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Rule

Medicare Program; Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2009; E-Prescribing Exemption for Computer-Generated Facsimile Transmissions; and Payment for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)

Action

Final Rule With Comment Period.

Summary

This final rule with comment period implements changes to the physician fee schedule and other Medicare Part B payment policies to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. It also finalizes the calendar year (CY) 2008 interim relative value units (RVUs) and issues interim RVUs for new and revised codes for CY 2009. In addition, as required by the statute, it announces that the physician fee schedule update is 1.1 percent for CY 2009, the preliminary estimate for the sustainable growth rate for CY 2009 is 7.4 percent, and the conversion factor (CF) for CY 2009 is $36.0666. This final rule with comment period also implements or discusses certain provisions of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). (See the Table of Contents for a listing of the specific issues addressed in this rule.)

 

Table of Contents Back to Top

Tables Back to Top

DATES: Back to Top

Effective Date: This final rule with comment period is effective on January 1, 2009 except for amendments to § 410.62 and § 411.351 which are effective July 1, 2009.

Comment Date: Comments will be considered if we receive them at one of the addresses provided below, no later than 5 p.m. e.s.t. on December 29, 2008.

ADDRESSES: Back to Top

In commenting, please refer to file code CMS-1403-FC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (no duplicates, please):

1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the instructions for “Comment or Submission” and enter the filecode to find the document accepting comments.

2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare Medicaid Services, Department of Health and Human Services, Attention: CMS-1403-FC, P.O. Box 8013, Baltimore, MD 21244-8013.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3. By express or overnight mail. You may send written comments to the following address ONLY: Centers for Medicare Medicaid Services, Department of Health and Human Services, Attention: CMS-1403-FC, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) before the close of the comment period to either of the following addresses:

7500 Security Boulevard, Baltimore, MD 21244-1850; or

Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201.

(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 received after the comment period.

Submission of comments on paperwork requirements. You may submit comments on this document's paperwork requirements by mailing your comments to the addresses provided at the end of the “Collection of Information Requirements” section in this document.

For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Back to Top

Pam West, (410) 786-2302, for issues related to practice expense.

Rick Ensor, (410) 786-5617, for issues related to practice expense methodology.

Stephanie Monroe, (410) 786-6864, for issues related to malpractice RVUs.

Esther Markowitz, (410) 786-4595, for issues related to telehealth services.

Craig Dobyski, (410) 786-4584, for issues related to geographic practice cost indices.

Ken Marsalek, (410) 786-4502, for issues related to the multiple procedure payment reduction for diagnostic imaging.

Catherine Jansto, (410) 786-7762, or Cheryl Gilbreath, (410) 786-5919, for issues related to payment for covered outpatient drugs and biologicals.

Edmund Kasaitis, (410) 786-0477, or Bonny Dahm, (410) 786-4006, for issues related to the Competitive Acquisition Program (CAP) for Part B drugs.

Corinne Axelrod, (410) 786-5620, for issues related to Health Professional Shortage Area Bonus Payments.

Henry Richter, (410) 786-4562, for issues related to payments for end-stage renal disease facilities.

Lisa Grabert, (410) 786-6827, for issues related to hospital-acquired conditions and the Physician Resource Use Feedback Program.

August Nemec, (410) 786-0612, for issues related to independent diagnostic testing facilities; enrollment issues; and the revision to the “Appeals of CMS or CMS contractor Determinations When a Provider or Supplier Fails To Meet the Requirements for Medicare Billing Privileges” final rule.

Lisa Ohrin, (410) 786-4565, Kristin Bohl, (410) 786-8680, or Don Romano, (410) 786-1401, for issues related to anti-markup provisions and physician self-referral (incentive payment and shared savings programs).

Diane Stern, (410) 786-1133, for issues related to the quality reporting system for physician payment for CY 2009.

Andrew Morgan, (410) 786-2543, for issues related to the e-prescribing exemption for computer-generated fax transmissions.

Terri Harris, (410) 786-6830, for issues related to payment for comprehensive outpatient rehabilitation facilities (CORFs).

Lauren Oviatt, (410) 786-4683, for issues related to CORF conditions of coverage.

Trisha Brooks, (410) 786-4561, for issues related to personnel standards for portable x-ray suppliers.

David Walczak, (410) 786-4475, for issues related to beneficiary signature for nonemergency ambulance transport services.

Jean Stiller, (410) 786-0708, for issues related to the prohibition concerning providers of sleep tests

Mark Horney, (410) 786-4554, for issues related to the solicitation for comments and data pertaining to physician organ retrieval services.

Regina Walker-Wren, (410) 786-9160, for information concerning educational requirements for nurse practitioners and clinical nurse specialists.

Randy Throndset, (410) 786-0131, for information concerning physician certification and recertification for Medicare home health services.

William Larson, (410) 786-4639, for coverage issues related to the initial preventive physical examination.

Cathleen Scally, (410) 786-5714, for payment issues related to the initial preventive physical examination.

Dorothy Shannon, (410) 786-3396, for issues related to speech language pathology.

Kendra Hedgebeth, (410) 786-4644, or Gina Longus, (410) 786-1287, for issues related to low vision aids.

Christopher Molling, (410) 786-6399, or Anita Greenberg, (410) 786-4601, for issues related to the repeal to transfer of title for oxygen equipment.

Karen Jacobs, (410) 786-2173, or Hafsa Bora, (410) 786-7899, for issues related to the therapeutic shoes fee schedule.

Diane Milstead, (410) 786-3355, or Gaysha Brooks, (410) 786-9649, for all other issues.

SUPPLEMENTARY INFORMATION: Back to Top

Submitting Comments: We welcome comments from the public on the following issues:

  • The Exception for Incentive Payment and Shared Savings Programs (§ 411.357(x)) in section II.N.1. of this final rule with comment period;
  • Sections 131(c), 144(b), and 149 of the MIPPA as described in sections III.C., III.J., and III.M. of this final rule with comment period.
  • Interim Relative Value Units (RVUs) for selected codes identified in Addendum C;
  • Information on pricing for items in Tables 2 through 5;
  • Issues related to the Physician Resource Use Feedback Program described in section II.S.6. of this final rule with comment period; and
  • The physician self-referral designated health services (DHS) codes listed in Tables 29, 30, and 31. You can assist us by referencing the file code [CMS-1403-FC] and the section heading on which you choose to comment.

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to view public comments.

Comments received timely will also 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, phone 1-800-743-3951.

Table of Contents Back to Top

To assist readers in referencing sections contained in this preamble, we are providing a table of contents. Some of the issues discussed in this preamble affect the payment policies, but do not require changes to the regulations in the Code of Federal Regulations (CFR). Information on the regulation's impact appears throughout the preamble, and therefore, is not exclusively in section XVI. of this final rule with comment period.

I. Background

A. Development of the Relative Value System

1. Work RVUs

2. Practice Expense Relative Value Units (PE RVUs)

3. Resource-Based Malpractice RVUs

4. Refinements to the RVUs

5. Adjustments to RVUs are Budget Neutral

B. Components of the Fee Schedule Payment Amounts

C. Most Recent Changes to Fee Schedule

II. Provisions of the Proposed Regulation

A. Resource-Based Practice Expense (PE) Relative Value Units (RVUs)

1. Current Methodology

2. PE Proposals for CY 2009

B. Geographic Practice Cost Indices (GPCIs): Locality Discussion

C. Malpractice RVUs (TC/PC issue)

D. Medicare Telehealth Services

E. Specific Coding Issues Related to Physician Fee Schedule

1. Payment for Preadministration-Related Services for Intravenous Infusion of Immune Globulin

2. Multiple Procedure Payment Reduction for Diagnostic Imaging

3. HCPCS Code for Prostate Saturation Biopsies

F. Part B Drug Payment

1. Average Sales Price (ASP) Issues

2. Competitive Acquisition Program (CAP) Issues

G. Application of the HPSA Bonus Payment

H. Provisions Related to Payment for Renal Dialysis Services Furnished by End-Stage Renal Disease (ESRD) Facilities

I. Independent Diagnostic Testing Facility (IDTF) Issues

J. Physician and Nonphysician Practitioner (NPP) Enrollment Issues

K. Amendment to the Exemption for Computer-Generated Facsimile (FAX) Transmissions From the National Council for Prescription Drug Programs (NCPDP) SCRIPT Standard for Transmitting Prescription and Certain Prescription-Related Information for Part D Covered Drugs Prescribed for Part D Eligible Individuals

L. Comprehensive Outpatient Rehabilitation Facilities (CORF) and Rehabilitation Agency Issues

M. Technical Corrections for Therapy-Related Issues

N. Physician Self-Referral and Anti-Markup Issues

1. Exception for Incentive Payment and Shared Savings Programs (§ 411.357(x))

2. Changes to Reassignment Rules Related to Diagnostic Tests (Anti-Markup Provisions)

O1. Physician Quality Reporting Initiative

O2. Electronic Prescribing (E-Prescribing) Incentive Program

P. Discussion of Chiropractic Services Demonstration

Q. Educational Requirements for Nurse Practitioners and Clinical Nurse Specialists

R. Portable X-Ray Issue

S. Other Issues

1. Physician Certification (G0180) and Recertification (G0179) for Medicare-Covered Home Health Services Under a Home Health Plan of Care (POC) in the Home Health Prospective Payment System (HH PPS)

2. Prohibition Concerning Payment of Continuous Positive Airway Pressure (CPAP) Devices

3. Beneficiary Signature for Nonemergency Ambulance Transport Services

4. Solicitation of Comments and Data Pertaining to Physician Organ Retrieval Services

5. Revision to the “Appeals of CMS or CMS contractor Determinations When a Provider or Supplier Fails To Meet the Requirements for Medicare Billing Privileges” Final Rule

6. Physician Resource Use Feedback Program

T. Electronic Prescribing (E-Prescribing) Incentive Program

III. Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) Provisions

A. Section 101: Improvements to Coverage of Preventive Services

B. Section 131: Physician Payment, Efficiency, and Quality Improvements

C. Section 131(c): Physician Resource Use Feedback Program

D. Section 132: Incentives for Electronic Prescribing

E. Section 133(b): Expanding Access to Primary Care Services

F. Section 134: Extension of Floor on Medicare Work Geographic Adjustment Under the Medicare Physician Fee Schedule

G. Section 136: Extension of Treatment of Certain Physician Pathology Services Under Medicare

H. Section 141: Extension of Exceptions Process for Medicare Therapy Caps

I. Section 143: Speech-Language Pathology Services

J. Section 144(b): Repeal of Transfer of Title for Oxygen Equipment

K. Section 145: Clinical Laboratory Tests

L. Section 146: Improved Access to Ambulance Services

M. Section 149: Adding Certain Entities as Originating Sites for Payment of Telehealth Services

N. Section 153: Renal Dialysis Provisions

IV. Potentially Misvalued Codes Under PFS

A. Valuing Services Under the Physician Fee Schedule

B. Requested Approaches for the AMA RUC To Utilize

C. AMA RUC Review of Potentially Misvalued Codes

V. Refinement of Relative Value Units for Calendar Year 2009 and Response to Public Comments on Interim Relative Value Units for 2008

A. Summary of Issues Discussed Related to the Adjustment of Relative Value Units

B. Process for Establishing Work Relative Value Units for the Physician Fee Schedule

C. Interim 2008 Codes

D. Establishment of Interim Work Relative Value Units for New and Revised Physician's Current Procedural Terminology (CPT) Codes and New Healthcare Common Procedure Coding System Codes (HCPCS) for 2009 (Includes Table Titled “AMA RUC Recommendations and CMS' Decisions for New and Revised 2009 CPT Codes”)

E. Discussion of Codes and AMA RUC Recommendations

F. Additional Coding Issues

G. Establishment of Interim PE RVUs for New and Revised Physician's Current Procedural Terminology (CPT) Codes and New Healthcare Common Procedure Coding System (HCPCS) Codes for 2009

VI. Physician Self-Referral Prohibition: Annual Update to the List of CPT/HCPCS Codes

A. General

B. Speech-Language Pathology Services

C. Annual Update to the Code List

VII. Physician Fee Schedule Update for CY 2009

A. Physician Fee Schedule Update

B. The Percentage Change in the Medicare Economic Index (MEI)

C. The Update Adjustment Factor (UAF)

VIII. Allowed Expenditures for Physicians' Services and the Sustainable Growth Rate (SGR)

A. Medicare Sustainable Growth Rate

B. Physicians' Services

C. Preliminary Estimate of the SGR for 2009

D. Revised Sustainable Growth Rate for 2008

E. Calculation of 2009, 2008, and 2007 Sustainable Growth Rates

IX. Anesthesia and Physician Fee Schedule Conversion Factors for CY 2009

A. Physician Fee Schedule Conversion Factor

B. Anesthesia Conversion Factor

X. Telehealth Originating Site Facility Fee Payment Amount Update

XI. Payment for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)—Services Excluded From Coverage

A. Low Vision Aid Exclusion

B. Replacement of Reasonable Charge Methodology by Fee Schedules for Therapeutic Shoes

XII. Provisions of the Final Rule

XIII. Waiver of Proposed Rulemaking and Delay in Effective Date

XIV. Collection of Information Requirements

XV. Response to Comments

XVI. Regulatory Impact Analysis

Regulation Text

Addendum A—Explanation and Use of Addendum B

Addendum B—Relative Value Units and Related Information Used in Determining Medicare Payments for CY 2009

Addendum C—Codes With Interim RVUs

Addendum D—2009 Geographic Adjustment Factors (GAFs)

Addendum E—2009 Geographic Practice Cost Indices (GPCIs) by State and Medicare Locality

Addendum F—Multiple Procedure Payment Reduction Code List

Addendum G—CY 2009 ESRD Wage Index for Urban Areas Based on CBSA Labor Market Areas

Addendum H—CY 2009 ESRD Wage Index Based on CBSA Labor Market Areas for Rural Areas

Addendum I—CPT/HCPCS Imaging Codes Defined by Section 5102(b) of the DRA

Addendum J—List of CPT/HCPCS Codes Used To Define Certain Designated Health Services Under Section 1877 of the Social Security Act

Acronyms Back to Top

In addition, because of the many organizations and terms to which we refer by acronym in this final rule with comment period, we are listing these acronyms and their corresponding terms in alphabetical order below:

ACCAmerican College of Cardiology

ACRAmerican College of Radiology

AFROCAssociation of Freestanding Radiation Oncology Centers

AHAAmerican Heart Association

AHRQ[HHS] Agency for Healthcare Research and Quality

AIDSAcquired immune deficiency syndrome

AMAAmerican Medical Association

AMPAverage manufacturer price

AOAAmerican Osteopathic Association

ASCAmbulatory surgical center

ASPAverage sales price

ASRTAmerican Society of Radiologic Technologists

ASTROAmerican Society for Therapeutic Radiology and Oncology

ATAAmerican Telemedicine Association

AWPAverage wholesale price

BBABalanced Budget Act of 1997 (Pub. L. 105-33)

BBRA[Medicare, Medicaid and State Child Health Insurance Program] Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)

BIPAMedicare, Medicaid, and SCHIP Benefits Improvement Protection Act of 2000 (Pub. L. 106-554)

BLSBureau of Labor Statistics

BNBudget neutrality

CABGCoronary artery bypass graft

CADCoronary artery disease

CAHCritical access hospital

CAHEACommittee on Allied Health Education and Accreditation

CAPCompetitive acquisition program

CBSACore-Based Statistical Area

CCHITCertification Commission for Healthcare Information Technology

CEAMACouncil on Education of the American Medical Association

CFConversion factor

CfCConditions for Coverage

CFRCode of Federal Regulations

CKDChronic kidney disease

CLFSClinical laboratory fee schedule

CMACalifornia Medical Association

CMHCCommunity mental health center

CMPCivil money penalty

CMSCenters for Medicare Medicaid Services

CNSClinical nurse specialist

CoPCondition of participation

CORF Comprehensive Outpatient Rehabilitation Facility

CPAPContinuous positive air pressure

CPEPClinical Practice Expert Panel

CPIConsumer Price Index

CPI-UConsumer price index for urban customers

CPT[Physicians'] Current Procedural Terminology (4th Edition, 2002, copyrighted by the American Medical Association)

CRTCertified respiratory therapist

CSWClinical social worker

CYCalendar year

DHSDesignated health services

DMEDurable medical equipment

DMEPOSDurable medical equipment, prosthetics, orthotics, and supplies

DNPDoctor of Nursing Practice

DRADeficit Reduction Act of 2005 (Pub. L. 109-171)

DSMTDiabetes self-management training

E/MEvaluation and management

EDIElectronic data interchange

EEGElectroencephalogram

EHRElectronic health record

EKGElectrocardiogram

EMGElectromyogram

EMTALAEmergency Medical Treatment and Active Labor Act

EOGElectro-oculogram

EPOErythopoeitin

ESRDEnd-stage renal disease

FAXFacsimile

FDAFood and Drug Administration (HHS)

FFSFee-for-service

FMS[Department of the Treasury's] Financial Management Service

FPLPFederal Payment Levy Program

FR Federal Register

GAFGeographic adjustment factor

GAOGeneral Accounting Office

GPOGroup purchasing organization

GPCIGeographic practice cost index

HACHospital-acquired conditions

HCPACHealth Care Professional Advisory Committee

HCPCSHealthcare Common Procedure Coding System

HCRISHealthcare Cost Report Information System

HH PPSHome Health Prospective Payment System

HHAHome health agency

HHRGHome health resource group

HHS[Department of] Health and Human Services

HIPAAHealth Insurance Portability and Accountability Act of 1996 (Pub. L. 104-191)

HIT Health information technology

HITSPHealthcare Information Technology Standards Panel

HIVHuman immunodeficiency virus

HOPDHospital outpatient department

HPSAHealth Professional Shortage Area

HRSAHealth Resources Services Administration (HHS)

ICFIntermediate care facilities

ICRInformation collection requirement

IDTFIndependent diagnostic testing facility

IFCInterim final rule with comment period

IPPSInpatient prospective payment system

IRSInternal Revenue Service

IVIGIntravenous immune globulin

IWPUTIntra-service work per unit of time

JRCERTJoint Review Committee on Education in Radiologic Technology

MAMedicare Advantage

MA-PDMedicare Advantage-Prescription Drug Plans

MedCACMedicare Evidence Development and Coverage Advisory Committee (formerly the Medicare Coverage Advisory Committee (MCAC))

MedPACMedicare Payment Advisory Commission

MEIMedicare Economic Index

MIEA-TRHCAMedicare Improvements and Extension Act of 2006 (that is, Division B of the Tax Relief and Health Care Act of 2006 (TRHCA) (Pub. L. 109-432)

MIPPAMedicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275)

MMAMedicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173)

MMSEAMedicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-173)

MNTMedical nutrition therapy

MPMalpractice

MPPRMultiple procedure payment reduction

MQSAMammography Quality Standards Act of 1992 (102)

MRAMagnetic resonance angiography

MRIMagnetic resonance imaging

MS-DRGMedicare Severity-Diagnosis related group

MSAMetropolitan statistical area

NCDNational Coverage Determination

NCPDPNational Council for Prescription Drug Programs

NDCNational drug code

NISTANational Institute of Standards and Technology Act

NPNurse practitioner

NPDBNational Practitioner Data Bank

NPINational Provider Identifier

NPPNonphysician practitioner

NPPESNational Plan and Provider Enumeration System

NQFNational Quality Forum

NRCNuclear Regulatory Commission

NTTAANational Technology Transfer and Advancement Act of 1995 (Pub. L. 104-113)

NUBCNational Uniform Billing Committee

OACT[CMS'] Office of the Actuary

OBRAOmnibus Budget Reconciliation Act

ODFOpen door forum

OIGOffice of Inspector General

OMBOffice of Management and Budget

ONC[HHS'] Office of the National Coordinator for Health Information Technology

OPPSOutpatient prospective payment system

OSAObstructive Sleep Apnea

OSCAROnline Survey and Certification and Reporting

P4PPay for performance

PAPhysician assistant

PCProfessional component

PCFPatient compensation fund

PDPPrescription drug plan

PEPractice expense

PE/HRPractice expense per hour

PEACPractice Expense Advisory Committee

PECOSProvider Enrollment, Chain, and Ownership System

PERCPractice Expense Review Committee

PFSPhysician Fee Schedule

PHPPartial hospitalization program

PIM[Medicare] Program Integrity Manual

PLIProfessional liability insurance

POAPresent on admission

POCPlan of care

PPIProducer price index

PPSProspective payment system

PPTAPlasma Protein Therapeutics Association

PQRIPhysician Quality Reporting Initiative

PRAPaperwork Reduction Act

PSAPhysician scarcity areas

PSGPolysomnography

PTPhysical therapy

ResDACResearch Data Assistance Center

RFARegulatory Flexibility Act

RIARegulatory impact analysis

RNRegistered nurse

RNACReasonable net acquisition cost

RRTRegistered respiratory therapist

RUC[AMA's Specialty Society] Relative (Value) Update Committee

RVURelative value unit

SBASmall Business Administration

SGRSustainable growth rate

SLPSpeech-language pathology

SMS[AMA's] Socioeconomic Monitoring System

SNFSkilled nursing facility

SORSystem of record

SRSStereotactic radiosurgery

TCTechnical Component

TINTax identification number

TRHCATax Relief and Health Care Act of 2006 (Pub. L. 109-432)

UPMCUniversity of Pittsburgh Medical Center

USDEUnited States Department of Education

VBPValue-based purchasing

WAMPWidely available market price

I. Background Back to Top

Since January 1, 1992, Medicare has paid for physicians' services under section 1848 of the Social Security Act (the Act), “Payment for Physicians' Services.” The Act requires that payments under the physician fee schedule (PFS) be based on national uniform relative value units (RVUs) based on the relative resources used in furnishing a service. Section 1848(c) of the Act requires that national RVUs be established for physician work, practice expense (PE), and malpractice expense. Before the establishment of the resource-based relative value system, Medicare payment for physicians' services was based on reasonable charges.

A. Development of the Relative Value System

1. Work RVUs

The concepts and methodology underlying the PFS were enacted as part of the Omnibus Budget Reconciliation Act (OBRA) of 1989 (101), and OBRA 1990, (101). The final rule, published on November 25, 1991 (56 FR 59502), set forth the fee schedule for payment for physicians' services beginning January 1, 1992. Initially, only the physician work RVUs were resource-based, and the PE and malpractice RVUs were based on average allowable charges.

The physician work RVUs established for the implementation of the fee schedule in January 1992 were developed with extensive input from the physician community. A research team at the Harvard School of Public Health developed the original physician work RVUs for most codes in a cooperative agreement with the Department of Health and Human Services (DHHS). In constructing the code-specific vignettes for the original physician work RVUs, Harvard worked with panels of experts, both inside and outside the Federal government, and obtained input from numerous physician specialty groups.

Section 1848(b)(2)(B) of the Act specifies that the RVUs for anesthesia services are based on RVUs from a uniform relative value guide. We established a separate conversion factor (CF) for anesthesia services, and we continue to utilize time units as a factor in determining payment for these services. As a result, there is a separate payment methodology for anesthesia services.

We establish physician work RVUs for new and revised codes based on recommendations received from the American Medical Association's (AMA) Specialty Society Relative Value Update Committee (RUC).

2. Practice Expense Relative Value Units (PE RVUs)

Section 121 of the Social Security Act Amendments of 1994 (103), enacted on October 31, 1994, amended section 1848(c)(2)(C)(ii) of the Act and required us to develop resource-based PE RVUs for each physician's service beginning in 1998. We were to consider general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising PEs.

Section 4505(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), amended section 1848(c)(2)(C)(ii) of the Act to delay implementation of the resource-based PE RVU system until January 1, 1999. In addition, section 4505(b) of the BBA provided for a 4-year transition period from charge-based PE RVUs to resource-based RVUs.

We established the resource-based PE RVUs for each physician's service in a final rule, published November 2, 1998 (63 FR 58814), effective for services furnished in 1999. Based on the requirement to transition to a resource-based system for PE over a 4-year period, resource-based PE RVUs did not become fully effective until 2002.

This resource-based system was based on two significant sources of actual PE data: the Clinical Practice Expert Panel (CPEP) data; and the AMA's Socioeconomic Monitoring System (SMS) data. The CPEP data were collected from panels of physicians, practice administrators, and nonphysicians (for example, registered nurses (RNs)) nominated by physician specialty societies and other groups. The CPEP panels identified the direct inputs required for each physician's service in both the office setting and out-of-office setting. We have since refined and revised these inputs based on recommendations from the RUC. The AMA's SMS data provided aggregate specialty-specific information on hours worked and PEs.

Separate PE RVUs are established for procedures that can be performed in both a nonfacility setting, such as a physician's office, and a facility setting, such as a hospital outpatient department. The difference between the facility and nonfacility RVUs reflects the fact that a facility typically receives separate payment from Medicare for its costs of providing the service, apart from payment under the PFS. The nonfacility RVUs reflect all of the direct and indirect PEs of providing a particular service.

Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) directed the Secretary of Health and Human Services (the Secretary) to establish a process under which we accept and use, to the maximum extent practicable and consistent with sound data practices, data collected or developed by entities and organizations to supplement the data we normally collect in determining the PE component. On May 3, 2000, we published the interim final rule (65 FR 25664) that set forth the criteria for the submission of these supplemental PE survey data. The criteria were modified in response to comments received, and published in the Federal Register (65 FR 65376) as part of a November 1, 2000 final rule. The PFS final rules published in 2001 and 2003, respectively, (66 FR 55246 and 68 FR 63196) extended the period during which we would accept these supplemental data through March 1, 2005.

In CY 2007 PFS final rule with comment period (71 FR 69624), we revised the methodology for calculating PE RVUs beginning in CY 2007 and provided for a 4-year transition for the new PE RVUs under this new methodology. We will continue to evaluate this policy and proposed necessary revisions through future rulemaking.

3. Resource-Based Malpractice (MP) RVUs

Section 4505(f) of the BBA amended section 1848(c) of the Act requiring us to implement resource-based malpractice (MP) RVUs for services furnished on or after 2000. The resource-based MP RVUs were implemented in the PFS final rule published November 2, 1999 (64 FR 59380). The MP RVUs were based on malpractice insurance premium data collected from commercial and physician-owned insurers from all the States, the District of Columbia, and Puerto Rico.

4. Refinements to the RVUs

Section 1848(c)(2)(B)(i) of the Act requires that we review all RVUs no less often than every 5 years. The first 5-Year Review of the physician work RVUs was published on November 22, 1996 (61 FR 59489) and was effective in 1997. The second 5-Year Review was published in the CY 2002 PFS final rule with comment period (66 FR 55246) and was effective in 2002. The third 5-Year Review of physician work RVUs was published in the CY 2007 PFS final rule with comment period (71 FR 69624) and was effective on January 1, 2007. (Note: Additional codes relating to the third 5-Year Review of physician work RVUs were addressed in the CY 2008 PFS final rule with comment period (72 FR 66360).)

In 1999, the AMA's RUC established the Practice Expense Advisory Committee (PEAC) for the purpose of refining the direct PE inputs. Through March 2004, the PEAC provided recommendations to CMS for over 7,600 codes (all but a few hundred of the codes currently listed in the AMA's Current Procedural Terminology (CPT) codes). As part of the CY 2007 PFS final rule with comment period (71 FR 69624), we implemented a new methodology for determining resource-based PE RVUs and are transitioning this over a 4-year period.

In the CY 2005 PFS final rule with comment period (69 FR 66236), we implemented the first 5-Year Review of the MP RVUs (69 FR 66263).

5. Adjustments to RVUs are Budget Neutral

Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments in RVUs for a year may not cause total PFS payments to differ by more than $20 million from what they would have been if the adjustments were not made. In accordance with section 1848(c)(2)(B)(ii)(II) of the Act, if adjustments to RVUs cause expenditures to change by more than $20 million, we make adjustments to ensure that expenditures do not increase or decrease by more than $20 million.

As explained in the CY 2007 PFS final rule with comment period (71 FR 69624), due to the increase in work RVUs resulting from the third 5-Year Review of physician work RVUs, we applied a separate budget neutrality (BN) adjustor to the work RVUs for services furnished during 2007 and 2008. This approach is consistent with the method we used to make BN adjustments to reflect the changes in the PE RVUs.

Section 133(b) of the MIPPA amends section 1848(c)(2)(B) of the Act to specify that, instead of continuing to apply the BN adjustor for the 5-Year Review to work RVUs, the BN adjustment must be applied to the CF for years beginning with CY 2009. Further discussion of this MIPPA provision as it relates to the CY 2009 PFS can be found in sections III. and IX. of this final rule with comment period.

B. Components of the Fee Schedule Payment Amounts

To calculate the payment for every physician's service, the components of the fee schedule (physician work, PE, and MP RVUs) are adjusted by a geographic practice cost index (GPCI). The GPCIs reflect the relative costs of physician work, PE, and malpractice insurance in an area compared to the national average costs for each component.

RVUs are converted to dollar amounts through the application of a CF, which is calculated by CMS' Office of the Actuary (OACT).

The formula for calculating the Medicare fee schedule payment amount for a given service and fee schedule area can be expressed as:

Payment = [(RVU work × GPCI work) + (RVU PE × GPCI PE) + (RVU malpractice × GPCI malpractice)] × CF.

C. Most Recent Changes to the Fee Schedule

The CY 2008 PFS final rule with comment period (72 FR 66222) addressed certain provisions of Division B of the Tax Relief and Health Care Act of 2006—Medicare Improvements and Extension Act of 2006 (Pub. L. 109-432) (MIEA-TRHCA), and made other changes to Medicare Part B payment policy to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. The CY 2008 PFS final rule with comment period also discussed refinements to resource-based PE RVUs; GPCI changes; malpractice RVUs; requests for additions to the list of telehealth services; several coding issues including additional codes from the 5-Year Review; payment for covered outpatient drugs and biologicals; the competitive acquisition program (CAP); clinical lab fee schedule issues; payment for end-stage renal dialysis (ESRD) services; performance standards for facilities; expiration of the physician scarcity area (PSA) bonus payment; conforming and clarifying changes for comprehensive outpatient rehabilitation facilities (CORFs); a process for updating the drug compendia; physician self-referral issues; beneficiary signature for ambulance transport services; durable medical equipment (DME) update; the chiropractic services demonstration; a Medicare economic index (MEI) data change; technical corrections; standards and requirements related to therapy services under Medicare Parts A and B; revisions to the ambulance fee schedule; the ambulance inflation factor for CY 2008; and an amendment to the e-prescribing exemption for computer-generated facsimile transmissions.

We also finalized the calendar year (CY) 2007 interim RVUs and issued interim RVUs for new and revised procedure codes for CY 2008.

In accordance with section 1848(d)(1)(E)(i) of the Act, we also announced that the PFS update for CY 2008 is −10.1 percent, the preliminary estimate for the sustainable growth rate (SGR) for CY 2008 is −0.1 percent and the CF for CY 2008 is $34.0682. However, subsequent to publication of the CY 2008 PFS final rule with comment period, section 101(a) of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-173) (MMSEA) was enacted on December 29, 2007 and provided for a 0.5 percent update to the conversion factor for the period beginning January 1, 2008 and ending June 30, 2008. For the first half of 2008 (that is, January through June), the Medicare PFS conversion factor was $38.0870. In the absence of legislation, the PFS conversion factor for the second half of 2008 would have been $34.0682, as announced in the PFS final rule with comment period for CY 2008. However, as a result of the enactment of the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275) (MIPPA), the Medicare PFS conversion factor remained at $38.0870 for the remaining portion of 2008 (July through December).

