[Federal Register: June 12, 1998 (Volume 63, Number 113)]
[Proposed Rules]
[Page 32289-32338]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12jn98-33]
[[Page 32289]]
_______________________________________________________________________
Part II
Department of Health and Human Services
_______________________________________________________________________
Health Care Financing Administration
_______________________________________________________________________
42 CFR Parts 416 and 488
Medicare Program; Update of Ratesetting Methodology, Payment Rates,
Payment Policies, and the List of Covered Surgical Procedures for
Ambulatory Surgical Centers Effective October 1, 1998; Proposed Rule
[[Page 32290]]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 416 and 488
[HCFA-1885-P]
RIN 0938-AH81
Medicare Program; Update of Ratesetting Methodology, Payment
Rates, Payment Policies, and the List of Covered Surgical Procedures
for Ambulatory Surgical Centers Effective October 1, 1998
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Proposed rule.
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SUMMARY: In this rule we propose to--
<bullet> Update the criteria for determining which surgical
procedures can be appropriately and safely performed in an ambulatory
surgical center (ASC);
<bullet> Make additions to and deletions from the current list of
Medicare covered ASC procedures based on the revised criteria;
<bullet> Rebase the ASC payment rates using cost, charge, and
utilization data collected by a 1994 survey of ASCs;
<bullet> Refine the ratesetting methodology that was implemented by
a final notice published on February 8, 1990 in the Federal Register;
<bullet> Require that ASC payment, coverage, and wage index updates
be implemented annually on January 1 rather than having these updates
occur randomly throughout the year;
<bullet> Reduce regulatory burden; and
<bullet> Make several technical policy changes.
This proposed rule implements requirements of section 1833(i)(1)
and (2) of the Social Security Act.
DATES: Comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m. on August
11, 1998.
ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: HCFA-1885-P, P.O. Box 26688,
Baltimore, MD 21207-5178.
If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
FOR FURTHER INFORMATION CONTACT: Joan H. Sanow, (410) 786-5723.
SUPPLEMENTARY INFORMATION: Because of staffing and resource
limitations, we cannot accept comments by facsimile (FAX) transmission.
In commenting, please refer to file code HCFA-1885-P. Comments received
timely will be available for public inspection as they are received,
generally beginning approximately 3 weeks after publication of a
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Table of Contents
I. Background
A. Legislative History
B. Published Changes to ASC List
C. Published Changes to ASC Payment Rates
D. Payment Rate for Extracorporeal Shock Wave Lithotripsy
E. ASC Town Meeting (July 1996)
F. Revisions to the Conditions for Coverage of ASCs
II. Comments
III. Provisions of the Proposed Regulations
A. Basis and Scope (proposed Sec. 416.1)
B. Definitions (Sec. 416.2)
C. Basic requirements (proposed Sec. 416.3 and Sec. 416.4)
D. Additions to/Deletions from the ASC list
1. Revision of 42 CFR 416.65
2. Eliminate Numeric Thresholds
3. Formation of Advisory Group
4. Proposed Additions to the ASC List
a. Additions Suggested by Commenters
b. Proposed Additions Resulting from Changes to CPT
c. Proposed Additions Resulting from Ambulatory Payment
Classification (APC) Groupings
5. Proposed Deletions and Exclusions from the ASC List
a. Procedures Excluded For Reasons of Safety, Reasonableness and
Medical Necessity
b. Unlisted procedures
c. Exclusion of Office-Based Procedures
d. Suggested Additions Not Accepted
e. Procedures Deleted Because of CPT Coding Changes
f. Procedures Recommended by Commenter for Deletion
6. Comments on the ASC List
E. Ratesetting Methodology
1. Current method
2. Proposed ratesetting method--Determine a per-procedure cost
for every reported CPT code at the individual facility level
a. Use 1994 Survey Data
b. Audit Representative Sample of Facilities
c. Adjust Audited Surveys
d. Standardize Unaudited Costs and Charges
e. Calculate Facility-Specific Cost-to-Charge Ratio
5f. Convert Each Procedure Charge to a Procedure Cost
g. Remove Intraocular Lens (IOL) Costs from Four Lens Insertion
Procedures
h. Calculate Facility Specific Portion of Procedure Cost
Attributable to Labor Expenses
i. Deflation by Wage Index Value
j. Adjust Reported Costs for Inflation to Offset Fiscal Year
Differences Among Facilities
3. Proposed ratesetting method:--Determine the median per-
procedure cost, across all facilities, for each reported CPT code
a. Weights
b. Determination of weighted, trimmed median per procedure cost
across all facilities
