatient services furnished in CY 2013 from the national claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, critical access hospital (CAH) claims and hospital claims for clinical laboratory tests for persons who are neither inpatients nor outpatients of the hospital).

We then excluded claims with condition codes 04, 20, 21, and 77 because 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, and, therefore, we do not use claims for services furnished in these areas in ratesetting.

We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 119 million claims that contain hospital bill types paid under the OPPS.

1. Claims that were not bill types 12X (Hospital Inpatient (Medicare Part B only)), 13X (Hospital Outpatient), 14X (Hospital—Laboratory Services Provided to Nonpatients), or 76X (Clinic—Community Mental Health Center). Other bill types are not paid under the OPPS; therefore, these claims were not used to set OPPS payment.

2. Claims that were bill types 12X, 13X or 14X. Claims with bill types 12X and 13X are hospital outpatient claims. Claims with bill type 14X are laboratory specimen claims.

3. Claims that were bill type 76X (CMHC).

To convert charges on the claims to estimated cost, we multiplied the charges on each claim by the appropriate hospital-specific CCR associated with the revenue code for the charge as discussed in section II.A.1.c. of this proposed rule. We then flagged and excluded 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 0.0001); and those from hospitals with overall ancillary CCRs that were identified as outliers (that exceeded+/−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, which is the revenue code-to-cost center crosswalk, to match a cost center to every possible revenue code appearing in the outpatient claims that is relevant to OPPS services, 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 ancillary CCR for the revenue code in question as the default CCR. 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 ancillary CCR to the clinic revenue code. The revenue code-to-cost center crosswalk is available for inspection on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Revenue codes that we do not use in establishing relative costs or to model impacts are identified with an “N” in the revenue code-to-cost center crosswalk.

We applied the CCRs as described above to claims with bill type 12X, 13X, or 14X, excluding all claims from CAHs and hospitals in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands and claims from all hospitals for which CCRs were flagged as invalid.

We identified claims with condition code 41 as partial hospitalization services of hospitals and moved them to another file. We note that the separate file containing partial hospitalization claims is included in the files that are available for purchase as discussed above.

We then excluded claims without a HCPCS code. We moved to another file claims that contained only influenza and pneumococcal pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at reasonable cost; therefore, these claims are not used to set OPPS rates.

We next copied line-item costs for drugs, blood, and brachytherapy sources to a separate file (the lines stay on the claim, but are copied onto another file). No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit arithmetic and geometric mean and median cost and a per day arithmetic and geometric mean and median cost for drugs and nonimplantable biologicals, therapeutic radiopharmaceutical agents, and brachytherapy sources, as well as other information used to set payment rates, such as a unit-to-day ratio for drugs.

Prior to CY 2013, our payment policy for nonpass-through separately paid drugs and biologicals was based on a redistribution methodology that accounted for pharmacy overhead by allocating cost from packaged drugs to separately paid drugs. This methodology typically would have required us to reduce the cost associated with packaged coded and uncoded drugs in order to allocate that cost. However, for CY 2013, we paid for separately payable drugs and biologicals under the OPPS at ASP+6 percent, based upon the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. Under that policy, we did not redistribute the pharmacy overhead costs from packaged drugs to separately paid drugs. For the CY 2014 OPPS, we continued the CY 2013 payment policy for separately payable drugs and biologicals, and we are proposing to continue this payment policy for CY 2015. We refer readers to section V.B.3. of this proposed rule for a complete discussion of our CY 2015 proposed payment policy for separately paid drugs and biologicals.

We then removed line-items that were not paid during claim processing, presumably for a line-item rejection or denial. The number of edits for valid OPPS payment in the Integrated Outpatient Code Editor (I/OCE) and elsewhere has grown significantly in the past few years, especially with the implementation of the full spectrum of National Correct Coding Initiative (NCCI) edits. To ensure that we are using valid claims that represent the cost of payable services to set payment rates, we removed line-items with an OPPS status indicator that were not paid during claims processing in the claim year, but have a status indicator of “S,” “T,” and “V” in the prospective year’s payment system. This logic preserves charges for services that would not have been paid in the claim year but for which some estimate of cost is needed for the prospective year, such as services newly removed from the inpatient list for CY 2014 that were assigned status indicator “C” in the claim year. It also preserves charges for packaged services so that the costs can be included in the cost of the services with which they are reported, even if the CPT codes for the packaged services were not paid because the service is part of another service that was reported on the same claim or the code otherwise violates claims processing edits.

For CY 2015, we are proposing to continue the policy we implemented for CY 2013 and CY 2014 to exclude line-item data for pass-through drugs and biologicals (status indicator “G” for CY 2013) and nonpass-through drugs and biologicals (status indicator “K” for CY 2013) where the charges reported on the claim for the line were either denied or rejected during claims processing. Removing lines that were eligible for payment but were not paid ensures that we are using appropriate data. The trim avoids using cost data on lines that we believe were defective or invalid because those rejected or denied lines did not meet the Medicare requirements for payment. For example, edits may reject a line for a separately paid drug because the number of units billed exceeded the number of units that would be reasonable and, therefore, is likely a billing error (for example, a line reporting 55 units of a drug for which 5 units is known to be a fatal dose). As with our trimming in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74849) of line-items with a status indicator of “S,” “T,” “V,” or “X,” we believe that unpaid line-items represent services that are invalidly reported and, therefore, should not be used for ratesetting. We believe that removing lines with valid status indicators that were edited and not paid during claims processing increases the accuracy of the data used for ratesetting purposes.

For the CY 2015 OPPS, as part of our proposal to continue packaging clinical diagnostic laboratory tests, we also are proposing to apply the line item trim to these services if they did not receive payment in the claims year. Removing these lines ensures that, in establishing the CY 2015 OPPS relative payments weights, we appropriately allocate the costs associated with packaging these services.

b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims

(1) Splitting Claims

For the CY 2015 OPPS, 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 are presented below.) We note that, under the proposed CY 2015 OPPS packaging policy, we are proposing to delete status indicator “X” and revise the title and description of status indicator “Q1” to reflect that deletion, as discussed in sections II.A.3. and XI. of this proposed rule. We note that we also are proposing to create status indicator “J1” to reflect the comprehensive APCs discussed in section II.A.2.e. of this proposed rule. For CY 2015, we are proposing to define major procedures as any HCPCS code having a status indicator of “J1,” “S,” “T,” or “V”; define minor procedures as any code having a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N”; and classify “other” procedures as any code having a status indicator other than one that we have classified as major or minor. For CY 2015, we are proposing to continue to assign status indicator “R” to blood and blood products; status indicator “U” to brachytherapy sources; status indicator “Q1” to all “STV-packaged codes”; status indicator “Q2” to all “T-packaged codes”; and status indicator “Q3” 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.

As discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68709), we established status indicators “Q1,” “Q2,” and “Q3” 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 2015 as we have treated them since CY 2008. Specifically, we are continuing 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 procedure claims for 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 geometric mean costs for composite APCs from multiple procedure major claims is discussed in section II.A.2.f. of this proposed rule.

Specifically, we are proposing to divide the remaining claims into the following five groups:

1. Single Procedure Major Claims: Claims with a single separately payable procedure (that is, status indicator “S,” “T,” or “V” which includes codes with status indicator “Q3”); claims with status indicator “J1,” which receive special processing for comprehensive APCs, as discussed in section II.A.2.e. of this proposed rule; claims with one unit of a status indicator “Q1” code (“STV-packaged”) where there was no code with status indicator “S,” “T,” or “V” 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 Procedure Major Claims: Claims with more than one separately payable procedure (that is, status indicator “S,” “T,” or “V” 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” or “V”). 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 Procedure 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” (“STV-packaged”) or status indicator “Q2” (“T-packaged”) code.

4. Multiple Procedure 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” (“STV-packaged”) or more than one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” or “V” 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, and do not contain a code for a separately payable or packaged OPPS service. Non-OPPS claims include claims for therapy services 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 file that can be purchased as described above. Claims that contain codes to which we have assigned status indicators “Q1” (“STV-packaged”) and “Q2” (“T-packaged”) appear in the data for the single major file, the multiple major file, and the multiple minor file used for ratesetting. Claims that contain codes to which we have assigned 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.

(2) Creation of “Pseudo” Single Procedure Claims

To develop “pseudo” single procedure claims for this proposed rule, we examined both the multiple procedure major claims and the multiple procedure minor claims. We first examined the multiple major procedure 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 payable procedure on a different date of service (that is, a “pseudo” single procedure claim).

We also are proposing to use the bypass codes listed in Addendum N to this proposed rule (which is available via the Internet on our Web site) and discussed in section II.A.1.b. of this proposed rule to remove separately payable procedures which we determined contained limited or no packaged costs or that were otherwise suitable for inclusion on the bypass list from a multiple procedure bill. As discussed above, we ignore the “overlap bypass codes,” that is, those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs, in this initial assessment for “pseudo” single procedure claims. The proposed CY 2015 “overlap bypass codes” are listed in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site). 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 procedure claims by dividing the cost for the multiple units by the number of units on the line. If one unit of a single, separately payable procedure code remained on the claim after removal of the multiple units of the bypass code, we created a “pseudo” single procedure claim from that residual claim record, which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used.

We then assessed the claims to determine if the proposed criteria for the multiple imaging composite APCs, discussed in section II.A.2.f.(5) of this proposed rule, were met. If the criteria for the 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 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 packaged code would not be a separately payable procedure, we considered it to be unavailable for use in setting the composite APC costs on which the proposed CY 2015 OPPS relative payment weights are based. Having identified “single session” claims for the imaging composite APCs, we reassessed the claim to determine if, after removal of all lines for bypass codes, including the “overlap bypass codes,” a single unit of a single separately payable code remained on the claim. If so, we attributed the packaged costs on the claim to the single unit of the single remaining separately payable code other than the bypass code to create a “pseudo” single procedure claim. We also identified line-items of overlap bypass codes as a “pseudo” single procedure claim. This allowed us to use more claims data for ratesetting purposes.

We also are proposing to examine the multiple procedure minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes with status indicator “Q1” (“STV-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 2014 relative payment weight, and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q1.” We then packaged all costs for the following into a single cost for the “Q1” HCPCS code that had the highest CY 2014 relative payment weight to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q1” HCPCS code with the highest CY 2014 relative payment weight; other codes with status indicator “Q1”; and all other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for the selected code 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 geometric mean cost for the status indicator “Q1” HCPCS code.

Similarly, if a multiple procedure 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 2014 relative payment weight and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the “Q2” HCPCS code that had the highest CY 2014 relative payment weight to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q2” HCPCS code with the highest CY 2014 relative payment weight; other codes with status indicator “Q2”; and other packaged HCPCS codes and packaged revenue code costs. 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.

If a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q1” (“STV-packaged”), we selected the T-packaged status indicator “Q2” HCPCS code that had the highest relative payment weight for CY 2014 and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the selected (“T-packaged”) HCPCS code to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q2” HCPCS code with the highest CY 2014 relative payment weight; other codes with status indicator “Q2”; codes with status indicator “Q1” (“STV-packaged”); and other packaged HCPCS codes and packaged revenue code costs. We selected status indicator “Q2” HCPCS codes instead of “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2014 relative payment weights. If a status indicator “Q1” HCPCS code had a higher CY 2014 relative payment weight, it became 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.

We then applied our proposed process for creating “pseudo” single procedure claims to the conditionally packaged codes that do not meet the criteria for packaging, which enabled us to create single procedure claims from them, if they met the criteria for single procedure claims. Conditionally packaged codes are identified using status indicators “Q1” and “Q2,” and are described in section XI.A. of this proposed rule.

Lastly, we excluded those claims that we were not able to convert to single procedure claims even after applying all of the techniques for creation of “pseudo” single procedure claims to multiple procedure major claims and to multiple procedure minor claims. 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 hospitals billed the code with a unit of one.

We are proposing to continue to apply the methodology described above for the purpose of creating “pseudo” single procedure claims for the CY 2015 OPPS.

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process

We then packaged the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) and the costs of those lines for codes with status indicator “Q1” or “Q2” when they are not separately paid), and the costs of the services reported under packaged revenue codes in Table 4 below that appeared on the claim without a HCPCS code into the cost of the single major procedure remaining on the claim. For a more complete discussion of our proposed CY 2015 OPPS packaging policy, we refer readers to section II.A.3. of this proposed rule.

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 CMS should review the final list of packaged revenue codes for consistency with OPPS policy and ensure that future versions of the I/OCE edit accordingly. As we have in the past, we are proposing to continue to compare the final list of packaged revenue codes that we adopt for CY 2015 to the revenue codes that the I/OCE will package for CY 2015 to ensure consistency.

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68531), we replaced the NUBC standard abbreviations for the revenue codes listed in Table 2 of the CY 2009 OPPS/ASC proposed rule with the most current NUBC descriptions of the revenue code categories and subcategories to better articulate the meanings of the revenue codes without changing the list of revenue codes. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60362 through 60363), we finalized changes to the packaged revenue code list based on our examination of the updated NUBC codes and public comment on the CY 2010 proposed list of packaged revenue codes.

For CY 2015, as we did for CY 2014, we reviewed the changes to revenue codes that were effective during CY 2013 for purposes of determining the charges reported with revenue codes but without HCPCS codes that we would propose to package for CY 2015. We believe that the charges reported under the revenue codes listed in Table 4 below continue to reflect ancillary and supportive services for which hospitals report charges without HCPCS codes. Therefore, for CY 2015, we are proposing to continue to package the costs that we derive from the charges reported without HCPCS codes under the revenue codes displayed in Table 4 below for purposes of calculating the geometric mean costs on which the proposed CY 2015 OPPS/ASC payment rates are based.

In accordance with our longstanding policy, we are proposing to continue to exclude: (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 after July 1, 2014, the I/OCE assigned packaging flag number 3 to claims on which hospitals submitted token charges less than $1.01 for a service with status indicator “S” or “T” (a major separately payable service under the OPPS) for which the Medicare Administrative Contractor (MAC) was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the relative payment 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. We are proposing to continue these processes for the CY 2015 OPPS.

For the remaining claims, we are proposing to then standardize 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. The claims accounting that we provide for the proposed and final rule contains the formula we use to standardize the total cost for the effects of the 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 geometric mean costs. We are proposing to use these pre-reclassified wage indices for standardization using the new OMB labor market area delineations described in section II.C. of this proposed rule.

In accordance with our longstanding practice, we also are proposing to exclude single and “pseudo” single procedure claims for which the total cost on the claim was 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 114 million claims were left. Using these approximately 114 million claims, we created approximately 94 million single and “pseudo” single procedure claims, of which we used approximately 94 million single bills (after trimming out approximately 1 million claims as discussed in section II.A.1.a. of this proposed rule) in the CY 2015 geometric mean cost development and ratesetting.

As discussed above, the OPPS has historically developed the relative weights on which APC payments are based using APC median costs. For the CY 2013 OPPS and the CY 2014 OPPS, we calculated the APC relative payment weights using geometric mean costs, and we are proposing to do the same for CY 2015. Therefore, the following discussion of the 2 times rule violation and the development of the relative payment weight refers to geometric means. For more detail about the CY 2015 OPPS/ASC policy to calculate relative payment weights based on geometric means, we refer readers to section II.A.2.f. of this proposed rule.

We are proposing to use these claims to calculate the CY 2015 geometric mean costs for each separately payable HCPCS code and each APC. The comparison of HCPCS code-specific and APC geometric mean costs 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 shall not be treated as comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary) for an item or service within the group is more than 2 times greater than the lowest median cost (or mean cost, if so elected) for an item or service within the same group (the 2 times rule). While we have historically applied the 2 times rule based on median costs, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68270), as part of the CY 2013 policy to develop the OPPS relative payment weights based on geometric mean costs, we also applied the 2 times rule based on geometric mean costs. For the CY 2015 OPPS, we are proposing to continue to develop the APC relative payment weights based on geometric mean costs.

We note that, for purposes of identifying significant HCPCS codes for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC geometric mean cost to be significant. This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 94 million single procedure or single session claims we use for establishing geometric mean costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC geometric mean. We note that this method of identifying significant HCPCS codes within an APC for purposes of the 2 times rule was used in prior years under the median-based cost methodology. Under our proposed CY 2015 policy to continue to base the relative payment weights on geometric mean costs, we believe that this same consideration for identifying significant HCPCS codes should apply because the principles are consistent with their use in the median-based cost methodology. Unlisted codes are not used in establishing the percent of claims contributing to the APC, nor are their costs used in the calculation of the APC geometric mean. Finally, we reviewed the geometric mean costs for the services for which we are proposing to pay separately under this proposed rule, and we reassigned HCPCS codes to different APCs where it was necessary to ensure clinical and resource homogeneity within the APCs. The APC geometric means were recalculated after we reassigned the affected HCPCS codes. Both the HCPCS code-specific geometric means and the APC geometric means were weighted to account for the inclusion of multiple units of the bypass codes in the creation of “pseudo” single procedure claims.

As we discuss in sections II.A.2.d., II.A.2.f., and VIII.B. of this proposed rule, in some cases, APC geometric mean costs are calculated using variations of the process outlined above. Specifically, section II.A.2.d. of this proposed rule addresses the proposed calculation of single APC criteria-based geometric mean costs. Section II.A.2.f. of this proposed rule discusses the proposed calculation of composite APC criteria-based geometric mean costs. Section VIII.B. of this proposed rule addresses the methodology for calculating the proposed geometric mean costs for partial hospitalization services.

(2) Recommendations of the Panel Regarding Data Development

At the March 2014 meeting of the Panel, we discussed the claims accounting process for the CY 2014 OPPS final rule, the final CY 2014 policy of adopting the new standard cost centers for CT, MRI, and cardiac catheterization in the new Medicare cost report Form CMS-2552-10, as well as the calculation of estimated cost for those APCs.

At the March 2014 Panel meeting, the Panel made a number of recommendations related to the data process. The Panel’s data-related recommendations and our responses follow.

Recommendation: The Panel recommends that the work of the Data Subcommittee continue.

CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that CMS provide the Panel with a list of APCs for which costs fluctuate by more than 10 percent.

CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that CMS provide the Panel with data on comprehensive APCs as well as the effect of conditional packaging on visit codes.

CMS Response: We are accepting this recommendation.

d. Proposed Calculation of Single Procedure APC Criteria-Based Costs

(1) Device-Dependent APCs

Historically, 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. The standard methodology for calculating device-dependent APC costs utilizes claims data that generally reflect the full cost of the required device by using only the subset of single procedure claims that pass the procedure-to-device and device-to-procedure edits; do not contain token charges (less than $1.01) for devices; and, until January 1, 2014, did not contain the “FB” modifier signifying that the device was furnished without cost to the provider, or where a full credit was received; and do not contain the “FC” modifier signifying that the hospital received partial credit for the device. 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).

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 through 74859), we finalized a policy to define 29 device-dependent APCs as single complete services and to assign them to comprehensive APCs that provide all-inclusive payments for those services, but we delayed implementation of this policy until CY 2015 (78 FR 74862). This policy is a further step toward improving the prospective nature of our payments for these services where the cost of the device is relatively high compared to the other costs that contribute to the cost of the service. Table 5 of the CY 2014 OPPS/ASC final rule with comment period provided a list of the 39 APCs recognized as device-dependent APCs and identified the 29 device-dependent APCs that are converted to comprehensive APCs. In addition, in the CY 2014 OPPS/ASC final rule with comment period we finalized a policy for the treatment of the remaining 10 device-dependent APCs that applied our standard APC ratesetting methodology to calculate the CY 2014 payment rates for these APCs, but implementation of this policy was also delayed until CY 2015.

As proposed in the CY 2014 OPPS/ASC proposed rule (78 FR 43556 through 43557), for CY 2015, we are proposing to no longer implement procedure-to-device edits and device-to-procedure edits for any APC. Under this proposed policy, which was discussed but not finalized in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 through 74858), hospitals are still expected to adhere to the guidelines of correct coding and append the correct device code to the claim, when applicable. However, claims would no longer be returned to providers when specific procedure and device code pairings do not appear on a claim. As we stated in both the CY 2014 OPPS/ASC proposed rule (78 FR 43556 through 43557) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 through 748598), we believe that this is appropriate because of the experience hospitals now have had in coding and reporting these claims fully and, for the more costly devices, the comprehensive APCs will reliably reflect the cost of the device if it is included anywhere on the claim. Therefore, we do not believe that the burden imposed upon hospitals to adhere to the procedure-to-device edits and device-to-procedure edits and the burden imposed upon the Medicare program to maintain those edits continued to be warranted. As with all other items and services recognized under the OPPS, we expect hospitals to code and report their costs appropriately, regardless of whether there are claims processing edits in place.

