I R PInnovative Resources for Payors
	
[Federal Register: August 9, 2002 (Volume 67, Number 154)]
[Proposed Rules]               
[Page 52141-52190]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09au02-37]                         
 
[[pp. 52141-52190]] Medicare Program; Changes to the Hospital Outpatient Prospective 
Payment System and Calendar Year 2003 Payment Rates; and Changes to 
Payment Suspension for Unfiled Cost Reports

[[Continued from page 52140]]

[[Page 52141]]

and we would not expect these procedures to be performed during the 
same operative session with a higher paying procedure with status 
indicator ``T.'' Therefore, we propose to continue our current policy 
of multiple procedure discounting. That is, when two or more APCS with 
status indicator ``T'' are billed together we propose to pay 100 
percent for the highest cost APC and 50 percent for all other APCs with 
status indicator ``T.'' We propose not to adjust these payments to 
account for device costs in the APCs.

F. Outpatient Billing For Dialysis

    Currently, hospitals are unable to bill for dialysis treatments 
furnished to End-Stage Renal Disease (ESRD) patients on an outpatient 
basis, unless the hospital also has a certified hospital-based ESRD 
facility. As a result of this policy, there has been an increase in 
denials by the PROs for inappropriate hospital admissions.
    When ESRD patients come to the hospital for a medical emergency or 
for problems with their access sites, they typically miss their 
regularly scheduled dialysis appointments. If the ESRD patient's usual 
facility is unable to reschedule the dialysis treatment, the 
beneficiary has to wait until the next scheduled dialysis appointment. 
CMS is concerned that by maintaining this policy, beneficiaries may be 
receiving interrupted care because there will be unnecessary lapses in 
treatment. The ESRD patient should not be prevented from receiving her 
or his normal dialysis because he or she experienced another unrelated 
medical situation. Therefore, we propose to allow payment for dialysis 
treatments for ESRD patients in the outpatient department of a hospital 
in specific situations. Payment would be limited to unscheduled 
dialysis for ESRD patients in exceptional circumstances. Outpatient 
dialysis for acute patients would not be included in this payment 
mechanism.
    We propose to limit this payment to medical situations in which the 
ESRD patient cannot obtain her or his regularly scheduled dialysis 
treatment at a certified ESRD facility. Situations that we propose to 
allow are limited to: (1) dialysis performed following or in connection 
with a vascular access procedure; (2) dialysis performed following 
treatment for an unrelated medical emergency. For example, if a patient 
goes to the emergency room for chest pains and misses a regularly 
scheduled dialysis treatment that cannot be rescheduled, we would allow 
the hospital to provide and bill Medicare for the dialysis treatment; 
and (3) emergency dialysis--Currently, the only mechanism available for 
payment in this situation is through an inpatient admission. We will 
maintain our policy that routine treatments in non-ESRD certified 
hospitals would not be payable under OPPS.
    We believe it is important to make this change in policy for two 
reasons: (1) to ensure that hospital outpatient departments are paid 
for providing this much needed service; and (2) to prevent dialysis 
patients from receiving interrupted care. Non-ESRD certified hospital 
outpatient facilities would bill Medicare using a new G code, G0GGG, 
``Unscheduled or emergency treatment for dialysis for ESRD patient in 
the outpatient department of a hospital that does not have a certified 
ESRD facility.'' We propose that this new code will have status 
indicator ``S'' and be assigned to APC 0170. Payment would be roughly 
equivalent to the reimbursement rate for acute dialysis. We propose to 
implement this change effective January 1, 2003. Effective January 1, 
2003, this would be the only way for non-ESRD certified hospital 
outpatient facilities to bill Medicare and be paid for providing 
outpatient dialysis to ESRD beneficiaries.
    CMS will be monitoring the use of this new code to ensure that (1) 
certified dialysis facilities are not incorrectly using this code; and 
(2) the same dialysis patient is not repeatedly using this code, which 
would indicate routine dialysis treatment.
    When ESRD patients receive outpatient dialysis in non-ESRD 
certified hospital outpatient facilities, the patient's home facility 
would be responsible for obtaining and reviewing the patient's medical 
records to ensure that appropriate care was provided in the hospital 
and that modifications are made, if necessary, to the patient's plan of 
care upon her or his return to the facility. This ensures continuity of 
care for the patient.




IX. Summary of and Responses to MedPAC Recommendations

    The Medicare Payment Advisory Commission (MedPAC) in its March 2002 
Report to the Congress: ``Medicare Payment Policy,'' makes a number of 
recommendations relating to the OPPS. This section provides responses 
to those recommendations.
    Recommendation: For calendar year 2003, the Secretary should 
increase the payment rates for services covered by the OPPS by the rate 
of increase in the hospital market basket.
    Response: Section 1833(t)(3)(C)(ii) of the Act requires the 
Secretary to update the conversion factor annually. Under section 
1833(t)(3)(C)(iv) of the Act, the update is equal to the hospital 
market basket percentage increase applicable under the hospital 
inpatient PPS, minus one percentage point for the years 2000 and 2002. 
The Secretary has the authority under section 1833(t)(3)(C)(iv) of the 
Act to substitute a market basket that is specific to hospital 
outpatient services. In the September 8, 1998 proposed rule on the 
OPPS, we indicated that we were considering the option of developing an 
outpatient-specific market basket and invited comments on possible 
sources of data suitable for constructing one (63 FR 47579). We 
received no comments in response to this invitation, and we therefore 
announced in the April 7, 2000 final rule that we would update the 
conversion factor by the hospital inpatient market basket increase, 
minus one percentage point, for the years 2000, 2001, and 2002 (65 FR 
18502). (As required by section 401(c) of the BIPA, we made payment 
adjustments effective April 1, 2001 under a special payment rule that 
had the effect of providing a full market basket update in 2001.) For 
2003, we propose to increase payment rates by the rate of increase in 
the hospital market basket.
    Recommendation: The Congress should--
     Replace hospital-specific payments for pass-through 
devices with national rates.
     Give the Secretary authority to consider alternatives to 
average wholesale price (AWP) when determining payments for pass-
through drugs and biologicals.
    Response: Regarding the pricing of transitional pass-through 
devices, we share the Commission's concern that the current methodology 
provides incentives for hospitals to inflate charges for transitional 
pass-through devices to increase payments. However, we believe that 
alternative approaches are not necessarily superior. Further, the 
salience of this problem should be much less in the future.
    At present, the payment for a transitional pass-through device is 
set, on a claim-by-claim basis, relative to the hospital's charge for 
that device. The charge is reduced to a measure of cost by application 
of a hospital-specific cost-to-charge ratio, and a subtraction is made 
to reflect the portion of device costs already recognized in the 
payment for the associated procedure APC. This procedure means that a 
higher charge by a hospital will result in a higher payment from 
Medicare. The Commission notes that this method embodies an incentive 
for hospitals, perhaps prompted by manufacturers, to increase charges 
as a means of

[[Page 52142]]

increasing payments. The Commission is concerned that this situation 
may lead to excessive payments and may bias the charges used to revise, 
from year to year, relative weights in the OPPS.
    In fact, the extent to which hospitals raising their charges on 
devices is problematic depends on the outcomes. In general, we 
anticipate that hospital charge structures, on average, reflect their 
costs; this assumption helps support the use of charge data to revise 
relative weights in hospital prospective payment systems. Accordingly, 
whether payments to hospitals for transitional pass-through devices 
might be considered excessive depends on whether hospitals inflate 
charges beyond the levels appropriate to recover their costs. Whether 
their behavior leads to biases in charge data depends on whether they 
set charges on transitional pass-through devices significantly 
differently than on other services.
    Moving to a fee schedule for transitional pass-through devices 
would remove the particular incentive problem that the Commission 
noted, which we agree would be desirable. However, the establishment of 
appropriate national rates would then become the focus. In the absence 
of field data on actual costs, we will be inevitably reliant on 
information that manufacturers provide. At present, manufacturers are 
asked for information about prices on applications for pass-through 
status. Anecdotal information suggests this information is not fully 
reliable as a measure of what hospitals actually pay.
    The Commission's report discusses the possibility of CMS setting 
the rate for a device based on analysis of the manufacturer's costs, 
including an appropriate rate of return on equity. This approach would 
confront a number of accounting, legal, and operational difficulties.
     First, it would take some time to complete the analysis 
for a new product, which could significantly delay establishment of a 
rate. The rate that would be used in the meantime, or whether billing 
would be permitted at all, would be open to question.
     Second, it appears that large firms with multiple product 
lines supply most devices, which would make determining the costs of a 
particular device difficult. This problem would be compounded when 
multiple enterprises are involved in bringing a product to market, 
which is not uncommon in the device industry, where invention and 
initial development may occur in one firm and final development, 
manufacturing, and marketing in another.
     Third, the government generally does not have access to 
manufacturers cost information. While legal authority could be 
enhanced, manufacturers would face incentives that raise questions 
about the reliability of information provided, and the need for 
government accounting and auditing resources would be high.
     Fourth, as the Commission's report notes, an appropriate 
rate of return on equity would have to be established.
     Fifth, devices are now paid, under BIPA, on the basis of 
categories. As a result, if a manufacturer brings to market a product 
that fits the description of a category, hospitals can bill for that 
manufacturer's product without any change in coding or notification of 
CMS. Consequently, we do not know what specific devices are actually 
being billed in these categories, or who manufactures them. Whatever 
rate might be established on the basis of an initial application for a 
category would presumably be based on the applicant's costs. Later 
entrants might have significantly different cost structures, but this 
information would not come into account unless a more elaborate process 
was implemented to include it.
    Finally, whether a rate set in this fashion would pay less or more 
than the current method is unclear. The current method is based on 
actual experience in the field, and it will reflect, though perhaps 
somewhat tenuously, whatever competitive market pressures exist. Any 
method that we use aimed at ensuring a more reliable price could yield 
a price that is too high, since it will not reflect market activity. 
Whether a rate set by ex ante analysis of this sort would produce 
superior results does not appear obvious.
    The Commission's report also mentions the possibility of using 
competitive bidding to set rates for transitional pass-through devices. 
While competitive bidding appears attractive as a means of setting a 
market-related price, it has not proven an easy process for Medicare to 
implement. Competitive bidding seems best suited for established 
products with multiple suppliers. However, transitional pass-through 
devices are by definition new to the market and will frequently have 
only one manufacturer, at least at the start of the 2 to 3 year 
transitional pass-through period. Even in those instances in which this 
technique would be possible, it involves a fair amount of 
administrative resources and time, and using it to establish a rate 
that will be used at the most for 3 years does not appear to be an 
effective use of resources.
    Both of the suggestions discussed above reflect procedures that 
involve relatively high overhead on the part of CMS and of other 
actors. It is not obvious whether either would produce results that are 
superior to those derived from the present method. While they would 
change incentives on hospitals, incentives of manufacturers would still 
be a source of concern. We agree with the Commission that further 
investigation would be necessary to determine a feasible alternative to 
cost-based pass-through payments.
    In considering the advantages of various approaches, it is 
important to keep the size of the problem in mind, especially when 
contemplating procedures for setting rates that would involve 
substantial administrative resources. As of July 1, 2002, the OPPS pays 
for 100 categories of devices. As is explained in section III.C of this 
preamble, we are proposing that 95 categories will lose pass-through 
status and be retired as of January 1, 2003.\3\ Since the initial 
categories were established in April 2001, we have added only three 
categories. While several applications are pending, given the 
extensiveness of the existing categories, it appears likely that the 
number of new categories to be established in future years will be 
small.\4\ The likely volume of claims represented by these new 
categories is of course speculative, but it also does not seem likely 
to be large relative to the size of the OPPS system. As discussed 
below, we developed criteria for the establishment of new categories 
that were specifically intended to limit future pass-through payments 
to devices that provide a substantial clinical improvement.
---------------------------------------------------------------------------

