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Proposed Rule2022-15372

Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Organ Acquisition; Rural Emergency Hospitals: Payment Policies, Conditions of Participation, Provider Enrollment, Physician Self-Referral; New Service Category for Hospital Outpatient Department Prior Authorization Process; Overall Hospital Quality Star Rating

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Published

July 26, 2022

Issuing agencies

Health and Human Services DepartmentCenters for Medicare & Medicaid Services

Abstract

This proposed rule would revise the Medicare hospital outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) payment system for Calendar Year (CY) 2023 based on our continuing experience with these systems. In this proposed rule, we describe the changes to the amounts and factors used to determine the payment rates for Medicare services paid under the OPPS and those paid under the ASC payment system. Also, this proposed rule would update and refine the requirements for the Hospital Outpatient Quality Reporting (OQR) Program, the ASC Quality Reporting (ASCQR) Program, and the Rural Emergency Hospital Quality Reporting (REH) Program. We are also proposing updates to the requirements for Organ Acquisition, Rural Emergency Hospitals, Prior Authorization, and Overall Hospital Quality Star Rating. We are establishing a new provider type for rural emergency hospitals (REHs), and we have proposals regarding payment policy, quality measures, and enrollment policy for REHs. Finally, we are soliciting comments on the use of CMS data to drive competition in healthcare marketplaces, and an alternative methodology for counting organs.

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[Federal Register Volume 87, Number 142 (Tuesday, July 26, 2022)]
[Proposed Rules]
[Pages 44502-44843]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-15372]

[[Page 44501]]

Vol. 87

Tuesday,

No. 142

July 26, 2022

Part II

Department of Health and Human Services

-----------------------------------------------------------------------

Centers for Medicare & Medicaid Services

42 CFR Part 405, 410, 411, et al.

Medicare Program: Hospital Outpatient Prospective Payment and
Ambulatory Surgical Center Payment Systems and Quality Reporting
Programs; Organ Acquisition; Rural Emergency Hospitals: Payment
Policies, Conditions of Participation, Provider Enrollment, Physician
Self-Referral; New Service Category for Hospital Outpatient Department
Prior Authorization Process; Overall Hospital Quality Star Rating;
Proposed Rule

Federal Register / Vol. 87 , No. 142 / Tuesday, July 26, 2022 /
Proposed Rules

[[Page 44502]]

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 411, 412, 413, 416, 419, and 424

[CMS-1772-P]
RIN 0938-AU82

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule would revise the Medicare hospital
outpatient prospective payment system (OPPS) and the Medicare
ambulatory surgical center (ASC) payment system for Calendar Year (CY)
2023 based on our continuing experience with these systems. In this
proposed rule, we describe the changes to the amounts and factors used
to determine the payment rates for Medicare services paid under the
OPPS and those paid under the ASC payment system. Also, this proposed
rule would update and refine the requirements for the Hospital
Outpatient Quality Reporting (OQR) Program, the ASC Quality Reporting
(ASCQR) Program, and the Rural Emergency Hospital Quality Reporting
(REH) Program. We are also proposing updates to the requirements for
Organ Acquisition, Rural Emergency Hospitals, Prior Authorization, and
Overall Hospital Quality Star Rating. We are establishing a new
provider type for rural emergency hospitals (REHs), and we have
proposals regarding payment policy, quality measures, and enrollment
policy for REHs. Finally, we are soliciting comments on the use of CMS
data to drive competition in healthcare marketplaces, and an
alternative methodology for counting organs.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, by September 13, 2022.

ADDRESSES: In commenting, please refer to file code CMS-1772-P.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1772-P, P.O. Box 8010,
Baltimore, MD 21244-1810.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1772-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
Elise Barringer, <a href="/cdn-cgi/l/email-protection#296c45405a4c076b485b5b40474e4c5b694a445a0741415a074e465f">[email&#160;protected]</a> or 410-786-9222.
Advisory Panel on Hospital Outpatient Payment (HOP Panel), contact
the HOP Panel mailbox at <a href="/cdn-cgi/l/email-protection#8bcadbc8dbeae5eee7cbe8e6f8a5e3e3f8a5ece4fd">[email&#160;protected]</a>.
Ambulatory Surgical Center (ASC) Payment System, contact Scott
Talaga via email at <a href="/cdn-cgi/l/email-protection#2b7848445f5f057f4a474a4c4a6b48465805434358054c445d">[email&#160;protected]</a> or Mitali Dayal via email
at <a href="/cdn-cgi/l/email-protection#b0fdd9c4d1dcd99ef4d1c9d1dc82f0d3ddc39ed8d8c39ed7dfc6">[email&#160;protected]</a>.
Ambulatory Surgical Center Quality Reporting (ASCQR) Program
Administration, Validation, and Reconsideration Issues, contact Anita
Bhatia via email at <a href="/cdn-cgi/l/email-protection#43022d2a37226d012b22372a2203202e306d2b2b306d242c35">[email&#160;protected]</a>.
Ambulatory Surgical Center Quality Reporting (ASCQR) Program
Measures, contact Cyra Duncan via email <a href="/cdn-cgi/l/email-protection#71320803105f35041f12101f31121c025f1919025f161e07">[email&#160;protected]</a>.
Blood and Blood Products, contact Josh McFeeters via email at
<a href="/cdn-cgi/l/email-protection#5c16332f34293d72113f1a393928392e2f1c3f312f7234342f723b332a">[email&#160;protected]</a>.
Cancer Hospital Payments, contact Scott Talaga via email at
<a href="/cdn-cgi/l/email-protection#e7b484889393c9b3868b868086a7848a94c98f8f94c9808891">[email&#160;protected]</a>.
CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck
Braver via email at <a href="/cdn-cgi/l/email-protection#7b38130e18105539091a0d1e093b18160855131308551c140d">[email&#160;protected]</a>.
Composite APCs (Low Dose Brachytherapy and Multiple Imaging),
contact Au'Sha Washington via email at <a href="/cdn-cgi/l/email-protection#2f6e5a7c474e01784e5c474641485b40416f4c425c0147475c01484059">[email&#160;protected]</a>.
Comprehensive APCs (C-APCs), contact Mitali Dayal via email at
<a href="/cdn-cgi/l/email-protection#6c2105180d000542280d150d005e2c0f011f4204041f420b031a">[email&#160;protected]</a>.
Hospital Inpatient Quality Reporting Program--Administration
Issues, contact Julia Venanzi at <a href="/cdn-cgi/l/email-protection#115b647d78703f47747f707f6b7851727c623f7979623f767e67">[email&#160;protected]</a>.
Hospital Outpatient Quality Reporting (OQR) Program Administration,
Validation, and Reconsideration Issues, contact Shaili Patel via email
<a href="/cdn-cgi/l/email-protection#94c7fcf5fdf8fdbac4f5e0f1f8d4f7f9e7bafcfce7baf3fbe2">[email&#160;protected]</a>.
Hospital Outpatient Quality Reporting (OQR) Program Measures,
contact Janis Grady via email <a href="/cdn-cgi/l/email-protection#c288a3acabb1ec85b0a3a6bb82a1afb1ecaaaab1eca5adb4">[email&#160;protected]</a>.
Hospital Outpatient Visits (Emergency Department Visits and
Critical Care Visits), contact Emily Yoder via email at
<a href="/cdn-cgi/l/email-protection#16537b7f7a6f384f7972736456757b65387e7e6538717960">[email&#160;protected]</a>.
Inpatient Only (IPO) Procedures List, contact Abigail Cesnik at
<a href="/cdn-cgi/l/email-protection#1554777c72747c793b5670667b7c7e557678663b7d7d663b727a63">[email&#160;protected]</a>.
Mental Health Services Furnished Remotely by Hospital Staff To
Beneficiaries in Their Homes, Emily Yoder at <a href="/cdn-cgi/l/email-protection#2b6e464247520572444f4e596b48465805434358054c445d">[email&#160;protected]</a>.
New Technology Intraocular Lenses (NTIOLs), contact Scott Talaga
via email at <a href="/cdn-cgi/l/email-protection#4714242833336913262b26202607242a34692f2f3469202831">[email&#160;protected]</a>.
No Cost/Full Credit and Partial Credit Devices, contact Scott
Talaga via email at <a href="/cdn-cgi/l/email-protection#7221111d06065c26131e13151332111f015c1a1a015c151d04">[email&#160;protected]</a>.
OPPS Brachytherapy, contact Scott Talaga via email at
<a href="/cdn-cgi/l/email-protection#683b0b071c1c463c0904090f09280b051b4600001b460f071e">[email&#160;protected]</a>.
OPPS Data (APC Weights, Conversion Factor, Copayments, Cost-to-
Charge Ratios (CCRs), Data Claims, Geometric Mean Calculation, Outlier
Payments, and Wage Index), contact Erick Chuang via email at
<a href="/cdn-cgi/l/email-protection#61241308020a4f220914000f0621020c124f0909124f060e17">[email&#160;protected]</a>, or Scott Talaga via email at
<a href="/cdn-cgi/l/email-protection#590a3a362d2d770d3835383e38193a342a7731312a773e362f">[email&#160;protected]</a>, or Josh McFeeters via email at
<a href="/cdn-cgi/l/email-protection#e5af8a968d9084cba886a3808091809796a5868896cb8d8d96cb828a93">[email&#160;protected]</a>.
OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar
Products, contact Josh McFeeters via email at
<a href="/cdn-cgi/l/email-protection#dc96b3afb4a9bdf291bf9ab9b9a8b9aeaf9cbfb1aff2b4b4aff2bbb3aa">[email&#160;protected]</a>, or Gil Ngan via email at
<a href="/cdn-cgi/l/email-protection#cc8ba5a0e282abada28cafa1bfe2a4a4bfe2aba3ba">[email&#160;protected]</a>, or Cory Duke via email at <a href="/cdn-cgi/l/email-protection#e5a68a979ccba1908e80a5868896cb8d8d96cb828a93">[email&#160;protected]</a>,
or Au'Sha Washington via email at <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="f7b682849f96d9a096849f9e9990839899b7949a84d99f9f84d9909881">[email&#160;protected]</a>.
OPPS New Technology Procedures/Services, contact the New Technology
APC mailbox at <a href="/cdn-cgi/l/email-protection#8fc1eaf8dbeaece7cedfcceeffffe3e6eceefbe6e0e1fccfece2fca1e7e7fca1e8e0f9">[email&#160;protected]</a>.
OPPS Packaged Items/Services, contact Mitali Dayal via email at
<a href="/cdn-cgi/l/email-protection#420f2b36232e2b6c06233b232e7002212f316c2a2a316c252d34">[email&#160;protected]</a> or Cory Duke via email at
<a href="/cdn-cgi/l/email-protection#c98aa6bbb0e78dbca2ac89aaa4bae7a1a1bae7aea6bf">[email&#160;protected]</a>.
OPPS Pass-Through Devices, contact the Device Pass-Through mailbox
at <a href="/cdn-cgi/l/email-protection#d094b5a6b9b3b58084b1a0a0bcb9b3b1a4b9bfbea390b3bda3feb8b8a3feb7bfa6">[email&#160;protected]</a>.
OPPS Status Indicators (SI) and Comment Indicators (CI), contact
Marina Kushnirova via email at <a href="/cdn-cgi/l/email-protection#a6ebc7d4cfc8c788edd3d5cec8cfd4c9d0c7e6c5cbd588ceced588c1c9d0">[email&#160;protected]</a>.

[[Page 44503]]

Organ Acquisition Payment Policies, contact Katie Lucas via email
at <a href="/cdn-cgi/l/email-protection#85cee4f1ede0f7ecebe0abc9f0e6e4f6c5e6e8f6abededf6abe2eaf3">[email&#160;protected]</a>, or Mandy Michael via email at
<a href="/cdn-cgi/l/email-protection#28694549464c490665414b40494d44684b455b0640405b064f475e">[email&#160;protected]</a>, or Kellie Shannon via email at
<a href="/cdn-cgi/l/email-protection#0e456b6262676b205d666f606061604e6d637d2066667d20696178">[email&#160;protected]</a>.
Outpatient Department Prior Authorization Process, contact Yuliya
Cook via email at <a href="/cdn-cgi/l/email-protection#7128041d1808105f321e1e1a31121c025f1919025f161e07">[email&#160;protected]</a>.
Overall Hospital Quality Star Rating, contact Tyson Nakashima via
email at <a href="/cdn-cgi/l/email-protection#65311c160a0b4b2b040e04160d0c0804250608164b0d0d164b020a13">[email&#160;protected]</a>.
Partial Hospitalization Program (PHP) and Community Mental Health
Center (CMHC) Issues, contact the PHP Payment Policy Mailbox at
<a href="/cdn-cgi/l/email-protection#8edec6dedeeff7e3ebe0fadee1e2e7edf7ceede3fda0e6e6fda0e9e1f8">[email&#160;protected]</a>.
Request for Information on Use of CMS Data to Drive Competition in
Healthcare Marketplaces, contact Terri Postma via email at
<a href="/cdn-cgi/l/email-protection#96c2f3e4e4ffb8c6f9e5e2fbf7d6f5fbe5b8fefee5b8f1f9e0">[email&#160;protected]</a>.
Rural Emergency Hospital Provider Enrollment, contact Frank Whelan
via email at <a href="/cdn-cgi/l/email-protection#581e2a393633760f303d343936183b352b7630302b763f372e">[email&#160;protected]</a>.
Rural Emergency Hospital Quality Reporting (REHQR) Program Issues,
contact Anita Bhatia via email at <a href="/cdn-cgi/l/email-protection#efae81869b8ec1ad878e9b868eaf8c829cc187879cc1888099">[email&#160;protected]</a>.
Rural Emergency Hospitals (REH) Physician Self-Referral Law Update
Issues, contact Lisa O. Wilson via email at <a href="/cdn-cgi/l/email-protection#b5f9dcc6d49be2dcd9c6dadb87f5d6d8c69bddddc69bd2dac3">[email&#160;protected]</a> or
Matthew Edgar via email at <a href="/cdn-cgi/l/email-protection#2a674b5e5e424f5d046f4e4d4b586a49475904424259044d455c">[email&#160;protected]</a>.
Skin Substitutes, contact Josh McFeeters via email at
<a href="/cdn-cgi/l/email-protection#f6bc99859e8397d8bb95b0939382938485b6959b85d89e9e85d8919980">[email&#160;protected]</a>.
Use of the Medicare Outpatient Observation Notice by REHs, contact
Nishamarie Sherry via email at <a href="/cdn-cgi/l/email-protection#0f41667c676e626e7d666a215c676a7d7d764f6c627c2167677c21686079">[email&#160;protected]</a> or Janet
Miller via email at <a href="/cdn-cgi/l/email-protection#014b606f64752f4c686d6d647341626c722f6969722f666e77">[email&#160;protected]</a>.
All Other Issues Related to Hospital Outpatient Payments Not
Previously Identified, contact the OPPS mailbox at
<a href="/cdn-cgi/l/email-protection#8ac5fffefaebfee3efe4fedadad9cae9e7f9a4e2e2f9a4ede5fc">[email&#160;protected]</a>.
All Other Issues Related to the Ambulatory Surgical Center Payments
Not Previously Identified, contact the ASC mailbox at
<a href="/cdn-cgi/l/email-protection#58190b1b08080b183b352b7630302b763f372e">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the search instructions on that website to
view public comments. CMS will not post on <a href="http://Regulations.gov">Regulations.gov</a> public
comments that make threats to individuals or institutions or suggest
that the individual will take actions to harm the individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other comments.

Addenda Available Only Through the Internet on the CMS Website

In the past, a majority of the Addenda referred to in our OPPS/ASC
proposed and final rules were published in the Federal Register as part
of the annual rulemakings. However, beginning with the CY 2012 OPPS/ASC
proposed rule, all of the Addenda no longer appear in the Federal
Register as part of the annual OPPS/ASC proposed and final rules to
decrease administrative burden and reduce costs associated with
publishing lengthy tables. Instead, these Addenda are published and
available only on the CMS website. The Addenda relating to the OPPS are
available at: <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices</a>.
The Addenda relating to the ASC payment system are available at:
<a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices</a>.

Current Procedural Terminology (CPT) Copyright Notice

Throughout this proposed rule, we use CPT codes and descriptions to
refer to a variety of services. We note that CPT codes and descriptions
are copyright 2021 American Medical Association. All Rights Reserved.
CPT is a registered trademark of the American Medical Association
(AMA). Applicable Federal Acquisition Regulations (FAR and Defense
Federal Acquisition Regulations (DFAR) apply.

Table of Contents

I. Summary and Background
A. Executive Summary of This Document
B. Legislative and Regulatory Authority for the Hospital OPPS
C. Excluded OPPS Services and Hospitals
D. Prior Rulemaking
E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel
or the Panel)
F. Public Comments Received on the CY 2022 OPPS/ASC Final Rule
With Comment Period
II. Proposed Updates Affecting OPPS Payments
A. Proposed Recalibration of APC Relative Payment Weights
B. Proposed Conversion Factor Update
C. Proposed Wage Index Changes
D. Proposed Statewide Average Default Cost-to-Charge Ratios
(CCRs)
E. Proposed Adjustment for Rural Sole Community Hospitals (SCHs)
and Essential Access Community Hospitals (EACHs) Under Section
1833(t)(13)(B) of the Act for CY 2023
F. Proposed Payment Adjustment for Certain Cancer Hospitals for
CY 2023
G. Proposed Hospital Outpatient Outlier Payments
H. Proposed Calculation of an Adjusted Medicare Payment From the
National Unadjusted Medicare Payment
I. Proposed Beneficiary Copayments
III. Proposed OPPS Ambulatory Payment Classification (APC) Group
Policies
A. Proposed OPPS Treatment of New and Revised HCPCS Codes
B. Proposed OPPS Changes--Variations Within APCs
C. Proposed New Technology APCs
D. Universal Low Volume APC Policy for Clinical and
Brachytherapy APCs
E. OPPS APC-Specific Policies
IV. Proposed OPPS Payment for Devices
A. Proposed Pass-Through Payment for Devices
B. Proposal to Publicly Post OPPS Device Pass-Through
Applications
C. Proposed Device-Intensive Procedures
V. Proposed OPPS Payment for Drugs, Biologicals, and
Radiopharmaceuticals
A. Proposed OPPS Transitional Pass-Through Payment for
Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals
B. Proposed OPPS Payment for Drugs, Biologicals, and
Radiopharmaceuticals Without Pass-Through Payment Status
C. Proposal in Physician Fee Schedule Proposed Rule To Require
HOPDs and ASCs to Report Discarded Amounts of Certain Single-Dose or
Single-Use Package Drugs
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for
Drugs, Biologicals, Radiopharmaceuticals, and Devices
A. Amount of Additional Payment and Limit on Aggregate Annual
Adjustment
B. Proposed Estimate of Pass-Through Spending for CY 2023
VII. Proposed OPPS Payment for Hospital Outpatient Visits and
Critical Care Services
VIII. Proposed Payment for Partial Hospitalization Services
A. Background
B. Proposed PHP APC Update for CY 2023
C. Outpatient Non-PHP Mental Health Services Furnished Remotely
to Partial Hospitalization Patients After the COVID-19 PHE
D. Outlier Policy for CMHCs
IX. Proposed Services That Will Be Paid Only as Inpatient Services
A. Background
B. Proposed Changes to the Inpatient Only (IPO) List
X. Nonrecurring Policy Changes
A. Mental Health Services Furnished Remotely by Hospital Staff
to Beneficiaries in Their Homes

[[Page 44504]]

