2010-16400. Medicare Program; Changes to the Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System for CY 2010, and Extension of Part B Payment for Services Furnished by Hospitals or Clinics Operated by the ...

AGENCY:

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

ACTION:

Notice.

SUMMARY:

This Notice contains the final wage indices, hospital reclassifications, payment rates, impacts and addenda for payments made under the Medicare hospital outpatient payment system (OPPS) for CY 2010. This Notice also contains the payment rates and addenda for payments made under the Medicare Ambulatory Surgical Center (ASC) payment system for CY 2010. The final rates, wage indices, addenda and impacts for the OPPS and as applicable for the ASC payment system contained in this Notice reflect the provisions of the Affordable Care Act. It also announces the extension of payment under Medicare Part B to hospitals and ambulatory care clinics operated by the Indian Health Service, Indian Tribes, or Tribal Organizations.

DATES:

Effective Date: The revised CY 2010 national unadjusted OPPS and ASC payment rates described in this Notice are effective for payments for services furnished on or after January 1, 2010.

FOR FURTHER INFORMATION CONTACT:

Alberta Dwivedi, [phone].

SUPPLEMENTARY INFORMATION:

I. Provisions of the Notice

A. Medicare Hospital Outpatient Prospective Payment System (OPPS)

1. Background

We finalized changes to the payment rates and factors under the hospital outpatient prospective payment system (OPPS) in the CY 2010 OPPS/ASC final rule with comment period appearing in the November 20, 2009 Federal Register. On March 23, 2010, subsequent to the publication of the CY 2010 OPPS/ASC final rule, the Patient Protection and Affordable Care Act (Pub. L. 111-148) was signed into law. Shortly thereafter, on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) was signed into law. These two laws are discussed in this Notice and are collectively referred to as the “Affordable Care Act” throughout this Notice. As discussed in detail below, several provisions of these public laws revised components of the OPPS, and those revisions required us to revise the payment rates and various factors under the CY 2010 OPPS. This Notice addresses the provisions of the Affordable Care Act that impact the CY 2010 OPPS final wage index tables, rates, and impacts. We note that the payment rates and policies set forth in the CY 2010 OPPS/ASC final rule with comment period appearing in the November 20, 2009 Federal Register continue to apply to those aspects of the OPPS that are unaffected by the Affordable Care Act. This Notice makes no changes to the OPPS payment methodologies or policies.

2. CY 2010 OPPS OPD Fee Schedule Increase Factor

Section 1833(t)(3)(C)(ii) of the Act requires us to update the conversion factor used to determine payment rates under the OPPS on an annual basis using the OPD fee schedule increase factor in 1833(t)(3)(C)(iv) of the Act for the year involved. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject to 1833(t)(17) and 1833(t)(3)(F), the OPD fee schedule increase factor is equal to the market basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act to hospital discharges occurring during the fiscal year ending in such year, reduced by 1 percentage point for such factor for services furnished in each of 2000 and 2002. In addition, under 1833(t)(17) of the Act, hospitals that fail to meet the reporting requirements of the Hospital Outpatient Quality Data Reporting Program (HOP QDRP) are subject to a reduction of 2.0 percentage points from the OPD fee schedule increase factor. In accordance with 1833(t)(3)(C)(iv), the CY 2010 OPD fee schedule increase factor (commonly referred to as the “hospital operating market basket increase factor”) finalized in the CY 2010 OPPS final rule was 2.1 percent (74 FR 60419). In addition, under the CY 2010 OPPS/ASC final rule (74 FR 60419), a hospital that fails to meet the reporting requirements of the HOP QDRP reporting requirements receives a .1 percent update (that is, the CY 2010 estimate of the OPD fee schedule increase factor of 2.1 percent minus 2.0 percentage points) for services to which the OPD fee schedule increase factor applies.

Section 1833(t)(3)(F)(ii) and (G)(i) of the Social Security Act, as added by section 3401(i) of the Public Law 111-148, and as amended by section 10319(g) of such Act and section 1105(e) of Public Law 111-152, required the Secretary after calculating the OPD fee schedule increase factor, to reduce such factor by an adjustment of 0.25 percentage point, effective for services furnished on or after January 1, 2010 and before January 1, 2011. (In addition, new 1833(t)(3)(F) of the Act also provides that application of this subparagraph [1833(t)(3)(F)] may result in the increase factor under section 1833(t)(3)(C)(iv) of the Act being less than 0.0 for a year, and may result in payment rates under the payment system under this subsection for a year being less than such payment rates for the preceding year.) Therefore, the reduction of 0.25 percentage point applied to the full hospital operating market basket increase factor of 2.1 percent results in a revised hospital operating market basket increase factor of 1.85 percent. A hospital that failed to meet the reporting requirements of the HOP QDRP reporting requirements receives a negative 0.15 percent hospital operating market basket increase factor (that is, the revised hospital operating market basket increase factor of 1.85 percent minus 2.0 percentage points.)

3. CY 2010 OPPS Conversion Factor

To calculate the OPPS conversion factor for CY 2010 in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60419), we increased the CY 2009 conversion factor of $66.059 by 2.1 percent. We then adjusted the conversion factor for CY 2010 to ensure that any revisions we made to our updates for a revised wage index and rural adjustment were budget neutral. We calculated an overall budget neutrality factor of 0.9997 for wage index changes by comparing total payments from our simulation model using the FY 2010 IPPS final wage index values to those total payments using the FY 2009 IPPS final wage index values. For CY 2010, we did not propose a change to our rural adjustment policy. Therefore, the budget neutrality factor for the rural adjustment was 1.0000. For the CY 2010 OPPS/ASC final rule, we estimated that pass-through spending for both drugs and biologicals and devices for CY 2010 will equal approximately $45.5 million, which represents 0.14 percent of total projected CY 2010 OPPS spending. Therefore, the conversion factor was also adjusted by the difference between the 0.11 percent estimate of pass-through spending set aside for CY 2009 and the 0.14 percent estimate for CY 2010 pass-through spending. Finally, estimated payments for outliers remain at 1.0 percent of total OPPS payments for CY 2010. In our November 20, 2009 CY 2010 OPPS/ASC final rule with public comment, we announced a full conversion factor of $67.406 for the CY 2010 OPPS.

As indicated previously, hospitals that fail to meet the reporting requirements of the Hospital Outpatient Quality Data Reporting Program (HOP QDRP) are subject to a reduction of 2.0 percentage points from the OPD fee schedule increase factor, which is applied to the conversion factor that is used to calculate their payment rates. To calculate the CY 2010 reduced OPD fee schedule increase factor for those hospitals that fail to meet the requirements of the HOP QDRP for the full CY 2010 payment update in the CY 2010 OPPS/ASC final rule, we made all other adjustments described above, but used a reduced OPD fee schedule increase factor of 0.1 percent. This resulted in a reduced conversion factor of $66.086 for those hospitals that fail to meet the HOP QDRP reporting requirements.

