Federal Register: November 7, 2003 (Volume 68, Number 216)

[Federal Register: November 7, 2003 (Volume 68, Number 216)]
[Rules and Regulations]
[Page 63397-63446]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07no03-15]

[[Page 63397]]

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Part III

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 410 and 419

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

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410 and 419

[CMS-1471-FC]
RIN 0938-AL19

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

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

ACTION: Final rule with comment period.

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SUMMARY: This final rule with comment period revises the Medicare
hospital outpatient prospective payment system to implement applicable
statutory requirements and changes arising from our continuing
experience with this system. In addition, it describes changes to the
amounts and factors used to determine the payment rates for Medicare
hospital outpatient services paid under the prospective payment system.
These changes are applicable to services furnished on or after January
1, 2004. Finally, this rule responds to public comments received on the
August 12, 2003 proposed rule for revisions to the hospital outpatient
prospective payment system and payment rates (68 FR 47966).

DATES: Effective date: This final rule is effective January 1, 2004.
Comment date: We will consider comments on the ambulatory payment
classification assignments of Healthcare Common Procedure Coding System
codes identified in Addendum B with new interim (NI) condition codes,
if we receive them at the appropriate address, as provided below, no
later than 5 p.m. on January 6, 2004.

ADDRESSES: In commenting, please refer to file code CMS-1471-FC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission or e-mail.
Mail written comments (one original and two copies) to the
following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1471-FC, P.O.
Box 8018, Baltimore, MD 21244-8018.
Please allow sufficient time for mailed comments to be timely
received in the event of delivery delays.
If you prefer, you may deliver (by hand or courier) your written
comments (one original and two copies) to one of the following
addresses: Room 445-G, Hubert H. Humphrey Building, 200 Independence
Avenue, SW., Washington, DC 20201, or Room C5-14-03, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and could be considered late.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Dana Burley, (410) 786-0378--
outpatient prospective payment issues; Suzanne Asplen, (410) 786-4558
or Jana Petze, (410) 786-9374--partial hospitalization and community
mental health centers issues.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: Comments received timely will be
available for public inspection as they are received, generally
beginning approximately 3 weeks after publication of a document, at the
headquarters of the Centers for Medicare & Medicaid Services, 7500
Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of
each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view
public comments, call (410) 786-7195.

Availability of Copies and Electronic Access

Copies: To order copies of the Federal Register containing this
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that receive the Federal Register.
This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. The web site address is: http://www.access.gpo.gov/nara/index.html
.
To assist readers in referencing sections contained in this
document, we are providing the following table of contents.

Outline of Contents

I. Background
A. Authority for the Outpatient Prospective Payment System
B. Summary of Rulemaking for the Outpatient Prospective Payment
System
C. Summary of Changes in the August 12, 2003 Proposed Rule
1. Changes Required by Statute
2. Additional Changes to OPPS
D. Public Comments and Responses to the August 12, 2003 Proposed
Rule
II. Changes to the Ambulatory Payment Classification (APC) Groups
and Relative Weights
A. Recommendations of the Advisory Panel on APC Groups
1. Establishment of the Advisory Panel on APC Groups
2. August 2003 Meeting
3. Recommendations of the Advisory Panel and Our Responses
B. Other Changes Affecting the APCs
1. Limit on Variation of Costs of Services Classified Within an
APC Group
2. Procedures Moved From New Technology APCs to Clinically
Appropriate APCs
3. Revision of Cost Bands and Payment Amounts for New Technology
APCs
4. Creation of APCs for Combinations of Device Procedures
III. Recalibration of APC Weights for CY 2004
A. Data Issues
1. Period of Claims Data Used
2. Treatment of ``Multiple Procedure'' Claims
B. Description of Our Calculation of Weights for CY 2004
C. Discussion of Relative Weights for Specific Procedural APCs
IV. Transitional Pass-Through and Related Payment Issues
A. Background
B. Discussion of Pro Rata Reduction
V. Payment for Devices
A. Pass-Through Devices
B. Expiration of Transitional Pass-Through Payments in CY 2004
C. Reinstitution of C Codes for Expired Device Categories
D. Other Policy Issues Relating to Pass-Through Device
Categories
1. Reducing Transitional Pass-Through Device Categories To
Offset Costs Packaged Into APC Groups
2. Multiple Procedure Reduction for Devices
VI. Payment for Drugs, Biologicals, Radiopharmaceutical Agents,
Blood, and Blood Products
A. Pass-Through Drugs and Biologicals

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B. Drugs, Biologicals, and Radiopharmaceuticals Without Pass-
Through Status
1. Background
2. Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
3. Payment for Drugs, Biologicals, and Radiopharmaceuticals That
Are Not Packaged
4. Payment for Drug Administration
5. Generic Drugs and Radiopharmaceuticals
6. Orphan Drugs
7. Vaccines
8. Blood and Blood Products
9. Intravenous Immune Globulin
10. Payment for Split Unit of Blood
11. Other Issues
VII. Wage Index Changes for CY 2004
VIII. Copayment for CY 2004
IX. Conversion Factor Update for CY 2004
X. Outlier Policy and Elimination of Transitional Corridor Payments
for CY 2004
A. Outlier Policy for CY 2004
B. Elimination of Transitional Corridor Payments for CY 2004
XI. Other Policy Decisions and Changes
A. Hospital Coding for Evaluation and Management (E/M) Services
B. Status Indicators and Issues Related to OCE Editing
C. Observation Services
D. Procedures That Will Be Paid Only As Inpatient Procedures
E. Partial Hospitalization Payment Methodology
1. Background
2. PHP APC Update for CY 2004
3. Outlier Payments to CMHCs
XII. General Data, Billing, and Coding Issues
XIII. Provisions of the Final Rule With Comment Period for 2004
A. Changes Required by Statute
B. Additional Changes
C. Major Changes From the Proposed Rule
XIV. Collection of Information Requirements
XV. Response to Public Comments
XVI. Regulatory Impact Analysis
A. General
B. Changes in This Final Rule
C. Limitations of Our Analysis
D. Estimated Impacts of This Final Rule on Hospitals
E. Projected Distribution of Outlier Payments
F. Estimated Impacts of This Final Rule on Beneficiaries

Addenda

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

Alphabetical List of Acronyms Appearing in This Final Rule With
Comment Period

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

I. Background

A. Authority for the Outpatient Prospective Payment System

When the Medicare statute was originally enacted, Medicare payment
for hospital outpatient services was based on hospital-specific costs.
In an effort to ensure that Medicare and its beneficiaries pay
appropriately for services and to encourage more efficient delivery of
care, the Congress mandated replacement of the cost-based payment
methodology with a prospective payment system (PPS). The Balanced
Budget Act of 1997 (BBA) (Pub. L. 105-33), enacted on August 5, 1997,
added section 1833(t) to the Social Security Act (the Act) authorizing
implementation of a PPS for hospital outpatient services. The Balanced
Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), enacted on
November 29, 1999, made major changes that affected the hospital
outpatient PPS (OPPS). The Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554),
enacted on December 21, 2000, made further changes in the OPPS. The
OPPS was first implemented for services furnished on or after August 1,
2000.

B. Summary of Rulemaking for the Outpatient Prospective Payment System

[sbull] On September 8, 1998, we published a proposed rule (63 FR
47552) to establish in regulations a PPS for hospital outpatient
services, to eliminate the formula-driven overpayment for certain
hospital outpatient services, and to extend reductions in payment for
costs of hospital outpatient services.
[sbull] On April 7, 2000, we published a final rule with comment
period (65 FR

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18434) that addressed the provisions of the PPS for hospital outpatient
services scheduled to be effective for services furnished on or after
July 1, 2000. Under this system, Medicare payment for hospital
outpatient services included in the PPS is made at a predetermined,
specific rate. These outpatient services are classified according to a
list of ambulatory payment classifications (APCs). The April 7, 2000
final rule with comment period also established requirements for
provider departments and provider-based entities and prohibited
Medicare payment for nonphysician services furnished to a hospital
outpatient by a provider or supplier other than a hospital unless the
services are furnished under arrangement. In addition, this rule
extended reductions in payment for costs of hospital outpatient
services as required by the BBA and amended by the BBRA. Medicare
regulations governing the hospital OPPS are set forth at 42 CFR part
419. Subsequently, we announced a delay in implementation of the OPPS
from July 1, 2000 to August 1, 2000.
[sbull] On August 3, 2000, we published an interim final rule with
comment period (65 FR 47670) that modified criteria that we use to
determine which medical devices are eligible for transitional pass-
through payments. The rule also corrected and clarified certain
provider-based provisions included in the April 7, 2000 rule.
[sbull] On November 13, 2000, we published an interim final rule
with comment period (65 FR 67798) to provide the annual update to the
amounts and factors for OPPS payment rates effective for services
furnished on or after January 1, 2001. We implemented the 2001 OPPS on
January 1, 2001. We also responded to public comments on those portions
of the April 7, 2000 final rule that implemented related provisions of
the BBRA and public comments on the August 3, 2000 rule.
[sbull] On November 2, 2001, we published a final rule (66 FR
55857) that announced the Medicare OPPS conversion factor for calendar
year (CY) 2002. It also described the Secretary s estimate of the total
amount of the transitional pass-through payments for CY 2002 and the
implementation of a uniform reduction in each of the pass-through
payments for that year.
[sbull] On November 2, 2001, we also published an interim final
rule with comment period (66 FR 55850) that set forth the criteria the
Secretary will use to establish new categories of medical devices
eligible for transitional pass-through payments under Medicare's OPPS.
[sbull] On November 30, 2001, we published a final rule (66 FR
59856) that revised the Medicare OPPS to implement applicable statutory
requirements, including relevant provisions of BIPA, and changes
resulting from continuing experience with this system. In addition, it
described the CY 2002 payment rates for Medicare hospital outpatient
services paid under the PPS. This final rule also announced a uniform
reduction of 68.9 percent to be applied to each of the transitional
pass-through payments for certain categories of medical devices and
drugs and biologicals.
[sbull] On December 31, 2001, we published a final rule (66 FR
67494) that delayed, until no later than April 1, 2002, the effective
date of CY 2002 payment rates and the uniform reduction of transitional
pass-through payments that were announced in the November 30, 2001
final rule. In addition, this final rule indefinitely delayed certain
related regulatory provisions.
[sbull] On March 1, 2002, we published a final rule (67 FR 9556)
that corrected technical errors that affected the amounts and factors
used to determine the payment rates for services paid under the
Medicare OPPS and corrected the uniform reduction to be applied to
transitional pass-through payments for CY 2002 as published in the
November 30, 2001 final rule. These corrections and the regulatory
provisions that had been delayed became effective on April 1, 2002.
[sbull] On November 1, 2002, we published a final rule (67 FR
66718) that revised the Medicare OPPS to update the payment weights and
conversion factor for services payable under the 2003 OPPS on the basis
of data from claims for services furnished from April 1, 2001 through
March 31, 2002. The rule also removed from pass-through status most
drugs and devices that had been paid under pass-through provisions in
2002 as required by the applicable provisions of law governing the
duration of pass-through payment.
[sbull] On August 12, 2003, we published a proposed rule (68 FR
47966) that proposed the Medicare OPPS conversion factor for CY 2004.
In addition, it described proposed changes to the amounts and factors
used to determine the payment rates for Medicare hospital outpatient
services paid under the prospective payment system.

