Federal Register: August 12, 2003 (Volume 68, Number 155)

[Federal Register: August 12, 2003 (Volume 68, Number 155)]
[Proposed Rules]
[Page 47965-48014]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12au03-21]

[[Page 47965]]

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Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 410 and 419

Medicare Program; Changes to the Hospital Outpatient Prospective
Payment System and Calendar Year 2004 Payment Rates; Proposed Rule

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410 and 419

[CMS-1471-P]
RIN 0938-AL19

Medicare Program; Changes to the Hospital Outpatient Prospective
Payment System and Calendar Year 2004 Payment Rates

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare hospital
outpatient prospective payment system to implement applicable statutory
requirements and changes arising from our continuing experience with
this system. In addition, it would describe proposed changes to the
amounts and factors used to determine the payment rates for Medicare
hospital outpatient services paid under the prospective payment system.
These changes would be applicable to services furnished on or after
January 1, 2004.

DATES: We will consider comments if we receive them at the appropriate
address, as provided below, no later than 5 p.m. on October 6, 2003.

ADDRESSES: In commenting, please refer to file code CMS-1471-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission or e-mail.
Mail written comments (one original and two copies) to the
following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1471-P, P.O. Box 8018, Baltimore, MD
21244-8018.
Please allow sufficient time for mailed comments to be timely
received in the event of delivery delays.
If you prefer, you may deliver (by hand or courier) your written
comments (one original and two copies) to one of the following
addresses:
Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or Room C5-14-03, 7500 Security Boulevard,
Baltimore, MD 21244-1850.

(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and could be considered late.
We encourage commenters submitting as comments information that
contains beneficiary specific information (for example, medical
records, or invoices with beneficiary identification) to remove any
individually identifiable information, such as information that
identifies an individual, diagnoses, addresses, telephone numbers,
attending physician, medical record number, or Medicare or other
insurance number. Moreover, individually identifiable beneficiary
medical records, including progress notes, medical orders, test
results, consultation reports, and photocopies of checks from hospitals
or other documents that contain bank routing numbers should not be
submitted to us. Persons or organizations submitting proprietary
information as public comments must designate in writing if part or all
of the information contained in such comments should be considered as
exempt from disclosure under Exemption 4 of the Freedom of Information
Act (FOIA). Generally, Exemption 4 of the FOIA protects trade secrets
and commercial or financial information that is privileged or
confidential, and affords the same protections as the Trade Secrets
Act, which is also applicable. We will attempt to keep confidential and
protect from disclosure information that qualifies under Exemption 4.
However, only data that can be available for public inspection would be
used for the final rule. For information on viewing public comments,
see the beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Dana Burley, (410) 786-4532--
outpatient prospective payment issues; Suzanne Asplen, (410) 786-4558
or Jana Petze, (410) 786-9374--partial hospitalization and community
mental health centers issues.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: Comments received timely will be
available for public inspection as they are received, generally
beginning approximately 3 weeks after publication of a document, at the
headquarters of the Centers for Medicare & Medicaid Services, 7500
Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of
each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view
public comments, call (410) 786-7197.

Availability of Copies and Electronic Access

Copies: To order copies of the Federal Register containing this
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This Federal Register document is also available from the Federal
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Government Printing Office. The Web site address is: http://www.gpoaccess.gov/nara/index.html

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

Outline of Contents

I. Background
A. Authority for the Outpatient Prospective Payment System
B. Summary of Rulemaking for the Outpatient Prospective Payment
System
II. Proposed Changes to the Ambulatory Payment Classification (APC)
Groups and Relative Weights
A. Recommendations of the Advisory Panel on APC Groups
1. Establishment of the Advisory Panel on APC Groups
2. The Panel's Meetings
3. Establishment of an Observation Subcommittee
4. Recommendations of the Advisory Panel and Our Responses
B. Other Changes Affecting the APCs
1. Limit on Variation of Costs of Services Classified Within an
APC Group
2. Procedures Moved from New Technology APCs to Clinically
Appropriate APCs
3. Revision of Cost Bands and Payment Amounts for New Technology
APCs
4. APC Assignment for New Codes Created During Calendar Year
(CY) 2003
5. Creation of APCs for Combinations of Device Procedures
6. New APC for Antepartum Care
III. Recalibration of APC Weights for CY 2004

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A. Data Issues
1. Period of Claims Data Used
2. Treatment of ``Multiple Procedure'' Claims
3. Adjustment of Median Costs for CY 2003 OPPS
B. Description of How We Propose To Calculate Weights for CY
2004
IV. Transitional Pass-Through and Related Payment Issues
A. Background
B. Discussion of Pro Rata Reduction
V. Payment for Devices
A. Pass-Through Devices
B. Expiration of Transitional Pass-Through Payments in CY 2004
C. Other Policy Issues Relating to Pass-Through Device
Categories
VI. Payment for Drugs, Biologicals, Radiopharmaceutical Agents,
Blood, and Blood Products
A. Pass-Through Drugs and Biologicals
B. Drugs, Biologicals, and Radiopharmaceuticals Without Pass-
Through Status
1. Background
2. Proposed Criteria for Packaging Payment for Drugs,
Biologicals, and Radiopharmaceuticals
3. Payment for Drugs, Biologicals, and Radiopharmaceuticals That
Are Not Packaged
4. Proposed Payment Methodology for Drug Administration
5. Generic Drugs and Radiopharmaceuticals
6. Orphan Drugs
7. Vaccines
8. Blood and Blood Products
9. Intravenous Immune Globulin
10. Drug and Device Coding
11. Payment for Split Unit of Blood
12. Other Issues
VII. Wage Index Changes for CY 2004
VIII. Copayment for CY 2004
IX. Conversion Factor Update for CY 2004
X. Proposed Outlier Policy and Elimination of Transitional Corridor
Payments for CY 2004
A. Proposed Outlier Policy for CY 2004
B. Elimination of Transitional Corridor Payments for CY 2004
XI. Other Policy Decisions and Proposed Changes
A. Hospital Coding for Evaluation and Management (E/M) Services
B. Status Indicators and Issues Related to OCE Editing
C. Observation Services
D. Procedures That Will Be Paid Only As Inpatient Procedures
E. Partial Hospitalization Payment Methodology
1. Background
2. PHP APC Update for CY 2004
3. Outlier Payments to CMHCs
XII. Summary of and Responses to MedPAC Recommendations
XIII. Summary of Proposed Changes for 2004
A. Changes Required by Statute
B. Additional Changes
XIV. Collection of Information Requirements
XV. Response to Public Comments
XVI. Regulatory Impact Analysis
A. General
B. Changes in This Proposed Rule
C. Limitations of Our Analysis
D. Estimated Impacts of This Proposed Rule on Hospitals
E. Projected Distribution of Outlier Payments
F. Estimated Impacts of This Proposed Rule on Beneficiaries

Addenda

Addendum A--List of Ambulatory Payment Classifications (APCs) with
Status Indicators, Relative Weights, Payment Rates, and Copayment
Amounts
Addendum B--Payment Status by HCPCS Code, and Related Information
Addendum C--Hospital Outpatient Payment for Procedures by APC:
Displayed on Web Site Only
Addendum D--Payment Status Indicators for the Hospital Outpatient
Prospective Payment System
Addendum E--CPT Codes That Would Be Paid Only as Inpatient
Procedures
Addendum H--Wage Index for Urban Areas
Addendum I--Wage Index for Rural Areas
Addendum J--Wage Index for Hospitals That Are Reclassified
Addendum L--Packaged Nonchemotherapy Infusion Drugs
Addendum M--Separately Paid Nonchemotherapy Infusion Drugs
Addendum N--Packaged Chemotherapy Drugs Other Than Infusion
Addendum O--Separately Paid Chemotherapy Drugs Other Than Infusion
Addendum P--Packaged Chemotherapy Drugs Infusion Only
Addendum Q--Separately Paid Chemotherapy Drugs Infusion Only

Alphabetical List of Acronyms Appearing in the Proposed Rule

ACEP--American College of Emergency Physicians
AHA--American Hospital Association
AHIMA--American Health Information Management Association
AMA--American Medical Association
APC--Ambulatory payment classification
ASC--Ambulatory surgical center
AWP--Average wholesale price
BBA--Balanced Budget Act of 1997
BIPA--Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000
BBRA--Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act
of 1999
CAH--Critical access hospital
CCR--Cost center specific cost-to-charge ratio
CMHC--Community mental health center
CMS--Centers for Medicare & Medicaid Services (Formerly known as the
Health Care Financing Administration)
CPT--[Physicians'] Current Procedural Terminology, Fourth Edition,
2002, copyrighted by the American Medical Association
CY--Calendar year
DMEPOS--Durable medical equipment, prosthetics, orthotics, and
supplies
DRG--Diagnosis-related group
DSH--Disproportionate Share Hospital
EACH--Essential Access Community Hospital
E/M--Evaluation and management
ESRD--End-stage renal disease
FACA--Federal Advisory Committee Act
FDA--Food and Drug Administration
FI--Fiscal intermediary
FSS--Federal Supply Schedule
FY--Federal fiscal year
HCPCS--Healthcare Common Procedure Coding System
HCRIS--Hospital Cost Report Information System
HHA--Home health agency
HIPAA--Health Insurance Portability and Accountability Act of 1996
ICD-9-CM--International Classification of Diseases, Ninth Edition,
Clinical Modification
IME--Indirect Medical Education
IPPS--(Hospital) inpatient prospective payment system
IVIG--Intravenous Immune Globulin
LTC--Long Term Care
MedPAC--Medicare Payment Advisory Commission
MDH--Medicare Dependent Hospital
MSA--Metropolitan statistical area
NECMA--New England County Metropolitan Area
OCE--Outpatient code editor
OMB--Office of Management and Budget
OPD--(Hospital) outpatient department
OPPS--(Hospital) outpatient prospective payment system
PHP--Partial hospitalization program
PM--Program memorandum
PPS--Prospective payment system
PPV--Pneumococcal pneumonia (virus)
PRA--Paperwork Reduction Act
RFA--Regulatory Flexibility Act
RRC--Rural Referral Center
SBA--Small Business Administration
SCH--Sole Community Hospital
SDP--Single drug pricer
SI--Status Indicator
TEFRA--Tax Equity and Fiscal Responsibility Act
TOPS--Transitional outpatient payments
USPDI--United States Pharmacopoeia Drug Information

I. Background

A. Authority for the Outpatient Prospective Payment System

When the Medicare statute was originally enacted, Medicare payment
for hospital outpatient services was based on hospital-specific costs.
In an effort to ensure that Medicare and its beneficiaries pay
appropriately for services and to encourage more efficient delivery of
care, the Congress mandated replacement of the cost-based payment
methodology with a prospective payment system (PPS). The Balanced
Budget Act of 1997 (BBA) (Pub. L. 105-33), enacted on August 5, 1997,
added section 1833(t) to the Social Security Act (the Act) authorizing
implementation of a PPS for hospital outpatient services. The Balanced
Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), enacted on
November 29, 1999, made major changes that affected the hospital
outpatient PPS (OPPS). The Medicare, Medicaid, and

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SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L.
106-554), enacted on December 21, 2000, made further changes in the
OPPS. The OPPS was first implemented for services furnished on or after
August 1, 2000.