As discussed previously, section 1833(t)(3)(F)(ii) and (G)(i) of the Social Security Act, as added by section 3401(i) of the Affordable Care Act, and as amended by section 10319(g) of such Act and section 1105(e) of Public Law 111-152, requires the Secretary, after calculating the OPD fee schedule increase factor, to reduce such factor by an adjustment of 0.25 percentage point effective for services furnished on and after January 1, 2010 through December 31, 2010. Moreover, as discussed in more detail in section I.A.4 below, section 3137 of the Affordable Care Act extended section 508 reclassifications and special exception wage indices from October 1, 2009 to September 30, 2010. Section 3137(a) also required the Secretary, for the second half of the year, to recalculate wage indices by excluding section 508 and special exception hospital wage data in certain circumstances. The OPPS adopts the final fiscal year IPPS wage index on a calendar year basis. We use both the OPD fee schedule increase factor and the budget neutrality adjustment which accounts for the effects of adopting the new fiscal year IPPS wage index on a calendar year basis in the calculation of the OPPS conversion factor. Therefore, the reduction of 0.25 percentage point applied to the OPD fee schedule increase factor of 2.1 percent and the revised wage index budget neutrality factor of 0.9997 required us to recalculate the CY 2010 OPPS conversion factor. We note that none of the other components of the conversion factor calculation, specifically the adjustment to account for estimated cost of pass through drugs and non-implantable biologicals, and device categories and the proportion of estimated total OPPS payments for outlier payments changed as a result of the provisions of Affordable Care Act. The budget neutrality adjustment for the rural adjustment continues to be 1.0000 because we did not propose and the Affordable Care Act did not authorize any changes to the rural adjustment. Therefore, the only changes to the conversion factor, and thus to the CY 2010 OPPS payment rates, that are reflected in this Notice are caused by the statutorily required reduction applied to the OPD fee schedule increase factor and the statutory changes to the wage index.

To calculate the revised OPPS conversion factor for CY 2010 that is effective for covered OPD services furnished on or after January 1, 2010 through December 31, 2010, we used the same methodology that was used in the CY 2010 OPPS/ASC final rule (74 FR 60419). We first increased the CY 2009 conversion factor of $66.059 by the revised OPD fee schedule increase factor of 1.85 percent (2.1 percent which is the full inpatient operating market basket percentage increase applicable to hospital discharges under section 1886(b)(3)(B)(iii) of the Act less the 0.25 percentage point reduction) for CY 2010. We further adjusted the conversion factor to ensure that any revisions we made to our updates accounting for the statutorily required changes to the wage index were made on a budget neutral basis. We calculated an overall budget neutrality adjustment factor of 0.9997 for wage index changes by comparing total payments from our simulation model using the FY 2010 IPPS final wage index values, as adjusted by the Affordable Care Act (see discussion in section I.A.4.), to those payments using the final FY 2009 IPPS wage index values and multiplied this by the conversion factor which already was adjusted to reflect the revised OPD fee schedule increase factor. For purposes of calculating the overall budget neutrality adjustment for wage index changes, we created a single CY 2010 average wage index with 50 percent of the wage index in effect between January 1, 2010 and June 30, 2010 and 50 percent of the wage index in effect between July 1, 2010 and December 31, 2010. We note that the wage index adjustment of 0.9997 that we recalculated using the wage index values that resulted from the Affordable Care Act provisions is identical (when rounded to the 4th decimal) to the wage index adjustment that we calculated for the CY 2010 OPPS conversion factor that we published on November 20, 2009. Next, we multiplied the wage adjusted conversion factor by the budget neutrality factor for the rural adjustment of 1.0000 that was finalized in the CY 2010 OPPS/ASC final rule (74 FR 60419). Therefore, the final revised full conversion factor for CY 2010 resulting from the above-described steps is $67.241 for services furnished on and after January 1, 2010 and before January 1, 2011. We then adjusted the CY 2009 conversion factor to reflect changes in our estimate of total OPPS expenditures that would be dedicated to pass-through payments in CY 2010 that were finalized in the CY 2010 OPPS/ASC final rule (74 FR 60419). Finally, estimated payments for outliers remained at 1.0 percent of total OPPS payments for CY 2010 (74 FR 60419).

To calculate the revised final CY 2010 reduced market basket conversion factor for those hospitals that fail to meet the requirements of the HOP QDRP for the full CY 2010 payment update, we used the same methodology and adjustments discussed above, except that we used a reduced OPD fee schedule increase factor of negative 0.15 percent (that is, the revised OPD fee schedule increase factor of 1.85 percent minus 2.0 percentage points). This resulted in a final reduced conversion factor for CY 2010 of $65.921 for those hospitals that fail to meet the HOP QDRP requirement effective for covered OPD services furnished on or after January 1, 2010 through December 31, 2010. To calculate the reduced payment for these hospitals in our claims processing systems we apply a reduction ratio, that we refer to as the “reporting ratio” of 0.980, which remains unchanged from the reporting ratio we published on November 20, 2009 (74 FR 60641), notwithstanding the changes to the hospital operating market basket and wage index values for some hospitals required by the Affordable Care Act.

The recalculated CY 2010 final conversion factor of $67.241 is reflected in the revised CY 2010 OPPS payment rates and rate dependent files that are posted on the CMS Web site at http://www.cms.gov/​HospitalOutpatientPPS/​. Because the conversion factor was revised, we were required to recalculate a number of aspects of the CY 2010 OPPS using our established methodologies as set forth in the CY 2010 OPPS/ASC final rule (74 FR 60316) using the revised conversion factor, including the OPPS payment rates that rely on the conversion factor and other components of the payment system that depend on OPPS payment rates for CY 2010 OPPS using our established methodologies to take this revision into account.

These include CY 2010 OPPS APC payment rates that are printed in Addenda A and B of this Notice. We use the conversion factor to calculate OPPS payment rates for services in APCs with the following status indicators, “P”, “Q1”, “Q2”, “Q3”, “R”, “S”, “T”, “V”, “X”, and “U”. The components of the payment system that are impacted by these changes include: The offset amounts for devices (devices and implantable biologicals), “policy packaged” drugs (diagnostic radiopharmaceuticals and contrast agents), and “threshold packaged” drugs (drugs and non-implantable biologicals that maybe packaged under the drug packaging threshold) that are used for assessment of pass-through applications and reductions to payment for certain device-dependent procedures, nuclear medicine procedures, or other imaging procedures using contrast agents, when a diagnostic radiopharmaceutical, device or implantable biological, or contrast agent is receiving pass through payment (74 FR 60462 through 60463, and 60480 through 60484). The revised offset amounts are not published as addenda to OPPS update rules but are available at www.cms.hhs.gov/​HospitalOutpatientPPS/​ under “Annual Policy Files.” These revisions are effective for covered OPD services furnished on or after January 1, 2010 through December 31, 2010.