The proposed CY 2015 comprehensive APC policy consolidates and restructures the 39 current device-dependent APCs into 26 (of the total 28) comprehensive APCs, which are listed below in Table 5. The comprehensive APC policy is discussed in section II.A.2.e. of this proposed rule. As a result of the proposed CY 2015 comprehensive APC policy, device-dependent APCs would no longer exist in CY 2015 because these APCs will have all been converted to comprehensive APCs. In conjunction with the proposed termination of device-dependent APCs and as discussed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 through 74858), we are proposing to no longer use procedure-to-device edits and device-to-procedure edits for any APC because we continue to believe that the elimination of device-to-procedure edits and procedure-to-device edits is appropriate considering the experience that hospitals now have in coding and reporting these claims fully and, for the more costly devices, the comprehensive APCs will reliably reflect the cost of the device if it is included anywhere on the claim.

While we believe that device-to-procedure edits and procedure-to-device edits are no longer necessary, we are sensitive to the concerns raised by stakeholders in the past about the costs of devices being reported and captured. In light of these concerns, we are proposing to create claims processing edits that require any of the device codes used in the previous device-to-procedure edits to be present on the claim whenever a procedure code assigned to any 1 of the 26 proposed comprehensive APCs (of a total of 28 proposed comprehensive APCs) listed below in Table 5 is reported on the claim to ensure that device costs are captured by hospitals. We expect that hospitals would use an appropriate device code consistent with correct coding in order to ensure that device costs are always reported on the claim, so that costs are appropriately captured in claims that CMS uses for ratesetting.

Table 5 below provides a list of the 26 proposed CY 2015 comprehensive APCs, which we previously recognized as device-dependent APCs for CY 2014. This proposal would result in the term “device-dependent APC” no longer being employed beginning in CY 2015.

(2) Blood and Blood Products

Since the implementation of the OPPS in August 2000, we have made separate payments for blood and blood products through APCs rather than packaging payment for them into payments for the procedures with which they are administered. Hospital payments for the costs of blood and blood products, as well as for the costs of collecting, processing, and storing blood and blood products, are made through the OPPS payments for specific blood product APCs.

For CY 2015, 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 public 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 differences 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 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 are proposing to calculate the costs upon which the proposed CY 2015 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 hospital-specific simulated 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 hospital, we believe that it yields more accurate estimated costs for these products. We continue to believe that this methodology in CY 2015 will result in costs for blood and blood products that appropriately reflect the relative estimated costs of these products for hospitals without blood cost centers and, therefore, for these blood products in general.

We note that, as discussed in section II.A.2.e. of the CY 2014 OPPS/ASC final rule with comment period and this proposed rule, we established comprehensive APCs that will provide all-inclusive payments for certain device-dependent procedures. Under this policy, we include the costs of blood and blood products when calculating the overall costs of these comprehensive APCs. We are proposing to continue to apply the blood-specific CCR methodology described in this section when calculating the costs of the blood and blood products that appear on claims with services assigned to the comprehensive APCs. Because the costs of blood and blood products would be reflected in the overall costs of the comprehensive APCs (and, as a result, in the proposed payment rates of the comprehensive APCs), we are proposing not to make separate payments for blood and blood products when they appear on the same claims as services assigned to the comprehensive APCs.

We refer readers to Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) for the proposed CY 2015 payment rates for blood and blood products (which are identified with status indicator “R”). For a 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) Brachytherapy Sources

Section 1833(t)(2)(H) of the Act mandates the creation of additional groups of covered OPD services that classify devices of brachytherapy consisting of a seed or seeds (or radioactive source) (“brachytherapy sources”) separately from other services or groups of services. The statute provides certain criteria for the additional groups. For the history of OPPS payment for brachytherapy sources, we refer readers to prior OPPS final rules, such as the CY 2012 OPPS/ASC final rule with comment period (77 FR 68240 through 68241). As we have stated in prior OPPS updates, we believe that adopting the general OPPS prospective payment methodology for brachytherapy sources is appropriate for a number of reasons (77 FR 68240). The general OPPS payment methodology uses costs based on claims data to set the relative payment weights for hospital outpatient services. This payment methodology results in more consistent, predictable, and equitable payment amounts per source across hospitals by averaging the extremely high and low values, in contrast to payment based on hospitals’ charges adjusted to cost. We believe that the OPPS prospective payment methodology, as opposed to payment based on hospitals’ charges adjusted to cost, 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. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66779 through 66787), the CY 2009 OPPS/ASC final rule with comment period (73 FR 68668 through 68670), the CY 2010 OPPS/ASC final rule with comment period (74 FR 60533 through 60537), the CY 2011 OPPS/ASC final rule with comment period (75 FR 71978 through 71981), and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74160 through 74163) for further discussion of the history of OPPS payment for brachytherapy sources.

For CY 2015, we are proposing to use the costs derived from CY 2013 claims data to set the proposed CY 2015 payment rates for brachytherapy sources, as we are proposing to use to set the proposed payment rates for most other items and services that would be paid under the CY 2015 OPPS. We based the proposed payment rates for brachytherapy sources on the geometric mean unit costs for each source, consistent with the methodology proposed for other items and services paid under the OPPS, as discussed in section II.A.2. of this proposed rule. We also are proposing to continue the other payment policies for brachytherapy sources that we finalized and first implemented in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537). We are proposing to pay for the stranded and non-stranded not otherwise specified (NOS) codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest stranded or non-stranded prospective payment rate for such sources, respectively, on a per source basis (as opposed to, for example, a per mCi), which is based on the policy we established in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66785). We also are proposing to continue the policy we first implemented in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537) regarding payment for new brachytherapy sources for which we have no claims data, based on the same reasons we discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66786; which was delayed until January 1, 2010 by section 142 of Pub. L. 110-275). That policy is intended to enable us to assign 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 refer readers to Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) for the proposed CY 2015 payment rates for brachytherapy sources, which are identified with status indicator “U.” We are inviting public comments on this proposed policy and requesting recommendations for new HCPCS codes to describe new brachytherapy 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 through our program transmittals.

e. Establishment of Comprehensive APCs

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861 through 74910), effective January 1, 2015, we finalized a comprehensive payment policy that bundles or “packages” payment for the most costly medical device implantation procedures under the OPPS at the claim level. We defined a comprehensive APC (C-APC) as a classification for the provision of a primary service and all adjunctive services provided to support the delivery of the primary service. We established comprehensive APCs as a category broadly for OPPS payment and established 29 comprehensive APCs to prospectively pay for 167 of the most costly device-dependent services beginning in CY 2015 (78 FR 74910). Under this policy, we designated each service described by a HCPCS code assigned to a comprehensive APC as the primary service and, with few exceptions, consider all other services reported on a hospital Medicare Part B claim in combination with the primary service to be related to the delivery of the primary service (78 FR 74869). In addition, under this policy, we calculate a single payment for the entire hospital stay, defined by a single claim, regardless of the date of service span. This comprehensive APC packaging policy “packages” payment for all items and services typically packaged under the OPPS, but also packages payment for other items and services that are not typically packaged under the OPPS, except in the context of comprehensive APC payments (78 FR 74909).

Because of the overall complexity of this new policy and our introduction of complexity adjustments in the CY 2014 OPPS/ASC final rule with comment period, we modeled the dynamics of the policy as if we were implementing it for CY 2014, but delayed the effective date until January 1, 2015, to allow additional time for analysis, opportunity for public comment, and systems preparation. In this section of this CY 2015 OPPS/ASC proposed rule, we review the policies finalized in the CY 2014 OPPS/ASC final rule with comment period for comprehensive APCs. We then outline our proposed policy for CY 2015, which includes several clarifications and proposed modifications in response to public comments received. Finally, we summarize and respond to the public comments we received in response to the comprehensive APC policy outlined in the CY 2014 OPPS/ASC final rule with comment period. In this section, we use the terms “service” and “procedure” interchangeably.

(1) Background

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861 through 74910), we finalized a policy with a delayed implementation date of CY 2015, whereby we designated certain covered OPD services as “primary services” (identified by a new OPPS status indicator of “J1”) assigned to comprehensive APCs. When such a primary service is reported on a hospital Medicare Part B claim, taking into account the few exceptions that are discussed below, we treat all other items and services reported on the claim as integral, ancillary, supportive, dependent, and adjunctive to the primary service (hereinafter collectively referred to as “adjunctive services”) and representing components of a comprehensive service (78 FR 74865). This results in a single prospective payment for the primary, comprehensive service based on the cost of all reported services at the claim level. We only exclude charges for services that are not payable under the OPPS, such as certain mammography and ambulance services that are never covered OPD services in accordance with section 1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which must receive separate payment under section 1833(t)(2)(H) of the Act; pass-through drugs and devices, which also require separate payment under section 1833(t)(6) of the Act; and self-administered drugs (SADs) that are not otherwise packaged as supplies because they are not covered under Medicare Part B under section 1861(s)(2)(B) of the Act (78 FR 74865).

The ratesetting process set forth in the CY 2014 OPPS/ASC final rule with comment period for the comprehensive APC payment bundle policy is summarized as follows(78 FR 74887):

APC assignment of primary (“J1”) services. During ratesetting, single claims reporting a single procedure described by a HCPCS code assigned to status indicator “J1” are used to establish an APC assignment for each procedure described by that HCPCS code. The geometric mean of the total estimated costs on each claim is used to establish resource similarity for each procedure code’s APC assignment and is evaluated within the context of clinical similarity, with assignment starting from the APC assignments in effect for the current payment year. Claims reporting multiple procedures described by HCPCS codes assigned to status indicator “J1” are identified and the procedures are then assigned to a comprehensive APC based on the primary HCPCS code that has the highest APC geometric mean cost. This ensures that multiple procedures described by HCPCS codes assigned to status indicator “J1” reported on claims are always paid through and assigned to the comprehensive APC that would generate the highest APC payment. If multiple procedures described by HCPCS codes assigned to status indicator “J1” that are reported on the same claim have the same APC geometric mean estimated cost, as would be the case when two different procedures described by HCPCS codes assigned to status indicator “J1” are assigned to the same APC, identification of the primary service is then based on the procedure described by the HCPCS code assigned to status indicator “J1” with the highest HCPCS-level geometric mean cost. When there is no claims data available upon which to establish a HCPCS-level comprehensive geometric mean cost, we model a HCPCS-level geometric mean cost for the sole purpose of appropriately assigning the primary service reported on a claim. The comprehensive APC assignment of each procedure described by HCPCS codes assigned to status indicator “J1” is then confirmed by verifying that the APC assignment remains appropriate when considering the clinical similarity, as well as the estimated cost of all claims reporting each procedure described by HCPCS codes assigned to status indicator “J1,” including simple and complex claims, with multiple device-related procedures (78 FR 74887).

Complexity adjustments and determination of final comprehensive APC groupings. We then considered reassigning complex subsets of claims for each primary service described by a HCPCS code assigned to status indicator “J1.” All claims reporting more than one procedure described by HCPCS codes assigned to status indicator “J1” are evaluated for the existence of commonly occurring combinations of procedure codes reported on claims that exhibit a materially greater comprehensive geometric mean cost relative to the geometric mean cost of the claims reporting that primary service. This indicates that the subset of procedures identified by the secondary HCPCS code has increased resource requirements relative to less complex subsets of that procedure (78 FR 74887). The CY 2014 complexity adjustment criteria are as follows:

• The comprehensive geometric mean cost of the claims reporting the combination of procedures was more than two times the comprehensive geometric mean cost of the single major claims reporting only the primary service;
• There were more than 100 claims in the data year reporting the specific code combination;
• The number of claims reporting the specific code combination exceeded 5 percent of the volume of all claims reporting the designated primary service; and
• There would be no violation of the “2 times” rule within the receiving comprehensive APC (78 FR 74886).

If a combination of procedure codes reported on claims is identified that meets these requirements, that is, commonly occurring and exhibiting materially greater resource requirements, the combination of procedure codes is further evaluated to confirm clinical validity as a complex subset of the primary procedure and the combination of procedure codes is then identified as complex, and primary service claims with that combination of procedure codes are subsequently reassigned as appropriate. If a combination of procedure codes does not meet the requirement for a materially greater resource requirement or does not occur commonly, the combination of procedure codes is not considered to be complex, and primary service claims with that combination of procedure codes are not reassigned. All combinations of procedures described by HCPCS codes assigned to status indicator “J1” for each primary service are similarly evaluated. Once all combinations of procedures described by HCPCS codes assigned to status indicator “J1” have been evaluated, all claims identified for reassignment for each primary service are combined and the group is assigned to a higher level comprehensive APC within a clinical family of comprehensive APCs, that is, an APC with greater estimated resource requirements than the initially assigned comprehensive APC and with appropriate clinical homogeneity. We assessed resource variation for reassigned claims within the receiving APC using the geometric mean cost for all reassigned claims for the primary service relative to other services assigned to that APC using the 2 times rule criteria (78 FR 74887).

For new HCPCS codes and codes without data, we use the best data available to us to identify combinations of procedure codes that represent a more complex form of the primary service and warrant reassignment to a higher level APC. We will reevaluate our APC assignments and identification and APC placement of complex claims once claims data become available.

(2) Proposed CY 2015 Policy for Comprehensive APCs

(a) Proposed Methodology

After consideration of the public comments we received, which are discussed in detail below, in this section we describe our proposed payment methodology for comprehensive APCs for CY 2015. The basic steps for calculating the comprehensive APC payments remain the same as those finalized in the CY 2014 OPPS/ASC final rule with comment period, except for the complexity adjustment criteria described briefly above (78 FR 74885 through 74888). For CY 2015, we are proposing to restructure and consolidate some of the current device-dependent APCs to improve both the resource and clinical homogeneity of these APCs. In addition, instead of assigning any add-on codes to status indicator “J1” as finalized in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74873 through 74883), we are proposing to package all add-on codes, but to allow certain add-on codes to qualify a procedure code combination for a complexity adjustment.

Further, we are proposing to convert all current device-dependent APCs remaining after the proposed restructuring and consolidation of some of these APCs to comprehensive APCs. We also are proposing two new comprehensive APCs, C-APC 0067 for single-session cranial stereotactic radiosurgery (SRS) and C-APC 0351 for intraocular telescope implantation. In addition, we are proposing to reassign CPT codes 77424 and 77425 that describe intraoperative radiation therapy treatment (IORT) to C-APC 0648 (Level IV Breast and Skin Surgery). We discuss in detail below our proposed new complexity adjustment criteria and our proposal to package all add-on codes, but to allow complexity adjustments for qualifying code combinations of primary codes and add-on codes currently assigned to device-intensive comprehensive APCs. The steps are as follows:

Step 1: Select primary (“J1”) services. We continue to believe that the comprehensive packaging of adjunctive services into a primary service will further improve cost validity, payment accuracy, beneficiary transparency, and hospital efficiency (78 FR 74861). As in CY 2014, for CY 2015, we are proposing that services assigned to comprehensive APCs be designated as primary services for comprehensive APCs, using new status indicator “J1” as listed in Addendum J and Addendum B to this proposed rule (which are available via the Internet on the CMS Web site). We also are proposing to package all add-on codes, as discussed in detail below, and that none of these add-on codes will be considered primary services assigned to status indicator “J1.”

Treatment of add-on codes. We are proposing to assign all add-on codes status indicator “N” (unconditionally packaged). Therefore, under this proposal no add-on codes will be assigned to status indicator “J1.” However, we are proposing to evaluate a limited set of add-on codes assigned to the current device-dependent APCs, and to establish that when these add-on codes are reported in conjunction with a primary service a potential complexity adjustment under the proposed complexity adjustment criteria may be warranted (discussed further in Step 5 below).

Step 2: Definition of the payment package (comprehensive service). We are proposing the following changes to the comprehensive APCs payment packaging policy for the services that are assigned to status indicator “J1” or designated as primary services assigned to a comprehensive APC:

• We are proposing to restructure and consolidate the current device-dependent APCs, including some procedure code reassignments to improve clinical and resource homogeneity;
• We are proposing to package all of the add-on procedure codes, after we review and evaluate add-on codes reported in conjunction with primary “J1” services under the proposed complexity adjustment criteria for a potential complexity adjustment;
• We are proposing to create more comprehensive APCs, including converting all device-dependent APCs (including those that were not included in the CY 2014 policy) and to create new comprehensive APCs for single session cranial stereotactic radiosurgery and intraocular telescope implantation.

As stated in the CY 2014 OPPS/ASC final rule with comment period, we define the comprehensive APC payment packaging policy as including all covered OPD services on a hospital Medicare Part B claim reporting a primary service that is assigned to status indicator “J1,” excluding services that cannot be covered OPD services or that cannot by statute be paid under the OPPS. Services packaged for payment under the comprehensive APC payment packaging policy, that is, services that are typically integral, ancillary, supportive, dependent, or adjunctive to the primary service, provided during the delivery of the comprehensive service, include diagnostic procedures, laboratory tests and other diagnostic tests and treatments that assist in the delivery of the primary procedure; visits and evaluations performed in association with the procedure; uncoded services and supplies used during the service; outpatient department services that are similar to therapy and delivered either by therapists or non-therapists as part of the comprehensive service; durable medical equipment as well as prosthetic and orthotic items and supplies when provided as part of the outpatient service; and any other components reported by HCPCS codes that are provided during the comprehensive service, except excluded services that are described below (78 FR 74865). Items packaged for payment provided in conjunction with the primary service also include all drugs, biologicals, and radiopharmaceuticals, regardless of cost, except those drugs with pass-through payment status and those drugs that are usually self-administered (SADs), unless they function as packaged supplies (78 FR 74868 through 74869 and 74909). We refer readers to the Medicare Benefit Policy Manual, Chapter 15, Covered Medical and Other Health Services, Section 50.2.M, for a description of our policy on self-administered drugs treated as hospital outpatient supplies, including lists of SADs that function as supplies and those that do not function as supplies.

Services excluded from the comprehensive APC payment packaging policy are as follows: SADs that are not considered supplies, because they are not covered under Medicare Part B under section 1861(s)(2)(B) of the Act; services excluded from the OPPS according to section 1833(t)(1)(B) of the Act including recurring therapy services, which we considered unrelated to the comprehensive service (defined as therapy services reported on a separate facility claim for recurring services), ambulance services, diagnostic and screening mammography, the annual wellness visit providing personalized prevention plan services, and pass-through drugs and devices that are paid according to section 1833(t)(6) of the Act.

We also exclude preventive services defined in 42 CFR 410.2, “(1) [t]he specific services listed in section 1861(ww)(2) of the Act, with the explicit exclusion of electrocardiograms; (2) [t]he Initial Preventive Physical Examination (IPPE) (as specified by section 1861(ww)(1) of the Act); and (3) Annual Wellness Visit (AWV), providing Personalized Prevention Plan Services (PPPS) (as specified by section 1861(hhh)(1) of the Act).” These preventive services are listed by their HCPCS codes in Addendum J to this proposed rule and include: annual wellness visits providing personalized prevention plan services; initial preventive physical examinations; pneumococcal, influenza, and hepatitis B vaccines and administrations; mammography screenings; pap smear screenings and pelvic examination screenings; prostate cancer screening tests; colorectal cancer screening tests; diabetes outpatient self-management training services; bone mass measurements; glaucoma screenings; medical nutrition therapy services; cardiovascular screening blood tests; diabetes screening tests; ultrasound screenings for abdominal aortic aneurysm; and additional preventive services as defined in section 1861(ddd)(1) of the Act. We defined and discussed these services in detail for hospital billing purposes in the CY 2011 OPPS/ASC final rule with comment period pursuant to coverage and payment provisions in the Affordable Care Act (75 FR 72013 through 72020).

This proposed policy is consistent with our policy to exclude preventive services from the proposed ancillary services packaging policy, will encourage the provision of preventive services, and provide maximum flexibility to beneficiaries across different sites of service in receiving preventive services. In addition, the statute does not permit assessment of beneficiary cost-sharing for most preventive services, and some receive cost-based payment (75 FR 72013 through 72020; 78 FR 74962). While any beneficiary cost-sharing attributable to preventive services, if they were packaged, would be very small in relation to the comprehensive service overall, we believe that we should exclude these services from the OPPS beneficiary copayment calculations, as discussed in section II.I. of this proposed rule. We note that one preventive service (HCPCS code G0102 (Prostate cancer screening; digital rectal examination)) is proposed for continued packaging under the OPPS in CY 2015, both broadly and in the context of comprehensive services. Currently, this HCPCS code is packaged because it is included in evaluation and management services. We note that beneficiary cost-sharing is not waived for the service described by HCPCS code G0102.