4. Proposed ratesetting method:--Establish procedure groupings
a. Current Classification System
b. Proposed Ambulatory Payment Classification System
5. Proposed ratesetting methodology:--Determine a standard
payment rate for the procedures within each group
a. Setting rates based on ASC survey data
b. Setting Rates for Procedures with Limited Medicare Volume or
Aberrant Cost Data
[[Page 32291]]
c. Payment rate for CPT code 67027, Implantation of intravitreal
drug delivery system
6. Payment Policy Indicators
7. Comments on proposed ambulatory payment classification
groups, payment policy indicators and payment rates
8. Carrier adjustment of base rates to determine payment amounts
9. Using Resource Costing to Determine Procedure Costs
We are disappointed by our lack of success in the 1994 ASC survey
in gathering usable resource cost data. Our inability to establish
weights and base ASC payment rates on the resource cost data that we
did collect is particularly frustrating in light of the fact that we
expect, beginning January 1, 1999, to make payments to physicians under
the Medicare physicians' fee schedule that are determined in part on
the basis of resource-based practice expense relative units. We have
been closely monitoring the development of the resource-based practice
expense relative value units under the physicians' fee schedule and the
ratesetting method for the hospital outpatient prospective payment
system, which is also scheduled for implementation effective January 1,
1999. When we rebase ASC payment rates following the next ASC survey,
we are committed to reexamining the resource-based practice expense
relative value units established under the Medicare physicians' fee
schedule and the weights developed under the hospital outpatient
prospective payment system for their applicability to ASC ratesetting
in order to advance towards our goal of setting rates in a manner that
is consistent across different sites of service.
F. Scope of ASC Services (Sec. 416.21)
1. ASC Services
2. Venous Access Portals are ASC Facility Services
3. Acquisition of corneal tissue is an ASC service
4. Outside the Scope of ASC Services
G. Basis for Payment (Sec. 416.30)
1. Hospital outpatient department (HOPD)
2. ASCs Operated by a Hospital
3. Medicare approved ASCs
H. Extracorporeal Shock Wave Lithotripsy (ESWL)
1. Background
2. Comments
I. Schedule and Publication of Updates
1. Update of ASC list
2. Update of ASC Payment Rates
J. Technical Changes to 42 CFR Part 416
1. ASC payment rates
2. ASC survey
K. Explanation and Use of Addenda
IV. Collection of Information Requirements
V. Regulatory Impact Analysis
A. Rebased payment rates
1. Impact on ASCs
B. Additions to/Deletions from the ASC list
C. Impact of Technical Changes
D. Impact on Hospitals and Small Rural Hospitals
SUPPLEMENTARY INFORMATION:
I. Background
A. Legislative History
Section 1832(a)(2)(F)(i) of the Social Security Act (the Act)
provides that benefits under the Medicare Supplementary Medical
Insurance program (Part B) include payment for facility services
furnished in connection with surgical procedures specified by the
Secretary and performed in an ambulatory surgical center (ASC).
The Secretary is to review and update the list of ASC procedures
biennially.
To participate in the Medicare program as an ASC, a facility must
meet the standards specified under section 1832(a)(2)(F)(i) of the Act
and 42 CFR 416.25, which sets forth general conditions and requirements
for ASCs.
Generally, there are two primary elements in the total cost of
performing a surgical procedure: the cost of the physician's
professional services for performing the procedure, and the cost of
services furnished by the facility where the procedure is performed
(for example, surgical supplies and equipment and nursing services).
Section 1833(i)(2)(A) of the Act addresses what the ASC facility fee is
intended to represent and how the amount of the Medicare payment for
ASC facility services is to be determined. It requires us to review and
update ASC payment amounts annually.
The ASC payment rate is to be a standard overhead amount
established on the basis of our estimate of a fair fee that takes into
account the costs incurred by ASCs generally in providing facility
services in connection with performing a specific procedure. The Report
of the Conference Committee accompanying section 934 of the Omnibus
Budget Reconciliation Act of 1980 (Public Law 96-499), which enacted
the ASC benefit in December 1980, states, "This overhead factor is
expected to be calculated on a prospective basis * * * utilizing sample
survey and similar techniques to establish reasonable estimated
overhead allowances for each of the listed procedures which take
account of volume (within reasonable limits)." (See H.R. Rep. No 1479,
96th Cong., 2nd Sess. 134 (1980).)