    \3\ In accord with the BBRA amendment that established the pass-
through payment methodology, items are only eligible for pass-
through payments for 2 to 3 years. After expiration of pass-through 
status, payments for devices described by these categories will be 
packaged into APC payments for the procedures with which they are 
used.
    \4\ If a new device arrives on the market that would have fit in 
a category formerly in use but subsequently retired, it will not be 
eligible for pass-through payment.
---------------------------------------------------------------------------

    Considering that the identified alternatives do not appear to be 
manifestly superior to the current system but do involve significantly 
more administrative resources, and given the anticipated small volume 
of transitional pass-through devices in the future, we think on balance 
it would be best to let more experience develop with the current system 
before making significant changes to the current method.
    However, we agree that it would be desirable to give the Secretary 
authority

[[Page 52143]]

to use alternatives to AWP when determining payments for pass-through 
drugs and biologicals. At present, total payment for these items is 
governed by the general rule (section 1842(o) of the Act) for Medicare 

pricing of drugs, which requires they be paid at 95 percent of AWP. 
This rule also covers most drugs delivered ``incident to'' physicians' 
services in physicians' offices and elsewhere. The Congress is at 
present considering various changes to the AWP as the basis for 
Medicare payment for drugs, and if a change is adopted to this 
standard, it may be an appropriate standard for transitional pass-
through drugs and biologicals as well.
    Recommendation: The Secretary should do the following:
     Ensure additional payments are made only for new or 
substantially improved technologies that are expensive in relation to 
the applicable ambulatory payment classification rate.
     Avoid basing national rates only on reported costs.
     Ensure that the same broad principles guide payments for 
new technologies in the inpatient and outpatient payment systems.
    Response: We agree that additional payments should be limited to 
items that have the greatest merit and that have high costs not well 
captured in the existing payment structure. The Commission notes that 
limiting the number of transitional pass-through items limits the 
burdens on hospitals and us; reduces the likelihood of exceeding the 
statutory cap on aggregate pass-through payment, necessitating a 
uniform reduction in transitional pass-through payments; and limits the 
redistribution of funds across hospitals that are low versus high users 
of transitional pass-through items. We agree with these points. On 
November 2, 2001, we published an interim final rule with comment 
period in the Federal Register (66 FR 55850 to 55857) that set forth 
criteria we will use to evaluate whether to establish new categories of 
devices in the future. These criteria include tests of whether a device 
is new, whether it represents a substantial medical improvement for 
Medicare beneficiaries, and whether its costs are high relative to the 
payments that would otherwise be made.
    Section 1833(t)(6)(D) of the Act prescribes the method for setting 
payment for transitional pass-through drugs and devices. The issue of 
possible alternatives is discussed above.
    We agree that the same principles should govern payments for new 
technologies in the inpatient and outpatient prospective payment 
systems. Criteria governing extra new technology payments in the IPPS 
were established in a final rule published in the Federal Register (66 
FR 46902 to 46925) on September 7, 2001. The criteria have the same 
general form as those for the OPPS. They differ in some particulars, 
largely traceable to the difference of the two payment systems. In 
particular, the IPPS system pays on the basis of an episode of care. As 
a result, the bundle of payment is generally larger and hospitals are 
better able to absorb minor cost differences. Considering the impact of 
new technology on all costs of the episode is also pertinent. 
Consequently, the criteria for special payment for inpatient new 
technologies require examination of the net effect on costs of the 
entire episode (not just the added costs of a new technology), and the 
relative cost standard we established is somewhat more stringent than 
for the OPPS. We believe it is premature to judge whether it will make 
sense to make these criteria even closer in the future, as the 
Commission's discussion suggests.



X. Summary of Proposed Changes for 2003

A. Changes Required by Statute

    We are proposing the following changes to implement statutory 
requirements:
     Add APCs, delete APCs, and modify the composition of some 
existing APCs.
     Recalibrate the relative payment weights of the APCs.
     Update the conversion factor and the wage index.
     Revise the APC payment amounts to reflect the APC 
reclassifications, the recalibration of payment weights, and the other 
required updates and adjustments.
     Cease transitional pass-through payments for drugs and 
biologicals (including blood and blood products) and devices (including 
brachytherapy), that will, on January 1, 2003, have been paid under 
transitional pass-through methodology for at least 2 years.

B. Additional Changes to OPPS and Payment Suspension Provisions

    We are proposing the following additional changes to the OPPS and 
Payment Suspension Provisions:
     Creation of new evaluation and management service codes 
for outpatient clinic and emergency department encounters for 
implementation no earlier than January 1, 2004.
     Changes to the list of services that we do not pay in 
outpatient departments because we define them as ``inpatient only'' 
procedures.
     Changes to our policy of nonpayment for procedures on the 
``inpatient only'' list in special cases involving death or transfer 
before inpatient admission.
     Changes to our policy governing observation in cases of 
direct admission to observation.
     Changes to status indicators for HCPCS codes.
     Changes to our policies governing dialysis for ESRD 
patients and regarding partial hospitalization.
    In addition, we are making changes to payment suspension policies.

C. Changes to the Regulations Text

    A. We propose to make the following changes to our regulations:
     Amend Sec. 410.43(b) to add clinical social worker 
services (for the diagnosis and treatment of mental illnesses) that 
meet the requirements of section 1861(hh)(2) of the Act to the 
specified professional services that are separately covered and not 
paid as partial hospitalization services.
     Amend Sec. 419.66(c)(1) to specify that we must establish 
a new category for a medical device if it is not described by any 
category previously in effect as well as an existing category.




XI. Summary of Proposed Payment Suspension Provisions

    In this rule, we propose to revise Sec. 405.371 (c) to specify that 
we may suspend Medicare payments ``in whole or in part'' if a provider 
has failed to timely file an acceptable cost report. This provision is 
consistent with the existing provisions in Sec. 405.371(a) governing 
the suspension of Medicare payments ``in whole or in part'' under 
certain conditions. We believe the Medicare program would benefit 
because immediate complete payment suspension can be disruptive to 
providers and may negatively affect the care of Medicare patients.




XII. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:

[[Page 52144]]

     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    This rule does not impose information collection and recordkeeping 
requirements. Consequently, it need not be reviewed by the Office of 
Management and Budget under the authority of the Paperwork Reduction 
Act of 1995.



XIII. Response to Public Comments

    Because of the large number of items of correspondence we normally 
receive on a proposed rule, we are not able to acknowledge or respond 
to them individually. However, in preparing the final rule, we will 
consider all comments concerning the provisions of this proposed rule 
that we receive by the date and time specified in the DATES section of 
this preamble and respond to those comments in the preamble to that 
rule.



XIV. Regulatory Impact Analysis

    The regulatory impact analysis for this proposed rule consists of 
an impact analysis for the OPPS provisions and a regulatory impact 
statement for the provision for payment suspension for unfiled cost 
reports.

A. OPPS

1. General
    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review) 
and the Regulatory Flexibility Act (RFA) (September 16, 1980 Pub. L. 
96-354). Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more annually).
    We estimate the effects of the provisions that would be implemented 
by this proposed rule would result in expenditures exceeding $100 
million in any 1 year. We estimate the total increase (from changes in 
the proposed rule as well as enrollment, utilization, and case mix 
changes) in expenditures under the OPPS for CY 2003 compared to CY 2002 
to be approximately $1.372 billion. Therefore, this proposed rule is an 
economically significant rule under Executive Order 12866, and a major 
rule under 5 U.S.C. 804(2).
    The RFA requires agencies to determine whether a rule will have a 
significant economic impact on a substantial number of small entities. 
For purposes of the RFA, small entities include small businesses, 
nonprofit organizations and government agencies. Most hospitals and 
most other providers and suppliers are small entities, either by 
nonprofit status or by having revenues of $6 to $29 million or less in 
any 1 year (see 65 FR 69432).
    For purposes of the RFA we have determined that approximately 37 
percent of hospitals and 98 percent of mental health practitioners 
would be considered small entities according to the Small Business 
Administration (SBA) size standards. We do not have data available to 
calculate the percentages of entities in the pharmaceutical preparation 
manufacturing, biological products, or medical instrument industries. 
For the pharmaceutical preparation manufacturing industry (NAICS 
325412), the size standard is 750 or fewer employees and $67.6 billion 
in annual sales (1997 business census). For biological products (except 
diagnostic) (NAICS 325414) $5.7 billion and medical instruments (NAICS 
339112), with $18.5 billion in annual sales, the standard is 50 or 
fewer employees (see the standards web site at http://www.sba.gov/
regulations/siccodes/). Individuals and States are not included in the 
definition of a small entity.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. With 
the exception of hospitals located in certain New England counties, for 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area (MSA) and has fewer than 100 beds (or New England 
County Metropolitan Area (NECMA)). Section 601(g) of the Social 
Security Amendments of 1983 (Pub. L. 98-21) designated hospitals in 
certain New England counties as belonging to the adjacent NECMA. Thus, 
for purposes of the OPPS, we classify these hospitals as urban 
hospitals. We believe that the changes in this proposed rule would 
affect both a substantial number of rural hospitals as well as other 
classes of hospitals and that the effects on some may be significant. 
Therefore, we conclude that this proposed rule has a significant impact 
on a substantial number of small entities. However, the statute 
provides for small rural hospitals (of less than 100 beds) to be held 
harmless by the law and to continue to be paid at cost; therefore this 
proposed rule has no impact on them.
Unfunded Mandates
    Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4) also requires that agencies assess anticipated costs and 
benefits before issuing any rule that may result in an expenditure in 
any 1 year by State, local, or tribal governments, in the aggregate, or 
by the private sector, of $110 million. This proposed rule would not 
mandate any requirements for State, local, or tribal governments. This 
proposed rule imposes no unfunded mandates on the private sector.
Federalism
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it publishes a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on State and local 
governments, preempts State law, or otherwise has Federalism 
implications.
    We have examined this proposed rule in accordance with Executive 
Order 13132, Federalism, and have determined that it will not have an 
impact on the rights, roles, and responsibilities of State, local or 
tribal governments. The impact analysis (see table 10) shows that 
payments to governmental hospitals (including State, local and tribal 
governmental hospitals) would increase by 5 percent under the proposed 
rule.