B. Summary of Rulemaking for the Outpatient Prospective Payment System

[sbull] On September 8, 1998, we published a proposed rule (63 FR
47552) to establish in regulations a PPS for hospital outpatient
services, to eliminate the formula-driven overpayment for certain
hospital outpatient services, and to extend reductions in payment for
costs of hospital outpatient services. On June 30, 1999, we published a
correction notice (64 FR 35258) to correct a number of technical and
typographic errors in the September 1998 proposed rule including the
proposed amounts and factors used to determine the payment rates.
[sbull] On April 7, 2000, we published a final rule with comment
period (65 FR 18434) that addressed the provisions of the PPS for
hospital outpatient services scheduled to be effective for services
furnished on or after July 1, 2000. Under this system, Medicare payment
for hospital outpatient services included in the PPS is made at a
predetermined, specific rate. These outpatient services are classified
according to a list of ambulatory payment classifications (APCs). The
April 7, 2000 final rule with comment period also established
requirements for provider departments and provider-based entities and
prohibited Medicare payment for nonphysician services furnished to a
hospital outpatient by a provider or supplier other than a hospital
unless the services are furnished under arrangement. In addition, this
rule extended reductions in payment for costs of hospital outpatient
services as required by the BBA and amended by the BBRA. Medicare

regulations governing the hospital OPPS are set forth at 42 CFR part
419.
[sbull] On June 30, 2000, we published a notice (65 FR 40535)
announcing a delay in implementation of the OPPS from July 1, 2000 to
August 1, 2000. We implemented the OPPS on August 1, 2000.
[sbull] On August 3, 2000, we published an interim final rule with
comment period (65 FR 47670) that modified criteria that we use to
determine which medical devices are eligible for transitional pass-
through payments. The August 3, 2000 rule also corrected and clarified
certain provider-based provisions included in the April 7, 2000 rule.
[sbull] On November 13, 2000, we published an interim final rule
with comment period (65 FR 67798). This rule provided for the annual
update to the amounts and factors for OPPS payment rates effective for
services furnished on or after January 1, 2001. We implemented the 2001
OPPS on January 1, 2001. We also responded to public comments on those
portions of the April 7, 2000 final rule that implemented related
provisions of the BBRA and public comments on the August 3, 2000 rule.
[sbull] On November 2, 2001, we published a final rule (66 FR
55857) that announced the Medicare OPPS conversion factor for calendar
year (CY) 2002. In addition, it described the Secretary's estimate of
the total amount of the transitional pass-through payments for CY 2002
and the implementation of a uniform reduction in each of the pass-
through payments for that year.
[sbull] On November 2, 2001, we also published an interim final
rule with comment period (66 FR 55850) that set forth the criteria the
Secretary will use to establish new categories of medical devices
eligible for transitional pass-through payments under Medicare's OPPS.
[sbull] On November 30, 2001, we published a final rule (66 FR
59856) that revised the Medicare OPPS to implement applicable statutory
requirements, including relevant provisions of BIPA, and changes
resulting from continuing experience with this system. In addition, it
described the CY 2002 payment rates for Medicare hospital outpatient
services paid under the PPS. This final rule also announced a uniform
reduction of 68.9 percent to be applied to each of the transitional
pass-through payments for certain categories of medical devices and
drugs and biologicals.
[sbull] On December 31, 2001, we published a final rule (66 FR
67494) that delayed, until no later than April 1, 2002, the effective
date of CY 2002 payment rates and the uniform reduction of transitional
pass-through payments that were announced in the November 30, 2001
final rule. In addition, this final rule indefinitely delayed certain
related regulatory provisions.
[sbull] On March 1, 2002, we published a final rule (67 FR 9556)
that corrected technical errors that affected the amounts and factors
used to determine the payment rates for services paid under the
Medicare OPPS and corrected the uniform reduction to be applied to
transitional pass-through payments for CY 2002 as published in the
November 30, 2001 final rule. These corrections and the regulatory
provisions that had been delayed became effective on April 1, 2002.
[sbull] On November 1, 2002, we published a final rule (67 FR
66718) that revised the Medicare OPPS to update the payment weights and
conversion factor for services payable under the 2003 OPPS on the basis
of data from claims for services furnished from April 1, 2001 through
March 31, 2002. The rule also removed from pass-through status most
drugs and devices that had been paid under pass-through provisions in
2002 as required by the applicable provisions of law governing the
duration of pass-through payment.

II. Proposed Changes to the Ambulatory Payment Classification (APC)
Groups and Relative Weights

Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the APC group to which the
service is assigned. Each APC weight represents the median hospital
cost of the services included in that APC relative to the median
hospital cost of the services included in APC 601, Mid-Level Clinic
Visits. The APC weights are scaled to APC 601 because a mid-level
clinic visit is one of the most frequently performed services in the
outpatient setting.
Section 1833(t)(9)(A) of the Act requires the Secretary to review
the components of the OPPS not less often than annually and to revise
the groups, relative payment weights, and other adjustments to take
into account changes in medical practice, changes in technology, and
the addition of new services, new cost data, and other relevant
information and factors. Section 1833(t)(9)(A) of the Act requires the
Secretary, beginning in 2001, to consult with an outside panel of
experts to review the APC groups and the relative payment weights.
Finally, section 1833(t)(2) of the Act provides that, subject to
certain exceptions, the items and services within an APC group cannot
be considered comparable with respect to the use of resources if the
highest median (or mean cost, if elected by the Secretary) for an item
or service in the group is more than 2 times greater than the lowest
median cost for an item or service within the same group (referred to
as the ``2 times rule'').
We use the median cost of the item or service in implementing this
provision. The statute authorizes the Secretary to make exceptions to
the 2 times rule ``in

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unusual cases, such as low volume items and services.''
For purposes of this proposed rule, we analyzed the APC groups
within this statutory framework.

A. Recommendations of the Advisory Panel on APC Groups

1. Establishment of the Advisory Panel on APC Groups
Section 1833(t)(9)(A) of the Act requires that we consult with an
outside panel of experts, the Advisory Panel on APC Groups (the Panel),
to review the clinical integrity of the groups and weights. The Act
specifies that the Panel will act in an advisory capacity. This expert
panel, which is to be composed of representatives of providers subject
to the OPPS (currently employed full-time, in their respective areas of
expertise), reviews and advises us about the clinical integrity of the
APC groups and their weights. The Panel is not restricted to using our
data and may use data collected or developed by organizations outside
the Department in conducting its review.
On November 21, 2000, the Secretary signed the charter establishing
an ``Advisory Panel on APC Groups.'' The Panel is technical in nature
and is governed by the provisions of the Federal Advisory Committee Act
(FACA) as amended (Pub. L. 92-463).
On November 1, 2002, the Secretary renewed the charter. The new
charter indicates that the Panel continues to be technical in nature,
is governed by the provisions of the FACA, may convene ``up to three
meetings per year,'' and is chaired by a Federal official.
To establish the Panel, we solicited members in a notice published
in the Federal Register on December 5, 2000 (65 FR 75943). We received
applications from more than 115 individuals nominating either a
colleague or themselves. After carefully reviewing the applications, we
chose 15 highly qualified individuals to serve on the Panel.
Because of the loss of 6 Panel members in March 2003 due to the
expiration of terms of office, retirement, and a career change, a
Federal Register notice was published on February 28, 2003 (68 FR
9671), requesting nominations of Panel members. From the 40 nominations
we received, 6 new members have been chosen and will be identified on
the CMS Web site.
2. The Panel's Meetings
The first Panel meeting was held on February 27, February 28, and
March 1, 2001. During the 2001 meeting, the Panel members felt that
requiring consistency for all presentations with regard to format, data
submission, and general information would assist them in analyzing the
submissions and presentations and making recommendations. Therefore,
upon the Panel's recommendation, the Research Subcommittee was
established during the 2001 meeting.
The Panel began its 2002 meeting on January 22, 2002, by
considering the Research Subcommittee's recommendation to the Panel on
requirements for written submissions and oral presentations. The
Research Subcommittee recommended that all future oral presentations
and written submissions contain the following:
[sbull] Name, address, and telephone number of the proposed
presenter.
[sbull] Financial relationship(s), if any, with any company whose
products, services, or procedures are under consideration.
[sbull] CPT ([Physicians'] Current Procedural Technology) codes
involved.
[sbull] APC(s) affected.
[sbull] Description of the issue.
[sbull] Clinical description of the service under discussion, with
comparison to other services within the APC.
[sbull] Description of the resource inputs associated with the
service under discussion, with a comparison to resource inputs for
other services within the APC.
[sbull] Recommendations and rationale for change.
[sbull] Expected outcome of change and potential consequences of no
change.
The Panel adopted these Subcommittee recommendations.
The third Panel meeting was held on January 21 and 22, 2003, to
discuss the APCs of the newly implemented 2003 OPPS. We published a
notice in the Federal Register on December 27, 2002 (67 FR 79107), to
announce the following: The location and time of the third Panel
meeting; a list of agenda items; and that the meeting was open to the
public. In that document, we solicited public comment specifically on
the items included on the agenda for the January 2003 Panel meeting. In
this section, ``commenter'' refers to entities that provided comments
in response to that Federal Register notice. We also provided
additional information about the Panel meeting through a press release
and on the CMS Web site. Presentations for the 2003 meeting met, at a
minimum, the adopted guidelines for presentations referred to above.
3. Establishment of an Observation Subcommittee
At the third annual meeting in January 2003, the Panel suggested
numerous changes to the APCs (listed below) and that a subcommittee be
established to review observation issues, such as allowable
International Classification of Diseases, clinical modification codes,
and operational issues. Therefore, before the close of the third annual
meeting, the Observation Subcommittee was established. Other Panel
members that are not currently participating in this subcommittee are
welcome to take part in this subcommittee, which is tasked with
reviewing International Classification of Disease Codes, clinical
modification codes, and operational issues related to observation. This
subcommittee will report its findings to the Panel in 1 year.
4. Recommendations of the Advisory Panel and Our Responses
In this section, we consider the Panel's recommendations affecting
specific APCs. The Panel based its recommendations on claims data for
the period April 1, 2002 through September 30, 2002. This data set
comprises a portion of the data that will be used to set 2004 payment
rates. APC titles in this discussion are those that existed when the
APC Panel met in January 2003. In a few cases, APC titles have been
changed for this proposed rule, and, therefore, some APCs do not have
the same title in Addendum A as they have in this section.
The Panel's agenda included APCs that our staff believe violate the
2 times rule as well as APCs for which comments were submitted. As
discussed below, the Panel sometimes declined to recommend a change in
an APC even though the APC appeared to violate the 2 times rule. In
section II.B of this preamble, we discuss our proposals regarding the 2
times rule based on the April 1, 2002 through December 31, 2002 data
that we used to determine the proposed 2004 APC relative weights.
Section II.B also details the criteria we used when deciding to propose
exceptions to the 2 times rule.
a. Debridement and Destruction.
APC 0012: Level I Debridement & Destruction.
APC 0013: Level II Debridement & Destruction.
We expressed concern to the Panel that APCs 0012 and 0013 appear to
violate the 2 times rule. In order to remedy these violations, we asked
the Panel to consider the following changes:
(1) Move the following codes from APC 0013 to APC 0012:

[[Page 47970]]

15786............................. Abrasion, lesion, single.
15793............................. Chemical peel, nonfacial.
15851............................. Removal of sutures.
16000............................. Initial treatment of burn(s).
16025............................. Treatment of burn(s).
------------------------------------------------------------------------

(2) Move code 11057 (Trim skin lesions, over 4) from APC 0012 to
APC 0013.
The Panel agreed with our staff and recommended that we make these
changes. We propose to accept the Panel's recommendation.
b. Excision/Biopsy.
APC 0019: Level I Excision/Biopsy.
APC 0020: Level II Excision/Biopsy.
APC 0021: Level III Excision/Biopsy.
We expressed concern to the Panel that APCs 0019 and 0020 appear to
violate the 2 times rule. In order to remedy these violations, we asked
the Panel to consider the following changes:
(1) Move the following HCPCS codes from APC 0019 to a new APC:

(2) Move the following HCPCS codes from APC 0020 to APC 0021:

The Panel recommended that we not change the structure of APCs
0019, 0020, and 0021 at this time in the interest of preserving
clinical homogeneity. We propose to accept the Panel's recommendation
that we make no changes to the structure of these APCs for 2004. We
plan to place these APCs on the Panel's agenda for the 2005 update.
c. Thoracentesis/Lavage Procedures and Endoscopies.
APC 0071: Level I Endoscopy Upper Airway.
APC 0072: Level II Endoscopy Upper Airway.
APC 0073: Level III Endoscopy Upper Airway.
We expressed concern to the Panel that APCs 0071 and 0072 appear to
violate the 2 times rule. In order to remedy these violations, we asked
the Panel to consider the following changes:
Move the following HCPCS codes as described below:

Table 1.--HCPCS Codes Proposed To Be Redistributed From APCs 0071 and 0072 to APCs 0071, 0072, and 0073
----------------------------------------------------------------------------------------------------------------
HCPCS Description 2003 APC 2004 APC
----------------------------------------------------------------------------------------------------------------
31505......................................... Diagnostic laryngoscopy......... 0072 0071
31575......................................... Diagnostic laryngoscopy......... 0071 0072
31720......................................... Clearance of airways............ 0072 0073
----------------------------------------------------------------------------------------------------------------

The Panel recommended that we make the above changes. We propose to
accept the Panel's recommendation, with the exception of CPT code
31720. After reviewing an additional quarter of claims data that was
not available at the time the Panel convened, placement of CPT code
31720 into APC 0072 better reflects its resource consumption.
Therefore, we propose to keep CPT code 31720 in APC 0072.
d. Cardiac and Ambulatory Blood Pressure Monitoring.
APC 0097: Cardiac and Ambulatory Blood Pressure Monitoring.
We expressed concern to the Panel that APC 0097 appears to violate
the 2 times rule. We asked the Panel to recommend options for resolving
this violation, and suggested splitting APC 0097 into two APCs. The
Panel recommended that the structure of APC 0097 should not be changed
at this time based on clinical homogeneity considerations. We propose
to accept the Panel's recommendation that we make no changes to APC
0097 for 2004. We plan to place this APC on the Panel's agenda for the
2005 update.
e. Electrocardiograms.
APC 0099: Electrocardiograms.
APC 0340: Minor Ancillary Procedures.
We expressed concern to the Panel that APC 0099 appears to violate
the 2 times rule. We asked the Panel to recommend options for resolving
this violation, and suggested moving CPT code 93701 (Bioimpedance,
thoracic) from APC 0099 to APC 0340. The Panel felt, however, that the
structure of APC 0099 should not be changed at this time based on
clinical homogeneity considerations. We propose to accept the Panel's
recommendation that we make no changes to APC 0099 for 2004. We plan to
place this APC on the Panel's agenda for the 2005 update.
f. Cardiac Stress Tests.
APC 0100: Cardiac Stress Tests.
A presenter to the Panel, who represented a device manufacturer,
requested that we move CPT code 93025 (Microvolt t-wave assessment) out
of APC 0100. The presenter believes that the actual cost for this
procedure is significantly higher than for other procedures in the same
APC. Since this technology is often billed in conjunction with other
procedures (for example, stress tests, CPT code 93017), few single-APC
claims were available to evaluate the presenter's contention.
The Panel felt the data presented are insufficient to merit moving
the code and recommends that CPT code 93025 remain in APC 0100 until
more data are available for review. We propose to accept the Panel's
recommendation that CPT code 93025 remain in APC 0100 until more claims
data become available for review.
g. Revision/Removal of Pacemakers or Automatic Implantable
Cardioverter Defibrillators.
APC 0105: Revision/Removal of Pacemakers, AICD, or Vascular.
We asked the Panel to review the codes within APC 0105 for an
apparent violation of the 2 times rule, stating that we believe the
apparent violation is a result of incorrectly coded claims. The Panel
agreed and recommended no changes to APC 0105 at this time. We propose
to accept the Panel's recommendation that we make no changes to APC
0105 until more accurate claims data become available and support the
need for a change.
h. Sigmoidoscopy.
APC 0146: Level I Sigmoidoscopy.
APC 0147: Level II Sigmoidoscopy.
We expressed concern to the Panel that relatively simple procedures
such as anoscopy and rigid sigmoidoscopy have higher median costs than
more complex procedures such as flexible sigmoidoscopy. Panel members
suggested the high costs may be due to the need to perform an otherwise
minor office procedure in a hospital setting (for example, due to the
clinical condition of the patient). Panel members also suggested that
claims may be incorrectly coded because coding

[[Page 47971]]

instructions do not clearly state how to code when the procedure
performed is not as extensive as the procedure planned (for example,
when a colonoscopy is planned but only a sigmoidoscopy is performed).
In these cases, coding instructions are unclear as to whether the
planned procedure should be reported with a modifier for reduced
services or with the code for the actual procedure performed.
The Panel recommended that we make no changes to APCs 0146 and 0147
at this time. We propose to accept the Panel's recommendation that we
make no changes to APCs 0146 and 0147. We plan to place this APC on the
Panel's agenda for the 2005 update.
i. Anal/Rectal Procedures.
APC 0148: Level I Anal/Rectal Procedure.
APC 0149: Level III Anal/Rectal Procedure.
APC 0155: Level II Anal/Rectal Procedure.
We expressed concern to the Panel that APCs 0148 and 0149 appear to
violate the 2 times rule. We asked the Panel to recommend options for
resolving these violations, and suggested rearranging some of the CPT
codes within APCs 0148, 0149, and 0155. The Panel recommended that we
move CPT code 46040 (Incision of rectal abscess) from APC 0155 to APC
0149. We propose to accept the Panel's recommendation.
j. Insertion of Penile Prosthesis.
APC 0179: Urinary Incontinence Procedures.
APC 0182: Insertion of Penile Prosthesis.
A presenter to the Panel representing manufacturers and providers
requested that APC 0182 be split into two APCs, based on whether the
procedure used inflatable or non-inflatable penile prostheses. The
presenter stated that the complexity of the procedure, the cost of the
devices, and related resources were all significantly higher with
inflatable prostheses.
The Panel recommended that we eliminate APCs 0179 and 0182 and
create two new APCs, 0385 and 0386 that contain the following CPT
codes:

We propose to accept the Panel's recommendation to eliminate APCs
0179 and 0182 and create two new APCs, 0644 and 0645, containing the
above CPT code configurations.
k. Surgical Hysteroscopy.
APC 0190: Surgical Hysteroscopy.
A presenter to the Panel, who represented a device manufacturer,
requested that we move CPT code 58563 (Hysteroscopy, ablation) from APC
0190 to a higher paying APC. The presenter noted that endometrial
cryoablation is included in a new technology APC, while a thermal
ablation system is included with older, less costly techniques. The
presenter expressed concern that cryoablation may be reimbursed at a
higher rate than the thermal ablation system, giving its manufacturers
an unfair competitive advantage.
Panel members agreed that new, more expensive technologies that
prove to be more effective merit review for a higher payment rate.
Without substantial evidence of greater effectiveness, however, the
Panel was reluctant to create APCs that provide an incentive to use a
more expensive device. In its discussion of whether or not to recommend
moving CPT code 58563 to a higher paying APC, the Panel recommended
that we take into account different methods of endometrial ablation
associated with hysteroscopy, adequately reflect the resources used for
the various procedures, avoid creating a competitive advantage or
disadvantage, and collect data needed to track costs on the type of
technologies used for this procedure.
After consulting with experts in the field, we propose to split APC
0190 (Surgical Hysteroscopy) into 2 APCs that are more clinically
homogeneous. We propose to change the description for APC 0190 from
``Surgical Hysteroscopy'' to ``Level I Hysteroscopy'' and keep the
following HCPCS codes in APC 0190:

We also propose to move the following HCPCS codes from APC 0190 to
newly created APC 0387 titled ``Level II Hysteroscopy'':

In addition, we propose to move the following HCPCS codes as
described below:

Table 2.--HCPCS Codes Proposed To Be Redistributed to APCs 0130, 0195, and 0190
----------------------------------------------------------------------------------------------------------------
HCPCS Description 2003 APC 2004 APC
----------------------------------------------------------------------------------------------------------------
58578......................................... Laparoscopic procedure, uterus.. 0190 0130
58353......................................... Endometrial ablate, thermal..... 0193 0195
58555......................................... Hysteroscopy, diagnostic, sep. 0194 0190
procedure.
----------------------------------------------------------------------------------------------------------------

We believe these proposed changes take into account the different
technologies used to perform these procedures while maintaining the
clinical comparability of these APCs as well as improving their
homogeneity in terms of resource consumption.
l. Female Reproductive Procedures.
APC 0195: Level VII Female Reproductive Proc. APC 0202: Level VIII
Female Reproductive Proc.
A commenter requested that we place CPT code 57288 (Repair bladder
defect) in its own APC because it requires the use of a device. Our
staff suggested that CPT codes 57288 and 57287 remain in APC 0202,
while the remaining codes in APC 0202 be moved to APC 0195:

The Panel agreed with our staff, and we propose to accept the
Panel's recommendation to move CPT codes

[[Page 47972]]

57109, 58920, and 58925 from APC 0202 to APC 0195.
m. Nerve Injections.
APC 0203: Level IV Nerve Injections.
APC 0204: Level I Nerve Injections.
APC 0206: Level II Nerve Injections.
APC 0207: Level III Nerve Injections.
Several commenters suggested changes in the configuration of APCs
0203, 0204, 0206, and 0207 because of concerns that the current
classifications result in payment rates that are too low relative to
the resource costs associated with certain procedures in these APCs.
Several of these APCs include procedures associated with drugs or
devices for which pass-through payments are scheduled to expire in
2003.
We requested the Panel's input regarding whether or not these APCs
should be restructured. The Panel stated that the current configuration
of APCs 0203, 0204, 0206, and 0207 is more clinically cohesive than the
previous year's configuration and that more data should be collected
before making any changes. We propose to accept the Panel's
recommendation that we make no changes to the structure of these APCs
until more data become available for review.
n. Laminotomies and Laminectomies; Implantation of Pain Management
Device.
APC 0208: Laminotomies and Laminectomies.
APC 0223: Implantation of Pain Management Device.
A presenter to the Panel, who represented a device manufacturer,
requested that we move CPT code 62351 (Implant spinal canal catheter)
from APC 0208 to APC 0223 to better capture the device cost that may be
involved with the procedure. The Panel felt the data were insufficient
to merit moving the code and recommended that CPT code 62351 remain in
APC 0208 until more data are available for review. We propose to accept
the Panel's recommendation that CPT code 62351 remain in APC 0208 until
more claims data become available for review.
o. Extended EEG Studies and Sleep Studies; Electroencephalogram.
APC 0209: Extended EEG Studies and Sleep Studies, Level II.
APC 0213: Extended EEG Studies and Sleep Studies, Level I.
APC 0214: Electroencephalogram.
We expressed concern to the Panel that APC 0213 appears to
minimally violate the 2 times rule. In order to remedy this violation,
we asked the Panel to consider a commenter's suggestion that we move
CPT code 95955 (EEG during surgery) from APC 0214 to APC 0213. The
Panel agreed with the commenter's suggestion. We propose to accept the
Panel's recommendation to move CPT code 95955 from APC 0214 to APC
0213.
p. Nerve and Muscle Tests.
APC 0215: Level I Nerve and Muscle Tests.
APC 0216: Level III Nerve and Muscle Tests.
APC 0218: Level II Nerve and Muscle Tests.
We expressed concern to the Panel that APC 0218 appears to violate
the 2 times rule. In order to remedy this violation, one commenter
requested that we move CPT codes 95921 (Autonomic nerve function test)
and 95922 (Autonomic nerve function test) from APC 0218 to APC 0216,
while another commenter requested that we move CPT code 95904 (Sensory
nerve conduction test) from APC 0215 to APC 0218. Alternatively, our
staff suggested to the Panel that the following CPT codes be moved from
APC 0218 to APC 0215.