Consistent with the policy finalized in the CY 2014 OPPS/ASC final rule with comment period, we exclude brachytherapy services and pass-through drugs, biologicals and devices that are separately payable by statute (78 FR 74868, 74909). In addition, we exclude services assigned to OPPS status indicator “F” that are not paid under the OPPS and are instead paid on a reasonable cost basis (certain CRNA services, Hepatitis B vaccines, and corneal tissue acquisition, which is not part of a comprehensive service for CY 2015). In Addendum J to this proposed rule, we list the HCPCS codes that describe the services proposed for exclusion from the comprehensive APC payment bundling policy.

As we discussed in the CY 2014 OPPS/ASC final rule with comment period, we did not model a budget neutrality adjustment for newly included services that would otherwise be paid under non-OPPS fee schedules (for example, therapy and DMEPOS) because the policy would not be implemented until CY 2015, and the estimated costs were very low (78 FR 74901). We reflect the inclusion of the proposed new costs (which remain very low) in our annual adjustment for CY 2015 budget neutrality (we refer readers to section XXI. of this proposed rule).

Step 3: Ranking of primary services initial comprehensive APC assignments. We are proposing to continue to define each hospital Medicare Part B claim reporting a single unit of a single primary service assigned to status indicator “J1” (approximately 80 percent of the CY 2013 claims) as a single major procedure claim (78 FR 74871). We would sum all line item charges for services included in the comprehensive APC payment, convert the charges to costs, and calculate the “comprehensive” geometric mean cost of one unit of each service assigned to status indicator “J1.” (We note that we use the term “comprehensive” to describe the geometric mean cost of a claim reporting “J1” service(s) or the geometric mean cost of a comprehensive APC, inclusive of all of the items and services in the comprehensive APC payment bundle). Charges for services that would otherwise have been separately payable subject to longstanding adjustments, including the multiple procedure reduction (for example, HCPCS codes assigned to status indicators “A,” “S,” “T,” or “V”) would be added to the charges for the primary service. This process differs from our traditional cost accounting methodology only in that all such services on the claim are packaged (except certain services as described above). We would apply our standard data trim, excluding claims with extremely high primary units or extreme costs.

The comprehensive geometric mean costs are used to establish resource similarity and, along with clinical similarity, dictate the assignment of the primary services to the comprehensive APCs. We are proposing to establish a ranking of each primary service (single unit only) assigned to status indicator “J1” according to their comprehensive geometric mean costs. For CY 2015, we are proposing not to assign any add-on codes to status indicator “J1” because they are proposed to be packaged.

For the minority of claims reporting more than one primary service assigned to status indicator “J1” or units thereof (approximately 20 percent of CY 2013 claims), we are proposing to continue to identify one “J1” service as the primary service for the claim based on our cost-based ranking of primary services. We then assign these multiple “J1” procedure claims to the comprehensive APC to which the service designated as the primary service is assigned. If the reported “J1” services reported on a claim map to different comprehensive APCs, we designate the “J1” service assigned to the comprehensive APC with the highest comprehensive geometric mean cost as the primary service for that claim. If the reported multiple “J1” services on a claim map to the same comprehensive APC, we designate the most costly service as the primary service for that claim. This process results in initial assignments of claims for the primary services assigned to status indicator “J1” to the most appropriate comprehensive APCs based on both single and multiple procedure claims reporting these services and clinical and resource homogeneity.

Step 4—Complexity adjustments and determination of final comprehensive APC groupings. We are proposing to use the proposed complexity adjustments to provide increased payment for certain comprehensive services. We are proposing to apply a complexity adjustment by promoting qualifying “J1” service code combinations or code combinations of a “J1” services and certain add-on codes (as described further below) from the originating comprehensive APC (the comprehensive APC to which the designated primary service is first assigned) to a higher paying comprehensive APC in the same clinical family of comprehensive APCs, if reassignment is clinically appropriate and the reassignment would not create a 2 times rule violation in the receiving APC (the higher paying comprehensive APC in the same clinical family of comprehensive APCs). We are proposing to implement this type of complexity adjustment when the code combination represents a complex, costly form or version of the primary service according to the following criteria:

• Frequency of 25 or more claims reporting the code combination (frequency threshold); and
• Violation of the 2 times rule, that is, the comprehensive geometric mean cost of the complex code combination exceeds the comprehensive geometric mean cost of the lowest significant HCPCS code assigned to the comprehensive APC (cost threshold).

After designating a single primary service for a claim, we are proposing to evaluate that service in combination with each of the other procedure codes reported on the claim assigned to status indicator “J1” (or certain add-on codes) to determine if they meet the complexity adjustment criteria. For new HCPCS codes, we are proposing to determine initial comprehensive APC assignments and complexity adjustments using the best data available, mapping the new HCPCS codes to predecessor codes wherever possible.

Once we have determined that a particular code combination of “J1” services (or combinations of “J1” services reported in conjunction with certain add-on codes) represents a complex version of the primary service because it is sufficiently costly, frequent, and a subset of the primary comprehensive service overall according to the criteria described above, we are proposing to promote the complex version of the primary service as described by the code combination to the next higher cost comprehensive APC within the clinical family, unless the APC reassignment is not clinically appropriate, the reassignment would create a 2 times rule violation in the receiving APC, or the primary service is already assigned to the highest cost APC within the comprehensive APC clinical family. We are not proposing to create new APCs with a geometric mean cost that is higher than the highest cost comprehensive APC in a clinical family just to accommodate potential complexity adjustments. Therefore, the highest payment for any code combination for services assigned to a comprehensive APC will be the highest paying comprehensive APC in the clinical family.

As discussed below, we are proposing that add-on codes reported in conjunction with a “J1” service would receive complexity adjustments when a qualifying add-on code is reported in conjunction with the primary service assigned to status indicator “J1” and satisfies the criteria described above for a complexity adjustment (≥25 claims with the code combination and no violations of the 2 times rule). Any combinations of HCPCS codes that fail to meet the proposed complexity adjustment criteria (frequency and cost thresholds) would not be identified as complex subsets of the primary procedure and would not be reassigned to a higher paying comprehensive APC within the same clinical family of comprehensive APCs. We are providing the proposed list of qualifying code combinations (including add-on codes) in Addendum J to this proposed rule (which is available via the Internet on the CMS Web site).

Complexity Test for Eligible Add-On Codes. We are proposing to package all add-on codes into the payment for the comprehensive APC. However, add-on codes that are assigned to the current device-dependent APCs listed in Table 5 of this proposed rule will be evaluated for a possible complexity adjustment when they are reported in conjunction with a designated primary service assigned to status indicator “J1.” We are proposing to only evaluate the add-on codes that are assigned to the current device-dependent APCs for potential complexity adjustments because we believe that, in certain cases, these procedure codes may represent services with additional medical device costs that result in significantly more complex and costly procedures. To determine which combinations of primary service codes reported in conjunction with the add-on code may qualify for a complexity adjustment for CY 2015, we are proposing to apply the proposed frequency and cost criteria discussed above (25 or more claims and no “2 times” rule violations), testing claims reporting one unit of a single primary service assigned to status indicator “J1” and any number of units of a single add-on code. If the frequency and cost criteria for a complexity adjustment are met, and reassignment to the next higher cost APC in the clinical family is appropriate, we are proposing to make a complexity adjustment for the code combination; that is, we are proposing to reassign the primary service code reported in conjunction with the add-on code combination to a higher cost comprehensive APC within the same clinical family of comprehensive APCs. If any add-on code combination reported in conjunction with the primary service code does not qualify for a complexity adjustment, payment for these services will be packaged. We are listing the complexity adjustments proposed for add-on code combinations for CY 2015, along with all of the other proposed complexity adjustments, in Addendum J to this proposed rule (which is available via the Internet on the CMS Web site). One primary service code and add-on code combination (CPT code 37225 and 37233) that satisfied the frequency and cost criteria is not being proposed for a complexity adjustment because we believe that these claims are miscoded. Of the 35 qualifying claims reporting this code combination, only three claims contained the appropriate base code (CPT code 37228) for CPT add-on code 37233.

We note that, in response to public comments received, we are providing in Addendum J to this proposed rule a breakdown of cost statistics for each code combination that would qualify for a complexity adjustment (including primary code and add-on code combinations). Addendum J to this proposed rule also contains summary cost statistics for each of the code combinations proposed to be reassigned under a given primary code. The combined statistics for all proposed reassigned complex code combinations are represented by an alphanumeric code with the last 4 digits of the designated primary service followed by “A” (indicating “adjustment”). For example, the geometric mean cost listed in Addendum J for the code combination described by CPT code 33208A assigned to C-APC 0655 includes all code combinations that are proposed to be reassigned to C-APC 0655 when CPT code 33208 is the primary code. Providing the information contained in Addendum J in this proposed rule will allow stakeholders the opportunity to better assess the impact associated with the proposed reassignment of each of the code combinations eligible for a complexity adjustment.

(b) Additional Proposed Comprehensive APCs

Several commenters to the CY 2014 OPPS/ASC proposed rule questioned why we only converted a subset of the device-dependent APCs to comprehensive APCs (78 FR 74864). We responded that while we were initially adopting a subset of the most costly device-dependent services, we may extend comprehensive payments to other procedures in future years as part of a broader packaging initiative (78 FR 74864). Upon further review for CY 2015, we believe that the entire set of the currently device-dependent APCs (after the proposed reorganization and consolidation of the current device-dependent APCs) are appropriate candidates for comprehensive APC payment because the device-dependent APCs not included in last year’s comprehensive APC payment proposal are similar to the original 29 device-dependent APCs that were proposed as comprehensive APCs in CY 2014. Similar to the original 29 device-dependent APCs for CY 2014 that were converted to C-APCs, the additional device-dependent APCs that are being proposed for conversion to C-APCs contain comprehensive services primarily intended for the implantation of costly medical devices. Therefore, we are proposing to apply the comprehensive APC payment policy to the remaining device-dependent APCs for CY 2015.

In addition, since the publication of the CY 2014 OPPS/ASC final rule with comment period, stakeholders brought several services to our attention as appropriate candidates for comprehensive APC payment. Stakeholders recommended that we create comprehensive APCs for these procedures and technologies or assign them to a previously proposed comprehensive APC. We agree with the stakeholders. Similar to the other services designated as C-APCs in CY 2014, these procedures are comprehensive single-session services with high-cost implantable devices or high-cost equipment. For CY 2015, we are proposing to convert the following existing APCs into comprehensive APCs: APC 0067 (Single Session Cranial Stereotactic Radiosurgery) and APC 0351 (Level V Intraocular Surgery)). APC 0351 only contains one procedure—0308T (Insertion of ocular telescope prosthesis including removal of crystalline lens). We also are proposing to assign the CPT codes for IORT (CPT codes 77424 and 77425) to C-APC 0648 (Level IV Breast and Skin Surgery) because IORT is a single session comprehensive service that includes breast surgery combined with a special type of radiation therapy that is delivered inside the surgical cavity but is not technically brachytherapy. The HCPCS codes that we are proposing to assign to these APCs in CY 2015 would be assigned to status indicator “J1.”

(c) Proposed Reconfiguration and Restructuring of the Comprehensive APCs

Based on further examination of the structure of the comprehensive APCs illustrated in the CY 2014 OPPS/ASC final rule with comment period and an evaluation of their comprehensive geometric mean costs (using the updated CY 2013 claims data), we are proposing to reorganize, combine, and restructure some of the comprehensive APCs. The purpose of this APC restructuring is to improve resource and clinical homogeneity among the services assigned to certain comprehensive APCs and to eliminate APCs for clinically similar services, but with overlapping geometric mean costs. The services we are proposing to assign to each of the comprehensive APCs for CY 2015, along with the relevant cost statistics, are provided in Addendum J to this proposed rule. Addendum J is available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Table 7 below lists the additional 28 APCs proposed under the CY 2015 comprehensive APC policy.

In summary, our proposal to reorganize, combine, and restructure some of the comprehensive APCs includes the following proposed changes:

• Endovascular clinical family (renamed Vascular Procedures, VASCX). We are proposing to combine C-APCs 0082, 0083, 0104, 0229, 0319, and 0656 illustrated for CY 2014 to form three proposed levels of comprehensive endovascular procedure APCs: C-APC 0083 (Level I Endovascular Procedures); C-APC 0229 (Level II Endovascular Procedures); and C-APC 0319 (Level IV Endovascular Procedures).
• Automatic Implantable Cardiac Defibrillators, Pacemakers, and Related Devices (AICDP). We are proposing to combine C-APCs 0089, 0090, 0106, 0654, 0655, and 0680 as illustrated for CY 2014 to form three proposed levels of comprehensive APCs within a broader series of APCs for pacemaker implantation and similar procedures as follows: APC 0105 (Level I Pacemaker and Similar Procedures), a non-comprehensive APC; C-APC 0090 (Level II Pacemaker and Similar Procedures); C-APC 0089 (Level III Pacemaker and Similar Procedures); and C-APC 0655 (Level IV Pacemaker and Similar Procedures).
• We are proposing to delete the clinical family for Event Monitoring, which only had one comprehensive APC (C-APC 0680 (Insertion of Patient Activated Event)) with a single CPT code 33282 as illustrated for CY 2014. We also are proposing to reassign CPT code 33282 to C-APC 0090, which contains clinically similar procedures.
• In the urogenital family, we are proposing two levels instead of three levels for Urogenital Procedures, and to reassign several codes from APC 0195 to C-APC 0202 (Level V Female Reproductive Procedures).
• We are proposing to rename the arthroplasty family of APCs to Orthopedic Surgery. We also are proposing to reassign several codes from APC 0052 to C-APC 0425, which we are proposing to rename “Level V Musculoskeletal Procedures Except Hand and Foot.”
• We are proposing three levels of electrophysiologic procedures, using the current inactive APC “0086” instead of APC 0444, to have consecutive APC grouping numbers for this clinical family and renaming APC 0086 “Level III Electrophysiologic Procedures.” In addition, we are proposing to replace composite APC 8000 with proposed C-APC 0086 as illustrated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74870).

We also are proposing three new clinical families: Gastrointestinal Procedures (GIXXX) for gastrointestinal stents, Tube/Catheter Changes (CATHX) for insertion of various catheters, and Radiation Oncology (RADTX), which would include C-APC 0067 for single session cranial SRS.

(3) Public Comments

We received nine public comments in response to the CY 2014 OPPS/ASC final rule with comment period regarding our policy for comprehensive APCs from device manufacturers, the hospital community, and others. The commenters generally supported broader payment bundles, as long as the payment bundles are appropriately and accurately structured and provide adequate payment. Commenters expressed continued concern regarding the data provided in support of the comprehensive APC policy, the ability to replicate the methodology, and the ability of comprehensive APCs to adequately pay for complex services for patients. The comments, which were largely provided in the context of specific devices or drugs, or in regard to a specific clinical family of comprehensive APCs, are summarized below and accompanied by our responses.

Endovascular Family

Comment: Several commenters addressed the endovascular family of comprehensive APCs. The commenters expressed difficulty replicating CMS’ methodology, especially complexity reassignments for procedures in this family of services that is historically component-based and include many new codes and add-on codes. The commenters requested clarification of how CMS determined comprehensive APC assignments and complexity adjustments associated with add-on codes and other procedures.

One commenter expressed concern regarding payment levels for vascular procedures involving multiple vessels. The commenter recommended changes to the complexity adjustment criteria in order to allow for adjustments and to provide adequate payment for seven code combinations of lower extremity endovascular revascularization procedures assigned to C-APCs 0083 (Level I Endovascular Procedures), 0229 (Level II Endovascular Procedures) and 0445 (Level III Endovascular Procedures). The code combinations identified by the commenter were CPT code 37221 and 37222; 37229 and 37232; 37230 and 37232; 37231 and 37232; 37229 and 37234; 37231 and 37233; and 37231 and 37234. Procedures described by add-on codes (CPT codes 37222, 37232, 37233 and 37234) are furnished in conjunction with each of these code combinations. The commenter stated that each of the code combinations failed to meet the CY 2014 finalized cost threshold for a complexity adjustment (for example, the comprehensive geometric mean cost of the code combination was more than two times the comprehensive geometric mean cost of the single major claims reporting only the primary “J1” service), but that some of the code combinations met the CY 2014 frequency of ≥100 claims and ≥5 percent of the total claims volume for the primary service, including CPT codes 37221 and 37222 (Iliac artery revascularization (multiple vessels) with stent), 37229 and 37232 (Tibial/peroneal artery revascularization (multiple vessels) with atherectomy), and 37230 and 37232 (Tibial/peroneal artery revascularization (multiple vessels) with stent). The other four code combinations met the ≥5 percent volume threshold for the claims reporting the primary service, but in the relevant data year the frequency of these code combinations ranged from 13 to 22 cases, including CPT codes 37231 and 37232 (Tibial/peroneal artery revascularization (multiple vessels) with stent and atherectomy), 37229 and 37234 (Tibial/peroneal artery revascularization with atherectomy (multiple vessels) and with stent (multiple vessels)), 37231 and 37233 (Tibial/peroneal artery revascularization with stent and atherectomy (multiple vessels)), and 37231 and 37234 (Tibial/peroneal artery revascularization with stent (multiple vessels) and atherectomy). In no case did the geometric mean cost of the code combinations exceed the geometric mean cost of the single “J1” claims for the primary service alone by at least two times.

To qualify these code combinations for a complexity adjustment, the commenter recommended using a 1.5 instead of 2 times rule, patterned after the 50 percent multiple procedure reduction and based on the inability of hospitals to garner 100 percent efficiency when performing multiple procedures. The commenter stated that this slightly lower cost threshold would still be significant and, therefore, would appropriately allow complexity reassignment only for cases that are meaningfully underpaid under the threshold. (We received similar inquiries from other commenters regarding our application of the statutory “2 times” rule that are discussed below.)

In addition, the commenter recommended that CMS omit the CY 2014 required claim frequency threshold of greater than 100 claims with the specific combination of procedure codes. The commenter believed that the frequency threshold requiring that complex claims for a particular procedure code combination exceed 5 percent of the total volume of claims reporting the primary service alone is sufficient to ensure additional payment for only higher volume cases, and that an additional frequency threshold is not necessary. The commenter believed that the threshold should not depend on the procedures’ frequency in prior years, which can fluctuate significantly.

The commenter asked for clarification regarding our treatment of add-on codes, recommending that all add-on codes assigned to the endovascular comprehensive APCs be equally eligible for complexity adjustments. The commenter noted that Table 10 of the CY OPPS/ASC 2014 final rule with comment period (78 FR 74889 through 74900) listed complexity adjustments for only a small number of add-on codes (for example, certain drug-eluting stent codes), and did not list complexity adjustments for any of the add-on codes for peripheral artery revascularization associated with procedures assigned to C-APCs 0083, 0229 and 0445. The commenter could not assess whether only some add-on code combinations were considered for complexity adjustments, or whether all combinations were considered but eliminated due to not meeting the cost or frequency criteria.

Similarly, another commenter requested additional information regarding application of the complexity criteria to all of the percutaneous coronary intervention (PCI) related code combinations in Table 10 of the CY 2014 OPPS/ASC final rule with comment period. In particular, the commenter was not sure whether the C9600-C9602 code combination required intervention in an additional vessel, whether a second stent in a new vessel is required, or whether one stent and rotational atherectomy together with an additional stent in the same vessel would qualify the procedure(s) for a complexity adjustment. The commenter believed that it would not be appropriate to apply an adjustment only when the second intervention was in a separate vessel, where a procedure involving placement of a stent in one vessel and a second stent in a branch of the same vessel would not be eligible for complexity adjustment, but placement of two stents in two separate vessels would be eligible because the resources required are potentially very similar. Regarding claims with more than one unit of HCPCS code C9606, the commenter was not sure whether the second revascularization procedure must involve a second episode of acute myocardial infarction (AMI) in the same outpatient encounter, or whether the complexity adjustment would apply when there is a single episode of AMI in two separate vessels or in the same vessel. Regardless of CMS’ intent, the commenter questioned why interventions involving patients with AMI or total chronic occlusions are mapped to the same APCs as those that involve patients with lower levels of complexity.