2. Changes in this Proposed Rule

    We are proposing several changes to the OPPS that are required by 
the statute. We are required under section 1833(t)(3)(C)(ii) of the Act 
to update annually the conversion factor used to determine the APC 
payment rates. We are also required under section 1833(t)(9)(A) of the 
Act to revise, not less often than annually, the wage index and other 
adjustments. In addition, we must review the clinical integrity of 
payment groups and weights at least annually. Accordingly, in this 
proposed rule, we are updating the conversion factor and the wage index 
adjustment for hospital outpatient services furnished beginning January 
1, 2003 as

[[Page 52145]]

we discuss in sections VI and IV, respectively, of this preamble. We 
are also proposing revisions to the relative APC payment weights based 
on claims data from January 1, 2001 through December 31, 2001. Finally, 
we are proposing to remove 95 devices and more than 200 drugs and 
biologicals from pass-through payment status.
    Under this proposed rule, the change to the conversion factor as 
provided by statute would increase total OPPS payments by 3.5 percent 
in 2003. The changes to the wage index and to the APC weights (which 
incorporates the cessation of pass-through payments for many drugs and 
devices) do not increase OPPS payments because the OPPS is budget 
neutral. However, the wage index and APC weight changes do change the 
distribution of payments within the budget neutral system as shown in 
Table 10 and described in more detail in this section.
Alternatives Considered
    Alternatives to the changes we propose and the reason that we did 
not choose to propose them are discussed throughout this proposed rule. 
Below we discuss options we considered when analyzing methodologies to 
appropriately recognize the costs of former pass-through items. For a 
more detailed discussion, see section III.C.1 regarding the expiration 
of pass-through payment for devices and section III.C.2 regarding the 
expiration of pass-through payment for drugs and biologicals.
Payment for Categories of Devices
    We considered establishing separate APCs for categories of devices 
and paying for them separately. We did not propose this option because 
we believe that to the extent possible, hospital payment for procedures 
and visits should include all of the costs required to provide the 
procedures and visits.
    A second option we considered involved (1) packaging some 
categories of devices into the procedures with which they were billed 
in 2001 and (2) paying the rest through separate APCs (as discussed in 
section III.C.). We did not propose this option because we believe that 
devices are routinely used in the services for which they are needed 
and therefore are consistently paid at the cost of providing the 
service. Furthermore, criteria that would provide a basis for some 
devices to be packaged and for others to be paid separately would have 
to be developed and approved, thereby further complicating an already 
complex payment system.
Payment for Drugs and Biologicals
    We considered continuing to make separate payment for all drugs and 
biologicals through separate APCs. We did not propose to pay separately 
for all drugs through separate APCs because we believe that, to the 
extent possible, hospital payment for services should include all of 
the costs of the services. We believe that drugs should be packaged 
with the services in which they are furnished except when we determine 
that there is a valid reason to do otherwise. However, we recognize 
that (unlike the stability that exists with device usage with the 
applicable procedures) the use of drugs may vary widely depending upon 
patient and disease characteristics. Therefore, packaging payment for 
all drugs may, in some cases, provide inadequate payment for the 
services furnished. Where a hospital has a disproportionate share of 
patients who need greater amounts of expensive drugs, underpayment for 
the drugs needed by these patients could result in cessation of needed 
services. For the first year that we are ceasing transitional pass-
through payment for drugs, we decided to proceed cautiously by 
proposing to pay separately for drugs when the cost per encounter was 
more than $150 or when special characteristics existed (for example, 
orphan drugs, blood products).
    We also considered packaging the costs of all drugs into the cost 
of the associated procedures with which they were billed in 2001. We 
did not package all payment for drugs into the payment for the 
procedures because, while this packaging is ultimately our goal, we 
believe, for the reasons indicated above, that we need to proceed 
cautiously to ensure that we do not inadvertently threaten access to 
needed care.
Conclusion
    It is clear that the changes in this proposed rule would affect 
both a substantial number of rural hospitals as well as other classes 
of hospitals, and the effects on some may be significant. Therefore, 
the discussion below, in combination with the rest of this proposed 
rule, constitutes a regulatory impact analysis.
    The OPPS rates proposed for CY 2003 would have, overall, a positive 
effect for every category of hospital with the exception of children's 
hospitals, which are held harmless under the OPPS. The changes in the 
OPPS proposed for 2003 would result in an overall 3.5 percent increase 
in Medicare payments to hospitals, exclusive of outlier and 
transitional pass-through payments and transitional corridor payments. 
As described in the preamble, budget neutrality adjustments are made to 
the conversion factor and the weights to assure that the revisions in 
the wage index, APC groups, and relative weights do not affect 
aggregate payments. The impact of the wage and recalibration changes 
does vary somewhat by hospital group. Estimates of these impacts are 
displayed on Table 10.
    The overall projected increase in payments for urban hospitals is 
slightly lower (2.5 percent) than the average increase for all 
hospitals (3.5 percent) while the increase for rural hospitals is 
significantly greater (7.6 percent) than the average increase. Rural 
hospitals gain 2.3 percent from the wage index change, and also gain 
1.6 percent from APC changes. A discussion of the distribution of 
outlier payments that we project under this proposed rule can be found 
under section D below. Table 11 presents the outlier distribution that 
we expect to see under this proposed rule.

3. Limitations of Our Analysis

    The distributional impacts represent the projected effects of the 
proposed policy changes, as well as statutory changes effective for 
2003, on various hospital groups. We estimate the effects of individual 
policy changes by estimating payments per service while holding all 
other payment policies constant. We use the best data available but do 
not attempt to predict behavioral responses to our policy changes. In 
addition, we do not make adjustments for future changes in variables 
such as service volume, service mix, or number of encounters.

4. Estimated Impacts of This Proposed Rule on Hospitals

    The OPPS is a budget neutral payment system under which the 
increase to the total payments made under OPPS is limited by the 
increase to the conversion factor set under the methodology in the 
statute. The impact tables show the redistributive effects of the wage 
index and APC changes. In some cases, under this proposed rule, 
hospitals would receive more total payment than in 2002 while in other 
cases they would receive less total payment than they received in 2002. 
The impact of this proposed rule would depend on a number of factors, 
most significant of which are the mix of services furnished by a 
hospital (for example, how the APCs for the hospital's most frequently 
furnished services would change) and the impact of the wage index 
changes on the hospital.
    Column 4 in Table 10 represents the full impact on each hospital 
group of all

[[Page 52146]]

the changes for 2003. Columns 2 and 3 in the table reflect the 
independent effects of the proposed change in the wage index and the 
APC reclassification and recalibration changes, respectively. We 
excluded critical access hospitals (CAHs) from the analysis of the 
impact of the proposed 2003 OPPS rates that is summarized in Table 10. 
For that reason, the total number of hospitals included in Table 10 
(4,551) is lower than in previous years. CAHs are excluded from the 
OPPS.
    In general, the wage index changes favor rural hospitals, 
particularly the largest in bed size and volume. The only rural 
hospitals that would experience a negative impact due to wage index 
changes are those in Puerto Rico, a decrease of 2.8 percent. 
Conversely, the urban hospitals are generally negatively affected by 
wage index changes, with the largest decreases occurring in those with 
300-499 beds (-0.7 percent) and those in the Middle Atlantic (-1.3 
percent), Pacific (-.09 percent) and Puerto Rico Regions (-1.8 
percent). However, this effect is somewhat lessened by the distribution 
of outlier payments as discussed in more detail below.
    The APC reclassification and recalibration changes also favor rural 
hospitals and have a negative effect on urban hospitals in excess of 
200 beds. Specifically, urban hospitals with 200-299 beds (-0.5 percent 
decrease), urban hospitals with 300-499 beds (-2.0 percent decrease) 
and urban hospitals in excess of 500 beds (a -1.9 percent decrease) all 
show a decrease attributed to APC recalibration. We believe this occurs 
as a result of our folding 75 percent of estimated pass-through device 
costs into APC payments in the 2002 OPPS. Specifically, a comparison of 
the relative payment weights proposed for 2003, as listed in Addendum 
A, with the final 2002 relative payment weights in the March 1, 2002 
final rule shows a decrease in the weights for certain APCs in 2002 
that included a fold-in of 75 percent of estimated pass-through device 
costs. We relied on cost information supplied by device manufacturers 
in estimating the device costs to be folded in when calculating the 
median APC costs for the 2002 OPPS, whereas the proposed 2003 relative 
payment weights are based on actual hospital charges and utilization 
under the OPPS as reported by hospitals. We believe this downward 
tendency in the payment weights for APCs that include device costs, 
based on actual hospital experience, accounts in part for the lower 
positive effect of the proposed 2003 rates on urban hospitals and on 
teaching hospitals, which tend to perform a higher number of procedures 
involving costly new technology devices, in contrast with an increased 
positive effect in 2003 on rural and non-teaching hospitals, which tend 
to furnish a higher volume of clinic and preventive services than 
procedures associated with expensive new technology devices.
    In both urban and rural areas, hospitals that provide a lower 
volume of outpatient services are projected to receive a larger 
increase in payments than higher volume hospitals. In rural areas, 
hospitals with volumes of fewer than 5000 services are projected to 
experience a significant increase in payments (8.1 percent). The less 
favorable impact for the high volume urban hospitals is attributable to 
both wage index and APC changes. For example, urban hospitals providing 
more than 42,999 services are projected to gain a combined 1.6 percent 
due to these changes.
    Major teaching hospitals are projected to experience a smaller 
increase in payments (1.7 percent) than the aggregate for all hospitals 
(3.5 percent) due to negative impacts of the wage index (-0.5 percent) 
and recalibration (-1.2 percent). Hospitals with less intensive 
teaching programs are projected to experience an overall increase (2.0 
percent) that is smaller than the average for all hospitals. There is 
little difference in impact among hospitals with that serve low-income 
patients.

             Table 10.--Impact of Changes for CY 2003 Hospital Outpatient Prospective Payment System
[Percent change in total payment to hospitals (program and beneficiary); does not include the effects of outlier
                  and transitional pass-through payments or of transitional corridor payments.]
----------------------------------------------------------------------------------------------------------------
                                                               Number of     New wage       APC      All CY 2003
                                                               hospitals    index \2\   changes)\3\  changes \4\
                                                                \1\ (1)        (2)          (3)          (4)
----------------------------------------------------------------------------------------------------------------
ALL HOSPITALS..............................................         4,551          0.0          0.0          3.5
NON-TEFRA HOSPITALS........................................         4,002          0.0         -0.1          3.4
URBAN HOSPS................................................         2,429         -0.6         -0.5          2.5
    LARGE URBAN (GT 1 MILL.)...............................         1,398         -0.7         -0.1          2.6
    OTHER URBAN (LE 1 MILL.)...............................         1,031         -0.4         -0.9          2.2
RURAL HOSPS................................................         1,573          2.3          1.6          7.6
BEDS (URBAN):
    0-99 BEDS..............................................           554         -0.3          3.1          6.4
    100-199 BEDS...........................................           882         -0.6          1.4          4.3
    200-299 BEDS...........................................           488         -0.6         -0.5          2.3
    300-499 BEDS...........................................           364         -0.7         -2.0          0.7
    500+ BEDS..............................................           141         -0.3         -1.9          1.3
BEDS (RURAL):
    0-49 BEDS..............................................           754          0.4          2.9          7.0
    50-99 BEDS.............................................           479          1.5          2.3          7.6
    100-149 BEDS...........................................           201          2.4          1.5          7.6
    150-199 BEDS...........................................            73          5.5          0.1          9.5
    200+ BEDS..............................................            66          3.3          0.0          7.0
VOLUME (URBAN):
    LT 5,000...............................................           188          0.9          6.5         10.9
    5,000-10,999...........................................           305         -0.8          5.1          7.9
    11,000-20,999..........................................           472         -0.7          2.6          5.5
    21,000-42,999..........................................           657         -0.8          0.3          3.0
    GT 42,999..............................................           807         -0.5         -1.4          1.6
VOLUME (RURAL):
    LT 5,000...............................................           326          0.2          4.2          8.1
    5,000-10,999...........................................           446          0.6          4.4          8.7