After considering all of the above proposals, the Panel recommended
that we move CPT codes 95858, 95870, 95900, and 95903 from APC 0218 to
APC 0215. We propose to accept the Panel's recommendation.
q. Implantation of Drug Infusion Device.
APC 0227: Implantation of Drug Infusion Device.
APC 0227 contains only two CPT codes: one for implantation of
programmable spine infusion pumps, 62362, and for implantation of non-
programmable spine infusion pumps, 62361. A commenter requested that we
split APC 0227 into two APCs to recognize the cost difference between
CPT code 62361 and CPT code 62362. However, since our cost data do not
show a significant cost difference between the two devices and APC 227
does not violate the 2 times rule, the Panel recommended that CPT codes
62361 and 62362 remain in APC 0227. We propose to accept the Panel's
recommendation.
r. Ophthalmologic APCs.
APC 0230: Level I Eye Tests & Treatments.
APC 0235: Level I Posterior Segment Eye Procedures.
APC 0236: Level II Posterior Segment Eye Procedures.
APC 0698: Level II Eye Tests & Treatments.
We advised the Panel that APCs 0230 and 0235 violate the 2 times
rule but that the current configuration of these APCs reflects the
Panel's previous recommendations. A presenter to the Panel, who
represented a device manufacturer, expressed concern that the pass-
through device category ``New Technology: Intraocular Lens'' was
discontinued and these devices are now packaged. The presenter asked
the Panel to recommend that future new intraocular lens devices be
considered for a new pass-through category.
To remedy the violations to the 2 times rule, we asked the Panel to
consider moving CPT code 67820 (Revise eyelashes) from APC 0230 to APC
0698 and CPT code 67110 (Repair detached retina) from APC 0235 to APC
0236. The Panel recommended that we make these changes. We propose to
accept the Panel's recommendation and monitor the data for APC 0235 for
possible review next year. The Panel also acknowledged that making
recommendations concerning pass-through categories is beyond their
purview.
s. Skin Tests and Miscellaneous Red Blood Cell Tests; Transfusion
Laboratory Procedures.
APC 0341: Skin Tests and Miscellaneous Red Blood Cell Tests.
APC 0345: Level I Transfusion Laboratory Procedures.
We advised the Panel that APCs 0341 and 0345 minimally violate the
2 times rule and suggested moving several CPT codes within these APCs
into a new APC because a commenter expressed concern over the
combination of skin tests and miscellaneous red blood cell tests in APC
0341, asserting that services within this APC cannot be considered
comparable with respect to resource usage.
In order to remedy these violations to the 2 times rule, we
suggested moving CPT code 86901 (Blood typing, Rh (D)) from APC 0345 to
a new APC along with the following CPT codes from APC 0341:

The Panel recommended that we make the above changes. We propose to
accept the Panel's recommendation to move HCPCS codes 86880, 86885,
86886, and 86900 from APC 0341 to new APC 0409 and to move CPT code
86901 (Blood typing, Rh (D)) from APC 0345 to new APC 0409.

[[Page 47973]]

t. Otorhinolaryngologic Function Tests.
APC 0363: Level I Otorhinolaryngologic Function Tests.
APC 0660: Level II Otorhinolaryngologic Function Tests.
We expressed concern to the Panel that APC 0660 appears to violate
the 2 times rule and suggested moving CPT codes 92543 (Caloric
vestibular test) and 92588 (Evoked auditory test) from APC 0660 to APC
0363. The Panel recommended that we make these CPT code changes. We
propose to accept the Panel's recommendation to move CPT codes 92543
and 92588 from APC 0660 to APC 0363.
u. Tube Changes and Repositioning.
APC 0121: Level I Tube changes and Repositioning
APC 0122: Level II Tube changes and Repositioning
We expressed concern to the Panel that APC 0121 appears to violate
the 2 times rule. In order to remedy this violation, we suggested
moving the following CPT codes from APC 0121 to APC 0122:

The Panel recommended that we make these CPT code changes. We
propose to accept the Panel's recommendation to move CPT codes 47530,
50688, 51710, and 62225 from APC 0121 to APC 0122.
v. Myelography.
APC 0274: Myelography.
We advised the Panel that APC 0274 minimally violates the 2 times
rule and suggested moving CPT codes 72285 (X-ray c/t spine disk) and
72295 (X-ray
c/t spine disk) from APC 0274 to a new APC. A presenter, from an
organization representing radiologists, agreed with our proposal. The
Panel recommended that we make these CPT code changes. We propose to
accept the Panel's recommendation to move CPT codes 72285 and 72295
from APC 0274 to new APC 0388.
w. Therapeutic Radiologic Procedures.
APC 0296: Level I Therapeutic Radiologic Procedures
APC 0297: Level II Therapeutic Radiologic Procedures
We advised the Panel that APCs 0296 and 0297 appear to minimally
violate the 2 times rule as a result of changes recommended by the
Panel and adopted by CMS last year. The Panel recommended that no
changes be made to APCs 0296 and 0297 in the interest of preserving the
clinical homogeneity of these APCs. We propose to accept the Panel's
recommendation that we make no CPT code changes to APCs 0296 and 0297.
x. Vascular Procedures; Cannula/Access Device Procedures.
APC 0103: Miscellaneous Vascular Procedures
APC 0115: Cannula/Access Device Procedures
A commenter requested that we move CPT code 36860 (External cannula
declotting) from APC 0103 to APC 0115, asserting that this procedure is
more similar to other procedures in APC 0115 and does not fit well in
its current miscellaneous APC. The Panel found that the claims data
were insufficient to support moving CPT code 36860 from APC 0103 to the
higher paying APC 0115 and recommends that CPT code 36860 remain in APC
0103 until more data are available for review. We propose to accept the
Panel's recommendation that CPT code 36860 remain in APC 0103 until
more claims data become available for review.
y. Angiography and Venography Except Extremity.
APC 0279: Level II Angiography and Venography except Extremity.
APC 0280: Level III Angiography and Venography except Extremity.
APC 0668: Level I Angiography and Venography except Extremity.
A commenter requested that we move CPT code 75978 (Repair venous
blockage) from APC 0668 to APC 0280 and that we move CPT code 75774
(Artery x-ray, each vessel) from APC 0668 to APC 0279. A presenter to
the Panel testified that CPT code 75978 is commonly used for dialysis
patients and often requires multiple intraoperative attempts to
succeed; thus, it should be paid under APC 280. The Panel felt that
APCs 0279, 0280, and 0668 were clinically homogenous and recommended
that we only make changes after consulting with experts in the field.
We propose to accept the Panel's recommendation to make no changes to
APCs 0279, 0280, and 0668 until consulting with experts in the field.
We plan to place these APCs on the Panel's agenda for the 2005 update.
z. Computed Tomography (CT), Magnetic Resonance (MR), and
Ultrasound Guidance Procedures Currently Packaged.
APC 0332: Computerized Axial Tomography and Computerized
Angiography without Contrast Material.
APC 0335: Magnetic Resonance Imaging, Miscellaneous.
APC 0268: Ultrasound Guidance Procedures.
A presenter to the Panel expressed concern that the packaging of
guidance procedures for tissue ablation does not recognize the
significant difference in cost and time required to perform each
procedure (for example, MRI vs. CT). This presenter felt that hospitals
needed more education on the appropriate application of these codes.
Another commenter requested that CPT codes 76362, 76394, and 76490 be
changed from a status indicator of N to a status indicator of S and
included in an appropriate clinical or new technology APC.
The Panel agreed with the above comments and stated that the
packaging of these three procedures made it difficult for hospitals to
track their use for the purpose of allocating funds. The Panel
recommended changing the following CPT codes from a packaged status (N
status indicator) to a separately payable status (S status indicator)
within the indicated APCs:

Table 3.--HCPCS Codes Proposed To Be Designated as Separately Payable
------------------------------------------------------------------------
HCPCS Description 2003 status 2004 APC
------------------------------------------------------------------------
76362.......... CT scan for tissue Packaged........ 0332
ablation.
76394.......... MRI for tissue Packaged........ 0335
ablation.
76490.......... US for tissue Packaged........ 0268
ablation.
------------------------------------------------------------------------

We propose to accept the Panel's recommendation to change HCPCS
codes 76362, 76394, and 76490 from a packaged status to a separately
payable status as indicated above.
aa. Magnetic Resonance Imaging and Magnetic Resonance Angiography
Without Contrast.

[[Page 47974]]