B. Comment Solicitation on Intensive Outpatient Mental Health
Treatment, Including Substance Use Disorder (SUD) Treatment
Furnished by Intensive Outpatient Programs (IOPs)
C. Direct Supervision of Certain Cardiac and Pulmonary
Rehabilitation Services by Interactive Communications Technology
D. Use of Claims Data for CY 2023 OPPS and ASC Payment System
Ratesetting Due to the PHE
E. Supervision by Nonphysician Practitioners of Hospital and CAH
Diagnostic Services Furnished to Outpatients
F. Coding and Payment for Category B Investigational Device
Exemption Clinical Studies and Devices
G. OPPS Payment for Software as a Service
H. Proposed Payment Adjustments Under the IPPS and OPPS for
Domestic NIOSH Approved Surgical N95 Respirators
I. Proposal To Exempt Rural Sole Community Hospitals From the
Method To Control Unnecessary Increases in the Volume of Clinic
Visit Services Furnished in Excepted Off-Campus Provider-Based
Departments (PBDs)
XI. Proposed CY 2023 OPPS Payment Status and Comment Indicators
A. Proposed CY 2023 OPPS Payment Status Indicator Definitions
B. Proposed CY 2023 Comment Indicator Definitions
XII. MedPAC Recommendations
A. Proposed OPPS Payment Rates Update
B. Proposed ASC Conversion Factor Update
C. Proposed ASC Cost Data
XIII. Proposed Updates to the Ambulatory Surgical Center (ASC)
Payment System
A. Background
B. Proposed ASC Treatment of New and Revised Codes
C. Proposed Update to the List of ASC Covered Surgical
Procedures and Covered Ancillary Services
D. Proposed Update and Payment for ASC Covered Surgical
Procedures and Covered Ancillary Services
E. ASC Payment System Policy for Non-Opioid Pain Management
Drugs and Biologicals That Function as Surgical Supplies
F. Proposed New Technology Intraocular Lenses (NTIOLs)
G. Proposed ASC Payment and Comment Indicators
H. Proposed Calculation of the ASC Payment Rates and the ASC
Conversion Factor
XIV. Requirements for the Hospital Outpatient Quality Reporting
(OQR) Program
A. Background
B. Hospital OQR Program Quality Measures
C. Administrative Requirements
D. Form, Manner, and Timing of Data Submitted for the Hospital
OQR Program
E. Payment Reduction for Hospitals That Fail To Meet the
Hospital OQR Program Requirements for the CY 2023 Payment
Determination
XV. Requirements for the Ambulatory Surgical Center Quality
Reporting (ASCQR) Program
A. Background
B. ASCQR Program Quality Measures
C. Administrative Requirements
D. Form, Manner, and Timing of Data Submitted for the ASCQR
Program
E. Proposed Payment Reduction for ASCs That Fail To Meet the
ASCQR Program Requirements
XVI. Requirements for the Rural Emergency Hospital Quality Reporting
(REHQR) Program
A. Background
B. REHQR Program Quality Measures
C. Quality Reporting Requirements Under the REH Quality
Reporting (REHQR) Program
XVII. Organ Acquisition Payment Policy
A. Background of Organ Acquisition Payment Policies
B. Counting Research Organs To Calculate Medicare's Share of
Organ Acquisition Costs
C. Costs of Certain Services Furnished to Potential Deceased
Donors
D. Technical Corrections and Clarifications to 42 CFR 405.1801,
412.100, 413.198, 413.402, 413.404, 413.420 and Nomenclature Changes
to 42 CFR 412.100 and 42 CFR Part 413, Subpart L
E. Clarification of Allocation of Administrative and General
Costs
F. Organ Payment Policy--Request for Information on Counting
Organs for Medicare's Share of Organ Acquisition Costs, IOPO Kidney
SACs, and Reconciliation of All Organs for IOPOs
XVIII. Rural Emergency Hospitals (REH): Payment Policies, Conditions
of Participation, Provider Enrollment, Use of the Medicare
Outpatient Observation Notice, and Physician Self-Referral Updates
A. Rural Emergency Hospitals (REH) Payment Policies
B. REH Conditions of Participation
C. REH Provider Enrollment
D. Use of the Medicare Outpatient Observation Notice by REHs
E. Physician Self-Referral Updates
XIX. Request for Information on Use of CMS Data To Drive Competition
in Healthcare Marketplaces
A. Background
B. Request for Public Comment
XX. Addition of a New Service Category for Hospital Outpatient
Department (OPD) Prior Authorization Process
A. Background
B. Controlling Unnecessary Increases in the Volume of Covered
OPD Services
XXI. Overall Hospital Quality Star Rating
A. Background
B. Veterans Health Administration Hospitals
C. Frequency of Publication and Data Used
D. Overall Hospital Quality Star Ratings Suppression
XXII. Files Available to the Public via the Internet
XXIII. Collection of Information Requirements
A. Statutory Requirement for Solicitation of Comments
B. ICRs for the Hospital OQR Program
C. ICRs for the ASCQR Program
D. ICRs for Rural Emergency Hospitals (REH) Physician Self-
Referral Law Update
E. ICRs for Addition of a New Service Category for Hospital
Outpatient Department (OPD) Prior Authorization Process
F. ICRs for Proposed Payment Adjustments for NIOSH-Approved
Domestic Surgical N95 Respirators
G. ICRs for Proposed REH Provider Enrollment Requirements
XXIV. Response to Comments
XXV. Economic Analyses
A. Statement of Need
B. Overall Impact of Provisions of This Proposed Rule
C. Detailed Economic Analyses
D. Regulatory Review Costs
E. Regulatory Flexibility Act (RFA) Analysis
F. Unfunded Mandates Reform Act Analysis
G. Conclusion
H. Federalism Analysis
Regulations Text

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
In this proposed rule, we propose to update the payment policies
and payment rates for services furnished to Medicare beneficiaries in
hospital outpatient departments (HOPDs) and ambulatory surgical centers
(ASCs), beginning January 1, 2023. Section 1833(t) of the Social
Security Act (the Act) requires us to annually review and update the
payment rates for services payable under the Hospital Outpatient
Prospective Payment System (OPPS). Specifically, section 1833(t)(9)(A)
of the Act requires the Secretary of the Department of Health and Human
Services (the Secretary) to review certain components of the OPPS not
less often than annually, and to revise the groups, the relative
payment weights, and the wage and other adjustments that 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. In addition, under section 1833(i)(D)(v) of the Act, we
annually review and update the ASC payment rates. This proposed rule
also includes additional policy changes made in accordance with our
experience with the OPPS and the ASC payment system and recent changes
in our statutory authority. We describe these and various other
statutory authorities in the relevant sections of this proposed rule.
In addition, this proposed rule would update and refine the
requirements for the Hospital Outpatient Quality

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Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program.
We are also proposing updates to the requirements for Organ
Acquisition, Prior Authorization, and Overall Hospital Quality Star
Rating. We are also proposing new regulatory requirements to codify
payment policy, quality measures, and enrollment policy for Rural
Emergency Hospitals. Finally, we are soliciting comments on the use of
CMS data to drive competition in healthcare marketplaces, and a Request
for Information on an alternative methodology for counting organs.
2. Summary of the Major Provisions
<bullet> OPPS Update: For 2023, we propose to increase the payment
rates under the OPPS by an Outpatient Department (OPD) fee schedule
increase factor of 2.7 percent. This proposed increase factor is based
on the proposed hospital inpatient market basket percentage increase of
3.1 percent for inpatient services paid under the hospital inpatient
prospective payment system (IPPS) reduced by a proposed productivity
adjustment of 0.4 percentage point. Based on this update, we estimate
that total payments to OPPS providers (including beneficiary cost-
sharing and estimated changes in enrollment, utilization, and case-mix)
for calendar year (CY) 2023 would be approximately $86.2 billion, an
increase of approximately $6.2 billion compared to estimated CY 2022
OPPS payments.
We propose to continue to implement the statutory 2.0 percentage
point reduction in payments for hospitals that fail to meet the
hospital outpatient quality reporting requirements by applying a
reporting factor of 0.9805 to the OPPS payments and copayments for all
applicable services.
<bullet> Data used in CY 2023 OPPS/ASC Ratesetting: To set CY 2023
OPPS and ASC payment rates, we would normally use the most updated
claims and cost report data available. The best available claims data
is the most recent set of data which would be from 2 years prior to the
calendar year that is the subject of rulemaking. Therefore, we are
proposing to use the CY 2021 claims data to set CY 2023 OPPS and ASC
rates. However, cost report data usually lags the claims data by a year
and CMS believes that the CY 2020 cost report data are not the best
overall approximation of expected outpatient hospital services as the
majority of the cost reports we would typically use for CY 2023 rate
setting have cost reporting periods that overlap with parts of the CY
2020 Public Health Emergency (PHE). In order to mitigate the impact of
some of the temporary changes in hospitals cost report data from CY
2020, we propose to use cost report data from the June 2020 extract
from Healthcare Cost Report Information System (HCRIS), which includes
cost report data from prior to the PHE. This is the same cost report
extract we used to set OPPS rates for CY 2022. We believe using the CY
2021 claims data with cost reports data through CY 2019 (prior to the
PHE) for CY 2023 OPPS ratesetting is the best approximation of expected
costs for CY 2023 hospital outpatient services for ratesetting
purposes. As a result, CMS is proposing to use CY 2021 claims data with
cost reports with cost reporting periods prior to the PHE to set CY
2023 OPPS and ASC payment system rates.
<bullet> Partial Hospitalization Update: For CY 2023, we propose to
calculate the CMHC and hospital-based PHP (HB PHP) geometric mean per
diem costs consistent with our existing methodology, except that while
we propose to use the latest available CY 2021 claims data, we propose
to continue to use the cost data that was available for the CY 2021
rulemaking.
<bullet> Changes to the Inpatient Only (IPO) List: For 2023, we
propose to remove ten services from the Inpatient Only list.
<bullet> 340B-Acquired Drugs: For CY 2023, we formally propose at
this time to continue our current policy of paying ASP minus 22.5
percent for 340B-acquired drugs and biologicals, including when
furnished in nonexcepted off-campus PBDs paid under the PFS. This
proposal is in accordance with the policy choices and calculations that
CMS made in the months leading up to publication of this proposed rule
before the Supreme Court issued its decision in American Hospital
Association v. Becerra (Docket 20-1114). However, we note that, in
light of the Supreme Court's recent decision in American Hospital
Association v. Becerra, we fully anticipate applying a rate of ASP + 6
percent to such drugs and biologicals in the final rule for CY 2023 and
making a corresponding decrease to the conversion factor consistent
with the OPPS statute and our longstanding policy that this adjustment
is made in a budget neutral manner. We are still evaluating how to
apply the Supreme Court's recent decision to prior calendar years. In
that decision, the Court summarized the parties' arguments regarding
budget neutrality and stated that, ``[a]t this stage, we need not
address potential remedies.'' We are interested in public comments on
the best way to craft any potential remedies affecting cost years 2018-
2022 given that the Court did not resolve that issue.
<bullet> Device Pass-Through Payment Applications: For CY 2023, we
received 8 applications for device pass-through payments. We solicit
public comment on these applications and will make final determinations
on these applications in the CY 2023 OPPS/ASC final rule. Beginning for
OPPS device pass-through applications received on or after January 1,
2023, we propose to publicly post online the completed application
forms and related materials that we receive from applicants, excluding
certain copyrighted or other materials that applicants indicate cannot
otherwise be released to the public.
<bullet> Cancer Hospital Payment Adjustment: For CY 2023, we
propose to continue providing additional payments to cancer hospitals
so that a cancer hospital's payment-to-cost ratio (PCR) after the
additional payments is equal to the weighted average PCR for the other
OPPS hospitals using the most recently submitted or settled cost report
data. However, section 16002(b) of the 21st Century Cures Act requires
that this weighted average PCR be reduced by 1.0 percentage point.
Based on the data and the required 1.0 percentage point reduction, we
proposed to use a target PCR of 0.89 to determine the CY 2023 cancer
hospital payment adjustment to be paid at cost report settlement. That
is, the payment adjustments would be the additional payments needed to
result in a PCR equal to 0.89 for each cancer hospital.
<bullet> ASC Payment Update: For CYs 2019 through 2023, we propose
to adopt a policy to update the ASC payment system using the hospital
market basket update. Using the hospital market basket methodology, for
CY 2023, we propose to increase payment rates under the ASC payment
system by 2.7 percent for ASCs that meet the quality reporting
requirements under the ASCQR Program. This proposed increase is based
on a hospital market basket percentage increase of 3.1 percent reduced
by a productivity adjustment of 0.4 percentage point. Based on this
proposed update, we estimate that total payments to ASCs (including
beneficiary cost-sharing and estimated changes in enrollment,
utilization, and case-mix) for CY 2023 would be approximately 5.4
billion, an increase of approximately 130 million compared to estimated
CY 2022 Medicare payments.
<bullet> Changes to the List of ASC Covered Surgical Procedures:
For CY 2023, we propose to add one procedure, a lymph node biopsy or
excision, to the ASC CPL based upon existing criteria at Sec. 416.166.

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<bullet> Hospital Outpatient Quality Reporting (OQR) Program: For
the Hospital OQR Program measure set, we are proposing to: (1) add a
data validation targeting criterion to our existing four targeting
criteria that reads: ``Any hospital with a two-tailed confidence
interval that is less than 75 percent, and that had less than four
quarters of data due to receiving an ECE for one or more quarters,''
beginning with the CY 2023 reporting period/CY 2025 payment
determination; (2) align patient encounter quarters with the calendar
year, beginning with the CY 2024 reporting period/CY 2026 payment
determination; and (3) change the Cataracts: Improvement in Patient's
Visual Function within 90 Days Following Cataract Surgery (OP-31)
Measure from Mandatory to Voluntary Beginning with the CY 2027 Payment
Determination. We are requesting comment on the future readoption of
the Hospital Outpatient Volume on Selected Outpatient Surgical
Procedures (OP-26) measure or another volume indicator in the Hospital
OQR Program.
<bullet> Ambulatory Surgical Center Quality Reporting (ASCQR)
Program: For the ASCQR Program measure set, we are proposing to change
the Cataracts: Improvement in Patient's Visual Function within 90 Days
Following Cataract Surgery (ASC-11) Measure from Mandatory to Voluntary
Beginning with the CY 2027 Payment Determination. We are also
requesting comment on: (1) the potential future implementation of a
measures value pathways approach in the ASCQR Program; (2) the status
and feasibility of interoperability initiatives in the ASCQR Program;
and (3) the potential readoption of the ASC Facility Volume Data on
Selected ASC Surgical Procedures (ASC-7) measure or another volume
indicator in the ASCQR Program. We are also proposing to suspend
mandatory implementation of the ASC-11 measure.
<bullet> Organ acquisition payment policy: We are issuing a Request
for Information on counting Medicare organs for use in calculating
Medicare's share of organ acquisition costs, rather than making a
proposal, and will use the information to inform potential future
rulemaking. Also, we propose to exclude research organs from the
calculation of Medicare's share of organ acquisition costs and require
a cost offset; these proposals would help ensure that Medicare does not
share in the cost of research, and would lower the cost of procuring
and providing research organs to the research community. Finally, we
propose to cover as organ acquisition costs certain hospital costs
typically incurred when donors die from cardiac death, to promote organ
procurement and enhance equity.
<bullet> Rural Emergency Hospitals (REH): Provider Enrollment: We
are outlining provider enrollment requirements for REHs. The most
important of these is that REHs must comply with all applicable
provider enrollment provisions in 42 CFR part 424, subpart P in order
to enroll in Medicare.
<bullet> Rural Emergency Hospitals (REH) Physician Self-Referral
Law Update: We propose (1) a new exception for ownership or investment
interests in an REH; and (2) revisions to certain existing exceptions
to make them applicable to compensation arrangements to which an REH is
a party.
<bullet> Rural Emergency Hospital Quality Reporting (REHQR)
Program: For the REHQR Program, we are proposing to require a
QualityNet account and Security Official (SO) requirement in line with
other quality programs for purposes of data submission and access of
facility level reports. We are also requesting information on: (1)
measures recommended by the National Advisory Committee on Rural Health
and Human Services and additional suggested measures for the REHQR
Program, and (2) and comments on rural telehealth, behavioral and
mental health, and maternal health services.
<bullet> Overall Hospital Quality Star Ratings: For the Overall
Hospital Quality Star Ratings, we are: (1) providing information on the
previously finalized policy for inclusion of quality measure data from
Veteran's Health Administration hospitals; (2) proposing to amend Sec.
412.190(c) to state the use of publicly available measure results on
Hospital Compare or its successor websites from a quarter within the
prior 12 months (instead of the ``prior year''); and (3) conveying that
although CMS intends to publish Overall Hospital Quality Star Ratings
in 2023, we may apply the suppression policy discussed in the CY 2021
OPPS/ASC proposed rule (85 FR 48996 through 49027) should data analysis
demonstrate that the COVID-19 Public Health Emergency (PHE)
substantially affects the underlying measure data.
<bullet> REH Payment Policy: Section 125 of the Consolidated
Appropriations Act of 2021 (CAA) established a new provider type called
Rural Emergency Hospitals (REHs), effective January 1, 2023.
REHs are facilities that convert from either a critical access
hospital (CAH) or a rural hospital (or one treated as such under
section 1886(d)(8)(E) of the Social Security Act) with less than 50
beds, and that do not provide acute care inpatient services with the
exception of post-hospital extended care services furnished in a unit
of the facility that is a distinct part licensed as a skilled nursing
facility. By statute, REH services include emergency department
services and observation care and, at the election of the REH, other
outpatient medical and health services furnished on an outpatient
basis, as specified by the Secretary through rulemaking.
By statute, covered outpatient department services provided by REHs
will receive an additional 5 percent payment for each service.
Beneficiaries will not be charged a copayment on the additional 5
percent payment.
We are proposing to consider all covered outpatient department
services, other than inpatient hospital services as described in
section 1833(t)(1)(B)(ii), that would otherwise be paid under the OPPS
as REH services. REHs would be paid for furnishing REH services at a
rate that is equal to the OPPS payment rate for the equivalent covered
outpatient department service increased by 5 percent. We are also
proposing that REHs may provide outpatient services that are not
otherwise paid under the OPPS (such as services paid under the Clinical
Lab Fee Schedule) as well as post-hospital extended care services
furnished in a unit of the facility that is a distinct part of the
facility licensed as a skilled nursing facility; however, these
services would not be considered REH services and therefore would be
paid under the applicable fee schedule and would not receive the
additional 5 percent payment increase that CMS proposes to apply to REH
services.
Finally, we are proposing that REHs would also receive a monthly
facility payment. After the initial payment is established in CY 2023,
the payment amount will increase in subsequent years by the hospital
market basket percentage increase.
<bullet> Proposed Addition of a New Service Category for Hospital
Outpatient Department Prior Authorization Process: We propose to add
facet joint interventions as a category of services to the prior
authorization process for hospital outpatient departments beginning for
dates of service on or after March 1, 2023.
<bullet> Mental Health Services Furnished Remotely by Hospital
Staff to Beneficiaries in Their Homes: For CY 2023, CMS is proposing to
consider mental health services furnished remotely by hospital staff
using communications technology to beneficiaries in their homes as
covered outpatient department services payable under the OPPS and would
create OPPS-specific coding for these services.

