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CFR Citation: 42 CFR Parts 410 and 419

RIN ID: RIN 0938-AL19

CMS ID: [CMS-1471-FC]

NOTICE: Part III

DOCUMENT ACTION: Final rule with comment period.

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

DATES: Effective date: This final rule is effective January 1, 2004.

Comment date: We will consider comments on the ambulatory payment classification assignments of Healthcare Common Procedure Coding System codes identified in Addendum B with new interim (NI) condition codes, if we receive them at the appropriate address, as provided below, no later than 5 p.m. on January 6, 2004.

DOCUMENT SUMMARY: This final rule with comment period revises 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 describes 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 are applicable to services furnished on or after January 1, 2004. Finally, this rule responds to public comments received on the August 12, 2003 proposed rule for revisions to the hospital outpatient prospective payment system and payment rates (68 FR 47966).

SUMMARY: Health and Human Services Department, Centers for Medicare & Medicaid Services,

SUPPLEMENTAL 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) 7867195.

Availability of Copies and Electronic Access

Copies: To order copies of the Federal Register containing this document, send your request to: New Orders, Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 152507954. Specify the date of the issue requested and enclose a check or money order payable to the Superintendent of Documents, or enclose your Visa or Master Card number and expiration date. Credit card orders can also be placed by calling the order desk at (202) 5121800 (or tollfree at 1888293 6498) or by faxing to (202) 5122250. The cost for each copy is $10. As an alternative, you can view and photocopy the Federal Register document at most libraries designated as Federal Depository Libraries and at many other public and academic libraries throughout the country that receive the Federal Register.

This Federal Register document is also available from the Federal Register online database through GPO Access, a service of the U.S. Government Printing Office. The web site address is: http://www.access.gpo.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

C. Summary of Changes in the August 12, 2003 Proposed Rule

1. Changes Required by Statute

2. Additional Changes to OPPS

D. Public Comments and Responses to the August 12, 2003 Proposed Rule
II. 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. August 2003 Meeting

3. 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. Creation of APCs for Combinations of Device Procedures III. Recalibration of APC Weights for CY 2004

A. Data Issues

1. Period of Claims Data Used

2. Treatment of ``Multiple Procedure'' Claims

B. Description of Our Calculation of Weights for CY 2004

C. Discussion of Relative Weights for Specific Procedural APCs IV. Transitional PassThrough and Related Payment Issues

A. Background

B. Discussion of Pro Rata Reduction
V. Payment for Devices

A. PassThrough Devices

B. Expiration of Transitional PassThrough Payments in CY 2004

C. Reinstitution of C Codes for Expired Device Categories

D. Other Policy Issues Relating to PassThrough Device Categories

1. Reducing Transitional PassThrough Device Categories To Offset Costs Packaged Into APC Groups

2. Multiple Procedure Reduction for Devices
VI. Payment for Drugs, Biologicals, Radiopharmaceutical Agents, Blood, and Blood Products

A. PassThrough Drugs and Biologicals

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B. Drugs, Biologicals, and Radiopharmaceuticals Without Pass Through Status

1. Background

2. Criteria for Packaging Payment for Drugs, Biologicals, and Radiopharmaceuticals

3. Payment for Drugs, Biologicals, and Radiopharmaceuticals That Are Not Packaged

4. Payment for Drug Administration

5. Generic Drugs and Radiopharmaceuticals

6. Orphan Drugs

7. Vaccines

8. Blood and Blood Products

9. Intravenous Immune Globulin

10. Payment for Split Unit of Blood

11. Other Issues
VII. Wage Index Changes for CY 2004
VIII. Copayment for CY 2004
IX. Conversion Factor Update for CY 2004
X. Outlier Policy and Elimination of Transitional Corridor Payments for CY 2004

A. Outlier Policy for CY 2004

B. Elimination of Transitional Corridor Payments for CY 2004 XI. Other Policy Decisions and 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. General Data, Billing, and Coding Issues
XIII. Provisions of the Final Rule With Comment Period for 2004

A. Changes Required by Statute

B. Additional Changes

C. Major Changes From the Proposed Rule
XIV. Collection of Information Requirements
XV. Response to Public Comments
XVI. Regulatory Impact Analysis