II. Provisions of the Final Rule With Comment Period Back to Top

In response to the CY 2009 PFS proposed rule (73 FR 38502) we received approximately 4,100 timely public comments. These included comments from individual physicians, health care workers, professional associations and societies, manufacturers and Congressmen. The majority of the comments addressed proposals related to independent diagnostic testing facilities, anti-markup, prohibition concerning providers of sleep tests, and the general impact of the proposed rule on specific specialties. To the extent that comments were outside the scope of the proposed rule, they are not addressed in this final rule with comment period.

A. Resource-Based Practice Expense (PE) Relative Value Units (RVUs)

Practice expense (PE) is the portion of the resources used in furnishing the service that reflects the general categories of physician and practitioner expenses, such as office rent and personnel wages but excluding malpractice expenses, as specified in section 1848(c)(1)(B) of the Act.

Section 121 of the Social Security Amendments of 1994 (103), enacted on October 31, 1994, required CMS to develop a methodology for a resource-based system for determining PE RVUs for each physician's service. Until that time, PE RVUs were based on historical allowed charges. This legislation stated that the revised PE methodology must consider the staff, equipment, and supplies used in the provision of various medical and surgical services in various settings beginning in 1998. The Secretary has interpreted this to mean that Medicare payments for each service would be based on the relative PE resources typically involved with furnishing the service.

The initial implementation of resource-based PE RVUs was delayed from January 1, 1998, until January 1, 1999, by section 4505(a) of the BBA. In addition, section 4505(b) of the BBA required that the new payment methodology be phased in over 4 years, effective for services furnished in CY 1999, and fully effective in CY 2002. The first step toward implementation of the statute was to adjust the PE values for certain services for CY 1998. Section 4505(d) of the BBA required that, in developing the resource-based PE RVUs, the Secretary must—

  • Use, to the maximum extent possible, generally-accepted cost accounting principles that recognize all staff, equipment, supplies, and expenses, not solely those that can be linked to specific procedures and actual data on equipment utilization.
  • Develop a refinement method to be used during the transition.
  • Consider, in the course of notice and comment rulemaking, impact projections that compare new proposed payment amounts to data on actual physician PE.

In CY 1999, we began the 4-year transition to resource-based PE RVUs utilizing a “top-down” methodology whereby we allocated aggregate specialty-specific practice costs to individual procedures. The specialty-specific PEs were derived from the American Medical Association's (AMA's) Socioeconomic Monitoring Survey (SMS). In addition, under section 212 of the BBRA, we established a process extending through March 2005 to supplement the SMS data with data submitted by a specialty. The aggregate PEs for a given specialty were then allocated to the services furnished by that specialty on the basis of the direct input data (that is, the staff time, equipment, and supplies) and work RVUs assigned to each CPT code.

For CY 2007, we implemented a new methodology for calculating PE RVUs. Under this new methodology, we use the same data sources for calculating PE, but instead of using the “top-down” approach to calculate the direct PE RVUs, under which the aggregate direct and indirect costs for each specialty are allocated to each individual service, we now utilize a “bottom-up” approach to calculate the direct costs. Under the “bottom up” approach, we determine the direct PE by adding the costs of the resources (that is, the clinical staff, equipment, and supplies) typically required to provide each service. The costs of the resources are calculated using the refined direct PE inputs assigned to each CPT code in our PE database, which are based on our review of recommendations received from the AMA's Relative Value Update Committee (RUC). For a more detailed explanation of the PE methodology see the June 29, 2006 proposed notice (71 FR 37242) and the CY 2007 PFS final rule with comment period (71 FR 69629).

1. Current Methodology

a. Data Sources for Calculating Practice Expense

The AMA's SMS survey data and supplemental survey data from the specialties of cardiothoracic surgery, vascular surgery, physical and occupational therapy, independent laboratories, allergy/immunology, cardiology, dermatology, gastroenterology, radiology, independent diagnostic testing facilities (IDTFs), radiation oncology, and urology are used to develop the PE per hour (PE/HR) for each specialty. For those specialties for which we do not have PE/HR, the appropriate PE/HR is obtained from a crosswalk to a similar specialty.

The AMA developed the SMS survey in 1981 and discontinued it in 1999. Beginning in 2002, we incorporated the 1999 SMS survey data into our calculation of the PE RVUs, using a 5-year average of SMS survey data. (See the CY 2002 PFS final rule with comment period (66 FR 55246)). The SMS PE survey data are adjusted to a common year, 2005. The SMS data provide the following six categories of PE costs:

  • Clinical payroll expenses, which are payroll expenses (including fringe benefits) for nonphysician clinical personnel.
  • Administrative payroll expenses, which are payroll expenses (including fringe benefits) for nonphysician personnel involved in administrative, secretarial, or clerical activities.
  • Office expenses, which include expenses for rent, mortgage interest, depreciation on medical buildings, utilities, and telephones.
  • Medical material and supply expenses, which include expenses for drugs, x-ray films, and disposable medical products.
  • Medical equipment expenses, which include depreciation, leases, and rent of medical equipment used in the diagnosis or treatment of patients.
  • All other expenses, which include expenses for legal services, accounting, office management, professional association memberships, and any professional expenses not previously mentioned in this section.

In accordance with section 212 of the BBRA, we established a process to supplement the SMS data for a specialty with data collected by entities and organizations other than the AMA (that is, those entities and organizations representing the specialty itself). (See the Criteria for Submitting Supplemental Practice Expense Survey Data interim final rule with comment period (65 FR 25664)). Originally, the deadline to submit supplementary survey data was through August 1, 2001. In the CY 2002 PFS final rule (66 FR 55246), the deadline was extended through August 1, 2003. To ensure maximum opportunity for specialties to submit supplementary survey data, we extended the deadline to submit surveys until March 1, 2005 in the Revisions to Payment Policies Under the Physician Fee Schedule for CY 2004 final rule with comment period (68 FR 63196) (hereinafter referred to as CY 2004 PFS final rule with comment period).

The direct cost data for individual services were originally developed by the Clinical Practice Expert Panels (CPEP). The CPEP data include the supplies, equipment, and staff times specific to each procedure. The CPEPs consisted of panels of physicians, practice administrators, and nonphysicians (for example, RNs) who were nominated by physician specialty societies and other groups. There were 15 CPEPs consisting of 180 members from more than 61 specialties and subspecialties. Approximately 50 percent of the panelists were physicians.

The CPEPs identified specific inputs involved in each physician's service provided in an office or facility setting. The inputs identified were the quantity and type of nonphysician labor, medical supplies, and medical equipment.

In 1999, the AMA's RUC established the PEAC. From 1999 to March 2004, the PEAC, a multi-specialty committee, reviewed the original CPEP inputs and provided us with recommendations for refining these direct PE inputs for existing CPT codes. Through its last meeting in March 2004, the PEAC provided recommendations for over 7,600 codes which we have reviewed and in most instances have accepted. As a result, the current PE inputs differ markedly from those originally recommended by the CPEPs. The PEAC was replaced by the Practice Expense Review Committee (PERC) and now these PE-related activities are addressed by the AMA RUC PE subcommittee.

b. Allocation of PE to Services

The aggregate level specialty-specific PEs are derived from the AMA's SMS survey and supplementary survey data. To establish PE RVUs for specific services, it is necessary to establish the direct and indirect PE associated with each service.

(i) Direct costs. The direct costs are determined by adding the costs of the resources (that is, the clinical staff, equipment, and supplies) typically required to provide the service. The costs of these resources are calculated from the refined direct PE inputs in our PE database. These direct inputs are then scaled to the current aggregate pool of direct PE RVUs. The aggregate pool of direct PE RVUs can be derived using the following formula: (PE RVUs × physician CF) × (average direct percentage from SMS/(Supplemental PE/HR data)).

(ii) Indirect costs. The SMS and supplementary survey data are the source for the specialty-specific aggregate indirect costs used in our PE calculations. We then allocate the indirect costs to the code level on the basis of the direct costs specifically associated with a code and the maximum of either the clinical labor costs or the physician work RVUs. For calculation of the 2009 PE RVUs, we use the 2007 procedure-specific utilization data crosswalked to 2009 services. To arrive at the indirect PE costs—

  • We apply a specialty-specific indirect percentage factor to the direct expenses to recognize the varying proportion that indirect costs represent of total costs by specialty. For a given service, the specific indirect percentage factor to apply to the direct costs for the purpose of the indirect allocation is calculated as the weighted average of the ratio of the indirect to direct costs (based on the survey data) for the specialties that furnish the service. For example, if a service is furnished by a single specialty with indirect PEs that were 75 percent of total PEs, the indirect percentage factor to apply to the direct costs for the purposes of the indirect allocation would be (0.75/0.25) = 3.0. The indirect percentage factor is then applied to the service level adjusted indirect PE allocators.
  • We use the specialty-specific PE/HR from the SMS survey data, as well as the supplemental surveys for cardiothoracic surgery, vascular surgery, physical and occupational therapy, independent laboratories, allergy/immunology, cardiology, dermatology, radiology, gastroenterology, IDTFs, radiation oncology, and urology. (Note: For radiation oncology, the data represent the combined survey data from the American Society for Therapeutic Radiology and Oncology (ASTRO) and the Association of Freestanding Radiation Oncology Centers (AFROC)). As discussed in the CY 2008 PFS final rule with comment period (72 FR 66233), the PE/HR survey data for radiology is weighted by practice size. We incorporate this PE/HR into the calculation of indirect costs using an index which reflects the relationship between each specialty's indirect scaling factor and the overall indirect scaling factor for the entire PFS. For example, if a specialty had an indirect practice cost index of 2.00, this specialty would have an indirect scaling factor that was twice the overall average indirect scaling factor. If a specialty had an indirect practice cost index of 0.50, this specialty would have an indirect scaling factor that was half the overall average indirect scaling factor.
  • When the clinical labor portion of the direct PE RVU is greater than the physician work RVU for a particular service, the indirect costs are allocated based upon the direct costs and the clinical labor costs. For example, if a service has no physician work and 1.10 direct PE RVUs, and the clinical labor portion of the direct PE RVUs is 0.65 RVUs, we would use the 1.10 direct PE RVUs and the 0.65 clinical labor portions of the direct PE RVUs to allocate the indirect PE for that service.

c. Facility/Nonfacility Costs

Procedures that can be furnished in a physician's office as well as in a hospital or facility setting have two PE RVUs: facility and nonfacility. The nonfacility setting includes physicians' offices, patients' homes, freestanding imaging centers, and independent pathology labs. Facility settings include hospitals, ambulatory surgical centers (ASCs), and skilled nursing facilities (SNFs). The methodology for calculating PE RVUs is the same for both facility and nonfacility RVUs, but is applied independently to yield two separate PE RVUs. Because the PEs for services provided in a facility setting are generally included in the payment to the facility (rather than the payment to the physician under the PFS), the PE RVUs are generally lower for services provided in the facility setting.

d. Services With Technical Components (TCs) and Professional Components (PCs)

Diagnostic services are generally comprised of two components: a professional component (PC) and a technical component (TC), both of which may be performed independently or by different providers. When services have TCs, PCs, and global components that can be billed separately, the payment for the global component equals the sum of the payment for the TC and PC. This is a result of using a weighted average of the ratio of indirect to direct costs across all the specialties that furnish the global components, TCs, and PCs; that is, we apply the same weighted average indirect percentage factor to allocate indirect expenses to the global components, PCs, and TCs for a service. (The direct PE RVUs for the TC and PC sum to the global under the bottom-up methodology.)

e. Transition Period

As discussed in the CY 2007 PFS final rule with comment period (71 FR 69674), we are implementing the change in the methodology for calculating PE RVUs over a 4-year period. During this transition period, the PE RVUs will be calculated on the basis of a blend of RVUs calculated using our methodology described previously in this section (weighted by 25 percent during CY 2007, 50 percent during CY 2008, 75 percent during CY 2009, and 100 percent thereafter), and the CY 2006 PE RVUs for each existing code. PE RVUs for codes that are new during this period will be calculated using only the current PE methodology and will be paid at the fully transitioned rate.

f. PE RVU Methodology

The following is a description of the PE RVU methodology.

(i) Setup File

First, we create a setup file for the PE methodology. The setup file contains the direct cost inputs, the utilization for each procedure code at the specialty and facility/nonfacility place of service level, and the specialty-specific survey PE per physician hour data.

(ii) Calculate the Direct Cost PE RVUs

Sum the costs of each direct input.

Step 1: Sum the direct costs of the inputs for each service. The direct costs consist of the costs of the direct inputs for clinical labor, medical supplies, and medical equipment. The clinical labor cost is the sum of the cost of all the staff types associated with the service; it is the product of the time for each staff type and the wage rate for that staff type. The medical supplies cost is the sum of the supplies associated with the service; it is the product of the quantity of each supply and the cost of the supply. The medical equipment cost is the sum of the cost of the equipment associated with the service; it is the product of the number of minutes each piece of equipment is used in the service and the equipment cost per minute. The equipment cost per minute is calculated as described at the end of this section.

Apply a BN adjustment to the direct inputs.

Step 2: Calculate the current aggregate pool of direct PE costs. To do this, multiply the current aggregate pool of total direct and indirect PE costs (that is, the current aggregate PE RVUs multiplied by the CF) by the average direct PE percentage from the SMS and supplementary specialty survey data.

Step 3: Calculate the aggregate pool of direct costs. To do this, for all PFS services, sum the product of the direct costs for each service from Step 1 and the utilization data for that service.

Step 4: Using the results of Step 2 and Step 3 calculate a direct PE BN adjustment so that the aggregate direct cost pool does not exceed the current aggregate direct cost pool and apply it to the direct costs from Step 1 for each service.

Step 5: Convert the results of Step 4 to an RVU scale for each service. To do this, divide the results of Step 4 by the Medicare PFS CF.

(iii) Create the Indirect PE RVUs

Create indirect allocators.

Step 6: Based on the SMS and supplementary specialty survey data, calculate direct and indirect PE percentages for each physician specialty.

Step 7: Calculate direct and indirect PE percentages at the service level by taking a weighted average of the results of Step 6 for the specialties that furnish the service. Note that for services with TCs and PCs we are calculating the direct and indirect percentages across the global components, PCs, and TCs. That is, the direct and indirect percentages for a given service (for example, echocardiogram) do not vary by the PC, TC and global component.

Step 8: Calculate the service level allocators for the indirect PEs based on the percentages calculated in Step 7. The indirect PEs are allocated based on the three components: the direct PE RVU, the clinical PE RVU, and the work RVU.

For most services the indirect allocator is: indirect percentage * (direct PE RVU/direct percentage) + work RVU.

There are two situations where this formula is modified:

  • If the service is a global service (that is, a service with global, professional, and technical components), then the indirect allocator is: indirect percentage * (direct PE RVU/direct percentage) + clinical PE RVU + work RVU.
  • If the clinical labor PE RVU exceeds the work RVU (and the service is not a global service), then the indirect allocator is: indirect percentage * (direct PE RVU/direct percentage) + clinical PE RVU.

(Note: For global services, the indirect allocator is based on both the work RVU and the clinical labor PE RVU. We do this to recognize that, for the professional service, indirect PEs will be allocated using the work RVUs, and for the TC service, indirect PEs will be allocated using the direct PE RVU and the clinical labor PE RVU. This also allows the global component RVUs to equal the sum of the PC and TC RVUs.)

For presentation purposes in the examples in Table 1, the formulas were divided into two parts for each service. The first part does not vary by service and is the indirect percentage * (direct PE RVU/direct percentage). The second part is either the work RVU, clinical PE RVU, or both depending on whether the service is a global service and whether the clinical PE RVU exceeds the work RVU (as described earlier in this step.)

Apply a BN adjustment to the indirect allocators.

Step 9: Calculate the current aggregate pool of indirect PE RVUs by multiplying the current aggregate pool of PE RVUs by the average indirect PE percentage from the physician specialty survey data. This is similar to the Step 2 calculation for the direct PE RVUs.

Step 10: Calculate an aggregate pool of indirect PE RVUs for all PFS services by adding the product of the indirect PE allocators for a service from Step 8 and the utilization data for that service. This is similar to the Step 3 calculation for the direct PE RVUs.

Step 11: Using the results of Step 9 and Step 10, calculate an indirect PE adjustment so that the aggregate indirect allocation does not exceed the available aggregate indirect PE RVUs and apply it to indirect allocators calculated in Step 8. This is similar to the Step 4 calculation for the direct PE RVUs.

Calculate the Indirect Practice Cost Index.

Step 12: Using the results of Step 11, calculate aggregate pools of specialty-specific adjusted indirect PE allocators for all PFS services for a specialty by adding the product of the adjusted indirect PE allocator for each service and the utilization data for that service.

Step 13: Using the specialty-specific indirect PE/HR data, calculate specialty-specific aggregate pools of indirect PE for all PFS services for that specialty by adding the product of the indirect PE/HR for the specialty, the physician time for the service, and the specialty's utilization for the service.

Step 14: Using the results of Step 12 and Step 13, calculate the specialty-specific indirect PE scaling factors as under the current methodology.

Step 15: Using the results of Step 14, calculate an indirect practice cost index at the specialty level by dividing each specialty-specific indirect scaling factor by the average indirect scaling factor for the entire PFS.

Step 16: Calculate the indirect practice cost index at the service level to ensure the capture of all indirect costs. Calculate a weighted average of the practice cost index values for the specialties that furnish the service. (Note: For services with TCs and PCs, we calculate the indirect practice cost index across the global components, PCs, and TCs. Under this method, the indirect practice cost index for a given service (for example, echocardiogram) does not vary by the PC, TC and global component.)

Step 17: Apply the service level indirect practice cost index calculated in Step 16 to the service level adjusted indirect allocators calculated in Step 11 to get the indirect PE RVU.

(iv) Calculate the Final PE RVUs

Step 18: Add the direct PE RVUs from Step 6 to the indirect PE RVUs from Step 17.

Step 19: Calculate and apply the final PE BN adjustment by comparing the results of Step 18 to the current pool of PE RVUs. This final BN adjustment is required primarily because certain specialties are excluded from the PE RVU calculation for rate-setting purposes, but all specialties are included for purposes of calculating the final BN adjustment. (See “Specialties excluded from rate-setting calculation” below in this section.)

(v) Setup File Information

  • Specialties excluded from rate-setting calculation: For the purposes of calculating the PE RVUs, we exclude certain specialties such as midlevel practitioners paid at a percentage of the PFS, audiology, and low volume specialties from the calculation. These specialties are included for the purposes of calculating the BN adjustment.
  • Crosswalk certain low volume physician specialties: Crosswalk the utilization of certain specialties with relatively low PFS utilization to the associated specialties.
  • Physical therapy utilization: Crosswalk the utilization associated with all physical therapy services to the specialty of physical therapy.
  • Identify professional and technical services not identified under the usual TC and 26 modifiers: Flag the services that are PC and TC services, but do not use TC and 26 modifiers (for example, electrocardiograms). This flag associates the PC and TC with the associated global code for use in creating the indirect PE RVU. For example, the professional service code 93010 is associated with the global code 93000.
  • Payment modifiers: Payment modifiers are accounted for in the creation of the file. For example, services billed with the assistant at surgery modifier are paid 16 percent of the PFS amount for that service; therefore, the utilization file is modified to only account for 16 percent of any service that contains the assistant at surgery modifier.
  • Work RVUs: The setup file contains the work RVUs from this final rule.

(vi) Equipment Cost per Minute

The equipment cost per minute is calculated as:

(1/(minutes per year * usage)) * price * ((interest rate/(1-(1/((1 + interest rate) ** life of equipment)))) + maintenance)

Where:

minutes per year= maximum minutes per year if usage were continuous (that is, usage = 1); 150,000 minutes.

usage= equipment utilization assumption; 0.5.

price= price of the particular piece of equipment.

interest rate= 0.11.

life of equipment= useful life of the particular piece of equipment.

maintenance= factor for maintenance; 0.05.

Note: To illustrate the PE calculation, in Table 1 we have used the conversion factor (CF) of $36.0666 which is the CF effective January 1, 2009 as published in this final rule.

Table 1—Calculation of PE RVUs Under Methodology for Selected Codes Back to Top
Step Source Formula 99213 Office visit, est nonfacility 33533 CABG, arterial single facility 71020 Chest x-ray nonfacility 71020TC Chest x-ray nonfacility 7102026 Chest x-ray nonfacility 93000 ECG, complete nonfacility 93005 ECG, tracing nonfacility 93010 ECG, report nonfacility
(1) Labor cost (Lab) Step 1 AMA $13.32 $77.52 $5.74 $5.74 $— $6.12 $6.12 $—
(2) Suppy cost (Sup) Step 1 AMA $2.98 $7.34 $3.39 $3.39 $— $1.19 $1.19 $—
(3) Equipment cost (Eqp) Step 1 AMA $0.19 $0.65 $8.17 $8.17 $— $0.12 $0.12 $—
(4) Direct cost (Dir) Step 1 =(1)+(2)+(3) $16.50 $85.51 $17.31 $17.31 $— $7.43 $7.43 $—
(5) Direct adjustment (Dir Adj) Steps 2-4 See footnote* 0.625 0.625 0.625 0.625 0.625 0.625 0.625 0.625
(6) Adjusted labor Steps 2-4 =Lab*Dir Adj =(1)*(5) $8.33 $48.48 $3.59 $3.59 $— $3.83 $3.83 $—
(7) Adjusted supplies Steps 2-4 =Sup*Dir Adj =(2)*(5) $1.87 $4.59 $2.12 $2.12 $— $0.75 $0.75 $—
(8) Adjusted equipment Steps 2-4 =Eqp*Dir Adj =(3)*(5) $0.12 $0.41 $5.11 $5.11 $— $0.07 $0.07 $—
(9) Adjusted direct Steps 2-4 =(6)+(7)+(8) $10.32 $53.48 $10.82 $10.82 $— $4.65 $4.65 $—
(10) Conversion Factor (CF) Step 5 MFS 36.0666 36.0666 36.0666 36.0666 36.0666 36.0666 36.0666 36.0666
(11) Adj. labor cost converted Step 5 =(Lab*Dir Adj)/CF =(6)/(10) 0.23 1.34 0.10 0.10 0.11 0.11
(12) Adj. supply cost converted Step 5 =(Sup*Dir Adj)/CF =(7)/(10) 0.05 0.13 0.06 0.06 0.02 0.02
(13) Adj. equip cost converted Step 5 =(Eqp*Dir Adj)/CF =(8)/(10) 0.00 0.01 0.14 0.14 0.00 0.00
(14) Adj. direct cost converted Step 5 =(11)+(12)+(13) 0.29 1.48 0.30 0.30 0.13 0.13
(15) Wrk RVU Setup File MFS 0.92 33.64 0.22 0.22 0.17 0.17
(16) Dir_pct Steps 6, 7 Surveys 33.8% 32.6% 40.7% 40.7% 40.7% 37.7% 37.7% 37.7%
(17) Ind_pct Steps 6, 7 Surveys 66.2% 67.4% 59.3% 59.3% 59.3% 62.3% 62.3% 62.3%
(18) Ind. Alloc. formula (1st part) Step 8 See Step 8 ((14)/(16))*(17) ((14)/(16))*(17) ((14)/(16))*(17) ((14)/(16))*(17) ((14)/(16))*(17) ((14)/(16))*(17) ((14)/(16))*(17) ((14)/(16))*(17)
(19) Ind. Alloc. (1st part) Step 8 See (18) 0.56 3.06 0.44 0.44 0.21 0.21
(20) Ind. Alloc. formulas (2nd part) Step 8 See Step 8 (15) (15) (15)+(11) (11) (15) (15)+(11) (11) (15)
(21) Ind. Alloc. (2nd part) Step 8 See (20) 0.92 33.64 0.32 0.10 0.22 0.28 0.11 0.17
(22) Indirect Allocator (1st+2nd) Step 8 =(19)+(21) 1.48 36.70 0.76 0.54 0.22 0.49 0.32 0.17
(23) Indirect Adjustment (Ind Adj) Steps 9-11 See footnote** 0.337 0.337 0.337 0.337 0.337 0.337 0.337 0.337
(24) Adjusted Indirect Allocator Steps 9-11 =Ind Alloc * Ind Adj 0.50 12.37 0.26 0.18 0.07 0.16 0.11 0.06
(25) Ind.Practice Cost Index (PCI) Steps 12-16 See Steps 12-16 = Adj. Ind 0.973 0.976 1.087 1.087 1.087 1.237 1.237 1.237
(26) Adjusted Indirect Step 17 Alloc*PCI =(24)*(25) 0.49 12.07 0.28 0.20 0.08 0.20 0.13 0.07
(27) PE RVU Steps 18-19 =(Adj Dir+Adj Ind) *budn =((14)+(26)) *budn 0.77 13.44 0.57 0.49 0.08 0.33 0.26 0.07

2. PE Proposals for CY 2009

a. RUC Recommendations for Direct PE Inputs

In the CY 2009 PFS proposed rule, we agreed with the AMA RUC PE recommendations for 23 codes except for the inclusion of the clinical staff for quality-related activities for 8 immunization injection services (73 FR 38512). The AMA RUC recommendations and other PE issues are addressed below.

Immunization Services

We did not accept the AMA RUC-recommended inclusion of 4 minutes of clinical staff time related to quality activities (QA) for the 4 immunization codes for the initial injection: CPT codes 90465, 90467, 90471, and 90473; nor did we accept the recommended 1 minute of QA time for the 4 “each additional” subsequent injection for CPT codes 90466, 90468, 90472 and 90474. As we explained, unlike the clinical staff time related to quality activities that is included for mammography services as required by the Mammography Quality Standards Act of 1992 (102) (MQSA), there is no statutory requirement for quality-related clinical staff time inputs for these services.

Comment: We received comments from individuals and group practice physicians, specialty societies, the AMA RUC, the AMA, two State medical societies, a vaccine manufacturer, a pharmaceutical research association, and the National Vaccine Advisory Committee regarding our omission of the QA clinical labor time for the immunization injection codes. These commenters requested that we add back the QA clinical time as recommended by the AMA RUC.

Response: Based on the commenters' requests, we reexamined the issue. We have identified clinical QA time included in other services that is not based on a statutory requirement. For many cardiac and vascular ultrasound services, for example, QA time is included because it is directly related to compliance with accreditation requirements. After our review, we believe there was evidence to support the inclusion of this QA time in this case in order to comply with State and Federal regulatory guidelines. We have revised the PE database to reflect QA time for these immunization services.

Comment: Other commenters representing specialty societies supported our acceptance of the AMA RUC recommendations for the 15 other services identified in Table 2 of the proposed rule.

Response: We have finalized the AMA RUC PE recommendations for these services.

b. Equipment Time-in-Use

The formula for estimating the cost per minute for equipment is based upon a variety of factors, including the cost of the equipment, useful life, interest rate, maintenance cost, and utilization. The purpose of this formula is to identify an estimated cost per minute for the equipment that can be multiplied by the time the equipment is in use to obtain an estimated per use equipment cost to develop the resource-based PE RVU.

In calculating the estimated cost per minute for services that are in use 24 hours per day for 7 days per week, we have assumed that the maximum amount of time that the equipment can be in use is approximately 525,000 minutes (that is, 525,000 minutes = (24 hours per day) × (7 days per week) × (52 weeks per year) × (60 minutes per hour)).

For CY 2008, we used 525,000 minutes to calculate the per minute equipment cost for the equipment used in CPT code 93012, Telephonic transmission of post-symptom electrocardiogram rhythm strip(s), 24-hour attended monitoring, per 30 day period of time; tracing only and CPT code 93271, Patient demand single or multiple event recording with presymptom memory loop, 24-hour attended monitoring, per 30 day period of time; monitoring, receipt of transmissions, and analysis. Based on information presented to us by a provider group suggesting that the equipment was in use continuously, we determined that this equipment is used 24 hours a day, 7 days a week. Thus, we assigned the equipment a 100 percent usage rate. However, in subsequent discussions with a provider group, we determined that, although there may be a 100 percent usage rate for a particular month, this does not correspond to a 100 percent usage rate for a year. Therefore, for CY 2009 we proposed to apply our standard utilization rate of 50 percent to the 525,000 maximum minutes of use, consistent with our utilization rate assumption for other equipment. This results in 262,500 minutes (that is, 262,500 = 525,000 × 0.50) of average use over the course of the year.

In the CY 2008 PFS rule, we used 43,200 minutes (60 minutes per hour × 24 hours per day × 30 days per month) to estimate the per use cost of the equipment in these monthly services. We are continuing to use 43,200 minutes in determining the equipment cost per use for these codes.

Comment: The majority of comments received supported our proposal to assign the standard 50 percent utilization rate to CPT codes 93012 and 93271. Other comments disagreed with our proposal and described it as an arbitrary method for changing equipment utilization rates. Many commenters suggested that we should develop a survey process that would obtain service specific utilization rates for all PFS services.

Response: We agree with the commenters that support assigning the standard 50 percent equipment utilization rate to CPT codes 93012 and 93271 and we will finalize our proposal to use the standard 50 percent utilization rate for CPT codes 93012 and 93271. Although we did not make any proposals related to a comprehensive survey of services specific equipment costs, we plan to continue to work with interested parties to analyze the possibilities for potential inclusion in a future rulemaking cycle.

c. Change to PE Database Inputs for Certain Cardiac Stress Tests

In the CY 2009 PFS proposed rule, we proposed to change the PE database for CPT code 93025, Microvolt T-wave alternans for assessment of ventricular arrhythmias, to make the clinical labor staff type consistent with the other cardiac stress tests, CPT codes 93015 and 93017. In addition, we proposed to add the specific Microvolt T-wave testing equipment in place of the cardiac stress testing treadmill devices, as well as to revise the time-in-use for the equipment in CPT 93025 to reflect the service period. We also proposed to apply similar revisions to the equipment time-in-use to the other 2 CPT codes, CPT codes 93015 and 93017.

Comment: The manufacturer of the equipment technology and the specialty society were supportive of these proposed changes. In addition, the AMA RUC noted that it would address this issue at the 2008 October AMA RUC meeting.

Response: We have received and accepted the AMA RUC recommendations for CPT 93025, 93015 and 93017 which support all of the changes in our proposal. The PE database is revised to reflect these changes.

d. Revisions to § 414.22(b)(5)(i) Concerning Practice Expense

Current regulations at § 414.22(b)(5)(i) provide an explanation of the two levels of PE RVUs for the facility and nonfacility settings that are used in determining payment under the PFS. Section 414.22(b)(5)(i)(A) discusses facility PE RVUs and § 414.22(b)(5)(i)(B) discusses nonfacility PE RVUs. Language in each of these sections incorrectly implies that the facility PE RVU is lower than or equal to the nonfacility PE RVUs. However, there are some instances where the facility PE RVUs may actually be greater than the nonfacility PE RVUs. In order to address this inaccuracy, we proposed to revise § 414.22(b)(5)(i)(A) and (B) to remove this language.