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

On August 12, 2003, we published a proposed rule (68 FR 47966) that
proposed changes to the Medicare hospital OPPS and CY 2004 payment
rates including proposed changes used to determine these payment rates.
The following is a summary of the major changes that we proposed and
the issues we addressed in the August 12, 2003 proposed rule.
1. Changes Required by Statute
We proposed the following changes to implement statutory
requirements:
[sbull] Add APCs, delete APCs, and modify the composition of some
existing APCs.
[sbull] Recalibrate the relative payment weights of the APCs.
[sbull] Update the conversion factor and the wage index.
[sbull] Revise the APC payment amounts to reflect the APC
reclassifications, the recalibration of payment weights, and the other
required updates and adjustments.
[sbull] Cease transitional pass-through payments for drugs and
biologicals and devices that will have been paid under the transitional
pass-through methodology for at least 2 years by January 1, 2004.
[sbull] Cease transitional outpatient payments (TOPS payments) for
all hospitals paid under OPPS except for cancer hospitals and children
s hospitals.
2. Additional Changes to OPPS
We proposed the following additional changes to the OPPS:
[sbull] Adjust payment to moderate the effects of decreased median
costs for non-pass-through drugs, biologicals, and
radiopharmaceuticals.
[sbull] Implement a new method for paying for drug administration.
[sbull] Create new evaluation and management service codes for
outpatient clinic and emergency department encounters.
[sbull] Change status indicators for Healthcare Common Procedure
Coding System (HCPCS) codes.
[sbull] List midyear and proposed HCPCS codes that are paid under
OPPS.
[sbull] Allocate a portion of the outlier percentage target amount
to community mental health centers (CMHCs) and create a separate
threshold for outlier payments for partial hospitalization services.
[sbull] Create methodology and payment rates for separately payable
drugs and radiopharmaceuticals for 2004.
[sbull] Make several changes in our current payment policy with
regard to payment

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for Q0081, Q0083, Q0084, and Q0085 to facilitate accurate payments for
drugs and drug administration.
[sbull] Change the status indicator and payment amount for P9010 by
assigning it to APC 0957 (Platelet concentrate) with a payment rate of
$37.30.
[sbull] Establish new payment bands for new technology APCs.

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

We received approximately 876 timely items of correspondence
containing multiple comments on the August 12, 2003 proposed rule.
Summaries of the public comments and our responses to those comments
are set forth below under the appropriate section heading of this final
rule with comment period.
We received comments from various sources including but not limited
to health care facilities, physicians, drug and device manufacturers,
and beneficiaries. Hospital associations and the Medicare Payment
Advisory Commission (MedPAC) generally supported our proposed approach
to revising the relative weights for APCs. Pharmaceutical and medical
device manufacturers and some individual hospitals that furnish
particular devices or drugs were concerned with the proposed reductions
in payment for medical devices and drugs. We received many thoughtful
comments from a wide range of commenters with regard to methodological
issues in OPPS. In addition, several comments provided external data to
support their assertions. The following are the major issues addressed
by the commenters:
[sbull] The proposal to use $150 as the packaging threshold for
separate payment of drugs.
[sbull] The proposal to pay for orphan drugs within the OPPS,
basing payment on claims data.
[sbull] The proposal to pay for generic drugs at 43 percent of
average wholesale prices (AWP) beginning with the time of the generic
drug's Food and Drug Administration (FDA) approval.
[sbull] The proposed payments for blood and blood products under
OPPS.
[sbull] The proposal to establish a separate outlier pool for
community mental health centers(CMHCs).The proposal to apply an
adjustment to increase payment to small rural hospitals' clinic and
emergency room (ER) visit rates to ameliorate the effect of the
sunsetting of the transitional corridor payments.
[sbull] The proposal to reinstitute drug and device coding
requirements.
[sbull] Propose APC assignments and status indicators for numerous
services.
In addition to comments regarding the policy proposals in the
August 12, 2003 proposed rule, we received comments about the
publication date of the proposed rule and the comment period.
Comment: Some commenters objected to the use of the date on which
the August 12, 2003 proposed rule was made public by web posting and by
public display at the Office of the Federal Register as the beginning
of the comment period. They indicated that we should start the comment
period only on the publication of the proposed rule in the Federal
Register because that is where subscribers look for it. They objected
to what they view as a 55-day comment period if it were to start on the
date of Federal Register publication (August 12, 2003). Some commenters
objected to the publication of the proposed rule so late in the year.
They indicated that our publication on August 9 resulted in the comment
period ending so close to the publication deadline for the final rule
that they believed that their comments could not be fully analyzed and
used and would not be as effective as if the proposed rule were
published in June or early July. They urged us to publish the proposed
rule in late spring. Some commenters objected to the scheduling of the
APC Panel meeting so soon after the issuance of the proposed rule
because they felt that it gave them inadequate time to prepare their
presentations for the Panel.
Response: The comment period on a proposed rule begins on the day
that the proposed rule is available for public comment. We believe that
putting the document on display at the Office of the Federal Register
and also making it available on the CMS Web site meets the test of
being publicly available and that, therefore, is the start of the
comment period. The publication of the proposed rule on the internet
makes it available to many more people than routinely access the
Federal Register or can visit the Office of the Federal Register where
the display copy is located. The public had 60 days to comment on the
proposed rule. This is the standard amount of time generally allowed
for comment on notices of proposed rulemaking. Therefore, we do not
believe the public was at a disadvantage or limited in the amount of
time available to make public comments.
Our review of the public comments is extensive, with the comments
being read and considered carefully, often by many staff. We agree that
it is preferable, when possible, to issue the proposed rule as early as
possible. However, the important issue is whether we have sufficient
time to carefully and thoughtfully consider all comments in development
of the final rule, rather than the amount of time between the end of
the comment period and the publication of the final rule.

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

Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the APC group to which the
service is assigned. Each APC weight represents the median hospital
cost of the services included in that APC relative to the median
hospital cost of the services included in APC 0601, Mid-Level Clinic
Visits. The APC weights are scaled to APC 0601 because a mid-level
clinic visit is one of the most frequently performed services in the
outpatient setting.
Section 1833(t)(9)(A) of the Act requires the Secretary to review
the components of the OPPS not less often than annually and to revise
the groups, relative payment weights, and other adjustments to take
into account changes in medical practice, changes in technology, and
the addition of new services, new cost data, and other relevant
information and factors. Section 1833(t)(9)(A) of the Act requires the
Secretary, beginning in 2001, to consult with an outside panel of
experts to review the APC groups and the relative payment weights.
Finally, section 1833(t)(2) of the Act provides that, subject to
certain exceptions, the items and services within an APC group cannot
be considered comparable with respect to the use of resources if the
highest median (or mean cost, if elected by the Secretary) for an item
or service in the group is more than 2 times greater than the lowest
median cost for an item or service within the same group (referred to
as the ``2 times rule'').
We use the median cost of the item or service in implementing this
provision. The statute authorizes the Secretary to make exceptions to
the 2 times rule ``in unusual cases, such as low volume items and
services.''
For purposes of the proposed rule and this final rule we analyzed
the APC groups within this statutory framework.

A. Recommendations of the Advisory Panel on APC Groups

1. Establishment of the Advisory Panel on APC Groups
Section 1833(t)(9)(A) of the Social Security Act (the Act) requires
that we consult with an outside panel of experts, the Panel, to review
the clinical integrity of the APC groups and their

[[Page 63402]]

weights. The Act specifies that the Panel will act in an advisory
capacity. This expert panel, which is to be composed of representatives
of providers subject to the OPPS (currently employed full-time, in
their respective areas of expertise), reviews and advises us about the
clinical integrity of the APC groups and their weights. The Panel is
not restricted to using our data and may use data collected or
developed by organizations outside the Department in conducting its
review.
On November 21, 2000, the Secretary signed the charter establishing
an ``Advisory Panel on APC Groups.'' The Panel is technical in nature
and is governed by the provisions of the Federal Advisory Committee Act
(FACA) as amended (Pub. L. 92-463).
On November 1, 2002, the Secretary renewed the charter. The new
charter indicates that the Panel continues to be technical in nature,
is governed by the provisions of the FACA, may convene ``up to three
meetings per year,'' and is chaired by a Federal official.
To establish the Panel, we solicited members in a notice published
in the Federal Register on December 5, 2000 (65 FR 75943). We received
applications from more than 115 individuals nominating either a
colleague or themselves. After carefully reviewing the applications, we
chose 15 highly qualified individuals to serve on the Panel.
Because of the loss of 6 Panel members in March 2003 due to the
expiration of terms of office, retirement, and a career change, a
Federal Register notice was published on February 28, 2003 (68 FR
9671), requesting nominations of Panel members. From the 40 nominations
we received, 6 new members have been chosen and have been identified on
the CMS web site.
We received one comment regarding our selection of Panel members.
Comment: One commenter stated that Community Mental Health Centers
(CMHCs) have not been represented on the APC Panel even though the
names of qualified nominees have been submitted. The commenter went on
to say that the Federal Register (February 28, 2003, at 68 FR 9671
through 9672) specifically states, ``Qualified nominees will meet those
requirements necessary to be a Panel member. Panel members must be
representatives of Medicare providers (including Community Mental
Health Centers) subject to the OPPS * * * [therefore,] I feel that it
is imperative to have a freestanding CMHC representative on the
Panel.''
Response: The Federal Register notice on the APC Panel to which the
commenter referred, states in section II, Criteria for Nominees, the
following: ``The Panel shall consist of up to 15 members selected by
the Secretary, or designee, from among representatives of Medicare
providers (including Community Mental Health Centers) subject to the
OPPS.'' The language does not mandate that a CMHC representative will
be on the Panel. In the regulation, we simply identified
representatives from CMHCs--or any other organizations--as possible
nominees.
This year, when we requested nominations for the APC Panel, the
list of nominees was long, prestigious, and included representatives
from all aspects of the health care industry: Doctors, nurses, hospital
administrators, coders, etc. Therefore, our choices were difficult;
however, since there are definite Federal guidelines governing our
selections, and specific Panel and Agency needs to address, given the
clinical range of services paid under the OPPS, we were able to
identify the most qualified individuals. Since the needs of the Agency
and the Panel change due to members leaving, we invite all concerned
Medicare providers to continue to nominate qualified individuals when
the need arises.
The Panel's biannual meetings are forums to discuss APCs and
representatives from the CMCHs--and other organizations--are invited to
attend Panel meetings and to make presentations to the Panel on
relevant agenda items.
Comment: The commenter also stated that the APC Panel sets the
payment rates for the outpatient services.
Response: While the Panel is an advisory committee mandated by law
to review the APC groups, and their associated weights, and to advise
the Secretary of Health and Human Services and the Administrator of the
Centers for Medicare & Medicaid Services concerning the clinical
integrity of the APC groups and their weights, the APC Panel does not
set payment rates for outpatient services. The advice provided by the
Panel is considered by us in our development of the annual rulemaking
to update the hospital OPPS. The APC Panel's activities most often
address whether or not the HCPCS codes within the APCs are comparable
clinically and with respect to resource use, assigning new codes to new
or existing APCs, reassigning codes to different APCs, and the
configuring of existing APCs into new APCs.
2. August 2003 Meeting
The APC Panel met on August 22, 2003 to discuss issues presented in
the proposed rule of August 12. We announced the meeting in the Federal
Register on July 25 and invited the public to make presentations to the
Panel on issues discussed in the proposed rule. In this section, we
summarize the issues discussed by the Panel, their recommendations on
those issues, and our decisions with respect to their recommendations.