Response: We begin by clarifying how we treated add-on codes, which are particularly common in the vascular family of comprehensive APCs, in modeling the CY 2014 payments for comprehensive APCs. The CPT Editorial Panel defines add-on codes as codes that describe procedures that are commonly carried out in addition to the primary procedure performed, listing add-on codes in Appendix D of the CPT codebook (2014 CPT Codebook Professional Edition, page xiv). The CPT codebook states that add-on codes are always performed in addition to the primary or “base” service or procedure and must never be reported as a stand-alone code. Add-on codes can also be Level II HCPCS codes, such as HCPCS codes C9601, C9603, C9605 and C9608, which are the drug-eluting stent insertion add-on codes that parallel the non-drug eluting stent insertion add-on CPT codes 92929, 92934, 92938 and 92944, respectively. In Table 15 of the CY 2014 OPPS/ASC final rule with comment period, we listed all add-on codes that are currently assigned to device-dependent APCs (78 FR 74944).

Historically and in most cases, the OPPS assigned add-on codes to the same APC as the base code and applied a multiple procedure reduction when these codes were reported with the base code. Because add-on codes represent an extension or continuation of or are adjunctive to a primary service, beginning in CY 2014, we unconditionally packaged add-on codes, except for drug administration services, and add-on codes assigned to device-dependent APCs due to the delayed implementation of the comprehensive APC policy until CY 2015 (78 FR 74943). We discussed in that same final rule with comment period how this policy will improve the accuracy of OPPS ratesetting, as we would no longer be reliant on incorrectly coded single add-on code claims to set OPPS payment rates for add-on codes (78 FR 74942).

In the CY 2014 OPPS/ASC proposed rule, we proposed to unconditionally package add-on codes assigned to comprehensive APCs and to assign the procedures to status indicator “N” (78 FR 43559). They were not proposed as primary services assigned to status indicator “J1” because they would always be furnished adjunctive to another primary service assigned status indicator “J1.” We had not proposed a complexity adjustment, so there was no need to consider whether the multiple procedure claims that correctly report an add-on code should be promoted to a higher comprehensive APC.

In the CY 2014 OPPS/ASC final rule with comment period, we designated certain especially costly add-on codes as primary services assigned to status indicator “J1.” (We refer readers to Table 9 in the 2014 OPPS final rule with comment period (78 FR 74873 through 74883), which provided the APC assignments for HCPCS codes proposed to be assigned to status indicator “J1” for CY 2014 and were displayed for illustration.) Other add-on codes assigned to the device-dependent APCs illustrated as comprehensive APCs were packaged because of the CY 2014 policy to package most add-on codes under the OPPS. Because these packaged add-on codes were not sufficiently costly, they were not designated as primary “J1” services. As a result, for example, CPT codes 37222, 37232, 37233, and 37234 were not assigned status indicator “J1” in the CY 2014 OPPS/ASC final rule with comment period and instead were packaged similar to almost all of the other add-on codes. However, for CY 2014, because the implementation of the comprehensive APC policy was delayed until CY 2015, payment for services described by add-on codes assigned to a device-dependent APC are paid separately under the OPPS (78 FR 74943).

In response to the comments we received on the CY 2014 OPPS/ASC final rule with comment period, we considered ways to refine and simplify the complexity test when add-on codes that are currently assigned to the device-dependent APCs are reported with primary services proposed to be assigned to comprehensive APCs for CY 2015 in this proposed rule. Because services described by add-on codes are by definition adjunctive and furnished in addition to primary services assigned status indicator “J1,” we believe that the add-on codes should not be classified as primary services themselves because they cannot serve as the primary service provided to a patient. However, we continue to believe that we should recognize the additional cost and complexity of certain cases involving procedures described by certain especially costly add-on codes that are currently assigned to a device-dependent APC in CY 2014 because like certain combinations of “J1” procedure codes, primary service code and add-on code combinations can represent more complex and significantly more costly variations of the primary service. Therefore, we are proposing to revert to our original CY 2014 proposal for comprehensive APCs in which we would not consider any add-on codes that are currently assigned to device-dependent APCs as primary services assigned to status indicator “J1” (78 FR 43559). For CY 2015, we are proposing to allow certain combinations of primary service codes and especially costly add-on codes representing a more costly, complex variation of a procedure to trigger a complexity adjustment. We refer readers to section II.A.2.e.(3)(a) of this proposed rule for a detailed description of our proposed new methodology of evaluating primary service procedures reported in conjunction with add-on codes for complexity adjustments.

Also, in evaluating the comprehensive APC assignments based on CY 2013 claims data, we are proposing to consolidate and restructure the vascular comprehensive APCs, in addition to other APCs. We refer readers to section II.A.2.e.(3)(c) of this proposed rule for a discussion of the proposed reconfiguration, and to Addendum J to this proposed rule for the updated cost statistics and proposed complexity adjustments for the services to address the commenters’ concerns. We are proposing complexity adjustments for several of the services indicated by the commenters, although some of the services continue to fail one or both of the proposed complexity criteria even under the proposed relaxed frequency and cost thresholds.

We agree with the commenters that we should revise the criteria for complexity adjustments. The delay in implementation afforded additional time for CMS and commenters to further analyze and consider the cost data. After further analysis and consideration of the public comments in response to the CY 2014 OPPS/ASC final rule with comment period, we believe that the complexity adjustment criteria in that final rule with comment period were too restrictive. None of the code combinations illustrated as qualifying for complexity adjustments in the CY 2014 OPPS/ASC final rule with comment period met all of the frequency and cost thresholds set forth in the CY 2014 OPPS/ASC final rule with comment period, and no code combinations would qualify under those criteria in CY 2015 using the CY 2013 cost data. However, we believe that especially costly and sufficiently frequent code combinations should qualify for a complexity adjustment.

In calculating the geometric mean costs for comprehensive APC services using the claims data for CY 2013, we noted that many of the comprehensive APCs in the same clinical family illustrated in the CY 2014 OPPS/ASC final rule with comment period had similar or overlapping comprehensive geometric mean costs, meaning that the geometric mean costs were close to one another or that the range of costs for procedures assigned to one comprehensive APC significantly overlapped the range of costs for procedures assigned to another comprehensive APC in the same clinical family. We are proposing to restructure and consolidate these comprehensive APCs, as further described in section II.A.2.e.(3)(c) of this proposed rule, in order to better distinguish service groups having different resource requirements. The proposed restructuring and consolidation eliminates the need for many of the complexity adjustments illustrated in the CY 2014 OPPS/ASC final rule with comment period because we are proposing to promote the primary service to a higher cost comprehensive APC for CY 2015 as compared to its illustrated comprehensive APC assignment for CY 2014. For example, for CY 2014, we illustrated complexity adjustments for the CPT code combinations 37228 and 35476, 37228 and 37220, 37228 and 37224, and multiple units of CPT code 37228 from C-APC 0083, the primary service CPT code 37228 was assigned with a comprehensive geometric mean cost of $4,230 to C-APC 0104 with a comprehensive geometric mean cost of $8,554. For CY 2015, we are proposing to consolidate C-APCs 0104 and 0229, and to retain C-APC 0229. Considering our proposed initial assignment of CPT code 37228 to C-APC 0229, CPT code 37228 has a proposed CY 2015 geometric mean cost of $7,250 and C-APC 0229 has a CY 2015 proposed comprehensive geometric mean cost of approximately $9,998.

We agree with the commenters that complexity adjustments should be based upon criteria that demonstrate that the complex combination is both sufficiently frequent and sufficiently costly such that a payment adjustment is warranted within a similar clinical family, if possible. Our reliance on clinical comparisons of each code combination in determining the complexity adjustments illustrated for CY 2014 likely contributed to the difficulty experienced by commenters in reproducing the results of the policy. Accordingly, we further analyzed the cost data in order to identify viable alternatives for complexity adjustment criteria. For CY 2015, we are proposing the following new complexity adjustment criteria to evaluate HCPCS code combinations for complexity adjustments:

• Frequency of 25 or more claims reporting the code combination (frequency threshold); and
• Violation of the “2 times” rule; that is, the comprehensive geometric mean cost of the “complex” code combination exceeds the comprehensive geometric mean cost of the lowest significant HCPCS code assigned to the originating comprehensive APC by at least 2 times (cost threshold). (“Significant” means frequency >1000 claims, or frequency>99 claims and contributing at least 2 percent of the single major claims used to establish the originating comprehensive APC’s geometric mean cost, including the claims reporting the complex code pair).

To illustrate how this second criterion is applied, for example, consider CPT code 33208 as the primary service reported in conjunction with HCPCS code C9600. CPT code 33208 is assigned to APC 0089. The lowest cost significant procedure assigned to APC 0089 is CPT code 33228, with a geometric mean cost of $8,669. There are 43 instances of the code combination of CPT code 33208 and HCPCS code C9600 in the CY 2013 claims data with a geometric mean cost of $21,914, which exceeds the geometric mean cost of CPT code 33228 ($8,669) by greater than two times ($21,914 > $17,338). Therefore, the code combination of CPT code 33208 and HCPCS code C9600 is assigned through a complexity adjustment to APC 0655, which is the next higher cost APC in the AIDCP clinical family of comprehensive APCs.

Whereas the criteria finalized in the CY 2014 OPPS/ASC final rule with comment period evaluated the marginal cost contribution of the additional procedure in comparison to the designated primary service alone (78 FR 74886), the proposed complexity adjustment criterion would employ our standard “2 times” rule (discussed in section III.B.2. of this proposed rule), comparing the costs associated with the code combination to the cost of other services assigned to the same comprehensive APC. We are proposing to make a complexity adjustment by reassigning a particular code combination to a higher cost comprehensive APC if there are 25 or more claims reporting the code combination in the data year and their comprehensive geometric mean cost exceeds the geometric mean cost of the lowest significant HCPCS code in the initial comprehensive APC by more than two times according to our standard “2 times” rule comparison. By “significant HCPCS code,” we mean our standard threshold for volume significance of the other codes being compared to the complex code combinations requiring a frequency >1000; or frequency >99 and contributing at least 2 percent of the single major claims used to establish the comprehensive APC geometric mean cost, including the claims reporting the complex code pair). We are proposing to apply the same test in assessing whether the complexity reassignment would create a “2 times” rule violation in the newly assigned comprehensive APC. However, if the claims comprise significant volume and violate the “2 times” rule cost differential, we are proposing to consider alternative comprehensive APC assignments, such as not making a complexity adjustment for the code combination, or not assigning the case to a higher cost APC within the same clinical family. In doing so, we also would require the complex code combination to be clinically similar to other procedures assigned to the comprehensive APC to which the complex code combination is reassigned. This is usually the case because complexity adjustments are confined to higher cost APCs within the same clinical family.

Comment: One commenter questioned the assignment of procedures within C-APCs 0083 (Level I Endovascular Procedures), 0229 (Level II Endovascular Procedures) and 0319 (Level IV Endovascular Procedures). The commenters believed that some of the procedures assigned to C-APC 0083 should be assigned to C-APC 0229, and stated that the adjunctive service rather than the primary service appeared to be driving the comprehensive APC mapping, specifically CPT code combinations 35476 and 37205, 35475 and 37205, 35471 and 37205, and 37220 and 37205.

Response: CPT code 37205 was deleted for CY 2014, and we are proposing to cross-walk CPT code 37205 to CPT code 37236 for CY 2015 based on the code descriptors. Until claims data are available for new codes, we are proposing to continue to make comprehensive APC assignments based on our best assessment of clinical and resource similarity (as we do for standard APC assignments), including examining the historical cost data for any predecessor code(s). Applying our proposed CY 2015 complexity adjustment criteria (significant volume of 25 or more complex claims and a “2 times” rule violation assessment relative to the lowest service within the originating comprehensive APC) would result in several complexity adjustments related to CPT code 37205, which are listed in Addendum J to this proposed rule (which is available via the Internet on the CMS Web site). We are proposing to provide these complexity adjustments when CPT code 37236 is reported in lieu of CPT code 37205 for each of these code combinations.

Comment: One commenter expressed concern regarding payment for certain anticoagulant and other drugs that are commonly furnished with services assigned to the endovascular family of comprehensive APCs, particularly Angiomax, Cleviprex, Recothrom and Agratroban. The commenter asked CMS to clarify that the proposed definition of a comprehensive APC includes adjunctive supplies, as well as adjunctive services. The commenter asserted that the proposed comprehensive APC payment methodology violates the OPPS statutory requirements for separate payment of specified covered outpatient drugs (SCODs) and the “2 times” rule. The commenter stated that CMS did not discuss application of the “2 times” rule in the statutory context, and noted that by design CMS selected primary procedures that were far more costly than the other services included in the comprehensive APC payment bundle. The commenter also asserted that the comprehensive APC policy is premature because it lacks clinical quality metrics and other safeguards for quality of outpatient care. The commenter recommended alternative policies to incentivize cost-effectiveness, such as required data submission on hospital treatment decisions and making hospitals whole for use of cost-effective items and services including drugs. The commenter did not believe that Medicare’s three hospital inpatient quality incentive programs include measures that are relevant for the comprehensive device-dependent procedures when they are furnished on an outpatient basis.

Response: In finalizing our CY 2014 policy to package drugs and biologicals that function as surgical supplies, we explained that CMS has the statutory authority to package the payment of any drugs, biologicals, and radiopharmaceuticals, including those that meet the statutory definition of a SCOD (78 FR 74931). Also, in finalizing our CY 2008 policy packaging all diagnostic radiopharmaceuticals and contrast agents, except those with pass-through status, we explained that CMS has the statutory authority to package the payment of any drugs, biologicals, and radiopharmaceuticals, including those that meet the statutory definition of a SCOD (72 FR 66766).

Our proposed definition of a comprehensive APC includes adjunctive supplies, as well as adjunctive services. In the CY 2014 OPPS/ASC final rule with comment period, we packaged all drugs, biologicals, and radiopharmaceuticals into the comprehensive APC payment, with the exception of certain drugs that are usually self-administered (SADs) and, therefore, not covered under Medicare Part B. We applied our existing policy that defines certain SADs as hospital supplies paid under the OPPS, such that these SADs would be included in the comprehensive APC payment bundle (78 FR 74868). For CY 2015, we are proposing to retain these aspects of our comprehensive APC policy. We are proposing to continue to package all drugs, biologicals, and radiopharmaceuticals into the comprehensive APC payment, including those SADs defined as hospital supplies, which are packaged in the OPPS (Medicare Benefit Policy Manual Chapter 15, Section 50.2.M, available at http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c15.pdf). Therefore, beginning in CY 2015, Angiomax, Cleviprex, Recothrom, Agratroban, and any other drugs, biologicals, and radiopharmaceuticals (except for SADs that are not considered hospital supplies) would be packaged when administered to a patient receiving a comprehensive service. There would be no separate payment for these non-pass-through drugs under the OPPS regardless of cost or any other factors.

We appreciate the commenters’ concerns regarding ensuring the quality of hospital outpatient care. In section XIII. of this proposed rule, we discuss the Hospital OQR Program for CY 2015. To the extent that inpatient quality measures would not apply to the comprehensive services proposed for CY 2015, stakeholders should suggest specific measures that would be relevant in response to the section of the proposed rule dealing with hospital outpatient quality measures.

Automatic Implantable Cardiac Defibrillators and Pacemakers and Related Devices (AICDP)

Comment: One commenter asked CMS to create a comprehensive APC for Cardiac Resynchronization Therapy Pacemaker (CRT-P) in the absence of defibrillation (CPT code 33225) because the comprehensive APC packaging policy decreases payment relative to the multiple procedure reduction policy. The commenter requested a complexity adjustment when CPT code 33225 is reported in combination with CPT code 33206, 33207, 33208, or 33214 because of their high mean cost relative to all other pacemaker insertion procedures assigned to C-APC 0089 (Level III Insertion/replacement of Permanent Pacemaker) and C-APC 0655 (Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode).

Response: CPT code 33225 is an add-on code that was not assigned to status indicator “J1” in the CY 2014 OPPS/ASC final rule with comment period. For CY 2015, we are proposing to continue packaging this service, but to provide a complexity adjustment when the service is furnished in conjunction with CPT code 33207, 33208, or 33228 from C-APC 0089 to C-APC 0655 because these code combinations meet the proposed complexity adjustment criteria. The code combinations of CPT 33206 and 33225 and 33214 and 33225 meet the proposed cost threshold, but not the proposed frequency threshold and, therefore, we do not believe that we should provide complexity adjustments for these code combinations. Services that are reported fewer than 25 times a year do not comprise significant volume and are not sufficiently frequent service combinations in the context of the proposed comprehensive APC policy and proposed complexity adjustment criteria and, therefore, do not qualify for a complexity adjustment.

Neurostimulators

Comment: One commenter recommended splitting C-APC 0318 (Level II Implantation of Neurostimulator) to achieve a narrower cost range, placing vagal nerve and spinal cord stimulation in its own comprehensive APC and creating a separate comprehensive APC for other neurostimulator devices. The commenter also recommended reassigning CPT code 61886 to C-APC 0039 (Level I Implantation of Neurostimulator) to place all single generator procedures in the lower APC. In contrast, another commenter supported the complexity adjustments and the final comprehensive APC structure proposed for the neurostimulator family. The commenter stated in response to the CY 2014 OPPS/ASC final rule with comment period that appropriately differentiating payment rates for less-intensive pulse generator replacements from the more intensive initial system implants, which include placement of lead array(s), and also appropriately distinguishing payment rates between simpler less resource-intensive nerve stimulation procedures (for example, sacral nerve stimulation) and more complex resource-intensive nerve stimulation procedures (for example, spinal cord stimulation) is most appropriate. This commenter supported mapping the spinal cord stimulation system implants into C-APC 0318 because these implants have similar procedural complexity and resource utilization with the other procedures assigned to C-APC 0318.

Response: Some of the procedure codes assigned to the different neurostimulator comprehensive APCs illustrated for CY 2014 had similar or overlapping costs, in particular C-APCs 0040 and 0061, which had comprehensive geometric mean costs of $4,715 and $6,567 respectively. Having also updated the APCs based on CY 2013 cost data, for CY 2015, we are proposing to restructure the neurostimulator comprehensive APCs from four comprehensive APCs to three comprehensive APCs within a single series of APCs titled “Neurostimulator and Related Procedures.” We are proposing to begin this series with the non-comprehensive APC 0688 followed by the three levels of comprehensive APCs for neurostimulator procedures as follows: C-APC 0061 (Level II Neurostimulator and Related Procedures); C-APC 0039 (Level III Neurostimulator and Related Procedures); and C-APC 0318 (Level IV Neurostimulator and Related Procedures). This proposed reconfiguration would establish groups of neurostimulator device-related services that have different and nonoverlapping cost ranges while applying the “2 times” rule, including several complexity adjustments for complex code combinations. We believe that the procedures proposed for assignment to C-APC 0318 for CY 2015 are clinically similar and similar in associated resources and, therefore, should be assigned to the same comprehensive APC. We also believe that CPT code 61886 more appropriately belongs in the higher level C-APC 0318 rather than C-APC 0039 based on its cost and complexity because it describes implantation of a cranial neurostimulator with connection to two or more electrode arrays. We do not believe that CPT code 61886 should be assigned to C-APC 0039 with less complex procedures.

Urogenital

Comment: Several commenters addressed the urogenital clinical family of comprehensive APCs. One commenter recommended that CMS exempt C-APC 0202 (Level VII Female Reproductive Procedures) from the comprehensive APC policy, due to the variability in geometric mean costs between cases with a single “J1” procedure and cases with multiple procedures furnished during the same surgical session (not otherwise specified). Alternatively, the commenter recommended different complexity criteria that would reassign the claims assigned to C-APC 0202 (Level VII Female Reproductive Procedures) to C-APC 0385 (Level I Urogenital Procedures) or C-APC 0386 (Level II Urogenital Procedures). The commenter suggested that we make a complexity adjustment for any claim with a service assigned to status indicator “J1” and at least two additional surgical procedures. The commenter also suggested the following possible alternative cost criteria: (1) Using percent of total device costs reported on a claim instead of the presence of a second service assigned status indicator “J1” to assess costliness; or (2) using a cost threshold of 1.5 instead of 2 times the cost of single claims for the primary service. The commenter also suggested a volume threshold of 50 instead of 100 claims. Finally, the commenter asked CMS to clarify how it determined uncommon clinical scenarios or extreme resource values for the complexity adjustment, and what data or information qualifies code combinations for reassignment.