[[Page 52147]]


    11,000-20,999..........................................           373          1.3          2.7          7.7
    21,000-42,999..........................................           290          1.9          1.4          6.9
    GT 42,999..............................................           138          4.3         -0.2          7.8
REGION (URBAN):
    NEW ENGLAND............................................           127         -0.6          0.6          3.4
    MIDDLE ATLANTIC........................................           372         -1.3          0.2          2.3
    SOUTH ATLANTIC.........................................           370         -0.2         -0.1          3.2
    EAST NORTH CENT........................................           413         -0.7         -1.4          1.4
    EAST SOUTH CENT........................................           153         -0.6         -1.0          1.9
    WEST NORTH CENT........................................           172         -0.3         -1.6          1.6
    WEST SOUTH CENT........................................           293          0.5         -0.7          3.3
    MOUNTAIN...............................................           122         -0.4         -1.1          1.9
    PACIFIC................................................           368         -0.9          0.6          3.1
    PUERTO RICO............................................            39         -1.8          4.7          6.4
REGION (RURAL):
    NEW ENGLAND............................................            40          1.6          1.3          6.5
    MIDDLE ATLANTIC........................................            63          2.2          1.3          7.2
    SOUTH ATLANTIC.........................................           226          2.6          2.1          8.4
    EAST NORTH CENT........................................           213          1.2         -0.2          4.6
    EAST SOUTH CENT........................................           232          2.3          2.6          8.7
    WEST NORTH CENT........................................           271          2.0          0.9          6.6
    WEST SOUTH CENT........................................           278          1.8          3.2          8.8
    MOUNTAIN...............................................           141          4.1          1.3          9.2
    PACIFIC................................................           104          5.6          2.7         12.1
    PUERTO RICO............................................             5         -2.8         10.4         11.1
TEACHING STATUS:
    NON-TEACHING...........................................         2,935          0.4          1.1          5.0
    MINOR..................................................           782         -0.4         -1.1          2.0
    MAJOR..................................................           284         -0.5         -1.2          1.7
DSH PATIENT PERCENT:
     0.....................................................            11          4.9         10.1         19.4
    GT 0-0.10..............................................           982         -0.2         -0.4          3.0
    0.10-0.16..............................................           873          0.7         -0.8          3.4
    0.16-0.23..............................................           767         -0.6         -0.3          2.6
    0.23-0.35..............................................           756         -0.2          0.1          3.4
    GE 0.35................................................           613         -0.1          2.2          5.8
URBAN IME/DSH:
    IME & DSH..............................................           982         -0.7         -1.2          1.6
    IME/NO DSH.............................................             0          0.0          0.0          0.0
    NO IME/DSH.............................................         1,441         -0.4          0.7          3.8
    NO IME/NO DSH..........................................             6          5.4          9.8         19.7
RURAL HOSP. TYPES:
    NO SPECIAL STATUS......................................           610          0.7          2.7          7.1
    RRC....................................................           167          4.2          0.2          8.2
    SCH/EACH...............................................           507          1.5          2.7          7.8
    MDH....................................................           199          0.8          2.1          6.6
    SCH AND RRC............................................            75          4.0          0.5          8.2
TYPE OF OWNERSHIP:
    VOLUNTARY..............................................         2,440         -0.1         -0.4          3.1
    PROPRIETARY............................................           707         -0.6          0.9          3.8
    GOVERNMENT.............................................           855          0.7          0.7          5.0
SPECIALTY HOSPITALS:
    EYE AND EAR............................................            13         -1.4         11.5         13.7
    TRAUMA.................................................           153         -0.3         -1.5          1.6
    CANCER.................................................            10          0.5         -3.9          0.2
TEFRA HOSPITALS (NOT INCLUDED ON OTHER LINES):
    REHAB..................................................           166         10.3          2.8         16.9
    PSYCH..................................................           198          0.1         15.9         20.1
    LTC....................................................           143          1.3         15.9         20.4
    CHILDREN...............................................            42         -1.4         -2.8        -0.9
----------------------------------------------------------------------------------------------------------------
Note: For CY 2003, under the OPPS transitional corridor policy, the following categories of hospitals are held
  harmless compared to their 1996 payment margin for these services: cancer and children's hospitals and rural
  hospitals with 100 or fewer beds.
\1\ Some data necessary to classify hospitals by category were missing; thus, the total number of hospitals in
  each category may not equal the national total.
\2\ This column shows the impact of updating the wage index used to calculate payment by applying the proposed
  FY 2003 hospital inpatient wage index after geographic reclassification by the Medicare Geographic
  Classification Review Board. The hospital inpatient proposed rule for FY 2003 was published in the Federal
  Register on May 9, 2002.
\3\ This column shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups
  and the recalibration of APC weights based on 2001 hospital claims data.

[[Page 52148]]


\4\ This column shows changes in total payment from CY 2002 to CY 2003, excluding outlier and pass-through
  payments. It incorporates all of the changes reflected in columns 2 and 3. In addition, it shows the impact of
  the proposed CY 2003 payment update. The sum of the columns may be different from the percentage changes shown
  here due to rounding.

    As stated elsewhere in this preamble, we propose to allocate 2 
percent of the estimated 2003 expenditures to outlier payments. In 
Table 11 below, we provide a distribution by percentage of the total 
projected outlier payments for the categories of hospitals that we show 
in the impact table (Table 10).
    We project, based on the mix of services for the hospitals that 
will be paid under the OPPS in 2003, that most hospitals will receive 
outlier payments. It appears that, with the exception of some smaller 
bed hospitals, all Tax Equity & Fiscal Responsibility Act of 1982 
(TEFRA) hospitals can be expected to receive outlier payments. This is 
because TEFRA hospitals provide an atypical mix of specialty services 
(which account for less than 1 percent of total OPPS payment before 
consideration of outliers). A greater percentage of non-TEFRA hospitals 
are not projected to receive outlier payments.
    The anticipated outlier payments for urban hospitals can be 
expected to ameliorate the impact of the wage index and APC changes on 
payments to urban hospitals.

     Table 11.--Distribution of Outlier Payments for CY 2003 Hospital Outpatient Prospective Payment System
----------------------------------------------------------------------------------------------------------------
                                                                                                      Percent of
                                                               Number of    Percent of   Number of      total
                                                                 hosps     total hosps   hosps with    outlier
                                                                                          outliers     payments
----------------------------------------------------------------------------------------------------------------
ALL HOSPITALS...............................................        4,551       100.00        4,306       100.00
NON-TEFRA HOSPITALS.........................................        4,002        88.00        3,987        99.40
URBAN HOSPS.................................................        2,429        53.40        2,420        83.20
    LARGE URBAN (GT 1 MILL.)................................        1,398        30.80        1,396        55.20
    OTHER URBAN (LE 1 MILL.)................................        1,031        22.60        1,024        28.00
RURAL HOSPS.................................................        1,573        34.60        1,567        16.00
BEDS (URBAN):
    0-99 BEDS...............................................          554        12.20          550         6.80
    100-199 BEDS............................................          882        19.40          877        18.20
    200-299 BEDS............................................          488        10.80          488        16.20
    300-499 BEDS............................................          364         8.00          364        21.00
    500+ BEDS...............................................          141         3.00          141        21.00
BEDS (RURAL):
    0-49 BEDS...............................................          754        16.60          751         4.20
    50-99 BEDS..............................................          479        10.60          477         5.00
    100-149 BEDS............................................          201         4.40          200         2.60
    150-199 BEDS............................................           73         1.60           73         2.00
    200+ BEDS...............................................           66         1.40           66         2.40
VOLUME (URBAN):
    LT 5,000................................................          188         4.20          180         1.00
    5,000-10,999............................................          310         6.80          309         2.80
    11,000-20,999...........................................          467        10.20          467         7.00
    21,000-42,999...........................................          659        14.40          659        15.80
    GT 42,999...............................................          805        17.60          805        56.60
VOLUME (RURAL):
    LT 5,000................................................          326         7.20          321         1.00
    5,000-10,999............................................          447         9.80          446         2.60
    11,000-20,999...........................................          372         8.20          372         3.80
    21,000-42,999...........................................          290         6.40          290         4.20
    GT 42,999...............................................          138         3.00          138         4.40
REGION (URBAN):
    NEW ENGLAND.............................................          127         2.80          126         6.20
    MIDDLE ATLANTIC.........................................          372         8.20          371        22.80
    SOUTH ATLANTIC..........................................          370         8.20          369        11.00
    EAST NORTH CENT.........................................          413         9.00          409        15.60
    EAST SOUTH CENT.........................................          153         3.40          152         3.40
    WEST NORTH CENT.........................................          172         3.80          172         4.40
    WEST SOUTH CENT.........................................          293         6.40          292         8.20
    MOUNTAIN................................................          122         2.60          122         3.00
    PACIFIC.................................................          368         8.00          368         8.60
    PUERTO RICO.............................................           39         0.80           39         0.20
REGION (RURAL):
    NEW ENGLAND.............................................           40         0.80           40         1.00
    MIDDLE ATLANTIC.........................................           63         1.40           63         1.00
    SOUTH ATLANTIC..........................................          226         5.00          223         3.00
    EAST NORTH CENT.........................................          213         4.60          212         3.00
    EAST SOUTH CENT.........................................          232         5.00          232         1.60
    WEST NORTH CENT.........................................          271         6.00          270         2.40
    WEST SOUTH CENT.........................................          278         6.20          278         1.60
    MOUNTAIN................................................          141         3.00          141         1.40
    PACIFIC.................................................          104         2.20          103         1.20
    PUERTO RICO.............................................            5         0.20            5         0.00
TEACHING STATUS:
    NON-TEACHING............................................        2,935        64.40        2,920        39.80

[[Page 52149]]


    MINOR...................................................          782        17.20          782        27.20
    MAJOR...................................................          284         6.20          284        32.20
DSH PATIENT PERCENT:
    0.......................................................           11         0.20           10         0.00
    GT 0--0.10..............................................          982        21.60          978        24.80
    0.10--0.16..............................................          873        19.20          873        19.40
    0.16--0.23..............................................          767        16.80          765        17.60
    0.23--0.35..............................................          756        16.60          753        20.00
    GE 0.35.................................................          613        13.40          608        17.40
URBAN IME/DSH:
    IME & DSH...............................................          982        21.60          982        57.20
    IME/NO DSH..............................................            0         0.00            0         0.00
    NO IME/DSH..............................................        1,441        31.60        1,433        26.00
    NO IME/NO DSH...........................................            6         0.20            5         0.00
RURAL HOSP. TYPES:
    NO SPECIAL STATUS.......................................          621        13.60          617         5.20
    RRC.....................................................          167         3.60          166         4.00
    SCH/EACH................................................          511        11.20          511         4.40
    MDH.....................................................          199         4.40          198         1.00
    SCH AND RRC.............................................           75         1.60           75         1.40
TYPE OF OWNERSHIP:
    VOLUNTARY...............................................        2,440        53.60        2,435        73.60
    PROPRIETARY.............................................          707        15.60          702        10.40
    GOVERNMENT..............................................          855        18.80          850        15.20
SPECIALTY HOSPITALS:
    EYE AND EAR.............................................           13         0.20           13         0.20
    TRAUMA..................................................          153         3.40          153        15.00
    CANCER..................................................           10         0.20           10         3.80
TEFRA HOSPITALS (NOT INCLUDED ON OTHER LINES):
    REHAB...................................................          166         3.60          113         0.20
    PSYCH...................................................          198         4.40           65         0.20
    LTC.....................................................          143         3.20          100         0.20
    CHILDREN................................................           42         1.00           41         0.20
----------------------------------------------------------------------------------------------------------------

5. Estimated Impacts of This Proposed Rule on Beneficiaries
    For services for which the beneficiary pays a coinsurance of 20 
percent of the payment rate, the beneficiary share of payment would 
increase for services for which OPPS payments would rise and would 
decrease for services for which OPPS payments would fall. For example 
for a mid level office visit (APC 0601), the minimum unadjusted 
copayment in 2002 was $9.67; under this proposed rule, the minimum 
unadjusted copayment would be $10.82 because the OPPS payment for the 
service would increase under this proposed rule. For some services 
(those services for which a national unadjusted copayment amount is 
shown in Addendum B), however, the beneficiary copayment is frozen 
based on historic data and would not change, therefore not presenting 
any potential impact on beneficiaries.
    However, in all cases, the statute limits beneficiary liability for 
copayment for a service to the inpatient hospital deductible for the 
applicable year. This amount was $812 for 2002, but is not yet 
determined for 2003. In general, the impact of this proposed rule on 
beneficiaries would vary based on the service the beneficiary receives 
and whether the copayment for the service is one that is frozen under 
the OPPS.