a. Blood and Blood Products

The Panel heard testimony by suppliers of blood and blood products
and their representatives who expressed significant concerns about the
proposed payment rates, particularly in light of new safety and testing
requirements. These presenters to the Panel recommended that we exclude
blood and blood products from the OPPS and pay for them at reasonable
cost. After listening to the testimony, reviewing the median costs and
proposed payments rate from our hospital claims data, and deliberating
the issue, the Panel recommended that we continue to pay for blood and
blood products within the OPPS. However, the Panel further recommended
that we freeze the payment rates for blood and blood products at 2003
levels for 2004 and 2005 while we undertake further analysis of the
cost data. The Panel also recommended that hospitals be educated on the
proper billing for blood and blood products.
As discussed elsewhere in this final rule, we will accept the
Panel's recommendation with respect to 2004. We will freeze the payment
rates for blood and blood products at the 2003 payment levels. However,
we are not making a decision with respect to 2005 at this time. Any
proposals regarding our 2005 payment rates or policies for these items
will be discussed in our proposed rule for the CY 2005 update. The
Panel also recommended that the APCs for blood and blood products be on
the agenda for the winter 2004 meeting in time for consideration of the
2005 payment rates. We agree to place this item on the agenda for the
next APC Panel meeting.

b. Nuclear Medicine, Brachytherapy, and Radiosurgery Services

(1) Nuclear Medicine APCs and Radiopharmaceuticals
The Panel heard testimony on and considered the proposed
restructuring of the nuclear medicine APCs discussed in the August 12,
2003 proposed rule. The Panel recommended that we move forward with the
categorization system in the proposed OPPS 2004 rule absent strong,
reasoned opposition from provider groups. If strong opposition was
revealed in the public comments,

[[Page 63403]]

the Panel recommended that we maintain the classification system that
is in place for 2003. The Panel also recommended that we change the
HCPCS code descriptors for radiopharmaceuticals to be on a ``per-dose''
basis--not on a ``per-unit'' basis.
We have accepted the Panel's recommendation that we move forward
with the proposed restructuring, after considering public comments on
this issue. As discussed in section II.A.3 of this final rule, we will
implement the restructuring with certain changes to the proposed
reclassification based on our review of the public comments. For
reasons discussed in section VI.B.3 of this final rule, we are not
accepting the Panel's recommendation to change the HCPCS code
descriptors at this time.
The Panel further recommended that APCs for radiopharmaceuticals be
on the agenda for the January 2004 meeting. In preparation for that
meeting, the Panel recommended that our staff analyze the claims for
the nuclear medicine APCs and do the following: Itemize the costs,
determine what proportion of the median cost can be attributed to
radiopharmaceuticals, and present the data at the Panel's January 2004
meeting. The Panel recommended that the issue of packaging the costs of
radiopharmaceuticals under the 2003 threshold of $150 be placed on the
agenda for the Panel's winter 2004 meeting.
We will consider this topic for placement on the agenda for the
Panel's 2004 meeting. As discussed in section VI.B.3 of this rule,
however, we are revising our threshold for packaging
radiopharmaceuticals from $150 to $50.
(2) Brachytherapy Services
The Panel recommended that we review whether the codes for needles
and catheters were included in the payment rate proposed for APC 0313.
The Panel also recommended that we consider outside data presented by
commenters in establishing payment rates for APCs 312 and 651 to arrive
at an appropriate payment rate. See our discussion, below, regarding
APCs 312, 313, and 651 and our considerations concerning the claims
used to set the relative weights for these APCs.
The Panel further recommended that we discontinue use of G codes
for prostate brachytherapy and use appropriate Current Procedural
Terminology (CPT) codes paid in clinical APCs when making payment for
these services. The Panel recommended we pay separately for
brachytherapy sources for the treatment of prostate cancer in the same
manner by which we are paying separately for the brachytherapy sources
for the treatment of other types of cancer. We have accepted the
Panel's recommendation. As discussed in section II.B.4 of this final
rule, we will discontinue use of the special G codes for prostate
brachytherapy and allow separate payment for the sources used in these
treatments.
(3) Radiation Therapy and Radiosurgery APC Issues
The APC Panel heard testimony concerning radiation treatment
delivery codes CPT 77412 through 77416, which we proposed to assign to
APC 0301 and CPT 77417, assigned to APC 0260. The presenter stated that
many hospital billing departments had not updated their charge masters
since the inception of OPPS to reflect the costs of newer technology,
specifically with respect to the use of x-ray guidance during external
beam radiation treatment delivery. The APC Panel recommended that we
review whether the use of x-ray guidance (as opposed to CT or
ultrasound guidance) for radiation therapy is being properly reported
and included in the payment rates for the radiation treatment delivery
codes. We agree that we should review these issues further and will do
so in preparation for the 2005 update. However, we did not receive
sufficient or convincing information upon which to base a change for
2004. Therefore, we encourage interested parties to submit any
additional information on the use of these codes and cost of providing
these services in the outpatient hospital setting in response to this
final rule with comment period.
The APC Panel also heard testimony concerning the proposed payment
rate for CPT 77418, assigned to APC 0412 (IMRT treatment delivery). The
presenter stated that the proposed amount was too low. However, the APC
Panel supported the proposal in the absence of compelling evidence that
the rate derived from the claims data is wrong. We concur with the APC
Panel's recommendation and will retain CPT 77418 in APC 0412. We used
approximately 113,000 claims to set the weight for this procedure,
which we believe is a sufficiently robust set of data.
During this section of the APC Panel's August 22 meeting, the Panel
members also heard testimony concerning HCPCS codes G0251 and G0173
used to report stereotactic radiosurgery. The APC Panel supported the
proposed payment rates for these codes until more data become
available. The APC Panel also asked to review this issue further at its
winter 2004 meeting. We discuss stereotactic radiosurgery in further
detail below. We have decided to make certain changes to the payment
for these procedures. However, the APC assignment for these codes for
2004 is interim final. We solicit comments on the 2004 assignments, and
we will also include this on the APC Panel's agenda for its winter 2004
meeting.
The final topic in this section of the APC Panel's August 22
meeting pertained to HCPCS codes G0242 and G0243 (multi source photon
stereotactic planning). The APC Panel was requested to recommend that
we combine the coding for these procedures under one code, with the
payment for the new code derived by adding the payment for G0242 and
G0243 together. The information presented to the APC Panel stated that
the services represented by the two G codes represent one continuous
procedure, that it is a surgical procedure, and the cost center mapping
should be to a surgical cost center. The APC Panel will review this
request at its winter 2004 meeting. The APC Panel is interested in
receiving comments on this topic from professional societies
representing neurosurgeons, radiation oncologists and others concerning
this proposal.

c. Payment and Coding for Drug Administration and for Certain Drugs,
Biologicals, and Radiopharmaceuticals

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

[[Page 63404]]