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We are proposing to require an in-person service within 6 months prior
to the initiation of the remote service and then every 12 months
thereafter, that exceptions to the in-person visit requirement may be
made based on beneficiary circumstances (with the reason documented in
the patient's medical record), and that more frequent visits are also
allowed under our policy, as driven by clinical needs on a case-by-case
basis. We are also proposing that audio-only interactive
telecommunications systems may be used to furnish these services in
instances where the beneficiary is not capable of, or does not consent
to, the use of two-way, audio/video technology.
<bullet> Supervision by Nonphysician Practitioners of Hospital and
CAH Diagnostic Services Furnished to Outpatients: For CY 2023, to
improve clarity, we propose to replace cross-references at Sec.
410.27(a)(1)(iv)(A) and (B) and Sec. 410.28(e) to the definitions of
general and personal supervision at Sec. 410.32(b)(3)(i) and (iii)
with the text of those definitions. We also propose to revise Sec.
410.28(e) to clarify that certain nonphysician practitioners (nurse
practitioners, physician assistants, clinical nurse specialists and
certified nurse midwifes) may supervise the performance of diagnostic
tests to the extent they are authorized to do so under their scope of
practice and applicable State law.
<bullet> Exemption of Rural Sole Community Hospitals (SCH) from the
Method to Control Unnecessary Increases in the Volume of Clinic Visit
Services Furnished in Excepted Off-Campus Provider-Based Departments
(PBDs): We are proposing to exempt rural Sole Community Hospitals
(rural SCHs) from the site-specific Medicare Physician Fee Schedule
(PFS)-equivalent payment for the clinic visit service, as described by
HCPCS code G0463, when provided at an off-campus PBD excepted from
section 1833(t)(21) of the Act (departments that bill the modifier
``PO'' on claim lines).
<bullet> Proposed Payment Adjustments under the IPPS and OPPS for
Domestic NIOSH-Approved Surgical N95 Respirators: As discussed in
section X.H of the preamble of this proposed rule, the Biden-Harris
Administration has made it a priority to ensure America is prepared to
continue to respond to COVID-19, and to combat future pandemics. To
improve hospital preparedness and readiness for future threats, we are
proposing to provide payment adjustments to hospitals under the IPPS
and OPPS for the additional resource costs they incur to acquire
domestic NIOSH-approved surgical N95 respirators. These surgical
respirators, which faced severe shortage at the onset of the COVID-19
pandemic, are essential for the protection of beneficiaries and
hospital personnel that interface with patients. The Department of
Health and Human Services (HHS) recognizes that procurement of domestic
NIOSH-approved surgical N95 respirators, while critical to pandemic
preparedness and protecting health care workers and patients, can
result in additional resource costs for hospitals. The proposed payment
adjustments would account for these additional resource costs.
We believe the proposed payment adjustments would help achieve a
strategic policy goal, namely, sustaining a level of supply resilience
for surgical N95 respirators that is critical to protect the health and
safety of personnel and patients in a public health emergency. We are
proposing that the payment adjustments would commence for cost
reporting periods beginning on or after January 1, 2023.
3. Summary of Costs and Benefits
In section XXIII of this proposed rule, we set forth a detailed
analysis of the regulatory and federalism impacts that the changes
would have on affected entities and beneficiaries. Key estimated
impacts are described below.
a. Impacts of All OPPS Changes
Table 84 in section XXIII.C of this proposed rule displays the
distributional impact of all the OPPS changes on various groups of
hospitals and CMHCs for CY 2023 compared to all estimated OPPS payments
in CY 2022. We estimate that the policies in this proposed rule would
result in a 2.9 percent overall increase in OPPS payments to providers.
We estimate that total OPPS payments for CY 2023, including beneficiary
cost-sharing, to the approximately 3,502 facilities paid under the OPPS
(including general acute care hospitals, children's hospitals, cancer
hospitals, and CMHCs) will increase by approximately $1.8 billion
compared to CY 2022 payments, excluding our estimated changes in
enrollment, utilization, and case-mix.
We estimated the isolated impact of our OPPS policies on CMHCs
because CMHCs are only paid for partial hospitalization services under
the OPPS. Continuing the provider-specific structure we adopted
beginning in CY 2011, and basing payment fully on the type of provider
furnishing the service, we estimate an 8.4 percent decrease in CY 2023
payments to CMHCs relative to their CY 2022 payments.
b. Impacts of the Updated Wage Indexes
We estimate that our update of the wage indexes based on the FY
2023 IPPS proposed rule wage indexes would result in no change for
urban hospitals under the OPPS and no change for rural hospitals. These
wage indexes include the continued implementation of the OMB labor
market area delineations based on 2010 Decennial Census data, with
updates, as discussed in section II.C of this proposed rule.
c. Impacts of the Rural Adjustment and the Cancer Hospital Payment
Adjustment
There are no significant impacts of our CY 2023 payment policies
for hospitals that are eligible for the rural adjustment or for the
cancer hospital payment adjustment. We are not making any change in
policies for determining the rural hospital payment adjustments. While
we are implementing the reduction to the cancer hospital payment
adjustment for CY 2023 required by section 1833(t)(18)(C) of the Act,
as added by section 16002(b) of the 21st Century Cures Act, the target
payment-to-cost ratio (PCR) for CY 2023 is 0.89, equivalent to the 0.89
target PCR for CY 2022, and therefore has no budget neutrality
adjustment.
d. Impacts of the OPD Fee Schedule Increase Factor
For the CY 2023 OPPS/ASC, we are establishing an OPD fee schedule
increase factor of 2.7 percent and applying that increase factor to the
conversion factor for CY 2023. We note that the following estimated
changes are based on the formal proposal discussed in V.B of this
proposed rule. However, we are making available online alternative
impact tables and other supporting data associated with the alternative
policy for 340B-acquired drugs.
As a result of the OPD fee schedule increase factor and other
budget neutrality adjustments, we estimate that urban hospitals would
experience an increase in payments of approximately 3.0 percent and
that rural hospitals would experience an increase in payments of 2.6
percent. Classifying hospitals by teaching status, we estimate
nonteaching hospitals will experience an increase in payments of 3.2
percent, minor teaching hospitals would experience an increase in
payments of 3.0 percent, and major teaching hospitals would experience
an increase in payments of 2.6 percent. We also classified hospitals by
the type of ownership. We estimate that hospitals with voluntary
ownership would

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experience an increase of 2.8 percent in payments, while hospitals with
government ownership would experience an increase of 2.8 percent in
payments. We estimate that hospitals with proprietary ownership would
experience an increase of 3.5 percent in payments.
e. Impacts of the Proposed ASC Payment Update
For impact purposes, the surgical procedures on the ASC covered
surgical procedure list are aggregated into surgical specialty groups
using CPT and HCPCS code range definitions. The percentage change in
estimated total payments by specialty groups under the CY 2023 payment
rates, compared to estimated CY 2022 payment rates, generally ranges
between an increase of 1 and 6 percent, depending on the service, with
some exceptions. We estimate the impact of applying the hospital market
basket update to ASC payment rates would increase payments by $130
million under the ASC payment system in CY 2023.

B. Legislative and Regulatory Authority for the Hospital OPPS

When Title XVIII of the Act was 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 reasonable cost-based
payment methodology with a prospective payment system (PPS). The
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section
1833(t) to the Act, authorizing implementation of a PPS for hospital
outpatient services. The OPPS was first implemented for services
furnished on or after August 1, 2000. Implementing regulations for the
OPPS are located at 42 CFR parts 410 and 419.
The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS.
The following Acts made additional changes to the OPPS: the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit
Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8,
2006; the Medicare Improvements and Extension Act under Division B of
Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA)
(Pub. L. 109-432), enacted on December 20, 2006; the Medicare,
Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173),
enacted on December 29, 2007; the Medicare Improvements for Patients
and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July
15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111-
148), enacted on March 23, 2010, as amended by the Health Care and
Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on
March 30, 2010 (these two public laws are collectively known as the
Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010
(MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act
of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; the
Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L.
112-96), enacted on February 22, 2012; the American Taxpayer Relief Act
of 2012 (Pub. L. 112-240), enacted January 2, 2013; the Pathway for SGR
Reform Act of 2013 (Pub. L. 113-67) enacted on December 26, 2013; the
Protecting Access to Medicare Act of 2014 (PAMA, Pub. L. 113-93),
enacted on March 27, 2014; the Medicare Access and CHIP Reauthorization
Act (MACRA) of 2015 (Pub. L. 114-10), enacted April 16, 2015; the
Bipartisan Budget Act of 2015 (Pub. L. 114-74), enacted November 2,
2015; the Consolidated Appropriations Act, 2016 (Pub. L. 114-113),
enacted on December 18, 2015, the 21st Century Cures Act (Pub. L. 114-
255), enacted on December 13, 2016; the Consolidated Appropriations
Act, 2018 (Pub. L. 115-141), enacted on March 23, 2018; the Substance
Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for
Patients and Communities Act (Pub. L. 115-271), enacted on October 24,
2018; the Further Consolidated Appropriations Act, 2020 (Pub. L. 116-
94), enacted on December 20, 2019; the Coronavirus Aid, Relief, and
Economic Security Act (Pub. L. 116-136), enacted on March 27, 2020; and
the Consolidated Appropriations Act, 2021 (Pub. L. 116-260), enacted on
December 27, 2020.
Under the OPPS, we generally pay for hospital Part B services on a
rate-per-service basis that varies according to the APC group to which
the service is assigned. We use the Healthcare Common Procedure Coding
System (HCPCS) (which includes certain Current Procedural Terminology
(CPT) codes) to identify and group the services within each APC. The
OPPS includes payment for most hospital outpatient services, except
those identified in section I.C of this proposed rule. Section
1833(t)(1)(B) of the Act provides for payment under the OPPS for
hospital outpatient services designated by the Secretary (which
includes partial hospitalization services furnished by CMHCs), and
certain inpatient hospital services that are paid under Medicare Part
B.
The OPPS rate is an unadjusted national payment amount that
includes the Medicare payment and the beneficiary copayment. This rate
is divided into a labor-related amount and a nonlabor-related amount.
The labor-related amount is adjusted for area wage differences using
the hospital inpatient wage index value for the locality in which the
hospital or CMHC is located.
All services and items within an APC group are comparable
clinically and with respect to resource use, as required by section
1833(t)(2)(B) of the Act. In accordance with section 1833(t)(2)(B) of
the Act, subject to certain exceptions, items and services within an
APC group cannot be considered comparable with respect to the use of
resources if the highest median cost (or mean cost, if elected by the
Secretary) for an item or service in the APC group is more than 2 times
greater than the lowest median cost (or mean cost, if elected by the
Secretary) for an item or service within the same APC group (referred
to as the ``2 times rule''). In implementing this provision, we
generally use the cost of the item or service assigned to an APC group.
For new technology items and services, special payments under the
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act
provides for temporary additional payments, which we refer to as
``transitional pass-through payments,'' for at least 2 but not more
than 3 years for certain drugs, biological agents, brachytherapy
devices used for the treatment of cancer, and categories of other
medical devices. For new technology services that are not eligible for
transitional pass-through payments, and for which we lack sufficient
clinical information and cost data to appropriately assign them to a
clinical APC group, we have established special APC groups based on
costs, which we refer to as New Technology APCs. These New Technology
APCs are designated by cost bands which allow us to provide appropriate
and consistent payment for designated new procedures that are not yet
reflected in our claims data. Similar to pass-through payments, an
assignment to a New Technology APC is temporary; that is, we retain a
service within a New Technology APC until we acquire sufficient data to
assign it to a clinically appropriate APC group.

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C. Excluded OPPS Services and Hospitals

Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to
designate the hospital outpatient services that are paid under the
OPPS. While most hospital outpatient services are payable under the
OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for
ambulance, physical and occupational therapy, and speech-language
pathology services, for which payment is made under a fee schedule. It
also excludes screening mammography, diagnostic mammography, and
effective January 1, 2011, an annual wellness visit providing
personalized prevention plan services. The Secretary exercises the
authority granted under the statute to also exclude from the OPPS
certain services that are paid under fee schedules or other payment
systems. Such excluded services include, for example, the professional
services of physicians and nonphysician practitioners paid under the
Medicare Physician Fee Schedule (MPFS); certain laboratory services
paid under the Clinical Laboratory Fee Schedule (CLFS); services for
beneficiaries with end-stage renal disease (ESRD) that are paid under
the ESRD prospective payment system; and services and procedures that
require an inpatient stay that are paid under the hospital IPPS. In
addition, section 1833(t)(1)(B)(v) of the Act does not include
applicable items and services (as defined in subparagraph (A) of
paragraph (21)) that are furnished on or after January 1, 2017 by an
off-campus outpatient department of a provider (as defined in
subparagraph (B) of paragraph (21)). We set forth the services that are
excluded from payment under the OPPS in regulations at 42 CFR 419.22.
Under Sec. 419.20(b) of the regulations, we specify the types of
hospitals that are excluded from payment under the OPPS. These excluded
hospitals are:
<bullet> Critical access hospitals (CAHs);
<bullet> Hospitals located in Maryland and paid under Maryland's
All-Payer or Total Cost of Care Model;
<bullet> Hospitals located outside of the 50 States, the District
of Columbia, and Puerto Rico; and
<bullet> Indian Health Service (IHS) hospitals.

D. Prior Rulemaking

On April 7, 2000, we published in the Federal Register a final rule
with comment period (65 FR 18434) to implement a prospective payment
system for hospital outpatient services. The hospital OPPS was first
implemented for services furnished on or after August 1, 2000. Section
1833(t)(9)(A) of the Act requires the Secretary to review certain
components of the OPPS, not less often than annually, and to revise the
groups, the relative payment weights, and the wage and other
adjustments to take into account changes in medical practices, changes
in technology, the addition of new services, new cost data, and other
relevant information and factors.
Since initially implementing the OPPS, we have published final
rules in the Federal Register annually to implement statutory
requirements and changes arising from our continuing experience with
this system. These rules can be viewed on the CMS website at: <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices</a>.html.

E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the
Panel)

1. Authority of the Panel
Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of
Public Law 106-113, and redesignated by section 202(a)(2) of Public Law
106-113, requires that we consult with an expert outside advisory panel
composed of an appropriate selection of representatives of providers to
annually review (and advise the Secretary concerning) the clinical
integrity of the payment groups and their weights under the OPPS. In CY
2000, based on section 1833(t)(9)(A) of the Act, the Secretary
established the Advisory Panel on Ambulatory Payment Classification
Groups (APC Panel) to fulfill this requirement. In CY 2011, based on
section 222 of the Public Health Service Act (the PHS Act), which gives
discretionary authority to the Secretary to convene advisory councils
and committees, the Secretary expanded the panel's scope to include the
supervision of hospital outpatient therapeutic services in addition to
the APC groups and weights. To reflect this new role of the panel, the
Secretary changed the panel's name to the Advisory Panel on Hospital
Outpatient Payment (the HOP Panel or the Panel). The HOP Panel is not
restricted to using data compiled by CMS, and in conducting its review,
it may use data collected or developed by organizations outside the
Department.
2. Establishment of the Panel
On November 21, 2000, the Secretary signed the initial charter
establishing the Panel, and, at that time, named the APC Panel. This
expert panel is composed of appropriate representatives of providers
(currently employed full-time, not as consultants, in their respective
areas of expertise) who review clinical data and advise CMS about the
clinical integrity of the APC groups and their payment weights. Since
CY 2012, the Panel also is charged with advising the Secretary on the
appropriate level of supervision for individual hospital outpatient
therapeutic services. The Panel is technical in nature, and it is
governed by the provisions of the Federal Advisory Committee Act
(FACA). The current charter specifies, among other requirements, that
the Panel--
<bullet> May advise on the clinical integrity of Ambulatory Payment
Classification (APC) groups and their associated weights;
<bullet> May advise on the appropriate supervision level for
hospital outpatient services;
<bullet> May advise on OPPS APC rates for ASC covered surgical
procedures;
<bullet> Continues to be technical in nature;
<bullet> Is governed by the provisions of the FACA;
<bullet> Has a Designated Federal Official (DFO); and
<bullet> Is chaired by a Federal Official designated by the
Secretary.
The Panel's charter was amended on November 15, 2011, renaming the
Panel and expanding the Panel's authority to include supervision of
hospital outpatient therapeutic services and to add critical access
hospital (CAH) representation to its membership. The Panel's charter
was also amended on November 6, 2014 (80 FR 23009), and the number of
members was revised from up to 19 to up to 15 members. The Panel's
current charter was approved on November 20, 2020, for a 2-year period.
The current Panel membership and other information pertaining to
the Panel, including its charter, Federal Register notices, membership,
meeting dates, agenda topics, and meeting reports, can be viewed on the
CMS website at: <a href="https://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/AdvisorPanelAmbulatoryPaymentClassificationGroups.html">https://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/AdvisorPanelAmbulatoryPaymentClassificationGroups.html</a>.
3. Panel Meetings and Organizational Structure
The Panel has held many meetings, with the last meeting taking
place on August 22, 2021. Prior to each meeting, we publish a notice in
the Federal Register to announce the meeting, new members, and any
other changes of which the public should be aware. Beginning in CY
2017, we have transitioned to one meeting per year (81

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FR 31941). In CY 2018, we published a Federal Register notice
requesting nominations to fill vacancies on the Panel (83 FR 3715). As
published in this notice, CMS is accepting nominations on a continuous
basis.
In addition, the Panel has established an administrative structure
that, in part, currently includes the use of three subcommittee
workgroups to provide preparatory meeting and subject support to the
larger panel. The three current subcommittees include the following:
<bullet> APC Groups and Status Indicator Assignments Subcommittee,
which advises and provides recommendations to the Panel on the
appropriate status indicators to be assigned to HCPCS codes, including
but not limited to whether a HCPCS code or a category of codes should
be packaged or separately paid, as well as the appropriate APC
assignment of HCPCS codes regarding services for which separate payment
is made;
<bullet> Data Subcommittee, which is responsible for studying the
data issues confronting the Panel and for recommending options for
resolving them; and
<bullet> Visits and Observation Subcommittee, which reviews and
makes recommendations to the Panel on all technical issues pertaining
to observation services and hospital outpatient visits paid under the
OPPS.
Each of these workgroup subcommittees was established by a majority
vote from the full Panel during a scheduled Panel meeting, and the
Panel recommended at the August 23, 2021, meeting that the
subcommittees continue. We accepted this recommendation.
For discussions of earlier Panel meetings and recommendations, we
refer readers to previously published OPPS/ASC proposed and final
rules, the CMS website mentioned earlier in this section, and the FACA
database at <a href="http://facadatabase.gov">http://facadatabase.gov</a>.