B. Payment Suspension for Unfiled Cost Reports

Overall Impact
    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-
354), section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132. (A 
description of each of these requirements is stated above in section 
XIV.A.1.) We have determined that the proposed payment suspension 
provision does not have an economic impact on Medicare payments or 
other payments to providers. We are proposing to allow the Secretary 
flexibility in payment suspensions, but we are not altering the final 
payment determination in any way. With the implementation of the 
various prospective payment systems, the majority of the payment to 
providers is based on the PPS methodology and not on the cost report. 
Suspending all payments because the cost report is not timely filed 
negatively affects providers. Providing the Secretary with flexibility 
in payment suspension can lessen the financial impact on providers. For 
these reasons, we are not preparing analyses for either the RFA or 
section 1102(b) of the Act because we have determined, and we certify, 
that this rule would not have a significant economic impact on a 
substantial number of small entities or a significant impact on the 
operations of a substantial number of small rural hospitals. Under the 
requirement for Unfunded Mandates, this proposed rule will not have an 
economic effect on State, local, or tribal governments, in the 
aggregate, or on the private sector.
Anticipated Effects
    1. Effects on providers that file cost reports. The majority of 
providers that file cost reports comply with the timeliness provisions 
and will be unaffected by this proposed regulation.

[[Page 52150]]

In FY 2000, collectively 16 percent of hospitals, skilled nursing 
facilities, and home health agencies filed late cost reports. Of this 
16 percent, 65 percent of those were only 1 day late. Currently, when a 
provider fails to file an acceptable cost report, the provider is 
placed on a complete payment suspension. Under this provision, for 
those providers who do not file timely, an immediate payment suspension 
less than the total suspension currently required might be imposed if 
the Secretary deemed it appropriate, which would allow the provider to 
more easily continue operations while completing and submitting the 
acceptable cost report.
    2. Effects on other providers. The payment suspension provision 
does not affect other providers.
    3. Effects on the Medicare Program. The provision would allow the 
Secretary to more effectively manage the Medicare program by imposing 
other than complete payment suspension when it is appropriate to do so. 
The Medicare program benefits because immediate complete payment 
suspension can be disruptive to providers and may negatively affect the 
care of Medicare patients. There are no costs to the Medicare program 
to doing so, because when the cost report is submitted, the suspended 
payments are returned to the provider.
    4. Effects on Beneficiaries. We have determined that this provision 
has a potentially positive impact on beneficiaries. Under this proposed 
provision the Secretary will have the discretion to impose less than 
100 percent payment suspension when a provider fails to timely file an 
acceptable cost report. Doing so will lessen the financial burden on 
the provider and thereby allow it to provide adequate services to its 
patient population as it works to complete and file an acceptable cost 
report.
Alternatives Considered
    We considered not revising existing Sec. 405.371(c) to provide that 
payment suspension could be ``in whole or in part''. However, we did 
not choose this option because we believe the Secretary should have the 
discretion to impose partial payment suspensions when circumstances 
warrant in order to more effectively manage the Medicare program.
Conclusion
    In conclusion, we have determined that the proposed payment 
suspension provision does not have an economic impact on Medicare 

payments.
Federalism
    Since this regulation does not impose any costs on State or local 
governments, it will not have an effect on State or local governments. 
State or local governments will have no roles or responsibilities 
associated with this provision.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements, Rural areas, X-rays.

42 CFR Part 410

    Health facilities, Health professions, Kidney diseases, 
Laboratories, Medicare, Reporting and recordkeeping requirements, Rural 
areas, X-rays.

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR chapter IV as follows:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

Subpart C--Suspension of Payment, Recovery of Overpayments, and 
Repayment of Scholarships and Loans

    1. The authority citation for subpart C continues to read as 
follows:

    Authority: Secs. 1102, 1815, 1833, 1842, 1866, 1870, 1871, 1879, 
and 1892 of the Social Security Act (42 U.S.C. 1302, 1395g, 1395l, 
1395u, 1395cc, 1395gg, 1395hh, 1395pp, and 1395ccc) and 31 U.S.C. 
3711.

    2.Section 405.371(c) is revised to read as follows:


Sec. 405.371  Suspension, offset and recoupment of Medicare payments to 
providers and suppliers of services.

* * * * *
    (c) Suspension of payment in the case of unfiled cost reports. If a 
provider has failed to timely file an acceptable cost report, payment 
to the provider is immediately suspended in whole or in part until a 
cost report is filed and determined by the intermediary to be 
acceptable. In the case of an unfiled cost report, the provisions of 
Sec. 405.372 do not apply. (See Sec. 405.372(a)(2) concerning failure 
to furnish other information.)

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

    1.The authority citation continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

    2. In 410.43 republish the introductory text of paragraph (b), and 
add a new paragraph (b)(6) to read as follows:


Sec. 410.43  Partial hospitalization services: Conditions and 
exclusions.

* * * * *
    (b) The following services are separately covered and not paid as 
partial hospitalization services:
* * * * *
    (6) Clinical social worker services that meet the requirements of 
section 1861(hh)(2) of the Act.

PART 419--PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT 
DEPARTMENT SERVICES

    1. The authority citation continues to read as follows:

    Authority: Secs. 1102, 1833(t), and 1871 of the Social Security 
Act (42 U.S.C. 1302, 1395l(t), and 1395hh).


Sec. 419.66  [Amended]

    2. In Sec. 419.66, paragraph (c)(1) is amended by adding the phrase 
``or by any category previously in effect'' after ``categories'' and 
before ``and'.


Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
    Dated: July 31, 2002.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: August 5, 2002.
Tommy G. Thompson,
Secretary.
BILLING CODE 4120-01-P

[[Page 52151]]





Addendum A.--List of Ambulatory Payment Classifications (APCs) With Status Indicators, Relative Weights, Payment
                                 Rates, and Copayment Amounts Calendar Year 2003
----------------------------------------------------------------------------------------------------------------
                                                                                           National     Minimum
         APC               Group title         Status indicator    Relative     Payment   unadjusted  unadjusted
                                                                    weight       rate      copayment   copayment
----------------------------------------------------------------------------------------------------------------
0620................  Critical Care........  S                         10.25     $533.09     $150.55     $106.62
0656................  Transcatheter          T                         90.90   $4,927.70  ..........     $985.54
                       Placement of Drug-
                       Eluting Coronary
                       Stents.
0657................  Placement of Tissue    S                          1.38      $71.77  ..........      $14.35
                       Clips.
0658................  Percutaneous Breast    T                          5.57     $289.69  ..........      $57.94
                       Biopsies.
----------------------------------------------------------------------------------------------------------------


Addendum A.--List of Ambulatory Payment Classifications (APCs) with Status Indicators, Relative Weights, Payment
                                 Rates, and Copayment Amounts Calendar Year 2003
----------------------------------------------------------------------------------------------------------------
                                                                                        National       Minimum
       APC             Group title           Status         Relative    Payment rate   unadjusted    unadjusted
                                            indicator        weight                     copayment     copayment
----------------------------------------------------------------------------------------------------------------
0001.............  Level I              S                         0.43        $22.36         $7.88         $4.47
                    Photochemotherapy.
0002.............  Fine needle Biopsy/  T                         0.63        $32.77         $8.52         $6.55
                    Aspiration.
0003.............  Bone Marrow Biopsy/  T                         1.24        $64.49        $27.08        $12.90
                    Aspiration.
0004.............  Level I Needle       T                         1.63        $84.77        $22.04        $16.95
                    Biopsy/Aspiration
                    Except Bone Marrow.
0005.............  Level II Needle      T                         3.02       $157.07        $69.11        $31.41
                    Biopsy /Aspiration
                    Except Bone Marrow.
0006.............  Level I Incision &   T                         1.89        $98.30        $25.56        $19.66
                    Drainage.
0007.............  Level II Incision &  T                         9.44       $490.96       $103.10        $98.19
                    Drainage.
0008.............  Level III Incision   T                        16.32       $848.79  ............       $169.76
                    and Drainage.
0009.............  Nail Procedures....  T                         0.68        $35.37         $8.34         $7.07
0010.............  Level I Destruction  T                         0.70        $36.41        $10.56         $7.28
                    of Lesion.
0011.............  Level II             T                         1.93       $100.38        $27.88        $20.08
                    Destruction of
                    Lesion.
0012.............  Level I Debridement  T                         0.76        $39.53        $10.67         $7.91
                    & Destruction.
0013.............  Level II             T                         1.10        $57.21        $14.30        $11.44
                    Debridement &
                    Destruction.
0015.............  Level III            T                         1.43        $74.37        $18.59        $14.87
                    Debridement &
                    Destruction.
0016.............  Level IV             T                         2.57       $133.66        $56.14        $26.73
                    Debridement &
                    Destruction.
0017.............  Level VI             T                        16.46       $856.07       $227.84       $171.21
                    Debridement &
                    Destruction.
0018.............  Biopsy of Skin/      T                         0.92        $47.85        $15.79         $9.57
                    Puncture of Lesion.
0019.............  Level I Excision/    T                         3.94       $204.92        $75.82        $40.98
                    Biopsy.
0020.............  Level II Excision/   T                         7.36       $382.79       $114.84        $76.56
                    Biopsy.
0021.............  Level III Excision/  T                        14.58       $758.29       $227.49       $151.66
                    Biopsy.
0022.............  Level IV Excision/   T                        18.10       $941.36       $367.13       $188.27
                    Biopsy.
0023.............  Exploration          T                         2.38       $123.78        $40.37        $24.76
                    Penetrating Wound.
0024.............  Level I Skin Repair  T                         2.00       $104.02        $37.45        $20.80
0025.............  Level II Skin        T                         5.89       $306.33       $116.41        $61.27
                    Repair.
0027.............  Level IV Skin        T                        15.73       $818.10       $343.60       $163.62
                    Repair.
0028.............  Level I Breast       T                        17.44       $907.04       $303.74       $181.41
                    Surgery.
0029.............  Level II Breast      T                        29.89     $1,554.55       $632.64       $310.91
                    Surgery.
0030.............  Level III Breast     T                        40.23     $2,092.32       $763.55       $418.46
                    Surgery.
0032.............  Insertion of         T                         7.14       $371.34  ............        $74.27
                    Central Venous/
                    Arterial Catheter.
0033.............  Partial              P                         4.96       $257.96  ............        $51.59
                    Hospitalization.
0035.............  Placement of         T                         0.24        $12.48         $3.74         $2.50
                    Arterial or
                    Central Venous
                    Catheter.
0041.............  Level I Arthroscopy  T                        27.58     $1,434.41       $580.06       $286.88
0042.............  Level II             T                        43.24     $2,248.87       $804.74       $449.77
                    Arthroscopy.
0043.............  Closed Treatment     T                         1.68        $87.38  ............        $17.48
                    Fracture Finger/
                    Toe/Trunk.
0045.............  Bone/Joint           T                        13.47       $700.56       $280.22       $140.11
                    Manipulation Under
                    Anesthesia.
0046.............  Open/Percutaneous    T                        29.03     $1,509.82       $535.76       $301.96
                    Treatment Fracture
                    or Dislocation.
0047.............  Arthroplasty         T                        29.59     $1,538.95       $537.03       $307.79
                    without Prosthesis.
0048.............  Arthroplasty with    T                        36.93     $1,920.69       $633.83       $384.14
                    Prosthesis.
0049.............  Level I              T                        19.45     $1,011.58  ............       $202.32
                    Musculoskeletal
                    Procedures Except
                    Hand and Foot.
0050.............  Level II             T                        23.60     $1,227.41  ............       $245.48
                    Musculoskeletal
                    Procedures Except
                    Hand and Foot.
0051.............  Level III            T                        34.03     $1,769.87  ............       $353.97
                    Musculoskeletal
                    Procedures Except
                    Hand and Foot.
0052.............  Level IV             T                        42.37     $2,203.62  ............       $440.72
                    Musculoskeletal
                    Procedures Except
                    Hand and Foot.
0053.............  Level I Hand         T                        14.76       $767.65       $253.49       $153.53
                    Musculoskeletal
                    Procedures.
0054.............  Level II Hand        T                        23.50     $1,222.21       $472.33       $244.44
                    Musculoskeletal
                    Procedures.
0055.............  Level I Foot         T                        18.28       $950.72       $355.34       $190.14
                    Musculoskeletal
                    Procedures.
0056.............  Level II Foot        T                        22.94     $1,193.09       $405.81       $238.62
                    Musculoskeletal
                    Procedures.
0057.............  Bunion Procedures..  T                        23.87     $1,241.45       $496.58       $248.29
0058.............  Level I Strapping    S                         1.09        $56.69        $14.74        $11.34
                    and Cast
                    Application.
0060.............  Manipulation         S                         0.36        $18.72  ............         $3.74
                    Therapy.