the packaging of drugs and the adequacy of payment for separately paid
drugs. However, in the absence of alternative proposals by us, the APC
Panel did not make further recommendations on that issue. The APC Panel
requested that we present alternative options during the winter 2004
meeting, including a new APC structure for drugs and
radiopharmaceuticals. As for specific drug issues, after hearing
testimony concerning the codes for Baclofin refill kits, the APC Panel
recommended that we delete code C9010 and retain the other codes for
this product used in the treatment of Parkinson's disease and
spasticity.
We have carefully considered each of the APC Panel's
recommendations along with comments on the subject of drug
administration and payment for drugs, biologicals, and
radiopharmaceuticals. For the reasons discussed more fully elsewhere in
this final rule, we have decided to accept the APC Panel's
recommendations that we continue using Q0081 through Q0084 in 2004;
that we continue to define these codes on a per-visit, rather than per-
day basis; that we delete code Q0085; and that we delete code C9010. We
have decided to continue paying for the drug administration ``Q'' codes
according to our current rules and discuss that decision further in
section VI.B.4 of this final rule. We will consider the Panel's
recommendation that we investigate other approaches for paying for
drugs and radiopharmaceuticals. However, for 2004, we have determined
that we will pay separately under their own APCs for drugs, biologicals
and radiopharmaceuticals for which the median per day costs are in
excess of $50.
(4) Device-Related Procedures
The APC Panel heard testimony from the device manufacturing
community and others concerning payment for procedures that involve the
implantation of devices. The presenters discussed concerns that
affected such procedures in general, such as the absence of a proposal
to limit payment reductions for such procedures between 2003 and 2004
and issues related to the hospital claims for these procedures.
Presentations to the APC Panel also discussed inadequacies in the
claims data or our methodology for using the claims data to set
relative weights for specific device-related APCs (APCs 0046, 0107,
0108, 0222, 0225, 0385, and 0386. Presenters urged that the APC Panel
advise us to use the best external data possible, including proprietary
data that would be held confidential. Presentations to the APC Panel
also addressed the multiple surgical reduction with respect to device-
related APCs.
The APC Panel recommended:
[sbull] That we use credible external data that can be made
publicly available for establishing the median costs for APCs 0107 and
0386.
[sbull] That we change the status indicator for CPT 61885 so that
it is not subject to the multiple procedure discounting.
[sbull] That we assign the new CPT codes for central venous access
devices into appropriate APCs, either clinical APCs or new technology
APCs.
[sbull] That the APC assignments of the new central venous access
devices be reviewed by the APC Panel at its next meeting.
[sbull] That we provide the APC Panel with median cost data for all
APCs in spreadsheet format for its consideration in advance of and
during its next meeting.
[sbull] That we review the presenter's suggestions with respect to
APC 0046 and make recommendations for any changes to this APC to the
APC Panel at its next meeting.
[sbull] That we change the status indicator for CPT 93571 and 93572
from ``N'' (packaged status) to an appropriate indicator that allows
separate payment under the APC.
We considered the final set of recommendations from the APC Panel's
August 2003 meeting and have accepted several of them. Specifically, we
decided to use external data in setting the median cost for 2004 for
APC 0107. We have not used external data for APC 0386. Each of these
decisions is discussed in greater detail elsewhere in this final rule.
We accepted the Panel's recommendation to change the status indicator
for CPT 61885. In order to do so, we moved this code into its own APC,
0039, Implant neurostim, one array. We have assigned the new CPT codes
for central venous access devices to New Technology APCs as displayed
in Addendum B. The range of new CPT codes is 36555 through 36597, and
the new APC assignments include APCs 0032, 0115, 0109, 0187, and 1541.
The assignment of these codes is subject to public comment and will
be placed on the APC Panel's agenda for its next meeting. During that
meeting, we will also provide the APC Panel with spreadsheet data on
the median costs of all APCs. With respect to APC 0046, we are
sympathetic to the presenter's concerns. However, we were not provided
with data that we considered sufficient to assess whether a new coding
structure with increased payment rates is warranted for the treatment
of bone fractures with external fixation devices. However, we would
support the specialty societies' efforts to request changes to the
existing CPT coding structure. For reasons discussed elsewhere, we have
not accepted the Panel's recommendation with respect to CPT codes 93571
and 93572.
Comment: An association voiced concern that the Panel meeting on
August 22, 2003 came too soon after the publication of the August 12,
2003 proposed rule for its members to prepare adequately for
presentation to the Panel.
Response: The agency must schedule the Panel meetings sufficiently
in advance of the meeting in order to provide ample notice to the
public of the meeting and to allow sufficient time for the Panel
members to arrange their schedules. We attempted to balance those needs
with the goal of conducting the first mid-year meeting of the Panel
during the comment period so that issues discussed in the August 12,
2003 proposed rule could be topics for the Panel's consideration and
interested parties' testimony before the Panel. The July 25, 2003
Federal Register notice (68 FR 44089) announced the second 2003 meeting
of the APC Panel, which we believe provided sufficient advance notice
of the meeting.
While it is true that the proposed rule was placed on display on
August 6, published on August 12, and the meeting was held on August
22, 2003, many interested parties attended the meeting and presented
thoughtful comments on most issues discussed in the proposed rule.
Nevertheless, we will take this comment into consideration for future
planning of APC Panel meetings.
Comment: Several commenters expressed concern about the length of
the meeting and time allotted on the agenda to particular issues. One
commenter stated that scheduling only [1] day for Panel deliberations
was inadequate. A commenter was concerned that device-related issues
were relegated to the last hour, that presenters were given only 2
minutes, and that there was little time for Panel discussion and
consideration of the issues presented.
Response: We appreciate the commenter's interest in ensuring that
adequate time be allowed for the public to present issues for the
Panel's consideration and for the Panel to have sufficient time for
their discussion and deliberation.
Although the device issues were scheduled for the last hour of the
meeting, the Panel members received the written presentations
beforehand, and had an opportunity to review them

[[Page 63405]]

before the meeting. Placing a limit on presentations is a prerogative
of the Panel Chair and must at times be done in order to allow all
interested parties to make presentations on agenda items. However, we
will take all of the concerns into consideration when scheduling future
meetings.
3. Recommendations of the Advisory Panel and Our Responses

January 2003 Meeting

In this section, we consider the Panel's recommendations affecting
specific APCs. The Panel based its recommendations on claims data for
the period April 1, 2002 through September 30, 2002. This data set
comprises a portion of the data that will be used to set 2004 payment
rates. APC titles in this discussion are those that existed when the
APC Panel met in January 2003. In a few cases, APC titles have been
changed for this final rule, and, therefore, some APCs do not have the
same title in Addendum A as they have in this section.
The Panel's agenda included APCs that our staff believed violated
the 2 times rule as well as APCs for which comments were submitted. As
discussed below, the Panel sometimes declined to recommend a change in
an APC even though the APC appeared to violate the 2 times rule. In
section II.B of the August 12, 2003 proposed rule, we discuss our
proposals regarding the 2 times rule based on the April 1 through
December 31, 2002 data that we used to determine the final 2004 APC
relative weights. Section II.B (68 FR 47977) of the August 12, 2003
proposed rule also details the criteria we used when deciding to
propose exceptions to the 2 times rule.
Unless otherwise specified in each of the following discussions of
the APC Panel's recommendations, our proposed actions are finalized in
this final rule.

a. Debridement and Destruction

APC 0012: Level I Debridement & Destruction
APC 0013: Level II Debridement & Destruction
We expressed concern to the Panel that APCs 0012 and 0013 appear to
violate the 2 times rule. In order to remedy these violations, we asked
the Panel to consider the following changes:
(1) Move the following codes from APC 0013 to APC 0012:

------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
11001..................................... Debride infected skin add-
on.
11302..................................... Shave skin lesion.
15786..................................... Abrasion, lesion, single.
15793..................................... Chemical peel, nonfacial.
15851..................................... Removal of sutures.
16000..................................... Initial treatment of
burn(s).
16025..................................... Treatment of burn(s).
------------------------------------------------------------------------

(2) Move code 11057 (Trim skin lesions, over 4) from APC 0012 to
APC 0013.
The Panel agreed with our staff and recommended that we make these
changes. We proposed to accept the Panel's recommendation.
However, we received comments from a group of hospitals concerning
the proposed change for CPT code 15851, removal of sutures under
anesthesia (other than local), same surgeon. In their comments, the
hospitals noted that the descriptor for CPT codes 15851 and 15850
(removal of sutures under anesthesia (other than local), other surgeon,
were virtually identical with the exception of which surgeon performs
the suture removal. The commenters did not believe that the identity of
the surgeon could result in a significant difference in resource costs
to the hospital. Our clinical staff agree and believe that the
difference in hospital median costs derived from our claims data may be
due to a misunderstanding about the coding. For 2004, we have decided
that we will place both CPT codes for suture remove under anesthesia in
APC 0016.

b. Excision/Biopsy

APC 0019: Level I Excision/Biopsy
APC 0020: Level II Excision/Biopsy
APC 0021: Level III Excision/Biopsy
We expressed concern to the Panel that APCs 0019 and 0020 appear to
violate the 2 times rule. In order to remedy these violations, we asked
the Panel to consider the following changes:
(1) Move the following HCPCS codes from APC 0019 to a new APC:

------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
11755..................................... Biopsy, nail unit.
11976..................................... Removal of contraceptive
cap.
24200..................................... Removal of arm foreign body.
28190..................................... Removal of foot foreign
body.
56605..................................... Biopsy of vulva/perineum.
56606..................................... Biopsy of vulva/perineum.
69100..................................... Biopsy of external ear.
------------------------------------------------------------------------

The APC Panel recommended that we make these changes, and we
proposed to do so in our August 12, 2003 proposed rule.
(2) Move the following HCPCS codes from APC 0020 to APC 0021:

The Panel recommended that we not change the structure of APCs
0019, 0020, and 0021 at this time in the interest of preserving
clinical homogeneity. In August, we proposed to accept the Panel's
recommendation that we make no changes to the structure of these APCs
for 2004. However, following our review of the median costs developed
for the final rule, using a more complete set of claims for services
from April through December 2002, we determined that CPT codes 11404
and 11623 should be moved to APC 0021. We plan to place these APCs on
the Panel's agenda for the 2005 update.

c. Thoracentesis/Lavage Procedures and Endoscopies

APC 0071: Level I Endoscopy Upper Airway
APC 0072: Level II Endoscopy Upper Airway
APC 0073: Level III Endoscopy Upper Airway
We expressed concern to the Panel that APCs 0071 and 0072 appear to
violate the 2 times rule. In order to remedy these violations, we asked
the Panel to consider the changes below.
Move the following HCPCS codes as described below:

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

The Panel recommended that we make the above changes. We proposed
to accept the Panel's recommendation, with the exception of CPT code
31720. After reviewing an additional quarter of claims data that were
not available at the time the Panel convened, placement of CPT code
31720 into APC 0072 better reflects its resource consumption.
Therefore, we proposed to keep CPT code 31720 in APC 0072.