APC 0336: Magnetic Resonance Imaging and Magnetic Resonance
Angiography without Contrast
A commenter requested that we change CPT code 76393 (MR guidance
for needle placement) from a packaged status to a separately payable
status within APC 0336. Based on clinical homogeneity considerations,
the Panel agreed with the commenter and recommended that CPT code 76393
be changed from a status indicator of N to a status indicator of S and
placed in APC 0335. We propose to accept the Panel's recommendation.
bb. Plain Film Except Teeth; Plain Film Except Teeth Including Bone
Density Measurement.
APC 0260: Level I Plain Film Except Teeth.
APC 0261: Level II Plain Film Except Teeth Including Bone Density
Measurement.
APC 0272: Level I Fluoroscopy.
A commenter requested that we move CPT codes 76120 (Cine/video x-
rays) and 76125 (Cine/video x-rays add-on) from APC 0260 to APC 0261.
However, a presenter to the Panel argued that these CPT codes are
fluoroscopic procedures that should not be grouped with Level I
radiography procedures. The Panel recommended that we move CPT code
76120 from APC 0260 to APC 0272 and that CPT code 76125 remain in APC
0260. This change makes the APCs more clinically coherent. We propose
to accept the Panel's recommendation.
cc. Chemotherapy Administration by Other Technique Except Infusion.
APC 0116: Chemotherapy Administration by Other Technique Except
Infusion.
A presenter to the Panel requested that we split APC 0116 into
three APCs according to the method of administration: (a) Subcutaneous
or intramuscular administration (CPT code 96400); (b) ``push''
administration (CPT code 96408); and (c) central nervous system
administration (CPT code 96450). The presenter also requested that
existing CPT codes should replace the more nonspecific Q codes for
administration of chemotherapy because the CPT codes would provide more
detailed data on methods of chemotherapy administration, which could be
used for future payment policy decisions. Another presenter agreed with
this request and stated that CPT codes are preferable to Q codes
because other payers require CPT codes.
The Panel agreed with the above suggestions to split APC 0116 into
3 APCs according to the method of administration. The Panel recommended
that we require hospitals to use the existing CPT codes (for example,
96400, 96408, and 96450) for administration of chemotherapy and map
them to APCs 0116, 0117, and 0118, as appropriate. The Panel also
recommended that payment rates be based on current Q code cost data
until cost data for the CPT codes are available. These cost data would
be used to determine whether to change the APC structure for
chemotherapy administration.
We propose not to accept the Panel's recommendations to split APC
0116 into 3 APCs and to use CPT codes for administration of
chemotherapy. We would consider such a split in the future but would
like to first address the administration of drugs issue. We believe
that making a change in APC 116 would be too complicated for hospitals
given the changes for administration in general that we are considering
in this proposed rule for implementation in CY 2004. We will consider
such a split for APC 116 for CY 2005. We also believe the use of CPT
codes would be burdensome to hospitals, would require extensive
education, and would result in a significant amount of miscoding. The
CPT codes for infusion therapy are based on the service furnished per
hour. We do not believe that all hospitals routinely record the start
and stop time for infusion therapy and that doing so in order to be
able to bill the proper number of hours of infusion therapy could be
very burdensome for them. Moreover, the historic cost data on which we
base the payment for the service is reported on a per visit basis (much
easier to cull from the record than the number of hours of service) and
if we changed to CPT codes for these services, we would be unable to
convert the charge/cost data now on a per visit basis to a per hour
basis (as required by the CPT code) for budget neutrality purposes.
Please see section VI of this proposed rule for further discussion on
payments for drugs and drug administration.
dd. Capturing the Costs of Drugs and Biologicals Packaged Into
APCs.
APC 0290: Level I Diagnostic Nuclear Medicine Excluding Myocardial
Scans.
APC 0291: Level II Diagnostic Nuclear Medicine Excluding Myocardial
Scans.
APC 0292: Level III Diagnostic Nuclear Medicine Excluding
Myocardial Scans.
APC 0294: Level II Therapeutic Nuclear Medicine.
APC 0666: Myocardial Add-on Scans.
We told the Panel that APCs 0290 and 0291 appear to violate the 2
times rule. Several presenters to the Panel expressed concern that our
cost data are inadequate because of confusion over coding due to
changes in codes and coding instructions for these procedures, poor
hospital reporting of radiopharmaceutical use, and the use of single
(not multiple) claims in determining costs. One presenter claimed that
the current cost data used for CPT code 78122 (Whole blood volume
determination) underestimated real costs because of confusion about
whether to code radiopharmaceuticals on a ``per dose'' basis or ``per
millicurie'' basis. This presenter requested that we move CPT code
78122 from APC 0290 to the higher paying APC 0292.
Other presenters agreed with these concerns and said they were
applicable to payments for all drugs, not just radiopharmaceuticals.
These commenters were also concerned about the loss of drug-specific
data due to packaging because hospitals would have no incentive to
code, and thereby, identify, packaged drugs.
Pass-through payments for 236 drugs, biologicals, and
radiopharmaceuticals expired as of 2003, and these items are now paid
either separately or packaged with the procedures with which they are
associated. Drugs and radiopharmaceuticals with median costs for
administration of $150 or less were packaged. Beginning in 2003 claims
data will not provide specific cost information for packaged items. We
requested input from the Panel for methods to determine drug costs.
Panel members were concerned that packaging the costs of
radiopharmaceuticals into procedures would result in underpayments for
the service because we lack adequate data on the cost of
radiopharmaceuticals. They were also concerned about creating
incentives to use radiopharmaceuticals based on cost rather than
clinical efficacy. The Panel recommended that we consider grouping
drugs and radiopharmaceuticals into new APCs taking into account both
their cost and clinical use. The Panel further recommended that, if new
APCs for radionucliides are created, the descriptors should be as
simple as possible and use of confusing units of measure should be
limited.
Due to the packaging of radiopharmaceuticals into the APC payments
for nuclear medicine procedures, we, along with commenters have
expressed concern to the Panel regarding whether the current nuclear
medicine APC structure is homogeneous in terms of resource consumption.
We have reviewed information about the use and cost of various

[[Page 47975]]

radiopharmaceuticals and believe that reorganizing the APCs for nuclear
medicine would result in greater clinical and resource homogeneity.
Therefore, we propose to eliminate APCs 0286, 0290, 0291, 0292, 0294,
0666 and create 20 new APCs for nuclear medicine that contain the
following CPT codes:

------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
APC 0389:
78000............................ Thyroid, single uptake.
78001............................ Thyroid, multiple uptakes.
78003............................ Thyroid suppress/stimul.
78020............................ Thyroid met uptake.
78099............................ Endocrine nuclear procedure.
78190............................ Platelet survival, kinetics.
78191............................ Platelet survival.
78199............................ Blood/lymph nuclear exam.
78299............................ GI nuclear procedure.
78399............................ Musculoskeletal nuclear exam.
78499............................ Cardiovascular nuclear exam.
78599............................ Respiratory nuclear exam.
78699............................ Nervous system nuclear exam.
78725............................ Kidney function study.
78799............................ Genitourinary nuclear exam.
78999............................ Nuclear diagnostic exam.
79999............................ Nuclear medicine therapy.
APC 0390:
78006............................ Thyroid imaging with uptake.
78010............................ Thyroid imaging.
78015............................ Thyroid met imaging.
78016............................ Thyroid met imaging/studies.
APC 0391:
78007............................ Thyroid image, mult uptakes.
78011............................ Thyroid imaging with flow.
78018............................ Thyroid met imaging, body.
78070............................ Parathyroid nuclear imaging.
APC 0392:
78075............................ Adrenal nuclear imaging.
APC 0393:
78110............................ Plasma volume, single.
78111............................ Plasma volume, multiple.
78120............................ Red cell mass, single.
78121............................ Red cell mass, multiple.
78122............................ Blood volume.
78130............................ Red cell survival study.
78135............................ Red cell survival kinetics.
78140............................ Red cell sequestration.
78160............................ Plasma iron turnover.
78162............................ Radioiron absorption exam.
78170............................ Red cell iron utilization.
78172............................ Total body iron estimation.
APC 0400:
78102............................ Bone marrow imaging, ltd.
78103............................ Bone marrow imaging, mult.
78104............................ Bone marrow imaging, body.
78185............................ Spleen imaging.
78195............................ Lymph system imaging.
APC 0394:
78201............................ Liver imaging.
78202............................ Liver imaging with flow.
78205............................ Liver imaging (3D).
78206............................ Liver image (3d) with flow.
78215............................ Liver and spleen imaging.
78216............................ Liver & spleen image/flow.
78220............................ Liver function study.
78223............................ Hepatobiliary imaging.
APC 0395:
78230............................ Salivary gland imaging.
78231............................ Serial salivary imaging.
78232............................ Salivary gland function exam.
78258............................ Esophageal motility study.
78261............................ Gastric mucosa imaging.
78262............................ Gastroesophageal reflux exam.
78264............................ Gastric emptying study.
78278............................ Acute GI blood loss imaging.
78290............................ Meckel's divert exam.
78291............................ Leveen/shunt patency exam.
78270............................ Vit B-12 absorption exam.
78271............................ Vit b-12 absrp exam, int fac.
78272............................ Vit B-12 absorp, combined.
78282............................ GI protein loss exam.
APC 0396:
78300............................ Bone imaging, limited area.
78305............................ Bone imaging, multiple areas.
78306............................ Bone imaging, whole body.
78315............................ Bone imaging, 3 phase.
78320............................ Bone imaging (3D).
APC 0397:
78414............................ Non-imaging heart function.
78445............................ Venous thrombosis study.
78455............................ Venous thrombosis study.
78456............................ Acute venous thrombus image.
78457............................ Venous thrombosis imaging.
78458............................ Ven thrombosis images, bilat.
APC 0398:
78428............................ Cardiac shunt imaging.
78460............................ Heart muscle blood, single.
78461............................ Heart muscle blood, multiple.
78464............................ Heart image (3d), single.
78465............................ Heart image (3d), multiple.
78466............................ Heart infarct image.
78468............................ Heart infarct image (ef).
78469............................ Heart infarct image (3D).
78472............................ Gated heart, planar, single.
78473............................ Gated heart, multiple.
78481............................ Heart first pass, single.
78483............................ Heart first pass, multiple.
78494............................ Heart image, spect.
APC 0399:
78478............................ Heart wall motion add-on.
78480............................ Heart function add-on.
78496............................ Heart first pass add-on.
APC 0401:
78580............................ Lung perfusion imaging.
78584............................ Lung V/Q image single breath.
78585............................ Lung V/Q imaging.
78586............................ Aerosol lung image, single.
78587............................ Aerosol lung image, multiple.
78588............................ Perfusion lung image.
78591............................ Vent image, 1 breath, 1 proj.
78593............................ Vent image, 1 proj, gas.
78594............................ Vent image, mult proj, gas.
78596............................ Lung differential function.
APC 0402:
78600............................ Brain imaging, ltd static.
78601............................ Brain imaging, ltd w/flow.
78605............................ Brain imaging, complete.
78606............................ Brain imaging, compl w/flow.
78607............................ Brain imaging (3D).
78610............................ Brain flow imaging only.
78615............................ Cerebral vascular flow image.
APC 0403:
78630............................ Cerebrospinal fluid scan.
78635............................ CSF ventriculography.
78645............................ CSF shunt evaluation.
78647............................ Cerebrospinal fluid scan.
78650............................ CSF leakage imaging.
78660............................ Nuclear exam of tear flow.
APC 0404:
78700............................ Kidney imaging, static.
78701............................ Kidney imaging with flow.
78704............................ Imaging renogram.
78707............................ Kidney flow/function image.
78708............................ Kidney flow/function image.
78709............................ Kidney flow/function image.
78710............................ Kidney imaging (3D).
78715............................ Renal vascular flow exam.
APC 0405:
78730............................ Urinary bladder retention.
78740............................ Ureteral reflux study.
78760............................ Testicular imaging.
78761............................ Testicular imaging/flow.
APC 0406:
78800............................ Tumor imaging, limited area.
78801............................ Tumor imaging, mult areas.
78802............................ Tumor imaging, whole body.
78803............................ Tumor imaging, whole body.
78805............................ Abscess imaging, ltd area.
78806............................ Abscess imaging, whole body.
78807............................ Nuclear localization/abscess.
G0273............................ Pretx planning, non-Hodgkins.
APC 0407:
79000............................ Init hyperthyroid therapy.
79001............................ Repeat hyperthyroid therapy.
79020............................ Thyroid ablation.
79030............................ Thyroid ablation, carcinoma.
79035............................ Thyroid metastatic therapy.
APC 0408:
79100............................ Hematopoetic nuclear therapy.
79200............................ Intracavitary nuclear trmt.
79300............................ Interstitial nuclear therapy.
79400............................ Nonhemato nuclear therapy.
79420............................ Thyroid metastatic therapy.
79440............................ Nuclear joint therapy.
G0274............................ Radiopharm tx, non-Hodgkins.
------------------------------------------------------------------------

We believe that the proposed APC structure, which takes into
account the organ(s) being examined (or treated) as well as the type
and complexity of the procedure, is more homogeneous both clinically
and in terms of resource consumption than the current APC structure.
Currently, payment for the radiopharmaceutical ``zevalin''
(Ibritumomab Tiuxetan) is packaged into the payment for HCPCS codes
G0273 (Pretx planning, non-Hodgkins) and G0274 (Radiopharm tx, non-
Hodgkins). To ensure consistency with our payment policy for other
radiopharmaceuticals (that is, making separate payment for
radiopharmaceuticals whose costs are greater than $150 per episode of
care), we are proposing to make payment for ``zevalin'' (Ibritumomab
Tiuxetan) separately from payment for the procedures with which
``zevalin'' (Ibritumomab Tiuxetan) is used.
We propose to use HCPCS A9522 (Indium 111 ibritumomab tiuxetan) to
report the use of In-111 Zevalin (In-111 Ibritumomab Tiuxetan) and
HCPCS A9523 (Yttrium 90 ibritumomab tiuxetan) to report the use of Y90
Zevalin (Y90 Ibritumomab Tiuxetan). We would place HCPCS A9522 in APC
9118 with a payment amount of $2,084.55 and HCPCS A9523 in APC 9117
with a payment amount of $18,066.09. We note that payment rates for
radiopharmaceuticals are not subject to wage index adjustments because
no

[[Page 47976]]

portion of the payment is attributed to labor-related costs.
Because we propose that payment for G0273 and G0274 no longer
include payment for ``zevalin,'' we also propose to place G0273 into
newly created APC 0406 and G0274 into newly created APC 0408. These
APCs include procedures that are similar clinically and in terms of
resource consumption to G0274 and G0273, respectively.
Please see section VI of this proposed rule for further discussion
on payments for drugs, biologicals, and radiopharmaceuticals.
ee. Endoscopy Lower Airway.
APC 0076: Endoscopy Lower Airway.
A presenter to the Panel expressed concern that APC 0076 apparently
violates the 2 times rule and requested that we move CPT code 31631
(bronchoscopy with tracheal stent placement) from APC 0076 and into a
new APC.
The Panel suggested that a new APC comprised of the four most
costly procedures in APC 0076 would result in a more homogenous
grouping, and recommended that we move the following CPT codes from APC
0076 and into newly created APC 0415.