We received no comments on our proposed technical change and have revised the regulations at § 414.22(b)(5)(i)(A) and (B) as proposed.

e. Other PE Direct Input Issues

(i) Removal of Conscious Sedation (CS) PE Inputs for Services in Which CS is not Inherent—Technical Correction

In reviewing the PE database, we noted that the conscious sedation (CS) PE inputs for 12 CPT codes in which CS is not inherent had not been removed after CPT 2005 began identifying these codes in a separate Addendum. The CS inputs for CPT codes 19300, 22520, 22521, 31717, 62263, 62264, 62268, 62269, 63610, 64585, 64590, and 64595 had been added by the AMA RUC's PEAC prior to CY 2005. At that time, the AMA RUC recommended deletion of the CS PE inputs for all procedures that were not identified in the CPT 2005 manual Addendum which lists the services in which CS is inherent; and thus include the associated direct PE inputs. Due to a technical error, these inputs were not removed for CY 2005. We have removed the CS PE inputs for the 12 CPT codes noted above. We ask that the AMA RUC permit specialty societies to bring any CPT codes forward to either the February or April 2009 AMA RUC meetings should any other discrepancies between the CPT Addendum and the PE database be identified.

(ii) Jejunostomy Tube Price

A comment received on the CY 2009 PFS proposed rule stated that we had mistakenly entered the price for a set of 2, rather than just 1, jejunostomy tube in each of the following CPT codes 49441, 49446, 49451, and 49452. So that the price of this PE supply can be properly valued as part of the PE RVUs for each of the four services in which it is found, we have changed the price of this supply from $198 to $97.50 in CPT codes 49441, 49446, 49451, and 49452. In addition, because it's correct price is less than $150, this item was erroneously placed on the list for re-pricing of higher-cost supplies on Table 29 in the proposed rule; and, as a result of this price correction, it has been removed from the list of supply items in need of repricing.

(iii) Supply Code SH079, Collagen, Dermal Implant (2.5ml uou) (Contigen)

We received comments from a specialty society representing urologists noting that the dermal collagen implant, priced at $317, was an inappropriate supply input for CPT 52330. The specialty society asked that we remove this supply from this service. We agree that inclusion of the dermal collagen implant as a supply input for CPT code 52330 is not appropriate. The PE RVUs for CPT 52330 reflect the removal of this supply item.

(iv) Contractor Pricing of CPT 77371 for Stereotactic Radiosurgery (SRS) Treatment Delivery

CPT code 77371, Radiation treatment delivery, stereotactic radiosurgery (SRS) (complete course of treatment of cerebral lesion(s) consisting of one session); multi-source Cobalt 60 based, (more commonly known as Gamma Knife) was a new CPT code for CY 2007. At that time, we accepted nearly all of the AMA RUC PE recommendations for this procedure (we did not accept the Cobalt 60 radiation source as a direct PE input) during CY 2007 rulemaking, and these recommendations are reflected in the PE RVUs for CPT 77371. The PE inputs for CPT 77371 had been proposed by the sitting AMA RUC specialty society representing therapeutic radiation oncology physicians. The AMA RUC discussed and amended the specialty's proposal for direct PE inputs (particularly the amount of clinical labor time) prior to agreeing on the final AMA RUC recommendation that was forwarded to CMS for CY 2007. Due to the equipment expense (nearly $4 million) along with the many Nuclear Regulatory Commission (NRC) requirements for construction of the facility required to furnish these procedures, all but one of these facilities is connected with a hospital setting, leaving a single free-standing nonfacility provider.

Comment: We received 3 comments stating that the PE RVUs listed in Addendum B for CPT 77371 are exceptionally inadequate. All commenters, including the single freestanding nonfacility based provider, noted the difference in payments between those made under OPPS and the PFS for CPT 77371. For CY 2009, the commenters noted that the proposed OPPS payment is $7,608 and the PFS payment under the proposed rule would be $1,260. A freestanding nonfacility provider noted that it had worked with the Medicare contractor but was unsuccessful in securing a higher payment because the contractor could not deviate from the established PE RVUs. Two commenters also stated that they believe the direct PE inputs are incorrect since the cost data they had gathered from other facility providers of this stereotactic radiosurgery (SRS) service included extra clinical labor time due to Nuclear Regulatory Commission (NRC) requirements for both the physicist and the registered nurse. In addition, they disagreed with our decision to treat the Cobalt 60 radiation source (recommended by the AMA RUC as a 1-month renewable equipment item) as an indirect PE cost in the CY 2007 PFS final rule with comment period. The commenters have asked us to contractor-price CPT 77371 for CY 2009 if a payment correction cannot be made in the final rule.

Response: We will ask the AMA RUC to review the direct PE inputs for this code in light of these comments. In the interim, we believe the commenters have raised sufficient questions regarding the propriety of the direct PE inputs and PE RVUs established for this new code in 2007 to warrant contractor-pricing for CPT 77371 for CY 2009.

f. Supply and Equipment Items Needing Specialty Input

We have identified some supply and equipment items from the CY 2008 final rule with comment period for which we were unable to verify the pricing information (see Table 2: Items Needing Specialty Input for Pricing and Table 3: Equipment Items Needing Specialty Input for Pricing). For the items listed in Tables 2 and 3, we are requesting that commenters provide pricing information. In addition, we are requesting acceptable documentation, as described in the footnote to each table, to support the recommended prices. For supplies or equipment that previously appeared on these lists, we may propose to delete these items unless we receive adequate information to support current pricing by the conclusion of the comment period for this final rule.

In Tables 4 and 5, we have listed specific supplies and equipment items related to new CY 2009 CPT codes that are discussed in section V. of this final rule with comment period. We have added these items to the PE database along with the associated prices (on an interim basis). We plan to propose finalized pricing information in the CY 2010 PFS proposed rule. Item prices identified in these tables are also reflected in the PE RVUs in Addendum B. In addition, we have asked commenters to submit specific information in response to the discussion of the supply and equipment items for some each of the new CPT codes in section V. of this final rule with comment period. We have also specifically asked for public comment about the direct cost inputs for the 3 new 2009 CPT codes which we contractor-priced for CY 2009 (CPT codes 93229, 93299, and 95803).

Table 2—Supply Items Needing Specialty Input for Pricing Back to Top
Code 2008/9 Description Unit Unit price Primary Associated Specialties Associated * CPT code(s) Prior item status on table Commenter response and CMS action 2009 Item status refer to note(s)
* CPT codes and descriptions only are copyright 2009 American Medical Association. All Rights Reserved. Applicable FARS/DFARS apply.
Note: Acceptable documentation includes detailed description (including system, kit or product components), source (multiple sources requested), and current pricing information. For most items, there will be multiple sources of documentation available—multiple products/models that can be used as acceptable substitutes in performing a procedure. We ask that documentation from multiple sources be submitted with verified prices of the various products which represent the price range. In these instances, only one specific item/model/product is available on the market for use in a given procedure, one source of documentation is required. However, CMS expects that all documentation reflect the market price for each product reflecting the manufacturer or vendor discounts, rebates, etc. Invoices from physician purchases are the preferred documentation. In cases where this is not possible, CMS may accept other documentation such as copies of catalog pages, hard copy from specific Web pages, physician invoices, and typical or average sales price “quotes” (letter format okay) from manufacturers, vendors, or distributors. Unacceptable documentation includes phone numbers and addresses of manufacturer, vendors or distributors, Web site links without pricing information, etc.
A. Additional documentation required. Need detailed description (including “kit”, system, or product contents and component parts), source, and current pricing information (including pricing per specified unit of measure in database).
B. No/Insufficient information received. Where applicable, retained price in database on an interim basis. Forward acceptable documentation promptly.
C. Submitted price accepted.
D. 2008/9 price retained on an interim basis. Forward acceptable documentation promptly.
Gas, argon, cryoablation Urology, Radiology, Interventional Radiology 50395 YES New item 2008 A, D.
Gas, helium, cryoablation Urology, Radiology, Interventional Radiology 50395 YES New item 2008 A, D.
SL119 Sealant spray oz Radiation Oncology 77333 YES No comments received B.
Catheter, Kumpe Item Radiology, Interventional Radiology 50385, 50386 YES New item 2008 A, D.
Disposable aspirating syringe Oral and Maxillofacial Surgery 21073 YES New item 2008 A, D.
Guidewire, angle tip (Terumo), 180 cm. 1 Radiology, Interventional Radiology 50385, 50386 YES New item 2008 A, D.
Snare, Nitinol (Amplatz) Item Radiology, Interventional Radiology 50385, 50386 YES New item 2008 A, D.
NA Agent, neurolytic ml Orthopedic Surgery, Podiatry 64632 NO New item 2009 A.
NA Strut, replacement, dynamic external Item 1151 20697 NO New item 2009 A.
NA Tube, anaerobic culture Item 62267 Lab NO New item 2009 A, B.
NA Tube, jejunsostomy Item 97.50 49441, 49446, 49451 and 49452 Accessory NO Price changed/CMS error. $195 price for 2 J-tubes. $97.50 accepted C.
Table 3—Equipment Items Needing Specialty Input for Pricing Back to Top
Code 2008/9 Description 2008/9 Price Primary specialties associated with item * CPT code(s) associated with item Prior status on table Commenter response and CMS action 2009 Item status refer to note(s)
* CPT codes and descriptions only are copyright 2009 American Medical Association. All Rights Reserved. Applicable FARS/DFARS apply.
Note: Acceptable documentation includes detailed description (including system, kit or product components), source (multiple sources requested), and current pricing information. For most items, there will be multiple sources of documentation available—multiple products/models that can be used as acceptable substitutes in performing a procedure. We ask that documentation from multiple sources be submitted with verified prices of the various products which represent the price range. In these instances, only one specific item/model/product is available on the market for use in a given procedure, one source of documentation is required. However, CMS expects that all documentation reflect the market price for each product reflecting the manufacturer or vendor discounts, rebates, etc. Invoices from physician purchases are the preferred documentation. In cases where this is not possible, CMS may accept other documentation such as copies of catalog pages, hard copy from specific Web pages, physician invoices, and typical or average sales price “quotes” (letter format okay) from manufacturers, vendors, or distributors. Unacceptable documentation includes phone numbers and addresses of manufacturer, vendors or distributors, Web site links without pricing information, etc.
A. Additional documentation required. Need detailed description (including kit contents), source, and current pricing information (including pricing per specified unit of measure in database). Accept copies of catalog pages or hard copy from specific Web pages. Phone numbers or addresses of manufacturer, vendors, or distributors are not acceptable documentation.
B. No/Insufficient received. Retained price in database on an interim basis. Forward acceptable documentation promptly.
C. Submitted price accepted.
D. 2008/9 price, where specified, retained on an interim basis. Forward acceptable documentation promptly.
E. See discussion in section V. of this final rule with comment period. Forward requested documentation promptly, for example, whether item is typical.
Camera mount-floor 2300 Dermatology 96904 Yes Specialty to submit, asap A and D.
Cross slide attachment 500 Dermatology 96904 Yes Specialty to submit, asap A and D.
Plasma pheresis machine 37,900 Radiology, Dermatology 36481, G0341 Yes Revised description based on comments received that light source was not part of item. Documentation requested B.
ED039 Psychology Testing Equipment Psychology 96101, 96102 Yes Specialty to submit, asap B.
Strobe, 400 watts (Studio)(2) 1500 Dermatology 96904 Yes Documentation requested B.
Cryosurgery system (for tumor ablation). 1 Urology, Radiology, Interventional Radiology 50593 Yes New item 2008 A and D.
Workstation, dual, echocardiography 85000 Cardiology 93351 No New item 2009, Specialty submitted $173,509—CMS accept $85,000 E.
EQ136 Infrared Coagulator (with hand applicator, includes light guide) 3659.50 46606, 46608, 46610, 46612, 46930 No New price for 2009 with addition of light guide, Supply code, Eq136, descriptor changed to include the light guide E.
Table 4—Practice Expense Supply Item Additions for CY 2009 Back to Top
Equip code Supply description Unit Unit price * CPT code(s) associated with item Supply category Comments
* CPT codes and descriptions only are copyright 2009 American Medical Association. All Rights Reserved. Applicable FARS/DFARS apply.
A. Price verification needed. Item(s) added to table of supplies requiring specialty input.
B. Request explanation/rationale as to why specific supply is necessary, how it differs from current PE database item, and why current PE item(s) cannot be used for procedure(s).
C. CMS price correction.
D. Also, see discussion in section V. of this final rule with comment period. Proxy in use on an interim basis: SH062 Sclerosing solution, inj.
NA Agent, neurolytic ml 64632 Pharmacy, Rx A, B and D.
NA IV infusion set, Sof-set (Minimed) Item 11.5 96369 and 96371 Hypodermic, IV B.
NA Strut, replacement, dynamic external Item 1151 20697 Accessory A.
NA Swab, patient prep, 1.5 ml (chloraprep) Item 1.04 93352 Pharmacy, NonRx B.
NA Tube, anaerobic culture Item 62267 Lab A.
NA Tube, jejunsostomy Item 97.50 49441, 49446, 49451 and 49452 Accessory A and C.
Table 5—Practice Expense Equipment Item Additions for CY 2009 Back to Top
Item code Equipment description Equip life Unit price * CPT code(s) associated with item Supply or equipment category Comments
* CPT codes and descriptions only are copyright 2009 American Medical Association. All Rights Reserved. Applicable FARS/DFARS apply.
A. Price verification needed. Item(s) added to table of equipment requiring specialty input.
B. Interim value, CY 2009 only. CMS assigned the pacemaker monitoring system to these two CPT codes that the specialty association requested a pacemaker “interrogation” system. Since the CMS PE database does not contain such an item, we assigned, on an interim basis, the pacemaker monitoring system that was assigned to these 2 codes previously. Although we remain uncertain as to the appropriate equipment that should be assigned, we will work with the specialty as they provide us with more information and documentation for the typical equipment needed for these 2 services when provided in the physician's office.
C. Interim value, CY 2009 only. CMS assigned EQ198 to all new cardiac monitoring codes for CY 2009 because the crosswalked codes (for CY 2008) each contained the equipment item EQ198. While the specialty requested the “pacemaker monitoring system” for these services, CMS was not provided any information to support the change in technology for these services provided in the physician's office setting.
D. Also, see discussion in Section V. of this final rule with comment period.
NA Workstation, dual, echocardiography 5 85000 93351 DOCUMENTATION A and D.
NA Pacemaker, Interrogation, System (CMS used Pacemaker, Monitoring, System as proxy for price) 5 123250 93693 and 93696 OTHER EQUIPMENT B and D.
EQ198 Pacemaker follow-up system (incl software and hardware) (Paceart) 7 23507 93279, 93280, 93281, 93282, 93284, 93285, 93286, 93287, 93288, 93289, 93290, 93291, 93292, 93724 OTHER EQUIPMENT C and D.
EQ136 Infrared Coagulator (with hand applicator, includes light guide) 10 3659.50 46606, 46608, 46610, 46612, 46930 OTHER EQUIPMENT A and D.

B. Geographic Practice Cost Indices (GPCI): Locality Discussion

1. Update

Section 1848(e)(1)(A) of the Act requires us to develop separate Geographic Practice Cost Indices (GPCIs) to measure resource cost differences among localities compared to the national average for each of the three fee schedule components (work, PE and malpractice). While requiring that the PE and malpractice GPCIs reflect the full relative cost differences, section 1848(e)(1)(A)(iii) of the Act requires that the physician work GPCIs reflect only one-quarter of the relative cost differences compared to the national average.

Section 1848(e)(1)(C) of the Act requires us to review and, if necessary, adjust the GPCIs at least every 3 years. This section also specifies that if more than 1 year has elapsed since the last GPCI revision, we must phase in the adjustment over 2 years, applying only one-half of any adjustment in each year. As discussed in the CY 2008 PFS final rule with comment period (72 FR 66243), we established new GPCIs for each Medicare locality in CY 2008 and implemented them. The CY 2008 adjustment to the GPCIs reflected the first year of the 2-year phase-in.

We noted in the CY 2009 PFS proposed rule (73 FR 38513), that the physician work GPCIs we calculated did not reflect the 1.000 floor that was in place during CY 2006 through June 30, 2008. However, as discussed in section III. of this preamble, section 134 of the MIPPA of 2008 extended the 1.000 work GPCI floor from July 1, 2008, through December 31, 2009. Additionally, section 134(b) of the MIPPA sets a permanent 1.500 work GPCI floor in Alaska for services furnished beginning January 1, 2009. As such, the CY 2009 GPCIs and summarized GAFs reflect these statutorily mandated work GPCI floors.

See Addenda D and E for the CY 2009 GPCIs and summarized geographic adjustment factors (GAFs).

For a detailed explanation of how the GPCI update was developed, see the CY 2008 PFS final rule with comment period (72 FR 66244).

2. Payment Localities

a. Background

As stated above in this section, section 1848(e)(1)(A) of the Act requires us to develop separate GPCIs to measure resource cost differences among localities compared to the national average for each of the three fee schedule components (work, PE, and malpractice). Payments under the PFS are based on the relative resources required to provide services, and are adjusted for differences in resource costs among payment localities using the GPCIs. As a result, PFS payments vary between localities. Although the PFS payment for a particular service is actually adjusted by applying a GPCI to each fee schedule component, for purposes of discussion and comparison, we calculate a geographic adjustment factor (GAF) for each locality. These GAFs reflect a weighted average of the GPCIs within the locality and can be used as a general proxy for area practice costs. A GAF is calculated to reflect a summarization of the GPCIs, (which is used only to make comparisons across localities). The GAFs are not an absolute measure of actual costs, nor are they used to calculate PFS payments. Rather, they are a tool that can be used as a proxy for differences in the cost of operating a medical practice among various geographic areas (for example counties) for the purpose of assessing the potential impact of alternative locality configurations.

Prior to 1992, Medicare payments for physicians' services were made on the basis of reasonable charges. Payment localities were established under the reasonable charge system by local Medicare carriers based on their knowledge of local physician charging patterns and economic conditions. A total of 210 localities were developed; including 22 “Statewide” localities where all areas within a State (whether urban or rural) received the same payment amount for a given service. These localities changed little between the inception of Medicare in 1966 and the beginning of the PFS in 1992. Following the inception of the PFS, we acknowledged that there was no consistent geographic basis for these localities and that they did not reflect the significant economic and demographic changes that had taken place since 1966. As a result, a study was begun in 1994 which culminated in a comprehensive locality revision which was implemented in 1997.

The 1997 payment locality revision was based and built upon the prior locality structure. The 22 previously existing Statewide localities remained Statewide localities. New localities were established in the remaining 28 States by comparing the area cost differences (using the GAFs as a proxy for costs) of the localities within these States. We ranked the existing localities within these States by GAFs in descending order. The GAF of the highest locality within a State was compared to the weighted average GAF of other localities. If the differences between these GAFs exceeded 5 percent, the highest locality remained a distinct locality. If the GAFs associated with all the localities in a State did not vary by at least 5 percent, the State became a Statewide locality. If the highest locality remained a distinct locality, the process was repeated for the second highest locality and so on until the variation among remaining localities fell below the 5 percent threshold. The rest of the localities within the State were combined into a single rest-of-State locality as their costs were relatively homogeneous. The revised locality structure (which is the one currently in use) reduced the number of localities from 210 to 89. The number of Statewide localities increased from 22 to 34. The development of the current locality structure is described in detail in the CY 1997 PFS proposed rule (61 FR 34615) and the subsequent final rule (61 FR 59494).

Although there have been no changes to the locality structure since 1997, we have proposed changes in recent years, although we did not finalize them. As we have frequently noted, any changes to the locality configuration must be made in a budget neutral manner. Therefore, changes in localities can lead to significant redistributions in payments. For many years, we have not considered making changes to localities without the support of a State Medical Association, which we believed would demonstrate consensus for the change among the professionals who would be affected. However, we recognize that over time changes in demographics or local economic conditions may lead us to conduct a more comprehensive examination of existing payment localities, and consideration of potential alternatives.

Payment Locality Approaches Discussed in the CY 2008 PFS Proposed Rule

For the past several years, we have been involved in discussions with California physicians and their representatives about recent shifts in relative demographics and economic conditions among a number of counties within the current California payment locality structure. In the CY 2008 PFS proposed rule, we described three options for changing the payment localities in California. For a detailed discussion of the options for changing the payment localities in California, see the CY 2008 PFS proposed rule and final rule with comment period (72 FR 38139 and 72 FR 66245, respectively).

After evaluating the comments on these options, which included MedPAC's two suggestions for developing changes in payment localities for the entire country (not just California), other States expressing interest in having their payment localities reconfigured, and the California Medical Association's decision not to endorse any option, we decided not to proceed with any of the alternatives we presented. We explained in the CY 2008 final rule with comment period (72 FR 66248) that we intended to conduct a thorough analysis of potential approaches to reconfiguring localities and would address this issue again in future rulemaking. We also noted that some commenters wanted us to consider a national reconfiguration of localities rather than just making changes one State at a time.

b. Alternative Payment Locality Approaches

In the CY 2009 PFS proposed rule, we explained that as a follow-up to the CY 2008 PFS final rule with comment period, we contracted with Acumen, LLC to conduct a preliminary study of several options for revising the payment localities. To that end, we are currently reviewing several alternative approaches for reconfiguring payment localities on a nationwide basis. However, our study of possible alternative payment locality configurations is in the early stages of development. We also stated that we are not making any changes to our payment localities at this time. For a discussion of the alternative payment locality configurations currently under consideration, see the CY 2009 PFS proposed rule (73 FR 38514).

Our preliminary study of several options for revising the payment localities was posted on the CMS Web site on August 21, 2008. The report entitled, “Review of Alternative GPCI Payment Locality Structures”, which was produced by Acumen, LLC under contract to CMS, is accessible from the PFS Federal regulation notices Web page under the download section of the CY 2009 PFS proposed rule (CMS-1403-P). The report may also be accessed directly from the following link: http://www.cms.hhs.gov/PhysicianFeeSched/downloads/ReviewOfAltGPCIs.pdf. Comments on the interim report were accepted through November 3, 2008.

In the CY 2009 PFS proposed rule and on the CMS Web site, we encouraged interested parties to submit comments on the options presented in the proposed rule and in our interim report. We also requested comments on the administrative and operational issues associated with each option, as well as suggestions for other options.

Comment: We received comments on the options discussed in the proposed rule from various specialty groups and medical societies, as well as a few group practices and individual practitioners. Generally, commenters commended us for acknowledging the need for intermittent reconfiguration of PFS payment localities and expressed support for our study of alternative locality configurations. Some commenters urged us to expedite changes in our payment localities and suggested that we do so as part of the CY 2009 final rule. Other commenters requested that, in any locality reconfiguration, we minimize the payment discrepancy between urban and rural areas to ensure continued access to care.

Response: We would like to thank the public for the comments submitted on the options presented in the proposed rule and in the interim report posted on the CMS Web site. We will summarize all comments received in future rulemaking. As we have stated previously, we will provide extensive opportunities for public comment (for example, town hall meetings or open door forums, as well as a proposed rule) on any specific proposals for changes to the locality configuration before implementing any changes.

C. Malpractice RVUs (PC/TC Issue)

In the CY 1992 PFS final rule (56 FR 59527), we described in detail how malpractice (MP) RVUs are calculated for each physicians' service and, when professional liability insurance (PLI) premium data are not available, how we crosswalk or assign RVUs to services. Following the initial calculation of resource-based MP RVUs, the MP RVUs are then subject to review by CMS at 5-year intervals. Reviewing the MP RVUs every 5 years ensures that the MP relative values reflect any marketplace changes in the physician community's ability to acquire PLI. However, there are codes that define certain radiologic services that have never been part of the MP RVU review process. The MP RVUs initially assigned to these codes have not been revised because there is a lack of suitable data on the cost of PLI for technical staff or imaging centers (where most of these services are performed).

In the CY 2008 PFS proposed rule (72 FR 38143), we noted that the PLI workgroup, a subset of the Relative Value Update Committee (RUC) of the AMA, brought to our attention the fact that there are approximately 600 services that have TC MP RVUs that are greater than the PC MP RVUs. The PLI workgroup requested that we make changes to these MP RVUs and suggested that it is illogical for the MP RVUs for the TC of a service to be higher than the MP RVUs for the PC.

We responded that we would like to develop a resource-based methodology for the technical portion of these MP RVUs; but that we did not have data to support such a change. We asked for information about how, and if, technicians employed by facilities purchase PLI or how their professional liability is covered. We also asked for comments on what types of PLI are carried by facilities that perform these technical services.

In the CY 2008 PFS final rule with comment period (72 FR 66248), one commenter suggested that we “flip” the MP RVUs between the PCs and TCs, or make them equal. Reversing the RVUs would reduce the MP RVUs for the TC and increase the MP RVUs for the PC. The AMA's PLI workgroup recommended that we reduce the MP RVUs for the TC for these codes to zero. The workgroup suggested that there are no identifiable separate costs for professional liability for the TC. The workgroup also recommended that the MP RVUs removed from the TC for these codes be redistributed across all physicians' services.

We responded that we did not believe it would be appropriate to “flip” the PC and TC MP RVU values because the professional part of the MP RVUs has undergone a resource-based review, is derived from actual data, and is consistent with the resource-based methodology for PFS payments. We stated that we would not simply equalize the PC and TC RVU values because we had no data to demonstrate that the MP costs for the technical portion of these services are the same as the professional portion.

We also noted that we have received several comments supporting the decision to examine the possibility of developing a resource-based methodology for the technical portion of the MP RVUs. The commenters supported the collection and analysis of appropriate MP premium data before making any changes to the MP RVU distribution.

We stated that we would continue to solicit, collect, and analyze appropriate data on this subject. We noted that when we had sufficient information we would be better able to make a determination as to what, if any, changes should be made and that we would propose any changes in future rulemaking.

In the CY 2009 PFS proposed rule (73 FR 38515), we stated that the issue of assigning MP RVUs for the TC of certain services continues to be a source of concern for several physician associations and for CMS. We noted that we did not receive a response to our CY 2008 request for additional data on this issue and that this issue is one of importance to CMS. We also stated that the lack of available PLI data affects our ability to make a resource-based evaluation of the TC MP RVUs for these codes. We indicated that as part of our work to update the MP RVUs in CY 2010, we would instruct our contractor to research available data sources for the MP costs associated with the TC portion of these codes and that we would also ask the contractor to look at what is included in general liability insurance versus PLI for physicians and other professional staff. We also stated that if data sources are available, we would instruct the contractor to gather the data so we will be ready to implement revised MP RVUs for the TC of these codes in conjunction with the update of MP RVUs for the PCs in 2010.

The following is a summary of the comments we received on the CY 2009 PFS proposed rule and our responses.

Comment: Most commenters opposed any change to the MP RVUs that would make the TC MP RVUs zero. The commenters stated that there are identifiable MP expenses associated with allied health professionals and that for many radiation oncology centers there are separate MP insurance policies for the radiation oncologists and the nonphysician clinical personnel. The commenters requested that we ensure that the liability insurance associated with the nonphysician personnel is reflected in the MP RVUs for technical services. The commenters also stated that these expenses do not represent general insurance liability premiums which are part of the PE RVUs. The commenters were supportive of our plan for researching data sources for MP premium data for the TC of these codes. One commenter provided the name of a company that provides liability insurance to imaging facilities.

Other commenters, including the AMA, proposed that CMS reduce to zero the TC MP RVUs associated with the codes identified as having higher TC MP RVUs than PC MP RVUs. The commenters stated that any premium data received would represent general liability insurance, not liability insurance premium data related to nonphysician clinical personnel. The commenters suggested that premium data does not exist to support a resource-based computation of the MP RVUs for the TC and stated that general liability insurance premiums are included in the PE component and should not be part of the MP RVU calculation.

Response: We appreciate the comments in support of our proposal to instruct our contractor to research available data sources for the MP costs associated with the TC portions of these codes. As we stated in the CY 2008 PFS final rule with comment period (72 FR 66248), we are not able to evaluate whether sufficient data exists or to make a judgment on the RUC's assertion that such data are not available. It is possible that the contractor responsible for collecting the data for the 5-year MP RVU update will identify providers of professional liability insurance for nonphysician clinical personnel. We plan to share the information received on a potential source of such data with our contractor. If such premium data can be identified, it will be incorporated into the MP RVU update. In the event that we adopt such data, we will ensure there is no duplication of costs between the PE and the MP RVUs. As noted in the CY 2009 PFS proposed rule, and discussed above in this section, we will be addressing this issue as part of the update to the malpractice RVUs for CY 2010.

D. Medicare Telehealth Services

1. Requests for Adding Services to the List of Medicare Telehealth Services

Section 1834(m)(4)(F) of the Act defines telehealth services as professional consultations, office visits, and office psychiatry services, and any additional service specified by the Secretary. In addition, the statute required us to establish a process for adding services to or deleting services from the list of telehealth services on an annual basis.

In the December 31, 2002 Federal Register (67 FR 79988), we established a process for adding services to or deleting services from the list of Medicare telehealth services. This process provides the public an ongoing opportunity to submit requests for adding services. We assign any request to make additions to the list of Medicare telehealth services to one of the following categories:

  • Category #1: Services that are similar to professional consultations, office visits, and office psychiatry services. In reviewing these requests, we look for similarities between the proposed and existing telehealth services for the roles of, and interactions among, the beneficiary, the physician (or other practitioner) at the distant site and, if necessary, the telepresenter. We also look for similarities in the telecommunications system used to deliver the proposed service, for example, the use of interactive audio and video equipment.
  • Category #2: Services that are not similar to the current list of telehealth services. Our review of these requests includes an assessment of whether the use of a telecommunications system to deliver the service produces similar diagnostic findings or therapeutic interventions as compared with the face to face “hands on” delivery of the same service. Requestors should submit evidence showing that the use of a telecommunications system does not affect the diagnosis or treatment plan as compared to a face to face delivery of the requested service.

Since establishing the process, we have added the following to the list of Medicare telehealth services: psychiatric diagnostic interview examination; ESRD services with two to three visits per month and four or more visits per month (although we require at least one visit a month to be furnished in-person “hands on”, by a physician, clinical nurse specialist (CNS), nurse practitioner (NP), or physician assistant (PA) to examine the vascular access site); individual medical nutrition therapy; and the neurobehavioral status exam.

Requests to add services to the list of Medicare telehealth services must be submitted and received no later than December 31 of each calendar year to be considered for the next rulemaking cycle. For example, requests submitted before the end of CY 2007 are considered for the CY 2009 proposed rule. Each request for adding a service to the list of Medicare telehealth services must include any supporting documentation you wish us to consider as we review the request. Because we use the annual PFS as a vehicle for making changes to the list of Medicare telehealth services, requestors should be advised that any information submitted is subject to disclosure for this purpose. For more information on submitting a request for an addition to the list of Medicare telehealth services, including where to directly mail these requests, visit our Web site at http://www.cms.hhs.gov/telehealth/.