The offset amount for each group of items, devices, “threshold packaged” drugs and nonimplantable biologicals, and “policy packaged” drugs and biologicals, are calculated using the same methodology. For a discussion of the methodology we use for devices and implantable biologicals, see our CY 2008 final rule with comment period (72 FR 66751 through 66752 and 74 FR 60463), and for our discussion of the methodology we use for diagnostic radiopharmaceuticals and contrast agents, see our CY 2010 final rule with comment period discussion at 74 FR 60482. We use these offset amounts in our cost significance calculation when evaluating an application for pass-through payment for both drugs and nonimplantable biologicals, and devices including implantable biologicals. Finally, for a subset of the device-dependent procedures, we reduce OPPS payment by the device offset amount when a hospital furnishes a device received at no cost or full credit and by half of the device offset amount when a hospital furnishes a device received for partial credit (74 FR 60464 through 60466).

4. Revision of Hospital Wage Index Values for CY 2010 as Required by Section 3137(a) of Affordable Care Act

Section 1833(t)(2)(D) of the Act requires the Secretary to determine a wage adjustment factor to adjust, for geographic wage differences, the portion of the OPPS payment rate, which includes copayment, that is attributable to labor and labor-related cost. This adjustment must be made in a budget neutral manner. The OPPS labor-related share is 60 percent of the national OPPS payment. The OPPS has consistently adopted the final fiscal year IPPS wage indices as the wage index values for adjusting the OPPS standard payment amounts for labor market differences. Thus, the wage index that applies to a particular acute care short-stay hospital under the IPPS would also apply to that hospital under the OPPS. We discuss our wage index policy in the CY 2010 OPPS/ASC final rule with comment (74 FR 60419).

In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually. The IPPS wage index values that we adopted in the CY 2010 OPPS included all reclassifications that were approved by the Medicare Geographic Classification Review Board (MGCRB) for FY 2010. Reclassifications under section 508 of Public Law 108-173 (MMA) and the assignment of certain special exception wage indices that were extended by section 106(a) of Public Law 109-432 (MIEA-TRHCA), section 117(a)(1) of Public Law 110-173 (MMSEA), and section 124 of Public Law 110-275 (MIPPA) were set to terminate on September 30, 2009. Similar to our treatment of section 508 reclassifications extended under Public Law 110-173 as described in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68586), we expected hospitals with section 508 reclassifications to revert to their home area wage index, with out-migration adjustment if applicable, or a current MGCRB reclassification, from October 1, 2009 to December 31, 2009 after section 508 reclassifications expired. We also extended the assignment of certain special exceptions wage indices for certain hospitals from January 1, 2009 through December 31, 2009, under the OPPS, in order to give these hospitals their special exception wage index under the OPPS for the same time period as under the IPPS. We refer readers to the Federal Register Notice published subsequent to the FY 2009 IPPS final rule for a detailed discussion of the changes to the wage index values as required by section 124 of Public Law 110-275 (73 FR 57888). Because the provisions of section 124 of Public Law 110-275 expired in 2009 and because the Affordable Care Act had not yet passed, we did not propose to recognize section 508 reclassifications and wage indices for certain special exceptions hospitals for the OPPS wage indices for CY 2010 (74 FR 60419).

Section 3137(a), as amended by section 10317, of the Affordable Care Act extended the wage index reclassifications originally designated under section 508 of Public Law 108-173 and certain special exception wage indices effective for services furnished on and after October 1, 2009 through September 30, 2010. We will implement the section 508 wage indices for OPPS payments for fiscal year 2010 under the OPPS. As indicated, the extended section 508 reclassifications will expire on September 30, 2010. Hospitals with a section 508 reclassification wage index will revert to their home area wage index, with out-migration adjustment if applicable, or a current MGCRB reclassification, from October 1, 2010 to December 31, 2010 after the section 508 reclassifications expire on September 30, 2010.

Further, as we did for CY 2009, the OPPS will recognize the special exception wage indices for certain hospitals from January 1, 2010 through December 31, 2010, under the OPPS, in order to give these hospitals the special exception wage index values under the OPPS for the same time period as under the IPPS. Finally, provisions of section 3137(a) required us to recalculate wage indices for certain areas to exclude the wage data of section 508 and special exception hospitals in certain circumstances. This recalculation resulted in revised wage indices beginning on April 1, or midway through the fiscal year. To implement the same policy on a calendar year basis, the OPPS will adopt these revised wage indices midway through the calendar year beginning July 1, 2010. The revised wage indices that would apply for all providers that are paid under the OPPS are on public display on the CMS Web site at http://www.cms.gov/​AcuteInpatientPPS/​WIFN/​itemdetail.asp. The revised wage indices also have been published by CMS in the June 2, 2010 Federal Register (75 FR 31147). We used these wage indices along with the wage indices that we finalized in our CY 2010 OPPS/ASC final rule with comment period and in effect in the OPPS between January 1, 2010 and June 30, 2010 to calculate the budget neutrality adjustment for CY 2010 to the conversion factor discussed in I.A.3.above. As a result of the changes to the wage indices that are required by section 3137, we estimate a budget neutrality adjustment for the revised wage index of 0.9997 that we used for calculating the revised CY 2010 OPPS conversion factor of $67.241.

We also note that section 3137(a), as amended by Section 10317, specifies that if the Section 508 or special exception hospital's wage index applicable for the period beginning on October 1, 2009, and ending on March 31, 2010, is lower than for the period beginning on April 1, 2010, and ending on September 30, 2010, the hospital shall be paid an additional amount that reflects the difference between the wage indices. To apply this provision to both inpatient and outpatient hospital payments we compared the two wage index values applicable for the period beginning on October 1, 2009, and ending on March 31, 2010, and for the period beginning on April 1, 2010, and ending on September 30, 2010 and assigned each Section 508 and special exception hospital the higher of the two wage index values. Consistent with our typical application of the wage index for these two sets of providers, we assigned the Section 508 providers their higher FY 2010 wage index from October 1, 2009 through September 30, 2010 and assigned the special exception providers their higher FY 2010 wage index from January 1, 2010 through December 31, 2010.

5. Extension of Transitional Outpatient Payments (TOPs) for Small Rural Hospitals That Are Not Sole Community Hospitals and That Have 100 or Fewer Beds and Extension of TOPs to All SCHs (Including EACHs), Irrespective of the 100 Bed Limitation

Section 5105 of the Deficit Reduction Act of 2005 (DRA) reinstituted TOPs for covered OPD services furnished on or after January 1, 2006 and before January 1, 2009, for rural hospitals having 100 or fewer beds that are not sole community hospitals (SCHs). When the OPPS payment was less than the provider's pre-BBA amount, the amount of payment was increased by 95 percent of the amount of the difference between these two amounts for CY 2006, by 90 percent in CY 2007, and 85 percent in CY 2008. Section 147 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) extended the period of TOPs for small rural hospitals with 100 or fewer beds through December 31, 2009; when the OPPS payment was less than the provider's pre-BBA amount, the amount of payment was increased by 85 percent of the amount of the difference between these two amounts for CY 2009. Section 147 also provided 85 percent of the hold harmless amount from January 1, 2009 through December 31, 2009 to sole community hospitals (SCHs) including essential access community hospitals (EACHs) with 100 or fewer beds. We note that EACHs are considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Accordingly, under the statute, EACHs are treated as SCHs.