Response: The commenter was not clear regarding which surgical procedures we should count or consider in determining complexity adjustments, for example specific services assigned status indicator “J1” that do not meet our proposed complexity criteria or surgical procedures that are not assigned to a comprehensive APC. It was not clear whether the commenters’ recommendations were mutually exclusive, or recommended in some combination with one another. Also, it was not clear whether the commenter was suggesting that any two surgical procedures, even those not assigned to a comprehensive APC, should qualify a claim for complexity adjustment. As discussed above, for CY 2015, we are proposing different complexity adjustment criteria than those that were discussed in the CY 2014 OPPS/ASC final rule with comment period. As discussed above, for CY 2015, we are proposing less stringent complexity adjustment criteria—codes combinations, either two “J1” service codes or a “J1” service code and an add-on code that is eligible for a complexity adjustment must appear at least 25 times in the claims data and violate the 2 times rule. Extremely few claims involve the provision of more than two surgical procedures. Therefore, we do not believe that it is necessary or appropriate to complicate our proposed methodology by attempting to isolate marginal costs associated with other packaged surgical procedures. The complexity adjustment (both in the CY 2014 OPPS/ASC final rule with comment period and proposed in this CY 2015 OPPS/ASC proposed rule) would reassign all claims reporting a qualifying code combination, whether or not additional (third, fourth, or subsequent) services assigned to a comprehensive APC appear on the claim.

Stem Cell Transplant

Comment: One commenter recommended that CMS apply the comprehensive service concept to outpatient stem cell transplant (SCT) because the procedures occur in small volume and, due to their clinical nature, are almost always multiple procedure claims that are unusable under the standard ratesetting methodology. Specifically, the commenter requested that CMS create three comprehensive APCs for autologous outpatient SCT, where donor and recipient are the same; allogeneic-related outpatient SCT, where donor and recipient are biologically related; and allogeneic-unrelated transplants, where donor and recipient are biologically unrelated. The commenter stated that the costs associated with these three types of outpatient SCT vary significantly according to the donor search and acquisition costs, which are relatively modest for autologous outpatient SCT, $5,000 to $20,000 for allogeneic-related outpatient SCT, and $30,000 to $80,000 for allogeneic unrelated outpatient SCT. The commenter discussed how the low CCR associated with revenue code 0819 (Blood and Blood Products), which must be used to report donor search and acquisition charges, makes providers hesitant to report high donor charges and contributes to incorrectly coded claims.

Due to inaccuracies in cost reporting and exclusion of certain multiple procedure claims from ratesetting, the commenter believed that outpatient SCT payment is based on only a handful of incorrectly and incompletely coded single procedure claims. The commenter also believed that comprehensive APCs would improve payment adequacy by allowing the use of multiple procedure claims, provided CMS also create a separate and distinct CCR for donor search and acquisition charges so that they are not diluted by lower cost services. Alternatively, the commenter suggested that CMS require transplant centers to report their actual costs on outpatient claims for allogeneic SCT, and apply a default CCR of 1.0 for claims reporting the outpatient allogeneic procedure CPT code.

Response: For CY 2015, we are proposing to continue to pay separately for allogeneic transplantation procedures under APC 0111 (Blood Product Exchange) and APC 0112 (Apheresis and Stem Cell Procedures), with proposed rule geometric mean costs of approximately $1,127 and $3,064, respectively. Allogeneic harvesting procedures, which are performed not on the beneficiary but on a donor, cannot be paid separately under the OPPS because hospitals may bill and receive payment only for services provided to the Medicare beneficiary who is the recipient of the SCT and whose illness is being treated with the transplant. We stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60575) and in section 231.11 of Chapter 4 of the Medicare Claims Processing Manual (Pub. 100-04) that payment for allogeneic stem cell acquisition services (such as harvesting procedures and donor evaluation) is packaged into the payment for the transplant procedure (either the Medicare Severity—Diagnosis Related Group (MS-DRG) when the transplant is performed inpatient, or the APC when the transplant is performed outpatient). Hospitals should report all allogeneic outpatient SCT acquisition charges on the recipient’s outpatient claim as uncoded charges under revenue code 0819.

While converting the outpatient SCT APCs to comprehensive APCs would reduce to small degree the differential between the OPPS payment rate and the costs as represented in the public comment we received, it would only provide a relatively modest increase in payment, consistent with our previous data studies on this issue. We believe that we need to further examine the costs associated with this service and how they could best be captured for payment ratesetting purposes in the OPPS. This service remains low volume in the HOPD, but we will continue to monitor this issue and the volume of outpatient allogeneic transplant services.

General Comments on Comprehensive APCs

We also received several general comments that were not related to specific comprehensive APCs, as described below.

Comment: Many of the commenters recommended continued refinement of the comprehensive APC payment methodology to better identify and recognize the costs associated with complex services and patients. Some commenters suggested developing a list similar to the IPPS listing of complications and comorbidities (CCs) and major complications and comorbidities (MCCs) to identify complications and comorbidities associated with higher acuity patients in the outpatient setting. Other commenters suggested additional reimbursement when additional services, testing, or drugs are needed for patients with certain diagnoses (for example, end stage renal disease), or patients needing extended recovery time following a procedure in order to assess or treat comorbidities and ensure safe discharge. One commenter asserted that there is a critical difference between “complex” patients and “complex” procedures. The commenter stated that because the CY 2014 complexity adjustment test is multiple procedure-based rather than patient severity-based similar to the MS-DRG system, it is incredibly difficult for two procedures to meet the complexity test, particularly the 2 times rule requirement. The commenter believed that the cost threshold for the complexity test is not commensurate with the marginal payment increase.

Response: We believe that some of these commenters misunderstood the complexity adjustment criteria described in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74886). The complexity adjustment criteria for the illustrated CY 2014 payment rates compared the comprehensive cost of the complex claims to the comprehensive cost of the single major claims for the primary service, not the comprehensive geometric mean cost of the initial comprehensive APC (78 FR 74886). However, for CY 2015, we believe that it would be more appropriate to use the 2 times rule, which compares the geometric mean cost of the code combination to the geometric mean cost of the lowest cost service assigned to the comprehensive APC with significant claims volume (>1000 single claims or >99 single and at least 2 percent of the total volume of single claims assigned to the APC). For further description of the 2 times rule, we refer readers to section III.B of this proposed rule. We agree with the commenter that the CY 2014 complexity adjustment cost criterion was too high of a threshold. Therefore, we are proposing to change the cost criterion for the complexity adjustment to twice the geometric mean cost of the lowest cost service having significant claims volume (as described above) in the APC.

Section 1833(t)(2) of the Act provides a procedure-based payment methodology for the OPPS, which is unlike the IPPS that makes payments based on both diagnoses and procedures. Currently OPPS payments are not based on patient severity or diagnosis like under the IPPS. The complexity adjustment test is procedure-based because the current OPPS payment methodology is procedure-based.

Comment: Several commenters recommended alternative complexity adjustment criteria, including a cost threshold of 1.5 instead of 2 times; a numeric volume test of 50 claims instead of 100, or omitting the numeric test; or basing the complexity adjustment on the number of surgical procedures on a claim (any claim with a service assigned to status indicator “J1” and at least two additional surgical procedures). Some commenters asserted generally that there should be tests other than the presence of two or more “J1” services on a claim. In addition, most of the commenters requested further information regarding how CMS determined complexity reassignments, including treatment of add-on codes. The commenters requested that CMS provide an addendum to the OPPS rule containing this information.

Response: As discussed above, for CY 2015, we are proposing less stringent frequency and cost thresholds for complexity adjustments. In addition, in response to public comments, we are presenting the proposed complexity adjustment cost information in a more detailed format in Addendum J to this proposed rule, rather than in long tables within the preamble text.

Comment: Several commenters requested that CMS maintain the device-dependent edits to ensure accurate cost reporting and attribution. One commenter requested in particular that CMS maintain the device-dependent edits for prostate cryoablation (CPT code 55873), percutaneous renal cryoablation, and other urogenital services to ensure accurate coding and payment. The commenter believed that comprehensive groupings will exacerbate reporting error if CMS discontinued the edits.

Response: We appreciate the commenters’ concerns regarding accurate coding, and we understand that providers sometimes fail to itemize costs for packaged services separately on claims for the primary service(s). Our policy for comprehensive APCs reduces the need for separate itemization of packaged services by establishing clear packaging allocation rules at the hospital claim level. However, as we have observed in attempting to assess the marginal cost attributable to add-on codes and other packaged services, it is best if CMS can reliably identify and isolate these costs using claims data. Therefore, we are continuing to require hospitals to report all charges, including packaged charges, on claims to ensure all costs are reported and enable reliable cost estimation for packaged items and services. It is important that hospitals report all HCPCS codes consistent with their descriptors, CPT and/or CMS instructions, and correct coding principles, and that they report all charges for all services they furnish. We are proposing to package all device-dependent add-on codes, although we would evaluate their additional cost for purposes of applying the proposed complexity adjustment criteria.

Instead of eliminating all device-dependent edits, beginning in CY 2015, we are proposing to continue to require the reporting of a device code for all procedures that are currently assigned to a device-dependent APC in CY 2014. However to reduce hospitals’ administrative burden, we are proposing that the device claims edit would be satisfied by the reporting of any medical device C-code currently listed among the device edits for the CY 2014 device-dependent APCs. A particular device C-code or codes would no longer be required for a particular procedure. We refer readers to section IV.B. of this proposed rule for a detailed discussion of this proposed policy.

Comment: Several commenters recommended that CMS conduct a demonstration to confirm estimated savings, or delay the comprehensive APC payment policy pending further study.

Response: The comprehensive APC payment policy was finalized in the CY 2014 OPPS/ASC final rule with comment period with delayed implementation until CY 2015, and we do not believe that further delay is necessary. We also do not believe that a demonstration is necessary. We delayed implementation until CY 2015, and the public comments we received on the CY 2014 OPPS/ASC final rule with comment period do not reflect a need for fundamental changes to the policy or further delay in implementing the policy. The comprehensive APC policy is another step towards making the OPPS more of a prospective payment system and less of a fee schedule-type payment system with separate payment for each individually coded service. The rationale and statutory authority for the comprehensive APC policy was fully explained in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861). The public comments were largely supportive of the comprehensive APC payment methodology, provided we improve the transparency and reproducibility of the methodology and refine the complexity adjustments for the most costly, complex cases. These complex cases are mostly confined to three clinical families (endovascular, pacemaker/defibrillator, and neurostimulator). In response to comments and additional analysis including the new CY 2013 claims data, we are proposing to refine the complexity adjustment criteria discussed in section II.A.2.e.(3)(a) of this proposed rule.

(4) Proposed List of CY 2015 Comprehensive APCs and Summary of Proposed Policies

In summary, we are proposing to continue to define a comprehensive service as a classification for the provision of a primary service and all adjunctive services and supplies reported on the hospital Medicare Part B claim, with few exceptions, resulting in a single beneficiary copayment per claim. The comprehensive APC payment bundle would include all hospital services reported on the claim that are covered under Medicare Part B, except for the excluded services or services requiring separate payment by statute as noted above.

We are proposing to continue to define a clinical family of comprehensive APCs as a set of clinically related comprehensive APCs that represent different resource levels of clinically comparable services. We are proposing a total of 28 comprehensive APCs within 13 clinical families for CY 2015, as described below.

We are proposing a comprehensive APC payment methodology that adheres to the same basic principles as those finalized in the CY 2014 OPPS/ASC final rule with comment period, with the following proposed changes for CY 2015:

• We are proposing to reorganize and consolidate several of the current device-dependent APCs and CY 2014 comprehensive APCs;
• We are proposing to expand the comprehensive APC policy to include all device-dependent APCs and to create two other new comprehensive APCs (C-APC 0067 and C-APC 0351);
• We are proposing new complexity adjustment criteria:
• Frequency of 25 or more claims reporting the HCPCS code combination (the frequency threshold); and
• Violation of the “2 times” rule; that is, the comprehensive geometric mean cost of the complex code combination exceeds the comprehensive geometric mean cost of the lowest significant HCPCS code assigned to the comprehensive APC by more than 2 times (the cost threshold).

We are proposing to package all add-on codes, although we would evaluate claims reporting a single primary service code reported in combination with an applicable add-on code (we refer readers to Table 9 in this proposed rule for the list of applicable add-on codes) for complexity adjustments. We believe that the proposed criteria would improve transparency, reduce subjectivity in complexity assignments, reduce the beneficiary copayment for some cases, and reduce burden on other stakeholders in analyzing the comprehensive APC assignments. The proposed policies would result in 52 complexity adjustments listed in Addendum J to this proposed rule (which is available via the Internet on the CMS Web site).

f. Calculation of Composite APC Criteria-Based 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 necessary, high quality 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. Combining 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 may be low in volume and/or incorrectly coded. Under the OPPS, we currently have composite policies for extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and ablation services, mental health services, multiple imaging services, and cardiac resynchronization therapy services. We refer readers to 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) and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) for more recent background.

For CY 2015, we are proposing to continue our composite APC payment policies for LDR prostate brachytherapy services, mental health services, and multiple imaging services, as discussed below. In addition, we note that we finalized a policy in the CY 2014 OPPS/ASC final rule with comment period to modify our longstanding policy to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur (78 FR 74910 through 74912). For CY 2014, we created one new composite APC, entitled “Extended Assessment and Management (EAM) Composite” (APC 8009), to provide payment for all qualifying extended assessment and management encounters rather than recognize two levels of EAM composite APCs (78 FR 74910 through 74912). Under this policy, we allow any visits, a Level 4 or 5 Type A ED visit or a Level 5 Type B ED visit furnished by a hospital in conjunction with observation services of substantial duration to qualify for payment through EAM composite APC 8009. For CY 2015, we are proposing to pay for qualifying extended assessment and management services through composite APC 8009. For CY 2015, we also are proposing to discontinue our composite APC payment policies for cardiac electrophysiologic evaluation and ablation services (APC 8000), and to pay for these services through comprehensive APC 0086 (Level III Electrophysiologic Procedures), as presented in a proposal included under section II.A.2.e. of this proposed rule. As such, we are proposing to delete APC 8000 for CY 2015.

We note that we finalized a policy to discontinue and supersede the cardiac resynchronization therapy composite APC with comprehensive APC 0108 (Level II Implantation of Cardioverter-Defibrillators (ICDs)), as discussed in section II.A.2.e. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74902). For CY 2014, APC 0108 is classified as a composite APC, as discussed in the CY 2014 OPPS/ASC final rule with comment period, because comprehensive APCs were not made effective until CY 2015 (78 FR 74925). For CY 2015, with the implementation of our new comprehensive APC policy, we are proposing to effectuate the policy finalized in the CY 2014 OPPS/ASC final rule with comment period, and pay for cardiac resynchronization therapy services through comprehensive APC 0108 (proposed to be renamed “Level II ICD and Similar Procedures”), which is discussed in section II.A.2.e. of this proposed rule.

(1) Extended Assessment and Management Composite APC (APC 8009)

Beginning in CY 2008, we included composite APC 8002 (Level I Extended Assessment and Management (EAM) Composite) and composite APC 8003 (Level II Extended Assessment and Management (EAM) Composite) in the OPPS to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur (an extended visit). In most of these circumstances, observation services are furnished in conjunction with evaluation and management services as an integral part of a patient’s extended encounter of care. From CY 2008 through CY 2013, in the circumstances when 8 or more hours of observation care was provided in conjunction with a high level visit, critical care, or direct referral for observation and is an integral part of a patient’s extended encounter of care, and was not furnished on the same day as surgery or post-operatively, a single OPPS payment was made for the observation and evaluation and management services through one of the two composite APCs as appropriate. We refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163 through 74165) for a full discussion of this longstanding policy for CY 2013 and prior years. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74910), we created one new composite APC, APC 8009 (Extended Assessment and Management (EAM) Composite), to provide payment for all qualifying extended assessment and management encounters rather than recognizing two levels of EAM composite services. Under the CY 2014 finalized policy, we no longer recognize composite APC 8002 or APC 8003. Beginning in CY 2014, we allowed services identified by the new single clinic visit HCPCS code G0463, a Level 4 or 5 Type A ED visit (CPT codes 99284 or 99285), a Level 5 Type B ED visit (HCPCS code G0384) or critical care (CPT code 99291) provided by a hospital in conjunction with observation services of substantial duration (8 or more hours) (provided the observation was not furnished on the same day as surgery or post-operatively) (78 FR 74910 through 74912) to qualify for payment through EAM composite APC 8009.

For CY 2015, we are proposing to continue our CY 2014 finalized policy to provide payment for all qualifying extended assessment and management encounters through composite APC 8009. As we did for CY 2014, for CY 2015, we are proposing to allow a clinic visit and certain high level ED visits furnished by a hospital in conjunction with observation services of substantial duration (8 or more hours) to qualify for payment through the EAM composite APC 8009 (provided the observation is not furnished on the same day as surgery or post-operatively). Specifically, we are proposing to continue to allow a clinic visit, a Level 4 or Level 5 Type A ED visit, or a Level 5 Type B ED visit furnished by a hospital or a direct referral for observation (identified by HCPCS code G0379) performed in conjunction with observation services of substantial duration to qualify for payment through composite APC 8009 (provided the observation is not furnished on the same day as surgery or post-operatively). We note that, for CY 2015, we are proposing to continue our current policy where one service code describes all clinic visits. We refer readers to the CY 2014 OPPS/ASC final rule with comment period (78 FR 74910 through 74912) for a full discussion of the creation of composite APC 8009.

As we noted in the CY 2014 OPPS/ASC final rule with comment period, the historical cost data used annually to calculate the geometric mean costs and payment rate for composite APC 8009 would not reflect the single clinic visit code that was new for CY 2014 (HCPCS code G0463) until our CY 2016 rulemaking cycle. We stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74910 through 74912) that when hospital claims data for the CY 2014 clinic and ED visit codes become available, we would calculate the geometric mean cost for the EAM composite APC 8009 using CY 2014 single and “pseudo” single procedure claims that meet each of the following criteria:

• The claims do not contain a HCPCS code to which we have assigned status indicator “T” that is reported 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 ensure that they would not contain a code for a service with status indicator “T” on the same date of service.)
• The claims contain 8 or more units of HCPCS code G0378 (Observation services, per hour.)
• The claims contain one of the following codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same date of service as HCPCS code G0378; or CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes); or HCPCS code G0463 (Hospital outpatient clinic visit for assessment and management of a patient) provided on the same date of service or 1 day before the date of service for HCPCS code G0378.

Because we have no available cost data for HCPCS code G0463, for CY 2015, we are proposing to calculate the geometric mean cost for procedures assigned to APC 8009 using CY 2013 single and “pseudo” single procedure claims that met each of the following criteria:

• The claim did not contain a HCPCS code to which we have assigned status indicator “T” that is reported 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 assured that they would not contain a code for a service with status indicator “T” on the same date of service.)
• The claim contained 8 or more units of HCPCS code G0378 (Observation services, per hour.)
• The claim contained one of the following codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same date of service as HCPCS code G0378; or CPT code 99201 (Office or other outpatient visit for the evaluation and management of a new patient (Level 1)); CPT code 99202 (Office or other outpatient visit for the evaluation and management of a new patient (Level 2)); CPT code 99203 (Office or other outpatient visit for the evaluation and management of a new patient (Level 3)); CPT code 99204 (Office or other outpatient visit for the evaluation and management of a new patient (Level 4)); CPT code 99205 (Office or other outpatient visit for the evaluation and management of a new patient (Level 5)); CPT code 99211 (Office or other outpatient visit for the evaluation and management of an established patient (Level 1)); CPT code 99212 (Office or other outpatient visit for the evaluation and management of an established patient (Level 2)); CPT code 99213 (Office or other outpatient visit for the evaluation and management of an established patient (Level 3)); CPT code 99214 (Office or other outpatient visit for the evaluation and management of an established patient (Level 4)); CPT code 99215 (Office or other outpatient visit for the evaluation and management of an established patient (Level 5)); 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)); or HCPCS code G0384 (Type B emergency department visit (Level 5)); or CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) provided on the same date of service or 1 day before the date of service for HCPCS code G0378.

The proposed CY 2015 geometric mean cost resulting from this methodology for EAM composite APC 8009 is approximately $1,287.

(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)

LDR prostate brachytherapy is a treatment for prostate cancer in which hollow needles or catheters are inserted into the prostate, followed by permanent implantation of radioactive sources into the prostate through the needles/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), which are generally present together on claims for the same date of service in the same operative session. In order to base payment on claims for the most common clinical scenario, and to further 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 began providing a single payment for LDR prostate brachytherapy when the composite service, reported 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 geometric mean 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. 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 services and a detailed description of how we developed the LDR prostate brachytherapy composite APC.