2. Submitted Requests for Addition to the List of Telehealth Services

We received the following requests in CY 2007 for additional approved services to become effective for CY 2009: (1) Diabetes self-management training (DSMT); and (2) critical care services. In addition, in the CY 2008 PFS final rule with comment period (72 FR 66250), we committed to continuing to evaluate last year's request to add subsequent hospital care to the list of approved telehealth services. In the CY 2009 PFS proposed rule (73 FR 38515), we responded to these requests. We did not propose to add DSMT or critical care services to the list of Medicare telehealth services. We proposed to create HCPCS codes specific to follow-up inpatient consultations delivered via telehealth, and we proposed to revise § 410.78 and § 414.65 to revise our regulations accordingly. The following is a summary of the discussion from the proposed rule and a summary of the comments we received and our responses.

a. Diabetes Self-Management Training (DSMT)

The American Telemedicine Association (ATA) and the Marshfield Clinic submitted a request to add individual and group diabetes self management training (DSMT) (as represented by Healthcare Common Procedure Coding System (HCPCS) codes G0108 and G0109) to the list of approved telehealth services. The requesters believe that DSMT services can be considered and approved for telehealth as Category 1 services because they are comparable to medical nutrition therapy (MNT) services approved for telehealth.

As discussed in the CY 2009 PFS proposed rule (73 FR 38516), § 414.65 provides for the payment of individual MNT furnished via telehealth. Group MNT is not an approved telehealth service, so it cannot be used as a point of comparison for group DSMT (as represented by HCPCS code G0109). In addition, group counseling services have a different interactive dynamic between the physician or practitioner at the distant site and beneficiary at the originating site as compared to services on the current list of Medicare telehealth services. (See 70 FR 45787 and 70 FR 70157 for a previous discussion of group services.) Since the interactive dynamic of group DSMT is not similar to individual MNT or any other service currently approved for telehealth, we believe that group DSMT must be evaluated as a category 2 service.

Section 1861(qq) of the Act provides that DSMT (which can be either a group or individual service) involves educational and training services to ensure therapy compliance or to provide necessary skills and knowledge to participate in managing the condition, including the skills necessary for the self administration of injectable drugs. We believe individual DSMT is not analogous to individual MNT because of the element of skill based training that is encompassed within individual DSMT, but is not an aspect of individual MNT (or any other services currently approved for telehealth). Due to the statutory requirement that DSMT services include teaching beneficiaries the skills necessary for the self administration of injectable drugs, we believe that DSMT, whether provided to an individual or a group, must be evaluated as a category 2 service.

Because we consider individual and group DSMT to be category 2 services, we needed to evaluate whether these are services for which telehealth can be an adequate substitute for a face to face encounter. After reviewing studies submitted with the request, we determined that we do not have sufficient comparative analysis that either individual or group DSMT delivered via telecommunications is equivalent to DSMT delivered face to face. We did not find evidence that providing DSMT via telehealth is an adequate substitute for providing DSMT in person. Therefore, we proposed not to add individual and group DSMT (as described by HCPCS codes G0108 and G0109) to the list of approved telehealth services.

Comment: Some commenters disagreed with our proposal and noted that adding DSMT to the list of approved telehealth services would provide a physician or practitioner with an additional tool for supporting patient compliance with management of diabetes. One commenter acknowledged that training patients in the self-administration of injectable drugs, a required component of DSMT programs, would be difficult to perform via telehealth. However, the commenter disagreed that this concern should prevent diabetes patients from accessing the DSMT benefit through telehealth. The commenter believes that educating a patient on diet, exercise, medications, managing stress and illness, and managing blood sugar can be taught via telehealth.

Another commenter agreed that telehealth should not serve as a substitute for initial DSMT training that may involve hands-on teaching of injectable medications or appropriate usage of glucose monitors. However, the commenter believes that follow-up telehealth encounters can help to quickly identify any potential problems or health concerns.

Response: The request we received was to add individual and group DSMT as described by HCPCS codes G0108 and G0109 to the list of Medicare telehealth services. As discussed above, teaching beneficiaries the skills necessary for the self administration of injectable drugs is a statutorily required element of DSMT (and is typically provided as part of an individual DSMT session). This skill based training is typically not a component of any of the current Medicare telehealth services.

Group DSMT (which comprises the vast majority of DSMT; initial and follow up) is by definition furnished in a group setting and, therefore, the interactive dynamic is not similar to any existing telehealth service. No group services are approved for telehealth. For more information on our review of the use of telehealth to furnish group services, see the CY 2006 PFS proposed rule (70 FR 45787).

In order to consider addition of services for Medicare telehealth that are not similar to the existing list of telehealth services, we require comparative studies showing that the use of an interactive audio and video telecommunications system is an adequate substitute for the in person (face-to-face) delivery of the requested service. To date, requestors have not submitted sufficient comparative analyses supporting the approval of skill based training (such as teaching a patient how to administer self-injectable drugs) for telehealth. Likewise, requestors have not submitted comparative analyses showing that the use of a telecommunications system is an adequate substitute for group counseling services (DSMT or otherwise) furnished in person.

We agree with the commenters that skill-based training, such as teaching patients how to inject insulin, would be difficult to accomplish without the physical in person presence of the teaching practitioner. However, we disagree that this training element should be carved out of individual (or group) DSMT for purposes of providing Medicare telehealth services. The skill-based training involved in teaching beneficiaries the skills necessary for the self-administration of injectable drugs is a key component of this statutorily defined benefit (and therefore inherent in the codes that describe DSMT). We do not believe that it would be appropriate to carve out this statutorily required component of DSMT for purposes of telehealth.

b. Critical Care Services

The (UPMC) submitted a request to add critical care services (as defined by HCPCS codes 99291 and 99292) as a “Category 1” service. The requester draws similarities to the evaluation and management (E/M) consultation services currently approved for telehealth. The requester noted that the primary difference between critical care and other E/M services already approved for telehealth is that critical care is specific to patients with vital organ failure. Anecdotally, UPMC has found that the use of telecommunications systems and software gives stroke patients timely access to highly specialized physicians. According to the request, UPMC physicians are able to give “an equally effective examination, spend the same amount of time with the patient and develop the same course of treatment just as if they were bedside.”

The acuity of a critical care patient is significantly greater than the acuity generally associated with patients receiving the E/M services approved for telehealth. Because of the acuity of critically ill patients, we do not consider critical care services similar to any services on the current list of Medicare telehealth services. Therefore, we believe critical care must be evaluated as a Category 2 service.

Because we consider critical care services to be Category 2, we needed to evaluate whether these are services for which telehealth can be an adequate substitute for a face-to-face encounter. We had no evidence suggesting that the use of telehealth could be a reasonable surrogate for the face-to-face delivery of this type of care. As such, we did not propose to add critical care services (as defined by HCPCS codes 99291 and 99292) to the list of approved telehealth services.

Comment: UPMC submitted a detailed description of their experiences using telehealth to support the treatment of acute stroke patients and provided supporting studies describing the use of telemedicine in remote stroke assessment. Per their comment, remote stroke assessment has specific and unique clinical importance because an urgent decision, based in part on a neurological examination, must be made regarding the administration of thrombolytic therapy within 3 hours of the onset of stroke symptoms. The elements of remote stroke assessment involve discrete interactions between physicians and patients, and the consultative input of specialists experienced in acute stroke treatment is considered in directing the bedside care of the patient.

Some commenters were concerned that our proposal will not permit the use of telehealth to treat critically ill patients. We received comments and supporting documentation regarding the feasibility and value of providing consultations via telehealth to patients who are critically ill.

Response: Consultations are already included on the list of approved telehealth services. Our proposal not to add critical care services (as defined by 99291 and 99292) to the list of Medicare telehealth services does not preclude physicians or NPPs from providing medically necessary and clinically appropriate telehealth consultations to patients who are critically ill. We believe that permitting initial and follow up inpatient consultation via telehealth will help provide greater access to specialty care for critically ill patients (including stroke patients). If guidance or advice is needed regarding a critically ill patient, a consultation may be requested from an appropriate source and may be furnished as a telehealth service. (See the CMS Internet-Only Medicare Claims Processing Manual, Chapter 12, Section 30.6.10 for more information on Medicare policy regarding payment for consultation services.)

In support of the request to approve critical care services (as described by HCPCS codes 99291 through 99292), UPMC provided comparative analyses involving the use of an interactive audio and video telecommunications system as a substitute for an in-person (face-to-face) clinical assessment. However, the focus of these studies was limited to stroke patients (critical care services include a broad range of disease categories). Additionally, one study recruited clinically stable patients. This study noted that “because of the subacute nature of our test bed, the current data must be considered preliminary in determining their potential impact on actual clinical decision making.” The same study also noted that although the use of telehealth “may expedite stroke-related decision making, it cannot and should not be thought of as a substitute for the comprehensive clinical evaluation of the acute stroke patient, including thorough medical and cardiac evaluations.” In another study submitted, the patients selected were not randomized.

Comment: A few commenters supported our proposal not to add critical care services to the list of Medicare approved telehealth services. The commenters believe that, within the current standards of practice, critical care services require the physical presence of the physician rendering the critical care services.

We received approximately 20 comments expressing opposition to our proposal not to add critical care services to the list of Medicare approved telehealth services which distinguished between their use of telehealth for critical care services and the use of telehealth for remote stroke assessments, as described in the original request. Many of the commenters characterized our proposal as a “non-coverage determination” of remote critical care services and described an intensive care unit (ICU) model that integrates continuous surveillance of the ICU with an electronic medical records interface. This model is also programmed to automatically prompt the physician to rapidly respond and intervene in the event of certain changes in a patient's physiological status. Many of these commenters included documentation and references to studies that the adoption of this model reduced medical errors; enhanced patient safety; reduced complications; decreased overall length of stay in the ICU; and resulted in a statistically significant decrease in ICU mortality in comparison to the traditional ICU model. The commenters also noted that patient outcomes have been equivalent if not superior to patient outcomes prior to adopting this model of care.

The American Medical Association (AMA) recently developed Category III tracking codes for remote critical care services (0188T-0189T). Two specialty societies commented that they are working with other critical care organizations to collect and analyze data on remote critical care services, as requested by the CPT editorial panel.

Response: In the CY 2009 PFS proposed rule, we explained that we have no evidence suggesting that the use of telehealth could be a reasonable surrogate for the face-to-face delivery of critical care services, as defined by HCPCS codes 99291 and 99292. We agree with the comments that, within the current standards of practice, critical care services require the physical presence of the physician rendering the critical care services.

Our proposal not to add critical care services to the list of approved telehealth services for Medicare was in no way a “non-coverage determination” for remote critical care services described by the AMA's Category III tracking codes, 0188T-0189T. Consistent with the AMA's creation of those tracking codes, we believe that remote critical care services are different from the telehealth delivery of critical care services (as defined by CPT codes 99291 through 99292). Category III CPT codes track utilization of a service, facilitating data collection on, and assessment of new services and procedures. We believe that the data collected for these tracking codes will help provide useful information on how to best categorize and value remote critical care services in the future. However, at the present time, we do not have sufficient evidence that the provision of critical care services (as represented by HCPCS codes 99291 and 99292) via telehealth is an adequate substitute for an in person (face-to-face) encounter.

c. Subsequent Hospital Care

Prior to 2006, follow-up inpatient consultations (as described by CPT codes 99261 through 99263) were approved for telehealth. CPT 2006 deleted the follow-up inpatient consultation codes and advised practitioners instead to bill for these services using the codes for subsequent hospital care (as described by CPT codes 99231 through 99233). For CY 2006, we removed the deleted codes for follow-up inpatient consultations from the list of approved telehealth services.

In the CY 2008 PFS proposed rule (72 FR 38144) and subsequent final rule with comment period (72 FR 66250), we discussed a request we received from the ATA to add subsequent hospital care to the list of approved telehealth services. Because there is currently no method for practitioners to bill for follow-up inpatient consultations delivered via telehealth, the ATA requested that we approve use of the subsequent hospital care codes to bill follow-up inpatient consultations furnished via telehealth, as well as to bill for subsequent hospital care services furnished via telehealth that are related to the ongoing E/M of the hospital inpatient (72 FR 66250). Since the subsequent hospital care codes describe a broader range of services than follow-up inpatient consultation, including some services that may not be appropriate for addition to the list of telehealth services, we did not add subsequent hospital care to the list of approved telehealth services. Instead, we committed to continue to evaluate whether, and if so, by what mechanism subsequent hospital care could be approved for telehealth when used for follow-up inpatient consultations (72 FR 66249).

In the CY 2009 PFS proposed rule, we proposed to create a new series of HCPCS codes for follow-up inpatient telehealth consultations. Practitioners would use these codes to submit claims to their Medicare contractors for payment of follow-up inpatient consultations provided via telehealth. We proposed that the new HCPCS codes would be limited to the range of services included in the scope of the previous CPT codes for follow-up inpatient consultations, and the descriptions would be modified to limit the use of such services for telehealth. The HCPCS codes would clearly designate these services as follow-up inpatient consultations provided via telehealth, and not subsequent hospital care used for inpatient visits. Utilization of these codes would allow for payment for these services, as well as enable us to monitor whether the codes are used appropriately. We also proposed to establish the RVUs for these services at the same level as the RVUs established for subsequent hospital care (as described by CPT codes 99231 through 99233). We believe this is appropriate because a physician or practitioner furnishing a telehealth service is paid an amount equal to the amount that would have been paid if the service had been furnished without the use of a telecommunication system. Since physicians and practitioners furnishing follow-up inpatient consultations in a face-to-face encounter must continue to utilize subsequent hospital care codes (as described by CPT codes 99231 through 99233), we believe it is appropriate to set the RVUs for the new telehealth G codes at the same level as for the subsequent hospital care codes.

Comment: Several commenters enthusiastically supported our proposal to create a new series of HCPCS codes for follow-up inpatient telehealth consultations. Some commenters were concerned that our proposed definition of the new HCPCS codes did not clearly distinguish these consultations from subsequent hospital care, and they believed it would not preclude the use of telehealth for the ongoing E/M of an inpatient. Other commenters supported our effort to reinstitute follow-up inpatient consultations delivered via telehealth, but discouraged us from creating new HCPCS codes for the long-term. A few commenters recommended that instead we approve subsequent hospital care for telehealth. The AMA and others urged us to implement the proposed G codes as an interim measure, while working expeditiously with the CPT Editorial Panel and the RUC to develop appropriate codes and RVUs for the long-term.

Response: We are pleased that the majority of commenters supported our proposal to create a new series of HCPCS codes for follow-up inpatient telehealth consultations. As discussed in the CY 2009 PFS proposed rule, we considered other approaches to provide and bill for follow-up inpatient consultations delivered via telehealth. In response to the comments requesting that we approve subsequent hospital care for telehealth only when the codes are used for follow-up inpatient consultations, we were concerned that the other approaches under consideration would lead to a misuse of the service, and practitioners would provide a broader range of services via telehealth than was formerly approved, including the ongoing, day-to-day E/M of a hospital inpatient. We were also concerned that it could be difficult to implement sufficient controls and monitoring to ensure that whatever mechanism we created would be limited to the delivery of services that were formerly described as follow-up inpatient consultations. We continue to believe that creating HCPCS codes specific to the telehealth delivery of follow-up inpatient consultations allows us to provide payment for these services, as well as enables us to best monitor whether the codes are used appropriately.

As noted previously, CPT deleted the follow-up inpatient consultation codes. We determined that there was a need to establish a method by which practitioners could provide and bill Medicare for follow-up inpatient consultations delivered via telehealth, without allowing the ongoing E/M of a hospital inpatient via telehealth. Physicians and NPPs furnishing follow-up inpatient consultations in a face-to-face encounter must continue to utilize subsequent hospital care codes (as described by CPT codes 99231 through 99233).

In response to commenters concerns that the new HCPCS codes will not prevent the use of telehealth for the ongoing E/M of an inpatient, we have modified the definition of follow-up inpatient telehealth consultations. We clarified that the criteria for these services will be subject to and consistent with Medicare policy for consultation services, including criteria that would distinguish a follow-up consultation from a subsequent E/M visit.

Result of Evaluation of 2009 Requests

We will finalize our proposal not to add DSMT (as defined by HCPCS codes G0108 and G0109) and not to add critical care services (as defined by HCPCS codes 99291 and 99292) to the list of Medicare telehealth services.

We will finalize our proposal to add follow-up inpatient telehealth consultation, as represented by HCPCS codes G0406 through G0408, to the list of Medicare telehealth services. We will also finalize our proposal to add follow-up inpatient telehealth consultations to the list of Medicare services at § 410.78 and § 414.65.

Practitioners would use the new HCPCS codes to submit claims to their Medicare contractors for payment of follow-up inpatient consultations provided via telehealth. These new HCPCS codes are limited to the range of services included in the scope of the previous CPT codes for follow-up inpatient consultations, and the descriptions limit the use of such services for telehealth. The HCPCS codes clearly designate these services as follow-up inpatient consultations provided via telehealth, and not subsequent hospital care used for inpatient visits. Utilization of these codes will allow for payment for these services, as well as enable us to monitor whether the codes are used appropriately.

We also will finalize our proposal to establish the RVUs for these services at the same level as the RVUs established for subsequent hospital care (as described by CPT codes 99231 through 99233). Physicians and NPPs furnishing follow-up inpatient consultations in a face-to-face encounter must continue to utilize subsequent hospital care codes (as described by CPT codes 99231 through 99233).

We are finalizing our proposal to create HCPCS codes specific to the telehealth delivery of follow-up inpatient consultations solely to re-establish the ability for practitioners to provide and bill for follow-up inpatient consultations delivered via telehealth. These codes are intended for use by practitioners serving beneficiaries located at qualifying originating sites (as defined in § 410.78) requiring the consultative input of physicians who are not available for an in person (face-to-face) encounter. These codes are not intended to include the ongoing E/M of a hospital inpatient.

Claims for follow-up inpatient telehealth consultations will be submitted to the Medicare contractors that process claims for the area where the physician or practitioner who furnishes the service is located. Physicians/practitioners must submit the appropriate HCPCS procedure code for follow-up inpatient telehealth consultations along with the “GT” modifier (“via interactive audio and video telecommunications system”). By coding and billing the “GT” modifier with the inpatient follow-up inpatient telehealth consultation codes, the distant site physician/practitioner certifies that the beneficiary was present at an eligible originating site when the telehealth service was furnished. (See the CMS Internet-Only Medicare Claims Processing Manual, Pub. 100-04, Chapter 12, § 190.6.1 for instructions for submission of interactive telehealth claims.)

In the case of Federal telemedicine demonstration programs conducted in Alaska or Hawaii, store-and-forward technologies may be used as a substitute for an interactive telecommunications system. Covered store-and-forward telehealth services are billed with the “GQ” modifier, “via asynchronous telecommunications system.” By using the “GQ” modifier, the distant site physician/practitioner certifies that the asynchronous medical file was collected and transmitted to him or her at the distant site from a Federal telemedicine demonstration project conducted in Alaska or Hawaii. (See the CMS Internet-Only Medicare Claims Processing Manual, Pub. 100-04, Chapter 12, § 190.6.2 for instructions for submission of telehealth store and forward claims.)

Follow-Up Inpatient Telehealth Consultations Defined

Follow-up inpatient telehealth consultations are consultative visits furnished via telehealth to follow up on an initial consultation, or subsequent consultative visits requested by the attending physician. The initial inpatient consultation may have been provided in person or via telehealth. The conditions of payment for follow-up inpatient telehealth consultations, including qualifying originating sites and the types of telecommunications systems recognized by Medicare, are subject to the provisions of § 410.78. Payment for these services is subject to the provisions of § 414.65.

Follow-up inpatient telehealth consultations include monitoring progress, recommending management modifications, or advising on a new plan of care in response to changes in the patient's status or no changes on the consulted health issue. Counseling and coordination of care with other providers or agencies is included as well, consistent with the nature of the problem(s) and the patient's needs. The physician or practitioner who furnishes the inpatient follow-up consultation via telehealth cannot be the physician of record or the attending physician, and the follow-up inpatient consultation would be distinct from the follow-up care provided by a physician of record or the attending physician. If a physician consultant has initiated treatment at an initial consultation and participates thereafter in the patient's ongoing care management, such care would not be included in the definition of a follow-up inpatient consultation and is not appropriate for delivery via telehealth. Follow-up inpatient telehealth consultations are subject to the criteria for consultation services, as described in the CMS Internet-Only Medicare Claims Processing Manual, Pub 100-04, Chapter 12, § 30.6.10.

Payment for follow-up inpatient telehealth consultations includes all consultation related services furnished before, during, and after communicating with the patient via telehealth. Pre-service activities would include, but would not be limited to, reviewing patient data (for example, diagnostic and imaging studies, interim lab work) and communicating with other professionals or family members. Intra-service activities must include at least two of the three key elements described below for each procedure code. Post-service activities would include, but would not be limited to, completing medical records or other documentation and communicating results of the consultation and further care plans to other health care professionals. No additional E/M service could be billed for work related to a follow-up inpatient telehealth consultation.

Follow-up inpatient telehealth consultations could be provided at various levels of complexity. To reflect this, we are establishing three codes.

Practitioners taking a problem focused interval history, conducting a problem focused examination, and engaging in medical decision making that is straightforward or of low complexity, would bill a limited service, using HCPCS code G0406. At this level of service, practitioners would typically spend 15 minutes communicating with the patient via telehealth.

Practitioners taking an expanded focused interval history, conducting an expanded problem focused examination, and engaging in medical decision making that is of moderate complexity, would bill an intermediate service using HCPCS code G0407. At this level of service, practitioners would typically spend 25 minutes communicating with the patient via telehealth.

Practitioners taking a detailed interval history, conducting a detailed examination, and engaging in medical decision making that is of high complexity, would bill a complex service, using HCPCS code G0408. At this level of service, practitioners would typically spend 35 minutes or more communicating with the patient via telehealth.

We are establishing the following HCPCS codes to describe follow-up inpatient consultations approved for telehealth:

  • G0406, Follow-up inpatient telehealth consultation, limited, typically 15 minutes communicating with the patient via telehealth.
  • G0407, Follow-up inpatient telehealth consultation, intermediate, typically 25 minutes communicating with the patient via telehealth.
  • G0408, Follow-up inpatient telehealth consultation, complex, typically 35 minutes or more communicating with the patient via telehealth.

3. Other Issues

Comment: In 2005, CMS received a request to add the following procedure codes to the list of approved telehealth services: initial nursing facility care (as described by HCPCS codes 99304 through 99306); subsequent nursing facility care (HCPCS codes 99307 through 99310); nursing facility discharge services (HCPCS codes 99315 and 99316); and other nursing facility services (as described by HCPCS code 99318). In the CY 2007 PFS final rule with comment period, we did not add these nursing facility care services to the list of approved telehealth services because these procedure codes did not describe services that were appropriate to the originating sites eligible in CY 2007. At that time, SNFs were not defined in the statute as originating sites. (See 71 FR 69657.)

Section 149 of the MIPPA recognizes SNFs as telehealth originating sites, effective for services furnished on or after January 1, 2009. In light of this provision, the American Telemedicine Association (ATA) urged us to add nursing facility care codes to the list of telehealth services for CY 2009, as requested in 2005.

Response: Section 149 of the MIPPA did not add any services to the approved telehealth list. Currently, telehealth may substitute for a face-to-face, “hands on” encounter for professional consultations, office visits, office psychiatry services, and a limited number of other PFS services that we have determined to be appropriate for telehealth. We will continue to review requests for additions to this list using our existing criteria.

Telehealth is a delivery mechanism for otherwise payable Part B services. Although the requested nursing facility services are not on the approved telehealth list, we will pay eligible distant site physicians or practitioners for eligible Medicare telehealth services if the service is separately payable under the PFS when furnished in a face-to-face encounter at a SNF effective January 1, 2009.

Since we believed it was not relevant to add these codes when SNFs were not eligible originating sites, we did not include a full review of these codes in the CY 2007 PFS proposed rule or final rule with comment period. We also note that in considering nursing facility care for telehealth, we would need to carefully evaluate the use of telehealth for the personal visits that are currently required under § 483.40, (which are billed using procedure codes included in this request). Overall, we believe that it would be more appropriate to consider the addition of nursing facility care services for telehealth through full notice and comment procedures.

In the CY 2010 PFS proposed rule, we will address the request to add nursing facility care services to the list of approved telehealth services, as received in 2005. In light of the previous request to add these services and the new legislation adding SNFs as permissible telehealth originating sites, we will accept additional information in support of this request for consideration in the CY 2010 proposed rule if received prior to December 31, 2008.

Comment: We received a request to add health and behavior assessment and intervention codes (as described by HCPCS codes 96150 through 96154) to the list of approved telehealth services.

Response: Requests submitted before the end of CY 2008 will be considered for the CY 2010 proposed rule. Requestors should be advised that each request to add a service to the list of Medicare telehealth services must include any supporting documentation the requestor wishes us to consider as we review the request. For more information on submitting a request for an addition to the list of Medicare telehealth services, including where to directly mail these requests, visit our Web site at http://www.cms.hhs.gov/telehealth/.

E. Specific Coding Issues Related to the Physician Fee Schedule

1. Payment for Preadministration-Related Services for Intravenous Infusion of Immune Globulin

In the CY 2009 PFS proposed rule (73 FR 38518), we proposed to discontinue payment for HCPCS code G0332, Services for intravenous infusion of immunoglobulin prior to administration (this service is to be billed in conjunction with administration of immunoglobulin), for services furnished after December 31, 2008.

Immune globulin is a complicated biological product that is purified from human plasma obtained from human plasma donors. In past years, there have been issues reported with the supply of intravenous immune globulin (IVIG) due to numerous factors including decreased manufacturing capacity, increased usage, more sophisticated processing steps, and low demand for byproducts from IVIG fractionation.

When IVIG is furnished to a patient in a physician's office, three different payments are usually recognized: payment for the IVIG product itself (described by a HCPCS J code); payment for the administration of the IVIG product (described by one or more CPT codes); and similar payment for the preadministration-related services (HCPCS code G0332). The Medicare payment rates for IVIG products are established through the Part B average sales price (ASP) drug payment methodology.

As explained in detail in the CY 2006, CY 2007 and CY 2008 PFS final rules with comment period (70 FR 70218 to 70221, 71 FR 69678 to 69679, and 72 FR 66254 to 66255, respectively), we created, in 2006, a temporary code in order to pay separately for the IVIG preadministration-related services in order to assist in ensuring appropriate access to IVIG during a period of market instability. Part of this instability was due to the implementation of the new ASP payment methodology for IVIG drugs which began in 2005. The payment for preadministration-related services was continued in 2007 and 2008 because of continued reported instability in the IVIG marketplace. The preadministration-related payment was designed to pay the physician practice for the added costs of obtaining adequate supplies of the appropriate IVIG product and scheduling the patient infusion during a period of market uncertainty.

The PFS rates for the pre-administration service codes were $72, $75, and $75 respectively in 2006, 2007, and 2008.

In the CY 2009 PFS proposed rule, we noted that the Office of the Inspector General's (OIG) study on the availability and pricing of IVIG published in a April 2007 report entitled, “Intravenous Immune Globulin: Medicare Payment and Availability (OEI-03-05-00404),” found that for the third quarter of CY 2006, just over half of IVIG sales to hospitals and physicians were at prices below Medicare payment amounts. Relative to the previous three quarters, this represented a substantial increase of the percentage of sales with prices below Medicare amounts. During the third quarter of 2006, 56 percent of IVIG sales to hospitals and over 59 percent of IVIG sales to physicians by the largest 3 distributors occurred at prices below the Medicare payment amounts. We reviewed national claims data for IVIG drug utilization as well as utilization of the preadministration-related services HCPCS code. The data show modest increases in the utilization of IVIG drugs and the preadministration-related services code, which suggest that IVIG pricing and access may be improving.

In the CY 2009 PFS proposed rule, we noted that these factors, taken as a whole, suggested a lessening of the instability of the IVIG market. As a result of these developments, we proposed to discontinue the preadministration-related service payment in 2009 for HCPCS code G0332. For CY 2009, under the Outpatient Prospective Payment System (OPPS), a proposal was made to package payment for HCPCS code G0332 (73 FR 41457).

The following is a summary of the comments received and our responses.

Comment: We received several comments from beneficiaries, patient advocate groups, manufacturers, and physicians. Most commenters opposed the elimination of the preadministration-related services payment. A few commenters requested that the preadministration-related services payment become permanent for both the PFS and the OPPS. Some commenters stated that the market conditions for IVIG are not fundamentally different than they were when CMS initially instituted the preadministration-related services payment in CY 2006. The commenters requested that CMS continue the separate payment until there is more stability in the IVIG market. Several commenters stated that the information CMS presented in the CY 2009 PFS proposed rule did not conclusively prove that the IVIG market was stabilizing. The commenters stated that significant access problems remain.

In response to the findings of the OIG report, some commenters stated that the lag inherent in the ASP pricing system may have played a role in substantially increasing the percentage of IVIG sales at prices below the Medicare payment amounts in the third quarter of 2006. The preadministration-related service fee was cited as providing some assistance to physicians and hospitals that are experiencing problems obtaining IVIG. Several commenters noted that the OIG report could be interpreted as leaving a large percent of hospitals and physicians unable to acquire IVIG at prices below Medicare's payment amounts. Many commenters stated that they do not believe the introduction of new brand-specific reporting codes for IVIG will result in a more stable marketplace.

One commenter presented patient surveys conducted in CYs 2006, 2007 and 2008 which described access limitations and shifts in the site of service. These surveys were limited in size and surveyed only patients receiving IVIG for primary immune deficiency. Another commenter referred to a report on IVIG issued in February 2007 titled, “Analysis of Supply, Distribution, Demand and Access Issues Associated with Immune Globulin Intravenous” prepared by the Eastern Research Group under contract (Contract No. HHSP23320045012XI) to the Assistant Secretary of Planning and Evaluation in the U.S. Department of Health and Human Services and cited this report as an important source of information on IVIG usage and patient access.

Response: The separate payment for IVIG preadministration-related service was designed to compensate the physician practice for the additional, unusual, and temporary costs associated with obtaining IVIG products and scheduling patient infusions during a temporary period of market instability. This payment was never intended to subsidize payment for drugs made under the ASP system.

In the CY 2009 PFS proposed rule, we referred to data from the OIG study that indicated that for the third quarter of 2006, just over half of IVIG sales to hospitals and physicians were at prices below Medicare payment amounts. Relative to the previous three quarters, this represented a substantial increase of the percentage of sales with prices below Medicare amounts. We agree with the commenters that it is likely that increased ASP payments were the result of previous price increases from past quarters influencing future ASP data. Furthermore, the new HCPCS codes for IVIG products allow the physician to report and receive payment for the specific product furnished to the patient. We stated clearly in the CY 2006 PFS final rule with comment period that the preadministration-related services payment policy was a temporary measure to pay physicians for the unusual and temporary costs associated with procuring IVIG. We expected that these costs would decline over time as practices became more familiar with the nuances of the IVIG market and the availability of the limited primary and secondary suppliers in their areas.