Section 3121 of the Affordable Care Act extends the hold harmless provision for small rural hospitals with 100 or fewer beds and that are not sole community hospitals (as defined in section 1886(d)(5)(iii) of the Social Security Act) for an additional year through December 31, 2010, at 85 percent of the hold harmless amount. Thus, for covered OPD services furnished on or after January 1, 2010 through December 31, 2010, for which the PPS amount is less than the pre-BBA amount, the amount of payment shall be increased by 85 percent of the amount of the difference between these two amounts for CY 2010. In addition, section 3121 of the Affordable Care Act extended for an additional year the period of TOPs payments for SCHs (as defined in section 1886(d)(5)(iii) of the Act). As stated previously, EACHs fall within the definition of an SCH as set forth in 1886(d)(5)(iii) of the Act. Further, section 3121(b) of the Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the Act to provide that in the case of covered OPD services furnished on or after January 1, 2010 and before January 1, 2011, the 100-bed limitation will not be applied for SCHs (including EACHs) under 1833(t)(3)(D)(i)(III) of the Act. Therefore, under section 1833(t)(3)(D)(i)(III) of the Act, payment will be increased under section 1833(t) of the Act to SCHs (including EACHs) for covered OPD services furnished on or after January 1, 2010 through December 31, 2010, by 85 percent of the amount of the difference between these two amounts when the PPS amount is less that the pre-BBA amount without regard to the 100-bed limitation. Cancer and children's hospitals are permanently held harmless under section 1833(t)(7)(D)(ii) of the Social Security Act and continue to receive TOPs payments in CY 2010.

B. Ambulatory Surgical Center Payment System

1. Background

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60596), we updated and finalized the CY 2010 ASC rates and lists of covered surgical procedures and covered ancillary services. We also corrected some of those ASC rates in a correction notice published in the Federal Register on December 31, 2009 (74 FR 69502). In that correction notice, we revised the ASC rates to reflect changes in the Medicare Physician Fee Schedule (MPFS) conversion factor and practice expense (PE) relative value units (RVUs) listed for some CPT codes in Addendum B to the CY 2010 MPFS final rule with comment period (74 FR 62017), which were incorrect due to certain technical errors and, consequently, were corrected in a correction notice to that final rule (74 FR 65449). We are also publishing a second correction notice in the Federal Register around the same time as this Notice to address changes to the ASC rates resulting from corrections to the PE RVUs and to the MPFS conversion factor identified subsequent to publication of the December 31, 2009 correction notice. In this Notice, we discuss changes to the ASC payment rates due to changes to the OPPS and MPFS under the Affordable Care Act. The rates in this Notice also reflect technical corrections to the CY 2010 ASC payment rates published in the CY 2010 OPPS/ASC final rule with comment period as corrected by the two correction notices. None of these changes affected ASC payment methodologies or policies.

2. Changes to the CY 2010 Ambulatory Surgical Center Payment System Required by the Changes to the Hospital Outpatient Prospective Payment System and the Medicare Physician Fee Schedule

Under the revised ASC payment system, for most covered surgical procedures, we use the OPPS APCs to group services paid under the ASC payment system and we use the APC relative payment weights developed under the OPPS as the basis for ASC relative payment weights for calculating ASC payment rates. Specifically, we multiply an ASC relative payment weight derived from the OPPS APC relative weight by a budget neutral ASC conversion factor to calculate national unadjusted ASC payment rates each year. We refer to this as the standard ratesetting methodology for the ASC payment system. We transitioned to the standard ratesetting methodology over a four-year period for procedures on the CY 2007 list of covered surgical procedures. CY 2010 is the third year of this four-year transition to fully implementing the standard ratesetting methodology. ASC payment rates for CY 2010 are a transitional blend of 25 percent of the CY 2007 ASC payment rate for a covered surgical procedure on the CY 2007 ASC list of surgical procedures and 75 percent of the payment rate for the procedure calculated under the standard ratesetting methodology. We discuss the standard ratesetting methodology and our transition to the full implementation of the standard ratesetting methodology in our August 2, 2007 ASC final rule (72 FR 42491 through 42493, 42519 through 42521). We update the ASC relative payment weights annually using the OPPS relative payment weights for that calendar year. Because the standard ratesetting methodology adopts the OPPS relative payment weights (not rates), reductions to OPPS payments created by the Affordable Care Act as discussed in section I.A.3. above do not impact payment made under the standard ratesetting methodology as the Affordable Care Act did not change any OPPS APC relative weights for CY 2010.

However, the ASC payment system establishes the payment rates for several services using other methodologies that are impacted by the Affordable Care Act. Specifically, the calculation of device-intensive services, brachytherapy services, and bone density scans (a type of covered ancillary radiology service) under the ASC payment system rely directly on the actual payment rates under the OPPS and MPFS, which are impacted by the provisions of the Affordable Care Act discussed above and below. The Affordable Care Act changed the OPPS payment rates for any service where the OPPS conversion factor is used in its calculation, because the Affordable Care Act revised the CY 2010 OPD fee schedule increase factor (see I.A.3. of this Notice). This change impacted payments for device-intensive services and brachytherapy services, which are dependent on payments established under the OPPS.

We use a modified ASC methodology based on OPPS data to establish payment rates for the device-intensive procedures under the ASC payment system. ASC device-intensive services are covered surgical procedures that are assigned to the OPPS device-dependent APCs with a device offset percentage (i.e., the proportion of the APC relative weight attributable to devices under the OPPS) greater than 50 percent of the APC cost under the OPPS. Under the ASC payment system, we sum the device portion and the service portion to derive the ASC payment rate for each service's device dependent APC. The device portion is equal to the device offset amount multiplied by the OPPS payment rate, which is the OPPS conversion factor multiplied by the OPPS relative payment weight, for each service's device dependent APC. The service portion is equal to the ASC standard ratesetting methodology (or blended payment rates during the transition period) applied to the service portion of the OPPS relative payment weight (72 FR 42503 through 42508). Because CY 2010 OPPS APC payment rates have changed as a result of the Affordable Care Act, the device offset amount, and therefore the device portion of the ASC payment rate for device-intensive services also changed.

The ASC Payment System also employs a modification to the standard ratesetting methodology to establish payment for brachytherapy sources. As discussed in our August 2, 2007 ASC final rule (72 FR 42498 to 42499), we finalized a policy to pay for brachytherapy services at the OPPS payment rates if OPPS rates were available, and if unavailable, to pay at contractor-priced rates. The CY 2010 OPPS established payment rates for brachytherapy sources based on a relative weight and the OPPS conversion factor, which has changed as a result of the Affordable Care Act. Because the ASC payment system adopts the final payment rate from the OPPS, these payment rates have changed for the ASC payment system.

Finally, payment for bone density scans under the ASC payment system is impacted by the changes made to the MPFS under section 3111 of the Affordable Care Act. Under the ASC payment system, payment for covered ancillary radiology services, which includes bone density scans, is capped at the lesser of the MPFS non-facility practice expense payment amount (calculated by multiplying the non-facility practice expense RVU by the MPFS conversion factor) or the ASC rate developed according to the ASC standard ratesetting methodology. Section 3111 of the Affordable Care Act requires that, for CY 2010, payment under the MPFS for certain bone density scans be established at 70 percent of the product of the CY 2006 MPFS relative value units for the service, the CY 2006 MPFS conversion factor and the CY 2010 geographic adjustment factor for the service. Therefore, the final payment rate for these bone density scans depends on both the ASC payment and the MPFS non-facility practice expense payment amount, which changed under the Affordable Care Act.