A. General

B. Changes in This Final Rule

C. Limitations of Our Analysis

D. Estimated Impacts of This Final Rule on Hospitals

E. Projected Distribution of Outlier Payments

F. Estimated Impacts of This Final Rule on Beneficiaries Addenda
Addendum AList of Ambulatory Payment Classifications (APCs) with Status Indicators, Relative Weights, Payment Rates, and Copayment Amounts
Addendum BPayment Status by HCPCS Code, and Related Information Addendum CHospital Outpatient Payment for Procedures by APC: Displayed on Web Site Only
Addendum DPayment Status Indicators for the Hospital Outpatient Prospective Payment System
Addendum ECPT Codes That Would Be Paid Only As Inpatient
Procedures
Addendum HWage Index for Urban Areas
Addendum IWage Index for Rural Areas
Addendum JWage Index for Hospitals That Are Reclassified
Addendum LPackaged Nonchemotherapy Infusion Drugs
Addendum MSeparately Paid Nonchemotherapy Infusion Drugs
Addendum NPackaged Chemotherapy Drugs Other Than Infusion
Addendum OSeparately Paid Chemotherapy Drugs Other Than Infusion Addendum PPackaged Chemotherapy Drugs Infusion Only
Addendum QSeparately Paid Chemotherapy Drugs Infusion Only
Alphabetical List of Acronyms Appearing in This Final Rule With Comment Period
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 costtocharge 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 Diagnosisrelated group
DSH Disproportionate Share Hospital
EACH Essential Access Community Hospital
E/M Evaluation and management
ESRD Endstage 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 ICD9CM 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 hospitalspecific 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 costbased payment methodology with a prospective payment system (PPS). The Balanced Budget Act of 1997 (BBA) (Pub. L. 10533), 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. 106113), enacted on November 29, 1999, made major changes that affected the hospital outpatient PPS (OPPS). The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106554), 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 formuladriven overpayment for certain hospital outpatient services, and to extend reductions in payment for costs of hospital outpatient services.
[sbull] On April 7, 2000, we published a final rule with comment period (65 FR
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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 providerbased 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. Subsequently, we announced a delay in implementation of the OPPS from July 1, 2000 to 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 rule also corrected and clarified certain providerbased 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) to provide 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. It also described the Secretary s estimate of the total amount of the transitional passthrough payments for CY 2002 and the implementation of a uniform reduction in each of the passthrough 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 passthrough 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 passthrough 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 passthrough 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 passthrough 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 passthrough status most drugs and devices that had been paid under passthrough provisions in 2002 as required by the applicable provisions of law governing the duration of passthrough payment.
[sbull] On August 12, 2003, we published a proposed rule (68 FR 47966) that proposed the Medicare OPPS conversion factor for CY 2004. In addition, it described proposed changes to the amounts and factors used to determine the payment rates for Medicare hospital outpatient services paid under the prospective payment system.

C. Summary of Changes in the August 12, 2003 Proposed Rule

On August 12, 2003, we published a proposed rule (68 FR 47966) that proposed changes to the Medicare hospital OPPS and CY 2004 payment rates including proposed changes used to determine these payment rates. The following is a summary of the major changes that we proposed and the issues we addressed in the August 12, 2003 proposed rule. 1. Changes Required by Statute

We proposed the following changes to implement statutory requirements:
[sbull] Add APCs, delete APCs, and modify the composition of some existing APCs.
[sbull] Recalibrate the relative payment weights of the APCs. [sbull] Update the conversion factor and the wage index. [sbull] Revise the APC payment amounts to reflect the APC reclassifications, the recalibration of payment weights, and the other required updates and adjustments.
[sbull] Cease transitional passthrough payments for drugs and biologicals and devices that will have been paid under the transitional passthrough methodology for at least 2 years by January 1, 2004. [sbull] Cease transitional outpatient payments (TOPS payments) for all hospitals paid under OPPS except for cancer hospitals and children s hospitals.

2. Additional Changes to OPPS

We proposed the following additional changes to the OPPS: [sbull] Adjust payment to moderate the effects of decreased median costs for nonpassthrough drugs, biologicals, and
radiopharmaceuticals.
[sbull] Implement a new method for paying for drug administration. [sbull] Create new evaluation and management service codes for outpatient clinic and emergency department encounters.
[sbull] Change status indicators for Healthcare Common Procedure Coding System (HCPCS) codes.
[sbull] List midyear and proposed HCPCS codes that are paid under OPPS.
[sbull] Allocate a portion of the outlier percentage target amount to community mental health centers (CMHCs) and create a separate threshold for outlier payments for partial hospitalization services. [sbull] Create methodology and payment rates for separately payable drugs and radiopharmaceuticals for 2004.
[sbull] Make several changes in our current payment policy with regard to payment
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for Q0081, Q0083, Q0084, and Q0085 to facilitate accurate payments for drugs and drug administration.
[sbull] Change the status indicator and payment amount for P9010 by assigning it to APC 0957 (Platelet concentrate) with a payment rate of $37.30.
[sbull] Establish new payment bands for new technology APCs. D. Public Comments and Responses to the August 12, 2003 Proposed Rule

We received approximately 876 timely items of correspondence containing multiple comments on the August 12, 2003 proposed rule. Summaries of the public comments and our responses to those comments are set forth below under the appropriate section heading of this final rule with comment period.