[[Page 63406]]

d. Cardiac and Ambulatory Blood Pressure Monitoring

APC 0097: Cardiac and Ambulatory Blood Pressure Monitoring
We expressed concern to the Panel that APC 0097 appears to violate
the 2 times rule. We asked the Panel to recommend options for resolving
this violation and suggested splitting APC 0097 into two APCs. The
Panel recommended that the structure of APC 0097 should not be changed
at this time based on clinical homogeneity considerations. We proposed
to accept the Panel's recommendation that we make no changes to APC
0097 for 2004. We received no comments disagreeing with this proposal,
and we will adopt it for 2004. We also plan to place this APC on the
Panel's agenda for the 2005 update.

e. Electrocardiograms

APC 0099: Electrocardiograms
APC 0340: Minor Ancillary Procedures
We expressed concern to the Panel that APC 0099 appears to violate
the 2 times rule. We asked the Panel to recommend options for resolving
this violation, and suggested moving CPT code 93701 (Bioimpedance,
thoracic) from APC 0099 to APC 0340. The Panel believed, however, that
the structure of APC 0099 should not be changed at this time based on
clinical homogeneity considerations. We proposed to accept the Panel's
recommendation that we make no changes to APC 0099 for 2004. We plan to
place this APC on the Panel's agenda for the 2005 update.

f. Cardiac Stress Tests

APC 0100: Cardiac Stress Tests
A presenter to the Panel, who represented a device manufacturer,
requested that we move CPT code 93025 (Microvolt t-wave assessment) out
of APC 0100. The presenter believes that the actual cost for this
procedure is significantly higher than for other procedures in the same
APC. Since this technology is often billed in conjunction with other
procedures (for example, stress tests, CPT code 93017), few single-APC
claims were available to evaluate the presenter's contention.
The Panel believed the data presented are insufficient to merit
moving the code and recommended that CPT code 93025 remain in APC 0100
until more data are available for review. We proposed to accept the
Panel's recommendation that CPT code 93025 remain in APC 0100 until
more claims data become available for review. We will adopt this
proposal for 2004.

g. Revision/Removal of Pacemakers or Automatic Implantable Cardioverter
Defibrillators

APC 0105: Revision/Removal of Pacemakers, AICD, or Vascular
We asked the Panel to review the codes within APC 0105 for an
apparent violation of the 2 times rule, stating that we believe the
apparent violation is a result of incorrectly coded claims. The Panel
agreed and recommended no changes to APC 0105 at this time. We proposed
to accept the Panel's recommendation that we make no changes to APC
0105 until more accurate claims data become available and support the
need for a change. We will adopt this proposal for 2004.

h. Sigmoidoscopy

APC 0146: Level I Sigmoidoscopy
APC 0147: Level II Sigmoidoscopy
We expressed concern to the Panel that relatively simple procedures
such as anoscopy and rigid sigmoidoscopy have higher median costs than
more complex procedures such as flexible sigmoidoscopy. Panel members
suggested the high costs may be due to the need to perform an otherwise
minor office procedure in a hospital setting (for example, due to the
clinical condition of the patient). Panel members also suggested that
claims may be incorrectly coded because coding instructions do not
clearly state how to code when the procedure performed is not as
extensive as the procedure planned (for example, when a colonoscopy is
planned but only a sigmoidoscopy is performed). In these cases, coding
instructions are unclear as to whether the planned procedure should be
reported with a modifier for reduced services or with the code for the
actual procedure performed.
The Panel recommended that we make no changes to APCs 0146 and 0147
at this time. We proposed to accept the Panel's recommendation that we
make no changes to APCs 0146 and 0147. We will adopt this proposal for
2004. However, we plan to place this APC on the Panel's agenda for the
2005 update.
i. Anal/Rectal Procedures
APC 0148: Level I Anal/Rectal Procedure
APC 0149: Level III Anal/Rectal Procedure
APC 0155: Level II Anal/Rectal Procedure
We expressed concern to the Panel that APCs 0148 and 0149 appear to
violate the 2 times rule. We asked the Panel to recommend options for
resolving these violations, and suggested rearranging some of the CPT
codes within APCs 0148, 0149, and 0155. The Panel recommended that we
move CPT code 46040 (Incision of rectal abscess) from APC 0155 to APC
0149. We proposed to accept the Panel's recommendation, and we will
adopt it for 2004.

j. Insertion of Penile Prosthesis

APC 0179: Urinary Incontinence Procedures
APC 0182: Insertion of Penile Prosthesis
A presenter to the Panel representing manufacturers and providers
requested that APC 0182 be split into two APCs, based on whether the
procedure used inflatable or non-inflatable penile prostheses. The
presenter stated that the complexity of the procedure, the cost of the
devices, and related resources were all significantly higher with
inflatable prostheses.
The Panel recommended that we eliminate APCs 0179 and 0182 and
create two new APCs, 0385 and 0386, that contain the following CPT
codes:

APC 0385
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
52282..................................... Cystoscopy, implant stent.
53440..................................... Correct bladder function.
53444..................................... Insert tandem cuff.
54400..................................... Insert semi-rigid
prosthesis.
54416..................................... Remv/repl penis contain
prosthesis.
------------------------------------------------------------------------

APC 0386
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
53445..................................... Insert uro/ves nck
sphincter.
53447..................................... Remove/replace ur sphincter.
54401..................................... Insert self-contained
prosthesis.
54405..................................... Insert multi-comp penis
prosthesis.
54410..................................... Remove/replace penis
prosthesis.
------------------------------------------------------------------------

We proposed to accept the Panel's recommendation to eliminate APCs
0179 and 0182 and create two new APCs, 0385 and 0386, containing the
above CPT code configurations.

k. Surgical Hysteroscopy

APC 0190: Surgical Hysteroscopy
A presenter to the Panel, who represented a device manufacturer,
requested that we move CPT code 58563 (Hysteroscopy, ablation) from APC
0190 to a higher paying APC. The presenter noted that endometrial
cryoablation is included in a new technology APC, while a thermal
ablation system is included with older, less costly

[[Page 63407]]

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

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

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

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

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

The Panel agreed with our staff, and we proposed to accept the
Panel's recommendation to move CPT codes 57109, 58920, and 58925 from
APC 0202 to APC 0195. We will adopt the Panel's recommendation for
2004.

m. Nerve Injections

APC 0203: Level IV Nerve Injections
APC 0204: Level I Nerve Injections
APC 0206: Level II Nerve Injections
APC 0207: Level III Nerve Injections
Several commenters suggested changes in the configuration of APCs
0203, 0204, 0206, and 0207 because of concerns that the current
classifications result in payment rates that are too low relative to
the resource costs associated with certain procedures in these APCs.
Several of these APCs include procedures associated with drugs or
devices for which pass-through payments are scheduled to expire in
2003.
We requested the Panel's input regarding whether or not these APCs
should be restructured. The Panel stated that the current configuration
of APCs 0203, 0204, 0206, and 0207 is more clinically cohesive than the
previous year's configuration and that more data should be collected
before making any changes. We proposed to accept the Panel's
recommendation that we make no changes to the structure of these APCs
until more data become available for review. We will adopt the Panel's
recommendation for 2004.

n. Laminotomies and Laminectomies; Implantation of Pain Management
Device

APC 0208: Laminotomies and Laminectomies
APC 0223: Implantation of Pain Management Device
A presenter to the Panel, who represented a device manufacturer,
requested that we move CPT code 62351 (Implant spinal canal catheter)
from APC 0208 to APC 0223 to better capture the device cost that may be
involved with the procedure. The Panel believed the data were
insufficient to merit moving the code and recommended that CPT code
62351 remain in APC 0208 until more data are available for review. We
proposed to accept the Panel's recommendation that CPT code 62351
remain in APC 0208 until more claims data become available for review.
We will adopt the Panel's recommendation for 2004.

o. Extended EEG Studies and Sleep Studies; Electroencephalogram

APC 0209: Extended EEG Studies and Sleep Studies, Level II
APC 0213: Extended EEG Studies and Sleep Studies, Level I
APC 0214: Electroencephalogram
We expressed concern to the Panel that APC 0213 appears to
minimally violate the 2 times rule. In order to remedy this violation,
we asked the Panel to consider a commenter's suggestion that we move
CPT code 95955 (EEG during surgery) from APC 0214 to APC 0213. The
Panel agreed with the commenter's suggestion. We proposed to accept the
Panel's recommendation to move CPT code 95955 from APC 0214 to APC
0213.

p. Nerve and Muscle Tests

APC 0215: Level I Nerve and Muscle Tests
APC 0216: Level III Nerve and Muscle Tests APC 0218:
Level II Nerve and Muscle Tests
We expressed concern to the Panel that APC 0218 appears to violate
the 2 times rule. In order to remedy this violation, one commenter
requested that we move CPT codes 95921 (Autonomic nerve function test)
and 95922 (Autonomic nerve function test) from APC 0218 to APC 0216,
while another

[[Page 63408]]

commenter requested that we move CPT code 95904 (Sensory nerve
conduction test) from APC 0215 to APC 0218. Alternatively, our staff
suggested to the Panel that the following CPT codes be moved from APC
0218 to APC 0215.

------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
95858..................................... Tensilon test & myogram.
95870..................................... Muscle test, nonparaspinal.
95900..................................... Motor nerve conduction test.
95903..................................... Motor nerve conduction test.
------------------------------------------------------------------------

After considering all of the above proposals, the Panel recommended
that we move CPT codes 95858, 95870, 95900, and 95903 from APC 0218 to
APC 0215. We proposed to accept the Panel's recommendation.

q. Implantation of Drug Infusion Device

APC 0227: Implantation of Drug Infusion Device
APC 0227 contains only two CPT codes: Implantation of programmable
spine infusion pumps, 62362, and Implantation of non-programmable spine
infusion pumps, 62361. A commenter requested that we split APC 0227
into two APCs to recognize the cost difference between CPT code 62361
and CPT code 62362. However, since our cost data do not show a
significant cost difference between the two devices and APC 0227 does
not violate the 2 times rule, the Panel recommended that CPT codes
62361 and 62362 remain in APC 0227. We proposed to accept the Panel's
recommendation, which we will adopt for 2004.

r. Ophthalmologic APCs

APC 0230: Level I Eye Tests & Treatments
APC 0235: Level I Posterior Segment Eye Procedures
APC 0236: Level II Posterior Segment Eye Procedures
APC 0698: Level II Eye Tests & Treatments
We advised the Panel that APCs 0230 and 0235 violate the 2 times
rule but that the current configuration of these APCs reflects the
Panel's previous recommendations. A presenter to the Panel, who
represented a device manufacturer, expressed concern that the pass-
through device category ``New Technology: Intraocular Lens'' was
discontinued and these devices are now packaged. The presenter asked
the Panel to recommend that future new intraocular lens devices be
considered for a new pass-through category.
To remedy the violations to the 2 times rule, we asked the Panel to
consider moving CPT code 67820 (Revise eyelashes) from APC 0230 to APC
0698 and CPT code 67110 (Repair detached retina) from APC 0235 to APC
0236. The Panel recommended that we make these changes. We proposed to
accept the Panel's recommendation and monitor the data for APC 0235 for
possible review next year. We will adopt this recommendation for 2004.
The Panel also acknowledged that making recommendations concerning
pass-through categories is beyond their purview.

s. Skin Tests and Miscellaneous Red Blood Cell Tests; Transfusion
Laboratory Procedures