We did not reference the report conducted by the Eastern Research Group (Contract No. HHSP23320045012XI) in the proposed rule. As the commenter noted, this report provides important comprehensive background on the IVIG marketplace. For example, it provides an analysis of IVIG supply and distribution, and an analysis of the demand for and utilization of IVIG products. This report describes how IVIG is administered and paid and includes information from the industry and others on physician and patient problems with access to IVIG. The study is a collection of multi-source information that provides an understanding of the IVIG marketplace. One limitation of the study is it depicts the market only up through the first quarter of 2006 and it does not have detailed information on IVIG pricing as the OIG report did. The OIG report also contains data from a later time period because it includes data through the third quarter of 2006.

We note, based on the information that follows, that the IVIG market today appears more stable than it was in CY 2006. We have reviewed national claims data for IVIG drug utilization, as well as the utilization of the preadministration-related services HCPCS code. These data show a modest increase in the utilization of IVIG and the preadministration-related services code in both physicians' offices and hospital outpatient departments from CY 2006 to CY 2007, after a period of decreased IVIG utilization in physicians' offices with a shift of IVIG infusions to the hospital outpatient department in the previous year, which suggests that IVIG pricing and access may be improving.

National Medicare claims history data show that there were about 3.1 million units of IVIG administered in physicians' offices in CY 2006, and 7.3 million units in hospital outpatient departments. In CY 2007, those numbers rose to estimates of 3.3 million units and 8.1 million units in the office and hospital outpatient department settings, respectively. Under the OPPS, the total number of days of IVIG administration increased modestly from CY 2006 to CY 2007, from 113,000 to 119,000. Aggregate allowed IVIG charges in the physician's office setting for CY 2006 were $82 million, while total payments (including beneficiary copayments) under the OPPS were $184 million for the same time period. In CY 2007, aggregate allowed charges in the physician's office setting are estimated at $8 million, while total OPPS payments are estimated at $246 million.

In summary, beginning in CY 2007, IVIG utilization increased modestly in both the physician's office setting and the hospital outpatient department, after a prior shift to the hospital and away from the physicians' offices, presumably reflecting increasing availability of IVIG and appropriate payment for the drug in both settings.

According to information on the Plasma Protein Therapeutics Association (PPTA) Web site regarding the supply of IVIG, in the past year, while the supply has spiked at various times throughout the year, the supply has remained above or near the 12-month moving average. While we acknowledge that the supply is only one of several factors that influence the market, we believe that an adequate supply is one significant factor that contributes to better access to IVIG for patients.

Therefore, because we believe that the reported transient market conditions that led us to adopt the separate payment for IVIG preadministration-related services have improved, we believe that continuation of the separate payment for preadministration services beyond CY 2008 is not warranted.

After consideration of the public comments received, we are finalizing our CY 2009 proposal, without modification, to discontinue separate payment under the PFS for IVIG preadministration-related services described by HCPCS code G0332. The treatment of payment for preadministration-related services under the OPPS will be addressed separately in that final rule. We will continue to work with IVIG stakeholders to understand their concerns regarding the pricing of IVIG and Medicare beneficiary access to this important therapy.

2. Multiple Procedure Payment Reduction for Diagnostic Imaging

In general, we price diagnostic imaging procedures in the following three ways:

  • The PC represents the physician's interpretation (PC-only services are billed with the 26 modifier).
  • The TC represents PE and includes clinical staff, supplies, and equipment (TC-only services are billed with the TC modifier).
  • The global service represents both PC and TC.

Effective January 1, 2006, we implemented a multiple procedure payment reduction (MPPR) on certain diagnostic imaging procedures (71 FR 48982 through 49252 and 71 FR 69624 through 70251). When two or more procedures within one of 11 imaging code families are furnished on the same patient in a single session, the TC of the highest priced procedure is paid at 100 percent and the TC of each subsequent procedure is paid at 75 percent (a 25-percent reduction). The reduction does not apply to the PC.

It is necessary to periodically update the list of codes subject to the MPPR to reflect new and deleted codes. In the CY 2009 PFS proposed rule, we proposed to subject several additional procedures to the MPPR (73 FR 38519). Six procedures represent codes newly created since the MPPR list was established. Four additional procedures have been identified as similar to procedures currently subject to the MPPR. We also proposed to remove CPT code 76778, a deleted code, from the list. Table 6 contains the proposed additions to the list. After we adopted the MPPR, section 5102 of the Deficit Reduction Act of 2005 (Pub. L. 109-171) (DRA) exempted the expenditure reductions resulting from this policy from the statutory BN requirement. Therefore, we proposed that expenditure reductions resulting from these changes be exempt from BN. (See the Regulatory Impact Analysis in section XVI. of this final rule with comment period for a discussion of BN.) The complete list of procedures subject to the MPPR is in Addendum F of this final rule with comment period.

Table 6—Procedures Proposed for Multiple Procedure Payment Reduction Back to Top
CPT code Short descriptor Code family
70336 mri, temporomandibular joint(s) Family 5 MRI and MRA (Head/Brain/Neck).
70554 Fmri brain by tech Family 5 MRI and MRA (Head/Brain/Neck).
75557 Cardiac mri for morph Family 4 MRI and MRA (Chest/Abd/Pelvis).
75559 Cardiac mri w/stress img Family 4 MRI and MRA (Chest/Abd/Pelvis).
75561 Cardiac mri for morph w/dye Family 4 MRI and MRA (Chest/Abd/Pelvis).
75563 Cardiac mri w/stress img dye Family 4 MRI and MRA (Chest/Abd/Pelvis).
76776 Us exam k transpl w/doppler Family 1 Ultrasound (Chest/Abdomen/Pelvis—Non-Obstetrical).
76870 Us exam, scrotum Family 1 Ultrasound (Chest/Abdomen/Pelvis—Non-Obstetrical).
77058 Mri, one breast Family 4 MRI and MRA (Chest/Abd/Pelvis).
77059 Mri, broth breasts Family 4 MRI and MRA (Chest/Abd/Pelvis).

The following is a summary of the comments we received and our responses.

Comment: Some commenters indicated that the MPPR should not be extended to additional procedures without providing data supporting the appropriateness of a 25-percent payment reduction for the additional procedures. A commenter expressed concern that the MPPR was being extended to include breast MRIs, but the commenter provided no other information.

Response: As stated in the CY 2006 PFS final rule with comment period (70 FR 70261), when multiple images are taken in a single session, most of the clinical labor activities and supplies are not duplicated for subsequent procedures. Specifically, the following activities are not duplicated for subsequent procedures:

  • Greeting the patient.
  • Positioning and escorting the patient.
  • Providing education and obtaining consent.
  • Retrieving prior exams.
  • Setting up the IV.
  • Preparing and cleaning the room.

In addition, we considered that supplies, with the exception of film, are not duplicated for subsequent procedures.

To determine the appropriate level of the payment reduction for multiple procedures, we examined multiple pairs of procedure codes from the families representing all modalities (that is, ultrasound, CT/CTA, and MRI/MRA studies) that were frequently performed on a single day based on historical claims data. Using PE input data provided by the RUC, we factored out the clinical staff minutes for the activities we indicated are not duplicated for subsequent procedures, and the supplies, other than film, which we considered are not duplicated for subsequent procedures. We did not assume any reduction in procedure (scanning) time or equipment for subsequent procedures. However, equipment time and indirect costs are allocated based on clinical labor time; therefore, these inputs were reduced accordingly. Removing the PE inputs for activities that are not duplicated, and adjusting the equipment time and indirect costs for the individual pairs of procedures studied, supported payment reductions ranging from 40 to 59 percent for the subsequent services. Because we found a relatively narrow range of percentage payment reductions across modalities and families, and taking into consideration that we did not eliminate any duplicative image acquisition time for subsequent procedures in our analysis, we originally proposed an across-the-board MPPR for all 11 families of 50 percent (which is approximately the midpoint of the range established through our analysis). We believe this level of reduction was both justified and conservative (70 FR 45849). To allow for a transition of the changes in payments for these services attributable to this policy, we implemented a 25 percent payment reduction for all code families in CY 2006 which was scheduled to increase to a 50 percent reduction in CY 2007.

Subsequent to the publication of the CY 2006 PFS final rule with comment period, section 5102 (b) of the DRA capped the PFS payment for most imaging services at the amount paid under the hospital outpatient prospective payment system (OPPS). In addition, in response to our request for data on the appropriateness of the 50 percent reduction in the CY 2006 PFS final rule with comment period, the American College of Radiology (ACR) provided information for 25 code combinations supporting a reduction of between 21 and 44 percent. Given the expected interaction between the MPPR policy and the further imaging payment reductions mandated by section 5102(b) of the DRA, along with the information we received from the ACR on the MPPR as it applies to common combinations of imaging services, we decided it was prudent to maintain the MPPR at its current 25 percent level while we continue to examine the appropriate payment levels. Therefore, we have maintained the MPPR at the 25 percent level.

In establishing the MPPR, we elected to use a single reduction percentage for all code pairs. We adopted a percentage reduction that is considerably lower than the range supported by our prior analysis, and slightly higher than the lowest percentage supported by ACR's analysis. We do not believe it is necessary to conduct another analysis for the additional codes because we adopted a conservative reduction percentage and are continuing use of a single reduction percentage for all code pairs. We believe the payment reduction policy, described above, represents an appropriate reduction for the typical delivery of multiple imaging services furnished in the same session.

Furthermore, in establishing the MPPR, we limited it to codes in the same family, that is, contiguous areas of the body that are commonly furnished on the same patient, in the same session, on the same day. We believe that the eight CPT codes that were newly created for 2007 or 2008, and proposed for inclusion in the MPPR beginning in CY 2009 (CPT codes 70554, 75557, 75559, 75561, 75563, 76776, 77058, and 77059), would have been included on the MPPR list when it was finalized in CY 2006, had they existed at the time. These CPT codes are similar to CPT codes that were selected for the list in CY 2006 and can be classified into the 11 contiguous body area families already in existence. For example, the procedure described by CPT code 76776 (Ultrasound, transplanted kidney, real time and duplex Doppler with image documentation) is similar to the procedure described by CPT code 76705 (Ultrasound, abdominal, real time with image documentation; limited (for example, single organ, quadrant, follow-up), which has been subject to the MPPR since the creation of the policy in CY 2006. Similarly, we believe we should add CPT codes 70336 and 76870, which were in existence in CY 2006, to the list because they also share characteristics with other procedures subject to the MPPR.

In response to the commenter expressing concern that we were adding the breast MRI CPT codes 77058 and 77059 in particular, we are not certain of the reason for his or her concern because none was stated. However, we continue to believe it is appropriate to add these CPT codes because their addition is consistent with our policy for other procedures included in Family 4, which describe procedures involving MRI of the chest area.

To the extent that the newly added procedures do not meet the MPPR criteria (for example, if they are not performed in the same session), they will be unaffected by the MPPR.

Comment: Commenters noted that we proposed to establish new composite rates for certain multiple diagnostic imaging procedures performed at the same time in hospital outpatient settings. One commenter asked whether individual procedure payment rates, or the composite payment rates under hospital OPPS will be used for purposes of applying the OPPS cap to PFS services. The commenter also asked whether we will continue our policy of applying the MPPR before application of the OPPS cap.

Response: Under the PFS, services are paid based on the individual CPT or HCPCS code. Therefore, the OPPS cap will continue to be applied based on the hospital OPPS ambulatory payment classification (APC) rate for the individual procedure, and not the composite rate. The policy of applying the MPPR before applying the OPPS cap remains unchanged.

Comment: Several commenters expressed concern that the proposed MPPR undervalues the procedures and jeopardizes beneficiary access to care. One commenter indicated that we should examine any shifts in the site-of-service that may have resulted due to the MPPR.

Response: The Government Accountability Office (GAO) and the Office of the Inspector General (OIG) have been performing several reviews relating to the utilization of imaging procedures including the effects of the OPPS cap and the MPPR on utilization, payment, and access to care. We will continue to monitor the effects of the policies to ensure that beneficiaries have proper access to care.

After reviewing the public comments, we are proceeding with the policy as proposed. The ten additional procedures listed in Table 6 will be subject to the MPPR, effective January 1, 2009.

3. HCPCS Code for Prostate Saturation Biopsies

In the CY 2009 PFS proposed rule, we proposed to create four new G codes for prostate saturation biopsy as shown in Table 7, currently reported with CPT code 88305, Surgical pathology, gross and microscopic examination, which is separately billed by the physician for each core sample taken. We also proposed to have Medicare contractors price these codes.

Table 7—G Codes for Prostate Biopsy Back to Top
G code Descriptor
G0416 Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, 1-20 specimens.
G0417 Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, 21-40 specimens.
G0418 Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, 41-60 specimens.
G0419 Surgical pathology, gross and microscopic examination for prostate needle saturation biopsy sampling, greater than 60 specimens.

The following is a summary of the comments we received and our responses.

Comment: Some commenters expressed opposition to this proposal, while others supported it but recommended modifications to the proposed G codes. All commenters were opposed to Medicare contractor pricing the G codes and stated that CMS, rather than the Medicare contractor, should assign an appropriate work value for each specimen level to capture the expertise, skill, time, and resources used to determine if prostate cancer is present.

Response: First, for CY 2009, the CPT Editorial Panel changed Category III code (0137T) to a Category I code, 55706, Biopsies, prostate; needle, transperineal, stereotactic template guided saturation sampling including image guidance, which the AMA RUC valued at 6.15 work RVUs. As discussed in the proposed rule, we currently pay $102.35 for CPT code 88305, which is the code used by pathologists when interpreting prostate biopsy samples. Patients requiring a prostate saturation biopsy generally have 30 to 60 specimens taken. The pathologist would bill CPT code 88305 for evaluation of each individual specimen. When CPT code 88305 is used to evaluate prostate saturation biopsies, the average total payment for the evaluation of samples from one prostate needle saturation biopsy ranges from $3000 to $6000, depending on the number of biopsies taken. We believe the use of CPT code 88305 to bill individually for the evaluation of each biopsy sample would result in overpayment for this service. Therefore, we are proceeding with the proposal to create four G codes for pathologic examination of prostate needle saturation tissue sampling for services furnished beginning in 2009.

However, we agree with commenters that, rather than having Medicare contractors price the new G codes, it would be preferable for us to specify the payment for these services. We generally use contractor pricing when we do not have sufficient information to set the price. Upon further reflection, we believe we can set prices for the new G-codes by analogy to the current RVUs for two existing codes: 88304 and 88305. We selected the mid-point of the range of samples for G0417, G0418, and G0419 to calculate the average number of samples for each code. We assumed 15 percent of the samples taken require considerable clinical expertise to differentiate and distinguish carcinoma from hyperplasia. We assigned the work and PE values of 88305 to the 15 percent of samples requiring this level of expertise. The remaining 85 percent of samples require confirmation of prostate tissue and interpretation indicating the presence of cancer or not since the diagnosis had been identified in the 15 percent of samples. We assigned the work and PE of 88304 to this group of samples. We assigned the full work and PE payment to the 15 percent sample component to reflect the skill, time, and effort required to identify and diagnose carcinoma. We applied the multiple surgical procedure discount (RVUs were reduced by 50 percent in accordance with current CMS policy) to the remaining 85 percent of samples reviewed for identification and confirmation of prostate tissue. We selected the 75th percentile of samples from G0416 to recognize the greater degree of skill, time, and effort required to review, identify, and interpret the initial biopsy specimens sampled. (See Addendum B for the values assigned to these G codes.)

Note:

Under the PFS, CPT code 88305 will continue to be recognized for those surgical pathology services unrelated to prostate needle saturation biopsy sampling.

F. Part B Drug Payment

1. Average Sales Price (ASP) Issues

Medicare Part B covers a limited number of prescription drugs and biologicals. For the purposes of this final rule with comment period, the term “drugs” will hereafter refer to both drugs and biologicals, unless otherwise specified. Medicare Part B covered drugs not paid on a cost or prospective payment basis generally fall into the following three categories:

  • Drugs furnished incident to a physician's service.
  • DME drugs.
  • Drugs specifically covered by statute (certain immunosuppressive drugs, for example).

Beginning in CY 2005, the vast majority of Medicare Part B drugs not paid on a cost or prospective payment basis are paid under the ASP methodology. The ASP methodology is based on data submitted to us quarterly by manufacturers. In addition to the payment for the drug, Medicare currently pays a furnishing fee for blood clotting factors, a dispensing fee for inhalation drugs, and a supplying fee to pharmacies for certain Part B drugs.

In this section, we discuss recent statutory changes to the ASP methodology and other drug payment issues.

a. Determining the Payment Amount Based on ASP Data

The methodology for developing Medicare drug payment allowances based on the manufacturers' submitted ASP data is specified in 42 CFR part 414, subpart K. We initially established this regulatory text in the CY 2005 PFS final rule with comment period (69 FR 66424). We further described the formula we use to calculate the payment amount for each billing code in the CY 2006 PFS proposed rule (70 FR 45844) and final rule with comment period (70 FR 70217). With the enactment of the MMSEA, the formula we use changed beginning April 1, 2008. Section 112(a) of the MMSEA requires us to calculate payment amounts using a specified volume-weighting methodology. In addition, section 112(b) of the MMSEA sets forth a special rule for determining the payment amount for certain inhalation drugs.

For each billing code, we calculate a volume-weighted, ASP-based payment amount using the ASP data submitted by manufacturers. Manufacturers submit ASP data to us at the 11-digit National Drug Code (NDC) level, including the number of units of the 11-digit NDC sold and the ASP for those units. We determine the number of billing units in an NDC based on the amount of drug in the package. For example: a manufacturer sells a box of four vials of a drug. Each vial contains 20 milligrams (mg). The billing code is per 10 MG. The number of billing units in this NDC for this billing code is (4 vials × 20mg)/10mg = 8 billable units.

Prior to April 1, 2008, we used the following three-step formula to calculate the payment amount for each billing code. First, we converted the manufacturer's ASP for each NDC into the ASP per billing unit by dividing the manufacturer's ASP for that NDC by the number of billing units in that NDC. Then, we summed the product of the ASP per billing unit and the number of units of the 11-digit NDC sold for each NDC assigned to the billing code. Then, we divided this total by the sum of the number of units of the 11-digit NDC sold for each NDC assigned to the billing code.

Beginning April 1, 2008, we use a two-step formula to calculate the payment amount for each billing code. We sum the product of the manufacturer's ASP and the number of units of the 11-digit NDC sold for each NDC assigned to the billing and payment code, and then divide this total by the sum of the product of the number of units of the 11-digit NDC sold and the number of billing units in that NDC for each NDC assigned to the billing and payment code.

In addition to the formula change, the MMSEA established a special payment rule for certain inhalation drugs furnished through an item of durable medical equipment (DME). The “grandfathering” provision in section 1847A(c)(6)(C)(ii) of the Act requires that certain drugs be treated as multiple source drugs for purposes of calculating the payment allowance limits. Section 112(b) of the MMSEA requires that, effective April 1, 2008, the payment amount for inhalation drugs furnished through an item of DME is the lesser of the amount determined by applying the grandfathering provision or by not applying that provision. We reviewed our payment determinations effective January 1, 2008 to identify the drugs subject to this special rule, and implemented this new requirement in accordance with the statutory implementation date of April 1, 2008. We identified that albuterol and levalbuterol, in both the unit dose and concentrated forms, are subject to the special payment rule. At this time, we have not identified other inhalation drugs furnished through an item of DME to which section 112(b) of the MMSEA applies.

The provisions in section 112 of the MMSEA are self-implementing for services on and after April 1, 2008. Because of the limited time between enactment and the implementation date, it was not practical to undertake and complete rulemaking on this issue prior to implementing the required changes. As a result of the legislation, we proposed to revise § 414.904 to codify the changes to the determination of payment amounts as required by section 112 of the MMSEA. We solicited comments on the proposed regulatory text.

The following is a summary of the comments we received and our responses.

Comment: We received a number of comments regarding our proposed regulatory text. All of comments we received strongly supported our proposed regulatory text. Several comments strongly urged CMS to ensure that the methodology is properly applied to all drugs paid under the ASP methodology.

Response: We appreciate the support from the public with regard to the implementation of this statutory provision. We have been applying the revised methodology since April 2008 and are unaware of payment issues resulting from its usage. The new methodology is being applied consistently across all Part B drugs subject to the ASP methodology.

Comment: One commenter requested that we limit the application of the special payment rule, established by section 112(b) of MMSEA to only albuterol and levalbuterol.

Response: We disagree with this comment. While we currently believe that we have identified all of the drugs to which the special payment rule applies, it would be imprudent to expressly limit its application to albuterol and levalbuterol in the regulations text because the statute does not do so. The statute refers to certain drugs described in section 1842(o)(1)(G) of the Act. Thus, we believe the regulations text, as proposed, adequately specifies the drugs to which the special rule applies. We have committed, via postings on our web site, to proceeding transparently when making pricing determinations and have done so by posting our decisions on our web site. We will continue to do so in the future.

After review of the public comments, we are finalizing our proposed regulatory text at § 414.904.

b. Average Manufacturer Price (AMP)/ Widely Available Market Prices (WAMP)

Section 1847A(d)(1) of the Act states that “the Inspector General of HHS shall conduct studies, which may include surveys to determine the widely available market prices (WAMP) of drugs and biologicals to which this section applies, as the Inspector General, in consultation with the Secretary, determines to be appropriate.” Section 1847A(d)(2) of the Act states that, “Based upon such studies and other data for drugs and biologicals, the Inspector General shall compare the ASP under this section for drugs and biologicals with—

  • The WAMP for such drugs and biologicals (if any); and
  • The average manufacturer price (AMP) (as determined under section 1927(k)(1) of the Act for such drugs and biologicals.”

Section 1847A(d)(3)(A) of the Act states that, “The Secretary may disregard the average sales price (ASP) for a drug or biological that exceeds the WAMP or the AMP for such drug or biological by the applicable threshold percentage (as defined in subparagraph (B)).” The applicable threshold percentage is specified in section 1847A(d)(3)(B)(i) of the Act as 5 percent for CY 2005. For CY 2006 and subsequent years, section 1847A(d)(3)(B)(ii) of the Act establishes that the applicable threshold percentage is “the percentage applied under this subparagraph subject to such adjustment as the Secretary may specify for the WAMP or the AMP, or both.” In CY 2006 through CY 2008, we specified an applicable threshold percentage of 5 percent for both the WAMP and AMP comparisons. We based this decision on the limited data available to support a change in the current threshold percentage.

For CY 2009, we proposed to specify an applicable threshold percentage of 5 percent for the WAMP and the AMP comparisons. As we stated in the proposed rule, the OIG is continuing its ongoing comparison of both the WAMP and the AMP. However, information on how recent changes to the ASP weighting methodology may affect the comparison of WAMP/AMP to ASP was not available in time for consideration prior to developing our proposal to maintain the applicable threshold percentage at 5 percent for CY 2009. Although we have recently received reports comparing ASP to AMP in which the OIG states it has applied the new volume-weighting methodology consistently, we have not had sufficient time to analyze these reports. Thus, we do not have data suggesting a more appropriate level for the threshold at this time. Therefore, we believe that continuing the 5 percent applicable threshold percentage for both the WAMP and AMP comparisons is appropriate for CY 2009.

As we noted in the CY 2008 PFS final rule with comment period (72 FR 66259), we understand that there are complicated operational issues associated with potential payment substitutions. We will continue to proceed cautiously in this area and provide stakeholders, particularly manufacturers of drugs impacted by potential price substitutions, with adequate notice of our intentions regarding such, including the opportunity to provide input with regard to the processes for substituting the WAMP or the AMP for the ASP. As part of our approach, we intend to develop a better understanding of the issues that may be related to certain drugs for which the WAMP and AMP may be lower than the ASP over time.

We solicited comments on our proposal to continue the applicable threshold at 5 percent for both the WAMP and AMP for CY 2009.

The following is a summary of the comments we received and our responses.

Comment: Most commenters supported maintaining the threshold at 5 percent. Other commenters suggested that we exercise caution in the determination of price substitutions and that we develop a formal process and criteria to determine when substitutions are necessary. Commenters also recommended that we provide adequate notice prior to making a price substitution.

Response: We appreciate the comments to maintain the threshold at 5 percent. As we noted in the CY 2008 PFS final rule with comment period (72 FR 66259), we understand that there are complicated operational issues associated with potential payment substitutions. We will continue to proceed cautiously in this area and provide stakeholders, particularly manufacturers of drugs impacted by potential price substitutions, with adequate notice of our intentions regarding such, including the opportunity to provide input with regard to the processes for substituting the WAMP or the AMP for the ASP. As part of our approach, we intend to develop a better understanding of the issues that may be related to certain drugs for which the WAMP and AMP may be lower than the ASP over time.

After reviewing of the public comments, we are finalizing our proposal to establish the WAMP/AMP threshold at 5 percent for CY 2009.

2. Competitive Acquisition Program (CAP) Issues

Section 303(d) of the MMA requires the implementation of a competitive acquisition program (CAP) for certain Medicare Part B drugs not paid on a cost or PPS basis. The provisions for acquiring and billing drugs under the CAP were described in the Competitive Acquisition of Outpatient Drugs and Biologicals Under Part B proposed rule (March 4, 2005, 70 FR 10746) and the interim final rule (July 6, 2005, 70 FR 39022), and certain provisions were finalized in the CY 2006 PFS final rule with comment period (70 FR 70236). The CY 2007 PFS final rule with comment period (72 FR 66260) then finalized portions of the July 6, 2005 IFC that had not already been finalized.

The CAP is an alternative to the ASP (buy and bill) methodology of obtaining certain Part B drugs used incident to physicians' services. Physicians who choose to participate in the CAP obtain drugs from vendors selected through a competitive bidding process and approved by CMS. Under the CAP, physicians agree to obtain all of the approximately 190 drugs on the CAP drug list from an approved CAP vendor. A vendor retains title to the drug until it is administered, bills Medicare for the drug, and bills the beneficiary for cost sharing amounts once the drug has been administered. The physician bills Medicare only for administering the drug to the beneficiary. The CAP currently operates with a single CAP drug category. CAP claims processing began on July 1, 2006.

After the CAP was implemented, section 108 of the MIEA-TRHCA made changes to the CAP payment methodology. Section 108(a)(2) of the MIEA-TRHCA requires the Secretary to establish (by program instruction or otherwise) a post-payment review process (which may include the use of statistical sampling) to assure that payment is made for a drug or biological only if the drug or biological has been administered to a beneficiary. The Secretary is required to recoup, offset, or collect any overpayments. This statutory change took effect on April 1, 2007. Conforming changes were proposed in the CY 2008 PFS proposed rule (72 FR 38153) and finalized in the CY 2008 PFS final rule with comment period (72 FR 66260).

In the CY 2009 PFS proposed rule, we proposed several refinements to the CAP regarding the annual CAP payment amount update mechanism, the definition of a CAP physician, the restriction on physician transportation of CAP drugs, and the dispute resolution process (73 FR 38522). However, since the publication of our proposed rule, we have announced the postponement of the CAP for 2009 due to contractual issues with the successful bidders. As a result, CAP physician election for participation in the CAP in 2009 is not being held this Fall, and CAP drugs will not be available from an Approved CAP Vendor for dates of service after December 31, 2008.

Moreover, we are currently soliciting public feedback on the CAP from participating physicians, potential vendors, and other interested parties. We are soliciting public comments about a range of issues, including, but not limited to the following issues: the categories of drugs provided under the CAP; the distribution of areas that are served by the CAP; and procedural changes that may increase the program's flexibility and appeal to potential vendors and physicians. Interested parties can submit feedback about the CAP electronically or request to meet with us in person. Feedback about the CAP and meeting requests can be submitted electronically to: MMA303DDrugBid@cms.hhs.gov.

We will also host a CAP Open Door Forum (ODF) this December for participating physicians, potential vendors, and other interested parties. Participants will have an opportunity to discuss the postponement and suggest changes to the program. Additional information about this event will be available on the CMS CAP Web site at http://www.cms.hhs.gov/CompetitiveAcquisforBios/.

We will assess information from the public and consider implementing changes to the CAP before proceeding with another bid solicitation for Approved CAP Vendor contracts. Furthermore, in light of the postponement of the CAP, we believe it would be prudent to consider the additional information that is being collected before finalizing any further changes to the program. For this reason, we will not finalize the CAP items in the CY 2009 proposed rule at this time. We appreciate the comments that we have received and we will consider these comments as we assess potential changes to the program and future rulemaking.

G. Application of the HPSA Bonus Payment

Section 1833(m) of the Act provides for an additional 10-percent bonus payment for physicians' services furnished in a year to a covered individual in an area that is designated as a geographic Health Professional Shortage Area (HPSA) as identified by the Secretary prior to the beginning of such year. The statute indicates that the HPSA bonus payment will be made for services furnished during a year in areas that have been designated as HPSAs prior to the beginning of that year. As a result, the HPSA bonus payment is made for physicians' services furnished in an area designated as of December 31 of the prior year, even if the area's HPSA designation is removed during the current year. However, for physicians' services furnished in areas that are designated as geographic HPSAs after the beginning of a year, the HPSA bonus payment is not made until the following year, if the area is still designated as of December 31 of that year.

In the CY 2005 PFS final rule with comment period (69 FR 66297), we stated that determination of zip codes for automatic HPSA bonus payment will be made on an annual basis and that there would be no updates to the zip code file during the year. We also stated that physicians furnishing covered services in “newly designated” HPSAs may add a modifier to their Medicare claims to collect the HPSA bonus payment until our next annual posting of zip codes for which automatic payment of the bonus will be made.

In the CY 2009 PFS proposed rule, we proposed to revise § 414.67 to clarify that physicians who furnish services in areas that are designated as geographic HPSAs as of December 31 of the prior year but not included on the list of zip codes for automated HPSA bonus payments should use the AQ modifier to receive the HPSA bonus payment.

Comment: We received comments in support of using the AQ modifier to ensure that all physicians furnishing services in a geographic HPSA that is not included in the list of zip codes eligible for automatic bonus payments will still receive the 10-percent HPSA bonus payment. One commenter emphasized that this clarification would lessen the administrative burdens they experienced from the lack of a modifier in the past.

A few commenters expressed concern that many physicians may not be aware of the AQ modifier requirement for services furnished in areas that are not on the list of zip codes for automatic payment. One commenter urged us to use educational materials and outreach in order to ensure physicians are aware they may need to use the AQ modifier when submitting their Medicare claims. Another commenter requested that we develop a method to ensure payments are received automatically for all physicians that would qualify for the HPSA bonus payment.

One commenter suggested that we change the HPSA bonus payment program to include nonphysicians and work with the Congress to allow all persons who directly bill under Part B to be eligible for the 10-percent bonus for working in a designated HPSA.

Response: We appreciate the comments in support of our efforts to ensure all physicians furnishing services to Medicare beneficiaries in an area that is designated as a geographic HPSA on December 31 of the prior year receive the HPSA bonus payment.

As a result of refinements in our systems, we expect that more areas that are eligible for the bonus payment will be on the list of zip codes eligible for automatic payment of the HPSA bonus, thereby reducing the number of physicians who need to use the modifier. However, we acknowledge that some physicians may not be aware of the need to use the modifier if they are furnishing services in a geographic HPSA that was designated after the list of eligible zip codes was created but prior to December 31. We will continue to utilize our provider education resources to increase awareness of the appropriate application of the AQ modifier. We will also continue to refine our systems to include as many areas as possible to the list of zip codes that receive automatic HPSA bonus payments.