F. Public Comments Received on the CY 2022 OPPS/ASC Final Rule With
Comment Period

We received approximately 13 timely pieces of correspondence on the
CY 2022 OPPS/ASC final rule with comment period that appeared in the
Federal Register on November 16, 2021 (86 FR 63458)

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Payment Weights

1. Database Construction
a. Use of CY 2021 Data in the CY 2023 OPPS Ratesetting
We primarily use two data sources in OPPS ratesetting: claims data
and cost report data. Our goal is always to use the best available data
overall for ratesetting. Ordinarily, the best available full year of
claims data would be the data from the year 2 years prior to the
calendar year that is the subject of the rulemaking. As discussed in
further detail in section X.C of this proposed rule, unlike CY 2020
claims data, we do not believe there are overwhelming concerns with CY
2021 claims data as a result of the COVID-19 PHE. Therefore, as
discussed in further detail in section X.C of this proposed rule, we
propose to use CY 2021 claims data and the data components related to
it in establishing the CY 2023 OPPS.
b. Database Source and Methodology
Section 1833(t)(9)(A) of the Act requires that the Secretary review
not less often than annually and revise the relative payment weights
for APCs. In the April 7, 2000 OPPS final rule with comment period (65
FR 18482), we explained in detail how we calculated the relative
payment weights that were implemented on August 1, 2000 for each APC
group.
For the CY 2023 OPPS, we propose to recalibrate the APC relative
payment weights for services furnished on or after January 1, 2023, and
before January 1, 2024 (CY 2023), using the same basic methodology that
we described in the CY 2022 OPPS/ASC final rule with comment period (86
FR 63466), using CY 2021 claims data. That is, we propose to
recalibrate the relative payment weights for each APC based on claims
and cost report data for hospital outpatient department (HOPD) services
to construct a database for calculating APC group weights.
For the purpose of recalibrating the proposed APC relative payment
weights for CY 2023, we began with approximately 180 million final
action claims (claims for which all disputes and adjustments have been
resolved and payment has been made) for HOPD services furnished on or
after January 1, 2021, and before January 1, 2022, before applying our
exclusionary criteria and other methodological adjustments. After the
application of those data processing changes, we used approximately 93
million final action claims to develop the proposed CY 2023 OPPS
payment weights. For exact numbers of claims used and additional
details on the claims accounting process, we refer readers to the
claims accounting narrative under supporting documentation for the CY
2023 OPPS/ASC proposed rule on the CMS website at: <a href="http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html">http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html</a>.
Addendum N to the CY 2023 OPPS/ASC proposed rule (which is
available via the internet on the CMS website at: <a href="http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html">http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html</a>) includes the proposed
list of bypass codes for CY 2023. The proposed list of bypass codes
contains codes that are reported on claims for services in CY 2021 and,
therefore, includes codes that were in effect in CY 2021 and used for
billing. We propose to retain deleted bypass codes on the proposed CY
2023 bypass list because these codes existed in CY 2021 and were
covered OPD services in that period, and CY 2021 claims data were used
to calculate proposed CY 2023 payment rates. Keeping these deleted
bypass codes on the bypass list potentially allows us to create more
``pseudo'' single procedure claims for ratesetting purposes. ``Overlap
bypass codes'' that are members of the proposed multiple imaging
composite APCs are identified by asterisks (*) in the third column of
Addendum N to this proposed rule. HCPCS codes that we propose to add
for CY 2023 are identified by asterisks (*) in the fourth column of
Addendum N.
c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
For CY 2023, we propose to continue to use the hospital-specific
overall ancillary and departmental cost-to-charge ratios (CCRs) to
convert charges to estimated costs through application of a revenue
code-to-cost center crosswalk. However, roughly half of the cost
reports we would typically use for CY 2023 ratesetting purposes are
from cost reporting periods that overlap with parts of CY 2020. When
utilizing this cost report data, more than half of the APC geometric
mean costs increased by more than 10 percent relative to estimates
based on prior ratesetting cycles. While some of this increase may be
attributable to changes that will continue into CY 2023, other aspects
of those changes may be more specific to the COVID-19 PHE. In the CY
2022 OPPS/ASC final rule with comment period (86 FR 63751 through
63754), we

[[Page 44511]]

described how CY 2020 claims data were too influenced by the COVID-19
PHE to be utilized for setting CY 2022 OPPS payment rates. After
reviewing the cost report data from the December 2021 HCRIS data set,
we believe cost report data that overlap with CY 2020 are also too
influenced by the COVID-19 PHE for purposes of calculating the CY 2023
OPPS payment rates. Therefore, in order to mitigate the impact on our
ratesetting process from the COVID-19 PHE effects in the CY 2020 cost
report data we would typically use for this CY 2023 OPPS/ASC proposed
rule, we propose to use cost report data from the June 2020 HCRIS data
set, which only includes cost report data through CY 2019 for CY 2023
OPPS/ASC proposed rule and final rule ratesetting purposes. For
additional discussion of the data we propose to use in CY 2023 OPPS
ratesetting, please see section X.C of this proposed rule.
To calculate the APC costs on which the CY 2023 APC payment rates
are based, we propose to calculate hospital-specific overall ancillary
CCRs and hospital-specific departmental CCRs for each hospital for
which we had CY 2021 claims data by comparing these claims data to
hospital cost reports available for the CY 2022 OPPS/ASC final rule
with comment period ratesetting, which, in most cases, are from CY
2019. For the proposed CY 2023 OPPS payment rates, we propose to use CY
2021 claims processed through December 31, 2021. We applied the
hospital-specific CCR to the hospital's charges at the most detailed
level possible, based on a revenue code-to-cost center crosswalk that
contains a hierarchy of CCRs used to estimate costs from charges for
each revenue code. To ensure the completeness of the revenue code-to-
cost center crosswalk, we reviewed changes to the list of revenue codes
for CY 2021 (the year of claims data we used to calculate the proposed
CY 2023 OPPS payment rates) and updates to the National Uniform Billing
Committee (NUBC) 2020 Data Specifications Manual. That crosswalk is
available for review and continuous comment on the CMS website at:
<a href="http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html">http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html</a>.
In accordance with our longstanding policy, we propose to calculate
CCRs for the standard and nonstandard cost centers accepted by the
electronic cost report database. In general, the most detailed level at
which we calculate CCRs is the hospital-specific departmental level.
Additionally, we have historically not included cost report lines for
certain nonstandard cost centers in the OPPS ratesetting database
construction when hospitals have reported these nonstandard cost
centers on cost report lines that do not correspond to the cost center
number. We have determined that hospitals are routinely reporting a
number of nonstandard cost centers in this way and that including this
additional data could significantly reduce certain APC geometric mean
costs. In particular, we estimate that the additional cost data from
nonstandard cost centers would decrease the geometric mean cost of APC
8004 (Ultrasound Composite) by 20 percent, APC 5863 (Partial
Hospitalizations (3 or more services) for hospital-based PHPs) by 12
percent and APC 5573 (Level 3 Imaging with Contrast) by 11 percent. In
other instances, we note that there are also potential increases in the
geometric mean costs of certain APCs, such as APC 5741 (Level 1
Electronic Analysis of Devices), which would increase by 4 percent, APC
5723 (Level 3 Diagnostic Tests and Related Services), which would
increase by 2.6 percent, and APC 5694 (Level 4 Drug Administration),
which would increase by 2.3 percent.
While we generally view the use of additional cost data as
improving our OPPS ratesetting process, we have historically not
included cost report lines for certain nonstandard cost centers in the
OPPS ratesetting database construction when hospitals have reported
these nonstandard cost centers on cost report lines that do not
correspond to the cost center number. Additionally, we are concerned
about the significant changes in APC geometric mean costs that our
analysis indicates would occur if we were to include such lines. We
believe it is important to further investigate the accuracy of these
cost report data before including such data in the ratesetting process.
Further, we believe it is appropriate to gather additional information
from the public as well before including them in OPPS ratesetting. For
CY 2023, we propose not to include the nonstandard cost centers
reported in this way in the OPPS ratesetting database construction. We
are soliciting comment on whether there exist any specific concerns
with regards to the accuracy of the data from these nonstandard cost
center lines that we would need to consider before including them in
future OPPS ratesetting.
For a discussion of the hospital-specific overall ancillary CCR
calculation, we refer readers to the CY 2007 OPPS/ASC final rule with
comment period (71 FR 67983 through 67985). The calculation of blood
costs is a longstanding exception (since the CY 2005 OPPS) to this
general methodology for calculation of CCRs used for converting charges
to costs on each claim. This exception is discussed in detail in the CY
2007 OPPS/ASC final rule with comment period and discussed further in
section II.A.2.a.(1) of this proposed rule.
2. Proposed Data Development and Calculation of Costs Used for
Ratesetting
In this section of this proposed rule, we discuss the use of claims
to calculate the OPPS payment rates for CY 2023. The Hospital OPPS page
on the CMS website on which the CY 2023 OPPS/ASC proposed rule is
posted (<a href="http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html">http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html</a>) provides an accounting of claims used
in the development of the proposed payment rates. That accounting
provides additional detail regarding the number of claims derived at
each stage of the process. In addition, later in this section we
discuss the file of claims that comprises the data set that is
available upon payment of an administrative fee under a CMS data use
agreement. The CMS website, <a href="http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html">http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html</a>, includes
information about obtaining the ``OPPS Limited Data Set,'' which now
includes the additional variables previously available only in the OPPS
Identifiable Data Set, including ICD-10-CM diagnosis codes and revenue
code payment amounts. This file is derived from the CY 2021 claims that
are used to calculate the proposed payment rates for this CY 2023
proposed rule.
Previously, the OPPS established the scaled relative weights on
which payments are based using APC median costs, a process described in
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74188).
However, as discussed in more detail in section II.A.2.f of the CY 2013
OPPS/ASC final rule with comment period (77 FR 68259 through 68271), we
finalized the use of geometric mean costs to calculate the relative
weights on which the CY 2013 OPPS payment rates were based. While this
policy changed the cost metric on which the relative payments are
based, the data process in general remained the same under the
methodologies that we used to obtain appropriate claims data and
accurate cost information in determining estimated service cost.
We used the methodology described in sections II.A.2.a through
II.A.2.c of this proposed rule to calculate the costs we used to
establish the proposed

[[Page 44512]]

relative payment weights used in calculating the OPPS payment rates for
CY 2023 shown in Addenda A and B to this proposed rule (which are
available via the internet on the CMS website at: <a href="http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html">http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html</a>). We refer readers to
section II.A.4 of this proposed rule for a discussion of the conversion
of APC costs to scaled payment weights.
We note that under the OPPS, CY 2019 was the first year in which
the claims data used for setting payment rates (CY 2017 data) contained
lines with the modifier ``PN'', which indicates nonexcepted items and
services furnished and billed by off-campus provider-based departments
(PBDs) of hospitals. Because nonexcepted items and services are not
paid under the OPPS, in the CY 2019 OPPS/ASC final rule with comment
period (83 FR 58832), we finalized a policy to remove those claim lines
reported with modifier ``PN'' from the claims data used in ratesetting
for the CY 2019 OPPS and subsequent years. For the CY 2023 OPPS, we
would continue to remove claim lines with modifier ``PN'' from the
ratesetting process.
For details of the claims accounting process used in the CY 2023
OPPS/ASC proposed rule, we refer readers to the claims accounting
narrative under supporting documentation for the CY 2023 OPPS/ASC
proposed rule on the CMS website at: <a href="http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html">http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html</a>.
a. Calculation of Single Procedure APC Criteria-Based Costs
(1) Blood and Blood Products
Since the implementation of the OPPS in August 2000, we have made
separate payments for blood and blood products through APCs rather than
packaging payment for them into payments for the procedures with which
they are administered. Hospital payments for the costs of blood and
blood products, as well as for the costs of collecting, processing, and
storing blood and blood products, are made through the OPPS payments
for specific blood product APCs.
We propose to continue to establish payment rates for blood and
blood products using our blood-specific CCR methodology, which utilizes
actual or simulated CCRs from the most recently available hospital cost
reports to convert hospital charges for blood and blood products to
costs. This methodology has been our standard ratesetting methodology
for blood and blood products since CY 2005. It was developed in
response to data analysis indicating that there was a significant
difference in CCRs for those hospitals with and without blood-specific
cost centers, and past public comments indicating that the former OPPS
policy of defaulting to the overall hospital CCR for hospitals not
reporting a blood-specific cost center often resulted in an
underestimation of the true hospital costs for blood and blood
products. Specifically, to address the differences in CCRs and to
better reflect hospitals' costs, we propose to continue to simulate
blood CCRs for each hospital that does not report a blood cost center
by calculating the ratio of the blood-specific CCRs to hospitals'
overall CCRs for those hospitals that do report costs and charges for
blood cost centers. We also propose to apply this mean ratio to the
overall CCRs of hospitals not reporting costs and charges for blood
cost centers on their cost reports to simulate blood-specific CCRs for
those hospitals. We propose to calculate the costs upon which the
proposed CY 2023 payment rates for blood and blood products are based
using the actual blood-specific CCR for hospitals that reported costs
and charges for a blood cost center and a hospital-specific, simulated,
blood-specific CCR for hospitals that did not report costs and charges
for a blood cost center.
We continue to believe that the hospital-specific, simulated,
blood-specific, CCR methodology better responds to the absence of a
blood-specific CCR for a hospital than alternative methodologies, such
as defaulting to the overall hospital CCR or applying an average blood-
specific CCR across hospitals. Because this methodology takes into
account the unique charging and cost accounting structure of each
hospital, we believe that it yields more accurate estimated costs for
these products. We continue to believe that using this methodology in
CY 2023 would result in costs for blood and blood products that
appropriately reflect the relative estimated costs of these products
for hospitals without blood cost centers and, therefore, for these
blood products in general.
We note that we defined a comprehensive APC (C-APC) as a
classification for the provision of a primary service and all
adjunctive services provided to support the delivery of the primary
service. Under this policy, we include the costs of blood and blood
products when calculating the overall costs of these C-APCs. We propose
to continue to apply the blood-specific CCR methodology described in
this section when calculating the costs of the blood and blood products
that appear on claims with services assigned to the C-APCs. Because the
costs of blood and blood products would be reflected in the overall
costs of the C-APCs (and, as a result, in the proposed payment rates of
the C-APCs), we propose not to make separate payments for blood and
blood products when they appear on the same claims as services assigned
to the C-APCs (we refer readers to the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66795 through 66796) for more information about
our policy not to make separate payments for blood and blood products
when they appear on the same claims as services assigned to a C-APC).
We refer readers to Addendum B to this proposed rule (which is
available via the internet on the CMS website) for the proposed CY 2023
payment rates for blood and blood products (which are generally
identified with status indicator ``R''). For a more detailed discussion
of the blood-specific CCR methodology, we refer readers to the CY 2005
OPPS proposed rule (69 FR 50524 through 50525). For a full history of
OPPS payment for blood and blood products, we refer readers to the CY
2008 OPPS/ASC final rule with comment period (72 FR 66807 through
66810).
For CY 2023, we propose to continue to establish payment rates for
blood and blood products using our blood-specific CCR methodology.
(2) Brachytherapy Sources
Section 1833(t)(2)(H) of the Act mandates the creation of
additional groups of covered OPD services that classify devices of
brachytherapy consisting of a seed or seeds (or radioactive source)
(``brachytherapy sources'') separately from other services or groups of
services. The statute provides certain criteria for the additional
groups. For the history of OPPS payment for brachytherapy sources, we
refer readers to prior OPPS final rules, such as the CY 2012 OPPS/ASC
final rule with comment period (77 FR 68240 through 68241). As we have
stated in prior OPPS updates, we believe that adopting the general OPPS
prospective payment methodology for brachytherapy sources is
appropriate for a number of reasons (77 FR 68240). The general OPPS
methodology uses costs based on claims data to set the relative payment
weights for hospital outpatient services. This payment methodology
results in more consistent, predictable,

[[Page 44513]]

and equitable payment amounts per source across hospitals by averaging
the extremely high and low values, in contrast to payment based on
hospitals' charges adjusted to costs. We believe that the OPPS
methodology, as opposed to payment based on hospitals' charges adjusted
to cost, also would provide hospitals with incentives for efficiency in
the provision of brachytherapy services to Medicare beneficiaries.
Moreover, this approach is consistent with our payment methodology for
the vast majority of items and services paid under the OPPS. We refer
readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR
70323 through 70325) for further discussion of the history of OPPS
payment for brachytherapy sources.
For CY 2023, except where otherwise indicated, we propose to use
the costs derived from CY 2021 claims data to set the proposed CY 2023
payment rates for brachytherapy sources because CY 2021 is the year of
data we propose to use to set the proposed payment rates for most other
items and services that would be paid under the CY 2023 OPPS. With the
exception of the proposed payment rate for brachytherapy source C2645
(Brachytherapy planar source, palladium-103, per square millimeter) and
the proposed payment rates for low-volume brachytherapy APCs discussed
in section III.D of this proposed rule, we propose to base the payment
rates for brachytherapy sources on the geometric mean unit costs for
each source, consistent with the methodology that we propose for other
items and services paid under the OPPS, as discussed in section II.A.2.
of this proposed rule. We also propose to continue the other payment
policies for brachytherapy sources that we finalized and first
implemented in the CY 2010 OPPS/ASC final rule with comment period (74
FR 60537). We propose to pay for the stranded and nonstranded not
otherwise specified (NOS) codes, HCPCS codes C2698 (Brachytherapy
source, stranded, not otherwise specified, per source) and C2699
(Brachytherapy source, non-stranded, not otherwise specified, per
source), at a rate equal to the lowest stranded or nonstranded
prospective payment rate for such sources, respectively, on a per-
source basis (as opposed to, for example, a per mCi), which is based on
the policy we established in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66785). We also propose to continue the policy we
first implemented in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60537) regarding payment for new brachytherapy sources
for which we have no claims data, based on the same reasons we
discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR
66786; which was delayed until January 1, 2010, by section 142 of Pub.
L. 110-275). Specifically, this policy is intended to enable us to
assign new HCPCS codes for new brachytherapy sources to their own APCs,
with prospective payment rates set based on our consideration of
external data and other relevant information regarding the expected
costs of the sources to hospitals. The proposed CY 2023 payment rates
for brachytherapy sources are included on Addendum B to this proposed
rule (which is available via the internet on the CMS website) and
identified with status indicator ``U''.
For CY 2018, we assigned status indicator ``U'' (Brachytherapy
Sources, Paid under OPPS; separate APC payment) to HCPCS code C2645
(Brachytherapy planar source, palladium-103, per square millimeter) in
the absence of claims data and established a payment rate using
external data (invoice price) at $4.69 per mm\2\. For CY 2019, in the
absence of sufficient claims data, we continued to establish a payment
rate for C2645 at $4.69 per mm\2\. Our CY 2018 claims data available
for the CY 2020 OPPS/ASC final rule with comment period included two
claims with a geometric mean cost for HCPCS code C2645 of $1.02 per
mm\2\. In response to comments from stakeholders, we agreed that given
the limited claims data available and a new outpatient indication for
C2645, a payment rate for HCPCS code C2645 based on the geometric mean
cost of $1.02 per mm\2\ may not adequately reflect the cost of HCPCS
code C2645. In the CY 2020 OPPS/ASC final rule with comment period, we
finalized our policy to use our equitable adjustment authority under
section 1833(t)(2)(E) of the Act, which states that the Secretary shall
establish, in a budget neutral manner, other adjustments as determined
to be necessary to ensure equitable payments, to maintain the CY 2019
payment rate of $4.69 per mm\2\ for HCPCS code C2645 for CY 2020.
Similarly, in the absence of sufficient claims data to establish an APC
payment rate, in the CY 2021 and CY 2022 OPPS/ASC final rules (85 FR
85879 through 85880 and 86 FR 63469) with comment period, we finalized
our policy to use our equitable adjustment authority under section
1833(t)(2)(E) of the Act to maintain the CY 2019 payment rate of $4.69
per mm\2\ for HCPCS code C2645 for CY 2021 and for CY 2022.
We did not receive any CY 2021 claims data for HCPCS code C2645.
Therefore, we propose to use our equitable adjustment authority under
section 1833(t)(2)(E) of the Act to maintain the CY 2019 payment rate
of $4.69 per mm\2\ for HCPCS code C2645 for CY 2023.
Additionally, for CY 2022 and subsequent calendar years, we adopted
a Universal Low Volume APC policy for clinical and brachytherapy APCs,
discussed in further detail in section III.D of this proposed rule. For
these Low Volume APCs, which have fewer than 100 CY 2021 single claims
used for ratesetting purposes in this CY 2023 OPPS/ASC proposed rule,
we use up to 4 years of claims data to establish a payment rate for
each item or service as we historically have done for low volume
services assigned to New Technology APCs. Further, we calculate the
cost for Low Volume APCs based on the greatest of the arithmetic mean
cost, median cost, or geometric mean cost using all claims for the APC
for up to 4 years. For CY 2023, we propose to designate 4 brachytherapy
APCs as Low Volume APCs for CY 2023 as these APCs meet our criteria to
be designated as a Low Volume APC. For more information on the
brachytherapy APCs we are designating as Low Volume APCs, see section
III.D of this proposed rule.
We invite stakeholders to submit recommendations for new codes to
describe new brachytherapy sources. Such recommendations should be
directed via email to <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="711e040501100518141f0501010231121c025f1919025f161e07">[email&#160;protected]</a> or by mail to the
Division of Outpatient Care, Mail Stop C4-01-26, Centers for Medicare
and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244. We
will continue to add new brachytherapy source codes and descriptors to
our systems for payment on a quarterly basis.
b. Comprehensive APCs (C-APCs) for CY 2023
(1) Background
In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861
through 74910), we finalized a comprehensive payment policy that
packages payment for adjunctive and secondary items, services, and
procedures into the most costly primary procedure under the OPPS at the
claim level. The policy was finalized in CY 2014 but the effective date
was delayed until January 1, 2015, to allow additional time for further
analysis, opportunity for public comment, and