For CY 2015, we are proposing to continue to pay for LDR prostate brachytherapy services using the composite APC payment methodology proposed and implemented for CY 2008 through CY 2014. That is, we are proposing to use CY 2013 claims reporting charges for both CPT codes 55875 and 77778 on the same date of service with no other separately paid procedure codes (other than those on the bypass list) to calculate the proposed payment rate for composite APC 8001. Consistent with our CY 2008 through CY 2014 practice, we are proposing not to use the claims that meet these criteria in the calculation of the geometric mean costs of procedures or services assigned to APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC 0651 (Complex Interstitial Radiation Source Application), the APCs to which CPT codes 55875 and 77778 are assigned, respectively. We are proposing to continue to calculate the geometric mean costs of procedures or services assigned to APCs 0163 and 0651 using single and “pseudo” single procedure claims. 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 geometric mean cost upon which to base the proposed composite APC payment rate.

Using a partial year of CY 2013 claims data available for the CY 2015 OPPS/ASC proposed rule, we were able to use 379 claims that contained both CPT codes 55875 and 77778 to calculate the geometric mean cost of these procedures upon which the proposed CY 2015 payment rate for composite APC 8001 is based. The proposed geometric mean cost for composite APC 8001 for CY 2015 is approximately $3,669.

(3) Mental Health Services Composite APC (APC 0034)

For CY 2015, we are proposing to continue our longstanding policy of limiting the aggregate payment for specified less resource-intensive mental health services furnished on the same date to the payment for a day of partial hospitalization services provided by a hospital, which we consider to be the most resource-intensive of all outpatient mental health services. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18452 through 18455) for the initial discussion of this longstanding policy and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74168) for more recent background.

Specifically, we are proposing that when the aggregate 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 exceeds the maximum per diem payment rate for partial hospitalization services provided by a hospital, those specified mental health services would be assigned to APC 0034 (Mental Health Services Composite). We are proposing to continue to set the payment rate for APC 0034 at the same payment rate that we are proposing to establish for APC 0176 (Level II Partial Hospitalization (4 or more services) for hospital-based PHPs), which is the maximum partial hospitalization per diem payment rate for a hospital, and that the hospital continue to be paid one unit of APC 0034. Under this policy, the I/OCE would continue to determine whether to pay for these specified mental health services individually, or to make a single payment at the same payment rate established for APC 0176 for all of the specified mental health services furnished by the hospital on that single date of service. We continue to believe that the costs associated with administering a partial hospitalization program at a hospital represent the most resource-intensive of all outpatient mental health services. Therefore, we do not believe that we should pay more for mental health services under the OPPS than the highest partial hospitalization per diem payment rate for hospitals.

(4) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 8008)

Effective January 1, 2009, we provide a single payment each time a hospital bills more than one imaging procedure within an imaging family on the same date of service, in order to reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session (73 FR 41448 through 41450). We utilize three imaging families based on imaging modality for purposes of this methodology: (1) Ultrasound; (2) computed tomography (CT) and computed tomographic angiography (CTA); and (3) magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes subject to the multiple imaging composite policy and their respective families are listed in Table 12 of the CY 2014 OPPS/ASC final rule with comment period (78 FR 74920 through 74924).

While there are three imaging families, there are five multiple imaging composite APCs due to the statutory requirement under section 1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging services provided with and without contrast. While the ultrasound procedures included in the policy do not involve contrast, both CT/CTA and MRI/MRA scans can be provided either with or without contrast. The five multiple imaging composite APCs established in CY 2009 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 define the single imaging session for the “with contrast” composite APCs as having at least one or more imaging procedures from the same family performed with contrast on the same date of service. For example, if the hospital performs an MRI without contrast during the same session as at least one other MRI with contrast, the hospital will receive payment for APC 8008, the “with contrast” composite APC.

We make a single payment for those imaging procedures that qualify for composite APC payment, as well as any packaged services furnished on the same date of service. The standard (noncomposite) APC assignments continue to apply for single imaging procedures and multiple imaging procedures performed across families. For a full discussion of the development of the multiple imaging composite APC methodology, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68559 through 68569).

For CY 2015, we are proposing to continue to pay for all multiple imaging procedures within an imaging family performed on the same date of service using the multiple imaging composite APC payment methodology. We continue to believe that this policy will reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session. The proposed CY 2015 payment rates for the five multiple imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, and APC 8008) are based on geometric mean costs calculated from a partial year of CY 2013 claims available for the proposed rule that qualified for composite payment under the current policy (that is, those claims with more than one procedure within the same family on a single date of service). To calculate the proposed geometric mean costs, we used the same methodology that we used to calculate the final CY 2013 and CY 2014 geometric mean costs for these composite APCs, as described in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74918). The imaging HCPCS codes referred to as “overlap bypass codes” that we removed from the bypass list for purposes of calculating the proposed multiple imaging composite APC geometric mean costs, pursuant to our established methodology as stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74918), are identified by asterisks in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site) and are discussed in more detail in section II.A.1.b. of this proposed rule.

For this CY 2015 OPPS/ASC proposed rule, we were able to identify approximately 636,000 “single session” claims out of an estimated 1.6 million potential composite APC cases from our ratesetting claims data, approximately 40 percent of all eligible claims, to calculate the proposed CY 2015 geometric mean costs for the multiple imaging composite APCs.

Table 8 below lists the proposed HCPCS codes that would be subject to the multiple imaging composite APC policy and their respective families and approximate composite APC geometric mean costs for CY 2015.

3. Proposed Changes to Packaged Items and Services

a. Background and Rationale for Packaging in the OPPS

Like other prospective payment systems, the OPPS relies on the concept of averaging to establish a payment rate for services. The payment may be more or less than the estimated cost of providing a specific service or bundle of specific services for a particular patient. The OPPS packages payment for multiple interrelated items and services into a single payment to create incentives for hospitals to furnish services most efficiently and to manage their resources with maximum flexibility. Our packaging policies support our strategic goal of using larger payment bundles in the OPPS to maximize hospitals’ incentives to provide care in the most efficient manner. For example, where there are a variety of devices, drugs, items, and supplies that could be used to furnish a service, some of which are more expensive than others, packaging encourages hospitals to use the most cost-efficient item that meets the patient’s needs, rather than to routinely use a more expensive item, which often results if separate payment is provided for the items.

Packaging also encourages hospitals to effectively negotiate 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 delivery. Similarly, packaging encourages hospitals to establish protocols that ensure that necessary services are furnished, while scrutinizing the services ordered by practitioners to maximize the efficient use of hospital resources. Packaging payments into larger payment bundles promotes the predictability and accuracy of payment for services over time. Finally, packaging may reduce the importance of refining service-specific payment because packaged payments include costs associated with higher cost cases requiring many ancillary items and services and lower cost cases requiring fewer ancillary items and services. Because packaging encourages efficiency and is an essential component of a prospective payment system, packaging payment for items and services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service has been a fundamental part of the OPPS since its implementation in August 2000. Over the last 15 years, as we have refined our understanding of the OPPS as a prospective payment system, we have packaged numerous services that we originally paid as primary services. As we continue to develop larger payment groups that more broadly reflect services provided in an encounter or episode of care, we have expanded the OPPS packaging policies. Most, but not necessarily all, items and services currently packaged in the OPPS are listed in 42 CFR 419.2(b), including the five packaging policies that were added in CY 2014 (78 FR 74925). Our overarching goal is to make OPPS payments for all services paid under the OPPS more consistent with those of a prospective payment system and less like those of a per service fee schedule, which pays separately for each coded item. As a part of this effort, we have continued to examine the payment for items and services provided in the OPPS to determine which OPPS services can be packaged to achieve the objective of advancing the OPPS as a prospective payment system.

We have examined the items and services currently provided under the OPPS, reviewing categories of integral, ancillary, supportive, dependent, or adjunctive items and services for which we believe payment would be appropriately packaged into payment of the primary service they support. Specifically, we examined the HCPCS code definitions (including CPT code descriptors) to determine whether there were categories of codes for which packaging would be appropriate according to existing OPPS packaging policies or a logical expansion of those existing OPPS packaging policies. In general, in this CY 2015 OPPS/ASC proposed rule, we are proposing to package the costs of selected HCPCS codes into payment for services reported with other HCPCS codes where we believe that one code reported an item or service that was integral, ancillary, supportive, dependent, or adjunctive to the provision of care that was reported by another HCPCS code. Below we discuss categories and classes of items and services that we are proposing to package beginning in CY 2015. For an extensive discussion of the history and background of the OPPS packaging policy, we refer readers to the CY 2000 OPPS final rule (65 FR 18434), the CY 2008 OPPS/ASC final rule with comment period (72 FR 66580), and the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925).

b. Proposed Revisions of a Packaging Policy Established in CY 2014—Procedures Described by Add-On Codes

In the CY 2014 OPPS/ASC final rule with comment period, we packaged add-on codes in the OPPS, with the exception of add-on codes describing drug administration services (78 FR 74943; 42 CFR 419.2(b)(18)). With regard to the packaging of add-on procedures that use expensive medical devices, we stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74943) that the most expensive medical devices used in procedures to insert or implant devices in the hospital outpatient setting are included in procedures that are assigned to comprehensive APCs. Comprehensive APCs are discussed in section II.A.2.e. of this proposed rule. In the CY 2014 OPPS/ASC final rule with comment period, we discussed the comprehensive APC policy, which we adopted, with modification, but delayed the implementation of, until CY 2015 (78 FR 74864). We stated that for CY 2014, we would continue to pay separately for only those add-on codes (except for drug administration add-on codes) that were assigned to device-dependent APCs in CY 2014, but that, after CY 2014, these device-dependent add-on codes would be paid under the comprehensive APC policy. According to the proposed changes to the comprehensive APC policy described in section II.A.2.e. of this proposed rule, we are proposing to package all of the procedures described by add-on codes that are currently assigned to device-dependent APCs, which will be replaced by comprehensive APCs. The device-dependent add-on codes that are separately paid in CY 2014 that we are proposing to package in CY 2015 are listed below in Table 9.

c. Proposed Packaging Policies for CY 2015

(1) Ancillary Services

Under the OPPS, we currently pay separately for certain ancillary services. Some of these ancillary services are currently assigned to status indicator “X,” which is defined as “ancillary services,” but some other ancillary services are currently assigned to status indicators other than “X.” This is because the current use of status indicator “X” in the OPPS is incomplete and imprecise. Some procedures and services that are ancillary, for example, a chest X-ray, are assigned to an APC with services assigned status indicator “S.” We reviewed all of the covered HOPD services provided in the HOPD and identified those that are commonly performed when provided with other HOPD services, and also provided as ancillary to a primary service in the HOPD. These ancillary services that we have identified are primarily minor diagnostic tests and procedures that are often performed with a primary service, although there are instances where hospitals provide such services alone and without another primary service during the same encounter.

As discussed in section II.A.3.a. of this proposed rule, our intent is that the OPPS be more of a prospective payment system with expanded packaging of items and services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service. Given that the longstanding OPPS policy is to package items and services that are integral, ancillary, supportive, dependent, or adjunctive to a primary service, we stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74945) that we believe that ancillary services should be packaged when they are performed with another service, but should continue to be separately paid when performed alone. We indicated that this packaging approach is most consistent with a prospective payment system and the regulation at 42 CFR 419.2(b) that packages many ancillary services into primary services while preserving separate payment for those instances in which one of these ancillary services is provided alone (not with any other service paid under the OPPS) to a hospital outpatient. We did not finalize the ancillary packaging policy for CY 2014 because we believed that further evaluation was necessary (78 FR 74946).

In this proposed rule, we are proposing to conditionally package certain ancillary services for CY 2015. Specifically, we are proposing to limit the initial set of APCs that contain conditionally packaged services to those ancillary service APCs with a proposed geometric mean cost of less than or equal to $100 (prior to application of the conditional packaging status indicator). We are limiting this initial set of packaged ancillary service APCs to those with a proposed geometric mean cost of less than or equal to $100 in response to public comments on the CY 2014 ancillary service packaging proposal in which commenters expressed concern that certain low volume but relatively costly ancillary services would have been packaged into high volume but relatively inexpensive primary services (for example, a visit) (74 FR 74945). We note that the proposed $100 geometric mean cost limit for selecting this initial group of conditionally packaged ancillary service APCs is less than the geometric mean cost of APC 0634, which contains the single clinic visit code G0463, which is a single payment rate for clinic visits beginning in CY 2014, and has a CY 2015 OPPS/ASC proposed rule geometric mean cost of $102.68. This proposed $100 geometric mean cost limit is part of the methodology of selecting the initial set of conditionally packaged ancillary service APCs under this proposed packaging policy. It is not meant to represent a threshold above which ancillary services will not be packaged, but as a basis for selecting this initial set of APCs, which will likely be updated and expanded in future years. In future years, we may package ancillary services assigned to APCs with geometric mean costs higher than $100. In addition, geometric mean costs can change over time. A change in the geometric mean cost of any of the proposed APCs above $100 in future years would not change the conditionally packaged status of services assigned to the APCs selected in 2015 in a future year. We will continue to consider these APCs to be conditionally packaged. However, we will review the conditionally packaged status of ancillary services annually.

We are proposing to exclude certain services from this packaging policy even though they are assigned to APCs with a geometric mean cost of ≤ $100. Preventive services will continue to be paid separately, and includes the following services listed in Table 10 below that would otherwise be packaged under this policy.

In addition, we are not proposing to package certain psychiatry and counseling-related services as we see similarities to a visit and, at this time, do not consider them to be ancillary services. We also are not proposing to package certain low cost drug administration services as we are examining various alternative payment policies for drug administration services, including the associated drug administration add-on codes.

Finally, we are proposing to delete status indicator “X” (Ancillary Services) because the majority of the services assigned to status indicator “X” are proposed to be assigned to status indicator “Q1” (STV-Packaged Codes). For the services that are currently assigned status indicator “X” that are not proposed to be conditionally packaged under this policy, we will assign those services status indicator “S” (Procedure or Service, Not Discounted When Multiple), indicating separate payment and that the services are not subject to the multiple procedure reduction. The APCs that we are proposing for conditional packaging as ancillary services in CY 2015 are listed below in Table 11.

The HCPCS codes that we are proposing to conditionally package as ancillary services for CY 2015 are displayed in Addendum B to this CY 2015 OPPS/ASC proposed rule. The supporting documents for the proposed rule are available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

We also are proposing to revise the regulations at 42 CFR 419.2(b)(7) to replace the phrase “Incidental services such as venipuncture” with “Ancillary services” to more accurately reflect the proposed packaging policy discussed above.

We are inviting public comments on these proposals.

(2) Prosthetic Supplies

We have a longstanding policy of providing payment under the OPPS for implantable DME, implantable prosthetics, and medical and surgical supplies, as provided at sections 1833(t)(1)(B)(i) and (t)(1)(B)(iii) of the Act and 42 CFR 419.2(b)(4), (b)(10), and (b)(11). In the CY 2014 OPPS/ASC final rule with comment period, we clarified that medical and surgical supplies under § 419.2(b)(4) include (but are not limited to) all supplies on the DMEPOS Fee Schedule except prosthetic supplies (78 FR 74947). Under 42 CFR 419.22(j), prosthetic supplies are currently excluded from payment under the OPPS and are paid under the DMEPOS Fee Schedule, even when provided in the HOPD. However, under section 1833(t)(1)(B)(i) of the Act, the Secretary has the authority to designate prosthetic supplies provided in the hospital outpatient setting as covered OPD services payable under the OPPS.

As mentioned above, implantable prosthetic devices are packaged in the OPPS under 42 CFR 419.2(b)(11). It is common for implantable prosthetic devices to be provided as a part of a device system. Such device systems include the implantable part or parts of the overall device system and also certain nonimplantable prosthetic supplies that are integral to the overall function of the medical device, part of which is implanted and part of which is external to the patient. These prosthetic supplies are integral to the implantable prosthetic because typically shortly after the surgical procedure to implant the implantable prosthetic device in the hospital, the surgeon and/or his or her colleagues will have to attach, fit, and program certain prosthetic supplies that are not surgically implanted into the patient but are a part of a system and that are essential to the overall function of an implanted device. Because these supplies are integral to the overall function of the implanted prosthetic, and because, as mentioned above, we package in the OPPS items and services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service, we believe that it is most consistent with a prospective payment system to package the payment of prosthetic supplies (along with the implantable prosthetic device) into the surgical procedure that implants the prosthetic device, as all of the components are typically necessary for the performance of the system and the hospital typically purchases the system as a single unit. Patients requiring replacement supplies at a time later than the initial surgical procedure and outside of the hospital would obtain them as they typically do from a DMEPOS supplier with payment for such supplies made under the DMEPOS Fee Schedule.

In addition to prosthetic supplies that are components of device systems, part of which are implanted, many other prosthetic supplies on the DMEPOS fee schedule are typical medical and surgical supplies and of the type that are packaged in the OPPS under § 419.2(b)(4). Consistent with our change from status indicator “A” to “N” for all nonprosthetic DMEPOS supplies in the CY 2014 OPPS final rule with comment period (78 FR 74947), we are proposing to package and change the status indicator from “A” to “N” for all DMEPOS prosthetic supplies. With this proposed change, all medical and surgical supplies would be packaged in the OPPS.

Therefore, we are proposing to delete “prosthetic supplies” from the regulations at § 419.22(j) because we are proposing that prosthetic supplies be packaged covered OPD services in the OPPS for CY 2015. Prosthetic supplies provided in the HOPD would be included in “medical and surgical supplies” (as are all other supplies currently provided in the HOPD) under § 419.2(b)(4). The HCPCS codes for prosthetic supplies that we are proposing to package for CY 2015 are displayed in Addendum B to this CY 2015 OPPS/ASC proposed rule. The supporting documents for the proposed rule, including but not limited to these Addenda, are available at the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

We are inviting public comments on these proposals.

4. Proposed Calculation of OPPS Scaled Payment Weights

For CY 2015, we are proposing to calculate the relative payment weights for each APC shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) using the APC costs discussed in sections II.A.1. and II.A.2. of this proposed rule. 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 clinic visit APCs. We selected APC 0606 as the base because it was the mid-level clinic visit APC (that is, Level 3 of five levels). For the CY 2013 OPPS (77 FR 68283), we established a policy of using geometric mean-based APC costs rather than median-based APC costs to calculate relative payment weights. For CY 2015, we are proposing to continue this policy.

For the CY 2014 OPPS, we standardized all of the relative payment weights to clinic visit APC 0634 as discussed in section VII. of this proposed rule. For CY 2015, we are proposing to continue this policy to maintain consistency in calculating unscaled weights that represent the cost of some of the most frequently provided services. We are proposing to assign APC 0634 a relative payment weight of 1.00 and to divide the geometric mean cost of each APC by the proposed geometric mean cost for APC 0634 to derive the proposed unscaled relative payment weight for each APC. The choice of the APC on which to base the proposed relative payment weights does not affect 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 budget neutral manner. Budget neutrality ensures that the estimated aggregate weight under the OPPS for CY 2015 is neither greater than nor less than the estimated aggregate weight that would have been made without the changes. To comply with this requirement concerning the APC changes, we are proposing to compare the estimated aggregate weight using the CY 2014 scaled relative payment weights to the estimated aggregate weight using the proposed CY 2015 unscaled relative payment weights.

For CY 2014, we multiplied the CY 2014 scaled APC relative payment weight applicable to a service paid under the OPPS by the volume of that service from CY 2013 claims to calculate the total relative payment weight for each service. We then added together the total relative payment weight for each of these services in order to calculate an estimated aggregate weight for the year. For CY 2015, we are proposing to apply the same process using the proposed CY 2015 unscaled relative payment weights rather than scaled relative payment weights. We are proposing to calculate the weight scaler by dividing the CY 2014 estimated aggregate weight by the proposed CY 2015 estimated aggregate weight. The service-mix is the same in the current and prospective years because we use the same set of claims for service volume in calculating the aggregate weight for each year. We note that the CY 2014 OPPS scaled relative weights incorporate the estimated payment weight from packaged laboratory tests previously paid at CLFS rates.

For a detailed discussion of the weight scaler calculation, we refer readers to the OPPS claims accounting document available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html
.