We recognize that there can be shortages of all types of healthcare practitioners and we indeed appreciate the value of these nonphysicians. However, section 1833(m) of the Act provides for the payment of an additional amount only to physicians and a change would require a statutory revision.

After careful consideration of all of the comments, we are adopting our proposal to add § 414.67(d) with minor revisions to clarify that physicians who furnish services in areas that are designated as geographic HPSAs as of December 31 of the prior year but not included on the list of zip codes for automated HPSA bonus payments should use the AQ modifier to receive the HPSA bonus payment.

H. Provisions Related to Payment for Renal Dialysis Services Furnished by End-Stage Renal Disease (ESRD) Facilities

In the CY 2009 PFS proposed rule (73 FR 38527), we outlined for CY 2009 the proposed updates to the case-mix adjusted composite rate payment system established under section 1881(b)(12) of the Act, added by section 623 of the MMA. These included updates to the drug add-on component of the composite rate system, as well as the wage index values used to adjust the labor component of the composite rate.

Specifically, we proposed the following provisions which are described in more detail below in this section:

  • A zero growth update to the proposed 15.5 percent drug add-on adjustment to the composite rates for 2009 required by section 1881(b)(12)(F) of the Act (resulting in a $20.33 per treatment drug add-on amount).
  • An update to the wage index adjustment to reflect the latest available wage data, including a revised BN adjustment factor of 1.056672;
  • The completion of the 4-year transition from the previous wage-adjusted composite rates to the CBSA wage-adjusted rates, where payment will be based on 100 percent of the revised geographic adjustments; and
  • A reduction of the wage index floor from 0.7500 to 0.7000.

A total of 56 comments were submitted under the caption “ESRD PROVISIONS.” Eight of these comments pertained to the proposed changes to ESRD payment related provisions listed above. The remaining 48 comments responded to the solicitation for public comment pertaining to the application of preventable hospital-acquired condition (HAC) payment provisions for IPPS hospitals in settings other than IPPS hospitals, including ESRD facilities. Please refer to section II.H.6. of this final rule with comment period for a discussion of the applicability of the HAC payment provision for IPPS hospitals in settings other than IPPS hospitals.

The ESRD payment related comments are discussed in detail below in this section. In addition, subsequent to the publication of the CY 2009 PFS proposed rule, section 153 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 15, 2008, mandates changes in ESRD payment effective January 1, 2009.

Section 153(a) of the MIPPA amends section 1881(b)(12)(G) of the Act to increase the composite rate component of the payment system and amends section 1881(b)(12)(A) to revise payments to ESRD facilities. The amendments that are effective January 1, 2009 include an update of 1 percent to the composite rate component of the payment system (for services furnished on or after January 1, 2009, and before January 1, 2010), and the establishment of a site neutral composite rate for both hospital-based and independent dialysis facilities which, when applying the geographic index, shall reflect the labor share based on the labor share otherwise applied for renal dialysis facilities. The labor share for both hospital-based and independent dialysis facilities is 53.711.

In addition, since we compute the drug add-on adjustment as a percentage of the weighted average base composite rate, the drug add-on percentage is decreased to account for the higher composite payment rate and will result in a 15.2 percent drug add-on adjustment for CY 2009. Since the statutory increase only applies to the composite rate, this adjustment to the drug add-on percentage is needed to ensure that the total drug add-on dollars remains constant.

Prior to the MIPPA provisions, effective for CY 2008, hospital-based dialysis facilities received a base composite rate of $136.68 and independent dialysis facilities received a base composite rate of $132.49, and so the CY 2009 base composite rate for independent dialysis facilities prior to the MIPPA was $132.49. The MIPPA mandates that payments for both the hospital-based dialysis facilities and independent dialysis facilities be based on the independent dialysis facilities rate. The 1 percent increase to the independent dialysis facility's 2008 composite rate of $132.49 results in a 2009 base composite rate for both hospital-based and independent dialysis facilities of $133.81. A drug add-on amount of $20.33 per treatment remains the same for 2009, which results in a 15.2 percent increase over the base independent composite rate of $133.81.

1. Growth Update to the Drug Add-On Adjustment to the Composite Rates

Section 623(d) of the MMA added section 1881(b)(12)(B)(ii) of the Act which requires us to establish an add-on to the composite rate to account for changes in the drug payment methodology stemming from enactment of the MMA. Section 1881(b)(12)(C) of the Act provides that the drug add-on must reflect the difference in aggregate payments between the revised drug payment methodology for separately billable ESRD drugs and the AWP payment methodology. In 2005, we generally paid for ESRD drugs based on average acquisition costs. Thus, the difference from AWP pricing was calculated using acquisition costs. However, in 2006 when we moved to ASP pricing for ESRD drugs, we recalculated the difference from AWP pricing using ASP prices.

In addition, section 1881(b)(12)(F) of the Act requires that beginning in CY 2006, we establish an annual update to the drug add-on to reflect the estimated growth in expenditures for separately billable drugs and biologicals furnished by ESRD facilities. This growth update applies only to the drug add-on portion of the case-mix adjusted payment system.

The CY 2008 drug add-on adjustment to the composite rate is 15.5 percent. The drug add-on adjustment for 2008 incorporates an inflation adjustment of 0.5 percent. This computation is explained in detail in the CY 2008 PFS final rule with comment period (72 FR 66280 through 66282).

a. Estimating Growth in Expenditures for Drugs and Biologicals for CY 2009

In the CY 2007 PFS final rule with comment period (71 FR 69682), we established an interim methodology for annually estimating the growth in ESRD drugs and biological expenditures that uses the Producer Price Index (PPI) for pharmaceuticals as a proxy for pricing growth, in conjunction with 2 years of ESRD drug data, to estimate per patient utilization growth. We indicated that this methodology would be used to update the drug add-on to the composite rate until such time that we had sufficient ESRD drug expenditure data to project the growth in ESRD drug expenditures beginning in CY 2010.

For CY 2009, we proposed revising the interim methodology for estimating the growth in ESRD drug expenditures by using ASP pricing instead of the PPI to estimate the price component of the update calculation.

As detailed below in this section, we proposed for CY 2009 to estimate price growth using historical ASP pricing data for ESRD drugs for CY 2006 through CY 2008, and to estimate growth in per patient utilization of drugs by using ESRD facility historical drug expenditure data for CY 2006 and CY 2007.

b. Estimating Growth in ESRD Drug Prices

For CY 2009, we proposed to estimate price growth using ASP pricing data for the four quarters of CY 2006 and CY2007, and the two available quarters of CY 2008. For this final rule with comment period, we are using four quarters of ASP prices for CYs 2006, 2007, and 2008. We calculated the weighted price change, for the original top ten ESRD drugs for which we had acquisition pricing, plus Aranesp. In CY 2006 and CY 2007, we calculated a weighted average price reduction of 1.8 percent. We also calculated a weighted average price reduction of 2.1 percent between CY 2007 and CY 2008. The overall average price reduction is 1.9 percent over the 3-year period. Thus, the weighted average ESRD drug pricing change projected for CY 2009 is a reduction of 1.9 percent.

Comment: Commenters were generally opposed to the use of ASP prices to estimate the price component of the drug add-on adjustment. One commenter stated that although the price of EPO has declined in the past few years, it has now stabilized and will likely not decline again in CY 2009. Two commenters, including MedPAC, supported the use of ASP prices stating that it is more closely related to the actual ESRD drug pricing than the use of the overall drug PPI. Another commenter stated that the PPI was a more accepted proxy for predicting drug price increases compared to ASP price trends which have never been used in forecasting drug price changes. Some suggested that we use a blend of ASP and PPI to soften the impact of the change in the methodology.

Response: Given that the statutory language mandates that we estimate the growth in ESRD drug expenditures in order to update the drug add-on adjustment, we believe we have an obligation to utilize the best data available to make those estimates. Although the PPI is a well recognized measure of overall drug price growth, it is not specific to ESRD drug prices. Given that ESRD drug pricing trends are very different from overall drug pricing trends, we do not believe it would be appropriate to continue using the PPI when more specific data are available. ASP pricing data that are specific to ESRD drugs provide the most accurate measure for estimating the price component of the total ESRD drug expenditure estimate for CY 2009. Therefore, for this final rule with comment period, we used ASP pricing data to estimate price growth in ESRD drugs.

c. Estimating Growth in per Patient Drug Utilization

To isolate and project the growth in per patient utilization of ESRD drugs for CY 2009, we removed the enrollment and price growth components from the historical drug expenditure data, and considered the residual to be utilization growth. As discussed previously in this section, we proposed to use ESRD facility drug expenditure data from CY 2006 and CY 2007 to estimate per patient utilization growth for CY 2009.

We first estimated total drug expenditures for all ESRD facilities. For the CY 2009 PFS proposed rule (73 FR 38528), we used the final CY 2006 ESRD claims data and the latest available CY 2007 ESRD facility claims, updated through December 31, 2007 (that is, claims with dates of service from January 1 through December 31, 2007, that were received, processed, paid, and passed to the National Claims History File as of December 31, 2007). For this final rule with comment period, we are using additional updated CY 2007 claims with dates of service for the same time period. This updated CY 2007 data file will include claims received, processed, paid, and passed to the National Claims History File as of June 30, 2008.

For the CY 2009 PFS proposed rule, we adjusted the December 2007 file to reflect our estimate of what total drug expenditures would be using the final June 30, 2008 bill file for CY 2007. The net adjustment we applied to the CY 2007 claims data was an increase of 12.6 percent to the December 2007 claims file. To calculate the proposed per patient utilization growth, we removed the enrollment component by using the growth in enrollment data between CY 2006 and CY 2007. This was approximately 3 percent. To remove the price effect, we calculated the weighted change between CY 2006 and CY 2007 ASP pricing for the top eleven ESRD drugs. We weighted the differences using 2007 ESRD facility drug expenditure data.

This process led to an overall 1.8 percent reduction in price between CY 2006 and CY 2007.

After removing the enrollment and price effects from the expenditure data, the residual growth would reflect the per patient utilization growth. To do this, we divided the product of the enrollment growth of 3 percent (1.03) and the price reduction of 1.8 percent (1.00 − 0.018 = 0.982) into the total drug expenditure change between 2006 and 2007 of 0 percent (1.00 − 0.00 = 1.00). The result is a utilization factor equal to 0.99 or 1.00/(1.03 * 0.982) = 0.99.

Since we observed a 1 percent drop in per patient utilization of drugs between CY 2006 and CY 2007, we projected a 1 percent drop in per patient utilization for ESRD facilities in CY 2009.

Comment: A few commenters suggested that the use of CY 2007 billing data to predict utilization change in CY 2009 is not accurate since the utilization change in CY 2007 was driven by a revision to the EPO monitoring policy which caused a one-time decline in utilization that has since leveled off.

Response: We agree that the revised monitoring policy for erythropoesis stimulating agents (ESAs) that took effect in CY 2007 could have contributed to the observed decrease in ESRD drug utilization between CY 2006 and CY 2007, especially given that EPO and Aranesp make up over 75 percent of all ESRD drug expenditures. Moreover, this effect could distort our estimate of per patient utilization growth in CY 2009. Since CY 2007, we have analyzed 2 years of historical claims data for estimating growth in utilization (CY 2005 and CY 2006). During that period, utilization based on an analysis of independent ESRD facility drug data has indicated no growth. We believe the use of CY 2005 and CY 2006 drug data is the best data available for use in projecting utilization in CY 2009. Therefore, for CY 2009, we will continue to use our estimate of growth in utilization based on CY 2005 and CY 2006 data (72 FR 66282). That is, we are finalizing an estimation of no growth in utilization for CY 2009.

2. Applying the Proposed Growth Update to the Drug Add-on Adjustment

In the CY 2007 PFS final rule with comment period (71 FR 69684), we revised our update methodology by applying the growth update to the per treatment drug add-on amount. That is, for CY 2007, we applied the growth update factor of 4.03 percent to the $18.88 per treatment drug add-on amount for an updated amount of $19.64 per treatment (71 FR 69684). For CY 2008, the per treatment drug add-on amount was updated to $20.33.

For CY 2009, we proposed no update to the per treatment drug add-on amount of $20.33 established in CY 2008.

3. Update to the Drug Add-On Adjustment

In the CY 2009 PFS proposed rule (73 FR 38529), we estimated a 1 percent reduction in per patient utilization of ESRD drugs for CY 2009. Using the projected decline of the CY 2009 ASP pricing for ESRD drugs of 1.9 percent, we projected that the combined growth in per patient utilization and pricing for CY 2009 would result in a negative update equal to −2.9 percent (0.99 * 0.981 = 0.971). However, we proposed to apply a zero percent update to the drug add-on adjustment and maintain the $20.33 per treatment drug add-on amount for CY 2009 that reflects a 15.5 percent drug add-on adjustment to the composite rate for CY 2009.

In addition, for CY 2009 we presented an alternative approach to the zero percent update. The alternative approach would be to apply an adjustment of less than 1.0 to the drug add-on adjustment. For CY 2009, we would “increase” the drug add-on by 0.971. Applying the 0.971 increase to the $20.33 per treatment adjustment would yield a drug add-on amount of $19.74 per treatment, which represents a 0.4 percent decrease in the CY 2008 drug add-on percentage of 15.5 percent. As such, the drug add-on adjustment to the composite rate for CY 2009 would be equal to 1.155 * 0.996 = 1.15 or 15.0 percent.

We solicited public comment on our proposal of a zero update, as well as the alternative approach presented above, so that we could make an informed decision with respect to the final update to the CY 2009 drug add-on adjustment to the composite rate.

Comment: Commenters were uniformly opposed to any decrease in the drug add-on adjustment, citing the plain reading of the statute which calls for an annual “increase” in the adjustment. As support for the reliance on the plain reading of the statute, several commenters cited case law examples in which courts have relied on dictionary definitions, biblical text, and common usage of terms for purposes of interpreting statutory text. One commenter disagreed with CMS' alternative reading of 1881(b)(12)(F) of the Act, under which an increase in the drug add-on could not be implemented when estimated drug growth is negative, pointing to MMA Conference Report language that referenced a payment update that would be based on a “growth” in drug spending and “drug cost increases.” Commenters further argued, citing case law the priority on plain language over policy arguments and cautioned against identifying gaps in statutes.

One commenter suggested that we should use the methodology to estimate growth in ESRD drug expenditures that yields a positive adjustment as required by the statute. Another commenter stated that if we believe ESRD drug expenditures will decline, this would indicate that the spread between AWP and ASP pricing will widen in CY 2009, thus justifying an increase in the drug add-on adjustment.

Response: We agree that the plain reading of the statute would preclude any decrease in the drug add-on adjustment and would not support a negative growth update. Specifically, section 1881(b)(12)(F) of the Act states in part that “the Secretary shall annually increase” the drug add-on amount based on the growth in expenditures for separately billed ESRD drugs. We interpret the statutory language “annually increase” to mean a positive or zero update to the drug add-on given that the statute also requires that the annual “increase” to the drug add-on adjustment reflect our estimate of the growth in ESRD drug expenditures. Since our analysis indicates a projected reduction in ESRD drug expenditures for CY 2009, we do not believe it would be appropriate to provide an increase that cannot be substantiated by the best data available.

Therefore, we are finalizing our proposal to provide a zero update to the drug add-on adjustment for CY 2009. If the statute had included, instead of the word “increase,” a broader term, we believe we would have had authority to decrease the rate to take into account the projected reduction.

4. Final Growth Update to the Drug Add-On Adjustment for 2009

As we indicated earlier, we have decided not to use CY 2007 expenditure data to estimate utilization growth for CY 2009, because of the potential distortion of our estimates due to the implementation of the ESA monitoring policy in 2007. Therefore, for this final rule with comment period, we are using the same data we use to estimate growth in utilization for CY 2008 as outlined in the CY 2008 PFS final rule with comment period (72 FR 66282). That is, for CY 2009, we estimate no growth in per patient utilization of ESRD drugs for CY 2009.

Similar to the CY 2009 PFS proposed rule, we estimated growth in ESRD drug prices using ASP pricing data for CYs 2006, 2007 and 2008. In the proposed rule, we had only 2 quarters of data for 2008, but for this final rule all four quarters of ASP pricing data are available. We calculated the weighted price change for the top eleven ESRD drugs. Tables 8 and 9 show the average ASP prices and the 2007 weights used. We note that the final CY 2007 weights are derived from the final CY 2007 ESRD facility claims file as of June 30, 2008. For CY 2006 and CY 2007, we calculated a weighted average price reduction of 1.8 percent. We also calculated a weighted average price reduction of 1.9 percent between CY 2007 and CY 2008. The overall average price reduction is 1.8 percent over the 3-year period. Thus, the weighted average ESRD drug pricing change projected for CY 2009 is a reduction of 1.8 percent.

We project that the combined growth in per patient utilization and pricing of ESRD drugs for CY 2009 would result in a negative update equal to −1.8 percent (1.00 * 0.982 = 0.982). If we implement this decrease in the update to the drug-on adjustment, the resulting savings would have been $14 million. However, as indicated above, for this final rule with comment period, we are applying no update to the drug add-on adjustment for CY 2009. Thus, we are applying a zero update to the $20.33 per treatment drug add-on amount for CY 2009. After adjusting for the MIPPA changes as discussed earlier in this section, the final drug add-on adjustment to the composite rate for CY 2009 is 15.2 percent.

Table 8—CY 2006, 2007 and 2008 ESRD Drug ASP Prices Back to Top
Independent drugs CY 2006 CY 2007 CY 2008
EPO $9.46 $9.17 $9.05
Paricalcitol 3.81 3.79 3.78
Sodium-ferric-glut 4.88 4.76 4.81
Iron-sucrose 0.36 0.37 0.36
Levocarnitine 9.44 8.07 6.31
Doxercalciferol 2.97 2.68 2.75
Calcitriol 0.55 0.54 0.40
Iron-dextran 11.94 11.69 11.69
Vancomycin 3.23 3.43 3.19
Alteplase 31.63 33.21 33.06
Aranesp 3.01 3.29 2.86
Table 9—CY 2007 Drug Weights for ESRD Facilities Back to Top
Independent drugs CY 2007 weights (%)
EPO 69.1
Paricalcitol 11.9
Sodium-ferric-glut 2.5
Iron-sucrose 6.1
Levocarnitine 0.2
Doxercalciferol 2.8
Calcitriol 0.1
Iron-dextran 0.0
Vancomycin 0.1
Alteplase 1.0
Aranesp 6.2

5. Update to the Geographic Adjustments to the Composite Rates

Section 1881(b)(12)(D) of the Act, as added by section 623(d) of the MMA, gives the Secretary the authority to revise the wage indexes previously applied to the ESRD composite rates. The wage indexes are calculated for each urban and rural area. The purpose of the wage index is to adjust the composite rates for differing wage levels covering the areas in which ESRD facilities are located.

a. Updates to Core-Based Statistical Area (CBSA) Definitions

In the CY 2006 PFS final rule with comment period (70 FR 70167), we announced our adoption of the OMB's CBSA-based geographic area designations to develop revised urban/rural definitions and corresponding wage index values for purposes of calculating ESRD composite rates. OMB's CBSA-based geographic area designations are described in OMB Bulletin 03-04, originally issued June 6, 2003, and is available online at http://www.whitehouse.gov/omb/bulletins/b03-04.html. In addition, OMB has published subsequent bulletins regarding CBSA changes, including changes in CBSA numbers and titles. We wish to point out that this and all subsequent ESRD rules and notices are considered to incorporate the CBSA changes published in the most recent OMB bulletin that applies to the hospital wage index used to determine the current ESRD wage index. The OMB bulletins may be accessed online at http://www.whitehouse.gov/omb/bulletins/index.html.

b. Updated Wage Index Values

In the CY 2007 PFS final rule with comment period (71 FR 69685), we stated that we intended to update the ESRD wage index values annually. The current ESRD wage index values for CY 2008 were developed from FY 2004 wage and employment data obtained from the Medicare hospital cost reports. The ESRD wage index values are calculated without regard to geographic classifications authorized under sections 1886(d)(8) and (d)(10) of the Act and utilize pre-floor hospital data that is unadjusted for occupational mix. To calculate the ESRD wage index, hospital wage index data for FY 2004 for all providers in each urban/rural geographic area are combined. The sum of the wages for all providers in each geographic area was divided by the total hours for all providers in each area. The result is the average hourly hospital wage for that geographic locale. The ESRD wage index was computed by dividing the average hourly hospital wage for each geographic area by the national average hourly hospital wage. The final step was to multiply each wage index value by the ESRD wage index budget neutrality factor (BNF).

We proposed to use the same methodology for CY 2009, with the exception that FY 2005 hospital data will be used to develop the CY 2009 wage index values. The CY 2009 ESRD wage index BNF is 1.056689. This figure differs slightly from the figure in the proposed rule (1.056672) because we used updated hospital wage data and treatment counts from the most current claims data. (See section II.H.5.c. of this final rule with comment period for details about this adjustment.) For a detailed description of the development of the CY 2009 wage index values based on FY 2005 hospital data, see the FY 2009 “Hospital Inpatient Prospective Payment Systems (IPPS) and Final Fiscal Year 2009 Rates” rule (73 FR 23630). Section III.G. of the preamble to the FY 2009 IPPS final rule, Computation of the Final FY 2009 Unadjusted Wage Index, describes the cost report schedules, line items, data elements, adjustments, and wage index computations. The wage index data affecting ESRD composite rates for each urban and rural locale may also be accessed on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp. The wage data are located in the section entitled, “FY 2009 Final Rule Occupational Mix Adjusted and Unadjusted Average Hourly Wage and Pre-reclassified Wage Index by CBSA.”

i. Fourth Year of the Transition

In the CY 2006 PFS final rule with comment period (70 FR 70167 through 70169), we indicated that we would apply a 4-year transition period to mitigate the impact on the composite rates resulting from our adoption of CBSA-based geographic designations. Beginning January 1, 2006, during each year of the transition, an ESRD facility's wage-adjusted composite rate (that is, without regard to any case-mix adjustments) is a blend of its old MSA-based wage-adjusted payment rate and its new CBSA-based wage adjusted payment rate for the transition year involved. In CY 2006, the first year of the transition, we implemented a 75/25 blend. In CY 2007, the second year of the transition, we implemented a 50/50 blend. In CY 2008, the third year of the transition, we implemented a 25/75 blend. Consistent with the transition blends announced in the CY 2006 PFS final rule with comment period (70 FR 70170), in CY 2009, each ESRD facility's composite payment rate will be based entirely on the CBSA-based wage index.

For CY 2009, we proposed to reduce the wage index floor from 0.75 to 0.70. For this final year of the transition (CY 2009), we believe that a reduction to 0.70 is appropriate as we continue to reassess the need for a wage index floor in future years. We believe that a gradual reduction in the floor is still needed to ensure patient access to dialysis in areas that have low wage index values, especially Puerto Rico, and to prevent sudden adverse effects to the payment system. However, we note that our goal is the eventual elimination of all wage index floors.

The wage index floor and blended share applicable for CY 2009 are shown in Table 10.

Table 10—Wage Index Transition Blend Back to Top
CY payment Floor Ceiling Old MSA New CBSA
* Each wage index floor is multiplied by a BN adjustment factor. For CY 2009 the BN adjustment is 1.056689 resulting in an actual wage index floor of 0.7397.
2009 0.70* None 0% 100%

Because CY 2009 is the final year of the 4-year transition period, each ESRD facility's composite payment rate will be based entirely on its applicable new CBSA-based wage index value.

Comment: We received a few comments that commend CMS for its use of a transition policy in shifting the Medicare ESRD program into a new geographic wage index system. Commenters stressed that prior to the elimination to the floor, we should provide protection to facilities in areas that would otherwise not be able to support dialysis facilities, which will ensure that access to care for beneficiaries is not compromised.

Response: We note that our goal is the eventual elimination of all wage index floors. However, we believe that a gradual reduction in the floor is still needed to ensure patient access to dialysis in areas that have low wage index values, especially Puerto Rico, and to prevent sudden adverse effects to the payment system. We will continue to reassess the need for a wage index floor in future years.

ii. Wage Index Values for Areas With No Hospital Data

In CY 2006, while adopting the CBSA designations, we identified a small number of ESRD facilities in both urban and rural geographic areas where there are no hospital wage data from which to calculate ESRD wage index values. The affected areas were rural Massachusetts, rural Puerto Rico, and the urban area of Hinesville, GA (CBSA 25980). For CY 2006, CY 2007, and CY 2008, we calculated the ESRD wage index values for those areas as follows:

  • For rural Massachusetts, because we had not determined a reasonable wage proxy, we used the FY 2005 wage index value in CY 2006 and CY 2007. For CY 2008, we used an alternative methodology as explained below.
  • For rural Puerto Rico, the situation was similar to rural Massachusetts. However, because all geographic areas in Puerto Rico were subject to the wage index floor in CY 2006, CY 2007, and CY 2008, we applied the ESRD wage index floor to rural Puerto Rico as well.
  • For the urban area of Hinesville, GA, we calculated the CY 2006, CY 2007, and CY 2008 wage index value based on the average wage index value for all urban areas within the State of Georgia.

For CY 2008, we adopted an alternative methodology for establishing a wage index value for rural Massachusetts. Because we used the same wage index value for 2 years with no update, we believed it was appropriate to establish a methodology which employed reasonable proxy data for rural areas (including rural Massachusetts), and also permitted annual updates to the wage index based on that proxy data. For rural areas without hospital wage data, we used the average wage index values from all contiguous CBSAs as a reasonable proxy for that rural area.

In determining the imputed rural wage index, we interpreted the term “contiguous” to mean sharing a border. In the case of Massachusetts, the entire rural area consists of Dukes and Nantucket Counties. We determined that the borders of Dukes and Nantucket counties are contiguous with Barnstable and Bristol counties. We will continue to use the same methodology for CY 2009. Under this methodology, the CY 2009 wage index values for the counties of Barnstable (CBSA 12700, Barnstable Town, MA-1.2643) and Bristol (CBSA 39300, Providence-New Bedford-Fall River, RI-MA-1.0696) were averaged resulting in an imputed proposed wage index value of 1.1670 for rural Massachusetts in CY 2009.

For rural Puerto Rico, we continued to apply the wage index floor in CY 2008. Because all areas in Puerto Rico that have a wage index were eligible for the ESRD wage index floor of 0.75, we applied that floor to ESRD facilities located in rural Puerto Rico. For CY 2009, all areas in Puerto Rico that have a wage index are eligible for the final ESRD wage index floor of 0.70. Therefore, we will apply the ESRD wage index floor of 0.70 to all ESRD facilities that are located in rural Puerto Rico.

For Hinesville, GA (CBSA 25980), which is an urban area without specific hospital wage data, we proposed to apply the same methodology in 2009 that we used to impute a wage index value in CY 2006, CY 2007, and CY 2008. Specifically, we proposed to use the average wage index value for all urban areas within the State of Georgia. We are finalizing our proposal, which results in a CY 2009 wage index value of 0.9110 for the Hinesville-Fort Stewart GA CBSA.

In the CY 2008 PFS final rule with comment period (72 FR 66283 through 66284), we stated that we would continue to evaluate existing hospital wage data and possibly wage data from other sources such as the Bureau of Labor Statistics, to determine if other methodologies might be appropriate for imputing wage index values for areas without hospital wage data for CY 2009 and subsequent years. To date, no data from other sources, superior to that currently used in connection with the IPPS wage index, have emerged. Therefore, for ESRD purposes, we continue to believe this is an appropriate policy. We received no comments on this section and are finalizing our policies for wage areas with no hospital data as proposed.

iii. Evaluation of Wage Index Policies Adopted in the FY 2008 IPPS Final Rule

We stated in the CY 2008 PFS final rule with comment period (72 FR 66284) that we planned to evaluate any policies adopted in the FY 2008 IPPS final rule (72 FR 47130, 47337 through 47338) that affect the wage index, including how we treat certain New England hospitals under section 601(g) of the Social Security Amendments of 1983 (98). This is relevant for the ESRD composite payment system, because the ESRD wage index is calculated using the same urban/rural classification system and computation methodology applicable under the IPPS, except that it is not adjusted for occupational mix and does not reflect geographic classifications authorized under sections 1886(d)(8) and (d)(12) of the Act. We also proposed to use the FY 2009 wage index data (collected from cost reports submitted by hospitals for cost reporting periods beginning during FY 2005), to compute the ESRD composite payment rates effective beginning January 1, 2009.

(1) CY 2009 Classification of Certain New England Counties

We are addressing the change in the treatment of “New England deemed counties” (that is, those counties in New England listed in § 412.64(b)(1)(ii)(B) that were deemed to part of urban areas under section 601(g) of the Social Security Amendments of 1983), that were made in the FY 2008 IPPS final rule with comment period (72 FR 47337 through 47338). These counties include the following: Litchfield County, Connecticut; York County, Maine; Sagadahoc County, Maine; Merrimack County, New Hampshire; and Newport County, Rhode Island. Of these five “New England deemed counties”, three (York County, Sagadahoc County, and Newport County) are also included in the MSAs defined by OMB, and therefore, used in the calculations of the urban hospital wage index values reflected in the ESRD composite payment rates. The remaining two counties, Litchfield County and Merrimack County, are geographically located in areas that are considered “rural” under the current IPPS and ESRD composite payment system labor market definitions, but have been previously deemed urban under the IPPS in certain circumstances as discussed below.

In the FY 2008 IPPS final rule with comment period, for purposes of IPPS, § 412.64(b)(1)(ii)(B) was amended such that the two “New England deemed counties” that are still considered rural under the OMB definitions (Litchfield County, CT and Merrimack County, NH) are no longer considered urban effective for discharges occurring on or after October 1, 2007, and therefore, are considered rural in accordance with § 412.64(b)(1)(ii)(C). For purposes of the ESRD wage index, we have recognized OMB's CBSA designations, as well as generally followed the policies under the IPPS with regard to the definitions for “urban” and “rural” for the wage index, but we do not to take into account IPPS geographic reclassifications in determining payments under the composite payment system. Accordingly, to reflect our general policy for the ESRD wage index, these two counties will be considered “rural” under the ESRD composite payment system effective with the next update of the payment rates on January 1, 2009, and will no longer be included in urban CBSA 25540 (Hartford-West Hartford-East Hartford, CT) and urban CBSA 31700 (Manchester-Nashua, NH), respectively.