In order to estimate the amount of those reasonable allowances, we
are required by section 1833(i)(2)(A)(i) of the Act to survey the
actual audited costs incurred by a representative sample of facilities
in connection with a representative sample of procedures. This survey
is to be conducted every five years, beginning no later than January 1,
1995.
Because payment for ASC facility services is subject to the usual
Medicare Part B deductible and coinsurance requirements, Medicare pays
participating ASCs 80 percent of the prospectively-determined rate,
adjusted for regional wage variations.
Section 1833(i)(2)(A)(ii) requires that the ASC payment rates
result in substantially lower Medicare expenditures than would have
been paid if the same procedure had been performed on an inpatient
basis in a hospital. Section 1833(i)(2)(A)(iii) requires that payment
for insertion of an intraocular lens (IOL) include an allowance for the
IOL that is reasonable and related to the cost of acquiring the class
of lens involved.
Under section 1833(i)(3)(A), the aggregate payment to hospital
outpatient departments for covered ASC procedures is equal to the
lesser of the following amounts:
<bullet> The amount paid for the same services that would be paid
to the hospital under section 1833(a)(2)(B) (that is, the lower of the
hospital's reasonable costs or customary charges less deductibles and
coinsurance).
<bullet> The amount determined under section 1833(i)(3)(B)(i) based
on a blend of the lower of the hospital's reasonable costs or customary
charges, less deductibles and coinsurance, and the amount that would be
paid to a free-standing ASC in the same area for the same procedures.
Under section 1833(i)(3)(B)(i), the blend amount for a cost
reporting period is the sum of the hospital cost proportion and the ASC
cost proportion. Under section 1833(i)(3)(B)(ii), the hospital cost
proportion and the ASC cost proportion for portions of cost reporting
periods beginning on or after January 1, 1991 are 42 and 58 percent,
respectively. Section 4521 of the Balanced Budget Act of 1997 (BBA
1997) (Public Law 105-33) amended section 1833(i)(3)(B)(i)(II) of the
Act to eliminate the formula-driven overpayment (FDO) for ASC
procedures.
Section 13531 of the Omnibus Budget Reconciliation Act of 1993
(OBRA 1993) (Public Law 103-66), prohibited the Secretary from
providing for any inflation update in the payment amounts for ASCs
determined under section 1833(i)(2)(A) of the Act for fiscal years
(FYs) 1994 and 1995. Section 13533 of OBRA 1993 established $150 as the
amount of payment allowed for an IOL inserted during or subsequent to
cataract surgery in an ASC on or after
[[Page 32292]]
January 1, 1994, and before January 1, 1999.
Section 141(a)(1) of the Social Security Act Amendments of 1994
(SSAA 1994) (Public Law 103-432) amended section 1833(i)(2)(A)(i) of
the Act to require that a quinquennial survey of ASCs be taken
beginning not later than January 1, 1995.
Section 141(a)(2) of SSAA 1994 added section 1833(i)(2)(C) to the
Act to provide that, beginning with FY 1996, there be an adjustment for
inflation during fiscal years when the Secretary does not update ASC
rates based on actual audited costs determined by surveying a
representative sample of facilities. Section 1833(i)(2)(C) of the Act
provides that ASC payment rates are to increased by the percentage
increase in the consumer price index for urban consumers (CPI-U), as
estimated by the Secretary for the 12-month period ending with the
midpoint of the year involved, beginning with FY 1996.
Section 141(a)(3) of SSAA 1994 amended section 1833(i)(1) of the
Act to require the Secretary to consult with appropriate trade and
professional organizations in specifying the procedures that constitute
the ASC list.
Section 141(b) of SSAA 1994 requires the Secretary to establish a
process for reviewing the appropriateness of the payment amount
provided under section 1833(i)(2)(A)(iii) of the Act for IOLs with
respect to a class of new-technology IOLs. That process is the subject
of a separate notice of proposed rulemaking entitled "Adjustment in
Payment Amounts for New Technology Intraocular Lenses" (BPD-831-P)
published in the Federal Register on September 9, 1997 at 62 FR 46698.
Section 4555 of BBA 1997 amended section 1833(i)(2)(C) of the Act
to limit the annual adjustment of ASC payment rates provided for in
that paragraph to the CPI-U increase reduced by 2.0 percentage points
(but not below zero) for fiscal years 1998 through 2002.
B. Published Changes to ASC List
We published a final notice in the Federal Register on February 8,
1990 (55 FR 4526) in which we implemented a new ratesetting methodology
that increased the number of ASC payment groups from four to the
current eight groups. We assigned a new payment rate to each of the
nearly 1500 current procedural technology (CPT) codes on the ASC list
at that time, and we revised the ASC list to be consistent with CPT
coding changes effected by The American Medical Association in 1988 and
1989.