APC 0341: Skin Tests and Miscellaneous Red Blood Cell Tests
APC 0345: Level I Transfusion Laboratory Procedures We advised the
Panel that APCs 0341 and 0345 minimally violate the 2 times rule and
suggested moving several CPT codes within these APCs into a new APC
because a commenter expressed concern over the combination of skin
tests and miscellaneous red blood cell tests in APC 0341, asserting
that services within this APC cannot be considered comparable with
respect to resource usage.
In order to remedy these violations to the 2 times rule, we
suggested moving CPT code 86901 (Blood typing, Rh (D)) from APC 0345 to
a new APC along with the following CPT codes from APC 0341:

------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
86880..................................... Coombs test, direct.
86885..................................... Coombs test, indirect,
qualitative.
86886..................................... Coombs test, indirect,
titer.
86900..................................... Blood typing, ABO.
------------------------------------------------------------------------

The Panel recommended that we make the above changes. We proposed
to accept the Panel's recommendation to move HCPCS codes 86880, 86885,
86886, and 86900 from APC 0341 to new APC 0409 and to move CPT code
86901 (Blood typing, Rh (D)) from APC 0345 to new APC 0409. We will
adopt the Panel's recommendation for 2004.

t. Otorhinolaryngologic Function Tests

APC 0363: Level I Otorhinolaryngologic Function Tests
APC 0660: Level II Otorhinolaryngologic Function Tests
We expressed concern to the Panel that APC 0660 appears to violate
the 2 times rule and suggested moving CPT codes 92543 (Caloric
vestibular test) and 92588 (Evoked auditory test) from APC 0660 to APC
0363. The Panel recommended that we make these CPT code changes. We
proposed to accept the Panel's recommendation to move CPT codes 92543
and 92588 from APC 0660 to APC 0363, and we will adopt the proposal for
2004.

u. Tube Changes and Repositioning

APC 0121: Level I Tube changes and Repositioning
APC 0122: Level II Tube changes and Repositioning
We expressed concern to the Panel that APC 0121 appears to violate
the 2 times rule. In order to remedy this violation, we suggested
moving the following CPT codes from APC 0121 to APC 0122:

------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
47530..................................... Revise/reinsert bile tube.
50688..................................... Change of ureter tube.
51710..................................... Change of bladder tube.
62225..................................... Replace/irrigate catheter.
------------------------------------------------------------------------

The Panel recommended that we make these CPT code changes. We
proposed to accept the Panel's recommendation to move CPT codes 47530,
50688, 51710, and 62225 from APC 0121 to APC 0122. We will adopt the
proposal for 2004.

v. Myelography

APC 0274: Myelography
We advised the Panel that APC 0274 minimally violates the 2 times
rule and suggested moving CPT codes 72285 (X-ray c/t spine disk) and
72295 (X-ray c/t spine disk) from APC 0274 to a new APC. A presenter,
from an organization representing radiologists, agreed with our
proposal. The Panel recommended that we make these CPT code changes. We
proposed to accept the Panel's recommendation to move CPT codes 72285
and 72295 from APC 0274 to new APC 0388. We will adopt the
recommendation for 2004.

w. Therapeutic Radiologic Procedures

APC 0296: Level I Therapeutic Radiologic Procedures
APC 0297: Level II Therapeutic Radiologic Procedures
We advised the Panel that APCs 0296 and 0297 appear to minimally
violate the 2 times rule as a result of changes recommended by the
Panel and adopted by us last year. The Panel recommended that no
changes be made to APCs 0296 and 0297 in the interest of preserving the
clinical homogeneity of these APCs. We proposed to accept the Panel's
recommendation that we make no CPT code changes to APCs 0296 and 0297,
and we are adopting the proposal for 2004.

x. Vascular Procedures; Cannula/Access Device Procedures

APC 0103: Miscellaneous Vascular Procedures

[[Page 63409]]

APC 0115: Cannula/Access Device Procedures
A commenter requested that we move CPT code 36860 (External cannula
declotting) from APC 0103 to APC 0115, asserting that this procedure is
more similar to other procedures in APC 0115 and does not fit well in
its current miscellaneous APC. The Panel found that the claims data
were insufficient to support moving CPT code 36860 from APC 0103 to the
higher paying APC 0115 and recommended that CPT code 36860 remain in
APC 0103 until more data are available for review. We proposed to
accept the Panel's recommendation that CPT code 36860 remain in APC
0103 until more claims data become available for review. We will adopt
this proposal for 2004.

y. Angiography and Venography Except Extremity

APC 0279: Level II Angiography and Venography except Extremity
APC 0280: Level III Angiography and Venography except Extremity
APC 0668: Level I Angiography and Venography except Extremity
A commenter requested that we move CPT code 75978 (Repair venous
blockage) from APC 0668 to APC 0280 and that we move CPT code 75774
(Artery x-ray, each vessel) from APC 0668 to APC 0279. A presenter to
the Panel testified that CPT code 75978 is commonly used for dialysis
patients and often requires multiple intraoperative attempts to
succeed; thus, it should be paid under APC 0280. The Panel believed
that APCs 0279, 0280, and 0668 were clinically homogenous and
recommended that we only make changes after consulting with experts in
the field. We proposed to accept the Panel's recommendation to make no
changes to APCs 0279, 0280, and 0668 until we have consulted with
experts in the field. We plan to place these APCs on the Panel's agenda
for the 2005 update.

z. Computed Tomography (CT), Magnetic Resonance (MR), and Ultrasound
Guidance Procedures Currently Packaged

APC 0332: Computerized Axial Tomography and Computerized
Angiography without Contrast Material
APC 0335: Magnetic Resonance Imaging, Miscellaneous
APC 0268: Ultrasound Guidance Procedures
A presenter to the Panel expressed concern that the packaging of
guidance procedures for tissue ablation does not recognize the
significant difference in cost and time required to perform each
procedure (for example, MRI vs. CT). This presenter believed that
hospitals needed more education on the appropriate application of these
codes. Another commenter requested that CPT codes 76362, 76394, and
76490 be changed from a status indicator of N to a status indicator of
S and be included in an appropriate clinical or new technology APC.
The Panel agreed with the above comments and stated that the
packaging of these three procedures made it difficult for hospitals to
track their use for the purpose of allocating funds. The Panel
recommended changing the following CPT codes from a packaged status (N
status indicator) to a separately payable status (S status indicator)
within the indicated APCs:

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

We proposed to accept the Panel's recommendation to change HCPCS
codes 76362, 76394, and 76490 from a packaged status to a separately
payable status as indicated above. HCPCS 76490 has been deleted for
2004. However, we will pay for it under APC 0268 during the grace
period from January through March 2004.

aa. Magnetic Resonance Imaging and Magnetic Resonance Angiography
Without Contrast

APC 0336: Magnetic Resonance Imaging and Magnetic Resonance
Angiography without Contrast
A commenter requested that we change CPT code 76393 (MR guidance
for needle placement) from a packaged status to a separately payable
status within APC 0336. Based on clinical homogeneity considerations,
the Panel agreed with the commenter and recommended that CPT code 76393
be changed from a status indicator of N to a status indicator of S and
placed in APC 0335. We proposed to accept the Panel's recommendation.

bb. Plain Film Except Teeth; Plain Film Except Teeth Including Bone
Density Measurement

APC 0260: Level I Plain Film Except Teeth
APC 0261: Level II Plain Film Except Teeth Including Bone Density
Measurement
APC 0272: Level I Fluoroscopy
A commenter requested that we move CPT codes 76120 (Cine/video x-
rays) and 76125 (Cine/video x-rays add-on) from APC 0260 to APC 0261.
However, a presenter to the Panel argued that these CPT codes are
fluoroscopic procedures that should not be grouped with Level I
radiography procedures. The Panel recommended that we move CPT code
76120 from APC 0260 to APC 0272 and that CPT code 76125 remain in APC
0260. This change makes the APCs more clinically coherent. We proposed
to accept the Panel's recommendation, and we will adopt the proposal
for 2004.

cc. Chemotherapy Administration by Other Technique Except Infusion

APC 0116: Chemotherapy Administration by Other Technique Except
Infusion
A presenter to the Panel requested that we split APC 0116 into
three APCs according to the method of administration: (a) Subcutaneous
or intramuscular administration (CPT code 96400); (b) ``push''
administration (CPT code 96408); and (c) central nervous system
administration (CPT code 96450). The presenter also requested that
existing CPT codes should replace the more nonspecific Q codes for
administration of chemotherapy because the CPT codes will provide more
detailed data on methods of chemotherapy administration, which could be
used for future payment policy decisions. Another presenter agreed with
this request and stated that CPT codes are preferable to Q codes
because other payers require CPT codes.
The Panel agreed with the above suggestions to split APC 0116 into
3 APCs according to the method of

[[Page 63410]]

administration. The Panel recommended that we require hospitals to use
the existing CPT codes (for example, 96400, 96408, and 96450) for
administration of chemotherapy and map them to APCs 0116, 0117, and
0118, as appropriate. The Panel also recommended that payment rates be
based on current Q code cost data until cost data for the CPT codes are
available. These cost data will be used to determine whether to change
the APC structure for chemotherapy administration.
We proposed not to accept the Panel's recommendations to split APC
0116 into three APCs and to use CPT codes for administration of
chemotherapy. We will consider such a split in the future but would
like to first address the administration of drugs issue. Based on the
comments we received on our proposed drug administration coding, we
believe that making a change in APC 0116 will be too complicated and
burdensome for hospitals at this time. (See a full discussion of this
in section VI.B.4 of this final rule.)
We will consider such a split for APC 0116 for CY 2005. We also
believe the use of CPT codes will be burdensome to hospitals, will
require extensive education, and will result in a significant amount of
miscoding. The CPT codes for infusion therapy are based on the service
furnished per hour. We do not believe that all hospitals routinely
record the start and stop time for infusion therapy and that doing so
in order to be able to bill the proper number of hours of infusion
therapy could be very burdensome for them. Moreover, the historic cost
data on which we base the payment for the service are reported on a per
visit basis (much easier to cull from the record than the number of
hours of service) and if we changed to CPT codes for these services, we
will be unable to convert the charge/cost data now on a per visit basis
to a per hour basis (as required by the CPT code) for budget neutrality
purposes. See section VI of this final rule for further discussion on
payments for drugs and drug administration.

dd. Capturing the Costs of Drugs, Biologicals and Radiopharmaceuticals
Packaged Into APCs