We received comments from various sources including but not limited to health care facilities, physicians, drug and device manufacturers, and beneficiaries. Hospital associations and the Medicare Payment Advisory Commission (MedPAC) generally supported our proposed approach to revising the relative weights for APCs. Pharmaceutical and medical device manufacturers and some individual hospitals that furnish particular devices or drugs were concerned with the proposed reductions in payment for medical devices and drugs. We received many thoughtful comments from a wide range of commenters with regard to methodological issues in OPPS. In addition, several comments provided external data to support their assertions. The following are the major issues addressed by the commenters:
[sbull] The proposal to use $150 as the packaging threshold for separate payment of drugs.
[sbull] The proposal to pay for orphan drugs within the OPPS, basing payment on claims data.
[sbull] The proposal to pay for generic drugs at 43 percent of average wholesale prices (AWP) beginning with the time of the generic drug's Food and Drug Administration (FDA) approval.
[sbull] The proposed payments for blood and blood products under OPPS.
[sbull] The proposal to establish a separate outlier pool for community mental health centers(CMHCs).The proposal to apply an adjustment to increase payment to small rural hospitals' clinic and emergency room (ER) visit rates to ameliorate the effect of the sunsetting of the transitional corridor payments.
[sbull] The proposal to reinstitute drug and device coding requirements.
[sbull] Propose APC assignments and status indicators for numerous services.

In addition to comments regarding the policy proposals in the August 12, 2003 proposed rule, we received comments about the publication date of the proposed rule and the comment period.

Comment: Some commenters objected to the use of the date on which the August 12, 2003 proposed rule was made public by web posting and by public display at the Office of the Federal Register as the beginning of the comment period. They indicated that we should start the comment period only on the publication of the proposed rule in the Federal Register because that is where subscribers look for it. They objected to what they view as a 55day comment period if it were to start on the date of Federal Register publication (August 12, 2003). Some commenters objected to the publication of the proposed rule so late in the year. They indicated that our publication on August 9 resulted in the comment period ending so close to the publication deadline for the final rule that they believed that their comments could not be fully analyzed and used and would not be as effective as if the proposed rule were published in June or early July. They urged us to publish the proposed rule in late spring. Some commenters objected to the scheduling of the APC Panel meeting so soon after the issuance of the proposed rule because they felt that it gave them inadequate time to prepare their presentations for the Panel.

Response: The comment period on a proposed rule begins on the day that the proposed rule is available for public comment. We believe that putting the document on display at the Office of the Federal Register and also making it available on the CMS Web site meets the test of being publicly available and that, therefore, is the start of the comment period. The publication of the proposed rule on the internet makes it available to many more people than routinely access the Federal Register or can visit the Office of the Federal Register where the display copy is located. The public had 60 days to comment on the proposed rule. This is the standard amount of time generally allowed for comment on notices of proposed rulemaking. Therefore, we do not believe the public was at a disadvantage or limited in the amount of time available to make public comments.

Our review of the public comments is extensive, with the comments being read and considered carefully, often by many staff. We agree that it is preferable, when possible, to issue the proposed rule as early as possible. However, the important issue is whether we have sufficient time to carefully and thoughtfully consider all comments in development of the final rule, rather than the amount of time between the end of the comment period and the publication of the final rule.
II. Changes to the Ambulatory Payment Classification (APC) Groups and Relative Weights

Under the OPPS, we pay for hospital outpatient services on a rate perservice 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 0601, MidLevel Clinic Visits. The APC weights are scaled to APC 0601 because a midlevel 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 unusual cases, such as low volume items and services.''

For purposes of the proposed rule and this final 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 Social Security Act (the Act) requires that we consult with an outside panel of experts, the Panel, to review the clinical integrity of the APC groups and their
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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 fulltime, 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. 92463).

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 have been identified on the CMS web site.

We received one comment regarding our selection of Panel members.