[[Page 52152]]


0068.............  CPAP Initiation....  S                         1.59        $82.69        $45.48        $16.54
0069.............  Thoracoscopy.......  T                        29.51     $1,534.79       $591.64       $306.96
0070.............  Thoracentesis/       T                         3.30       $171.63  ............        $34.33
                    Lavage Procedures.
0071.............  Level I Endoscopy    T                         1.01        $52.53        $14.18        $10.51
                    Upper Airway.
0072.............  Level II Endoscopy   T                         1.66        $86.33        $37.99        $17.27
                    Upper Airway.
0073.............  Level III Endoscopy  T                         3.63       $188.79        $74.14        $37.76
                    Upper Airway.
0074.............  Level IV Endoscopy   T                        12.84       $667.80       $295.70       $133.56
                    Upper Airway.
0075.............  Level V Endoscopy    T                        20.41     $1,061.50       $445.92       $212.30
                    Upper Airway.
0076.............  Endoscopy Lower      T                         9.30       $483.68       $189.92        $96.74
                    Airway.
0077.............  Level I Pulmonary    S                         0.26        $13.52         $7.44         $2.70
                    Treatment.
0078.............  Level II Pulmonary   S                         0.68        $35.37        $15.21         $7.07
                    Treatment.
0079.............  Ventilation          S                         1.63        $84.77        $16.80        $16.95
                    Initiation and
                    Management.
0080.............  Diagnostic Cardiac   T                        35.64     $1,853.60       $838.92       $370.72
                    Catheterization.
0081.............  Non-Coronary         T                        22.69     $1,180.08  ............       $236.02
                    Angioplasty or
                    Atherectomy.
0082.............  Coronary             T                        75.42     $3,922.52     $1,137.53       $784.50
                    Atherectomy.
0083.............  Coronary             T                        47.83     $2,487.59  ............       $497.52
                    Angioplasty and
                    Percutaneous
                    Valvuloplasty.
0084.............  Level I              S                         9.60       $499.29  ............        $99.86
                    Electrophysiologic
                    Evaluation.
0085.............  Level II             T                        31.77     $1,652.33       $363.51       $330.47
                    Electrophysiologic
                    Evaluation.
0086.............  Ablate Heart         T                        43.70     $2,272.79       $772.75       $454.56
                    Dysrhythm Focus.
0087.............  Cardiac              T                         5.81       $302.17  ............        $60.43
                    Electrophysiologic
                    Recording/Mapping.
0088.............  Thrombectomy.......  T                        33.96     $1,766.23       $678.68       $353.25
0089.............  Insertion/           T                       108.92     $5,664.82     $1,642.80     $1,132.96
                    Replacement of
                    Permanent
                    Pacemaker and
                    Electrodes.
0090.............  Insertion/           T                        77.15     $4,012.49     $1,444.50       $802.50
                    Replacement of
                    Pacemaker Pulse
                    Generator.
0091.............  Level II Vascular    T                        27.03     $1,405.80       $348.23       $281.16
                    Ligation.
0092.............  Level I Vascular     T                        24.97     $1,298.66       $505.37       $259.73
                    Ligation.
0093.............  Vascular Repair/     T                        26.29     $1,367.32       $277.34       $273.46
                    Fistula
                    Construction.
0094.............  Level I              S                         2.68       $139.38        $47.39        $27.88
                    Resuscitation and
                    Cardioversion.
0095.............  Cardiac              S                         0.66        $34.33        $16.73         $6.87
                    Rehabilitation.
0096.............  Non-Invasive         S                         1.82        $94.66        $48.15        $18.93
                    Vascular Studies.
0097.............  Cardiac and          X                         0.84        $43.69        $23.80         $8.74
                    Ambulatory Blood
                    Pressure
                    Monitoring.
0098.............  Injection of         T                         1.90        $98.82        $20.88        $19.76
                    Sclerosing
                    Solution.
0099.............  Electrocardiograms.  S                         0.38        $19.76  ............         $3.95
0100.............  Stress Tests and     X                         1.34        $69.69        $38.33        $13.94
                    Continuous ECG.
0101.............  Tilt Table           S                         4.40       $228.84       $105.27        $45.77
                    Evaluation.
0103.............  Miscellaneous        T                        11.26       $585.62       $210.82       $117.12
                    Vascular
                    Procedures.
0104.............  Transcatheter        T                        72.72     $3,782.09  ............       $756.42
                    Placement of
                    Intracoronary
                    Stents.
0105.............  Revision/Removal of  T                        19.14       $995.45       $370.40       $199.09
                    Pacemakers, AICD,
                    or Vascular.
0106.............  Insertion/           T                        29.23     $1,520.22       $410.46       $304.04
                    Replacement/Repair
                    of Pacemaker and/
                    or Electrodes.
0107.............  Insertion of         T                       181.51     $9,440.15     $2,076.83     $1,888.03
                    Cardioverter-
                    Defibrillator.
0108.............  Insertion/           T                       232.69    $12,101.97  ............     $2,420.39
                    Replacement/Repair
                    of Cardioverter-
                    Defibrillator
                    Leads.
0109.............  Removal of           T                         7.68       $399.43       $131.49        $79.89
                    Implanted Devices.
0110.............  Transfusion........  S                         4.04       $210.12  ............        $42.02
0111.............  Blood Product        S                        13.60       $707.32       $198.05       $141.46
                    Exchange.
0112.............  Apheresis,           S                        39.40     $2,049.15       $612.47       $409.83
                    Photopheresis, and
                    Plasmapheresis.
0113.............  Excision Lymphatic   T                        19.75     $1,027.18  ............       $205.44
                    System.
0114.............  Thyroid/             T                        37.55     $1,952.94       $507.76       $390.59
                    Lymphadenectomy
                    Procedures.
0115.............  Cannula/Access       T                        23.48     $1,221.17       $439.62       $244.23
                    Device Procedures.
0116.............  Chemotherapy         S                         0.85        $44.21  ............         $8.84
                    Administration by
                    Other Technique
                    Except Infusion.
0117.............  Chemotherapy         S                         3.87       $201.27        $52.33        $40.25
                    Administration by
                    Infusion Only.
0118.............  Chemotherapy         S                         5.68       $295.41        $72.03        $59.08
                    Administration by
                    Both Infusion and
                    Other Technique.
0119.............  Implantation of      T                        25.88     $1,345.99  ............       $269.20
                    Devices.
0120.............  Infusion Therapy     T                         1.81        $94.14        $25.42        $18.83
                    Except
                    Chemotherapy.
0121.............  Level I Tube         T                         2.17       $112.86        $45.14        $22.57
                    changes and
                    Repositioning.
0122.............  Level II Tube        T                         3.89       $202.32        $46.53        $40.46
                    changes and
                    Repositioning.
0123.............  Bone Marrow          S                         4.86       $252.76  ............        $50.55
                    Harvesting and
                    Bone Marrow/Stem
                    Cell Transplant.
0124.............  Revision of          T                        23.47     $1,220.65  ............       $244.13
                    Implanted Infusion
                    Pump.
0125.............  Refilling of         T                         1.73        $89.98  ............        $18.00
                    Infusion Pump.
0130.............  Level I Laparoscopy  T                        31.99     $1,663.77       $659.53       $332.75
0131.............  Level II             T                        42.44     $2,207.26     $1,001.89       $441.45
                    Laparoscopy.
0132.............  Level III            T                        57.95     $3,013.92     $1,239.22       $602.78
                    Laparoscopy.
0140.............  Esophageal Dilation  T                         5.84       $303.73       $107.24        $60.75
                    without Endoscopy.