[[Page 44514]]

systems preparation. The comprehensive APC (C-APC) policy was
implemented effective January 1, 2015, with modifications and
clarifications in response to public comments received regarding
specific provisions of the C-APC policy (79 FR 66798 through 66810).
A C-APC is defined as a classification for the provision of a
primary service and all adjunctive services provided to support the
delivery of the primary service. We established C-APCs as a category
broadly for OPPS payment and implemented 25 C-APCs beginning in CY 2015
(79 FR 66809 through 66810). We have gradually added new C-APCs since
the policy was implemented beginning in CY 2015, with the number of C-
APCs now totaling 69 (80 FR 70332; 81 FR 79584 through 79585; 83 FR
58844 through 58846; 84 FR 61158 through 61166; 85 FR 85885; and 86 FR
63474).
Under our C-APC policy, we designate a service described by a HCPCS
code assigned to a C-APC as the primary service when the service is
identified by OPPS status indicator ``J1''. When such a primary service
is reported on a hospital outpatient claim, taking into consideration
the few exceptions that are discussed below, we make payment for all
other items and services reported on the hospital outpatient claim as
being integral, ancillary, supportive, dependent, and adjunctive to the
primary service (hereinafter collectively referred to as ``adjunctive
services'') and representing components of a complete comprehensive
service (78 FR 74865 and 79 FR 66799). Payments for adjunctive services
are packaged into the payments for the primary services. This results
in a single prospective payment for each of the primary, comprehensive
services based on the costs of all reported services at the claim
level.
Services excluded from the C-APC policy under the OPPS include
services that are not covered OPD services, services that cannot by
statute be paid for under the OPPS, and services that are required by
statute to be separately paid. This includes certain mammography and
ambulance services that are not covered OPD services in accordance with
section 1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which also
are required by statute to receive separate payment under section
1833(t)(2)(H) of the Act; pass-through payment drugs and devices, which
also require separate payment under section 1833(t)(6) of the Act;
self-administered drugs (SADs) that are not otherwise packaged as
supplies because they are not covered under Medicare Part B under
section 1861(s)(2)(B) of the Act; and certain preventive services (78
FR 74865 and 79 FR 66800 through 66801). A list of services excluded
from the C-APC policy is included in Addendum J to this proposed rule
(which is available via the internet on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices</a>). If
a service does not appear on this list of excluded services, payment
for it will be packaged into the payment for the primary C-APC service
when it appears on an outpatient claim with a primary C-APC service.
In the interim final rule with request for comments (IFC) titled,
``Additional Policy and Regulatory Revisions in Response to the COVID-
19 Public Health Emergency'', published on November 6, 2020, we stated
that, effective for services furnished on or after the effective date
of the IFC and until the end of the PHE for COVID-19, there is an
exception to the OPPS C-APC policy to ensure separate payment for new
COVID-19 treatments that meet certain criteria (85 FR 71158 through
71160). Under this exception, any new COVID-19 treatment that meets the
following two criteria will, for the remainder of the PHE for COVID-19,
always be separately paid and will not be packaged into a C-APC when it
is provided on the same claim as the primary C-APC service. First, the
treatment must be a drug or biological product (which could include a
blood product) authorized to treat COVID-19, as indicated in section
``I. Criteria for Issuance of Authorization'' of the FDA letter of
authorization for the emergency use of the drug or biological product,
or the drug or biological product must be approved by FDA for treating
COVID-19. Second, the emergency use authorization (EUA) for the drug or
biological product (which could include a blood product) must authorize
the use of the product in the outpatient setting or not limit its use
to the inpatient setting, or the product must be approved by FDA to
treat COVID-19 disease and not limit its use to the inpatient setting.
For further information regarding the exception to the C-APC policy for
COVID-19 treatments, please refer to the November 6, 2020 IFC (85 FR
71158 through 71160).
The C-APC policy payment methodology set forth in the CY 2014 OPPS/
ASC final rule with comment period and modified and implemented
beginning in CY 2015 is summarized as follows (78 FR 74887 and 79 FR
66800):
Basic Methodology. As stated in the CY 2015 OPPS/ASC final rule
with comment period, we define the C-APC payment policy as including
all covered OPD services on a hospital outpatient claim reporting a
primary service that is assigned to status indicator ``J1'', excluding
services that are not covered OPD services or that cannot by statute be
paid for under the OPPS. Services and procedures described by HCPCS
codes assigned to status indicator ``J1'' are assigned to C-APCs based
on our usual APC assignment methodology by evaluating the geometric
mean costs of the primary service claims to establish resource
similarity and the clinical characteristics of each procedure to
establish clinical similarity within each APC.
In the CY 2016 OPPS/ASC final rule with comment period, we expanded
the C-APC payment methodology to qualifying extended assessment and
management encounters through the ``Comprehensive Observation
Services'' C-APC (C-APC 8011). Services within this APC are assigned
status indicator ``J2''. Specifically, we make a payment through C-APC
8011 for a claim that:
<bullet> Does not contain a procedure described by a HCPCS code to
which we have assigned status indicator ``T'';
<bullet> Contains 8 or more units of services described by HCPCS
code G0378 (Hospital observation services, per hour);
<bullet> Contains services provided on the same date of service or
one day before the date of service for HCPCS code G0378 that are
described by one of the following codes: HCPCS code G0379 (Direct
admission of patient for hospital observation care) on the same date of
service as HCPCS code G0378; CPT code 99281 (Emergency department visit
for the evaluation and management of a patient (Level 1)); CPT code
99282 (Emergency department visit for the evaluation and management of
a patient (Level 2)); CPT code 99283 (Emergency department visit for
the evaluation and management of a patient (Level 3)); CPT code 99284
(Emergency department visit for the evaluation and management of a
patient (Level 4)); CPT code 99285 (Emergency department visit for the
evaluation and management of a patient (Level 5)) or HCPCS code G0380
(Type B emergency department visit (Level 1)); HCPCS code G0381 (Type B
emergency department visit (Level 2)); HCPCS code G0382 (Type B
emergency department visit (Level 3)); HCPCS code G0383 (Type B
emergency department visit (Level 4)); HCPCS code G0384 (Type B
emergency department visit (Level 5)); CPT code 99291 (Critical care,
evaluation and management of the

[[Page 44515]]

critically ill or critically injured patient; first 30-74 minutes); or
HCPCS code G0463 (Hospital outpatient clinic visit for assessment and
management of a patient); and
<bullet> Does not contain services described by a HCPCS code to
which we have assigned status indicator ``J1''.
The assignment of status indicator ``J2'' to a specific set of
services performed in combination with each other allows for all other
OPPS payable services and items reported on the claim (excluding
services that are not covered OPD services or that cannot by statute be
paid for under the OPPS) to be deemed adjunctive services representing
components of a comprehensive service and resulting in a single
prospective payment for the comprehensive service based on the costs of
all reported services on the claim (80 FR 70333 through 70336).
Services included under the C-APC payment packaging policy, that
is, services that are typically adjunctive to the primary service and
provided during the delivery of the comprehensive service, include
diagnostic procedures, laboratory tests, and other diagnostic tests and
treatments that assist in the delivery of the primary procedure; visits
and evaluations performed in association with the procedure; uncoded
services and supplies used during the service; durable medical
equipment as well as prosthetic and orthotic items and supplies when
provided as part of the outpatient service; and any other components
reported by HCPCS codes that represent services that are provided
during the complete comprehensive service (78 FR 74865 and 79 FR
66800).
In addition, payment for hospital outpatient department services
that are similar to therapy services and delivered either by therapists
or nontherapists is included as part of the payment for the packaged
complete comprehensive service. These services that are provided during
the perioperative period are adjunctive services and are deemed not to
be therapy services as described in section 1834(k) of the Act,
regardless of whether the services are delivered by therapists or other
nontherapist health care workers. We have previously noted that therapy
services are those provided by therapists under a plan of care in
accordance with section 1835(a)(2)(C) and section 1835(a)(2)(D) of the
Act and are paid for under section 1834(k) of the Act, subject to
annual therapy caps as applicable (78 FR 74867 and 79 FR 66800).
However, certain other services similar to therapy services are
considered and paid for as hospital outpatient department services.
Payment for these nontherapy outpatient department services that are
reported with therapy codes and provided with a comprehensive service
is included in the payment for the packaged complete comprehensive
service. We note that these services, even though they are reported
with therapy codes, are hospital outpatient department services and not
therapy services. We refer readers to the July 2016 OPPS Change Request
9658 (Transmittal 3523) for further instructions on reporting these
services in the context of a C-APC service.
Items included in the packaged payment provided in conjunction with
the primary service also include all drugs, biologicals, and
radiopharmaceuticals, regardless of cost, except those drugs with pass-
through payment status and SADs, unless they function as packaged
supplies (78 FR 74868 through 74869 and 74909 and 79 FR 66800). We
refer readers to Section 50.2M, Chapter 15, of the Medicare Benefit
Policy Manual for a description of our policy on SADs treated as
hospital outpatient supplies, including lists of SADs that function as
supplies and those that do not function as supplies.
We define each hospital outpatient claim reporting a single unit of
a single primary service assigned to status indicator ``J1'' as a
single ``J1'' unit procedure claim (78 FR 74871 and 79 FR 66801). Line
item charges for services included on the C-APC claim are converted to
line item costs, which are then summed to develop the estimated APC
costs. These claims are then assigned one unit of the service with
status indicator ``J1'' and later used to develop the geometric mean
costs for the C-APC relative payment weights. (We note that we use the
term ``comprehensive'' to describe the geometric mean cost of a claim
reporting ``J1'' service(s) or the geometric mean cost of a C-APC,
inclusive of all of the items and services included in the C-APC
service payment bundle.) Charges for services that would otherwise be
separately payable are added to the charges for the primary service.
This process differs from our traditional cost accounting methodology
only in that all such services on the claim are packaged (except
certain services as described above). We apply our standard data trims,
which exclude claims with extremely high primary units or extreme
costs.
The comprehensive geometric mean costs are used to establish
resource similarity and, along with clinical similarity, dictate the
assignment of the primary services to the C-APCs. We establish a
ranking of each primary service (single unit only) to be assigned to
status indicator ``J1'' according to its comprehensive geometric mean
costs. For the minority of claims reporting more than one primary
service assigned to status indicator ``J1'' or units thereof, we
identify one ``J1'' service as the primary service for the claim based
on our cost-based ranking of primary services. We then assign these
multiple ``J1'' procedure claims to the C-APC to which the service
designated as the primary service is assigned. If the reported ``J1''
services on a claim map to different C-APCs, we designate the ``J1''
service assigned to the C-APC with the highest comprehensive geometric
mean cost as the primary service for that claim. If the reported
multiple ``J1'' services on a claim map to the same C-APC, we designate
the most costly service (at the HCPCS code level) as the primary
service for that claim. This process results in initial assignments of
claims for the primary services assigned to status indicator ``J1'' to
the most appropriate C-APCs based on both single and multiple procedure
claims reporting these services and clinical and resource homogeneity.
Complexity Adjustments. We use complexity adjustments to provide
increased payment for certain comprehensive services. We apply a
complexity adjustment by promoting qualifying paired ``J1'' service
code combinations or paired code combinations of ``J1'' services and
certain add-on codes (as described further below) from the originating
C-APC (the C-APC to which the designated primary service is first
assigned) to the next higher paying C-APC in the same clinical family
of C-APCs. We apply this type of complexity adjustment when the paired
code combination represents a complex, costly form or version of the
primary service according to the following criteria:
<bullet> Frequency of 25 or more claims reporting the code
combination (frequency threshold); and
<bullet> Violation of the 2 times rule, as stated in section
1833(t)(2) of the Act and section III.B.2. of this final rule with
comment period, in the originating C-APC (cost threshold).
These criteria identify paired code combinations that occur
commonly and exhibit materially greater resource requirements than the
primary service. The CY 2017 OPPS/ASC final rule with comment period
(81 FR 79582) included a revision to the complexity adjustment
eligibility criteria. Specifically, we finalized a policy to
discontinue the

[[Page 44516]]

requirement that a code combination (that qualifies for a complexity
adjustment by satisfying the frequency and cost criteria thresholds
described above) also not create a 2 times rule violation in the higher
level or receiving APC.
After designating a single primary service for a claim, we evaluate
that service in combination with each of the other procedure codes
reported on the claim assigned to status indicator ``J1'' (or certain
add-on codes) to determine if there are paired code combinations that
meet the complexity adjustment criteria. For a new HCPCS code, we
determine initial C-APC assignment and qualification for a complexity
adjustment using the best available information, crosswalking the new
HCPCS code to a predecessor code(s) when appropriate.
Once we have determined that a particular code combination of
``J1'' services (or combinations of ``J1'' services reported in
conjunction with certain add-on codes) represents a complex version of
the primary service because it is sufficiently costly, frequent, and a
subset of the primary comprehensive service overall according to the
criteria described above, we promote the claim including the complex
version of the primary service as described by the code combination to
the next higher cost C-APC within the clinical family, unless the
primary service is already assigned to the highest cost APC within the
C-APC clinical family or assigned to the only C-APC in a clinical
family. We do not create new APCs with a comprehensive geometric mean
cost that is higher than the highest geometric mean cost (or only) C-
APC in a clinical family just to accommodate potential complexity
adjustments. Therefore, the highest payment for any claim including a
code combination for services assigned to a C-APC would be the highest
paying C-APC in the clinical family (79 FR 66802).
We package payment for all add-on codes into the payment for the C-
APC. However, certain primary service add-on combinations may qualify
for a complexity adjustment. As noted in the CY 2016 OPPS/ASC final
rule with comment period (80 FR 70331), all add-on codes that can be
appropriately reported in combination with a base code that describes a
primary ``J1'' service are evaluated for a complexity adjustment.
To determine which combinations of primary service codes reported
in conjunction with an add-on code may qualify for a complexity
adjustment for CY 2023, we propose to apply the frequency and cost
criteria thresholds discussed above, testing claims reporting one unit
of a single primary service assigned to status indicator ``J1'' and any
number of units of a single add-on code for the primary ``J1'' service.
If the frequency and cost criteria thresholds for a complexity
adjustment are met and reassignment to the next higher cost APC in the
clinical family is appropriate (based on meeting the criteria outlined
above), we make a complexity adjustment for the code combination; that
is, we reassign the primary service code reported in conjunction with
the add-on code to the next higher cost C-APC within the same clinical
family of C-APCs. As previously stated, we package payment for add-on
codes into the C-APC payment rate. If any add-on code reported in
conjunction with the ``J1'' primary service code does not qualify for a
complexity adjustment, payment for the add-on service continues to be
packaged into the payment for the primary service and is not reassigned
to the next higher cost C-APC. We list the complexity adjustments for
``J1'' and add-on code combinations for CY 2023, along with all of the
other final complexity adjustments, in Addendum J to this proposed rule
(which is available via the internet on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices</a>).
Addendum J to this proposed rule includes the cost statistics for
each code combination that would qualify for a complexity adjustment
(including primary code and add-on code combinations). Addendum J to
this proposed rule also contains summary cost statistics for each of
the paired code combinations that describe a complex code combination
that would qualify for a complexity adjustment and are proposed to be
reassigned to the next higher cost C-APC within the clinical family.
The combined statistics for all proposed reassigned complex code
combinations are represented by an alphanumeric code with the first
four digits of the designated primary service followed by a letter. For
example, the proposed geometric mean cost listed in Addendum J for the
code combination described by complexity adjustment assignment 3320R,
which is assigned to C-APC 5224 (Level 4 Pacemaker and Similar
Procedures), includes all paired code combinations that are proposed to
be reassigned to C-APC 5224 when CPT code 33208 is the primary code.
Providing the information contained in Addendum J to this proposed rule
allows stakeholders the opportunity to better assess the impact
associated with the proposed assignment of claims with each of the
paired code combinations eligible for a complexity adjustment.
(2) Exclusion of Procedures Assigned to New Technology APCs From the C-
APC Policy
Services that are assigned to New Technology APCs are typically new
procedures that do not have sufficient claims history to establish an
accurate payment for them. Beginning in CY 2002, we retain services
within New Technology APC groups until we gather sufficient claims data
to enable us to assign the service to an appropriate clinical APC. This
policy allows us to move a service from a New Technology APC in less
than 2 years if sufficient data are available. It also allows us to
retain a service in a New Technology APC for more than 2 years if
sufficient data upon which to base a decision for reassignment have not
been collected (82 FR 59277).
The C-APC payment policy packages payment for adjunctive and
secondary items, services, and procedures into the most costly primary
procedure under the OPPS at the claim level. Prior to CY 2019, when a
procedure assigned to a New Technology APC was included on the claim
with a primary procedure, identified by OPPS status indicator ``J1'',
payment for the new technology service was typically packaged into the
payment for the primary procedure. Because the new technology service
was not separately paid in this scenario, the overall number of single
claims available to determine an appropriate clinical APC for the new
service was reduced. This was contrary to the objective of the New
Technology APC payment policy, which is to gather sufficient claims
data to enable us to assign the service to an appropriate clinical APC.
To address this issue and ensure that there are sufficient claims
data for services assigned to New Technology APCs, in the CY 2019 OPPS/
ASC final rule with comment period (83 FR 58847), we finalized
excluding payment for any procedure that is assigned to a New
Technology APC (APCs 1491 through 1599 and APCs 1901 through 1908) from
being packaged when included on a claim with a ``J1'' service assigned
to a C-APC. In the CY 2020 OPPS/ASC final rule with comment period, we
finalized that beginning in CY 2020, payment for services assigned to a
New Technology APC would be excluded from being packaged into the
payment for comprehensive observation services assigned status
indicator ``J2''