Comment: One commenter stated that Community Mental Health Centers (CMHCs) have not been represented on the APC Panel even though the names of qualified nominees have been submitted. The commenter went on to say that the Federal Register (February 28, 2003, at 68 FR 9671 through 9672) specifically states, ``Qualified nominees will meet those requirements necessary to be a Panel member. Panel members must be representatives of Medicare providers (including Community Mental Health Centers) subject to the OPPS * * * [therefore,] I feel that it is imperative to have a freestanding CMHC representative on the Panel.''

Response: The Federal Register notice on the APC Panel to which the commenter referred, states in section II, Criteria for Nominees, the following: ``The Panel shall consist of up to 15 members selected by the Secretary, or designee, from among representatives of Medicare providers (including Community Mental Health Centers) subject to the OPPS.'' The language does not mandate that a CMHC representative will be on the Panel. In the regulation, we simply identified
representatives from CMHCsor any other organizationsas possible nominees.

This year, when we requested nominations for the APC Panel, the list of nominees was long, prestigious, and included representatives from all aspects of the health care industry: Doctors, nurses, hospital administrators, coders, etc. Therefore, our choices were difficult; however, since there are definite Federal guidelines governing our selections, and specific Panel and Agency needs to address, given the clinical range of services paid under the OPPS, we were able to identify the most qualified individuals. Since the needs of the Agency and the Panel change due to members leaving, we invite all concerned Medicare providers to continue to nominate qualified individuals when the need arises.

The Panel's biannual meetings are forums to discuss APCs and representatives from the CMCHsand other organizationsare invited to attend Panel meetings and to make presentations to the Panel on relevant agenda items.

Comment: The commenter also stated that the APC Panel sets the payment rates for the outpatient services.

Response: While the Panel is an advisory committee mandated by law to review the APC groups, and their associated weights, and to advise the Secretary of Health and Human Services and the Administrator of the Centers for Medicare & Medicaid Services concerning the clinical integrity of the APC groups and their weights, the APC Panel does not set payment rates for outpatient services. The advice provided by the Panel is considered by us in our development of the annual rulemaking to update the hospital OPPS. The APC Panel's activities most often address whether or not the HCPCS codes within the APCs are comparable clinically and with respect to resource use, assigning new codes to new or existing APCs, reassigning codes to different APCs, and the configuring of existing APCs into new APCs.

2. August 2003 Meeting

The APC Panel met on August 22, 2003 to discuss issues presented in the proposed rule of August 12. We announced the meeting in the Federal Register on July 25 and invited the public to make presentations to the Panel on issues discussed in the proposed rule. In this section, we summarize the issues discussed by the Panel, their recommendations on those issues, and our decisions with respect to their recommendations. a. Blood and Blood Products

The Panel heard testimony by suppliers of blood and blood products and their representatives who expressed significant concerns about the proposed payment rates, particularly in light of new safety and testing requirements. These presenters to the Panel recommended that we exclude blood and blood products from the OPPS and pay for them at reasonable cost. After listening to the testimony, reviewing the median costs and proposed payments rate from our hospital claims data, and deliberating the issue, the Panel recommended that we continue to pay for blood and blood products within the OPPS. However, the Panel further recommended that we freeze the payment rates for blood and blood products at 2003 levels for 2004 and 2005 while we undertake further analysis of the cost data. The Panel also recommended that hospitals be educated on the proper billing for blood and blood products.

As discussed elsewhere in this final rule, we will accept the Panel's recommendation with respect to 2004. We will freeze the payment rates for blood and blood products at the 2003 payment levels. However, we are not making a decision with respect to 2005 at this time. Any proposals regarding our 2005 payment rates or policies for these items will be discussed in our proposed rule for the CY 2005 update. The Panel also recommended that the APCs for blood and blood products be on the agenda for the winter 2004 meeting in time for consideration of the 2005 payment rates. We agree to place this item on the agenda for the next APC Panel meeting.
b. Nuclear Medicine, Brachytherapy, and Radiosurgery Services (1) Nuclear Medicine APCs and Radiopharmaceuticals

The Panel heard testimony on and considered the proposed restructuring of the nuclear medicine APCs discussed in the August 12, 2003 proposed rule. The Panel recommended that we move forward with the categorization system in the proposed OPPS 2004 rule absent strong, reasoned opposition from provider groups. If strong opposition was revealed in the public comments,
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the Panel recommended that we maintain the classification system that is in place for 2003. The Panel also recommended that we change the HCPCS code descriptors for radiopharmaceuticals to be on a ``perdose'' basisnot on a ``perunit'' basis.