------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
31630............................. Bronchoscopy dilate/fracture
reduction.
31631............................. Bronchoscopy, dilate w/stent.
31640............................. Bronchoscopy w/tumor excise.
31641............................. Bronchoscopy, treat blockage.
------------------------------------------------------------------------

We propose to accept the Panel's recommendation that we move CPT
codes 31630, 31631, 31640, and 31641 from APC 0076 to new APC 0415.
ff. Gastrointestinal Endoscopic Stenting Procedures.
APC 0141: Upper GI Procedures.
APC 0142: Small Intestine Endoscopy.
APC 0143: Lower GI Endoscopy.
APC 0147: Level II Sigmoidoscopy.
A commenter requested that we create a new APC that would be
comprised of all the gastrointestinal endoscopic stent codes. The Panel
agreed with the commenter's suggestion because the resource
requirements for all gastrointestinal endoscopic stents appear to be
similar.
The Panel recommended that we move the following CPT codes from
their 2003 APCs to newly created APC 0384 for 2004:

Table 4.--HCPCS Codes To Be Moved Into New APC 0646
------------------------------------------------------------------------
HCPCS Description 2003 APC 2004 APC
------------------------------------------------------------------------
43219................ Esophagus endoscopy........ 0141 0384
43256................ Upper GI endoscopy w/stent. 0141 0384
44370................ Small bowel endoscopy w/ 0142 0384
stent.
44379................ Small bowel endoscopy w/ 0142 0384
stent.
44383................ Small bowel endoscopy...... 0142 0384
44397................ Colonoscopy w/stent........ 0143 0384
45387................ Colonoscopy w/stent........ 0143 0384
45327................ Proctosigmoidoscopy w/stent 0147 0384
45345................ Sigmoidoscopy w/stent...... 0147 0384
------------------------------------------------------------------------

We propose to accept the Panel's recommendation to move the
following gastrointestinal endoscopic stent CPT codes into newly
created APC 0384: 43219, 43256 (from APC 0141); 44370, 44379, 44383
(from APC 0142); 44397, 45387 (from APC 0143); 45327, and 45345 (from
APC 0147).
gg. Capturing the Costs of Devices That Are Packaged Into APCs.
APC 0081: Non-Coronary Angioplasty or Atherectomy.
APC 0083: Coronary Angioplasty and Percutaneous Valvuloplasty.
APC 0104: Transcatheter Placement of Intracoronary Stents.
APC 0222: Implantation of Neurological Device.
APC 0223: Implantation of Pain Management Device.
APC 0227: Implantation of Drug Infusion Device.
APC 0229: Transcatheter Placement of Intravascular Shunts.
Several commenters requested that the status indicators for the
above APCs (all of which include high-cost devices) be changed from T
(multiple-procedure discount applies) to S (multiple-procedure discount
does not apply). Two presenters to the Panel stated that hospitals do
not pay less for devices when they are used in the context of a
multiple-procedure claim and suggested that we apply the multiple-
procedure reduction to the non-device portion of the claim only.
Alternatively, these presenters recommended that we apply the discount
policy only when the device cost is below a predetermined proportion of
the APC cost. Another presenter to the Panel requested that APCs 0222,
0223, and 0227 be exempt from the multiple procedure discount policy
because the cost of the devices used in these procedures makes up more
than 50 percent of the APC cost.
We sought the Panel's input as to whether there are situations in
which we should not apply our multiple procedure discount policy. The
Panel recommended no changes to the status indicators for any of the
device-related APCs discussed because they were concerned that
exemptions from the discount policy could result in incentives to use
more devices than necessary. However, the Panel asked that we analyze
our data to determine if we may be underpaying for devices when the
multiple procedure discounting policy is applied and recommended that
we develop some methodology to track device costs. In section V.C of
this proposed rule, we discuss the issue of device costs and multiple
procedure reductions and our progress to date in developing
``combination APCs'' to address the Panel's concern.
hh. Discussion of Ways To Increase the Use of Multiple Claims To
Set APC Payment Rates.
A presenter to the Panel suggested that we use dates of service on
multiple procedure claims to increase the number of claims we use to
set payment rates. Another presenter suggested that we could further
increase the number of multiple procedure claims that could be used to
set payment rates by ignoring codes with status indicator K. Other
suggestions were to exclude from consideration those APCs with small
dollar values and to create a new code or APC specifically for the
insertion and removal of devices.
The Panel recommended that our staff explore ways to increase the
number of claims used to set payment rates, including the following
methodologies: sort multiple claims by date of service; exclude codes
with K status indicator from evaluation; exclude those APCs with
nominal costs (the definition of ``nominal'' can be determined by

[[Page 47977]]

modeling a variety of possible dollar amounts). In addition, the Panel
recommended that we create no G codes as part of the effort to use
multiple procedure claims for developing relative weights. If new codes
are needed, the Panel suggested that our staff work with the American
Medical Association's CPT Board to identify possible new codes. Please
see section V.C of this proposed rule for our discussion of the use of
multiple procedure claims for developing payment rates for procedures
that use devices.

B. Other Changes Affecting the APCs

1. Limit on Variation of Costs of Services Classified Within an APC
Group
Section 1833(t)(2) of the Act provides that the items and services
within an APC group cannot be considered comparable with respect to the
use of resources if the highest cost item or service within an APC
group is more than 2 times greater than the lowest cost item or service
within the same group. However, the statute authorizes the Secretary to
make exceptions to this limit on the variation of costs within each APC
group in unusual cases such as low volume items and services. No
exception may be made in the case of a drug or biological that has been
designated as an orphan drug under section 526 of the Federal Food,
Drug, and Cosmetic Act.
Taking into account the proposed APC changes discussed in relation
to the APC Panel recommendations in section II.A.4 of this proposed
rule and the use of 2002 claims data to calculate the median cost of
procedures classified to APCs, we reviewed all the APCs to determine
which of them would not meet the 2 times limit. We use the following
criteria when deciding whether to make exceptions to the 2 times rule
for affected APCs:
[sbull] Resource homogeneity.
[sbull] Clinical homogeneity.
[sbull] Hospital concentration.
[sbull] Frequency of service (volume).
[sbull] Opportunity for upcoding and code fragmentation.
For a detailed discussion of these criteria, refer to the April 7,
2000 final rule (65 FR 18457).
The following table contains APCs that we propose to exempt from
the 2 times rule based on the criteria cited above. In cases in which a
recommendation of the APC Panel appeared to result in or allow a
violation of the 2 times rule, we generally accepted the Panel
recommendation because Panel recommendations were based on explicit
consideration of resource use, clinical homogeneity, hospital
specialization, and the quality of the data used to determine payment
rates.
The median cost for hospital outpatient services for these and all
other APCs can be found at Web site: http://www.cms.hhs.gov.

Table 5.--Table of APCs Exempted From 2 Times Rule
------------------------------------------------------------------------
Proposed rule APC Description
------------------------------------------------------------------------
0004...................................... Level I Needle Biopsy/
Aspiration Except Bone
Marrow.
0018...................................... Biopsy of Skin/Puncture of
Lesion.
0019...................................... Level I Excision/Biopsy.
0020...................................... Level II Excision/Biopsy.
0032...................................... Insertion of Central Venous/
Arterial Catheter.
0043...................................... Closed Treatment Fracture
Finger/Toe/Trunk.
0046...................................... Open/Percutaneous Treatment
Fracture or Dislocation.
0048...................................... Arthroplasty with
Prosthesis.
0055...................................... Level I Foot Musculoskeletal
Procedures.
0058...................................... Level I Strapping and Cast
Application.
0060...................................... Manipulation Therapy.
0072...................................... Level II Endoscopy Upper
Airway.
0073...................................... Level III Endoscopy Upper
Airway.
0080...................................... Diagnostic Cardiac
Catheterization.
0084...................................... Level I Electrophysiologic
Evaluation.
0097...................................... Cardiac and Ambulatory Blood
Pressure Monitoring.
0099...................................... Electrocardiograms.
0105...................................... Revision/Removal of
Pacemakers, AICD, or
Vascular.
0130...................................... Level I Laparoscopy.
0147...................................... Level II Sigmoidoscopy.
0148...................................... Level I Anal/Rectal
Procedure.
0155...................................... Level II Anal/Rectal
Procedure.
0164...................................... Level I Urinary and Anal
Procedures.
0165...................................... Level III Urinary and Anal
Procedures.
0192...................................... Level IV Female Reproductive
Proc.
0203...................................... Level IV Nerve Injections
0204...................................... Level I Nerve Injections.
0207...................................... Level III Nerve Injections.
0213...................................... Extended EEG Studies and
Sleep Studies, Level I.
0214...................................... Electroencephalogram.
0218...................................... Level II Nerve and Muscle
Tests.
0231...................................... Level III Eye Tests &
Treatments.
0233...................................... Level II Anterior Segment
Eye Procedures.
0235...................................... Level I Posterior Segment
Eye Procedures.
0239...................................... Level II Repair and Plastic
Eye Procedures.
0245...................................... Level I Cataract Procedures
without IOL Insert.
0252...................................... Level II ENT Procedures.
0262...................................... Plain Film of Teeth.
0266...................................... Level II Diagnostic
Ultrasound Except Vascular.
0274...................................... Myelography.
0303...................................... Treatment Device
Construction.
0330...................................... Dental Procedures.
0340...................................... Minor Ancillary Procedures.