[[Page 44517]]

when they are included on a claim with a ``J2'' service (84 FR 61167).
We propose to continue to exclude payment for any procedure that is
assigned to a New Technology APC (APCs 1491 through 1599 and APCs 1901
through 1908) from being packaged when included on a claim with a
``J1'' or ``J2'' service assigned to a C-APC.
(3) Exclusion of Drugs and Biologicals Described by HCPCS Code C9399
(Unclassified Drugs or Biologicals) From the C-APC Policy
Section 1833(t)(15) of the Act, as added by section 621(a)(1) of
the Medicare Prescription Drug, Improvement, and Modernization Act of
2003 (Pub. L. 108-173), provides for payment under the OPPS for new
drugs and biologicals until HCPCS codes are assigned. Under this
provision, we are required to make payment for a covered outpatient
drug or biological that is furnished as part of covered outpatient
department services but for which a HCPCS code has not yet been
assigned in an amount equal to 95 percent of average wholesale price
(AWP) for the drug or biological.
In the CY 2005 OPPS/ASC final rule with comment period (69 FR
65805), we implemented section 1833(t)(15) of the Act by instructing
hospitals to bill for a drug or biological that is newly approved by
the FDA and that does not yet have a HCPCS code by reporting the
National Drug Code (NDC) for the product along with the newly created
HCPCS code C9399 (Unclassified drugs or biologicals). We explained that
when HCPCS code C9399 appears on a claim, the Outpatient Code Editor
(OCE) suspends the claim for manual pricing by the Medicare
Administrative Contractor (MAC). The MAC prices the claim at 95 percent
of the drug or biological's AWP, using Red Book or an equivalent
recognized compendium, and processes the claim for payment. We
emphasized that this approach enables hospitals to bill and receive
payment for a new drug or biological concurrent with its approval by
the FDA. The hospital does not have to wait for the next quarterly
release or for approval of a product-specific HCPCS code to receive
payment for a newly approved drug or biological or to resubmit claims
for adjustment. We instructed that hospitals would discontinue billing
HCPCS code C9399 and the NDC upon implementation of a product specific
HCPCS code, status indicator, and appropriate payment amount with the
next quarterly update. We also note that HCPCS code C9399 is paid in a
similar manner in the ASC setting, as 42 CFR 416.171(b) outlines that
certain drugs and biologicals for which separate payment is allowed
under the OPPS are considered covered ancillary services for which the
OPPS payment rate, which is 95 percent of AWP for HCPCS code C9399,
applies. Since the implementation of the C-APC policy in 2015, payment
for drugs and biologicals described by HCPCS code C9399 has been
included in the C-APC payment when these products appear on a claim
with a primary C-APC service. Packaging payment for these drugs and
biologicals that appear on a hospital outpatient claim with a primary
C-APC service is consistent with our C-APC packaging policy under which
we make payment for all items and services, including all non-pass-
through drugs, reported on the hospital outpatient claim as being
integral, ancillary, supportive, dependent, and adjunctive to the
primary service and representing components of a complete comprehensive
service, with certain limited exceptions (78 FR 74869). It has been our
position that the total payment for the C-APC with which payment for a
drug or biological described by HCPCS code C9399 is packaged includes
payment for the drug or biological at 95 percent of its AWP.
However, we have determined that in certain instances, drugs and
biologicals described by HCPCS code C9399 are not being paid at 95
percent of their AWPs when payment for them is packaged with payment
for a primary C-APC service. In order to ensure payment for new drugs,
biologicals, and radiopharmaceuticals described by HCPCS code C9399 at
95 percent of their AWP, for CY 2023 and subsequent years, we propose
to exclude any drug, biological, or radiopharmaceutical described by
HCPCS code C9399 from packaging when the drug, biological, or
radiopharmaceutical is included on a claim with a ``J1'' service, which
is the status indicator assigned to a C-APC, and a claim with a ``J2''
service, which is the status indicator assigned to comprehensive
observation services. Please see OPPS Addendum J for the proposed CY
2023 comprehensive APC payment policy exclusions.
We are also including a corresponding proposal in section XI
``Proposed CY 2023 OPPS Payment Status and Comment Indicators'', to add
a new definition to status indicator ``A'' to include unclassified
drugs and biologicals that are reportable with HCPCS code C9399. The
proposed definition, found in Addendum D1 to this proposed rule, would
ensure the MAC prices claims for drugs, biologicals or
radiopharmaceuticals billed with HCPCS code C9399 at 95 percent of the
drug or biological's AWP and pays separately for the drug, biological,
or radiopharmaceutical under the OPPS when it appears on the same claim
as a primary C-APC service.
(4) Additional C-APCs for CY 2023
For CY 2023, we propose to continue to apply the C-APC payment
policy methodology. We refer readers to the CY 2017 OPPS/ASC final rule
with comment period (81 FR 79583) for a discussion of the C-APC payment
policy methodology and revisions.
Each year, in accordance with section 1833(t)(9)(A) of the Act, we
review and revise the services within each APC group and the APC
assignments under the OPPS. As a result of our annual review of the
services and the APC assignments under the OPPS, we propose to add one
C-APC under the existing C-APC payment policy in CY 2023: Proposed C-
APC 5372 (Level 2 Urology and Related Services). This APC was selected
to be included in this proposed rule because, similar to other C-APCs,
this APC includes primary, comprehensive services, such as major
surgical procedures, that are typically reported with other ancillary
and adjunctive services. Also, similar to other clinical APCs that have
been converted to C-APCs, there are higher APC levels (Levels 3-8
Urology and Related Services) within the clinical family or related
clinical family of this APC that have previously been converted to C-
APCs.
Table 1 below lists the proposed C-APCs for CY 2023. All C-APCs are
displayed in Addendum J to this proposed rule (which is available via
the internet on the CMS website). Addendum J to this proposed rule also
contains all of the data related to the C-APC payment policy
methodology, including the list of complexity adjustments and other
information.
BILLING CODE 4120-01-P

[[Page 44518]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.000

[[Page 44519]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.001

BILLING CODE 4120-01-C

[[Page 44520]]

c. Calculation of Composite APC Criteria-Based Costs
As discussed in the CY 2008 OPPS/ASC final rule with comment period
(72 FR 66613), we believe it is important that the OPPS enhance
incentives for hospitals to provide necessary, high quality care as
efficiently as possible. For CY 2008, we developed composite APCs to
provide a single payment for groups of services that are typically
performed together during a single clinical encounter and that result
in the provision of a complete service. Combining payment for multiple,
independent services into a single OPPS payment in this way enables
hospitals to manage their resources with maximum flexibility by
monitoring and adjusting the volume and efficiency of services
themselves. An additional advantage to the composite APC model is that
we can use data from correctly coded multiple procedure claims to
calculate payment rates for the specified combinations of services,
rather than relying upon single procedure claims which may be low in
volume and/or incorrectly coded. Under the OPPS, we currently have
composite policies for mental health services and multiple imaging
services. We refer readers to the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66611 through 66614 and 66650 through 66652) for
a full discussion of the development of the composite APC methodology,
and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163)
and the CY 2018 OPPS/ASC final rule with comment period (82 FR 59241
through 59242 and 59246 through 52950) for more recent background.
(1) Mental Health Services Composite APC
We propose to continue our longstanding policy of limiting the
aggregate payment for specified less resource-intensive mental health
services furnished on the same date to the payment for a day of partial
hospitalization services provided by a hospital, which we consider to
be the most resource-intensive of all outpatient mental health
services. We refer readers to the April 7, 2000 OPPS final rule with
comment period (65 FR 18452 through 18455) for the initial discussion
of this longstanding policy and the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74168) for more recent background.
In the CY 2018 OPPS/ASC proposed rule and final rule with comment
period (82 FR 33580 through 33581 and 59246 through 59247,
respectively), we proposed and finalized the policy for CY 2018 and
subsequent years that, when the aggregate payment for specified mental
health services provided by one hospital to a single beneficiary on a
single date of service, based on the payment rates associated with the
APCs for the individual services, exceeds the maximum per diem payment
rate for partial hospitalization services provided by a hospital, those
specified mental health services will be paid through composite APC
8010 (Mental Health Services Composite). In addition, we set the
payment rate for composite APC 8010 for CY 2018 at the same payment
rate that will be paid for APC 5863, which is the maximum partial
hospitalization per diem payment rate for a hospital, and finalized a
policy that the hospital will continue to be paid the payment rate for
composite APC 8010. Under this policy, the I/OCE will continue to
determine whether to pay for these specified mental health services
individually, or to make a single payment at the same payment rate
established for APC 5863 for all of the specified mental health
services furnished by the hospital on that single date of service. We
continue to believe that the costs associated with administering a
partial hospitalization program at a hospital represent the most
resource intensive of all outpatient mental health services. Therefore,
we do not believe that we should pay more for mental health services
under the OPPS than the highest partial hospitalization per diem
payment rate for hospitals.
We propose that when the aggregate payment for specified mental
health services provided by one hospital to a single beneficiary on a
single date of service, based on the payment rates associated with the
APCs for the individual services, exceeds the maximum per diem payment
rate for partial hospitalization services provided by a hospital, those
specified mental health services would be paid through composite APC
8010 for CY 2023. In addition, we propose to set the payment rate for
composite APC 8010 at the same payment rate that we propose for APC
5863, which is the maximum partial hospitalization per diem payment
rate for a hospital, and that the hospital continue to be paid the
proposed payment rate for composite APC 8010.
(2) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and
8008)
Effective January 1, 2009, we provide a single payment each time a
hospital submits a claim for more than one imaging procedure within an
imaging family on the same date of service, to reflect and promote the
efficiencies hospitals can achieve when performing multiple imaging
procedures during a single session (73 FR 41448 through 41450). We
utilize three imaging families based on imaging modality for purposes
of this methodology: (1) ultrasound; (2) computed tomography (CT) and
computed tomographic angiography (CTA); and (3) magnetic resonance
imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes
subject to the multiple imaging composite policy and their respective
families are listed in Table 2 below.
While there are three imaging families, there are five multiple
imaging composite APCs due to the statutory requirement under section
1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging
services provided with and without contrast. While the ultrasound
procedures included under the policy do not involve contrast, both CT/
CTA and MRI/MRA scans can be provided either with or without contrast.
The five multiple imaging composite APCs established in CY 2009 are:
<bullet> APC 8004 (Ultrasound Composite);
<bullet> APC 8005 (CT and CTA without Contrast Composite);
<bullet> APC 8006 (CT and CTA with Contrast Composite);
<bullet> APC 8007 (MRI and MRA without Contrast Composite); and
<bullet> APC 8008 (MRI and MRA with Contrast Composite).
We define the single imaging session for the ``with contrast''
composite APCs as having at least one or more imaging procedures from
the same family performed with contrast on the same date of service.
For example, if the hospital performs an MRI without contrast during
the same session as at least one other MRI with contrast, the hospital
will receive payment based on the payment rate for APC 8008, the ``with
contrast'' composite APC.
We make a single payment for those imaging procedures that qualify
for payment based on the composite APC payment rate, which includes any
packaged services furnished on the same date of service. The standard
(noncomposite) APC assignments continue to apply for single imaging
procedures and multiple imaging procedures performed across families.
For a full discussion of the development of the multiple imaging
composite APC methodology, we refer readers to the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68559 through 68569).
For CY 2023, we propose to continue to pay for all multiple imaging

[[Page 44521]]

procedures within an imaging family performed on the same date of
service using the multiple imaging composite APC payment methodology.
We continue to believe that this policy would reflect and promote the
efficiencies hospitals can achieve when performing multiple imaging
procedures during a single session.
For CY 2023, except where otherwise indicated, we propose to use
the costs derived from CY 2021 claims data to set the proposed CY 2023
payment rates. Therefore, for CY 2023, the payment rates for the five
multiple imaging composite APCs (APCs 8004, 8005, 8006, 8007, and 8008)
are based on proposed geometric mean costs calculated from CY 2021
claims available for this proposed rule that qualify for composite
payment under the current policy (that is, those claims reporting more
than one procedure within the same family on a single date of service).
To calculate the proposed geometric mean costs, we use the same
methodology that we use to calculate the geometric mean costs for these
composite APCs since CY 2014, as described in the CY 2014 OPPS/ASC
final rule with comment period (78 FR 74918). The imaging HCPCS codes
referred to as ``overlap bypass codes'' that we removed from the bypass
list for purposes of calculating the proposed multiple imaging
composite APC geometric mean costs, in accordance with our established
methodology as stated in the CY 2014 OPPS/ASC final rule with comment
period (78 FR 74918), are identified by asterisks in Addendum N to this
proposed rule (which is available via the internet on the CMS website
\1\) and are discussed in more detail in section II.A.1.b of this
proposed rule,
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\1\ CY 2023 Medicare Hospital Outpatient Prospective Payment
System and Ambulatory Surgical Center Payment System Proposed Rule
(CMS-1772-P); Notice of Proposed Rulemaking. Available at: <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices</a>.
---------------------------------------------------------------------------

For CY 2023, we are able to identify approximately 0.95 million
``single session'' claims out of an estimated 2.0 million potential
claims for payment through composite APCs from our ratesetting claims
data, which represents approximately 47.5 percent of all eligible
claims, to calculate the proposed CY 2023 geometric mean costs for the
multiple imaging composite APCs. Table 2 of this proposed rule lists
the proposed HCPCS codes that would be subject to the multiple imaging
composite APC policy and their respective families and approximate
composite APC proposed geometric mean costs for CY 2023.
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BILLING CODE 4120-01-C
3. Changes to Packaged Items and Services
a. Background and Rationale for Packaging in the OPPS
Like other prospective payment systems, the OPPS relies on the
concept of averaging to establish a payment rate for services. The
payment may be more or less than the estimated cost of providing a
specific service or a bundle of specific services for a particular
beneficiary. The OPPS packages payments for multiple interrelated items
and services into a single payment to create incentives for hospitals
to furnish services most efficiently and to manage their resources with
maximum flexibility. Our packaging policies support our strategic goal
of using larger payment bundles in the OPPS to maximize hospitals'
incentives to provide care in the most efficient manner. For example,
where there are a variety of devices, drugs, items, and supplies that
could be used to furnish a service, some of which are more costly than
others, packaging encourages hospitals to use the most cost-efficient
item that meets the patient's needs, rather than to routinely use a
more expensive item, which may occur if separate payment is provided
for the item.
Packaging also encourages hospitals to effectively negotiate with
manufacturers and suppliers to reduce the purchase price of items and
services or to explore alternative group purchasing arrangements,
thereby encouraging the most economical health care delivery.
Similarly, packaging encourages hospitals to establish protocols that
ensure that necessary services are furnished, while scrutinizing the
services ordered by practitioners to maximize the efficient use of
hospital resources. Packaging payments into larger payment bundles
promotes the predictability and accuracy of payment for services over
time. Finally, packaging may reduce the importance of refining service-
specific payment because packaged payments include costs associated
with higher cost cases requiring many ancillary items and services and
lower cost cases requiring fewer ancillary items and services. Because
packaging encourages efficiency and is an essential component of a
prospective payment system, packaging payments for items and services
that are typically integral, ancillary, supportive, dependent, or
adjunctive to a primary service has been a fundamental part of the OPPS
since its implementation in August 2000. As we continue to develop
larger payment groups that more broadly reflect services provided in an
encounter or episode of care, we have expanded the OPPS packaging
policies. Most, but not necessarily all, categories of items and
services currently packaged in the OPPS are listed in 42 CFR 419.2(b).
Our overarching goal is to make payments for all services under the
OPPS more consistent with those of a prospective payment system and
less like those of a per-service fee schedule, which pays separately
for each coded item. As a part of this effort, we have continued to
examine the payment for items and services provided under the OPPS to
determine which OPPS services can be packaged to further achieve the
objective of advancing the OPPS toward a more prospective payment
system.
b. Proposal and Comment Solicitation on Packaged Items and Services
For CY 2023, we examined the items and services currently provided
under the OPPS, reviewing categories of integral, ancillary,
supportive, dependent, or adjunctive items and services for which we
believe payment would be appropriately packaged into payment for the
primary service that they support. Specifically, we examined the HCPCS
code definitions (including CPT code descriptors) and hospital
outpatient department billing patterns to determine whether there were
categories of codes for which packaging would be appropriate according
to existing OPPS packaging policies or a logical expansion of those
existing OPPS packaging policies.
For CY 2023, we are not proposing any changes to the overall
packaging policy previously discussed. We propose to continue to
conditionally package the costs of selected newly identified ancillary
services into payment for a primary service where we believe that the
packaged item or service is integral, ancillary, supportive, dependent,
or adjunctive to the provision of care that was reported by the primary
service HCPCS code.
While we are not proposing any changes to the overall packaging
policy above, we are soliciting comments on potential modifications to
our packaging policy, as described in section XIII.E.5 of this proposed
rule. Specifically, we are seeking comments and data regarding whether
to expand the current ASC payment system policy for non-opioid pain
management drugs and biologicals that function as surgical supplies to
the HOPD setting. Details on the current ASC policy can be found in
XIII.E.
4. Calculation of OPPS Scaled Payment Weights
We established a policy in the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68283) of using geometric mean-based APC costs to
calculate relative payment weights under the OPPS. In the CY 2022 OPPS/
ASC final rule with comment period (85 FR 63497 through 63498), we
applied this policy and calculated the relative payment weights for
each APC for CY 2022 that were shown in Addenda A and B of the CY 2022
OPPS/ASC final rule with comment period (which were made available via
the internet on the CMS website) using the APC costs discussed in
sections II.A.1. and II.A.2. of the CY 2022 OPPS/ASC final rule with
comment period. For CY 2023, as we did for CY 2022, we propose to
continue to apply the policy established in CY 2013 and calculate
relative payment weights for each APC for CY 2023 using geometric mean-
based APC costs.
For CY 2012 and CY 2013, outpatient clinic visits were assigned to
one of five levels of clinic visit APCs, with APC 0606 representing a
mid-level clinic visit. In the CY 2014 OPPS/ASC final rule with comment
period (78 FR 75036 through 75043), we finalized a policy that created
alphanumeric HCPCS code G0463 (Hospital outpatient clinic visit for
assessment and management of a patient), representing any and all
clinic visits under the OPPS. HCPCS code G0463 was assigned to APC 0634
(Hospital Clinic Visits). We also finalized a policy to use CY 2012
claims data to develop the CY 2014 OPPS payment rates for HCPCS code
G0463 based on the total geometric mean cost of the levels one through
five CPT E/M codes for clinic visits previously recognized under the
OPPS (CPT codes 99201 through 99205 and 99211 through 99215). In
addition, we finalized a policy to no longer recognize a distinction
between new and established patient clinic visits.
For CY 2016, we deleted APC 0634 and reassigned the outpatient
clinic visit HCPCS code G0463 to APC 5012 (Level 2 Examinations and
Related Services) (80 FR 70372). For CY 2023, as we did for CY 2022, we
proposed to continue to standardize all of the relative payment weights
to APC 5012. We believe that standardizing relative payment weights to
the geometric mean of the APC to which HCPCS code G0463 is assigned
maintains consistency in calculating unscaled weights that represent
the cost of some of the most frequently provided OPPS services. For CY
2023, as we did for CY 2022, we

[[Page 44527]]

proposed to assign APC 5012 a relative payment weight of 1.00 and to
divide the geometric mean cost of each APC by the geometric mean cost
for APC 5012 to derive the unscaled relative payment weight for each
APC. The choice of the APC on which to standardize the relative payment
weights does not affect payments made under the OPPS because we scale
the weights for budget neutrality.
We note that in the CY 2019 OPPS/ASC final rule with comment period
(83 FR 59004 through 59015) and the CY 2020 OPPS/ASC final rule with
comment period (84 FR 61365 through 61369), we discuss our policy,
implemented beginning on January 1, 2019, to control for unnecessary
increases in the volume of covered outpatient department services by
paying for clinic visits furnished at excepted off-campus provider-
based departments (PBDs) at a reduced rate. While the volume associated
with these visits is included in the impact model, and thus used in
calculating the weight scalar, the policy has a negligible effect on
the scalar. Specifically, under this policy, there is no change to the
relativity of the OPPS payment weights because the adjustment is made
at the payment level rather than in the cost modeling. Further, under
this policy, the savings that result from the change in payments for
these clinic visits are not budget neutral. Therefore, the impact of
this policy will generally not be reflected in the budget neutrality
adjustments, whether the adjustment is to the OPPS relative weights or
to the OPPS conversion factor. For a full discussion of this policy, we
refer readers to the CY 2020 OPPS/ASC final rule with comment period
(84 FR 61142).
Section 1833(t)(9)(B) of the Act requires that APC reclassification
and recalibration changes, wage index changes, and other adjustments be
made in a budget neutral manner. Budget neutrality ensures that the
estimated aggregate weight under the OPPS for CY 2023 is neither
greater than nor less than the estimated aggregate weight that would
have been calculated without the changes. To comply with this
requirement concerning the APC changes, we propose to compare the
estimated aggregate weight using the CY 2022 scaled relative payment
weights to the estimated aggregate weight using the proposed CY 2023
unscaled relative payment weights.
For CY 2022, we multiplied the CY 2022 scaled APC relative payment
weight applicable to a service paid under the OPPS by the volume of
that service from CY 2021 claims to calculate the total relative
payment weight for each service. We then added together the total
relative payment weight for each of these services in order to
calculate an estimated aggregate weight for the year. For CY 2023, we
propose to apply the same process using the estimated CY 2023 unscaled
relative payment weights rather than scaled relative payment weights.
We propose to calculate the weight scalar by dividing the CY 2022
estimated aggregate weight by the unscaled CY 2023 estimated aggregate
weight.
For a detailed discussion of the weight scalar calculation, we
refer readers to the OPPS claims accounting document available on the
CMS website at: <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index</a>.html. Click on the link labeled
``CY 2023 OPPS/ASC Notice of Proposed Rulemaking'', which can be found
under the heading ``Hospital Outpatient Prospective Payment System
Rulemaking'' and open the claims accounting document link at the bottom
of the page, which is labeled ``2023 NPRM OPPS Claims Accounting
(PDF)''.
We propose to compare the estimated unscaled relative payment
weights in CY 2023 to the estimated total relative payment weights in
CY 2022 using CY 2021 claims data, holding all other components of the
payment system constant to isolate changes in total weight. Based on
this comparison, we propose to adjust the calculated CY 2023 unscaled
relative payment weights for purposes of budget neutrality. We propose
to adjust the estimated CY 2023 unscaled relative payment weights by
multiplying them by a proposed weight scalar of 1.4152 to ensure that
the proposed CY 2023 relative payment weights are scaled to be budget
neutral. The proposed CY 2023 relative payment weights listed in
Addenda A and B to this proposed rule (which are available via the
internet on the CMS website) are scaled and incorporate the
recalibration adjustments discussed in sections II.A.1 and II.A.2 of
this proposed rule.
Section 1833(t)(14) of the Act provides the payment rates for
certain specified covered outpatient drugs (SCODs). Section
1833(t)(14)(H) of the Act provides that additional expenditures
resulting from this paragraph shall not be taken into account in
establishing the conversion factor, weighting, and other adjustment
factors for 2004 and 2005 under paragraph (9), but shall be taken into
account for subsequent years. Therefore, the cost of those SCODs (as
discussed in section V.B.2 of this proposed rule) is included in the
budget neutrality calculations for the CY 2023 OPPS.

