This excerpt taken from the KYPH 8-K filed Aug 9, 2006.
HOSPITAL OUTPATIENT SERVICES MEDICARE PAYMENT
Under the Medicare Hospital Outpatient Prospective Payment System, procedures are assigned by CPT code to ambulatory payment classifications based on clinical similarity and resource homogeneity. All procedures within an APC are paid the same amount. CMS uses hospital charge data (generally there is a lag time of two years) to determine the median costs for each of the procedures within an APC and then uses analyzes the cost data to set the payment amount.
The proposed 2007 Medicare payment rates are listed below with the 2006 Medicare payment rate provided as a reference.