[[Page 52153]]


0141.............  Upper GI Procedures  T                         7.82       $406.71       $150.48        $81.34
0142.............  Small Intestine      T                         8.21       $426.99       $152.78        $85.40
                    Endoscopy.
0143.............  Lower GI Endoscopy.  T                         8.37       $435.32       $186.06        $87.06
0146.............  Level I              T                         3.47       $180.47        $64.40        $36.09
                    Sigmoidoscopy.
0147.............  Level II             T                         7.30       $379.67        $83.53        $75.93
                    Sigmoidoscopy.
0148.............  Level I Anal/Rectal  T                         3.61       $187.75        $67.59        $37.55
                    Procedure.
0149.............  Level III Anal/      T                        16.91       $879.47       $293.06       $175.89
                    Rectal Procedure.
0150.............  Level IV Anal/       T                        22.02     $1,145.24       $437.12       $229.05
                    Rectal Procedure.
0151.............  Endoscopic           T                        18.23       $948.12       $245.46       $189.62
                    Retrograde
                    Cholangio-
                    Pancreatography
                    (ERCP).
0152.............  Percutaneous         T                         6.18       $321.42        $80.36        $64.28
                    Abdominal and
                    Biliary Procedures.
0153.............  Peritoneal and       T                        25.99     $1,351.71       $540.68       $270.34
                    Abdominal
                    Procedures.
0154.............  Hernia/Hydrocele     T                        26.98     $1,403.20       $491.12       $280.64
                    Procedures.
0155.............  Level II Anal/       T                        10.05       $522.69       $188.17       $104.54
                    Rectal Procedure.
0156.............  Level II Urinary     T                         3.10       $161.23        $48.37        $32.25
                    and Anal
                    Procedures.
0157.............  Colorectal Cancer    S                         2.73       $141.98        $22.19        $28.40
                    Screening: Barium
                    Enema.
0158.............  Colorectal Cancer    T                         7.56       $393.19  ............        $98.30
                    Screening:
                    Colonoscopy.
0159.............  Colorectal Cancer    S                         2.48       $128.98  ............        $32.25
                    Screening:
                    Flexible
                    Sigmoidoscopy.
0160.............  Level I              T                         6.44       $334.94       $105.06        $66.99
                    Cystourethroscopy
                    and other
                    Genitourinary
                    Procedures.
0161.............  Level II             T                        16.03       $833.70       $249.36       $166.74
                    Cystourethroscopy
                    and other
                    Genitourinary
                    Procedures.
0162.............  Level III            T                        21.50     $1,118.19  ............       $223.64
                    Cystourethroscopy
                    and other
                    Genitourinary
                    Procedures.
0163.............  Level IV             T                        24.77     $1,288.26  ............       $257.65
                    Cystourethroscopy
                    and other
                    Genitourinary
                    Procedures.
0164.............  Level I Urinary and  T                         1.18        $61.37        $18.41        $12.27
                    Anal Procedures.
0165.............  Level III Urinary    T                        12.62       $656.35  ............       $131.27
                    and Anal
                    Procedures.
0166.............  Level I Urethral     T                        15.63       $812.90       $218.73       $162.58
                    Procedures.
0167.............  Level III Urethral   T                        27.15     $1,412.04       $555.84       $282.41
                    Procedures.
0168.............  Level II Urethral    T                        24.10     $1,253.42       $405.60       $250.68
                    Procedures.
0169.............  Lithotripsy........  T                        46.44     $2,415.30     $1,115.69       $483.06
0170.............  Dialysis...........  S                         4.79       $249.12  ............        $49.82
0179.............  Urinary              T                        81.28     $4,227.29     $1,817.73       $845.46
                    Incontinence
                    Procedures.
0180.............  Circumcision.......  T                        18.95       $985.57       $304.87       $197.11
0181.............  Penile Procedures..  T                        29.88     $1,554.03       $621.82       $310.81
0182.............  Insertion of Penile  T                        83.80     $4,358.35     $1,438.26       $871.67
                    Prosthesis.
0183.............  Testes/Epididymis    T                        22.19     $1,154.08       $448.94       $230.82
                    Procedures.
0184.............  Prostate Biopsy....  T                         3.66       $190.35        $95.18        $38.07
0187.............  Miscellaneous        X                         4.19       $217.92        $94.96        $43.58
                    Placement/
                    Repositioning.
0188.............  Level II Female      T                         1.12        $58.25        $11.95        $11.65
                    Reproductive Proc.
0189.............  Level III Female     T                         1.63        $84.77        $18.60        $16.95
                    Reproductive Proc.
0190.............  Surgical             T                        20.06     $1,043.30       $424.28       $208.66
                    Hysteroscopy.
0191.............  Level I Female       T                         0.22        $11.44         $3.32         $2.29
                    Reproductive Proc.
0192.............  Level IV Female      T                         2.94       $152.91        $42.81        $30.58
                    Reproductive Proc.
0193.............  Level V Female       T                        14.57       $757.77       $171.13       $151.55
                    Reproductive Proc.
0194.............  Level VI Female      T                        18.88       $981.93       $397.84       $196.39
                    Reproductive Proc.
0195.............  Level VII Female     T                        24.37     $1,267.46       $483.80       $253.49
                    Reproductive Proc.
0196.............  Dilation and         T                        16.32       $848.79       $338.23       $169.76
                    Curettage.
0197.............  Infertility          T                         1.19        $61.89        $24.76        $12.38
                    Procedures.
0198.............  Pregnancy and        T                         1.33        $69.17        $32.92        $13.83
                    Neonatal Care
                    Procedures.
0199.............  Vaginal Delivery...  T                         5.69       $295.93        $72.98        $59.19
0200.............  Therapeutic          T                        14.49       $753.61       $307.83       $150.72
                    Abortion.
0201.............  Spontaneous          T                        15.84       $823.82       $329.65       $164.76
                    Abortion.
0202.............  Level VIII Female    T                        39.09     $2,033.03       $996.18       $406.61
                    Reproductive Proc.
0203.............  Level IV Nerve       T                        10.96       $570.02       $256.51       $114.00
                    Injections.
0204.............  Level I Nerve        T                         2.13       $110.78        $42.10        $22.16
                    Injections.
0206.............  Level II Nerve       T                         4.89       $254.32        $75.55        $50.86
                    Injections.
0207.............  Level III Nerve      T                         5.97       $310.49       $123.69        $62.10
                    Injections.
0208.............  Laminotomies and     T                        39.95     $2,077.76  ............       $415.55
                    Laminectomies.
0209.............  Extended EEG         S                        12.09       $628.79       $280.58       $125.76
                    Studies and Sleep
                    Studies, Level II.
0212.............  Nervous System       T                         3.53       $183.59        $84.45        $36.72
                    Injections.
0213.............  Extended EEG         S                         3.38       $175.79        $70.41        $35.16
                    Studies and Sleep
                    Studies, Level I.
0214.............  Electroencephalogra  S                         2.37       $123.26        $61.63        $24.65
                    m.
0215.............  Level I Nerve and    S                         0.60        $31.21  ............         $6.24
                    Muscle Tests.
0216.............  Level III Nerve and  S                         3.06       $159.15        $71.62        $31.83
                    Muscle Tests.
0218.............  Level II Nerve and   S                         1.06        $55.13  ............        $11.03
                    Muscle Tests.
0220.............  Level I Nerve        T                        16.66       $866.47  ............       $173.29
                    Procedures.
0221.............  Level II Nerve       T                        25.35     $1,318.43       $463.62       $263.69
                    Procedures.

[[Page 52154]]


0222.............  Implantation of      T                       140.56     $7,310.39  ............     $1,462.08
                    Neurological
                    Device.
0223.............  Implantation of      T                        20.30     $1,055.78  ............       $211.16
                    Pain Management
                    Device.
0224.............  Implantation of      T                        39.14     $2,035.63       $453.41       $407.13
                    Reservoir/Pump/
                    Shunt.
0225.............  Implantation of      T                        44.47     $2,312.84  ............       $462.57
                    Neurostimulator
                    Electrodes.
0226.............  Implantation of      T                        44.20     $2,298.80  ............       $459.76
                    Drug Infusion
                    Reservoir.
0227.............  Implantation of      T                       128.03     $6,658.71  ............     $1,331.74
                    Drug Infusion
                    Device.
0228.............  Creation of Lumbar   T                        55.05     $2,863.10       $696.46       $572.62
                    Subarachnoid Shunt.
0229.............  Transcatherter       T                        49.00     $2,548.44       $662.59       $509.69
                    Placement of
                    Intravascular
                    Shunts.
0230.............  Level I Eye Tests &  S                         0.78        $40.57        $15.82         $8.11
                    Treatments.
0231.............  Level III Eye Tests  S                         2.24       $116.50        $52.43        $23.30
                    & Treatments.
0232.............  Level I Anterior     T                         4.91       $255.36       $112.36        $51.07
                    Segment Eye
                    Procedures.
0233.............  Level II Anterior    T                        13.43       $698.48       $266.33       $139.70
                    Segment Eye
                    Procedures.
0234.............  Level III Anterior   T                        21.45     $1,115.59       $535.48       $223.12
                    Segment Eye
                    Procedures.
0235.............  Level I Posterior    T                         5.62       $292.29        $81.84        $58.46
                    Segment Eye
                    Procedures.
0236.............  Level II Posterior   T                        20.62     $1,072.43  ............       $214.49
                    Segment Eye
                    Procedures.
0237.............  Level III Posterior  T                        35.09     $1,825.00       $818.54       $365.00
                    Segment Eye
                    Procedures.
0238.............  Level I Repair and   T                         3.04       $158.11        $58.96        $31.62
                    Plastic Eye
                    Procedures.
0239.............  Level II Repair and  T                         6.91       $359.38       $115.94        $71.88
                    Plastic Eye
                    Procedures.
0240.............  Level III Repair     T                        16.99       $883.63       $315.31       $176.73
                    and Plastic Eye
                    Procedures.
0241.............  Level IV Repair and  T                        21.89     $1,138.48       $384.47       $227.70
                    Plastic Eye
                    Procedures.
0242.............  Level V Repair and   T                        28.87     $1,501.50       $597.36       $300.30
                    Plastic Eye
                    Procedures.
0243.............  Strabismus/Muscle    T                        20.94     $1,089.07       $431.39       $217.81
                    Procedures.
0244.............  Corneal Transplant.  T                        38.14     $1,983.62       $851.42       $396.72
0245.............  Level I Cataract     T                        14.39       $748.41       $251.21       $149.68
                    Procedures without
                    IOL Insert.
0246.............  Cataract Procedures  T                        23.59     $1,226.89       $495.96       $245.38
                    with IOL Insert.
0247.............  Laser Eye            T                         4.97       $258.48       $108.56        $51.70
                    Procedures Except
                    Retinal.
0248.............  Laser Retinal        T                         4.44       $230.92        $96.99        $46.18
                    Procedures.
0249.............  Level II Cataract    T                        27.75     $1,443.25       $524.67       $288.65
                    Procedures without
                    IOL Insert.
0250.............  Nasal Cauterization/ T                         1.68        $87.38        $30.58        $17.48
                    Packing.
0251.............  Level I ENT          T                         1.92        $99.86  ............        $19.97
                    Procedures.
0252.............  Level II ENT         T                         6.27       $326.10       $114.24        $65.22
                    Procedures.
0253.............  Level III ENT        T                        14.79       $769.21       $284.61       $153.84
                    Procedures.
0254.............  Level IV ENT         T                        21.89     $1,138.48       $352.93       $227.70
                    Procedures.
0256.............  Level V ENT          T                        35.51     $1,846.84  ............       $369.37
                    Procedures.
0258.............  Tonsil and Adenoid   T                        21.15     $1,099.99       $437.25       $220.00
                    Procedures.
0259.............  Level VI ENT         T                       291.05    $15,137.22     $7,417.24     $3,027.44
                    Procedures.
0260.............  Level I Plain Film   X                         0.81        $42.13        $23.17         $8.43
                    Except Teeth.
0261.............  Level II Plain Film  X                         1.37        $71.25        $34.15        $14.25
                    Except Teeth
                    Including Bone
                    Density
                    Measurement.
0262.............  Plain Film of Teeth  X                         0.60        $31.21        $10.30         $6.24
0263.............  Level I              X                         1.99       $103.50        $45.54        $20.70
                    Miscellaneous
                    Radiology
                    Procedures.
0264.............  Level II             X                         2.75       $143.02        $77.23        $28.60
                    Miscellaneous
                    Radiology
                    Procedures.
0265.............  Level I Diagnostic   S                         1.04        $54.09        $29.75        $10.82
                    Ultrasound Except
                    Vascular.
0266.............  Level II Diagnostic  S                         1.70        $88.42        $48.63        $17.68
                    Ultrasound Except
                    Vascular.
0267.............  Level III            S                         2.58       $134.18        $65.52        $26.84
                    Diagnostic
                    Ultrasound Except
                    Vascular.
0268.............  Ultrasound Guidance  S                         1.48        $76.97  ............        $15.39
                    Procedures.
0269.............  Level III            S                         3.42       $177.87        $92.49        $35.57
                    Echocardiogram
                    Except
                    Transesophageal.
0270.............  Transesophageal      S                         5.65       $293.85       $146.79        $58.77
                    Echocardiogram.
0271.............  Mammography........  S                         0.69        $35.89        $16.80         $7.18
0272.............  Level I Fluoroscopy  X                         1.38        $71.77        $38.64        $14.35
0274.............  Myelography........  S                         3.21       $166.95        $80.14        $33.39
0275.............  Arthrography.......  S                         3.09       $160.71        $69.09        $32.14
0276.............  Level I Digestive    S                         1.69        $87.90        $41.72        $17.58
                    Radiology.
0277.............  Level II Digestive   S                         2.50       $130.02        $60.47        $26.00
                    Radiology.
0278.............  Diagnostic           S                         2.65       $137.82        $66.07        $27.56
                    Urography.
0279.............  Level II             S                         8.41       $437.40       $174.57        $87.48
                    Angiography and
                    Venography except
                    Extremity.
0280.............  Level III            S                        15.51       $806.66       $353.85       $161.33
                    Angiography and
                    Venography except
                    Extremity.
0281.............  Venography of        S                         5.23       $272.01       $115.16        $54.40
                    Extremity.
0282.............  Miscellaneous        S                         1.76        $91.54        $44.51        $18.31
                    Computerized Axial
                    Tomography.
0283.............  Computerized Axial   S                         4.75       $247.04  ............        $49.41
                    Tomography with
                    Contrast Material.
0284.............  Magnetic Resonance   S                         7.74       $402.55       $201.02        $80.51
                    Imaging and
                    Magnetic Resonance
                    Angiography with
                    Contrast Material.
0285.............  Myocardial Positron  S                        16.73       $870.11       $374.15       $174.02
                    Emission
                    Tomography (PET).
0286.............  Myocardial Scans...  S                         6.94       $360.94       $198.52        $72.19
0287.............  Complex Venography.  S                         7.13       $370.82       $114.51        $74.16
0288.............  Bone Density:Axial   S                         1.38        $71.77  ............        $14.35
                    Skeleton.