We have accepted the Panel's recommendation that we move forward with the proposed restructuring, after considering public comments on this issue. As discussed in section II.A.3 of this final rule, we will implement the restructuring with certain changes to the proposed reclassification based on our review of the public comments. For reasons discussed in section VI.B.3 of this final rule, we are not accepting the Panel's recommendation to change the HCPCS code descriptors at this time.

The Panel further recommended that APCs for radiopharmaceuticals be on the agenda for the January 2004 meeting. In preparation for that meeting, the Panel recommended that our staff analyze the claims for the nuclear medicine APCs and do the following: Itemize the costs, determine what proportion of the median cost can be attributed to radiopharmaceuticals, and present the data at the Panel's January 2004 meeting. The Panel recommended that the issue of packaging the costs of radiopharmaceuticals under the 2003 threshold of $150 be placed on the agenda for the Panel's winter 2004 meeting.

We will consider this topic for placement on the agenda for the Panel's 2004 meeting. As discussed in section VI.B.3 of this rule, however, we are revising our threshold for packaging
radiopharmaceuticals from $150 to $50.

(2) Brachytherapy Services

The Panel recommended that we review whether the codes for needles and catheters were included in the payment rate proposed for APC 0313. The Panel also recommended that we consider outside data presented by commenters in establishing payment rates for APCs 312 and 651 to arrive at an appropriate payment rate. See our discussion, below, regarding APCs 312, 313, and 651 and our considerations concerning the claims used to set the relative weights for these APCs.

The Panel further recommended that we discontinue use of G codes for prostate brachytherapy and use appropriate Current Procedural Terminology (CPT) codes paid in clinical APCs when making payment for these services. The Panel recommended we pay separately for brachytherapy sources for the treatment of prostate cancer in the same manner by which we are paying separately for the brachytherapy sources for the treatment of other types of cancer. We have accepted the Panel's recommendation. As discussed in section II.B.4 of this final rule, we will discontinue use of the special G codes for prostate brachytherapy and allow separate payment for the sources used in these treatments.

(3) Radiation Therapy and Radiosurgery APC Issues

The APC Panel heard testimony concerning radiation treatment delivery codes CPT 77412 through 77416, which we proposed to assign to APC 0301 and CPT 77417, assigned to APC 0260. The presenter stated that many hospital billing departments had not updated their charge masters since the inception of OPPS to reflect the costs of newer technology, specifically with respect to the use of xray guidance during external beam radiation treatment delivery. The APC Panel recommended that we review whether the use of xray guidance (as opposed to CT or ultrasound guidance) for radiation therapy is being properly reported and included in the payment rates for the radiation treatment delivery codes. We agree that we should review these issues further and will do so in preparation for the 2005 update. However, we did not receive sufficient or convincing information upon which to base a change for 2004. Therefore, we encourage interested parties to submit any additional information on the use of these codes and cost of providing these services in the outpatient hospital setting in response to this final rule with comment period.

The APC Panel also heard testimony concerning the proposed payment rate for CPT 77418, assigned to APC 0412 (IMRT treatment delivery). The presenter stated that the proposed amount was too low. However, the APC Panel supported the proposal in the absence of compelling evidence that the rate derived from the claims data is wrong. We concur with the APC Panel's recommendation and will retain CPT 77418 in APC 0412. We used approximately 113,000 claims to set the weight for this procedure, which we believe is a sufficiently robust set of data.

During this section of the APC Panel's August 22 meeting, the Panel members also heard testimony concerning HCPCS codes G0251 and G0173 used to report stereotactic radiosurgery. The APC Panel supported the proposed payment rates for these codes until more data become available. The APC Panel also asked to review this issue further at its winter 2004 meeting. We discuss stereotactic radiosurgery in further detail below. We have decided to make certain changes to the payment for these procedures. However, the APC assignment for these codes for 2004 is interim final. We solicit comments on the 2004 assignments, and we will also include this on the APC Panel's agenda for its winter 2004 meeting.