(2) Multi-Campus Hospital Wage Index Data

In the CY 2008 ESRD composite payment system final rule (72 FR 66280), we established ESRD wage index values for CY 2008 calculated from the same data (collected from cost reports submitted by hospitals for cost reporting periods beginning during FY 2004) used to compute the FY 2008 acute care hospital inpatient wage index, without taking into account geographic reclassification under sections 1886(d)(8) and (d)(10) of the Act. However, the IPPS policy that apportions the wage data for multi-campus hospitals was not finalized before the ESRD composite payment system final rule. Therefore, the CY 2008 ESRD wage index values reflected the IPPS wage data that were based on a hospital's actual location without regard to the urban or rural designation of any related or affiliated provider. Accordingly, all wage data from different campuses of a multi-campus hospital were included in the calculation of the CBSA wage index of the main hospital. In the proposed rule, we noted that the IPPS wage data used to determine the proposed CY 2009 ESRD wage index values were computed from wage data submitted by hospitals for cost reporting periods beginning in FY 2005, and reflect our policy adopted under the IPPS beginning in FY 2008, which apportions the wage data for multi-campus hospitals located in different labor market areas, CBSAs, to each CBSA where the campuses are located (see the FY 2008 IPPS final rule with comment period (72 FR 47317 through 47320)). Specifically, under the CY 2009 ESRD composite payment system, the wage index was computed using IPPS wage data (published by hospitals for cost reporting periods beginning in 2005, as with the FY 2009 IPPS wage index). This resulted in the allocation of salaries and hours to the campuses of two multi-campus hospitals, with campuses that are located in different labor areas, one in Massachusetts and the other is Illinois. The ESRD wage index values proposed for CY 2009 in the following CBSAs are affected by this policy: Boston-Quincy, MA (CBSA 14484), Providence-New Bedford-Falls River, RI-MA (CBSA 39300), Chicago-Naperville-Joliet, IL (CBSA 16974), and Lake County-Kenosha County, IL-WI (CBSA 29404). (Please refer to Addenda G and H of this final rule with comment period.)

For CY 2009, we will use the FY 2009 wage index data (collected from cost reports submitted by hospitals for cost reporting periods beginning during FY 2005) to compute the ESRD composite payment rates effective beginning January 1, 2009.

Although we solicited comments, we did not receive any comments on this section and are implementing these provisions in this final notice. (For a detailed explanation of the multi-campus and New England deemed counties policies, refer to the CY 2009 PFS proposed rule (73 FR 38531 through 38532)).

c. Budget Neutrality Adjustment

Section 1881(b)(12)(E)(i) of the Act, as added by section 623(d) of the MMA, requires that any revisions to the ESRD composite rate payment system as a result of the MMA provision (including the geographic adjustment), be made in a budget neutral manner. This means that aggregate payments to ESRD facilities in CY 2008 should be the same as aggregate payments that would have been made if we had not made any changes to the geographic adjusters. We note that this BN adjustment only addresses the impact of changes in the geographic adjustments. A separate BN adjustment was developed for the case-mix adjustments currently in effect. As we did not propose any changes to the case-mix measures for CY 2009, the current case-mix BN adjustment will remain in effect for CY 2009. As in CY 2008, for CY 2009, we again proposed to apply a BN adjustment factor directly to the ESRD wage index values. As explained in the CY 2007 PFS final rule with comment period (71 FR 69687 through 69688), we believe this is the simplest approach because it allows us to maintain our base composite rates during the transition from the current wage adjustments to the revised wage adjustments described previously in this section. Because the ESRD wage index is only applied to the labor-related portion of the composite rate, we computed the BN adjustment factor based on that proportion (53.711 percent).

To compute the final CY 2009 wage index BN adjustment factor (1.056689), we used the most current FY 2005 pre-floor, pre-reclassified, non-occupational mix-adjusted hospital data to compute the wage index values, treatment counts from the most current 2007 outpatient claims (paid and processed as of June 30, 2008), and geographic location information for each facility which may be found on the Dialysis Facility Compare Web page on the CMS Web site at http://www.cms.hhs.gov/DialysisFacilityCompare/. The FY 2005 hospital wage index data for each urban and rural locale by CBSA may also be accessed on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp. The wage index data are located in the section entitled, “FY 2009 Final Proposed Rule Occupational Mix Adjusted and Unadjusted Average Hourly Wage and Pre-Reclassified Wage Index by CBSA.”

Using treatment counts from the 2007 claims and facility-specific CY 2008 composite rates, we computed the estimated total dollar amount each ESRD provider would have received in CY 2008 (the 3rd year of the 4-year transition). The total of these payments became the target amount of expenditures for all ESRD facilities for CY 2009. Next, we computed the estimated dollar amount that would have been paid to the same ESRD facilities using the proposed ESRD wage index for CY 2009 (the 4th year of the 4-year transition). The total of these payments became the fourth year new amount of wage-adjusted composite rate expenditures for all ESRD facilities. Section 153(a) of the MIPPA updated section 1881(b)(12)(G) of the Act and revised payments to ESRD facilities. The revisions that are effective January 1, 2009 include an update of 1 percent to the composite rate component of the payment system, and the establishment of a site neutral composite rate to hospital-based and independent dialysis facilities. We note that when computing the 4th year new amount, we did not include the MIPPA provisions because they are not budget neutral.

After comparing these two dollar amounts (target amount divided by the 4th year new amount), we calculated an adjustment factor that, when multiplied by the applicable CY 2009 ESRD wage index value, would result in aggregate payments to ESRD facilities that will remain within the target amount of composite rate expenditures. When making this calculation, the ESRD wage index floor value of 0.7000 is used whenever appropriate. The BN adjustment factor for the CY 2009 wage index is 1.056689. This figure differs slightly from the figure in the proposed rule (1.056672) because we have used updated hospital wage data and treatment counts from the most current claims data.

To ensure BN, we also must apply the BN adjustment factor to the wage index floor of 0.7000 which results in a adjusted wage index floor of 0.7397 (0.7000 × 1.056689) for CY 2009.

d. ESRD Wage Index Tables

The 2009 wage index tables are located in Addenda G and H of this final rule with comment period.

6. Application of the Hospital-Acquired Conditions Payment Policy for IPPS Hospitals to Other Settings

Value-based purchasing (VBP) ties payment to performance through the use of incentives based on measures of quality and cost of care. The implementation of VBP is rapidly transforming CMS from being a passive payer of claims to an active purchaser of higher quality, more efficient health care for Medicare beneficiaries. Our VBP initiatives include hospital pay for reporting (the Reporting Hospital Quality Data for the Annual Payment Update), physician pay for reporting (the Physician Quality Reporting Initiative), home health pay for reporting, the Hospital VBP Plan Report to Congress, and various VBP demonstration programs across payment settings, including the Premier Hospital Quality Incentive Demonstration and the Physician Group Practice Demonstration.

The preventable hospital-acquired conditions (HAC) payment provision for IPPS hospitals is another of our value-based purchasing initiatives. The principle behind the HAC payment provision (Medicare will not provide additional payments to IPPS hospitals to treat certain preventable conditions acquired during a beneficiary's IPPS hospital stay) could be applied to the Medicare payment systems for other settings of care. Section 1886(d)(4)(D) of the Act requires the Secretary to select for the HAC IPPS payment provision conditions that are: (1) High cost, high volume, or both; (2) assigned to a higher paying Medicare Severity-Diagnosis Related Group (MS-DRG) when present as a secondary diagnosis; and (3) could reasonably have been prevented through the application of evidence-based guidelines. Beginning October 1, 2008, Medicare can no longer assign an inpatient hospital discharge to a higher paying MS-DRG if a selected HAC was not present, or could not be identified based on clinical judgment, on admission. That is, the case will be paid as though the secondary diagnosis related to the HAC was not present. Medicare will continue to assign a discharge to a higher paying Medicare Severity-Diagnosis Related Group (MS-DRG) if a selected condition was present on admission.

The broad principle articulated in the HAC payment provision for IPPS hospitals (that is, Medicare not paying more for certain reasonably preventable hospital-acquired conditions) could potentially be applied to other Medicare payment systems for conditions that occur in settings other than IPPS hospitals. Other possible settings of care include, but are not limited to: hospital outpatient departments, ambulatory surgical centers, SNFs, HHAs, ESRD facilities, and physician practices. Implementation would be different for each setting, as each payment system is different and the level of reasonable prevention through the application of evidence-based guidelines would vary for candidate conditions across different settings of care. However, alignment of incentives across settings of care is an important goal for all of our VBP initiatives, including the HAC payment provision.

A related application of the broad principle behind the HAC payment provision for IPPS hospitals could be considered through Medicare secondary payer policy by requiring the provider that failed to prevent the occurrence of a preventable condition in one setting to pay for all or part of the necessary follow up care in a second setting. This would help shield the Medicare program from inappropriately paying for the downstream effects of a reasonably preventable condition acquired in the first setting but treated in the second setting.

We note that we did not propose new Medicare policy in this discussion of the possible application of the HAC payment policy for IPPS hospitals to other settings, as some of these approaches may require new statutory authority. Instead of proposing policy, we solicited public comment on the application of the preventable HAC payment provision for IPPS hospitals to other Medicare payment systems. We also stated that we look forward to working with stakeholders in the fight against all healthcare-associated conditions.

The following is a summary of the comments we received and our responses.

Comment: Commenters recommended that CMS work with technical experts, such as physicians and hospitals, to determine the impact, burden, and accuracy of POA indicator reporting in the inpatient setting before it is expanded to other settings of care. Commenters specifically recommended that CMS consider issues of adverse selection and access to care for vulnerable populations. Many commenters had concerns with CMS' authority and ability to implement such a policy for the physician office setting.

Response: We agree that the HAC payment provision should be studied to determine its impact. We also recognize the importance of aligning VBP policy across all Medicare payment systems. We believe it is appropriate to consider policies of not paying more for medical care that harms patients or leads to complications that could have been prevented. For example, we note that CMS is currently considering National Coverage Determinations (NCDs) for three of the National Quality Forum's Serious Reportable Events: (1) Surgery on the wrong body part, (2) surgery on the wrong patient, and (3) wrong surgery performed on a patient. NCDs can address physician services as well as institutional services. We will work with stakeholders as we move forward in combating healthcare-associated conditions in all Medicare payment settings. Any additional policies, within statutory authority, addressing these issues would be proposed through notice and comment rulemaking.

Comment: Some commenters stated that CMS may need to implement a Present on Admission (POA)-type indicator to recognize healthcare-acquired conditions in the physician office and ESRD settings of care, similar to the IPPS POA indicator.

Response: We agree that a POA-type indicator would aid in determining the onset of a healthcare-acquired condition. We welcome the opportunity to work with stakeholders to consider expansion of a POA-type indicator to all Medicare settings of care. We look forward to working with entities such as the National Uniform Billing Committee (NUBC) on the implementation of a POA-type indicator for all settings of care.

Comment: Many commenters identified attribution of a healthcare-acquired condition to an individual physician who is broadly managing the patient's care as a challenge in expanding the principle behind the HAC payment provision to the physician office setting. Some commenters noted that several physicians may be responsible for the care of a patient, therefore attribution of the adverse event to a single physician may be difficult.

Response: We recognize that because health care is delivered by a team of professionals, several providers could potentially share responsibility for the occurrence of a healthcare-associated condition. We have extensive experience in testing various attribution methodologies in our cost of care measurement initiative. We refer readers to section III.C. of this final rule with comment period (section 131(c) of the MIPPA) for further discussion of attribution.

Comment: Some commenters expressed concern regarding implementation of the Medicare secondary payer policy to hold the provider in which a health-care associated condition occurred liable for the cost of subsequent care required to treat the condition.

Response: We appreciate the comments regarding MSP policy and payment for health-care associated conditions in downstream care settings. We look forward to further exploring these issues with stakeholders.

Comment: A few commenters recognized that the HAC payment provision targets a portion of an MS-DRG payment and were unsure how this concept could be transferred to the physician office setting. Further, several commenters mentioned bundled or global payment as a more rational way to pay for Medicare services, which could obviate the need for a healthcare-acquired condition payment provision.

Response: As commenters noted, the HAC payment provision prohibits payment for a portion of the MS-DRG when a HAC occurs in the inpatient setting. In that the HAC payment provision results in payment being adjusted to a lower level of payment, the basic payment concept could be made applicable to other Medicare payment settings. Implementation of such policies would likely depend on the specific coding and payment systems used for each payment system.

Comment: Several commenters expressed the need to adjust for patient-specific factors like severity of illness and patient compliance. A few commenters stated that unlike the inpatient setting, the physician office setting does not lend itself to close monitoring of patient compliance.

Response: We recognize that certain beneficiaries may pose a greater risk of contracting a healthcare-acquired condition. We also note that providers must carefully consider those risk factors to avoid preventable conditions. We refer readers to the FY 2009 Inpatient Prospective Payment System final rule (73 FR 48487 through 48488 (http://edocket.access.gpo.gov/2008/pdf/E8-17914.pdf)) where we discussed risk-adjustment as a potential enhancement to the IPPS HAC provision.

Comment: Many commenters believe that it could be more effective to combat healthcare-acquired conditions by adjusting payments based on a provider's rates of healthcare-associated conditions rather than to directly adjust the payment for an individual service.

Response: We agree that capturing rates of healthcare-associated conditions and using those rates for performance-based payment may be a more sophisticated and effective way to adjust payment. Rates of healthcare-associated conditions may be good candidates as possible quality measures for VBP programs like the PQRI as discussed in more detail in section II.O. of this final rule with comment period. Further, the ESRD pay-for-performance program and the forthcoming Physician VBP Plan Report to Congress may also address healthcare-associated conditions.

Comment: Commenters raised concern regarding the use of financial incentives to combat healthcare-associated conditions. Many commenters suggested that CMS should encourage compliance with evidence-based guidelines rather than use direct payment adjustments to address healthcare-associated conditions in the physician office setting.

Response: We agree that it is important for Medicare providers to provide care that is consistent with evidence-based guidelines. We intend to consider all of our statutory and regulatory authorities, including the implementation of quality measures and payment adjustments, to encourage provision of care that is consistent with evidence-based guidelines. We look forward to working with stakeholders to further identify and apply available methods to combat healthcare-acquired conditions.

Comment: Many commenters supported the alignment of incentives across all Medicare settings of care.

Response: We appreciate the public's support of our efforts to align incentives across all Medicare payment settings. We look forward to working with stakeholders to expand VBP initiatives in all Medicare payment settings. Further, we intend to host a public listening session toward the end of CY 2008 to discuss the expansion of the HAC payment provision, specifically targeting both the inpatient and hospital outpatient department (HOPD) settings of care.

I. Independent Diagnostic Testing Facility (IDTF) Issues

In the CY 2007 and 2008 PFS final rules with comment period, we established performance standards for suppliers enrolled in the Medicare program as an IDTF (71 FR 69695 and 72 FR 66285). These standards were established to improve the quality of care for diagnostic testing furnished to Medicare beneficiaries by a Medicare-enrolled IDTF and to improve our ability to verify that these suppliers meet minimum enrollment criteria to enroll or maintain enrollment in the Medicare program. These performance standards were established at § 410.33. In the proposed rule, we proposed to expand on the quality and program safeguard activities that we implemented previously.

1. Improving Quality of Diagnostic Testing Services Furnished by Physician and Nonphysician Practitioner Organizations

During the CY 2008 PFS proposed rule comment period, we received comments requesting that we require that the IDTF performance standards adopted in § 410.33, including prohibitions regarding the sharing of space and leasing/sharing arrangements, apply to physicians and nonphysician practitioners (NPPs) who are furnishing diagnostic testing services for Medicare beneficiaries, and who have enrolled in the Medicare program as a clinic, group practice, or physician's office. The commenters stated that standards for imaging services were not applied consistently for all imaging centers and that two distinct compliance and regulatory standards would emerge depending on how the similarly situated imaging centers were enrolled. In addition, one commenter stated that we should not prohibit space sharing when done with an adjoining physician practice or radiology group that is an owner of an IDTF. Because these comments were outside of the scope of the provisions in the CY 2008 PFS proposed rule, we were not able to take action regarding these comments in the CY 2008 PFS final rule with comment period.

In the CY 2009 PFS proposed rule, we stated that we are concerned that—

  • Certain physician entities, including physician group practices, and clinics, can enroll as a group practice or clinic and furnish diagnostic testing services without the benefit of qualified nonphysician personnel, as defined in § 410.33(c), to conduct diagnostic testing.
  • Some physician entities expect to furnish diagnostic testing services for their own patients and the general public and are making the decision to enroll as a group or clinic thereby circumventing the performance standards found in the IDTF requirements in § 410.33.
  • Some physician organizations are furnishing diagnostic tests using mobile equipment provided by an entity that furnishes mobile diagnostic services.

Therefore, we proposed certain exceptions to the established performance standards found in § 410.33(g) because we believe that physician organizations already meet or exceed some of these standards. For example, their liability insurance coverage usually far exceeds the $300,000 per incident threshold, and there are a host of ways in which patients may make clinical complaints concerning their physicians. In addition, we believe that compliance with some of the performance standards would be costly and burdensome and possibly limit beneficiary access, particularly in rural or medically underserved areas. For these reasons, we proposed that physician entities do not need to comply with the following standards:

  • Maintaining additional comprehensive liability insurance for each practice location as required under § 410.33(g)(6).
  • Maintaining a formal clinical complaint process as required under § 410.33(g)(8).
  • Posting IDTF standards as required under § 410.33(g)(9).
  • Maintaining a visible sign posting business hours as required under § 410.33(g)(14)(ii).
  • Separately enrolling each practice location as required under § 410.33(g)(15)(i).

Accordingly, we proposed to add § 410.33(j) which states that, “A physician or NPP organization (as defined in § 424.502) furnishing diagnostic testing services, except diagnostic mammography services: (1) Must enroll as an independent diagnostic testing facility for each practice location furnishing these services; and (2) is subject to the provisions found in § 410.33, except for § 410.33(g)(6), § 410.33(g)(8), § 410.33(g)(9), § 410.33(g)(14)(ii), and § 410.33(g)(15)(i).” As discussed in section II.J. of this preamble, we proposed to define a “physician or nonphysician practitioner organization” as any physician or NPP entity that enrolls in the Medicare program as a sole proprietorship or organizational entity such as a clinic or group practice.

We maintained that this enrollment requirement is necessary to ensure that beneficiaries are receiving the quality of care that can only be administered by appropriately licensed or credentialed nonphysician personnel as described in § 410.33(c). Moreover, we proposed that physician or NPP organizations that do not enroll as an IDTF and meet the provisions at § 410.33 may be subject to claims denial for diagnostic testing services or a revocation of their billing privileges.

We solicited comments on whether we should consider establishing additional exceptions to the established performance standards in § 410.33(g) for physician and NPP organizations furnishing diagnostic testing services. We stated in the proposed rule that while we believe that most physician and NPP organizations utilize nonphysician personnel described in § 410.33(c) to furnish diagnostic testing services, we also solicited comments on whether physician or NPPs conduct diagnostic tests without benefit of qualified nonphysician personnel and under what circumstances the testing occurs.

While we proposed to apply the IDTF requirement to all diagnostic testing services furnished in physicians' offices, we stated that we were considering whether to limit this enrollment requirement to less than the full range of diagnostic testing services, such as to procedures that generally involve more costly testing and equipment. We solicited comments about whether the policy should apply only to imaging services or whether it should also include other diagnostic testing services such as electrocardiograms or other diagnostic testing services frequently furnished by primary care physicians. Within the scope of imaging services, we solicited comments about whether the policy should be limited to advanced diagnostic testing procedures which could include diagnostic magnetic resonance imaging, computed tomography, and nuclear medicine (including positron emission tomography), and other such diagnostic testing procedures described in section 1848(b)(4)(B) of the Act (excluding X-ray, ultrasound, and fluoroscopy). We also solicited comments on what would be appropriate criteria to limit this provision.

Finally, since these changes, if adopted, would take time to implement for suppliers that have enrolled in the Medicare program, we proposed an effective date of September 30, 2009, rather than the effective date of the final rule with comment period. For newly enrolling suppliers, we proposed the effective date of this rule which is January 1, 2009.

With the enactment of section 135 of the MIPPA legislation and after reviewing public comments, we are deferring the implementation of these proposals while we continue to review the public comments received on this provision and we will consider finalizing this provision in a future rulemaking effort if we deem it necessary. Section 135 of the MIPPA requires that the Secretary establish an accreditation process for those entities furnishing advanced diagnostic testing procedures which include diagnostic magnetic resonance imaging, computed tomography, and nuclear medicine (including positron emission tomography), and other such diagnostic testing procedures described in section 1848(b)(4)(B) of the Act (excluding X-ray, ultrasound, and fluoroscopy) by January 1, 2012.

Accordingly, we are not adopting our proposal to require physicians and NPPs to meet certain quality and performance standards when providing diagnostic testing services, except mammography services, within their medical practice setting and have removed the paperwork burden and regulatory impact analysis associated with this provision in this final rule with comment period.

2. Mobile Entity Billing Requirements

To ensure that entities furnishing mobile services are providing quality services and are billing for the diagnostic testing services they furnish to Medicare beneficiaries, we proposed a new performance standard for mobile entities at § 410.33(g)(16), which would require that entities furnishing mobile diagnostic services enroll in Medicare and bill directly for the mobile diagnostic services that they furnish, regardless of where the services are furnished. We believe that entities furnishing mobile diagnostic services to Medicare beneficiaries must be enrolled in the Medicare program, comply with the IDTF performance standards, and directly bill Medicare for the services they furnish.

While we understand that a mobile entity can furnish diagnostic testing services in various types of locations, we stated that we believe that it is essential that mobile entities use qualified physicians or nonphysician personnel to furnish diagnostic testing procedures and that the enrolled mobile supplier bill for the services furnished. We maintain that it is essential to our program integrity and quality improvement efforts that an entity furnishing mobile diagnostic testing services complies with the performance standards for IDTFs and bill the Medicare program directly for the services furnished to Medicare beneficiaries.

Since we believe that most mobile entities are already billing for the services they furnish, whether the service was provided in a fixed-based location or in a mobile facility, we proposed that this provision would be effective with the effective date of this final rule with comment period.

Comment: Several commenters supported our proposal to require mobile diagnostic service providers to enroll in Medicare as IDTFs and to be required to bill Medicare directly for the TC services they furnish.

Another commenter stated that this provision creates a single, universal quality standard for outpatient imaging that eliminates any possible inequity in standards that could exist between office-based imaging and IDTF imaging.

Several other commenters support the concept that all providers and suppliers serving Medicare beneficiaries must be enrolled to be eligible to receive payments from Medicare, directly or indirectly.

Response: We agree with these comments and thank the commenters for their support.

Comment: One commenter stated that this provision would eliminate two distinct and unfair competitive advantages that mobile cardiac nuclear imaging providers enjoy under existing regulations. One advantage is the ability to operate under a “mobile” Nuclear Regulatory Commission Radioactive Materials license, which does not require the same regulatory filings as fixed-site cardiac nuclear medicine laboratories, and in the case of some state Radioactive Materials licenses, it does not subject the mobile provider to the same pre-opening inspections that the fixed sites are subject to. Second, some mobile providers are able to secure accreditation from certain accrediting agencies that furnish a global, or “hub”, accreditation certification.

Response: We thank the commenter for its support.

Comment: One commenter stated that our proposal to require mobile providers to enroll in Medicare as IDTFs, be subject to all IDTF performance standards, and to bill Medicare directly, not only would it create a single, universal standard for quality among all imaging providers, but would also level the playing field in the competitive market for management services for companies which provide high quality fixed site programs for Medicare-enrolled physician practices and their Medicare enrollees.

Response: We appreciate the comments and thank the commenter for their support.

Comment: One commenter supports the proposal requiring these entities to enroll in Medicare and as such, for them to be required to abide by applicable Medicare policies. The commenter continued to state that they do not oppose the direct billing requirement but that if the proposal is finalized, CMS needs to provide a great amount of detail in how the provision will work and its impact on hospital billing practices.

Response: We have revised the provision at § 410.33(g)(17) for those IDTFs that are billing under arrangement with hospitals as described in section 1862(a)(14)of the Act and § 482.12(e).

Comment: Several commenters urged CMS to clarify that its proposal to require mobile testing entities to bill directly for services they furnish would not apply when such services are furnished “under arrangement to hospital inpatients and outpatients.” In addition, these commenters recommended that mobile diagnostic testing facilities that furnish these services to hospitals be excluded from the proposed IDTF performance standards.

Response: Although we are requiring all mobile entities that furnish diagnostic testing services to enroll in the Medicare program, we are not requiring mobile testing entities to bill directly for the services they furnish when such services are furnished under arrangement with hospitals as described in sections 1861(w)(1) and 1862(a)(14)of the Act and § 482.12(e).

Comment: One commenter urges CMS to exclude from the definition of entities furnishing mobile diagnostic testing services those entities that do the following: lease equipment and provide technicians who conduct diagnostic tests in the office of the billing physician or physician organization; and furnish testing under the supervision of a physician who shares an office with the billing physician or physician organization.

Response: We disagree with the commenter. We maintain that a mobile entity providing diagnostic testing services must enroll for any diagnostic imaging services that it furnishes to a Medicare beneficiary, regardless of whether the service is furnished in a mobile or fixed base location so that CMS knows which entity is providing these diagnostic testing services.

Comment: One commenter stated that the proposed IDTF performance standard is contrary to the Medicare “under arrangement” provisions and if the IDTF performance standard were extended into the hospital setting, it would prohibit hospitals from providing diagnostic imaging services under arrangement and present significant administrative and operational challenges for hospitals and their patients.

Response: We agree and have revised the provision to account for mobile IDTFs billing under arrangement with hospitals as described in sections 1861(w)(1) and 1862(a)(14)of the Act and § 482.12(e).

Comment: Several commenters requested that we not require mobile units that furnish diagnostic testing services to enroll in Medicare or be required to bill for all of the services they furnish.

Response: We disagree with the commenters. In order to maintain program integrity and enable CMS to monitor services furnished by mobile units providing diagnostic testing services, we maintain that a mobile entity providing diagnostic testing services must enroll for diagnostic imaging services that it furnishes to a Medicare beneficiary, regardless of whether the service is furnished in a mobile or fixed base location. We are requiring these mobile IDTFs to bill for the services that they furnish unless they are billing under arrangement with hospitals.

Comment: One commenter stated the contractual arrangement between mobile diagnostic imaging services companies and hospitals are commonplace throughout the United States health care industry and these long-standing arrangements, which can be short-term or long-term depending upon hospital demand, service a variety of important needs within the hospital and provider community, including a valuable means to address capacity, volume and equipment cost issue and limitations imposed by State Certificate of Need (CON) requirements.

Response: We understand the commenters' concerns and we are requiring these mobile IDTFs to bill for the services that they furnish unless they are billing under arrangement with hospitals.

Comment: One commenter suggested that we should provide clear and concise guidance on billing protocols that permit hospitals to continue billing for mobile diagnostic testing services furnished as inpatient and outpatient hospital services and allow informational billing (that is, no payment impact) by the mobile entities through the use of a billing modifier.

Response: We believe these comments are outside the scope of the rule.

Comment: One commenter does not support a restriction of an enrolled provider/supplier that would preclude them from arrangements that are allowed under the purchased diagnostic test or purchased interpretation rules due to their method of connecting a patient with testing equipment.

Response: We understand the commenters' concerns and we are requiring these mobile IDTFs to bill for the services they furnish unless they are billing under arrangement with hospitals.

Comment: One commenter states that they believe that the provision of diagnostic and other therapeutic services by a contracted provider to registered inpatients and outpatients is fully consistent with longstanding Medicare provisions expressly permitting hospitals to furnish services directly or “under arrangements,” and that the mobile entities that may furnish these services under arrangement would not bill directly for their services but would be under the control of another entity.

Response: We agree with the commenter and although we are requiring all mobile entities that provide diagnostic testing services to enroll in the Medicare program, we are not requiring mobile testing entities to bill directly for the services they furnish when such services are furnished under arrangement to hospitals.

After reviewing public comments, we are finalizing the provision at § 410.33(g)(16), which would require that entities furnishing mobile diagnostic services enroll in Medicare program as an IDTF regardless of where the services are furnished. By enrolling in the Medicare program, CMS or our contractor can determine if the mobile IDTF meets all of the performance standards found in § 410.33(g) and that its owners are not otherwise excluded or barred from participation in the Medicare program. We believe that requiring mobile IDTFs to enroll in order to furnish services to Medicare beneficiaries is consistent with the existing enrollment regulation found at § 424.505 which states that to receive payment for covered Medicare items or services from either Medicare or a Medicare beneficiary, a provider or supplier must be enrolled in the Medicare program. Moreover, by requiring mobile IDTFs to enroll in order to furnish services to Medicare beneficiaries, the Medicare contractor will be able to certify that mobile IDTFs are in compliance with the requirements for enrolling and maintaining enrollment set forth at § 424.520. Finally, the owner of a mobile IDTF is responsible for ensuring that the mobile IDTF meets all applicable regulatory requirements to maintain their enrollment in the Medicare program.

In addition, we are finalizing the provision at § 410.33(g)(17) requiring that mobile diagnostic services bill for the mobile diagnostic services that they furnish, unless the mobile diagnostic service is part of a hospital service and furnished under arrangement with that hospital as described in section 1862(a)(14)of the Act and § 482.12(e). To ensure that IDTFs are actually furnishing services under arrangement with a hospital, we will require that mobile IDTFs provide documentation of the arrangement with their initial or revalidation enrollment application, or change in enrollment application.

3. Revocation of Enrollment and Billing Privileges of IDTFs in the Medicare Program

Historically, we have allowed IDTFs whose Medicare billing numbers have been revoked to continue billing for services furnished prior to revocation for up to 27 months after the effective date of the revocation. Since we believe that permitting this extensive billing period poses a significant risk to the Medicare program, we proposed to limit the claims submission timeframe after revocation. In § 424.535(g) (redesignated as § 424.535(g)), we proposed that a revoked IDTF must submit all outstanding claims for not previously submitted items and services furnished within 30 calendar days of the revocation effective date. We stated that this change is necessary to limit the Medicare program's exposure to future vulnerabilities from physician and NPP organizations and individual practitioners that have had their billing privileges revoked. Accordingly, the proposed change would allow a Medicare contractor to conduct focused medical review on the claims submitted during the claims filing period to ensure that each claim is supported by medical documentation that the contractor can verify. We maintain that focused medical review of these claims will ensure that Medicare only pays for services furnished by a physician or NPP organization or individual practitioner and that these entities and individuals receive payment in a timely manner. In addition, we also proposed to add a new provision at § 424.44(a)(3) to account for this provision related to the requirements for the timely filing of claims. The timely filing requirements in § 424.44(a)(1) and (a)(2) will no longer apply to physician and NPP organizations, physicians, NPPs and IDTFs whose billing privileges have been revoked by CMS.

Comment: Several commenters recommended that we withdraw all of our proposed changes to the requirements for physician enrollment in Medicare, including changes to the effective date of billing privileges, eligibility to participate in the program, enrollment processing, reporting requirements, and revocation of billing privileges. Many of the commenters were concerned that it would be burdensome to add new requirements where they must submit all claims within 60 days of the effective date of revocation because of the time it takes to process claims and that it would be easier to leave the retrospective billing rules as they are.

Response: We are not adopting this recommendation. Instead, we will respond to the specific comments received in response to our specific proposals.

Comment: Several commenters requested that we make no revisions to current physician and NPP enrollment rules at this time.

Response: We are not adopting this recommendation. Instead, we will respond to the specific comments received in response to our specific proposals.

After reviewing public comments, we are finalizing the provisions found at § 424.535(h) (formerly § 424.535(g)) that require a revoked physician organization, a physician, a NPP, or an IDTF to submit all outstanding claims not previously submitted within 60 calendar days of the revocation effective date. Since IDTFs are already afforded approximately 30 days notification before the effective date of revocation (except for revocations identified in § 405.874(b)(2) and § 424.535(f) of this final rule), we believe that almost 90 days is more than sufficient time to file any outstanding claims.