B. Proposed Conversion Factor Update

Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to
update the conversion factor used to determine the payment rates under
the OPPS on an annual basis by applying the OPD rate increase factor.
For purposes of section 1833(t)(3)(C)(iv) of the Act, subject to
sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD rate
increase factor is equal to the hospital inpatient market basket
percentage increase applicable to hospital discharges under section
1886(b)(3)(B)(iii) of the Act. In the FY 2023 IPPS/LTCH PPS proposed
rule (87 FR 28402), consistent with current law, based on IHS Global,
Inc.'s fourth quarter 2021 forecast of the FY 2023 market basket
increase, the proposed FY 2023 IPPS market basket update was 3.1
percent. We note that under our regular process for the CY 2023 OPPS/
ASC final rule, we will use the market basket update for the FY 2023
IPPS/LTCH PPS final rule, which would be based on IHS Global, Inc.'s
second quarter 2022 forecast of the FY 2023 market basket increase. If
that forecast is higher than the market basket used for this proposed
rule, the CY 2023 OPPS/ASC final rule OPD rate increase factor will
reflect that higher market basket estimate.
Specifically, section 1833(t)(3)(F)(i) of the Act requires that,
for 2012 and subsequent years, the OPD fee schedule increase factor
under subparagraph (C)(iv) be reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II) of the Act. Section
1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as
equal to the 10-year moving average of changes in annual economy-wide,
private nonfarm business multifactor productivity (MFP) (as projected
by the Secretary for the 10-year period ending with the applicable
fiscal year, year, cost reporting period, or other annual period) (the
``MFP adjustment''). In the FY 2012 IPPS/LTCH PPS final rule (76 FR
51689 through 51692), we finalized our methodology for calculating and
applying the MFP adjustment, and then revised this methodology, as
discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49509). In the
FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28402), the proposed MFP
adjustment for FY 2023 was 0.4 percentage point.
Therefore, we propose that the MFP adjustment for the CY 2023 OPPS
will be 0.4 percentage point. We also propose that if more recent data
become subsequently available after the publication of the CY 2023
OPPS/ASC proposed rule (for example, a more

[[Page 44528]]

recent estimate of the market basket increase and/or the MFP
adjustment), we would use such updated data, if appropriate, to
determine the CY 2023 market basket update and the MFP adjustment,
which are components in calculating the OPD fee schedule increase
factor under sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act,
in the CY 2023 OPPS/ASC final rule.
We note that section 1833(t)(3)(F) of the Act provides that
application of this subparagraph may result in the OPD fee schedule
increase factor under section 1833(t)(3)(C)(iv) of the Act being less
than 0.0 percent for a year, and may result in OPPS payment rates being
less than rates for the preceding year. As described in further detail
below, we propose for CY 2023 an OPD fee schedule increase factor of
2.7 percent for the CY 2023 OPPS (which is the proposed estimate of the
hospital inpatient market basket percentage increase of 3.1 percent,
less the proposed 0.4 percentage point MFP adjustment).
We propose that hospitals that fail to meet the Hospital OQR
Program reporting requirements would be subject to an additional
reduction of 2.0 percentage points from the OPD fee schedule increase
factor adjustment to the conversion factor that would be used to
calculate the OPPS payment rates for their services, as required by
section 1833(t)(17) of the Act. For further discussion of the Hospital
OQR Program, we refer readers to section XIV of this proposed rule.
To set the OPPS conversion factor for 2023, we propose to increase
the CY 2022 conversion factor of $84.177 by 2.7 percent. In accordance
with section 1833(t)(9)(B) of the Act, we proposed further to adjust
the conversion factor for CY 2023 to ensure that any revisions made to
the wage index and rural adjustment are made on a budget neutral basis.
We propose to calculate an overall budget neutrality factor of 1.0010
for wage index changes by comparing proposed total estimated payments
from our simulation model using the proposed FY 2023 IPPS wage indexes
to those payments using the FY 2022 IPPS wage indexes, as adopted on a
calendar year basis for the OPPS. We further propose to calculate an
additional budget neutrality factor of 0.9995 to account for our
proposed policy to cap wage index reductions for hospitals at 5 percent
on an annual basis.
For the CY 2023 OPPS, we propose to maintain the current rural
adjustment policy, as discussed in section II.E. of this proposed rule.
Therefore, the proposed budget neutrality factor for the rural
adjustment is 1.0000.
We propose to continue previously established policies for
implementing the cancer hospital payment adjustment described in
section 1833(t)(18) of the Act, as discussed in section II.F of this
proposed rule. We propose to calculate a CY 2023 budget neutrality
adjustment factor for the cancer hospital payment adjustment by
comparing estimated total CY 2023 payments under section 1833(t) of the
Act, including the proposed CY 2023 cancer hospital payment adjustment,
to estimated CY 2023 total payments using the CY 2022 final cancer
hospital payment adjustment, as required under section 1833(t)(18)(B)
of the Act. The proposed CY 2023 estimated payments applying the
proposed CY 2023 cancer hospital payment adjustment were the same as
estimated payments applying the CY 2022 final cancer hospital payment
adjustment. Therefore, we propose to apply a budget neutrality
adjustment factor of 1.0000 to the conversion factor for the cancer
hospital payment adjustment. In accordance with section 1833(t)(18)(C),
as added by section 16002(b) of the 21st Century Cures Act (Pub. L.
114-255), we are applying a budget neutrality factor calculated as if
the proposed cancer hospital adjustment target payment-to-cost ratio
was 0.90, not the 0.89 target payment-to-cost ratio we applied as
stated in section II.F. of this proposed rule.
We estimate that proposed pass-through spending for drugs,
biologicals, and devices for CY 2023 would equal approximately $772.0
million, which represents 0.90 percent of total projected CY 2023 OPPS
spending. Therefore, the proposed conversion factor would be adjusted
by the difference between the 1.24 percent estimate of pass-through
spending for CY 2022 and the 0.90 percent estimate of proposed pass-
through spending for CY 2023, resulting in a proposed increase to the
conversion factor for CY 2023 of 0.34 percent.
Proposed estimated payments for outliers would remain at 1.0
percent of total OPPS payments for CY 2023. We estimate for the
proposed rule that outlier payments would be approximately 1.29 percent
of total OPPS payments in CY 2022; the 1.00 percent for proposed
outlier payments in CY 2023 would constitute a 0.29 percent decrease in
payment in CY 2023 relative to CY 2022.
We also propose to make an OPPS budget neutrality adjustment of
0.01 percent of the OPPS for the estimated spending of $8.3 million
associated with the proposed payment adjustment under the CY 2023 OPPS
for domestic NIOSH-approved surgical N95 respirators, as discussed in
section X.H of this proposed rule.
For CY 2023, we also propose that hospitals that fail to meet the
reporting requirements of the Hospital OQR Program would continue to be
subject to a further reduction of 2.0 percentage points to the OPD fee
schedule increase factor. For hospitals that fail to meet the
requirements of the Hospital OQR Program, we proposed to make all other
adjustments discussed above, but use a reduced OPD fee schedule update
factor of 0.7 percent (that is, the proposed OPD fee schedule increase
factor of 2.7 percent further reduced by 2.0 percentage points). This
would result in a proposed reduced conversion factor for CY 2023 of
$85.093 for hospitals that fail to meet the Hospital OQR Program
requirements (a difference of -1.692 in the conversion factor relative
to hospitals that met the requirements).
In summary, for 2023, we propose to use a reduced conversion factor
of $85.093 in the calculation of payments for hospitals that fail to
meet the Hospital OQR Program requirements (a difference of -1.692 in
the conversion factor relative to hospitals that met the requirements).
For 2023, we propose to use a conversion factor of $86.785 in the
calculation of the national unadjusted payment rates for those items
and services for which payment rates are calculated using geometric
mean costs; that is, the proposed OPD fee schedule increase factor of
2.7 percent for CY 2023, the required proposed wage index budget
neutrality adjustment of approximately 1.0010, the proposed 5 percent
annual cap for individual hospital wage index reductions adjustment of
approximately 0.9995, the proposed cancer hospital payment adjustment
of 1.0000, the proposed adjustment to account for the 0.01 percentage
point of OPPS spending associated with the payment adjustment for
domestic NIOSH-approved surgical N95 respirators, and the proposed
adjustment of an increase of 0.34 percentage point of projected OPPS
spending for the difference in pass-through spending, which that result
in a proposed conversion factor for CY 2023 of $86.785.

C. Proposed Wage Index Changes

Section 1833(t)(2)(D) of the Act requires the Secretary to
determine a wage adjustment factor to adjust the portion of payment and
coinsurance attributable to labor-related costs for relative
differences in labor and labor-related costs across geographic regions

[[Page 44529]]

in a budget neutral manner (codified at 42 CFR 419.43(a)). This portion
of the OPPS payment rate is called the OPPS labor-related share. Budget
neutrality is discussed in section II.B of this proposed rule.
The OPPS labor-related share is 60 percent of the national OPPS
payment. This labor-related share is based on a regression analysis
that determined that, for all hospitals, approximately 60 percent of
the costs of services paid under the OPPS were attributable to wage
costs. We confirmed that this labor-related share for outpatient
services is appropriate during our regression analysis for the payment
adjustment for rural hospitals in the CY 2006 OPPS final rule with
comment period (70 FR 68553). We propose to continue this policy for
the CY 2023 OPPS. We refer readers to section II.H of this proposed
rule for a description and an example of how the wage index for a
particular hospital is used to determine payment for the hospital.
As discussed in the claims accounting narrative included with the
supporting documentation for this proposed rule (which is available via
the internet on the CMS website), for estimating APC costs, we would
standardize 60 percent of estimated claims costs for geographic area
wage variation using the same FY 2023 pre-reclassified wage index that
we use under the IPPS to standardize costs. This standardization
process removes the effects of differences in area wage levels from the
determination of a national unadjusted OPPS payment rate and copayment
amount.
Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the OPPS
April 7, 2000 final rule with comment period (65 FR 18495 and 18545)),
the OPPS adopted the final fiscal year IPPS post-reclassified wage
index as the calendar year wage index for adjusting the OPPS standard
payment amounts for labor market differences. Therefore, the wage index
that applies to a particular acute care, short-stay hospital under the
IPPS also applies to that hospital under the OPPS. As initially
explained in the September 8, 1998 OPPS proposed rule (63 FR 47576), we
believe that using the IPPS wage index as the source of an adjustment
factor for the OPPS is reasonable and logical, given the inseparable,
subordinate status of the HOPD within the hospital overall. In
accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index
is updated annually.
The Affordable Care Act contained several provisions affecting the
wage index. These provisions were discussed in the CY 2012 OPPS/ASC
final rule with comment period (76 FR 74191). Section 10324 of the
Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act,
which defines a frontier State and amended section 1833(t) of the Act
to add paragraph (19), which requires a frontier State wage index floor
of 1.00 in certain cases, and states that the frontier State floor
shall not be applied in a budget neutral manner. We codified these
requirements at Sec. 419.43(c)(2) and (3) of our regulations. For
2023, we propose to implement this provision in the same manner as we
have since CY 2011. Under this policy, the frontier State hospitals
would receive a wage index of 1.00 if the otherwise applicable wage
index (including reclassification, the rural floor, and rural floor
budget neutrality) is less than 1.00. Because the HOPD receives a wage
index based on the geographic location of the specific inpatient
hospital with which it is associated, the frontier State wage index
adjustment applicable for the inpatient hospital also would apply for
any associated HOPD. We refer readers to the FY 2011 through FY 2022
IPPS/LTCH PPS final rules for discussions regarding this provision,
including our methodology for identifying which areas meet the
definition of ``frontier States'' as provided for in section
1886(d)(3)(E)(iii)(II) of the Act: for FY 2011, 75 FR 50160 through
50161; for FY 2012, 76 FR 51793, 51795, and 51825; for FY 2013, 77 FR
53369 through 53370; for FY 2014, 78 FR 50590 through 50591; for FY
2015, 79 FR 49971; for FY 2016, 80 FR 49498; for FY 2017, 81 FR 56922;
for FY 2018, 82 FR 38142; for FY 2019, 83 FR 41380; for FY 2020, 84 FR
42312; for FY 2021, 85 FR 58765; and for FY 2022, 86 FR 45178.
In addition to the changes required by the Affordable Care Act, we
note that the proposed FY 2023 IPPS wage indexes continue to reflect a
number of adjustments implemented in past years, including, but not
limited to, reclassification of hospitals to different geographic
areas, the rural floor provisions, the imputed floor wage index
adjustment in all-urban states, an adjustment for occupational mix, an
adjustment to the wage index based on commuting patterns of employees
(the out-migration adjustment), and an adjustment to the wage index for
certain low wage index hospitals to help address wage index disparities
between low and high wage index hospitals. We refer readers to the FY
2023 IPPS/LTCH PPS proposed rule (87 FR 28357 through 28380) for a
detailed discussion of all proposed changes to the FY 2023 IPPS wage
indexes. We note in particular that in the FY 2023 IPPS/LTCH PPS
proposed rule (87 FR 28377 through 28380), we proposed a permanent
approach to smooth year-to-year decreases in hospitals' wage indexes.
Specifically, for FY 2023 and subsequent years, we proposed to apply a
5-percent cap on any decrease to a hospital's wage index from its wage
index in the prior FY, regardless of the circumstances causing the
decline. That is, we proposed that a hospital's wage index for FY 2023
would not be less than 95 percent of its final wage index for FY 2022,
and that for subsequent years, a hospital's wage index would not be
less than 95 percent of its final wage index for the prior FY. We
stated that we believe this policy would increase the predictability of
IPPS payments for hospitals and mitigate instability and significant
negative impacts to hospitals resulting from changes to the wage index.
It would also eliminate the need for temporary and potentially
uncertain transition adjustments to the wage index in the future due to
specific policy changes or circumstances outside hospitals' control.
CBSAs are made up of one or more constituent counties. Each CBSA
and constituent county has its own unique identifying codes. The FY
2018 IPPS/LTCH PPS final rule (82 FR 38130) discussed the two different
lists of codes to identify counties: Social Security Administration
(SSA) codes and Federal Information Processing Standard (FIPS) codes.
Historically, CMS listed and used SSA and FIPS county codes to identify
and crosswalk counties to CBSA codes for purposes of the IPPS and OPPS
wage indexes. However, the SSA county codes are no longer being
maintained and updated, although the FIPS codes continue to be
maintained by the U.S. Census Bureau. The Census Bureau's most current
statistical area information is derived from ongoing census data
received since 2010; the most recent data are from 2015. The Census
Bureau maintains a complete list of changes to counties or county
equivalent entities on the website at: <a href="https://www.census.gov/geo/reference/county-changes.html">https://www.census.gov/geo/reference/county-changes.html</a> (which, as of May 6, 2019, migrated to:
<a href="https://www.census.gov/programs-surveys/geography.html">https://www.census.gov/programs-surveys/geography.html</a>). In the FY 2018
IPPS/LTCH PPS final rule (82 FR 38130), for purposes of crosswalking
counties to CBSAs for the IPPS wage index, we finalized our proposal to
discontinue the use of the SSA county codes and begin using only the
FIPS county codes. Similarly, for the purposes of crosswalking counties
to CBSAs for the OPPS wage index, in the CY 2018 OPPS/ASC final rule
with comment period (82 FR 59260), we

[[Page 44530]]

finalized our proposal to discontinue the use of SSA county codes and
begin using only the FIPS county codes. For CY 2023, under the OPPS, we
are continuing to use only the FIPS county codes for purposes of
crosswalking counties to CBSAs.
We propose to use the FY 2023 IPPS post-reclassified wage index for
urban and rural areas as the wage index for the OPPS to determine the
wage adjustments for both the OPPS payment rate and the copayment rate
for CY 2023. Therefore, any policies and adjustments for the FY 2023
IPPS post-reclassified wage index, including, but not limited to, the
5-percent cap on any decrease to a hospital's wage index from its wage
index in the prior FY described above, would be reflected in the final
CY 2023 OPPS wage index beginning on January 1, 2023. We refer readers
to the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28357 through 28380)
and the proposed FY 2023 hospital wage index files posted on the CMS
website at <a href="https://www.cms.gov/medicare/acute-inpatient-pps/fy-2023-ipps-proposed-rule-home-page">https://www.cms.gov/medicare/acute-inpatient-pps/fy-2023-ipps-proposed-rule-home-page</a>. With regard to budget neutrality for the
CY 2023 OPPS wage index, we refer readers to section II.B of this
proposed rule. We continue to believe that using the IPPS post-
reclassified wage index as the source of an adjustment factor for the
OPPS is reasonable and logical, given the inseparable, subordinate
status of the HOPD within the hospital overall.
Hospitals that are paid under the OPPS, but not under the IPPS, do
not have an assigned hospital wage index under the IPPS. Therefore, for
non-IPPS hospitals paid under the OPPS, it is our longstanding policy
to assign the wage index that would be applicable if the hospital was
paid under the IPPS, based on its geographic location and any
applicable wage index policies and adjustments. We propose to continue
this policy for CY 2023 and are including below a brief summary of the
major proposed FY 2023 IPPS wage index policies and adjustments that we
propose to apply to these hospitals under the OPPS for CY 2023. We
refer readers to the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28357
through 28380) for a detailed discussion of the proposed changes to the
FY 2023 IPPS wage indexes.
It has been our longstanding policy to allow non-IPPS hospitals
paid under the OPPS to qualify for the out-migration adjustment if they
are located in a section 505 out-migration county (section 505 of the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(MMA)). Applying this adjustment is consistent with our policy of
adopting IPPS wage index policies for hospitals paid under the OPPS. We
note that, because non-IPPS hospitals cannot reclassify, they are
eligible for the out-migration wage index adjustment if they are
located in a section 505 out-migration county. This is the same out-
migration adjustment policy that would apply if the hospital were paid
under the IPPS. For CY 2023, we propose to continue our policy of
allowing non-IPPS hospitals paid under the OPPS to qualify for the
outmigration adjustment if they are located in a section 505 out-
migration county (section 505 of the MMA). Furthermore, we propose that
the wage index that would apply for CY 2023 to non-IPPS hospitals paid
under the OPPS would continue to include the rural floor adjustment and
any policies and adjustments applied to the IPPS wage index to address
wage index disparities. In addition, the wage index that would apply to
non-IPPS hospitals paid under the OPPS would include the 5 percent cap
on wage index decreases that we may finalize for the FY 2023 IPPS wage
index as discussed previously.
For CMHCs, for CY 2023, we propose to continue to calculate the
wage index by using the post-reclassification IPPS wage index based on
the CBSA where the CMHC is located. Furthermore, we propose that the
wage index that would apply to a CMHC for CY 2023 would continue to
include the rural floor adjustment and any policies and adjustments
applied to the IPPS wage index to address wage index disparities. In
addition, the wage index that would apply to CMHCs would include the 5
percent cap on wage index decreases that we may finalize for the FY
2023 IPPS wage index as discussed above. Also, we propose that the wage
index that would apply to CMHCs would not include the outmigration
adjustment because that adjustment only applies to hospitals.
Table 4A associated with the FY 2023 IPPS/LTCH PPS final rule
(available via the internet on the CMS website at: <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index</a>)
identifies counties eligible for the out-migration adjustment. Table 2
associated with the FY 2023 IPPS/LTCH PPS final rule (available for
download via the website above) identifies IPPS hospitals that receive
the out-migration adjustment for FY 2023. We are including the
outmigration adjustment information from Table 2 associated with the FY
2023 IPPS/LTCH PPS proposed rule as Addendum L to this proposed rule,
with the addition of non-IPPS hospitals that would receive the section
505 outmigration adjustment under this proposed rule. Addendum L is
available via the internet on the CMS website. We refer readers to the
CMS website for the OPPS at: <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index</a>. At this link, readers
will find a link to the proposed FY 2023 IPPS wage index tables and
Addendum L.