The final topic in this section of the APC Panel's August 22 meeting pertained to HCPCS codes G0242 and G0243 (multi source photon stereotactic planning). The APC Panel was requested to recommend that we combine the coding for these procedures under one code, with the payment for the new code derived by adding the payment for G0242 and G0243 together. The information presented to the APC Panel stated that the services represented by the two G codes represent one continuous procedure, that it is a surgical procedure, and the cost center mapping should be to a surgical cost center. The APC Panel will review this request at its winter 2004 meeting. The APC Panel is interested in receiving comments on this topic from professional societies representing neurosurgeons, radiation oncologists and others concerning this proposal.
c. Payment and Coding for Drug Administration and for Certain Drugs, Biologicals, and Radiopharmaceuticals

The APC Panel heard testimony and discussed the proposals described in the August 12, 2003 proposed rule on payment for drug administration and the packaging of the costs of drugs, biologicals, and
radiopharmaceuticals. The APC Panel recommended that:
[sbull] We continue to use the current ``Q'' codes for drug administration and not institute new ``G'' codes to represent the administration of either packaged or separately paid drugs. [sbull] We allow billing of Q0081 on a pervisit basis, rather than on a perday basis as proposed.
[sbull] We delete Q0085 and allow hospitals to use both Q0083 and Q0084 when billing for chemotherapy administered by both infusion and other techniques in a given visit.
[sbull] That we consider adopting the final option among the three new methods of paying for drug administration that we proposed, as options to the current policy, in the August 12, 2003 proposed rule. [sbull] That we look further at hospital pharmacies' costs for preparing drugs and radiopharmaceuticals and this issue be examined more closely by the Panel during its winter 2004 meeting.

The APC Panel also expressed serious concern about the dollar threshold for
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the packaging of drugs and the adequacy of payment for separately paid drugs. However, in the absence of alternative proposals by us, the APC Panel did not make further recommendations on that issue. The APC Panel requested that we present alternative options during the winter 2004 meeting, including a new APC structure for drugs and
radiopharmaceuticals. As for specific drug issues, after hearing testimony concerning the codes for Baclofin refill kits, the APC Panel recommended that we delete code C9010 and retain the other codes for this product used in the treatment of Parkinson's disease and spasticity.

We have carefully considered each of the APC Panel's recommendations along with comments on the subject of drug administration and payment for drugs, biologicals, and
radiopharmaceuticals. For the reasons discussed more fully elsewhere in this final rule, we have decided to accept the APC Panel's recommendations that we continue using Q0081 through Q0084 in 2004; that we continue to define these codes on a pervisit, rather than per day basis; that we delete code Q0085; and that we delete code C9010. We have decided to continue paying for the drug administration ``Q'' codes according to our current rules and discuss that decision further in section VI.B.4 of this final rule. We will consider the Panel's recommendation that we investigate other approaches for paying for drugs and radiopharmaceuticals. However, for 2004, we have determined that we will pay separately under their own APCs for drugs, biologicals and radiopharmaceuticals for which the median per day costs are in excess of $50.

(4) DeviceRelated Procedures

The APC Panel heard testimony from the device manufacturing community and others concerning payment for procedures that involve the implantation of devices. The presenters discussed concerns that affected such procedures in general, such as the absence of a proposal to limit payment reductions for such procedures between 2003 and 2004 and issues related to the hospital claims for these procedures. Presentations to the APC Panel also discussed inadequacies in the claims data or our methodology for using the claims data to set relative weights for specific devicerelated APCs (APCs 0046, 0107, 0108, 0222, 0225, 0385, and 0386. Presenters urged that the APC Panel advise us to use the best external data possible, including proprietary data that would be held confidential. Presentations to the APC Panel also addressed the multiple surgical reduction with respect to device related APCs.

The APC Panel recommended:
[sbull] That we use credible external data that can be made publicly available for establishing the median costs for APCs 0107 and 0386.
[sbull] That we change the status indicator for CPT 61885 so that it is not subject to the multiple procedure discounting.
[sbull] That we assign the new CPT codes for central venous access devices into appropriate APCs, either clinical APCs or new technology APCs.
[sbull] That the APC assignments of the new central venous access devices be reviewed by the APC Panel at its next meeting.
[sbull] That we provide the APC Panel with median cost data for all APCs in spreadsheet format for its consideration in advance of and during its next meeting.
[sbull] That we review the presenter's suggestions with respect to APC 0046 and make recommendations for any changes to this APC to the APC Panel at its next meeting.
[sbull] That we change the status indicator for CPT 93571 and 93572 from ``N'' (packaged status) to an appropriate indicator that allows separate payment under the APC.

We considered the final set of recommendations from the APC Panel's August 2003 meeting and have accepted several of them. Specifically, we decided to use external data in setting the median cost for 2004 for APC 0107. We have not used external data for APC 0386. Each of these decisions is discussed in greater detail elsewhere in this final rule. We accepted the Panel's recommendation to change the status indicator for CPT 61885. In order to do so, we moved this code into its own APC, 0039, Implant neurostim, one array. We have assigned the new CPT codes for central venous access devices to New Technology APCs as displayed in Addendum B. The range of new CPT codes is 36555 through 36597, and the new APC assignments include APCs 0032, 0115, 0109, 0187, and 1541.