In addition to the changes made under the Affordable Care Act, the ASC payment rates in this Notice reflect the technical corrections to the CY 2010 ASC payment rates published in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60316), and as corrected in a December 31, 2009 correction notice and a second correction notice that will be published around the same time as this Notice to address changes to covered office-based and covered ancillary radiology services payment rates resulting from technical corrections to the MPFS non-facility practice expense payment amounts for CY 2010. Office-based procedures are procedures added to the ASC list of covered surgical procedures in CY 2008 or later years that we determine are performed predominantly (more than 50 percent of the time) in physicians' offices and are paid based on the same methodology as covered ancillary radiology services (i.e., the lesser of the MPFS rate or the ASC rate under the standard methodology). We have already implemented the changes made by these correction notices.

We note that the Department of Defense Appropriations Act, 2010 (Pub. L. 111-118), the Temporary Extension Act of 2010 (Pub. L. 111-144), and the Continuing Extension Act of 2010 (Pub. L. 111-157) extended a zero percent update for the MPFS from January 1, 2010 through May 31, 2010. Because the Affordable Care Act changes are effective January 1, 2010, and because the public laws listed above authorize a zero percent update for the MPFS for CY 2010 through May 31, 2010, this Notice incorporates a zero percent update for MPFS payment. On June 25, 2010 the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (Pub L. 111-192) authorized a 2.2 percent update for the MPFS from June 1, 2010 through November 30, 2010. As is our standard practice, we will recalculate the revised ASC CY 2010 payment rates based on CY 2010 MPFS payment rates using the 2.2 percent update factor, and we will make these revised payment rates available on our Web site under “Addenda Updates” at http://www.cms.gov/​ASCPayment/​11_​Addenda_​Updates.asp#TopOfPage.

Because of these changes to payment for device-intensive services, brachytherapy sources, and bone density scans created by the Affordable Care Act, and changes to MPFS non-facility practice expense payment amounts and the MPFS conversion factor for covered office-based services and ancillary radiology services created by technical corrections that we explained in the correction notices, we recalculated budget neutrality for the CY 2010 ASC payment system as part of this Notice.

We discuss our budget neutrality methodology in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60625 through 60629). Using updated payment amounts for the OPPS and MPFS for the services affected by the Affordable Care Act and additional changes to the CY 2010 MPFS non-facility practice expensive payment amounts based on the correction notices, we followed our standard scaling methodology to take into account the changes in the OPPS and MPFS payment amounts. We used the same claims data and scaling methodology described in the CY 2010 OPPS/ASC final rule with comment period to calculate a revised CY 2010 ASC payment weight scalar of 0.9556. (We previously finalized a CY 2010 ASC payment weight scalar of 0.9567 (74 FR 60628)). After scaling the weights, we calculated a wage index adjustment of 0.9996 and a final ASC conversion factor of $41.873. Both of these numbers did not change from what we previously finalized for CY 2010 (74 FR 60629). The Affordable Care Act did not impact the pre-floor, pre-reclassification wage indices that we adopt in the ASC payment system or the CPI-U. Therefore, the wage index adjustment and the final ASC conversion factor remained the same. We note that the technical corrections in the second correction notice impacted covered office-based procedures and covered ancillary radiology services with payment indicators of “P3” and “Z3”. When we recalculated budget neutrality to address Affordable Care Act changes in this Notice, we also reflected the technical changes made in previous correction notices; therefore, the CY 2010 payment for many covered office-based procedures and covered ancillary radiology services changed at least modestly.

We historically also have reported the payment weight scalar that we would have calculated if we proposed to fully implement the ASC payment system in the coming calendar year without further transition. In the CY 2010 OPPS/ASC final rule, we published a fully implemented CY 2010 ASC payment weight scalar of 0.9338 (74 FR 60674). Using the same claims data and budget neutrality methodology, including adjusting for changes in the wage index, and updating the OPPS and MPFS inputs, we calculated a revised fully implemented CY 2010 ASC payment weight scalar of 0.9326.

Using the revised scaled ASC payment weights and the conversion factor of $41.873, the revised OPPS payment amounts, and the revised MPFS non-facility practice expense payment amounts, we recalculated the revised CY 2010 ASC payment rates for all services, including device-intensive services, brachytherapy sources, and office-based and ancillary radiology services, appearing in Addenda AA and BB of this notice. These payment rates are effective for services furnished on and after January 1, 2010 through December 31, 2010. These files also may be viewed as supporting documentation to this Notice at http://www.cms.gov/​ASCPayment.

For purposes of applying the policy to reduce ASC payment for procedures involving devices furnished without cost or at reduced cost (74 FR 60613 through 60618), the revised offset amounts of the ASC payment are not published as addenda to the ASC update rules but are available at http://www.cms.gov/​ASCPayment under “Annual Policy Files.”

C. Elimination of Sunset for Reimbursement for All Medicare Part B Services in Hospitals and Clinics Operated by the Indian Health Service, Indian Tribes, or Tribal Organizations

Section 2902 of the Affordable Care Act indefinitely extends Section 630 of the MMA, retroactive to January 1, 2010. The specific Part B services are:

• Ambulance services;
• Clinical laboratory services;
• Part B drugs processed by the J4 A/B MAC and the DME MACs;
• Influenza and pneumonia vaccinations;
• Durable medical equipment;
• Therapeutic shoes;
• Prosthetics and orthotics;
• Surgical dressings, splints, and casts; and
• Screening and preventive services not covered prior to the implementation of section 630 of the MMA

Section 2902 of the Affordable Care Act indefinitely extends section 630 of the MMA to provide coverage for all Medicare Part B services listed above that were previously not covered under the Social Security Act. Hospitals operated by the Indian Health Service, Indian Tribes, or Tribal Organizations, however, will continue to be paid for Part B services under an all inclusive rate for hospital outpatient services rather than under the OPPS.

II. Other Required Information

A. Collection of Information Requirements

This document does not impose information collection and recordkeeping requirements. Consequently, it need not be reviewed by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995.

B. Waiver of Proposed Rulemaking

We ordinarily publish a Notice of proposed rulemaking in the Federal Register and invite public comment prior to a rule taking effect in accordance with section 553(b) of the Administrative Procedures Act (APA) and section 1871 of the Act. In addition in accordance with section 553(d) of the APA and section 1871(e)(1)(B)(i) of the Act, we ordinarily provide a 30-day delay to a substantive rule's effective date. For substantive rules that constitute major rules, in accordance with 5 U.S.C. 801, we ordinarily provide a 60-day delay in the effective date.

None of the above processes or effective date requirements apply, however, when the rule in question is interpretive, a general statement of policy or a rule of agency organization, procedure or practice. They also do not apply when Congress, itself, has created the rules that are to be applied, leaving no discretion or gaps for an agency to fill in through rulemaking.