We are proposing to include estimated payments to CMHCs in our comparison of the estimated unscaled relative payment weights in CY 2015 to the estimated total relative payment weights in CY 2014 using CY 2013 claims data, holding all other components of the payment system constant to isolate changes in total weight. Based on this comparison, we adjusted the proposed CY 2015 unscaled relative payment weights for purposes of budget neutrality. The proposed CY 2015 unscaled relative payment weights were adjusted by multiplying them by a weight scaler of 1.3220 to ensure that the proposed CY 2015 relative payment weights are budget neutral.

Section 1833(t)(14) of the Act provides the payment rates for certain SCODs. Section 1833(t)(14)(H) of the Act 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.” Therefore, the cost of those SCODs (as discussed in section V.B.3. of this proposed rule) is included in the budget neutrality calculations for the CY 2015 OPPS.

The proposed CY 2015 unscaled relative payment weights listed in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) incorporate the proposed recalibration adjustments discussed in sections II.A.1. and II.A.2. of this proposed rule.

B. Proposed Conversion Factor Update

Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to update the conversion factor used to determine the payment rates under the OPPS on an annual basis by applying the OPD fee schedule increase factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee schedule increase factor is equal to the hospital inpatient market basket percentage increase applicable to hospital discharges under section 1886(b)(3)(B)(iii) of the Act. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28087), consistent with current law, based on IHS Global Insight, Inc.’s first quarter 2014 forecast of the FY 2015 market basket increase, the proposed FY 2015 IPPS market basket update is 2.7 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(iv) of the Act, as added by section 3401(i) of the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148) and as amended by section 10319(g) of that law and further amended by section 1105(e) of the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), provide adjustments to the OPD fee schedule increase factor for CY 2015.

Specifically, section 1833(t)(3)(F)(i) of the Act requires that, for 2012 and subsequent years, the OPD fee schedule increase factor under subparagraph (C)(iv) be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or other annual period) (the “MFP adjustment”). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the MFP adjustment. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28087), we discussed the calculation of the proposed MFP adjustment for FY 2015, which is 0.4 percentage point.

We are proposing that if more recent data become subsequently available after the publication of this proposed rule (for example, a more recent estimate of the market basket increase and the MFP adjustment), we would use such data, if appropriate, to determine the CY 2015 market basket update and the MFP adjustment, components in calculating the OPD fee schedule increase factor under sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act, in the CY 2015 OPPS/ASC final rule with comment period.

In addition, section 1833(t)(3)(F)(ii) of the Act requires that, for each of years 2010 through 2019, the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act be reduced by the adjustment described in section 1833(t)(3)(G) of the Act. For CY 2015, section 1833(t)(3)(G)(iv) of the Act provides a 0.2 percentage point reduction to the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act. Therefore, in accordance with sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iv) of the Act, we are proposing to apply a 0.2 percentage point reduction to the OPD fee schedule increase factor for CY 2015.

We note that section 1833(t)(3)(F) of the Act provides that application of this subparagraph may result in the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act being less than 0.0 percent for a year, and may result in OPPS payment rates being less than rates for the preceding year. As described in further detail below, we are proposing to apply an OPD fee schedule increase factor of 2.1 percent for the CY 2015 OPPS (which is 2.7 percent, the proposed estimate of the hospital inpatient market basket percentage increase, less the proposed 0.4 percentage point MFP adjustment, and less the 0.2 percentage point additional adjustment).

Hospitals that fail to meet the Hospital OQR Program reporting requirements are subject to an additional reduction of 2.0 percentage points from the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates for their services, as required by section 1833(t)(17) of the Act. For further discussion of the Hospital OQR Program, we refer readers to section XIII. of this proposed rule.

In this proposed rule, we are proposing to amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (6) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2015, we reduce the OPD fee schedule increase factor by the MFP adjustment as determined by CMS, and to reflect the requirement in section 1833(t)(3)(G)(iv) of the Act, as required by section 1833(t)(3)(F)(ii) of the Act, that we reduce the OPD fee schedule increase factor by an additional 0.2 percentage point for CY 2015.

To set the OPPS conversion factor for CY 2015, we are proposing to increase the CY 2014 conversion factor of $72.672 by 2.1 percent. In accordance with section 1833(t)(9)(B) of the Act, we are proposing to further adjust the conversion factor for CY 2015 to ensure that any revisions made to the wage index and rural adjustment are made on a budget neutral basis. We are proposing to calculate an overall proposed budget neutrality factor of 0.9998 for wage index changes by comparing proposed total estimated payments from our simulation model using the proposed FY 2015 IPPS wage indexes to those payments using the FY 2014 IPPS wage indexes, as adopted on a calendar year basis for the OPPS.

For CY 2015, we are proposing to maintain the current rural adjustment policy, as discussed in section II.E. of this proposed rule. Therefore, the proposed budget neutrality factor for the rural adjustment is 1.0000.

For CY 2015, we are proposing to continue previously established policies for implementing the cancer hospital payment adjustment described in section 1833(t)(18) of the Act, as discussed in section II.F. of this proposed rule. We are proposing to calculate a CY 2015 budget neutrality adjustment factor for the cancer hospital payment adjustment by comparing estimated total CY 2015 payments under section 1833(t) of the Act, including the proposed CY 2015 cancer hospital payment adjustment, to estimated CY 2015 total payments using the CY 2014 final cancer hospital payment adjustment as required under section 1833(t)(18)(B) of the Act. The CY 2015 estimated payments applying the proposed CY 2015 cancer hospital payment adjustment are identical to estimated payments applying the CY 2014 final cancer hospital payment adjustment. Therefore, we are proposing to apply a budget neutrality adjustment factor of 1.0000 to the conversion factor for the cancer hospital payment adjustment.

For this proposed rule, we estimate that pass-through spending for drugs, biologicals, and devices for CY 2015 would equal approximately $15.5 million, which represents 0.03 percent of total projected CY 2015 OPPS spending. Therefore, the proposed conversion factor would be adjusted by the difference between the 0.02 percent estimate of pass-through spending for CY 2014 and the 0.03 percent estimate of pass-through spending for CY 2015, resulting in a proposed adjustment for CY 2015 of 0.01 percent. Finally, estimated payments for outliers would remain at 1.0 percent of total OPPS payments for CY 2015.

The proposed OPD fee schedule increase factor of 2.1 percent for CY 2015 (that is, the estimate of the hospital inpatient market basket percentage increase of 2.7 percent less the proposed 0.4 percentage point MFP adjustment and less the 0.2 percentage point required under section 1833(t)(3)(F)(ii) of the Act), the required proposed wage index budget neutrality adjustment of approximately 0.9998, the proposed cancer hospital payment adjustment of 1.0000, and the proposed adjustment of 0.01 percent of projected OPPS spending for the difference in the pass-through spending result in a proposed conversion factor for CY 2015 of $74.176.

Hospitals that fail to meet the reporting requirements of the Hospital OQR Program would continue to be subject to a further reduction of 2.0 percentage points to the OPD fee schedule increase factor. For hospitals that fail to meet the requirements of the Hospital OQR Program, we are proposing to make all other adjustments discussed above, but using a reduced OPD fee schedule update factor of 0.1 percent (that is, the proposed OPD fee schedule increase factor of 2.1 percent further reduced by 2.0 percentage points). This results in a proposed reduced conversion factor for CY 2015 of $72.692 for hospitals that fail to meet the Hospital OQR requirements (a difference of −$1.484 in the conversion factor relative to hospitals that met the requirements).

In summary, for CY 2015, we are proposing to use a conversion factor of $74.176 in the calculation of the national unadjusted payment rates for those items and services for which payment rates are calculated using geometric mean costs. We are proposing to amend § 419.32(b)(1)(iv)(B) by adding a new paragraph (6) to reflect the reductions to the OPD fee schedule increase factor that are required for CY 2015 to satisfy the statutory requirements of sections 1833(t)(3)(F) and (t)(3)(G)(iv) of the Act. We are proposing to use a reduced conversion factor of $72.692 in the calculation of payments for hospitals that fail to meet the Hospital OQR Program requirements.

C. Proposed Wage Index Changes

Section 1833(t)(2)(D) of the Act requires the Secretary to “determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner” (codified at 42 CFR 419.43(a)). This portion of the OPPS payment rate is called the OPPS labor-related share. 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, for all hospitals, 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 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 proposing to continue this policy for the CY 2015 OPPS. We refer readers to section II.H. of this proposed rule for a description and example of how the wage index for a particular hospital is used to determine payment for the hospital.

As discussed in section II.A.2.c. of this proposed rule, for estimating APC costs, we standardize 60 percent of estimated claims costs for geographic area wage variation using the same proposed FY 2015 pre-reclassified wage index 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 copayment amount.

Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the original OPPS April 7, 2000 final rule with comment period (65 FR 18495 and 18545)), the OPPS adopted the final fiscal year IPPS wage index as the calendar year wage index for adjusting the OPPS standard payment amounts for labor market differences. Thus, the wage index that applies to a particular acute care short-stay hospital under the IPPS also applies to that hospital under the OPPS. As initially explained in the September 8, 1998 OPPS proposed rule (63 FR 47576), we 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.

The Affordable Care Act contained several provisions affecting the wage index. These provisions were discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74191). As discussed in that final rule with comment period, section 10324 of the Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act, which defines a “frontier State,” and amended section 1833(t) of the Act to add new paragraph (19), which requires a “frontier State” wage index floor of 1.00 in certain cases, and states that the frontier State floor shall not be applied in a budget neutral manner. We codified these requirements in § 419.43(c)(2) and (c)(3) of our regulations. For the CY 2015 OPPS, we are proposing to implement this provision in the same manner as we have since CY 2011. That is, frontier State hospitals would receive a wage index of 1.00 if the otherwise applicable wage index (including reclassification, rural and imputed floor, and rural floor budget neutrality) is less than 1.00. Similar to our current policy for HOPDs that are affiliated with multi-campus hospital systems, the HOPD would receive a wage index based on the geographic location of the specific inpatient hospital with which it is associated. Therefore, if the associated hospital is located in a frontier State, the wage index adjustment applicable for the hospital would also apply for the affiliated HOPD. We refer readers to the following sections in the FY 2011 through FY 2014 IPPS/LTCH PPS final rules for discussions regarding this provision, including our methodology for identifying which areas meet the definition of frontier States as provided for in section 1886(d)(3)(E)(iii)(II) of the Act: For FY 2011, 75 FR 50160 through 50161; for FY 2012, 76 FR 51793, 51795, and 51825; for FY 2013, 77 FR 53369 through 53370; and for FY 2014, 78 FR 50590 through 50591. We also refer readers to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28069) for discussion regarding this provision.

In addition to the changes required by the Affordable Care Act, we note that the proposed FY 2015 IPPS wage indexes continue to reflect a number of adjustments implemented over the past few years, including, but not limited to, reclassification of hospitals to different geographic areas, the rural and imputed floor provisions, an adjustment for occupational mix, and an adjustment to the wage index based on commuting patterns of employees (the out-migration adjustment). We refer readers to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28054 through 28084) for a detailed discussion of all proposed changes to the FY 2015 IPPS wage indices. 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.

As discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28054 through 28055), the Office of Management and Budget (OMB) issued revisions to the current labor market area delineations on February 28, 2013, that included a number of significant changes such as new Core Based Statistical Areas (CBSAs), urban counties that become rural, rural counties that become urban, and existing CBSAs that are split apart (OMB Bulletin 13-01). This bulletin can be found at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b13-01.pdf. As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), in order to allow for sufficient time to assess the new revisions and their ramifications, we intended to propose changes to the IPPS wage index based on the newest CBSA delineations in the FY 2015 IPPS/LTCH PPS proposed rule. Similarly, in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74951), we stated that we intended to propose changes in the OPPS, which uses the IPPS wage index, based on the new OMB delineations in this CY 2015 OPPS/ASC proposed rule, consistent with any proposals in the FY 2015 IPPS/LTCH PPS proposed rule. We refer readers to proposed changes based on the new OMB delineations in the FY 2015 IPPS/LTCH proposed rule at 79 FR 28054 through 28084.

In this proposed rule, we are proposing to use the proposed FY 2015 hospital IPPS wage index for urban and rural areas as the wage index for the OPPS hospital to determine the wage adjustments for the OPPS payment rate and the copayment standardized amount for CY 2015. (We refer readers to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28054) and the proposed FY 2015 hospital wage index files posted on the CMS Web site.) We note that the proposed FY 2015 IPPS wage indexes reflect a number of proposed changes as a result of the new OMB delineations as well as a proposed 1-year extension of the imputed rural floor. The CY 2015 OPPS wage index (for hospitals paid under the IPPS and OPPS) would be the final FY 2015 IPPS wage index. Thus, any proposed adjustments, including the adjustments related to the new OMB delineations, that are finalized for the IPPS wage index would be reflected in the OPPS wage index. 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 not proposing to change our current regulations, which require that we use the FY 2015 IPPS wage indexes for calculating OPPS payments in CY 2015.

Hospitals that are paid under the OPPS but not under the IPPS do not have a hospital wage index under the IPPS. Therefore, for non-IPPS hospitals paid under the OPPS, we assign the wage index that would be applicable if the hospital were paid under the IPPS, based on its geographic location and any applicable wage index adjustments. We are proposing to adopt the proposed wage index changes from the FY 2015 IPPS/LTCH PPS proposed rule for these hospitals. The following is a brief summary of the major proposed changes in the FY 2015 IPPS wage indexes and any adjustments that we are proposing to apply to these hospitals under the OPPS for CY 2015. We refer the reader to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28054 through 28084) for a detailed discussion of the proposed changes to the wage indexes.

For CY 2015, we are proposing to continue our policy of allowing 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 (section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173)). Applying this adjustment is consistent with our proposed policy of adopting IPPS wage index policies for hospitals paid under the OPPS. We note that, because non-IPPS hospitals cannot reclassify, they are eligible for the out-migration wage adjustment if they are located in a section 505 out-migration county. This is the same proposed out-migration adjustment policy that would apply if the hospital were paid under the IPPS. Table 4J from the FY 2015 IPPS/LTCH PPS proposed rule (available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) identifies counties eligible for the out-migration adjustment and IPPS hospitals that would receive the adjustment for FY 2015.

As we have done in prior years, we are including Table 4J from the FY 2015 IPPS/LTCH PPS proposed rule 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 2015 OPPS. Addendum L is available via the Internet on the CMS Web site.

In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to adopt the new OMB labor market area delineations issued by OMB in OMB Bulletin No. 13-01 on February 28, 2013, based on standards published on June 28, 2010 (75 FR 37246 through 37252) and the 2010 Census data to delineate labor market areas for purposes of the IPPS wage index. For IPPS wage index purposes, for hospitals that would be designated as rural under the new OMB labor market area delineations that currently are located in urban CBSAs, we generally proposed to assign them the urban wage index value of the CBSA in which they are physically located for FY 2014 for a period of 3 fiscal years (79 FR 28060 through 28061). To be consistent, we are proposing to apply the same policy to hospitals paid under the OPPS but not under the IPPS so that such hospitals would maintain the wage index of the CBSA in which they are physically located for FY 2014 for the next 3 calendar years. This proposed policy would impact six hospitals for purposes of OPPS payment.

We believe that adopting the new OMB labor market area delineations would create a more accurate wage index system, but we also recognize that implementing the new OMB delineations may cause some short-term instability in hospital payments. Therefore, similar to the policy we adopted in the FY 2005 IPPS final rule (69 FR 49033), in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28062), we proposed a 1-year blended wage index for all hospitals that would experience any decrease in their actual payment wage index exclusively due to the proposed implementation of the new OMB delineations. We proposed that a post-reclassified wage index with the rural and imputed floors applied would be computed based on the hospital’s FY 2014 CBSA (that is, using all of its FY 2014 constituent county/ies), and another post-reclassified wage index with the rural and imputed floors applied would be computed based on the hospital’s new FY 2015 CBSA (that is, the FY 2015 constituent county/ies). We proposed to compare these two wage indexes. If the proposed FY 2015 wage index with FY 2015 CBSAs would be lower than the proposed FY 2015 wage index with FY 2014 CBSAs, we proposed that a blended wage index would be computed, consisting of 50 percent of each of the two wage indexes added together. We proposed that this blended wage index would be the hospital’s wage index for FY 2015. For purposes of the OPPS, we also are proposing to apply this 50-percent transition blend to hospitals paid under the OPPS but not under the IPPS. We believe a 1-year, 50/50 blended wage index would mitigate the short-term instability and negative payment impacts due to the proposed implementation of the new OMB delineations, providing hospitals with a transition period during which they may adjust to their new geographic CBSA. We believe that a longer transition period would reduce the accuracy of the overall labor market area wage index system, and generally would not be warranted for hospitals moving from one urban geographic labor market area to another.

In addition, for the FY 2015 IPPS, we proposed to continue the extension of the imputed floor policy (both the original methodology and alternative methodology) for another year, through September 30, 2015 (79 FR 28068 through 28069). For purposes of the CY 2015 OPPS, we are also proposing to apply the imputed floor policy to hospitals paid under the OPPS but not under the IPPS.

For CMHCs, we are proposing to continue to calculate the wage index by using the post-reclassification IPPS wage index based on the CBSA where the CMHC is located. As with OPPS hospitals and for the same reasons, we are proposing to apply a 1-year, 50/50 blended wage index to CMHCs that would receive a lower wage index due to the new CBSA delineations. In addition, as with OPPS hospitals and for the same reasons, for CMHCs currently located in urban CBSAs that would be designated as rural under the new OMB labor market area delineations, we are proposing to maintain the urban wage index value of the CBSA in which they are physically located for CY 2014 for the next 3 calendar years. Consistent with our current policy, the wage index that applies to CMHCs includes both the imputed floor adjustment and the rural floor adjustment, but does not include the out-migration adjustment because that adjustment only applies to hospitals.

With the exception of the proposed out-migration wage adjustment table (Addendum L to this proposed rule, which is available via the Internet on the CMS Web site), which includes non-IPPS hospitals paid under the OPPS, we are not reprinting the proposed FY 2015 IPPS wage indexes referenced in this discussion of the wage index. We refer readers to the CMS Web site for the OPPS at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At this link, readers will find a link to the proposed FY 2015 IPPS wage index tables.

D. Proposed Statewide Average Default CCRs

In addition to using CCRs to estimate costs from charges on claims for ratesetting, CMS uses overall hospital-specific CCRs calculated from the hospital’s most recent cost report to determine outlier payments, payments for pass-through devices, and monthly interim transitional corridor payments under the OPPS during the PPS year. MACs cannot calculate a CCR for some hospitals 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 MAC 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 the predetermined ceiling threshold for a valid CCR) or for hospitals in which the most recent cost report reflects an all-inclusive rate status (Medicare Claims Processing Manual (Pub. 100-04), Chapter 4, Section 10.11). In this proposed rule, we are proposing to update the default ratios for CY 2015 using the most recent cost report data. We discuss our policy for using default CCRs, including setting the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599) in the context of our adoption of an outlier reconciliation policy for cost reports beginning on or after January 1, 2009.

For CY 2015, we are proposing to continue to use our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we use to adjust charges to costs on claims data for setting the proposed CY 2015 OPPS relative payment weights. Table 12 below lists the proposed CY 2015 default urban and rural CCRs by State and compares them to last year’s default CCRs. These proposed CCRs represent the ratio of total costs to total charges for those cost centers relevant to outpatient services from each hospital’s most recently submitted cost report, weighted by Medicare Part B charges. We also are proposing to adjust ratios from submitted cost reports to reflect the final settled status by applying the differential between settled to submitted overall CCRs for the cost centers relevant to outpatient services from the most recent pair of final settled and submitted cost reports. We then are proposing to weight each hospital’s CCR by the volume of separately paid line-items on hospital claims corresponding to the year of the majority of cost reports used to calculate the overall CCRs. We refer readers to 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 our trimming criteria.

For Maryland, we used an overall weighted average CCR for all hospitals in the Nation as a substitute for Maryland CCRs. Few hospitals in Maryland are eligible to receive payment under the OPPS, which limits the data available to calculate an accurate and representative CCR. The weighted CCR is used for Maryland because it takes into account each hospital’s volume, rather than treating each hospital equally. We refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65822) for further discussion and the rationale for our longstanding policy of using the national average CCR for Maryland. In general, observed changes in the statewide average default CCRs between CY 2014 and CY 2015 are modest and the few significant changes are associated with areas that have a small number of hospitals.

Table 12 below lists the proposed statewide average default CCRs for OPPS services furnished on or after January 1, 2015.