The assignment of these codes is subject to public comment and will be placed on the APC Panel's agenda for its next meeting. During that meeting, we will also provide the APC Panel with spreadsheet data on the median costs of all APCs. With respect to APC 0046, we are sympathetic to the presenter's concerns. However, we were not provided with data that we considered sufficient to assess whether a new coding structure with increased payment rates is warranted for the treatment of bone fractures with external fixation devices. However, we would support the specialty societies' efforts to request changes to the existing CPT coding structure. For reasons discussed elsewhere, we have not accepted the Panel's recommendation with respect to CPT codes 93571 and 93572.

Comment: An association voiced concern that the Panel meeting on August 22, 2003 came too soon after the publication of the August 12, 2003 proposed rule for its members to prepare adequately for presentation to the Panel.

Response: The agency must schedule the Panel meetings sufficiently in advance of the meeting in order to provide ample notice to the public of the meeting and to allow sufficient time for the Panel members to arrange their schedules. We attempted to balance those needs with the goal of conducting the first midyear meeting of the Panel during the comment period so that issues discussed in the August 12, 2003 proposed rule could be topics for the Panel's consideration and interested parties' testimony before the Panel. The July 25, 2003 Federal Register notice (68 FR 44089) announced the second 2003 meeting of the APC Panel, which we believe provided sufficient advance notice of the meeting.

While it is true that the proposed rule was placed on display on August 6, published on August 12, and the meeting was held on August 22, 2003, many interested parties attended the meeting and presented thoughtful comments on most issues discussed in the proposed rule. Nevertheless, we will take this comment into consideration for future planning of APC Panel meetings.

Comment: Several commenters expressed concern about the length of the meeting and time allotted on the agenda to particular issues. One commenter stated that scheduling only [1] day for Panel deliberations was inadequate. A commenter was concerned that devicerelated issues were relegated to the last hour, that presenters were given only 2 minutes, and that there was little time for Panel discussion and consideration of the issues presented.

Response: We appreciate the commenter's interest in ensuring that adequate time be allowed for the public to present issues for the Panel's consideration and for the Panel to have sufficient time for their discussion and deliberation.

Although the device issues were scheduled for the last hour of the meeting, the Panel members received the written presentations beforehand, and had an opportunity to review them
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before the meeting. Placing a limit on presentations is a prerogative of the Panel Chair and must at times be done in order to allow all interested parties to make presentations on agenda items. However, we will take all of the concerns into consideration when scheduling future meetings.
3. Recommendations of the Advisory Panel and Our Responses

January 2003 Meeting

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 final 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 believed violated 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 the August 12, 2003 proposed rule, we discuss our proposals regarding the 2 times rule based on the April 1 through December 31, 2002 data that we used to determine the final 2004 APC relative weights. Section II.B (68 FR 47977) of the August 12, 2003 proposed rule also details the criteria we used when deciding to propose exceptions to the 2 times rule.

Unless otherwise specified in each of the following discussions of the APC Panel's recommendations, our proposed actions are finalized in this final 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: HCPCS Description 11001..................................... Debride infected skin add on.
11302..................................... Shave skin lesion. 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 proposed to accept the Panel's recommendation.

However, we received comments from a group of hospitals concerning the proposed change for CPT code 15851, removal of sutures under anesthesia (other than local), same surgeon. In their comments, the hospitals noted that the descriptor for CPT codes 15851 and 15850 (removal of sutures under anesthesia (other than local), other surgeon, were virtually identical with the exception of which surgeon performs the suture removal. The commenters did not believe that the identity of the surgeon could result in a significant difference in resource costs to the hospital. Our clinical staff agree and believe that the difference in hospital median costs derived from our claims data may be due to a misunderstanding about the coding. For 2004, we have decided that we will place both CPT codes for suture remove under anesthesia in APC 0016.
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: HCPCS Description 11755..................................... Biopsy, nail unit. 11976..................................... Removal of contraceptive cap.
24200..................................... Removal of arm foreign body. 28190..................................... Removal of foot foreign body.
56605..................................... Biopsy of vulva/perineum. 56606..................................... Biopsy of vulva/perineum. 69100..................................... Biopsy of external ear.