In addition, an agency may waive notice and comment rulemaking, as well as any delay in effective date, when the agency for good cause finds that notice and public comment on the rule, as well as the effective date, are impracticable, unnecessary or contrary to the public interest. In cases where an agency finds good cause, the agency must incorporate a statement of this finding and its reason in the rule issued.

The policies being publicized in this Notice do not constitute agency rulemaking. Rather, Congress, in the Affordable Care Act, has already required that the agency make these changes and we are simply notifying the public of the statutory requirements and their effect on payments made under the CY 2010 OPPS and ASC payment system. Specifically, we are notifying the public of the changes to payments for the CY 2010 OPPS that result from the reduction to the OPD fee schedule increase factor and the changes to the wage indices required by the Affordable Care Act. We are also notifying the public of the extension of section 508 reclassifications and special exception wage indices for FY 2010 (which apply to the OPPS for CY 2010), as well as the wage Indices resulting from Congress' requirement that certain reclassification wage indices be recalculated (effective April 1, 2010) to account for such extensions. We are also notifying the public that Congress extended transitional outpatient payments (TOPs) for a rural hospital that has not more than 100 beds and that is not a sole community hospital as well as for sole community hospitals such that the sole community hospital need not satisfy the 100-bed limitation for covered OPD service furnished on or after January 1, 2010 and before January 1, 2011. We are notifying the public that Congress extended Medicare payments to the Indian Health Service, Indian Tribes, or Tribal Organizations for selected Part B services. We are notifying the public of changes made to ASC payment rates due to changes to the OPPS conversion factor under the Affordable Care Act. Lastly, we are notifying the public that Congress has changed payment for bone density scans under the MPFS, which may impact payment for these services furnished in ASCs on or after January 1, 2010. As this Notice merely informs the public of these required modifications to the CY 2010 payment rates under the OPPS and, indirectly, to the ASC payment system, it is not a rule and does not require any notice and comment rulemaking. Additionally, for the ASC payment system, the payment rates announced in this Notice reflect technical corrections made to the MPFS that impact the ASC payment rates that we addressed in prior ASC correction notices; we are simply notifying the public of the effect on payment made under the CY 2010 ASC payment system based on these prior correction notices. To the extent that any of the policies articulated in this Notice constitute interpretations of Congress's requirements or procedures that will be used to implement Congress's directives, they are interpretative rules, general statements of policy and/or rules of agency procedure or practice, which are not subject to notice and comment rulemaking or a delayed effective date.

However, to the extent that notice and comment rulemaking or a delay in effective date or both would otherwise apply, we find good cause to waive such requirements. Specifically, we find it unnecessary to undertake notice and comment rulemaking in this instance because the provisions of the Affordable Care Act are self-implementing, and further many are already effective and have been implemented. Therefore, we would be unable to change any of the policies governing the OPPS and ASC payment systems for CY 2010, or the other changes made by the Affordable Care in response to public comment on this Notice. As the changes outlined in this Notice have already taken effect and are a result of the statutory effective dates, it would also be impracticable to undertake notice and comment rulemaking. Additionally, this Notice does not make any changes to the policies and payment methodologies for the OPPS and ASC payment system that were finalized in the CY 2010 OPPS/ASC final rule with comment period. Further, we believe it is in the public interest to have the accurate information and to have it as soon as possible and not delay its dissemination. For these reasons, we also find that a waiver of any delay in effective date, if it were otherwise applicable, is necessary to comply with the requirements of sections 2902, 3111, 3121, 3137, 3401 and 10319 of the Patient Protection and Affordable Care Act and section 1105 of the Health Care and Education Reconciliation Act of 2010. Therefore we find good cause to waive notice and comment procedures as well as any delay in effective date, if such procedures or delays are required at all.

III. Regulatory Impact Statement or Analysis

A. Overall Impact

Although this Notice merely announces provisions of the Affordable Care Act, and does not constitute a substantive rule, we are nevertheless preparing this impact analysis in the interest of ensuring that the impact of these changes are fully understood. The changes in this Notice are already in effect, with changes made to the OPPS pricer and the ASC payment system and have been announced through a Joint Signature Memorandum of instruction to Medicare contractors. We have, nevertheless, examined the impacts of this Notice as required by Executive Order 12866 (September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on Federalism, and the Congressional Review Act (5 U.S.C. 804(2)).

Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules that have economically significant effects ($100 million or more in any 1 year) or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal government or communities.

We estimate that the effects of the OPPS provisions that are announced in this Notice will not result in expenditures exceeding $100 million in any 1 year and therefore are not economically significant. We estimate the difference between CY 2010 OPPS expenditures required by or resulting from the Affordable Care Act that are announced in this Notice, when compared to the estimated expenditures announced in our November 20, 2009 CY 2010 final rule, (74 FR 60316) to be a decrease of approximately $98 million. Because this Notice is not a major rule, and because, furthermore, the expected change in expenditures resulting from the Affordable Care Act does not reach the $100 million threshold for a RIA, we are not required to provide a regulatory impact analysis.

However, because the changes required by the Affordable Care Act for the CY 2010 OPPS affect payment, we have prepared a regulatory impact analysis of changes to the OPPS payment system that, to the best of our ability, presents the costs and benefits of this Notice. Table I of this Notice displays the redistributional impact of the CY 2010 changes required by the Affordable Care Act on OPPS payment. The provisions of the Affordable Care Act result in a change in OPPS payments for CY 2010 as announced in this Notice compared to the CY 2010 payments established under the CY 2010 OPPS/ASC final rule appearing in the November 20, 2009 Federal Register. Table I presents only the changes in CY OPPS 2010 payments that result from the Affordable Care Act. We estimate that the effects of the changes to the CY 2010 OPPS and the non-facility MPFS PE RVUs resulting from the Affordable Care Act on the ASC payment system that are announced by this Notice will not exceed $100 million in any 1 year and, therefore, are not economically significant. Overall, we observe no change in aggregate expenditures under the CY 2010 ASC Payment System resulting from changes to the CY 2010 OPPS and MPFS as required by the Affordable Care Act and by technical changes implemented by prior correction notices.

The RFA requires agencies to analyze options for regulatory relief of small businesses if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Many hospitals, other providers, ASCs, and other suppliers are considered to be small entities, either by being nonprofit organizations or by meeting the Small Business Administration (SBA) definition of a small business (hospitals having revenues of $34.5 million or less in any 1 year and ASCs having revenues of $10 million or less in any 1 year). (For details on the latest standards for health care providers, we refer readers to the SBA's Web site at: http://sba.gov/​idc/​groups/​public/​documents/​sba_​homepage/​serv_​sstd_​tablepdf.pdf (refer to the 620000 series).)

For purposes of the RFA, we have determined that many hospitals and most ASCs would be considered small entities according to the SBA size standards. Individuals and States are not included in the definition of a small entity. Therefore, the Secretary has determined that this Notice will have a significant impact on a substantial number of small entities. We acknowledge that many of the affected entities are small entities. The discussion presented in this Notice and the impact analysis presented in Table I constitute our regulatory flexibility analysis of the impact of the provisions of the Affordable Care Act on small entities.