[[Page 52155]]


0289.............  Needle Localization  X                         1.84        $95.70        $44.80        $19.14
                    for Breast Biopsy.
0290.............  Level I Diagnostic   S                         2.16       $112.34        $56.17        $22.47
                    Nuclear Medicine
                    Excluding
                    Myocardial Scans.
0291.............  Level II Diagnostic  S                         4.19       $217.92       $108.96        $43.58
                    Nuclear Medicine
                    Excluding
                    Myocardial Scans.
0292.............  Level III            S                         4.53       $235.60       $117.80        $47.12
                    Diagnostic Nuclear
                    Medicine Excluding
                    Myocardial Scans.
0294.............  Level II             S                         4.45       $231.44       $127.29        $46.29
                    Therapeutic
                    Nuclear Medicine.
0295.............  Level I Therapeutic  S                         3.86       $200.75       $110.41        $40.15
                    Nuclear Medicine.
0296.............  Level I Therapeutic  S                         2.12       $110.26        $52.92        $22.05
                    Radiologic
                    Procedures.
0297.............  Level II             S                         7.80       $405.67       $172.51        $81.13
                    Therapeutic
                    Radiologic
                    Procedures.
0299.............  Miscellaneous        S                         6.20       $322.46  ............        $64.49
                    Radiation
                    Treatment.
0300.............  Level I Radiation    S                         1.53        $79.57  ............        $15.91
                    Therapy.
0301.............  Level II Radiation   S                         2.22       $115.46  ............        $23.09
                    Therapy.
0302.............  Level III Radiation  S                        10.17       $528.93       $200.99       $105.79
                    Therapy.
0303.............  Treatment Device     X                         2.93       $152.39        $68.58        $30.48
                    Construction.
0304.............  Level I Therapeutic  X                         1.69        $87.90        $41.52        $17.58
                    Radiation
                    Treatment
                    Preparation.
0305.............  Level II             X                         3.87       $201.27        $91.38        $40.25
                    Therapeutic
                    Radiation
                    Treatment
                    Preparation.
0310.............  Level III            X                        14.38       $747.89       $339.05       $149.58
                    Therapeutic
                    Radiation
                    Treatment
                    Preparation.
0312.............  Radioelement         S                         4.23       $220.00  ............        $44.00
                    Applications.
0313.............  Brachytherapy......  S                        13.80       $717.72  ............       $143.54
0314.............  Hyperthermic         S                         4.24       $220.52       $101.77        $44.10
                    Therapies.
0320.............  Electroconvulsive    S                         4.46       $231.96        $80.06        $46.39
                    Therapy.
0321.............  Biofeedback and      S                         1.27        $66.05        $21.78        $13.21
                    Other Training.
0322.............  Brief Individual     S                         1.44        $74.89        $12.40        $14.98
                    Psychotherapy.
0323.............  Extended Individual  S                         1.95       $101.42        $21.26        $20.28
                    Psychotherapy.
0324.............  Family               S                         2.71       $140.94  ............        $28.19
                    Psychotherapy.
0325.............  Group Psychotherapy  S                         1.55        $80.61        $18.27        $16.12
0330.............  Dental Procedures..  S                         0.64        $33.29  ............         $6.66
0332.............  Computerized Axial   S                         3.62       $188.27        $91.27        $37.65
                    Tomography and
                    Computerized
                    Angiography
                    without Contrast
                    Material.
0333.............  Computerized Axial   S                         5.69       $295.93       $146.98        $59.19
                    Tomography and
                    Computerized Angio
                    w/o Contrast
                    Material followed
                    by Contrast.
0335.............  Magnetic Resonance   S                         6.46       $335.98       $151.46        $67.20
                    Imaging,
                    Miscellaneous.
0336.............  Magnetic Resonance   S                         7.01       $364.58       $176.94        $72.92
                    Imaging and
                    Magnetic Resonance
                    Angiography
                    without Contrast.
0337.............  MRI and Magnetic     S                         9.86       $512.81       $240.77       $102.56
                    Resonance
                    Angiography
                    without Contrast
                    Material followed
                    by Contrast
                    Material.
0339.............  Observation........  S                         7.60       $395.27  ............        $79.05
0340.............  Minor Ancillary      X                         0.66        $34.33  ............         $6.87
                    Procedures.
0341.............  Skin Tests and       X                         0.16         $8.32         $3.08         $1.66
                    Miscellaneous Red
                    Blood Cell Tests.
0342.............  Level I Pathology..  X                         0.23        $11.96         $5.88         $2.39
0343.............  Level II Pathology.  X                         0.47        $24.44        $13.20         $4.89
0344.............  Level III Pathology  X                         0.66        $34.33        $18.54         $6.87
0345.............  Level I Transfusion  X                         0.19         $9.88         $3.06         $1.98
                    Laboratory
                    Procedures.
0346.............  Level II             X                         0.42        $21.84         $5.46         $4.37
                    Transfusion
                    Laboratory
                    Procedures.
0347.............  Level III            X                         0.98        $50.97        $12.74        $10.19
                    Transfusion
                    Laboratory
                    Procedures.
0348.............  Fertility            X                         0.83        $43.17  ............         $8.63
                    Laboratory
                    Procedures.
0352.............  Level I Injections.  X                         0.14         $7.28  ............         $1.46
0353.............  Level II Allergy     X                         0.43        $22.36  ............         $4.47
                    Injections.
0354.............  Administration of    K                         0.09         $4.68  ............  ............
                    Influenza/
                    Pneumonia Vaccine.
0355.............  Level I              K                         0.24        $12.48  ............         $2.50
                    Immunizations.
0356.............  Level II             K                         0.69        $35.89  ............         $7.18
                    Immunizations.
0359.............  Level II Injections  X                         0.83        $43.17  ............         $8.63
0360.............  Level I Alimentary   X                         1.65        $85.81        $42.91        $17.16
                    Tests.
0361.............  Level II Alimentary  X                         3.55       $184.63        $83.23        $36.93
                    Tests.
0362.............  Level III            X                         2.83       $147.19  ............        $29.44
                    Otorhinolaryngolog
                    ic Function Tests.
0363.............  Level I              X                         0.76        $39.53        $14.63         $7.91
                    Otorhinolaryngolog
                    ic Function Tests.
0364.............  Level I Audiometry.  X                         0.45        $23.40         $9.13         $4.68
0365.............  Level II Audiometry  X                         1.31        $68.13        $20.16        $13.63
0367.............  Level I Pulmonary    X                         0.60        $31.21        $15.61         $6.24
                    Test.
0368.............  Level II Pulmonary   X                         0.96        $49.93        $24.97         $9.99
                    Tests.
0369.............  Level III Pulmonary  X                         2.39       $124.30        $41.02        $24.86
                    Tests.
0370.............  Allergy Tests......  X                         0.74        $38.49        $11.16         $7.70
0371.............  Level I Allergy      X                         0.50        $26.00  ............         $5.20
                    Injections.
0372.............  Therapeutic          X                         0.56        $29.13        $10.09         $5.83
                    Phlebotomy.
0373.............  Neuropsychological   X                         2.37       $123.26  ............        $24.65
                    Testing.
0374.............  Monitoring           X                         1.20        $62.41  ............        $12.48
                    Psychiatric Drugs.

[[Page 52156]]


0600.............  Low Level Clinic     V                         0.91        $47.33  ............         $9.47
                    Visits.
0601.............  Mid Level Clinic     V                         1.04        $54.09  ............        $10.82
                    Visits.
0602.............  High Level Clinic    V                         1.57        $81.65  ............        $16.33
                    Visits.
0610.............  Low Level Emergency  V                         1.49        $77.49        $19.57        $15.50
                    Visits.
0611.............  Mid Level Emergency  V                         2.66       $138.34        $36.47        $27.67
                    Visits.
0612.............  High Level           V                         4.53       $235.60        $54.14        $47.12
                    Emergency Visits.
0620.............  Critical Care......  S                        10.25       $533.09       $150.55       $106.62
0656.............  Transcatheter        T                        90.90     $4,927.70  ............       $985.54
                    Placement of Drug-
                    Eluting Coronary
                    Stents.
0657.............  Placement of Tissue  S                         1.38        $71.77  ............        $14.35
                    Clips.
0658.............  Percutaneous Breast  T                         5.57       $289.69  ............        $57.94
                    Biopsies.
0659.............  Hyperbaric Oxygen..  S                         3.12       $162.27  ............        $32.45
0660.............  Level II             X                         1.65        $85.81        $31.75        $17.16
                    Otorhinolaryngolog
                    ic Function Tests.
0661.............  Level IV Pathology.  X                         3.46       $179.95        $98.97        $35.99
0662....