The APC Panel recommended that we make these changes, and we proposed to do so in our August 12, 2003 proposed rule.
(2) Move the following HCPCS codes from APC 0020 to APC 0021: HCPCS Description 11404..................................... Removal of skin lesion. 11423..................................... Removal of skin lesion. 11604..................................... Removal of skin lesion. 11623..................................... Removal of skin lesion.

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. In August, we proposed to accept the Panel's recommendation that we make no changes to the structure of these APCs for 2004. However, following our review of the median costs developed for the final rule, using a more complete set of claims for services from April through December 2002, we determined that CPT codes 11404 and 11623 should be moved to APC 0021. 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 changes below.

Move the following HCPCS codes as described below: Table 1.HCPCS Codes Final to be Redistributed From APCs 0071 and 0072 to APCs 0071, 0072, and 0073
2003 2004 HCPCS Description APC APC 31505............................. Diagnostic 0072 0071 laryngoscopy.
31575............................. Diagnostic 0071 0072 laryngoscopy.
31720............................. Clearance of airways 0072 0073

The Panel recommended that we make the above changes. We proposed to accept the Panel's recommendation, with the exception of CPT code 31720. After reviewing an additional quarter of claims data that were not available at the time the Panel convened, placement of CPT code 31720 into APC 0072 better reflects its resource consumption. Therefore, we proposed to keep CPT code 31720 in APC 0072.
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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 proposed to accept the Panel's recommendation that we make no changes to APC 0097 for 2004. We received no comments disagreeing with this proposal, and we will adopt it for 2004. We also 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 believed, however, that the structure of APC 0099 should not be changed at this time based on clinical homogeneity considerations. We proposed 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 twave 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 singleAPC claims were available to evaluate the presenter's contention.

The Panel believed the data presented are insufficient to merit moving the code and recommended that CPT code 93025 remain in APC 0100 until more data are available for review. We proposed to accept the Panel's recommendation that CPT code 93025 remain in APC 0100 until more claims data become available for review. We will adopt this proposal for 2004.
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 proposed 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. We will adopt this proposal for 2004.
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 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 proposed to accept the Panel's recommendation that we make no changes to APCs 0146 and 0147. We will adopt this proposal for 2004. However, 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 proposed to accept the Panel's recommendation, and we will adopt it for 2004.
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 noninflatable 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:
APC 0385
HCPCS Description 52282..................................... Cystoscopy, implant stent. 53440..................................... Correct bladder function. 53444..................................... Insert tandem cuff. 54400..................................... Insert semirigid prosthesis.
54416..................................... Remv/repl penis contain prosthesis.
APC 0386
HCPCS Description 53445..................................... Insert uro/ves nck sphincter.
53447..................................... Remove/replace ur sphincter. 54401..................................... Insert selfcontained prosthesis.
54405..................................... Insert multicomp penis prosthesis.
54410..................................... Remove/replace penis prosthesis.

We proposed to accept the Panel's recommendation to eliminate APCs 0179 and 0182 and create two new APCs, 0385 and 0386, 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
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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 proposed to split APC 0190 (Surgical Hysteroscopy) into two APCs that are more clinically homogeneous. We proposed to change the description for APC 0190 from ``Surgical Hysteroscopy'' to ``Level I Hysteroscopy'' and keep the following HCPCS codes in APC 0190:
HCPCS Description 58558..................................... Hysteroscopy, biopsy. 58559..................................... Hysteroscopy, lysis. 58562..................................... Hysteroscopy, remove fb. 58579..................................... Hysteroscope procedure.

We also proposed to move the following HCPCS codes from APC 0190 to newly created APC 0387 titled ``Level II Hysteroscopy'':
HCPCS Description 58560..................................... Hysteroscopy, resect septum. 58561..................................... Hysteroscopy, remove myoma. 58563..................................... Hysteroscopy, ablation.

In addition, we proposed to move the following HCPCS codes as described below:
Table 2.HCPCS Codes to be Redistributed to APCs 0130, 0195, and 0190 2003 2004 HCPCS Description APC APC 58578............................. Laparoscopic 0190 0130 procedure, uterus.
58353............................. Endometrial ablate, 0193 0195 thermal.
58555............................. Hysteroscopy, 0194 0190 diagnostic, sep.

procedure.

We believe these final 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.
1. 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: HCPCS Description 57109..................................... Vaginectomy partial w/nodes. 58920..................................... Partial removal of ovary(s). 58925.....................

FOR FURTHER INFORMATION CONTACT Dana Burley, (410) 786-0378-- outpatient prospective payment issues; Suzanne Asplen, (410) 7864558 or Jana Petze, (410) 7869374partial hospitalization and community mental health centers issues.