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we now define a small rural hospital as a hospital that is located outside an urban area and has fewer than 100 beds. Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98-21) designated hospitals in certain New England counties as belonging to the adjacent urban areas. Thus, for OPPS purposes, we continue to classify these hospitals as urban hospitals.

We believe that the changes to the OPPS announced by this Notice affect both a substantial number of rural hospitals as well as other classes of hospitals and that the effects on some may be significant. Therefore, the Secretary has determined that this Notice has a significant impact on the operations of a substantial number of small rural hospitals. Specifically, section 3121 of the Affordable Care Act extends TOPs payment for small rural hospitals that are not sole community hospitals and that have 100 or fewer beds and payments for SCHs (including EACHs), that meet applicable requirements regardless of the 100-bed limitation for covered OPD services furnished on and after January 1, 2010 through December 31, 2010. See our discussion of this change in section I.A.5 above. In addition, section 3137 as amended by section 10317 of the Affordable Care Act extends section 508 reclassifications and special exception wage index values from October 1, 2009 through September 30. It also resulted in the recalculation of wage index values to exclude the wage data of section 508/special exception hospitals in certain circumstances, thereby changing the final wage index values, effective April 1 for IPPS and July 1 for OPPS. These wage index changes affect some small rural hospitals. See section I.A.4 of this Notice for a discussion of the wage index changes required by Affordable Care Act. We also anticipate that Affordable Care Act changes impacting ASC payment in general will impact payment to rural ASCs.

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $133 million. This Notice will not mandate any requirements for State, local, or tribal governments, nor will it affect private sector costs.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct costs on State and local governments, preempts State law, or otherwise has Federalism implications. We have examined the provisions included in this Notice in accordance with Executive Order 13132, Federalism, and have determined that they will not have a substantial direct effect on State, local or tribal governments, preempt State law, or otherwise have a Federalism implication.

The following analysis, in conjunction with the remainder of this document, demonstrates that this Notice is consistent with the regulatory philosophy and principles identified in Executive Order 12866, the RFA, and section 1102(b) of the Act. The changes to the payment amounts under CY 2010 OPPS that are required by the Affordable Care Act and that are announced in this Notice will affect payments to a substantial number of small rural hospitals and a small number of rural ASCs, as well as other classes of hospitals and ASCs, and some effects may be significant.

The impact analysis presented in the CY 2010 OPPS/ASC final rule (74 FR 60662 through 60673) showed the estimated impact of changes to payments for CY 2010 OPPS compared to the estimated payments for CY 2009 OPPS. In contrast, the impact analysis presented in this Notice shows the estimated impact of changes to payment for CY 2010 as a result of the implementation of the changes required by the Affordable Care Act. The Affordable Care Act changed payments for services for which the payment is calculated using the conversion factor. In addition, we note that none of the APC relative weights changed because the relative weight calculations are not made using the conversion factor. For an assessment of distributional impact of changes to the relative weights between CY 2009 and CY 2010 please see the CY 2010 OPPS/ASC final rule (74 FR 60667 through 60672). Therefore, the decrease of 0.1 percent reflects changes to the total OPPS payment that would have been made in CY 2010 absent the provisions of the Affordable Care Act (This impact does not include the impact of changes to TOPs). However, we note that hospitals continue to receive a positive payment increase relative to CY 2009. When we compare the estimated total payments for the CY 2010 OPPS, including the provisions of the Affordable Care Act, to the estimated total payments for the CY 2009 OPPS, we find that for CY 2010, we expect that hospitals will see an aggregate increase in total OPPS payment of approximately $500 million, compared to CY 2009.

Effects of OPPS Changes in This Notice

This Notice announces changes to the OPPS and ASC payments for services furnished in CY 2010 that are required as a result of Sections 3121, 3401, 3137 and 10319 of the Patient Protection and Affordable Care Act and section 1105 of the Health Care and Education Reconciliation Act of 2010. These changes are discussed in detail in I.A of this Notice. Under the recalculated OPPS payment rates announced in this Notice, we estimate that the revised update to the conversion factor and other adjustments as provided by the statute will decrease total OPPS payments by 0.1 percent in CY 2010 compared to payment rates under the November 20, 2009 CY 2010 OPPS/ASC final rule.

The distributional impacts presented here are the projected effects of changes to the CY 2010 payments on various hospital groups, comparing the estimated CY 2010 OPPS payments under this Notice to the estimated payments under the November 20, 2009 CY 2010 OPPS/ASC final rule. We post on the CMS Web site our hospital-specific estimated payments for CY 2010 with the other supporting documentation for this Notice. To view the hospital-specific estimates of CY 2010 OPPS payments that we calculated including the effects of the changes made by the Affordable Care Act, we refer readers to the CMS Web site at: http://www.cms.gov/​HospitalOutpatientPPS/​. Select “regulations and Notices” from the left side of the page and then select “CMS-1504-N” from the list of regulations and Notices. The hospital-specific file layout and the hospital-specific file are listed with the other supporting documentation for this Notice of changes to the CY 2010 payment rates. We show hospital-specific data only for hospitals whose claims were used for modeling the impacts shown in Table I below. We do not show hospital-specific impacts for hospitals whose claims we were unable to use. We refer readers to section II.A.2. of the CY 2010 OPPS final rule (75 FR 60347) for a discussion of the hospitals whose claims we do not use for ratesetting and impact purposes.

We estimate the effects of the individual policy changes by estimating payments per service, while holding all other payment policies constant. We use the best data available, but do not attempt to predict behavioral responses to our policy changes. In addition, we do not make adjustments for future changes in variables such as service volume, service mix, or number of encounters.

Table 1 below shows the estimated impact of the changes on hospitals' CY 2010 OPPS payment as a result of the Affordable Care Act. Historically, the first line of the impact table, which estimates the change in payments to all hospitals, has always included cancer and children's hospitals, which are held harmless to their pre-BBA payment-to-cost ratio. We also are including CMHCs in the first line that includes all providers because we included CMHCs in our CY 2010 weight scaler estimate discussed in our November 20, 2009 CY 2010 OPPS/ASC final rule with comment period (74 FR 60408).

We present separate impacts for CMHCs in Table 1 because CMHCs are paid under only two APCs for services under the OPPS: APC 0172 (Level 1 Partial Hospitalization (3 units of service)) and APC 0173 (Level II Partial Hospitalization (4 or more units of service)). We note that CMHCs are also a different provider type.

The estimated decrease in the total payments made under the CY 2010 OPPS is a result of the decrease in the OPD fee schedule update factor as required by sections 3401 and 10319 of the Patient Protection and Affordable Care Act and section 1105 of the Health Care and Education Reconciliation Act of 2010, and the influence of the changes to the wage index required by section 3137 as amended by section 10317 of the Affordable Care Act. The distributional impacts presented do not include assumptions about changes in volume and service mix. The enactment of Public Law 108-173 on December 8, 2003, provided for the additional payment outside of the budget neutrality requirement for wage index for specific hospitals reclassified under section 508. Section 3137 as amended by section 10317 of the Affordable Care Act extended these section 508 reclassifications for October 1, 2009 through September 30, 2010. The amounts attributable to these reclassifications are incorporated into the CY 2010 estimates in the final column of Table 1.