Federal Register notices adding codes to and deleting codes from
the ASC list were subsequently published as follows:
<bullet> December 31, 1991 notice with comment period (56 FR 67666)
in which we added approximately 900 CPT codes to the ASC list,
including CPT code 50590, Extracorporeal shock wave lithotripsy (ESWL).
<bullet> January 26, 1995 final notice with comment period (60 FR
5185) in which we updated the ASC list to reflect CPT changes that had
occurred during the interval since publication of the December 31, 1991
notice. We deleted five codes from the ASC list on the basis of
modified quantitative criteria that we adopted to determine whether or
not a procedures should be retained on the list. We added nearly 30
codes that met our numeric criteria of adding to the list procedures
performed at least 20 percent of the time on a hospital inpatient basis
but no more than 50 percent of the time in a physician's office, based
on national claims history data. We solicited public comment on certain
additions to and deletions from the ASC list and the payment rates
assigned to the additions. We respond to those comments in this notice.
C. Published Changes to ASC Payment Rates
In a final notice published in the Federal Register on February 8,
1990 (55 FR 4526), we explained the new ASC ratesetting methodology and
increased the number of ASC payment groups from four to the current
eight groups on the basis of ASC survey data collected in 1986. The
rates that Medicare paid for services furnished on or after March 12,
1990 under the new eight-group payment methodology were published in a
separate notice with comment period in the same February 8, 1990
Federal Register (55 FR 4577). Subsequent updates of the ASC payment
rates are as follows:
<bullet> July 5, 1990 Federal Register notice with comment period
(55 FR 27690) increased payment rates by a CPI-U factor of 4.21
percent;
<bullet> December 31, 1991 Federal Register notice with comment
period (56 FR 67666) increased payment rates by a CPI-U factor of 5.1
percent and added a ninth payment group for ESWL;
<bullet> October 1, 1992 Federal Register notice with comment
period (57 FR 45544) increased payment rates by a CPI-U factor of 3.5
percent;
<bullet> September 26, 1995 Federal Register notice (60 FR 49619)
increased payment rates by a CPI-U factor of 3.2 percent;
<bullet> October 1, 1996 Federal Register notice (61 FR 51295)
increased payment rates by a CPI-U factor of 2.6 percent;
<bullet> February 19, 1998 Federal Register notice (62 FR 8462)
Increased payments rates by 0.6 percent effective for services
furnished on or after October 1,1997. The ASC payment rates implemented
by this notice, which are currently in effect, are:
Group 1--$314............................. Group 5--$678.
Group 2--$422............................. Group 6--$789 (639 + 150 for
IOL).
Group 3--$482............................. Group 7--$941.
Group 4--$595............................. Group 8--$928 (778 + 150 for
IOL).
There is no payment rate shown for group 9 because of the decision
in American Lithotripsy Society v. Sullivan, 785 F. Supp. 1034 (D.D.C.
1992) that prohibits payment for these services under the ASC benefit
at this time. Payment for ESWL as an ASC service is discussed below.
D. Payment Rate for Extracorporeal Shock Wave Lithotripsy
In the Federal Register published December 7, 1990, (55 FR 50590),
we published a notice proposing additions to and deletions from the ASC
list. We solicited comments on our proposal to add CPT code 50590,
Lithotripsy, extracorporeal shock wave, to the ASC list and on the
Group 7 payment rate of $812 that we proposed as the ASC facility fee
for the procedure. We also requested detailed information on facility
charges and costs associated with providing ESWL services to help us
evaluate the appropriateness of the proposed payment rate.
In the final notice with comment period published December 31, 1991
in the Federal Register (56 FR 67666), we established a payment rate
for ESWL as new ASC payment group 9. We set the group 9 rate at $1,150,
effective for services furnished on or after January 30, 1992. On
January 30, 1992, the American Lithotripsy Society filed a complaint
and motion to enjoin enforcement and implementation of the December 31,
1991 notice insofar as it concerned ESWL. In American Lithotripsy
Society v. Louis W. Sullivan, M.D., et al, 785 F. Supp. 1034 (D.D.C.
1992), the American Lithotripsy Society challenged HCFA's determination
that ESWL is a surgical procedure under the ASC benefit and the amount
payable for ESWL services in an ASC. The plaintiff alleged that the
$1,150 rate was not based on an estimate of a "fair fee" that took
into account costs incurred by ASCs performing such services as
required by section 1833(i)(2)(A) of the
[[Page 32293]]
Act and that the rate was not supported by the administrative record.