APC 0290: Level I Diagnostic Nuclear Medicine Excluding Myocardial
Scans
APC 0291: Level II Diagnostic Nuclear Medicine Excluding Myocardial
Scans
APC 0292: Level III Diagnostic Nuclear Medicine Excluding
Myocardial Scans
APC 0294: Level II Therapeutic Nuclear Medicine
APC 0666: Myocardial Add-on Scans
At the January 2003 meeting, we told the Panel that APCs 0290 and
0291 appear to violate the 2 times rule. Several presenters to the
Panel expressed concern that our cost data are inadequate because of
confusion over coding due to changes in codes and coding instructions
for these procedures, poor hospital reporting of radiopharmaceutical
use, and the use of single (not multiple) claims in determining costs.
One presenter claimed that the current cost data used for CPT code
78122 (Whole blood volume determination) underestimated real costs
because of confusion about whether to code radiopharmaceuticals on a
``per dose'' basis or ``per millicurie'' basis. This presenter
requested that we move CPT code 78122 from APC 0290 to the higher
paying APC 0292.
Other presenters agreed with these concerns and stated they were
applicable to payments for all drugs, not just radiopharmaceuticals.
These commenters were also concerned about the loss of drug-specific
data due to packaging because hospitals will have no incentive to code,
and thereby identify, packaged drugs.
Pass-through payments for 236 drugs, biologicals, and
radiopharmaceuticals expired as of 2003, were then paid either
separately or packaged with the procedures with which they are
associated. Drugs and radiopharmaceuticals with median costs for
administration of $150 or less were packaged. Beginning in 2003, claims
data do not provide specific cost information for packaged items. We
requested input from the Panel on methods for determining drug costs in
the future.
Panel members were concerned that packaging the costs of
radiopharmaceuticals into procedures would result in underpayments for
the service because we lack adequate data on the cost of
radiopharmaceuticals. They were also concerned about creating
incentives to use radiopharmaceuticals based on cost rather than
clinical efficacy. The Panel recommended that we consider grouping
drugs and radiopharmaceuticals into new APCs taking into account both
their cost and clinical use. The Panel further recommended that, if new
APCs for radionuclides are created, the descriptors should be as simple
as possible and use of confusing units of measure should be limited.
Due to the packaging of radiopharmaceuticals into the APC payments
for nuclear medicine procedures, we, along with commenters have
expressed concern to the Panel regarding whether the current nuclear
medicine APC structure is homogeneous in terms of resource consumption.
We have reviewed information about the use and cost of various
radiopharmaceuticals and believe that restructuring the APCs for
nuclear medicine will result in greater clinical and resource
homogeneity. Therefore, we proposed to eliminate APCs 0286, 0290, 0291,
0292, 0294, and 0666 and create 20 new APCs for nuclear medicine.
Comment: We received many comments about the proposed nuclear
medicine APCs. Generally, commenters supported our proposal for the new
APCs but had suggestions for modifications to improve clinical and
resource use homogeneity. The suggested modifications are:
[sbull] Split APC 0398 into three levels to account for differences
in the number of sessions provided and type and amount of
radiopharmaceutical used with these procedures.
[sbull] Split APC 0401 into two levels to account for the different
number of sessions, type and amount of radiopharmaceuticals used, and
whether or not ventilation imaging and perfusion imaging are part of
the procedure.
[sbull] Delete codes G0273 and G0274 and use the newly created CPT
codes 78804 and 79403. They recommended that we assign 78804 to a new
APC 0406T, Tumor/Infection Imaging Level II and that we assign 79403 to
the new APC for Radionucliide Therapy APC, created by combining
proposed APCs 0407 and 0408.
[sbull] Move codes 78015, 78016, and 78018 from APC 0390 to APC
0406 because they are for metastatic tumor imaging rather than for one
organ system.
[sbull] Move all of the nuclear medicine ``add-on'' codes into one
APC to be named ``Nuclear Medicine Add-On Imaging.'' Three of the
codes, 78478, Heart wall motion add-on, 78480 Heart function add-on,
and 78496, Heart function first pass add-on, are assigned to proposed
APC 0399. They recommended moving the remaining add-on code, 78020,
Thyroid carcinoma metastases uptake, to proposed APC 0399 with the
other three add-on codes, to create an APC comprised of add-on codes
with a status indicator ``X.''
[sbull] Move each of the codes in the series of codes, 78X99 into
the appropriate APCs based on the organ system to be consistent with
the proposed APC structure.
[sbull] Reassign codes 78270, 78271, and 78272 to APC 0389 because
they are

[[Page 63411]]

non-imaging nuclear medicine procedures with resource use more similar
to the procedures in APC 0389.
[sbull] Combine APCs 0390, 0391, and 0392 to create two new APCs
composed of thyroid, parathyroid, and adrenal systems. They suggest
that the codes should be reassigned to two levels of endocrine imaging
based on the number of sessions and radiopharmaceuticals used in the
procedure. The titles suggested for the new APCs are ``Endocrine Level
I'' and ``Endocrine Level II.''
[sbull] Combine proposed APCs 0407 and 0408 into one APC because
hospital claims data do not reflect any logical division between the
two proposed APCs. Further, they request that all of the nuclear
medicine therapy codes in the new APC should be paid separately since
they know of no nuclear medicine therapeutic radiopharmaceutical that
has costs below the proposed $150 threshold for packaging.
[sbull] Collapse and redistribute code assignments in APCs 0404 and
0405 to create two new APCs for Level I and Level II Renal and
Genitourinary Studies. They recommended assigning only one code, 78709,
Kidney imaging, multiple studies, with and without pharmaceutical
intervention, to the Level II APC.
Response: After careful review of the recommendations, with one
exception, we concur with the commenters that their recommended
modifications to the proposed APC classifications improve clinical
homogeneity and payment equity. The shifts in median cost that result
from the adjustments are minor in most cases and overall, the increased
cost is not significant.
The one exception to our agreement with the commenters'
recommendation is regarding the assignment of 78708, Kidney imaging
with vascular flow and function, single study. Commenters recommended
that it be assigned to APC 0404. We believe that it is more
appropriately assigned to APC 0405 based on both clinical and resource
use considerations.
Although we do not disagree with the commenters' suggestions, we
also will not assign the new code 78804, pre-treatment planning, non-
Hodgkins to the APC suggested by the commenters. Instead, we will
assign it to new technology APC 1508. A detailed discussion of this
assignment and other issues related to Zevalin is below in section
VI.B.
Thus, we will finalize the nuclear medicine APCs as shown below.

APC 0376: Cardiac Imaging Level II
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78473..................................... Gated heart, multiple.
78483..................................... Heart first pass, multiple.
------------------------------------------------------------------------

APC 0377: Cardiac Imaging Level III
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78461..................................... Heart muscle blood,
multiple.
78465..................................... Heart image (3D), multiple.
------------------------------------------------------------------------

APC 0378: Pulmonary Imaging Level II
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78584..................................... Lung V/Q image gas, single
breath.
78585..................................... Lung V/Q imaging gas.
78588..................................... Lung V/Q imaging aerosol.
78596..................................... Lung differential function.
------------------------------------------------------------------------

APC 0389: Non-Imaging Nuclear Medicine
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78000..................................... Thyroid, single uptake.
78001..................................... Thyroid, multiple uptakes.
78003..................................... Thyroid suppress/stimuli.
78190..................................... Platelet survival, kinetics.
78191..................................... Platelet survival.
78270..................................... Vitamin B-12 absorption
exam.
78271..................................... Vitamin B-12 absorp. exam,
intrin. Fac.
78272..................................... Vitamin B-12 absorp,
combined.
78725..................................... Kidney function study.
------------------------------------------------------------------------

APC 0390: Endocrine Level I
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78006..................................... Thyroid imaging with uptake.
78010..................................... Thyroid imaging.
78011..................................... Thyroid imaging with flow.
78099..................................... Endocrine nuclear procedure.
------------------------------------------------------------------------

APC 0391: Endocrine Level II
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78007..................................... Thyroid image, mult uptakes.
78070..................................... Parathyroid nuclear imaging.
78075..................................... Adrenal nuclear imaging.
------------------------------------------------------------------------

APC 0393: Red Cell/Plasma Studies
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78110..................................... Plasma volume, single.
78111..................................... Plasma volume, multiple.
78120..................................... Red cell mass, single.
78121..................................... Red cell mass, multiple.
78122..................................... Blood volume.
78130..................................... Red cell survival study.
78135..................................... Red cell survival kinetics.
78140..................................... Red cell sequestration.
78160..................................... Plasma iron turnover.
78162..................................... Radioiron absorption exam.
78170..................................... Red cell iron utilization.
78172..................................... Total body iron estimation.
------------------------------------------------------------------------

APC 0394: Hepatobiliary Imaging
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78201..................................... Liver imaging.
78202..................................... Liver imaging with flow.
78205..................................... Liver imaging (3D).
78206..................................... Liver image (3D) with flow.
78215..................................... Liver and spleen imaging.
78216..................................... Liver & spleen image/flow.
78220..................................... Liver function study.
78223..................................... Hepatobiliary imaging.
------------------------------------------------------------------------

APC 0395: Gastrointestinal Imaging
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78230..................................... Salivary gland imaging.
78231..................................... Serial salivary imaging.
78232..................................... Salivary gland function
exam.
78258..................................... Esophageal motility study.
78261..................................... Gastric mucosa imaging.
78262..................................... Gastroesophageal reflux
exam.
78264..................................... Gastric emptying study.
78278..................................... Acute GI blood loss imaging.
78282..................................... GI protein loss exam.
78290..................................... Meckel's divert exam.
78291..................................... Leveen/shunt patency exam.
78299..................................... GI nuclear procedure.
------------------------------------------------------------------------

APC 0396: Bone Imaging
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78300..................................... Bone imaging, limited area.
78305..................................... Bone imaging, multiple
areas.
78306..................................... Bone imaging, whole body.
78315..................................... Bone imaging, 3 phase.
78320..................................... Bone imaging (3D).
78399..................................... Musculoskeletal nuclear
exam.
------------------------------------------------------------------------

APC 0397: Vascular Imaging
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78445..................................... Venous thrombosis study.
78455..................................... Venous thrombosis study.