Table 1 shows the estimated redistribution of hospital and CMHC payments among providers between payments under the November 20, 2009 CY 2010 OPPS/ASC final rule published for CY 2010 and the CY 2010 payments announced in this Notice as a result of APC reconfiguration and recalibration (Column 2; which remain unchanged from the publication of the CY 2010 OPPS on November 20, 2009 because there were no changes made by the Affordable Care Act to the assignment of services to APCs or the median costs from which the scaled relative weights are derived); wage index changes (Column 3; which reflect the changes made by section 3137 (amended by section 10317) of the Affordable Care Act)); the combined impact of the APC recalibration, wage index effects, and the reduction applied to the OPD fee schedule increase factor (which is revised as required by sections 3401 and 10319 of the Patient Protection and Affordable Care Act and section 1105 of the Health Care and Education Reconciliation Act of 2010) which is used to update the conversion factor (Column 4); and, finally, estimated redistribution considering all payments for CY 2010 under this Notice relative to all CY 2010 payments under the November 20, 2009 CY 2010 OPPS/ASC final rule (Column 5). Because the reduction that applies to the OPD fee schedule increase factor as required by the Affordable Care Act, is applied uniformly across services for which the conversion factor is used to calculate OPPS payment, observed redistributions of payments in the impact table for hospitals largely depend on the impact of the wage index changes under section 3137 including changes to the wage index for the second half of the year and the extension of the section 508 reclassifications for part of CY 2010. However, total payments made under this system and the extent to which the changes required by Affordable Care Act would redistribute money during implementation also depend on volume, practice patterns, and the mix of services billed by various groups of hospitals, which CMS cannot forecast.

Overall, the revised CY 2010 OPPS rates are expected to have a negative effect for providers paid under the OPPS, resulting in a 0.1 percent estimated decrease in Medicare payments compared to CY 2010 OPPS rates announced in the November 20, 2009 final rule with comment period. Removing cancer and children's hospitals, because their payments are held harmless to the pre-BBA ratio between payment and cost, and CMHCs because they are a different provider type paid under two specific APCs, suggests that the required changes will continue to result in a 0.1 percent estimated decrease in Medicare payments to all other hospitals.

Table 1 contains the standard content that is provided in every OPPS impact table published in the Federal Register. Specifically, Column 1 contains the number of hospitals in total and by category for which we calculated an impact. These are the same hospitals whose claims were used for ratesetting and modeling of impacts for the CY 2010 OPPS that was published on November 20, 2010. Column 2 displays the CY 2010 APC changes due to the reassignment and recalibration under this Notice, relative to the November 20, 2009 CY 2010 OPPS/ASC final rule (74 FR 60431). Because nothing in the Affordable Care Act changed APC assignment or calibration, there are no changes in this column. Column 3 displays the effect of the new wage index changes required by the Affordable Care Act compared to the previous FY 2010 wage index adopted in the November 20, 2009 CY 2010 OPPS/ASC final rule. Although there are changes to the wage indices for some hospitals for half of the year because of changes made by the Affordable Care Act, the impact does not rise to a tenth of a percent for any category of provider. Column 4 displays the effect of the budget neutrality changes between the November 20, 2009 CY 2010 OPPS/ASC final rule and the payment rates for CY 2010 as announced by this Notice, specifically the reduction applied to the OPD fee schedule update factor as a result of the Affordable Care Act. Because not all OPPS payments are based on the conversion factor (e.g. separately paid drugs and biologicals are paid at ASP+4 percent for CY 2010), the impact of the 0.25 percentage point reduction to the OPD fee schedule update factor does not affect payment for all services and therefore the impact of the reduction is slightly less than 0.25. Column 5 displays the combined impact of all changes made for CY 2010, including changes in the section 508 reclassification wage index as required by the Affordable Care Act relative to payments announced in the November 20, 2009 CY2010 OPPS/ASC final rule. Therefore it incorporates the changes in payment that are outside of budget neutrality for section 508 and certain special exception hospitals. The increase in payment outside budget neutrality for section 508 hospitals is present throughout column 5 and is isolated as a 1.8 percent increase in the last row of Table 1.

5. Estimated Effect of This Notice on Beneficiaries

For services for which the beneficiary pays a copayment of 20 percent of the payment rate, the beneficiary share of payment will increase for services for which the OPPS payments will rise and will decrease for services for which the OPPS payments will fall. In all cases, the statute limits beneficiary liability for copayment for a procedure to the hospital inpatient deductible for the applicable year. The CY 2010 hospital inpatient deductible is $1,100.

In order to better understand the impact of changes in copayment on beneficiaries, we modeled the percent change in total copayment liability. We estimate, using the claims of the 4,222 hospitals and CMHCs on which our modeling is based, that total beneficiary liability for copayments continues to be 22.6 percent, as estimated in the November 20, 2009 CY 2010 OPPS/ASC final rule (74 FR 60673). To assess whether there are changes to the aggregate percentage of beneficiary liability, we recalculated the percentage using the revised conversion factor and wage indices on which the revised payments being announced in this Notice are based.

6. Conclusion

The changes announced in this Notice will affect all classes of hospitals and CMHCs. We estimated that most classes of hospitals will experience minor losses or remain neutral and that all classes of hospitals will experience negative updates in OPPS payments in CY 2010 compared to the payments announced in the November 20, 2009 CY 2010 OPPS/ASC final rule as a result of the provisions of the Affordable Care Act.

Table 1 demonstrates the estimated distributional impact of the OPPS budget neutrality requirements that are expected to result in a 0.1 percent decrease in payments for all services paid under the OPPS in CY 2010 under this Notice when compared to the November 20, 2009 CY 2010 OPPS/ASC final rule, after considering the OPD fee schedule increase factor (revised by the Affordable Care Act), wage index changes (including the effects of the extension of the section 508 reclassifications), estimated payment for outliers (which did not change as a result of the Affordable Care Act), and changes to the pass-through payment estimate (which did not change as a result of the Affordable Care Act). The accompanying discussion, in combination with the rest of this Notice, constitutes a regulatory impact analysis.

7. Accounting Statement

As required by OMB Circular A-4 (available at http://www.whitehouse.gov/​omb/​circulars/​a004/​a-4.pdf), in Table 2, we have prepared an accounting statement showing the CY 2010 estimated hospital OPPS incurred benefit impact associated with the changes to the CY 2010 OPD fee schedule increase factor and budget neutral wage index changes (as revised by the Affordable Care Act) shown in this Notice based on the baseline for the 2010 Medicare Trustees Report. All estimated impacts are classified as transfers.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical Assistance Program; No. 93.773 Medicare—Hospital Insurance Program; and No. 93.774, Medicare—Supplementary Medical Insurance Program)

Dated: June 18, 2010.

Marilyn Tavenner,

Acting Administrator and Chief Operating Officer, Centers for Medicare & Medicaid Services.

Approved: June 30, 2010.

Kathleen Sebelius,

Secretary.