On March 12, 1992, the United States District Court for the
District of Columbia held that HCFA's decision to classify ESWL as a
surgical procedure was rationally justified. However, it remanded the
final notice setting a rate for lithotripsy to the Secretary for
further consideration and stayed the regulation, insofar as it related
to ESWL, pending remand. On remand, the Secretary is required to
publish all material information that is relevant to the setting of the
ESWL rate, receive comments, and publish a final notice in accordance
with the applicable statutes and regulations.
To comply with the court order, Medicare ceased paying an ASC
facility fee for ESWL services furnished in Medicare approved ASCs and
resumed making payment on a reasonable cost basis for ESWL furnished in
a hospital outpatient setting. On October 1, 1993, we published a
proposed notice with comment period in the Federal Register (58 FR
51355) in which we proposed a revised ASC payment rate of $1,000, based
on further consideration of the data and methodology that we used to
determine the rate. We explained in detail in the October 1, 1993
notice how we arrived at the proposed rate, and we solicited
information on ESWL costs, charges, and utilization to enable us to
further evaluate the appropriateness of the assumptions that we used to
develop the proposed rate. The information submitted during the public
comment period persuaded us to defer publication of a final notice and
implementation of an ASC facility fee for ESWL, pending completion of
the 1994 ASC survey that was about to be conducted. In this notice of
proposed rulemaking we respond to the comments that were submitted
timely following publication of the October 1, 1993 notice, and we
propose an ASC payment rate for ESWL services that we have determined
in accordance with the ratesetting methodology that is also proposed in
this notice. In accordance with applicable statutes and regulations,
this notice of proposed rulemaking includes all material information
that is relevant to the setting of ASC payment rates, which includes a
payment rate for ESWL. Publication of this notice of proposed
rulemaking is followed by a 60-day public comment period. When the
comment period closes, and following review of all comments submitted
timely, we shall publish a final notice to implement rebased ASC
payment rates for procedures on the ASC list, including ESWL.
E. ASC Town Meeting (July 1996)
Many of the policy changes proposed in this notice had their
genesis in discussions and comments that emanated from an ASC "Town
Meeting" that was held at the central office of the Health Care
Financing Administration on July 25-26, 1996. The purpose of the Town
Meeting was to give representatives of professional and trade
associations and other parties with an interest in ASCs an opportunity
to come together with HCFA staff to exchange information and ideas
regarding Medicare ASC policy. More than 100 people from across the
country attended, including physicians, nurses, ASC administrators, and
representatives of independent and chain facilities, State licensing
and certification agencies, and numerous professional societies and ASC
trade associations. From the Town Meeting, we gained a greater
understanding of some of the immediate and long-term issues and
concerns facing ASC staff and partners, and we received numerous
suggestions and recommendations on ways to strengthen the ASC benefit
on behalf of Medicare beneficiaries.
The first day's meetings focussed on performance outcome measures
for ASCs and conditions for coverage of ASCs. The second day of the
meeting focussed on the criteria HCFA uses to determine which
procedures should be placed on the ASC list and the method HCFA uses to
set ASC payment rates. Following the Town Meeting, we received 79
written comments reiterating concerns and suggestions that were raised
during the meeting itself.
Virtually every commenter submitted a critique of a grouping system
that we presented at the meeting as a possible alternative to the
current eight ASC payment groups. We had distributed to participants a
listing of CPT surgical codes arranged in "Ambulatory Patient Groups"
(APGs). These groups were developed by 3M Health Information Systems
with the support of HCFA. The list was taken from The Ambulatory
Patient Groups Definitions Manual, Version 2.0. Only groups of CPT
codes were shown; no payment rates or procedure costs were given. We
were primarily interested in whether or not participants found the
groups to be clinically homogeneous as well as consistent in terms of
resource costs. Commenters were unanimous in disagreeing with the
internal consistency of numerous APG groups across most body systems.
The commenters' examples and reasons for taking issue with the
homogeneity of the APGs prompted us to re-examine the groups. We did
so, which resulted in the revision and reclassification of most of the
groups. The product of that exercise is the ambulatory payment
classification (APC) system that we propose in this notice as the basis
for ASC ratesetting.
F. Revisions to the Conditions for Coverage of ASCs
The standards and conditions for coverage of an ASC currently found
in subpart C of 42 CFR part 416 are being revised and are the subject
of a separate notice currently under development.
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