[[Page 47978]]

0341...................................... Skin Tests.
0344...................................... Level III Pathology.
0363...................................... Level I Otorhinolaryngologic
Function Tests.
0364...................................... Level I Audiometry.
0367...................................... Level I Pulmonary Test.
0368...................................... Level II Pulmonary Tests.
0370...................................... Allergy Tests.
0373...................................... Neuropsychological Testing.
0385...................................... Urinary Incontinence
Procedures.
0397...................................... Vascular Imaging.
0408...................................... Non-thyroid Radionucliide
Treatment.
0409...................................... Red Blood Cell Tests.
0600...................................... Low Level Clinic Visits.
0668...................................... Level I Angiography and
Venography except
Extremity.
0692...................................... Electronic Analysis of
Neurostimulator Pulse
Generators.
0698...................................... Level II Eye Tests &
Treatments.
------------------------------------------------------------------------

2. Procedures Moved From New Technology APCs to Clinically Appropriate
APCs
In the November 30, 2001 final rule (66 FR 59903), we made final
our proposal to change the period of time during which a service may be
paid under a new technology APC. The April 7, 2000 final rule initially
established the time frame that new technology APCs would be in effect
(65 FR 18457). Beginning in 2002, we retain a service within a new
technology APC group until we have acquired adequate data that allow us
to assign the service to a clinically appropriate APC. This policy
allows us to move a service from a new technology APC in less than 2
years if sufficient data are available, and it also allows us to retain
a service in a new technology APC for more than 3 years if sufficient
data upon which to base a decision for reassignment have not been
collected.
In the context of new technology procedures, we create HCPCS codes
for services only. We do not create HCPCS codes for equipment that is
used in the course of providing an item or service (except in the case
of ``C'' codes for devices that meet the criteria for transitional
pass-through payments). Equipment that is used to provide an item or
service is not separately coded because it is a resource required to
furnish the service. Like other resources that are required to furnish
a service (for example, cost of a room, cost of staff, cost of
supplies), the hospital should show charges either as part of its
charge for the procedure or with a revenue code.
As described in more detail below, we propose to delete four HCPCS
codes that are currently paid in new technology APCs. These four HCPCS
codes do not conform to our current policy to not create HCPCS codes
for equipment used to provide a service. In addition, there exist, or
soon will exist, CPT codes to describe the services being furnished,
including any equipment that is needed to perform them, so we believe
it is appropriate at this time to delete the HCPCS codes. The HCPCS
codes we propose to delete effective January 1, 2004 are:
C1088: Laser Optic Treatment system, Indigo Laseroptic Treatment
System,
C9701: Stretta System,
C9703: Bard Endoscopic Suturing System, and
C9711: H.E.L.P. Apheresis System.
These codes were created and assigned to New Technology APCs when
it was CMS policy to create a C code to describe an item of equipment
for which there was no other means of making payment for the service in
which the equipment was used. In the November 30, 2001 final rule, we
announced that we would not use New Technology APCs to pay for drugs,
devices, and equipment that are used in the performance of a procedure,
but which are not in and of themselves a complete service. It is due to
an oversight on our part that we did not delete these codes at that
time. We stopped using C codes to describe specific devices in April
2001 and no longer create C codes to describe items of equipment.
Moreover, we have found that there are existing CPT codes or, in the
case of C9701, there will soon be a CPT tracking code, that will
accurately report the services being furnished, and under which the
hospital should report the charges for providing the services,
including charges related to the equipment needed to furnish the
service. Therefore, payment will be appropriate regardless of whether
there are separate codes for these items of equipment.
HCPCS code C1088, the Laser Optic Treatment System, Indigo
Laseroptic Treatment System, now paid under APC 0980 is no longer
needed because our review of data shows that the equipment it describes
is appropriately reported under CPT codes 52647 and 52648. The
procedures described by these CPT codes may be performed by using
several types of equipment, one of which is the type described by
C1088. In fact, most of the claims containing line items for C1088 are
accompanied by line items for 52647 or 52648. This means that hospitals
are appropriately reporting these services under the applicable CPT
codes and that any charges associated with C1088 are likely duplicate
charges for the service provided. Therefore, we propose to delete C1088
and to have hospitals continue to report these services under CPT codes
52647 and 52648, which are in APC 0163.
HCPCS code C9701, the Stretta System, now paid under APC 0980, is
used in a procedure that will soon be given a CPT Category Three
Tracking Code by the American Medical Association's CPT Editorial
Panel. We propose to use the CPT tracking code to report services using
the Stretta System and to delete HCPCS code C9701. We propose to assign
the new CPT tracking code in APC 1557.
HCPCS code C9703, the Bard Endoscopic Suturing System, now paid
under APC 0979, is used in a procedure that has been granted a CPT
Category Three Tracking Code, 0008T, which describes the procedure for
which this equipment is used. We propose to delete C9703 and to require
hospitals to use 0008T to report services using this equipment. We
propose to assign CPT code 0008T to APC 1555 for 2004.
HCPCS code C9711, the H.E.L.P. Apheresis System, now paid under APC

[[Page 47979]]

0978, is used to provide apheresis, which is appropriately reported
using CPT codes 36511 through 36516. Therefore, we propose to delete
C9711 and to require hospitals to report the service in which this
equipment is used by using CPT codes 36511 through 36516.
3. Revision of Cost Bands and Payment Amounts for New Technology APCs
In the April 7, 2000 final rule (68 FR 18477), we created 15 new
technology APCs (APCs 0970 through 0984) to pay for certain new
technology services under the OPPS. As discussed in both the April 7,
2000 and November 30, 2001 final rules, new technology APCs are
intended to pay for new or rarely performed procedures for which we
lack sufficient cost data to make an assignment to a clinical APC. New
technology APCs are defined on the basis of costs, not the clinical
characteristics of a service. The payment rate for each new technology
APC is based on the midpoint of a range of costs.
In the November 30, 2001 final rule (66 FR 59856), we revised
several of the cost bands, added a payment level to the original group
of new technology APCs, and assigned status indicator ``T'' to APCs
0970 through 0985. We also created a parallel set of new technology
APCs (APCs 0706 through 0721), each of which was assigned status
indicator ``S.'' In addition, we changed the definition of what is
appropriately paid for under a new technology APC; we refined the
criteria for determining assignment of a procedure or service to a new
technology APC; we clarified the information that must be supplied for
a request for new technology status to be considered; and we removed
the restrictions on how long a procedure can be assigned to a new
technology APC. These changes, which are discussed in detail in the
November 30, 2001 final rule, were implemented effective April 1, 2002.
In the November 1, 2002 final rule, we established two additional
new technology APCs, APC 989, and APC 725; as these APCs were not
discussed in the proposed rule, they were considered interim with
comment.
In this proposed rule, we are proposing to implement a
comprehensive restructuring of all the new technology APCs. First, the
cost intervals in the current new technology APCs are inconsistent,
ranging from $50 to $1,500. Secondly, as the number of procedures
assigned to new technology APCs increases, we believe that narrower
cost bands are required to avoid significant mispayment for new
technology services. The increased number of new technology APCs that
would result from narrowing the cost bands cannot be accommodated
within the current sequence of available APC numbers. Therefore, we are
proposing to dedicate two new series of APC numbers to the restructured
new technology APCs, which would allow us to narrow the cost bands and
also afford us flexibility in creating additional bands as future needs
may dictate.
We propose to establish cost bands from $0 to $100 in increments of
$50, from $100 through $2,000 in intervals of $100, and from $2,000
through $6,000 in intervals of $500. We believe that these intervals
would allow us to price new technology services more appropriately and
consistently. We also propose to retain two parallel sets of new
technology APCs, one with status indicator ``S'' and the other with
status indicator ``T.'' We invite comments on the hierarchy of cost
levels of the restructured new technology APCs.
We would reassign current new technology procedures to the level in
the restructured new technology APCs so that the payment amount for the
procedure in 2004 closely approximates the current payment amount. As
we explained in the November 30, 2001 final rule, we generally keep a
procedure in the new technology APC to which it is initially assigned
until we have collected data sufficient to enable us to move the
procedure to a clinically appropriate APC. However, in cases where we
find that our original new technology APC assignment was based on
inaccurate or inadequate information, we may, based on more recent
information (including claims data), reassign the procedure or service
to a different new technology APC that more appropriately reflects its
cost.
The proposed restructured new technology APCs are listed in
Addendum A.
4. APC Assignment for New Codes Created During Calendar Year (CY) 2003
During CY 2003, we created several HCPCS codes to describe services
payable under the hospital OPPS. These codes have already been assigned
to APCs for CY 2003. In this proposed rule, we solicit comment on the
APC assignment of these services. In addition, in this proposed rule,
we propose to create a new HCPCS code with an effective date of July 1,
2003. Table 6 includes a new procedural HCPCS code created for
implementation in July 2003.
Table 6 does not include new codes for drugs and devices for which
we established or intend to establish pass-through payment eligibility
effective July or October 2003. Furthermore, neither the new procedural
HCPCS nor the new pass-through codes proposed for implementation
beginning October 2003, or later, are included in Addendum B of this
proposed rule.

Table 6--New G Code for 2003
------------------------------------------------------------------------
Effective
HCPCS code Long descriptor SI date APC
------------------------------------------------------------------------
G0296........... PET imaging, full and S 07/01/03 0714
partial ring PET
scanner only, for
restaging of
previously treated
thyroid cancer of
follicular cell
origin following
negative I-131 whole
body scan.
------------------------------------------------------------------------

5. Creation of APCs for Combinations of Device Procedures
In the course of developing the proposed rule for the 2004 OPPS, we
wanted to ensure that the claims we use to set payment rates for APCs
into which we package medical devices accurately reflect the costs of
both the device and non-device portions of the service. As discussed in
section III of this proposed rule, we have made a number of changes to
our methodology for the creation of single procedure claims used to set
relative weights. These changes enabled us to use charge data from more
claims to set relative weights. However, we have noted that in spite of
our new methodology, we were unable to significantly increase the
number of single procedure claims used to set relative weights for
several APCs that use high cost devices. One reason for this is that
these APCs are often billed in combination with several other major
procedures so that we are unable to generate single procedure claims
for these APCs.
In the past, commenters have alleged that without using multiple
procedure claims, we will be unable to capture the

[[Page 47980]]