E. Proposed Adjustment for Rural SCHs and EACHs Under Section 1833(t)(13)(B) of the Act

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 sources, and devices paid under the pass-through payment policy in accordance with section 1833(t)(13)(B) of the Act, as added by section 411 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). Section 1833(t)(13) of the Act provided 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 areas and hospitals in urban areas. Our analysis showed a difference in costs for rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, and devices paid under the pass-through payment policy, in accordance with section 1833(t)(13)(B) of the Act.

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) of the regulations to clarify that EACHs also are eligible to receive the rural SCH adjustment, assuming these entities otherwise meet the rural adjustment criteria. Currently, two hospitals are classified as EACHs, and as of CY 1998, under section 4201(c) of Public Law 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 outlier payments and copayments. We stated in the CY 2006 OPPS final rule with comment period (70 FR 68560) that we would not reestablish the adjustment amount on an annual basis, but we may review the adjustment in the future and, if appropriate, would revise the adjustment. We provided the same 7.1 percent adjustment to rural SCHs, including EACHs, again in CYs 2008 through 2014. Further, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated the regulations at § 419.43(g)(4) to specify, in general terms, that items paid at charges adjusted to costs by application of a hospital-specific CCR are excluded from the 7.1 percent payment adjustment.

For the CY 2015 OPPS, we are proposing to continue our policy of a 7.1 percent payment adjustment that is done in a budget neutral manner for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to costs.

F. Proposed OPPS Payment to Certain Cancer Hospitals Described by Section 1886(d)(1)(B)(v) of the Act

1. Background

Since the inception of the OPPS, which was authorized by the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare has paid the 11 hospitals that meet the criteria for cancer hospitals identified in section 1886(d)(1)(B)(v) of the Act under the OPPS for covered outpatient hospital services. These cancer hospitals are exempted from payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999 (Pub. L. 106-113), Congress established section 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” to determine cancer and children’s hospitals OPPS payments based on their pre-BBA payment amount (often referred to as “held harmless”).

As required under section 1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full amount of the difference between payments for covered outpatient services under the OPPS and a “pre-BBA amount.” That is, cancer hospitals are permanently held harmless to their “pre-BBA amount,” and they receive transitional outpatient payments (TOPs) or hold harmless payments to ensure that they do not receive a payment that is lower under the OPPS than the payment they would have received before implementation of the OPPS, as set forth in section 1833(t)(7)(F) of the Act. The “pre-BBA amount” is the product of the hospital’s reasonable costs for covered outpatient services occurring in the current year and the base payment-to-cost ratio (PCR) for the hospital defined in section 1833(t)(7)(F)(ii) of the Act. The “pre-BBA amount,” including the determination of the base PCR, are defined at 42 CFR 419.70(f). TOPs are calculated on Worksheet E, Part B, of the Hospital Cost Report or the Hospital Health Care Complex Cost Report (Form CMS-2552-96 and Form CMS-2552-10, respectively) as applicable each year. Section 1833(t)(7)(I) of the Act exempts TOPs from budget neutrality calculations.

Section 3138 of the Affordable Care Act amended section 1833(t) of the Act by adding a new paragraph (18), which instructs the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of the Act with respect to APC groups exceed outpatient costs incurred by other hospitals furnishing services under section 1833(t) of the Act, as determined appropriate by the Secretary. Section 1833(t)(18)(A) of the Act requires the Secretary to take into consideration the cost of drugs and biologicals incurred by cancer and other hospitals. Section 1833(t)(18)(B) of the Act provides that if the Secretary determines that cancer hospitals’ costs are greater than other hospitals’ costs, the Secretary shall provide an appropriate adjustment under section 1833(t)(2)(E) of the Act to reflect these higher costs. In 2011, after conducting the study required by section 1833(t)(18)(A) of the Act, we determined that outpatient costs incurred by the 11 specified cancer hospitals were greater than the costs incurred by other OPPS hospitals. For a complete discussion regarding the cancer hospital cost study, we refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74200 through 74201).

Based on these findings, we finalized a policy to provide a payment adjustment to the 11 specified cancer hospitals that reflects their higher outpatient costs as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74202 through 74206). Specifically, we adopted a policy to provide additional payments to the cancer hospitals so that each cancer hospital’s final PCR for services provided in a given calendar year is equal to the weighted average PCR (which we refer to as the “target PCR”) for other hospitals paid under the OPPS. The target PCR is set in advance of the calendar year and is calculated using the most recent submitted or settled cost report data that are available at the time of final rulemaking for the calendar year. The amount of the payment adjustment is made on an aggregate basis at cost report settlement. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs are assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period. For CYs 2012 and 2013, the target PCR for purposes of the cancer hospital payment adjustment was 0.91. For CY 2014, the target PCR for purposes of the cancer hospital payment adjustment was 0.89.

2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2015

For CY 2015, we are proposing to continue our policy to provide additional payments to cancer hospitals so that each cancer hospital’s final PCR is equal to the weighted average PCR (or “target PCR”) for the other OPPS hospitals using the most recent submitted or settled cost report data that are available at the time of the development of this proposed rule. To calculate the proposed CY 2015 target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A. of this proposed rule, used to estimate costs for the CY 2015 OPPS. Using these cost report data, we included data from Worksheet E, Part B, for each hospital, using data from each hospital’s most recent cost report, whether as submitted or settled.

We then limited the dataset to the hospitals with CY 2013 claims data that we used to model the impact of the proposed CY 2015 APC relative payment weights (3,881 hospitals) because it is appropriate to use the same set of hospitals that we are using to calibrate the modeled CY 2015 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2012 to 2013. We then removed the cost report data of the 47 hospitals located in Puerto Rico from our dataset because we do not believe that their cost structure reflects the costs of most hospitals paid under the OPPS and, therefore, their inclusion may bias the calculation of hospital-weighted statistics. We also removed the cost report data of 27 hospitals because these hospitals had cost report data that were not complete (missing aggregate OPPS payments, missing aggregate cost data, or missing both), so that all cost reports in the study would have both the payment and cost data necessary to calculate a PCR for each hospital, leading to a proposed analytic file of 3,807 hospitals with cost report data.

Using this smaller dataset of cost report data, we estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS are approximately 89 percent of reasonable cost (weighted average PCR of 0.89). Therefore, we are proposing that the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement would be the additional payment needed to result in a proposed target PCR equal to 0.89 for each cancer hospital.

Table 13 below indicates the estimated percentage increase in OPPS payments to each cancer hospital for CY 2015 due to the cancer hospital payment adjustment policy. The actual amount of the CY 2015 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital’s CY 2015 payments and costs. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs will be assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period.

G. Proposed Hospital Outpatient Outlier Payments

1. Background

The OPPS provides outlier payments to hospitals to help mitigate the financial risk associated with high-cost and complex procedures, where a very costly service could present a hospital with significant financial loss. As explained in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74958 through 74960), we set our projected target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for the prospective year. Outlier payments are provided on a service-by-service basis when the cost of a service exceeds the APC payment amount multiplier threshold (the APC payment amount multiplied by a certain amount) as well as the APC payment amount plus a fixed-dollar amount threshold (the APC payment plus a certain amount of dollars). In CY 2014, the outlier threshold was met when the hospital’s cost of furnishing a service exceeded 1.75 times (the multiplier threshold) the APC payment amount and exceeded the APC payment amount plus $2,900 (the fixed-dollar amount threshold). If the cost of a service exceeds both the multiplier 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 amount. Beginning with CY 2009 payments, outlier payments are subject to a reconciliation process similar to the IPPS outlier reconciliation process for cost reports, as discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599).

It has been our policy to report the actual amount of outlier payments as a percent of total spending in the claims being used to model the proposed OPPS. Our current estimate of total outlier payments as a percent of total CY 2013 OPPS payment, using available CY 2013 claims and the revised OPPS expenditure estimate for the FY 2015 President’s Budget, is approximately 1.2 percent of the total aggregated OPPS payments. Therefore, for CY 2013, we estimate that we paid 0.2 percent above the CY 2013 outlier target of 1.0 percent of total aggregated OPPS payments.

Using CY 2013 claims data and CY 2014 payment rates, we currently estimate that the aggregate outlier payments for CY 2014 will be approximately 0.9 percent of the total CY 2014 OPPS payments. The difference between 0.9 percent and the 1.0 percent target is reflected in the regulatory impact analysis in section XXII. of this proposed rule. We provide estimated CY 2015 outlier payments for hospitals and CMHCs with claims included in the claims data that we used to model impacts in the Hospital-Specific Impacts—Provider-Specific Data file on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

2. Proposed Outlier Calculation

For CY 2015, we are proposing to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS. We are proposing that a portion of that 1.0 percent, an amount equal to 0.47 percent of outlier payments (or 0.0047 percent of total OPPS payments) would be allocated to CMHCs for PHP outlier payments. This is the amount of estimated outlier payments that would result from the proposed CMHC outlier threshold as a proportion of total estimated OPPS outlier payments. As discussed in section VIII.D. of this proposed rule, for CMHCs, we are proposing to continue our longstanding policy that if a CMHC’s cost for partial hospitalization services, paid under either APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs), exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. For further discussion of CMHC outlier payments, we refer readers to section VIII.D. of this proposed rule.

To ensure that the estimated CY 2015 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 a hospital’s cost of furnishing a service exceeds 1.75 times the APC payment amount and exceeds the APC payment amount plus $3,100.

We calculated the proposed fixed-dollar threshold of $3,100 using the standard methodology most recently used for CY 2014 (78 FR 74959 through 74960). For purposes of estimating outlier payments for this proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2014 update to the Outpatient Provider-Specific File (OPSF). The OPSF contains provider-specific data, such as the most current CCRs, which are maintained by the Medicare contractors and used by the OPPS Pricer to pay claims. The claims that we use to model each OPPS update lag by 2 years.

In order to estimate the CY 2015 hospital outlier payments for this proposed rule, we inflated the charges on the CY 2013 claims using the same inflation factor of 1.1146 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321). We used an inflation factor of 1.0557 to estimate CY 2014 charges from the CY 2013 charges reported on CY 2013 claims. The methodology for determining this charge inflation factor is discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321). As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65845), we believe that the use of these charge inflation factors are appropriate for the OPPS because, with the exception of the inpatient routine service cost centers, hospitals use the same ancillary and outpatient cost centers to capture costs and charges for 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 could 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 are proposing to apply for the FY 2015 IPPS outlier calculation to the CCRs used to simulate the proposed CY 2015 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2015, we are proposing to apply an adjustment factor of 0.9813 to the CCRs that were in the April 2014 OPSF to trend them forward from CY 2014 to CY 2015. The methodology for calculating this proposed adjustment was discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321).

To model hospital outlier payments for this proposed rule, we applied the overall CCRs from the April 2014 OPSF file after adjustment (using the proposed CCR inflation adjustment factor of 0.9813 to approximate CY 2015 CCRs) to charges on CY 2013 claims that were adjusted (using the proposed charge inflation factor of 1.1146 to approximate CY 2015 charges). We simulated aggregated CY 2015 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming that outlier payments 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 2015 OPPS payments. We estimated that a proposed fixed-dollar threshold of $3,100, 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. For CMHCs, we are proposing that, if a CMHC’s cost for partial hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate.

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 furnished by hospitals that are required to report outpatient quality data and that fail to meet the Hospital OQR Program requirements. For hospitals that fail to meet the Hospital OQR Program requirements, we are proposing to continue the policy that we implemented in CY 2010 that the hospitals’ costs will be compared to the reduced payments for purposes of outlier eligibility and payment calculation. For more information on the Hospital OQR Program, we refer readers to section XIII. of this proposed rule.

H. Proposed Calculation of an Adjusted Medicare Payment from the 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 42 CFR Part 419, Subparts C and D. For this CY 2015 OPPS/ASC proposed rule, 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 payment weight determined under section II.A. of this proposed rule. Therefore, the proposed national unadjusted payment rate for most APCs contained in Addendum A to this proposed rule (which is available via the Internet on the CMS Web site) and for most HCPCS codes to which separate payment under the OPPS has been assigned in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) was calculated by multiplying the proposed CY 2015 scaled weight for the APC by the proposed CY 2015 conversion factor.

We note that section 1833(t)(17) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to submit data required to be submitted on quality measures selected by the Secretary, in the form and manner and at a time specified by the Secretary, incur a reduction of 2.0 percentage points 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 apply to certain outpatient items and services provided by hospitals that are required to report outpatient quality data and that fail to meet the Hospital OQR Program (formerly referred to as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) requirements. For further discussion of the payment reduction for hospitals that fail to meet the requirements of the Hospital OQR Program, we refer readers to section XIII. of this proposed rule.

We demonstrate in the steps below how to determine the APC payments that will be made in a calendar year under the OPPS to a hospital that fulfills the Hospital OQR Program requirements and to a hospital that fails to meet the Hospital OQR Program requirements for a service that has any of the following status indicator assignments: “J1,” “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” or “V,” (as defined in Addendum D1 to this proposed rule), in a circumstance in which the multiple procedure discount does not apply, the procedure is not bilateral, and conditionally packaged services (status indicator of “Q1” and “Q2”) qualify for separate payment. We note that, although blood and blood products with status indicator “R” and brachytherapy sources with status indicator “U” are not subject to wage adjustment, they are subject to reduced payments when a hospital fails to meet the Hospital OQR Program requirements. We note that we are also proposing to create new status indicator “J1” to reflect the proposed comprehensive APCs discussed in section II.A.2.e. of this proposed rule. We also note that we are proposing to delete status indicator “X” as part of the CY 2015 packaging proposal for ancillary services, discussed in section II.A.3. of this proposed rule.

Individual providers interested in calculating the payment amount that they would receive for a specific service from the national unadjusted payment rates presented in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) should follow the formulas presented in the following steps. For purposes of the payment calculations below, we refer to the proposed national unadjusted payment rate for hospitals that meet the requirements of the Hospital OQR Program as the “full” national unadjusted payment rate. We refer to the proposed national unadjusted payment rate for hospitals that fail to meet the requirements of the Hospital OQR Program as the “reduced” national unadjusted payment rate. The reduced national unadjusted payment rate is calculated by multiplying the proposed reporting ratio of 0.980 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 Hospital OQR Program requirements in order to receive the proposed full CY 2015 OPPS fee schedule increase factor of 2.1 percent.

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 OPPS final rule with comment period (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage. During our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553), we confirmed that this labor-related share for hospital outpatient services is appropriate.

The formula below is a mathematical representation of Step 1 and identifies the labor-related portion of a specific payment rate for a specific service.

X is the 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. We note that under the proposed CY 2015 OPPS policy for transitioning wage indexes into the new OMB labor market area delineations, a hold harmless policy for the wage index may apply, as discussed in section II.C. of this proposed rule. The wage index values assigned to each area reflect the geographic statistical areas (which are based upon OMB standards) to which hospitals are assigned for FY 2015 under the IPPS, reclassifications through the MGCRB, section 1886(d)(8)(B) “Lugar” hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as defined in § 412.103 of the regulations, and hospitals designated as urban under section 601(g) of 98. (For further discussion of the proposed changes to the FY 2015 IPPS wage indices, as applied to the CY 2015 OPPS, we refer readers to section II.C. of this proposed rule.) We are proposing to continue to apply a wage index floor of 1.00 to frontier States, in accordance with section 10324 of the Affordable Care Act of 2010.

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 Public Law 108-173. Addendum L to this proposed rule (which is available via the Internet on the CMS Web site) contains the qualifying counties and the proposed associated wage index increase developed for the FY 2015 IPPS and listed as Table 4J in the FY 2015 IPPS/LTCH PPS proposed rule and available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. This step is to be followed only if the hospital is not reclassified or redesignated under section 1886(d)(8) or section 1886(d)(10) of the Act.

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 and adjusts the labor-related portion of the national unadjusted payment rate for the specific service by the wage index.

X
a
is the 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 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 is the 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 an SCH, set forth in the regulations at § 412.92, or an EACH, which is considered to be an 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 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 proposed full and reduced national unadjusted payment rates that would apply to certain outpatient items and services performed by hospitals that meet and that fail to meet the Hospital OQR Program requirements, using the steps outlined above. For purposes of this example, we used a provider that is located in Brooklyn, New York that is assigned to CBSA 35614. This provider bills one service that is assigned to APC 0019 (Level I Excision/Biopsy). The proposed CY 2015 full national unadjusted payment rate for APC 0019 is approximately $380.32. The proposed reduced national unadjusted payment rate for APC 0019 for a hospital that fails to meet the Hospital OQR Program requirements is approximately $372.71. This proposed reduced rate is calculated by multiplying the proposed reporting ratio of 0.980 by the full unadjusted payment rate for APC 0019.

The proposed FY 2015 wage index for a provider located in CBSA 35614 in New York is 1.3014. This is based on the proposed 1-year 50/50 transition blend between the wage index under the old CBSA 35644 (1.3147) and the wage index under the new CBSA 35614 (1.2881). The labor-related portion of the proposed full national unadjusted payment is approximately $296.97 (.60 * $380.32 * 1.3014). The labor-related portion of the proposed reduced national unadjusted payment is approximately $291.03 (.60 * $372.71 * 1.3014). The nonlabor-related portion of the proposed full national unadjusted payment is approximately $152.13 (.40 * $380.32). The nonlabor-related portion of the proposed reduced national unadjusted payment is approximately $149.08 (40 * $372.71). The sum of the labor-related and nonlabor-related portions of the proposed full national adjusted payment is approximately $449.10 ($296.97 + $152.13). The sum of the proposed reduced national adjusted payment is approximately $440.11 ($291.03 + $149.08).

I. Proposed Beneficiary Copayments

1. Background

Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining the unadjusted 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, the effective copayment rate for a covered OPD service paid under the OPPS in CY 2006, and in calendar years thereafter, shall not exceed 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. However, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a year to the amount of the inpatient hospital deductible for that year.

Section 4104 of the Affordable Care Act eliminated the Part B coinsurance for preventive services furnished on and after January 1, 2011, that meet certain requirements, including flexible sigmoidoscopies and screening colonoscopies, and waived the Part B deductible for screening colonoscopies that become diagnostic during the procedure. Our discussion of the changes made by the Affordable Care Act with regard to copayments for preventive services furnished on and after January 1, 2011, may be found in section XII.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 72013).

2. Proposed OPPS Copayment Policy

For CY 2015, we are proposing to determine copayment amounts for new and revised APCs using the same methodology that we implemented beginning in 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 standard rounding principles that we have historically used 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) in which we discuss our rationale for applying these rounding principles.) The proposed national unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2015, are shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). As discussed in section XII.G. of this proposed rule, for CY 2015, the proposed Medicare beneficiary’s minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies will 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.

We note that OPPS copayments may increase or decrease each year based on changes in the calculated APC payment rates due to updated cost report and claims data, and any changes to the OPPS cost modeling process. However, as described in the CY 2004 OPPS/ASC final rule with comment period, the development of the copayment methodology generally moves beneficiary copayments closer to 20 percent of OPPS APC payments (68 FR 63458 through 63459).

3. Proposed Calculation of an Adjusted Copayment Amount for an APC Group

Individuals interested in calculating the national copayment liability for a Medicare beneficiary for a given service provided by a hospital that met or failed to meet its Hospital OQR Program 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, approximately $76.07 is 20 percent of the proposed full national unadjusted payment rate of approximately $380.32. For APCs with only a minimum unadjusted copayment in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site), the beneficiary payment percentage is 20 percent.

The formula below is a mathematical representation of Step 1 and calculates the national copayment as a percentage of national payment for a given service.

Step 2. Calculate the appropriate wage-adjusted payment rate for the APC for the provider in question, as indicated in Steps 2 through 4 under section II.H. of this proposed rule. Calculate the rural adjustment for eligible providers as indicated in Step 6 under section II.H. 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 and applies the beneficiary payment percentage to the adjusted payment rate for a service calculated under section II.H. of this proposed rule, with and without the rural adjustment, to calculate the 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 Hospital OQR Program requirements, multiply the copayment calculated in Step 3 by the proposed reporting ratio of 0.980.

The proposed unadjusted copayments for services payable under the OPPS that would be effective January 1, 2015, are shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). We note that the proposed national unadjusted payment rates and copayment rates shown in Addenda A and B to this proposed rule reflect the proposed full CY 2015 OPD fee schedule increase factor discussed in section II.B. of this proposed rule.

In addition, as noted above, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a year to the amount of the inpatient hospital deductible for that year.