[[Page 63412]]

78456..................................... Acute venous thrombus image.
78457..................................... Venous thrombosis imaging.
78458..................................... Ven thrombosis images,
bilat.
------------------------------------------------------------------------

APC 0398: Cardiac Imaging Level I
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78414..................................... Non-imaging heart function.
78428..................................... Cardiac shunt imaging.
78460..................................... Heart muscle blood, single.
78464..................................... Heart image (3D), single.
78466..................................... Heart infarct image.
78468..................................... Heart infarct image (ef).
78469..................................... Heart infarct image (3D).
78472..................................... Gated heart, planar, single.
78481..................................... Heart first pass, single.
78494..................................... Heart image, spect.
78499..................................... Unlisted cardiovascular.
------------------------------------------------------------------------

APC 0399: Nuclear Medicine Add-On Imaging
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78020..................................... Thyroid met uptake.
78478..................................... Heart wall motion add-on.
78480..................................... Heart function add-on.
78496..................................... Heart first pass add-on.
------------------------------------------------------------------------

APC 0400: Hematopoietic Imaging
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78102..................................... Bone marrow imaging, ltd.
78103..................................... Bone marrow imaging, mult.
78104..................................... Bone marrow imaging, body.
78185..................................... Spleen imaging.
78195..................................... Lymph system imaging.
78199..................................... Blood/lymph nuclear exam.
------------------------------------------------------------------------

APC 0401: Pulmonary Imaging, Level 1
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78580..................................... Lung perfusion imaging.
78586..................................... Aerosol lung image, single.
78587..................................... Aerosol lung image,
multiple.
78591..................................... Vent image, 1 breath, 1
proj.
78593..................................... Vent image, 1 proj, gas.
78594..................................... Vent image, mult proj, gas.
78599..................................... Respiratory Nuclear Exam.
------------------------------------------------------------------------

APC 0402: Brain Imaging
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78600..................................... Brain imaging, ltd static.
78601..................................... Brain imaging, ltd w/flow.
78605..................................... Brain imaging, complete.
78606..................................... Brain imaging, compl w/flow.
78607..................................... Brain imaging (3D).
78610..................................... Brain flow imaging only.
78615..................................... Cerebral vascular flow
image.
78699..................................... Nervous system nuclear exam.
------------------------------------------------------------------------

APC 0403: CSF Imaging
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78630..................................... Cerebrospinal fluid scan.
78635..................................... CSF ventriculography.
78645..................................... CSF shunt evaluation.
78647..................................... Cerebrospinal fluid scan.
78650..................................... CSF leakage imaging.
78660..................................... Nuclear exam of tear flow.
------------------------------------------------------------------------

APC 0404: Renal & Genitourinary Studies Level I
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78700..................................... Kidney imaging, static.
78701..................................... Kidney imaging with flow.
78704..................................... Imaging renogram.
78707..................................... Kidney flow/function image.
78710..................................... Kidney imaging (3D).
78715..................................... Renal vascular flow exam.
------------------------------------------------------------------------

APC 0405: Renal & Genitourinary Studies Level II
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78708..................................... Kidney flow/function image.
78709..................................... Kidney flow/function image.
------------------------------------------------------------------------

APC 0406: Tumor/Infection Imaging
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78015..................................... Thyroid metastases imaging.
78016..................................... Thyroid metastases imaging/
studies.
78018..................................... Thyroid metastases imaging/
body.
78800..................................... Tumor imaging, limited area.
78801..................................... Tumor imaging, mult areas.
78802..................................... Tumor imaging, whole body.
78803..................................... Tumor imaging, whole body.
78805..................................... Abscess imaging, ltd area.
78806..................................... Abscess imaging, whole body.
78807..................................... Nuclear localization/
abscess.
------------------------------------------------------------------------

APC 0407: Radionucliide Therapy
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
79000..................................... Init hyperthyroid therapy.
79001..................................... Repeat hyperthyroid therapy.
79020..................................... Thyroid ablation.
79030..................................... Thyroid ablation, carcinoma.
79035..................................... Thyroid metastatic therapy.
79100..................................... Hematopoetic nuclear
therapy.
79200..................................... Intracavitary nuclear
treatment.
79300..................................... Interstitial nuclear
therapy.
79400..................................... Nonhemato nuclear therapy.
79420..................................... Intravascular nuclear
therapy.
79440..................................... Nuclear joint therapy.
79999..................................... Nuclear medicine therapy.
------------------------------------------------------------------------

APC 1507: New Technology Level VII ($500-$600)
------------------------------------------------------------------------

------------------------------------------------------------------------
79403..................................... Hematopoetic nuclear
therapy.
------------------------------------------------------------------------

APC 1508: Tumor/Infection Imaging Level II
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
78804..................................... Pre-tx planning, non-
Hodgkins.
------------------------------------------------------------------------

We believe that the final APC structure, which takes into account
the organ(s) being examined (or treated) as well as the type and
complexity of the procedure, is more homogeneous both clinically and in
terms of resource consumption than the current APC structure.

ee. Endoscopy Lower Airway

APC 0076: Endoscopy Lower Airway
A presenter to the Panel expressed concern that APC 0076 apparently
violates the 2 times rule and requested that we move CPT code 31631
(bronchoscopy with tracheal stent placement) from APC 0076 and into a
new APC.
The Panel suggested that a new APC comprised of the four most
costly procedures in APC 0076 will result in a more homogenous
grouping, and recommended that we move the following CPT codes from APC
0076 and into newly created APC 0415.

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

We proposed to accept the Panel's recommendation that we move CPT
codes 31630, 31631, 31640, and 31641 from APC 0076 to new APC 0415. We

[[Page 63413]]

received no comments disagreeing with this proposal and will adopt this
recommendation for 2004.

ff. Gastrointestinal Endoscopic Stenting Procedures

APC 0141: Upper GI Procedures
APC 0142: Small Intestine Endoscopy
APC 0143: Lower GI Endoscopy
APC 0147: Level II Sigmoidoscopy

A commenter requested that we create a new APC that will be
comprised of all the gastrointestinal endoscopic stent codes. The Panel
agreed with the commenter's suggestion because the resource
requirements for all gastrointestinal endoscopic stents appear to be
similar. The Panel recommended that we move the following CPT codes
from their 2003 APCs to newly created APC 0384 for 2004:

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

We proposed to accept the Panel's recommendation to move the
following gastrointestinal endoscopic stent CPT codes into newly
created APC 0384: 43219, 43256 (from APC 0141); 44370, 44379, 44383
(from APC 0142); 44397, 45387 (from APC 0143); 45327, 45345 (from APC
0147). We received no comments disagreeing with this proposal, and we
will adopt it for 2004.

gg. Capturing the Costs of Devices That Are Packaged Into APCs

APC 0081: Non-Coronary Angioplasty or Atherectomy
APC 0083: Coronary Angioplasty and Percutaneous Valvuloplasty
APC 0104: Transcatheter Placement of Intracoronary Stents
APC 0222: Implantation of Neurological Device
APC 0223: Implantation of Pain Management Device
APC 0227: Implantation of Drug Infusion Device
APC 0229: Transcatheter Placement of Intravascular Shunts

Several commenters requested that the status indicators for the
above APCs (all of which include high-cost devices) be changed from T
(multiple-procedure discount applies) to S (multiple-procedure discount
does not apply). Two presenters to the Panel stated that hospitals do
not pay less for devices when they are used in the context of a
multiple-procedure claim and suggested that we apply the multiple-
procedure reduction to the non-device portion of the claim only.
Alternatively, these presenters recommended that we apply the discount
policy only when the device cost is below a predetermined proportion of
the APC cost. Another presenter to the Panel requested that APCs 0222,
0223, and 0227 be exempt from the multiple-procedure discount policy
because the cost of the devices used in these procedures makes up more
than 50 percent of the APC cost.
We sought the Panel's input as to whether there are situations in
which we should not apply our multiple procedure discount policy. The
Panel recommended no changes to the status indicators for any of the
device-related APCs discussed because they were concerned that
exemptions from the discount policy could result in incentives to use
more devices than necessary. However, the Panel asked that we analyze
our data to determine if we may be underpaying for devices when the
multiple procedure discounting policy is applied and recommended that
we develop some methodology to track device costs. In section II.B of
this preamble, we discuss the issue of device costs and multiple
procedure reductions and our progress to date in developing
``combination APCs'' to address the Panel's concern.

hh. Discussion of Ways To Increase the Use of Multiple Claims To Set
APC Payment Rates

A presenter to the Panel suggested that we use dates of service on
multiple procedure claims to increase the number of claims we use to
set payment rates. Another presenter suggested that we could further
increase the number of multiple procedure claims that could be used to
set payment rates by ignoring codes with status indicator K. Other
suggestions were to exclude from consideration those APCs with small
dollar values and to create a new code or APC specifically for the
insertion and removal of devices.
The Panel recommended that our staff explore ways to increase the
number of claims used to set payment rates, including the following
methodologies: sort multiple claims by date of service; exclude codes
with K status indicator from evaluation; exclude those APCs with
nominal costs (the definition of ``nominal'' can be determined by
modeling a variety of possible dollar amounts). In addition, the Panel
recommended that we not create G codes as part of the effort to use
multiple procedure claims for developing relative weights. If new codes
are needed, the Panel suggested that our staff work with the American
Medical Association's CPT Board to identify possible new codes.

B. Other Changes Affecting the APCs

1. Limit on Variation of Costs of Services Classified Within an APC
Group
Section 1833(t)(2) of the Act provides that the items and services
within an APC group cannot be considered comparable with respect to the
use of resources if the highest cost item or service within an APC
group is more than 2 times greater than the lowest cost item or service
within the same group. However, the statute authorizes the Secretary to
make exceptions to this limit on the variation of costs within each APC
group in unusual cases such as low volume items and services. No
exception may be made in the case of a drug or biological that has been
designated as an orphan drug under section 526 of the Federal Food,
Drug, and Cosmetic Act.
Taking into account the proposed APC changes discussed in relation
to the APC Panel recommendations in section II.A.4 of this preamble and
the use of 2002 claims data to calculate the

[[Page 63414]]

median cost of procedures classified to APCs, we reviewed all the APCs
to determine which of them would not meet the 2 times limit. We use the
following criteria when deciding whether to make exceptions to the 2
times rule for affected APCs:
[sbull] Resource homogeneity.
[sbull] Clinical homogeneity.
[sbull] Hospital concentration.
[sbull] Frequency of service (volume).
[sbull] Opportunity for upcoding and code fragmentation. For a
detailed discussion of these criteria, refer to the April 7, 2000 final
rule (65 FR 18457).
The following table contains the final list of APCs that we exempt
from the 2 times rule based on the criteria cited above. In cases in
which a recommendation of the APC Panel appeared to result in or allow
a violation of the 2 times rule, we generally accepted the Panel
recommendation because Panel recommendations were based on explicit
consideration of resource use, clinical homogeneity, hospital
specialization, and the quality of the data used to determine payment
rates.
The median cost for hospital outpatient services for these and all
other APC