costs of the more complex cases in which multiple procedures are
performed and multiple devices are used. These commenters further
requested that we change the status indicator of certain APCs from
``T'' to ``S'' in order to appropriately capture the cost of high cost
devices when multiple procedures, each using devices, were billed. In
addition to attempting to find a way to use multiple procedure claims,
we also decided to examine our claims data to investigate whether our
current payments for multiple procedures performed on the same date,
each using high cost devices accurately captured the costs of the
device and non-device portion of each procedure.
In order to do this, we reviewed claims from APCs that required
high cost devices and from which we were unable to use the majority of
claims to set a relative weight for the APC (for example, APCs for
insertion of pacemakers, defibrillators, and neurostimulators). We
determined the frequency with which other APCs were billed with the
high cost device APCs. We then selected those claims where two APCs
using high cost devices, or one APC using high cost devices and one
high cost, non-device-requiring APC, were billed together with a
frequency of more than 100 for the time period April 1, 2002 through
September 30, 2002. This number was chosen in order to ensure that we
had enough claims to determine reliable median costs. We included the
APC combination 0081/0104 unintentionally and performed the analysis
without realizing until after the data were developed that it had fewer
than 100 claims and therefore should not have been selected. We
expected that the data being used to set the 2004 weights would have a
similar number of each combination to the number we found in the April
2002 to September 2002 claims. Review of Table 7, Combination APCs Used
in Analysis, shows that even starting with 100 claims, we frequently
had to determine median costs with very few claims. Additionally, Table
7 reveals that only a few combinations of two high cost device-
requiring APCs are billed together 100 or more times. Six of the twelve
combinations we analyzed (for example, claims for insertion of
pacemakers and defibrillators) contained APC 0105 (Removal of pacemaker
defibrillator), which is not a high cost, device-requiring APC. As the
data show, APC 0105 is frequently found on multiple procedure claims,
but because it is not a high cost device-requiring APC, when it is
billed with these APCs, the multiple procedure reductions are applied
to APC 0105. Therefore, we have determined that the vast majority of
claims for APCs, such as ``insertion of Cardioverter Defibrillators,''
were not usable multiple procedure claims for the purpose of
determining relative weights under our single claim process because
they were billed with APC 0105.
After selecting the combinations to review, we determined the
hospital costs associated with providing these ``combination''
procedures using the following methodology:
1. We selected claims where the two APCs of interest both appeared
on the claim with the same date of service, and subjected them to the
same trimming methodology we use for single procedure claims.
2. We then required that each APC appear on the claim only once.
(For example, if two HCPCS codes from APC 0081 appeared on a claim with
one HCPCS code from APC 0229, we did not use the claim. Many claims
were discarded because of this requirement.)
3. From the claims in step two, we selected only those claims that
included the device category codes for the devices required to perform
the service. This is similar to our methodology for using single
procedure claims where the procedure requires the use of a device with
a category code (for example, for claims involving APCs 0222/0225, we
used only claims that contained C codes for both a neurostimulator
pulse generator and neuroelectrodes).
4. We ignored any line items for separately payable services under
OPPS or the lab fee schedule and any line items with revenue centers
containing HCPCS other than those in the APCs of interest.
5. At this point, we were left with claims where the only
separately payable services were the line items for the HCPCS in the
APCs of interest.
6. We packaged into the payable HCPCS codes all device category
codes, all packaged HCPCS codes, and all revenue center codes without
HCPCS.
7. We then determined the median cost for each APC pair using the
remaining claims.
We believe the median cost estimate determined by this methodology
should, if anything, overestimate the costs of the procedure
combinations studied since all packaged line items were attributed to
the APCs of interest unless they were clearly identified as being
associated with other procedures. For example, if line items for a
clinic visit and a medical or surgical supply revenue center appeared
on the claim, we packaged the charges associated with the revenue
center entirely into the APCs of interest and not into the APC for
clinic visits.
We also determined the median costs for these APCs using our usual
single claims methodology (these medians are contained in Addendum A).
We then determined a summed median cost of each APC pair using our
current payment policy, which allows payment at 100 percent for the
most expensive APC with ``T'' status indicator and 50 percent for each
additional APC with ``T'' status indicator. That is, we added the
median cost of the more expensive APC and 50 percent of the median cost
of the less expensive APC as a proxy for the total median cost (and
payment) using our current payment policy. We then compared this figure
with the median cost for the ``combination APC.'' (See Table 7.) We
believe this comparison is an indicator of whether our current payment
policy accurately pays for the costs of these APCs when they are billed
together on the same date of service.
Our comparison reveals that, of the 12 ``combination APCs''
created, 7 had higher median costs than the median costs obtained with
the multiple procedure methodology (we note that because APC 222 has a
status indicator of ``S'', we did not apply the multiple procedure
reduction for the APC 0222/0225 combination).
For three of these seven combinations, we consider the data
unreliable because we were able to use very few claims to determine the
``combination'' median cost. Specifically, for APC combination 0085/
0655, we were able to use only 37 claims; for APC combination 0105/
0089, we were to use only 16 claims; and for APC combination 0105/0655,
we were able to use only 12 claims. This is in distinction to the
number of claims we used to determine the median costs for APCs 0655
and 0089 alone (1,170 and 303 respectively). Further, two of these
combinations contain only one APC using high cost devices because APC
0105 does not require the use of high cost devices. This means that the
multiple procedure reduction was applied to APC 0105. In such cases, we
believe the reduction is appropriate because when a pacemaker or
defibrillator is removed and replaced, the patient is only anesthetized
once, the room only needs to be prepared once, and the time for
replacement is usually less than the time for insertion due to the
existence of a subcutaneous pocket.
Three other APC combinations, 0105/0090, 0105/0107, and 0105/0654,
also contain only one APC requiring the use of high cost devices and
therefore

[[Page 47981]]

should not pose the problem of underpayment due to the multiple
procedure reduction, which was applied to APC 0105. Furthermore, in
these three cases, the difference in median costs between the
combination median and the median determined by our multiple procedure
reduction methodology was, in our view, insignificant (all much less
than 5 percent).
For APC combination 0222/0225, the difference in median cost could
be considered significant at slightly under 5 percent, but only 74
claims were used to determine the combination median. Because we used
approximately 600 claims to determine the median costs for APCs 0222
and APC 0225 individually, we consider the combination median cost
comparatively unreliable.
Lastly, we note that for the other five combinations, our current
payment policy pays more than the ``combination'' payment methodology.
Based on this comparison we considered several options for payment
of these APCs when billed together:
1. Maintain our current payment policy.
2. Change the status indicators of certain APCs requiring the use
of high cost devices to ``S.''
3. Create ``combination APCs'' with relative weights calculated
using the methodology described above in order to make a single payment
when the two APCs in the combination are billed together.
The third option need not result in creation of new HCPCS codes and
APCs for hospitals to report. Instead, we could make changes in the
logic of the outpatient code editor (OCE) so that when hospitals bill
the two APCs in a combination, the OCE would ``map'' the payment to a
single amount rather than paying the more expensive APC at 100 percent
and the less expensive at 50 percent. The following is an example of
how combination APCs might work: If a unit of a code in APC 0081 was
billed with a unit of a code in APC 0104 on the same date, the multiple
procedure discount would not be applied, so payment would no longer be
made at 100 percent of the payment for APC 0104 (the highest paid APC
in the pair) and 50 percent of the payment for APC 0081. Instead, if we
were to implement combination APCs for this pair, the combination of
codes would be mapped to a new ``combination'' APC, and we would make a
single payment for both services. The payment rate for the new
``combination'' APC would be based upon a scaled weight calculated from
the median cost for all claims containing one unit of a code from APC
0081 and one unit of a code from APC 0104 (using the methodology
described above). If either of the APCs were billed without the partner
APC for that established ``combination'' APC, then the APC would map to
the current APC that contains the code.
Based on our analysis, we are proposing option one: Maintaining our
current payment policy. We believe that our analysis shows that our
current payments for these APCs adequately reflect the costs of the
procedures, even when billed in combination.
We note that only a few APCs requiring the use of high cost devices
are billed in combination. Thus, we do not believe there are compelling
reasons to establish a new, or special, payment policy in situations
where two APCs requiring high cost devices are billed together fewer
than 100 times. Even when APCs are billed together, we have shown that
frequently the data are unreliable due to the low number of claims we
can actually use to determine the total median cost of the ``combined''
procedure. Furthermore, even where the number of usable claims is large
enough to give us some assurance that the data are reliable, the median
costs as determined by the two methodologies do not support any changes
in our current payment policy. In some instances, adoption of the new
payment policy would actually reduce payments for these services, and,
in most other cases, any increase in payments would be negligible.
One commenter has brought to our attention the fact that, rarely,
correct coding does not allow hospitals to bill for two APCs requiring
high cost devices. One example is APC 0082 (Coronary Atherectomy) and
APC 0104 (Transcoronary Stent Placement) because atherectomy is
considered to be a component of stent placement when both are performed
together. In those cases, we would expect hospitals to bill for all the
devices used to accomplish the atherectomy and the stent placement. To
the extent that both were performed, the median cost of stent placement
should reflect the cost of performing an atherectomy. Therefore, we do
not believe there is a compelling reason to create new payment policy
for these rare situations. (See also the discussion below on ``case
rate'' purchasing by hospitals.)
It could be reasoned that our analysis of the costs of ``combined''
procedures is faulty because hospital coding and billing inaccuracies
may apply to these claims as well as single procedure claims (and may
even be magnified). However, that reasoning would undercut, and be
contrary to, the repeated comments that we need to use more multiple
procedure claims to set relative weights because single procedure
claims do not capture the true costs of complex procedures or episodes
of care. Our investigation was performed precisely to address these
concerns, determine how we might use multiple procedure claims, and
what effect use of those claims would have on payment rates. Even with
use of a methodology that overestimated the costs of combination
procedures, we were unable to show that the median costs (and payments)
using our current payment policy do not accurately reflect the costs
for performing these procedures.
Other possible factors affecting our analysis include charge
compression and/or inadequate charges for these procedures or the
devices associated with them. However, it is not possible for us to
know the magnitude of how charge compression or inadequate charges
might affect costs or what methodologic or payment adjustment would be
appropriate to address the problem. Furthermore, we point out that
charge compression and inadequate charges should affect our cost data
for these APCs when billed alone and when these APCs are billed in
combination. It is unknown whether the effects would be similar in each
instance but we have no reason to believe they would be different.
Therefore, we do not believe that adjusting for charge compression or
inadequate charges would change the ``relative'' median costs of the
APCs when billed alone or in combination. Finally, we believe that the
median costs of the APCs billed in combination support the concept that
economies of scale are achieved in those cases. There are at least two
reasons why this might occur: First, many hospitals purchase devices on
a case rate or capitated basis, which means that the hospitals' device
cost ``per case'' is fixed (with quarterly adjustments made based on
volume and actual device use in the previous quarter(s)). For example,
inserting a stent or cardioverter defibrillator requires the use of
multiple devices in addition to the stent or defibrillator. A hospital
may agree to pay $XXXX ``per case'' for all the devices used to insert
a stent (for example, guidewires, introducers, catheters, rotablators
etc.). This ``per case'' payment means that the hospital has the same
cost irrespective of whether a rotablator, two catheters, or four
catheters were used for a specific patient. Second, even if hospitals
purchase devices on a ``per device'' basis, it is possible that no
extra catheters, guidewires, and/or

[[Page 47982]]

introducers, for example, are used when a second related procedure is
performed (for example, an electrophysiology study and a defibrillator
lead placement, or an angioplasty and a stent placement).
In summary, we have concluded that there is no compelling reason to
change our current payment policy for APCs requiring the use of high
cost devices.
We solicit public comments on our methodology, analysis, and
payment options for these APCs. We particularly solicit comments on how
our analysis should affect any use of external data sources in the
final rule. Specifically, we ask commenters to explain why submitted
external data should be used in preference to our single or multiple
claim data for APCs requiring the use of high cost devices.
We also note that creation of ``combination APCs'' would allow us
to set relative weights using a number of claims that we otherwise
would not be able to use. Therefore we solicit comments on this
approach to using more claims to set relative weights and specifically
request comments on how to use those claims even if we do not create
``combination APCs.''

Table 7.--Combination APCs Used in Analysis
----------------------------------------------------------------------------------------------------------------
Sum of Percent
single APC Frequency Frequency difference
medians of of claims Median cost median for
Descriptions of both adjusted combination used for of services both APCs
Combination of APCs APCs in the for APC billed median cost in both to sum of
combination multiple on the same of services APCs adjusted
procedure date in both single
policy APCs medians
----------------------------------------------------------------------------------------------------------------
0081/0104.............. Noncoronary $5,760.50 55 2 $5,589.14 -2.97
Angioplasty/Athectomy
& Transcatheter
Placement of
Intracoronary Stent.
0081/0229.............. Noncoronary 4,507.09 6177 135 4,116.50 -8.67
Angioplasty/Athectomy
& Transcatheter
Placement of
Iintravascular Stent.
0085/0108.............. Level II 29,749.68 502 63 20,438.99 -31.30
Electrophysiologic
Evaluation &
Insertion/Replacement/
Convert of
Cardioverter
Defibrillator.
0085/0655.............. Level II 9,398.45 268 37 10,832.16 15.25
Electrophysiologic
Evaluation &
Insertion/Replacement/
Conversion of
Permanent Dual
Chamber Pacemaker.
0105/0089.............. Revision/Removal of 7,360.80 221 16 12,268.96 66.68
Pacemakers, AICD, or
Vascular & Insertion/
replacement of
Permanent