D. Proposed Statewide Average Default Cost-to-Charge Ratios (CCRs)

In addition to using CCRs to estimate costs from charges on claims
for ratesetting, we use overall hospital-specific CCRs calculated from
the hospital's most recent cost report to determine outlier payments,
payments for pass-through devices, and monthly interim transitional
outpatient payments (TOPs) under the OPPS during the PPS year. For
certain hospitals, under the regulations at 42 CFR 419.43(d)(5)(iii),
we use the statewide average default CCRs to determine the payments
mentioned earlier if it is not possible to determine an accurate CCR
for a hospital in certain circumstances. This includes hospitals that
are new, hospitals that have not accepted assignment of an existing
hospital's provider agreement, and hospitals that have not yet
submitted a cost report. We also use the statewide average default CCRs
to determine payments for hospitals whose CCR falls outside the
predetermined ceiling threshold for a valid CCR or for hospitals in
which the most recent cost report reflects an all-inclusive rate status
(Medicare Claims Processing Manual (Pub. 100-04), Chapter 4, Section
10.11).
We discussed our policy for using default CCRs, including setting
the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final
rule with comment period (73 FR 68594 through 68599) in the context of
our adoption of an outlier reconciliation policy for cost reports
beginning on or after January 1, 2009. For details on our process for
calculating the statewide average CCRs, we refer readers to the CY 2023
OPPS proposed rule Claims Accounting document that is posted on our
website. Due to concerns with cost report data as a result of the
COVID-19 PHE, we propose to calculate the default ratios for CY 2023
using the June 2020 HCRIS cost reports, consistent with the broader
proposal regarding CY 2023 OPPS ratesetting discussed in section X of
this proposed rule.
We no longer publish a table in the Federal Register containing the
statewide average CCRs in the annual OPPS proposed rule and final rule
with comment period. These CCRs with the

[[Page 44531]]

upper limit will be available for download with each OPPS CY proposed
rule and final rule on the CMS website. We refer readers to our website
at: <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices</a>.html;
click on the link on the left of the page titled ``Hospital Outpatient
Regulations and Notices'' and then select the relevant regulation to
download the statewide CCRs and upper limit in the Downloads section of
the web page.

E. Proposed Adjustment for Rural Sole Community Hospitals (SCHs) and
Essential Access Community Hospitals (EACHs) Under Section
1833(t)(13)(B) of the Act for CY 2023

In the CY 2006 OPPS final rule with comment period (70 FR 68556),
we finalized a payment increase for rural sole community hospitals
(SCHs) of 7.1 percent for all services and procedures paid under the
OPPS, excluding drugs, biologicals, brachytherapy sources, and devices
paid under the pass-through payment policy, in accordance with section
1833(t)(13)(B) of the Act, as added by section 411 of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)
(Pub. L. 108-173). Section 1833(t)(13) of the Act provided the
Secretary the authority to make an adjustment to OPPS payments for
rural hospitals, effective January 1, 2006, if justified by a study of
the difference in costs by APC between hospitals in rural areas and
hospitals in urban areas. Our analysis showed a difference in costs for
rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment
adjustment for rural SCHs of 7.1 percent for all services and
procedures paid under the OPPS, excluding separately payable drugs and
biologicals, brachytherapy sources, items paid at charges reduced to
costs, and devices paid under the pass-through payment policy, in
accordance with section 1833(t)(13)(B) of the Act.
In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010
and 68227), for purposes of receiving this rural adjustment, we revised
our regulations at Sec. 419.43(g) to clarify that essential access
community hospitals (EACHs) are also eligible to receive the rural SCH
adjustment, assuming these entities otherwise meet the rural adjustment
criteria. Currently, two hospitals are classified as EACHs, and as of
CY 1998, under section 4201(c) of Public Law 105-33, a hospital can no
longer become newly classified as an EACH.
This adjustment for rural SCHs is budget neutral and applied before
calculating outlier payments and copayments. We stated in the CY 2006
OPPS final rule with comment period (70 FR 68560) that we would not
reestablish the adjustment amount on an annual basis, but we may review
the adjustment in the future and, if appropriate, would revise the
adjustment. We provided the same 7.1 percent adjustment to rural SCHs,
including EACHs, again in CYs 2008 through 2022.
For CY 2023, we propose to continue the current policy of a 7.1
percent payment adjustment for rural SCHs, including EACHs, for all
services and procedures paid under the OPPS, excluding separately
payable drugs and biologicals, brachytherapy sources, items paid at
charges reduced to costs, and devices paid under the pass-through
payment policy, applied in a budget neutral manner.

F. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2023

1. Background
Since the inception of the OPPS, which was authorized by the
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare has paid
the 11 hospitals that meet the criteria for cancer hospitals identified
in section 1886(d)(1)(B)(v) of the Act under the OPPS for covered
outpatient hospital services. These cancer hospitals are exempted from
payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced
Budget Refinement Act of 1999 (Pub. L. 106-113), the Congress added
section 1833(t)(7), ``Transitional Adjustment to Limit Decline in
Payment,'' to the Act, which requires the Secretary to determine OPPS
payments to cancer and children's hospitals based on their pre-BBA
payment amount (these hospitals are often referred to under this policy
as ``held harmless'' and their payments are often referred to as ``hold
harmless'' payments).
As required under section 1833(t)(7)(D)(ii) of the Act, a cancer
hospital receives the full amount of the difference between payments
for covered outpatient services under the OPPS and a ``pre-BBA
amount.'' That is, cancer hospitals are permanently held harmless to
their ``pre-BBA amount,'' and they receive transitional outpatient
payments (TOPs) or hold harmless payments to ensure that they do not
receive a payment that is lower in amount under the OPPS than the
payment amount they would have received before implementation of the
OPPS, as set forth in section 1833(t)(7)(F) of the Act. The ``pre-BBA
amount'' is the product of the hospital's reasonable costs for covered
outpatient services occurring in the current year and the base payment-
to-cost ratio (PCR) for the hospital defined in section
1833(t)(7)(F)(ii) of the Act. The ``pre-BBA amount'' and the
determination of the base PCR are defined at Sec. 419.70(f). TOPs are
calculated on Worksheet E, Part B, of the Hospital Cost Report or the
Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-
2552-10, respectively), as applicable each year. Section 1833(t)(7)(I)
of the Act exempts TOPs from budget neutrality calculations.
Section 3138 of the Affordable Care Act amended section 1833(t) of
the Act by adding a new paragraph (18), which instructs the Secretary
to conduct a study to determine if, under the OPPS, outpatient costs
incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of
the Act with respect to APC groups exceed outpatient costs incurred by
other hospitals furnishing services under section 1833(t) of the Act,
as determined appropriate by the Secretary. Section 1833(t)(18)(A) of
the Act requires the Secretary to take into consideration the cost of
drugs and biologicals incurred by cancer hospitals and other hospitals.
Section 1833(t)(18)(B) of the Act provides that, if the Secretary
determines that cancer hospitals' costs are higher than those of other
hospitals, the Secretary shall provide an appropriate adjustment under
section 1833(t)(2)(E) of the Act to reflect these higher costs. In
2011, after conducting the study required by section 1833(t)(18)(A) of
the Act, we determined that outpatient costs incurred by the 11
specified cancer hospitals were greater than the costs incurred by
other OPPS hospitals. For a complete discussion regarding the cancer
hospital cost study, we refer readers to the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74200 through 74201).
Based on these findings, we finalized a policy to provide a payment
adjustment to the 11 specified cancer hospitals that reflects their
higher outpatient costs, as discussed in the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74202 through 74206). Specifically, we
adopted a policy to provide additional payments to the cancer hospitals
so that each cancer hospital's final PCR for services provided in a
given calendar year is equal to the weighted average PCR (which we
refer to as the ``target PCR'') for other hospitals paid under the
OPPS. The target PCR is set in advance of the

[[Page 44532]]

calendar year and is calculated using the most recently submitted or
settled cost report data that are available at the time of final
rulemaking for the calendar year. The amount of the payment adjustment
is made on an aggregate basis at cost report settlement. We note that
the changes made by section 1833(t)(18) of the Act do not affect the
existing statutory provisions that provide for TOPs for cancer
hospitals. The TOPs are assessed, as usual, after all payments,
including the cancer hospital payment adjustment, have been made for a
cost reporting period. Table 3 displays the target PCR for purposes of
the cancer hospital adjustment for CY 2012 through CY 2022.
BILLING CODE 4120-01-P
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2. Proposed Policy for CY 2023
Section 16002(b) of the 21st Century Cures Act (Pub. L. 114-255)
amended section 1833(t)(18) of the Act by adding subparagraph (C),
which requires that in applying Sec. 419.43(i) (that is, the payment
adjustment for certain cancer hospitals) for services furnished on or
after January 1, 2018, the target PCR adjustment be reduced by 1.0
percentage point less than what would otherwise apply. Section 16002(b)
also provides that, in addition to the percentage reduction, the
Secretary may consider making an additional percentage point reduction
to the target PCR that takes into account payment rates for applicable
items and services described under section 1833(t)(21)(C) of the Act
for hospitals that are not cancer hospitals described under section
1886(d)(1)(B)(v) of the Act. Further, in making any budget neutrality
adjustment under section 1833(t) of the Act, the Secretary shall not
take into account the reduced expenditures that result from application
of section 1833(t)(18)(C) of the Act.
We propose to provide additional payments to the 11 specified
cancer hospitals so that each cancer hospital's proposed PCR is equal
to the weighted average PCR (or ``target PCR'') for the other OPPS
hospitals, generally using the most recent submitted or settled cost
report data that are available, reduced by 1.0 percentage point, to
comply with section 16002(b) of the 21st Century Cures Act. We do not
propose an additional reduction beyond the 1.0 percentage point
reduction required by section 16002(b) of the 21st Century Cures Act
for CY 2023.
Under our established policy, to calculate the proposed CY 2023
target PCR, we would use the same extract of cost report data from
HCRIS used to estimate costs for the CY 2023 OPPS which, in most cases,
would be the most recently available hospital cost reports. However, as
discussed in section II.A.1.c and X.C of this proposed rule, we propose
to use cost report data from the June 2020 HCRIS data set, which does
not contain cost reports from CY 2020, given our concerns with CY 2020
cost report data as a result of the COVID-19 PHE. We believe a target
PCR based on the most recently available cost reports may provide a
less accurate estimation of cancer hospital PCRs and non-cancer
hospital PCRs than the data used for the CY 2022 rulemaking cycle,
which pre-dated the COVID-19 PHE. Therefore, for CY 2023, we propose to
continue to use the same target PCR we used for CY 2021 and CY 2022 of
0.89. This proposed CY 2023 target PCR of 0.89 includes the 1.0-
percentage point reduction required by section 16002(b) of the 21st
Century Cures Act for CY 2023. For a description of the CY 2021 target
PCR calculation, on which the proposed CY 2023 target PCR is based, we
refer readers to the CY 2021 OPPS/ASC final rule with comment period
(84 FR 85912 through 85914).
Table 4 shows the proposed estimated percentage increase in OPPS
payments to each cancer hospital for CY 2023, due to the cancer
hospital payment adjustment policy. The cost reporting periods for all
cancer hospitals in Table 4 overlaps with CY 2020 and the costs and
payments associated with each cancer hospital may be impacted by the
effects of the COVID-19 PHE. Therefore, the estimates in Table 4 are
likely to be less accurate than in other years and may overstate the
percentage increase in cancer hospital payments for CY 2023. The
actual, final amount of the CY 2023 cancer hospital payment adjustment
for each cancer hospital would be determined at cost report settlement
and would depend on each hospital's CY 2023 payments and costs from the
settled CY 2023 cost report. We note that the requirements contained in
section 1833(t)(18) of the Act do not affect the existing statutory
provisions that provide for TOPs for cancer hospitals. The TOPs will be
assessed, as usual, after all payments, including the cancer hospital
payment adjustment, have been made for a cost reporting period.

[[Page 44533]]

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BILLING CODE 4120-01-C

G. Proposed Hospital Outpatient Outlier Payments

1. Background
The OPPS provides outlier payments to hospitals to help mitigate
the financial risk associated with high-cost and complex procedures,
where a very costly service could present a hospital with significant
financial loss. As explained in the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66832 through 66834), we set our projected target
for aggregate outlier payments at 1.0 percent of the estimated
aggregate total payments under the OPPS for the prospective year.
Outlier payments are provided on a service-by-service basis when the
cost of a service exceeds the APC payment amount multiplier threshold
(the APC payment amount multiplied by a certain amount) as well as the
APC payment amount plus a fixed-dollar amount threshold (the APC
payment plus a certain dollar amount). In CY 2022, the outlier
threshold was met when the hospital's cost of furnishing a service
exceeded 1.75 times (the multiplier threshold) the APC payment amount
and exceeded the APC payment amount plus $6,175 (the fixed-dollar
amount threshold) (86 FR 63508 through 63510). If the hospital's cost
of furnishing a service exceeds both the multiplier threshold and the
fixed-dollar threshold, the outlier payment is calculated as 50 percent
of the amount by which the hospital's cost of furnishing the service
exceeds 1.75 times the APC payment amount. Beginning with CY 2009
payments, outlier payments are subject to a reconciliation process
similar to the IPPS outlier reconciliation process for cost reports, as
discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68594 through 68599).
It has been our policy to report the actual amount of outlier
payments as a percent of total spending in the claims being used to
model the OPPS. Our estimate of total outlier payments as a percent of
total CY 2021 OPPS payments, using CY 2021 claims available for this CY
2023 OPPS/ASC proposed rule, is approximately 1.0 percent. Therefore,
for CY 2021, we estimated that we paid the outlier target of 1.0
percent of total aggregated OPPS payments. Using an updated claims
dataset for this proposed rule, we estimate that we paid approximately
1.01 percent of the total aggregate OPPS payments in outliers for CY
2021.
For this proposed rule, using CY 2021 claims data and CY 2022
payment rates, we estimate that the aggregate outlier payments for CY
2022 would be approximately 1.07 percent of the total CY 2022 OPPS
payments. We provide estimated CY 2023 outlier payments for hospitals
and CMHCs with claims included in the claims data that we used to model
impacts in the Hospital-Specific Impacts--Provider-Specific Data file
on the CMS website at: <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index</a>.html.
2. Outlier Calculation for CY 2023
For CY 2023, we propose to continue our policy of estimating
outlier payments to be 1.0 percent of the estimated aggregate total
payments under the OPPS. We propose that a portion of that 1.0 percent,
an amount equal to less than 0.01 percent of outlier payments (or
0.0001 percent of total OPPS payments), would be allocated to CMHCs for
PHP outlier payments. This is the amount of estimated outlier payments
that would result from the proposed CMHC outlier threshold as a
proportion of total estimated OPPS outlier payments. We propose to
continue our longstanding policy that if a CMHC's cost for partial
hospitalization services, paid under APC 5853 (Partial Hospitalization
for CMHCs), exceeds

[[Page 44534]]

3.40 times the payment rate for proposed APC 5853, the outlier payment
would be calculated as 50 percent of the amount by which the cost
exceeds 3.40 times the proposed APC 5853 payment rate.
For further discussion of CMHC outlier payments, we refer readers
to section VIII.C of this proposed rule.
To ensure that the estimated CY 2023 aggregate outlier payments
would equal 1.0 percent of estimated aggregate total payments under the
OPPS, we propose that the hospital outlier threshold be set so that
outlier payments would be triggered when a hospital's cost of
furnishing a service exceeds 1.75 times the APC payment amount and
exceeds the APC payment amount plus $8,350.
We calculate the proposed fixed-dollar threshold of $8,350 using
the standard methodology most recently used for CY 2022 (86 FR 63508
through 63510). For purposes of estimating outlier payments for CY
2023, we use the hospital-specific overall ancillary CCRs available in
the April 2022 update to the Outpatient Provider-Specific File (OPSF).
The OPSF contains provider-specific data, such as the most current
CCRs, which are maintained by the MACs and used by the OPPS Pricer to
pay claims. The claims that we generally use to model each OPPS update
lag by 2 years.
In order to estimate the CY 2023 hospital outlier payments, we
inflate the charges on the CY 2021 claims using the same proposed
charge inflation factor of 1.13218 that we used to estimate the IPPS
fixed-loss cost threshold for the FY 2023 IPPS/LTCH PPS proposed rule
(87 FR 28667). We used an inflation factor of 1.06404 to estimate CY
2022 charges from the CY 2021 charges reported on CY 2021 claims before
applying CY 2022 CCRs to estimate the percent of outliers paid in CY
2022. The proposed methodology for determining these charge inflation
factors, as well as the solicitation of comments on an alternative
approach, is discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87
FR 28667 through 28678). As we stated in the CY 2005 OPPS final rule
with comment period (69 FR 65844 through 65846), we believe that the
use of the same charge inflation factors is appropriate for the OPPS
because, with the exception of the inpatient routine service cost
centers, hospitals use the same ancillary and cost centers to capture
costs and charges for inpatient and outpatient services.
As noted in the CY 2007 OPPS/ASC final rule with comment period (71
FR 68011), we are concerned that we could systematically overestimate
the OPPS hospital outlier threshold if we did not apply a CCR inflation
adjustment factor. Therefore, we propose to apply the same CCR
adjustment factor that we proposed to apply for the FY 2023 IPPS
outlier calculation to the CCRs used to simulate the proposed CY 2023
OPPS outlier payments to determine the fixed-dollar threshold.
Specifically, for CY 2023, we propose to apply an adjustment factor of
0.974495 to the CCRs that were in the April 2022 OPSF to trend them
forward from CY 2022 to CY 2023. The methodology for calculating the
proposed CCR adjustment factor, as well as the solicitation of comments
on an alternative approach, is discussed in the FY 2023 IPPS/LTCH PPS
proposed rule (87 FR 28668). We note that we propose to use the April
2022 OPSF for purposes of estimating costs for the OPPS outlier
threshold calculation whereas in section X of this proposed rule we
discussed using June 2020 HCRIS data extract for modeling hospital
outpatient costs in construction of our CY 2023 OPPS relative weights.
For modeling estimated outlier payments, since the April 2022 OPSF
contains cost data primarily from CY 2021 and CY 2022 and is the basis
for current CY 2022 OPPS outlier payments, we believe the April 2022
OPSF provides a more updated and accurate data source for determining
the CCRs that will be applied to CY 2023 hospital outpatient claims.
Therefore, we believe the April 2022 OPSF is a more accurate data
source for determining the fixed-dollar threshold to ensure that the
estimated CY 2023 aggregate outlier payments would equal 1.0 percent of
estimated aggregate total payments under the OPPS.
To model hospital outlier payments for this CY proposed rule, we
apply the overall CCRs from the April 2022 OPSF after adjustment (using
the proposed CCR inflation adjustment factor of 0.974495 to approximate
CY 2023 CCRs) to charges on CY 2021 claims that were adjusted (using
the proposed charge inflation factor of 1.13218 to approximate CY 2023
charges). We simulated aggregated CY 2021 hospital outlier payments
using these costs for several different fixed-dollar thresholds,
holding the 1.75 multiplier threshold constant and assuming that
outlier payments would continue to be made at 50 percent of the amount
by which the cost of furnishing the servic

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