In addition, we are finalizing the provisions found at § 424.44(a) related to the requirements for the timely filing of claims. The timely filing requirements in § 424.44(a)(1) and (a)(2) will no longer apply to physician and NPP organizations, physicians, NPPs or IDTFs. We revised this provision so that it is consistent with § 424.521 which limits the ability of these suppliers to bill Medicare retrospectively.

J. Physician and Nonphysician Practitioner (NPP) Enrollment Issues

1. Effective Date of Medicare Billing Privileges

In accordance with § 424.510, physician and NPP organizations (that is, groups, clinics, and sole owners) and individual practitioners including physicians and NPPs, operating as sole proprietorships or reassigning their benefits to a physician and nonphysician organization may submit claims as specified in § 424.44 after they are enrolled in the Medicare program. This provision permits newly enrolled physician and NPP organizations and individual practitioners, as well as existing physicians and nonphysician organizations and individual practitioners to submit claims for services that were furnished prior to the date of filing or the date the applicant received billing privileges to participate in the Medicare program.

For the purposes of this final rule with comment period, we believe that an NPP includes, but is not limited to, the following individuals: anesthesiology assistants, audiologists, certified nurse midwives, certified registered nurse anesthetists (CRNA), clinical social workers, nurse practitioners (NPs), physician assistants (PAs), clinical psychologists, psychologists billing independently, speech language pathologists, and registered dieticians or nutrition professionals.

Once enrolled, physician and NPP organizations and individual physicians and NPPs, depending on their effective date of enrollment, may retroactively bill the Medicare program for services that were furnished up to 27 months prior to being enrolled to participate in the Medicare program. For example, if a supplier is enrolled in the Medicare program in December 2008 with an approval date back to October 2006, that supplier could retrospectively bill for services furnished to Medicare beneficiaries as early as October 1, 2006.

Currently, physician and NPP organizations and individual practitioners, including physicians and NPPs, are allowed to bill Medicare prior to their enrollment date. Therefore, it is possible that the physician and NPP organizations and individual practitioners who meet our program requirements on the date of enrollment may not have met those same requirements prior to the date of enrollment, even though that supplier could bill Medicare and receive payments for services furnished up to 27 months prior to their enrolling in the Medicare program. In the proposed rule, we stated our concern that some physician and NPP organizations and individual practitioners may bill Medicare for services when they are not meeting our other program requirements, including those related to providing beneficiary protections, such as Advance Beneficiary Notices.

We solicited public comment on two approaches for establishing an effective date for Medicare billing privileges for physician and NPP organizations and for individual practitioners.

The first approach would establish the initial enrollment date for physician and NPP organizations and for individual practitioners, including physician and NPPs, as the date of approval by a Medicare contractor. This approach would prohibit physician and NPP organizations and individual practitioners from billing for services furnished to a Medicare beneficiary before they are approved and enrolled by a designated Medicare contractor to participate in the Medicare program and Medicare billing privileges are conveyed to their National Provider Identifier (NPI). Physicians and NPPs are eligible for NPIs and may apply for their NPIs at any time. To enroll in Medicare, a physician or NPP must have an NPI. If an enrollment application is received that is absent the NPI, it will be rejected. The NPI regulation, at 45 CFR 162.410(a)(1), requires a health care provider who is a covered entity under HIPAA to obtain an NPI. At 45 CFR 162.410(b), the NPI regulation states that a health care provider who is not a covered entity under HIPAA may obtain an NPI. The definition of “health care provider” is found at 45 CFR 160.103. The preamble of the NPI final rule (69 FR 3450) states that HIPAA does not prohibit a health plan from requiring its enrolled health care providers to obtain NPIs if those health care providers are eligible for NPIs (that is, that they meet the definition of “health care provider”). With exceptions for the two entities that are eligible to enroll in Medicare but are not eligible for NPIs, Medicare requires all providers, including physicians and NPPs, who apply for enrollment to have NPIs, and to report them on their Medicare enrollment applications. When applying for NPIs, providers indicate they are one of the following: An Entity type 1 (an individual person, such as a physician or an NPP, to include a sole proprietor/sole proprietorship); or an Entity type 2 (an organization, which is any legal entity other than an individual).

The date of approval is the date that a designated Medicare contractor determines that the physician or NPP organization or individual practitioner meets all Federal and State requirements for their supplier type

Given this first approach, in proposed § 424.520, we stated that we may implement regulations text that reads similar to: “The effective date of billing privileges for physician and NPP organizations and individual practitioners, including physicians and NPPs, is the date a Medicare contractor conveys billing privileges to a NPI.”

We also stated in the CY 2009 PFS proposed rule that we believe that this approach—

  • Prohibits physicians, NPP organizations, and individual practitioners from receiving payments before a Medicare contractor conveys Medicare billing privileges to an NPI (69 FR 3434);
  • Is consistent with our requirements in § 489.13 for those providers and suppliers that require a State survey prior to being enrolled and the requirements for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) suppliers in § 424.57(b)(2);
  • Is consistent with our requirements for providers identified in § 400.202 and surveyed suppliers that are allowed to bill for services only after they are approved to participate in the Medicare program. Surveyed suppliers are those suppliers who have been certified by either CMS or a State certification agency and are in compliance with Medicare requirements. Surveyed suppliers may include ASCs or portable x-ray suppliers; and
  • Ensures that we are able to verify a supplier's qualifications, including meeting any performance standards before payment for services can occur.

The second approach would establish the initial enrollment date for physician and NPP organizations and individual practitioners, including physician and NPPs, as the later of: (1) The date of filing of a Medicare enrollment application that was subsequently approved by a fee-for-service (FFS) contractor; or (2) the date an enrolled supplier first started furnishing services at a new practice location. The date of filing the enrollment application is the date that the Medicare FFS contractor receives a signed Medicare enrollment application that the Medicare FFS contractor is able to process to approval. This option would allow a supplier that is already seeing non-Medicare patients to start billing for Medicare patients beginning on the day they submit an enrollment application that can be fully processed. In contrast to the first option, newly enrolling physicians and NPP organizations, and individual practitioners or physician and NPP organizations and individual practitioners that are establishing or changing a practice location would be allowed to bill the Medicare program for services furnished to Medicare beneficiaries on or after the date of filing if a Medicare contractor approves Medicare billing privileges and conveys billing privileges to an NPI. It is also important to note that if a Medicare contractor rejects or denies an enrollment application, then the physician or NPP organization or individual practitioner is at risk of not receiving payment for any services furnished after the date of filing.

Given this second approach, in proposed § 424.520, we stated that we may implement regulations text that reads similar to: “The effective date of billing privileges for physician and NPP organizations and for individual practitioners, physicians and NPPs, is the later of—(1) The filing date of the Medicare enrollment application that was subsequently approved by a FFS contractor; or (2) The date that the physician or NPP organization or individual practitioner first furnished services at a new practice location.”

We also stated in the CY 2009 PFS proposed rule that we believe that this approach—

  • Prohibits physician and NPP organizations and individual practitioners, including physician and NPPs, from receiving payments before a Medicare contractor conveys Medicare billing privileges to an NPI (69 FR 3434);
  • Is consistent with our requirements found at § 410.33(i) that limit the retrospective billing for IDTFs and ensures that Medicare billing privileges are conveyed to physician and NPP organizations and to individual physicians and NPPs in a similar manner similar to IDTFs; and
  • Addresses the public's concern regarding contractor processing timeliness while appropriately ensuring that Medicare payments are made to physician and NPP organizations and to individual physicians and NPPs who have enrolled in a timely manner.

We maintain that it is not possible to verify that a supplier has met all of Medicare's enrollment requirements prior to submitting an enrollment application. Therefore, the Medicare program should not be billed for services before the later of the two dates that a physician or NPP organization, physician, or NPP has submitted an enrollment application that can be fully processed or when the enrolled supplier is open for business.

To assist physician and NPP organizations and individual practitioners in enrolling and updating their existing enrollment record, we established an Internet-based enrollment process known as the Internet-based Provider Enrollment, Chain and Ownership System (PECOS) that is more streamlined and efficient than the traditional paper-application enrollment method.

By using Internet-based PECOS, we expect that physician and NPP organizations and individual practitioners will be able to reduce the time necessary to enroll in the Medicare program or to make a change in their Medicare enrollment record by reducing common errors in the application submission process. We expect that Medicare contractors will fully process most complete Internet-based PECOS enrollment applications within 30 to 45 calendar days compared to 60 to 90 calendar days in the current paper-based enrollment process. Thus, if physician and NPP organizations and individual practitioners enroll in the Medicare program or make a change in their existing Medicare enrollment using Internet-based PECOS and submit required supporting documentation, including a signed certification statement, licensing and education documentation, and, if necessary, the electronic funds transfer authorization agreement (CMS-588) 45 days before their effective date, a Medicare contractor should be able to process the enrollment application without a delay in payment.

The date of filing for Internet-based PECOS will be the date the Medicare FFS contractor receives all of the following: (1) A signed certification statement; (2) an electronic version of the enrollment application; and (3) a signature page that the Medicare FFS contractor processes to approval.

In § 424.502, we also proposed to define a physician and NPP organization to mean any physician or NPP entity that enrolls in the Medicare program as a sole proprietorship or organizational entity such as a clinic or a group practice. In addition to establishing an organizational structure as a sole proprietorship, physicians and NPPs are able to establish various organizational relationships including corporations, professional associations, partnerships, limited liability corporations, and subchapter S corporations. We believe that the proposed definition would include sole proprietorships that receive a type 1 NPI and any organizational entity that is required to obtain a type 2 NPI.

Comment: Several commenters urged CMS to adopt the proposal to limit retrospective billing to the later of the date of filing or date the practice location was established.

Response: We agree with these commenters and have finalized this approach in this final rule with comment period.

Comment: One commenter recommended that we should not implement the revised effective date for billing privileges until January 1, 2010.

Response: We disagree with the commenter because we believe that it is essential that Medicare only pay for services to eligible practitioners that are qualified to bill for services.

Comment: Several commenters recommended that we refrain from implementing any proposed changes to the effective date of Medicare billing privileges until the Provider Enrollment, Chain and Ownership System (PECOS) system is fully functional and a thorough discussion is held between all affected parties and/or all current National Provider Identifier (NPI) applications are processed.

Response: While we understand this comment, we disagree with these commenters. By establishing an effective date of billing for physicians, NPPs, and physician and NPP organizations, we believe that Medicare will only pay for services furnished by licensed practitioners that meet all of the Medicare program requirements. In addition, we implemented the NPI on May 23, 2008. Accordingly, we do not believe that there is a nexus between the implementation of the effective date for physicians, NPPs, and physician and NPP organizations and the implementation of the Internet-based PECOS or the implementation of the NPI.

Comment: One commenter suggested that payment not commence until the provider's application has been processed and approved and that if the approval date is after the date the provider first started to render services, then payments will be paid retroactive to the rendering date. The commenter also requested that CMS implement an electronic enrollment processing system.

Response: We are finalizing a provision that allows physicians, NPPs (including CRNAs), and physician or NPP organizations to retrospectively bill for services up to 30 days prior to their effective date of billing when the physician or NPP organization met all program requirements, including State licensure requirements, where services were provided at the enrolled practice location prior to the date of filing and circumstances precluded enrollment in advance of providing services to Medicare beneficiaries in § 424.521(a)(1). Further, we are implementing Internet-based PECOS for physicians and NPPs by the end of CY 2008 to facilitate the electronic enrollment process.

Comment: One commenter suggested that the enrollment payment policy for CRNAs remain as it is.

Response: We are finalizing a provision that allows physicians, NPPs (including CRNAs), and physician or NPP organizations to retrospectively bill for services up to 30 days prior to their effective date of billing when the physician or nonphysician organization has met all program requirements, including State licensure requirements, where services were provided at the enrolled practice location prior to the date of filing and circumstances, such as, when a physician is called to work in a hospital emergency department which precluded enrollment in advance of providing services to Medicare beneficiaries in § 424.521(a)(1).

Comment: One commenter would like to recommend that CMS not make the new Web-based enrollment system too cumbersome. Their concerns are based on current member experiences with the IACS for review of PQRI claims. The requirements for the practice to designate a security officer, submit old IRS documents, etc., are extremely time-consuming, burdensome and serve as disincentives to physician participation.

Response: This comment is outside the scope of the proposed rule and cannot be addressed within this final rule.

Comment: One commenter asked that if we adopt either of these enrollment strategies, we should consider an exemption for hospital-based emergency physicians and NPP organizations to allow a period of retroactive billing and payment once an enrollment application is approved by the contractor.

Response: We are finalizing a provision that allows physicians, NPPs, and physician or NPP organizations to retrospectively bill for services up to a 30 days prior to their effective date of billing when the physician or NPP organization met all program requirements, including State licensure requirements, where services were furnished at the enrolled practice location prior to the date of filing and circumstances precluded enrollment in advance of providing services to Medicare beneficiaries in § 424.521(a)(1).

Comment: One commenter stated that they support our efforts to ensure participating providers and suppliers of services are complying with Medicare program requirements in a matter consistent with policy and are not attempting to “game” the system. However, should we move forward with this proposal, the commenter advises the drafting of policies to identify unusual activities beyond the control of the provider or supplier, such as hurricanes and other natural disasters, that necessitate a provider or supplier of services obtaining additional Medicare billing privileges in order to provide services.

Response: We are finalizing a provision that allows physicians, NPPs, physician or NPP organizations to retrospectively bill for services up to a 90 days prior to their effective date of billing when the physician or NPP organization met all program requirements, including State licensure requirements, services were furnished at the enrolled practice location prior to the date of filing and a Presidentially-declared disaster under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. §§ 5121-5206 (Stafford Act) precluded enrollment in advance of providing services to Medicare beneficiaries in § 424.521(a)(2).

Comment: A large number of commenters do not support either approach and go further to state that both proposals will negatively impact the ability of hospital emergency departments and their physicians to meet their statutory obligations under the Emergency Medical Treatment and Active Labor Act (EMTALA). Many of these commenters stated that in these emergency department situations, physicians are hired in very short timeframes, sometimes just days before they begin working in a new location that they cannot submit an enrollment application in such a short timeframe. They also continued to state that if we adopted the enrollment provisions as proposed, these emergency department enrollment situations would cause the physicians to forgo payment because they would not be able to submit an enrollment application before they begin furnishing services. Other commenters were opposed to both proposed approaches to limit retrospective billing after enrolling in the Medicare program and asked that we withdraw any proposed changes to the enrollment process.

Response: We disagree with the commenters. We believe that we have adopted an approach that balances the need to strengthen the Medicare enrollment process, protect the Medicare Trust Funds, and ensure that individual practitioners and physician and NPP organizations receive payment for services furnished to Medicare beneficiaries. The revised provision allows up to 30 days after furnishing services to submit an enrollment application (and up to 90 days when a Presidentially-declared disaster under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5206 (Stafford Act)) so the physician, NPP or physician or NPP organization has sufficient time to submit their enrollment application.

Comment: One commenter stated that they believe that it is unreasonable to expect physicians to furnish care to their patients without the ability to be paid for their services until they are officially enrolled in the Medicare program.

Response: While we agree that physicians should be reimbursed for the services furnished to Medicare beneficiaries, we also believe that physicians, NPPs and physician and NPP organizations are responsible for enrolling or making a change in their enrollment in a timely manner. In most cases, we believe that physicians and NPP practitioners can submit an enrollment application prior to providing Medicare services at a new practice location.

Comment: One commenter stated that in emergency room situations these enrollment scenarios will not work and gives the example using the second approach of when an emergency department is in desperate need of a provider. The department is able to obtain a physician almost immediately who is already employed within the organization and is also an approved provider in the Medicare program at their current practice location. Simply because the events in this example happened so quickly, the physician's CMS-855R was submitted to the Medicare contractor 1 week after he began providing services in the emergency department. If the second approach were in effect, 1 week of services the physician furnished to Medicare beneficiaries in the emergency department would be denied as his enrollment at this location was not in effect.

Response: We understand this commenter's concerns and are finalizing a provision that allows physicians, NPPs, physician or NPP organizations to retrospectively bill for services up to 30 days prior to their effective date of billing when the physician or NPP organization met all program requirements, including State licensure requirements, where services were furnished at the enrolled practice location prior to the date of filing and circumstances precluded enrollment in advance of providing services to Medicare beneficiaries in § 424.521(a)(1).

Comment: One commenter stated that should we adopt the second approach, they requested that a standard be established that defines what constitutes the receipt of a substantially complete application form for which the effective date under approach two may be established. This approach would address the situations where denial errors and clarifications can be corrected without delaying the effective date.

Response: As a general rule, applicants are given at least 30 days to cure any deficiencies/technicalities before a contractor rejects an enrollment application (see § 424.525). During the application review process, contractors notify applicants about missing information and documentation and afford the applicant at least 30 days to correct deficiencies. With the implementation of Internet-based PECOS, we expect that physicians and NPPs using the Web process will significantly decrease the number of incomplete applications and the need for contractors to request additional information. With the implementation of this final rule, we would require contactor to deny, rather than reject paper or Web applications when a physician, NPP, or physician or NPP organization fails to cure any deficiencies/technicalities.

Comment: One commenter urged CMS to adopt a standard establishing that the filing date for an enrollment application is when a signed application is first received by a contractor and not when the application is deemed complete and ready for approval by that contractor. Otherwise, delays associated with contractor processing could become a larger concern.

Response: We agree with this commenter and have adopted the “date of filing” as the date that the Medicare contractor receives a signed provider enrollment application that the Medicare contractor is able to process to approval.

Comment: Several commenters strongly opposed the approach where billing privileges would be conveyed based on the date of approval by the Medicare contractor and maintain that tying billing privileges to a contractor's approval of a practitioner's Medicare enrollment application could create unintended access problems for some patients. Other commenters added that in certain situations, the physicians would furnish services and would not be able to be compensated which they do believe is an unintended consequence by CMS.

Response: We agree with the commenters and have not adopted the proposed approach as it was proposed but revised it so that it would establish the effective date of billing for physicians, NPPs, and physician and NNP organizations as the later of date of filing of a Medicare enrollment application that was subsequently approved by a Medicare contractor or the date they first began furnishing services at a new practice location.

Comment: The suggestion to use the Medicare contractor's date of approval as the initial enrollment date would mean that an employer can expect to generate no revenue from a new hire for a minimum of 3 to 6 months, which is unacceptable.

Response: As stated above, we have not adopted the proposed approach but revised it so that it would establish the effective date of billing for physicians, NPPs, and physician and NNP organizations as the later of date of filing of a Medicare enrollment application that was subsequently approved by a Medicare contractor or the date they first began furnishing services at a new practice location.

Comment: One commenter supports the establishment of an effective billing date for physicians, NPPs, and physician and NPP organizations as the later of: (1) The date of filing of a Medicare enrollment application that was subsequently approved by a Medicare contractor; or (2) the date an enrolled physician or NPP first started furnishing services at a new practice location. The commenter further urges the agency to tie enrollment and when billing privileges begins to offering services at a new practice location.

Response: We appreciate this comment and have adopted a modified approach where that date of filing is the effective date of billing for physicians, NPPs, and physician and NPP organizations.

Comment: One commenter requests that current procedures change and allow enrollment applications to be submitted 60 days prior to a change.

Response: We disagree with the commenter and maintain that permitting billing 30 days before the filing of an enrollment application will provide a sufficient amount of time in most cases.

Comment: One commenter stated that the establishment of an effective billing date for physicians, NPPs, and physician and NPP organizations as: (1) The date of filing of a Medicare enrollment application that was subsequently approved by a Medicare contractor; or (2) the date an enrolled physician or NPP first started furnishing services at a new practice location will improve patient access to Medicare providers, since patients could be scheduled for appointments based on the date that a Medicare provider submits an enrollment application to the Medicare Administrative Contractor (MAC). This also allows new Medicare providers more flexibility when initiating services under Medicare.

Response: We thank the commenter for their support of this provision.

Comment: Several commenters recommend that providers should be able to submit enrollment applications with a requested effective date.

Response: We believe limiting retrospective payments will ensure that physicians, NPPs, and physician and NPP organizations will ensure that only qualified practitioners are able to bill for services furnished to Medicare beneficiaries. Moreover, we believe that establishing an effective date of Medicare billing privileges and establishing limited retrospective payments will encourage physicians, NPPs, and physician and NPP organizations to enroll and maintain their enrollment in with the Medicare program. However, the effective date of billing privileges is 30 days prior to the later of the date an enrollment application is filed or the date services were furnished at a new practice location.

Comment: Several commenters urged CMS to retain its current retrospective billing policy for physicians and NPPs. However, these commenters stated that if CMS revised its retrospective billing policy for physicians, NPPs, and NPP organizations that they preferred option 2 (establishment of an effective billing date for physicians, NPPs, and physician and NPPs as the later of: (1) The date of filing of a Medicare enrollment application that was subsequently approved by a Medicare contractor; or (2) the date an enrolled physician or NPP first started furnishing services at a new practice location), which limited retrospective billing to the later of the date of filing or the date the practice location was established.

Response: We agree with these commenters and have adopted this approach in this final rule.

Comment: One commenter recommends allowing those physicians who are about to complete their fellowship to submit an application to Medicare for a generic provider number which at a later date can be linked to an eventual employer.

Response: Since we do not establish a provisional enrollment status for physicians or other suppliers, but rather convey billing privileges to a NPI, we disagree with this commenter.

Comment: One commenter suggests that to improve the Medicare enrollment process, the processing of enrollment applications should take 30 to 45 days versus a 90 to 120 days activity. Medicare could follow the process employed by private payers and utilize one central repository for provider enrollment given that all processes basically require the same essential information.

Response: CMS already utilizes a single national repository of enrollment information. The national enrollment repository is known as the Provider Enrollment, Chain and Ownership System (PECOS).

Comment: Several commenters supported our proposed approach that would establish the initial enrollment date for individual practitioners and physician and NPP organizations as the date an enrolled supplier started furnishing services at the new practice location as it would be the fairest option for all enrollees.

Response: We appreciate this comment, and as stated above, we are finalizing this proposal with revisions so that it would establish the effective date of billing for physicians, NPPs, and physician and NNP organizations as the later of date of filing of a Medicare enrollment application that was subsequently approved by a Medicare contractor or the date they first began furnishing services at a new practice location.

Comment: One commenter stated that physician practices that allow new practitioners to treat Medicare patients before their applications are approved run the risk of submitting an application that is ultimately returned on a technicality, forcing them to begin the application process all over again.

Response: As stated above, to address the concern that enrollment applications are returned based on a technicality, we expect that physicians and NPPs using the Web process will significantly decrease the number of incomplete applications and the need for contractors to request additional information. With the implementation of this final rule, we would require contactor to deny, rather than reject paper or Web applications when a physician, NPP, or physician or NPP organization fails to cure any deficiencies/technicalities.

Comment: One commenter stated that new physicians' practices must begin paying rent, salaries and other expenses the minute they become operational, if not before. This commenter also stated that many of these physicians are already forced to take out loans to pay expenses in the early days of operation until they enroll and can bill for services furnished in the interim. Finally, this commenter stated that our proposal to limit retrospective billing to the later of the date of filing or the date the practice location is operational will inhibit the ability of physicians and NPPs to create their own organizations, and instead, it will force them to join already existing entities.

Response: We do not believe that the Medicare program pays for services rendered prior to the date a new practice location is established. As described above, the physician or NPP would be allowed to file his or her enrollment application 30 days prior to the opening of new practice location and receive payments for services provided from the day the practice location was established or opened assuming that the physician met State licensing requirements and other Medicare program requirements at the time of filing and subsequently thereafter.

Comment: One commenter urged CMS to withdraw any proposed changes to the enrollment process, but stated that they would consider supporting limiting retrospective billing to the later of the date of filing or the date the practice location is operational but only after Internet-based PECOS has been proven to facilitate timely enrollment processing (fewer than 30 days). Another commenter supported CMS implementing this requirement once the enrollment processing time is at a period of 30 to 45 days.

Response: We do not believe that a change to the effective date of Medicare billing privileges has a nexus to the implementation of the Internet-based PECOS.

Comment: One commenter suggested that we allow 30 to 60 days before submission of an application to serve as the date of approval because this timeline will allow for practices to obtain provider signatures, licenses, and certifications so that we can approve back to the date of licensure and/or the date the provider started furnishing services with a minimum of 30 to 60 days.

Response: We disagree with this commenter, because physicians, NPPs and physician and NPP organizations should have all the necessary licenses/certifications at the time of filing, not 30 or 60 days after filing an enrollment application.

Comment: Several commenters asked for clarification of the “date of filing” when submitting an application for enrollment.

Response: We have clarified the “date of filing” in the provision of the final rule as the date that the Medicare contractor receives a signed provider enrollment application that the Medicare contractor is able to process to approval.

Comment: One commenter recommends that we wait until the Internet-based PECOS system has been released and used by the physician population before making these changes.

Response: As stated above, we do not believe that a change to the effective date of Medicare billing privileges has a nexus to the implementation of the Internet-based PECOS.

Comment: Several commenters recommended that we shorten the period of time during which retrospective billing is permitted from 27 months to 12 months. Another commenter stated that reducing retrospective billing from 27 months to 12 months would provide sufficient time for enrollment to occur, reduce the possibility of improper billing and eliminate the unreasonable administrative burden that the our alternatives would place on all new physicians.

Response: We appreciate these comments, but continue to believe that allowing retrospective billing for 12 months prior to enrollment poses a significant risk to the Medicare program. Accordingly, with the implementation of this final rule, physician and NPPs and physician and NPP organizations will have a limited time period to submit claims before the effective date of their respective Medicare billing privileges.

Comment: Several commenters urged CMS to establish the new Web-based program and determine the accuracy and ease of the system before making new enrollment rules. This commenter also stated the new Web-based system should be far easier to use than the current process.

Response: We agree with these commenters and, as previously stated, we expect to implement Internet-based PECOS for individuals by the end of CY 2008.

Comment: One commenter stated that they have been advised by Medicare that this change means upon receiving notice that a graduate nurse anesthetist had passed his or her certifying exam that the “graduate” now a CRNA can retain any Medicare claims from his or her certification date forward and then submit these held claims upon receiving his or her National Provider Identifier (NPI). Further, the commenter stated that Medicare carriers have allowed this payment practice with the understanding that graduate nurse anesthetists are qualified to bill Medicare for their services upon their certification date.

Response: While we understand this comment, we believe that physicians and NPPs must meet all State licensing requirements before Medicare can convey billing privileges. Moreover, with the implementation of this final rule, physician and NPPs and physician and NPP organizations will have a limited time period to submit claims before the effective date of their Medicare billing privileges.

Comment: One commenter stated that they understand that there have been Medicare Carriers that allow CRNAs to hold their claims and back bill for up to 1 year prior to the date they are certified, consistent with Medicare payment policy.

Response: We believe that physician and NPPs must meet all State licensing requirements before Medicare can convey billing privileges. Moreover, with the implementation of this final rule, physician and NPPs and physician and NPP organizations will have a limited time period to submit claims before their effective date of Medicare billing privileges.

Comment: One commenter urged CMS to adopt the Council for Affordable Quality Healthcare's (CAQH) Universal Credentialing Database (UCD) as its provider credentialing information gathering tool. This commenter stated that CAQH has over 600,000 providers and suppliers in its database and is working with hospitals and State Medicaid programs as well.

Response: While we appreciate this comment, this comment is outside the scope of this final rule. However, it is important to understand that CMS' national enrollment repository, PECOS, maintains Medicare enrollment records on more than 610,000 physicians, 280,000 NPPs, 75,000 single specialty clinics, and 130,000 multi-specialty clinics. In addition, PECOS maintains enrollment records for all other provider and supplier types, except durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) suppliers. This means that we have collected and retained current enrollment information on approximately 80 percent of physicians and 98 percent of the NPPs enrolled in and billing the Medicare program. In addition, since the information obtained during the enrollment process for physician and NPP organizations updates our claims payment systems for Part B services, we are able to help ensure claims processing accuracy by utilizing its existing processes.

Comment: One commenter urged CMS to produce educational materials beyond the vague tip sheets located at the beginning of each application. In addition, this commenter recommends that we develop a series of frequently asked questions on Medicare provider enrollment.

Response: We already maintain a link to provider enrollment frequently asked questions at http://www.cms.hhs.gov/MedicareProviderSupEnroll. In addition, this Web site maintains more than 10 different provider enrollment outreach documents that the public can view online or download for future reference.

In an attempt to ensure that all physicians, NPPs, and NPP organizations are aware of and comply with their reporting responsibilities, we developed and posted reporting responsibilities for physicians, NPPs, and physician organizations on our provider enrollment Web page at http://www.cms.hhs.gov/MedicareProviderSupEnroll on September 16, 2008. In addition, on September 17, 2008, we issued a listserv announcement to those individual physicians and NPPs who subscribe to the CMS Physician Open Door Forum and to more than 150 national and State-level organizations that subscribe to the CMS provider partnership network. We also expect that contractors will continue to notify physicians and NPP organizations about their reporting responsibilities by listserv, bulletin, and/or direct mail in FY 2009 and beyond. With the implementation of this final rule with comment period on January 1, 2009, we will revise the educational materials found on our Web site and distribute this information through our established communication channels. Finally, we will post educational material, including fact sheets and frequent asked questions, regarding Internet-based PECOS as soon as this system is available to the public.

Comment: One commenter asked that we create extensive educational programming on provider enrollment for both our contractors and providers to ensure that both sides thoroughly understand the process and expectations.

Response: We provide Medicare contractors with manual instructions and other directives to ensure consistent enrollment processing. In addition, as stated above, we are disseminating additional educational materials to ensure that the public understands their reporting responsibilities.

Comment: One commenter suggested a process for the Medicare Contractor to notify the provider that the application has been received and it is being processed to ensure the approved billing date is the same between the provider and the Medicare contractor.

Response: Due to cost constraints, most Medicare contractors can not notify an applicant when their paper enrollment application is received; however, Medicare contractors are required to notify an applicant when the application is missing information or if additional supporting documentation is needed to process the enrollment request.

Comment: One commenter stated that the NPP nomenclature is ambiguous because CMS lists all suppliers as NPPs (including audiologists and physical and occupational therapists) on page 38535 of the proposed rule, rather than limiting this term to physician assistants, nurse practitioners, and clinical nurse specialists as defined in Medicare policy manuals.

Response: We have revised this rule to refer to individual physicians and NPPs and physician and NPP organizations.

Comment: One commenter urges CMS to require contractors to provide accurate and complete information to applicants, allowing their practices to complete their enrollment applications in an easy and efficient manner.

Response: While we appreciate this comment, this comment is outside the scope of this proposed rule and can not be addressed in this final rule.

Comment: One commenter urged CMS to require Medicare contractors to communicate requests for additional information in such a manner that the communications can be easily tracked.

Response: We believe that this issue is outside the scope of the proposed rule and can not be addressed in this final rule.

Comment: One commenter urged a “timeout” on the release of new rules and regulations surrounding the Medicare provider enrollment process.

Response: We recognize that we have published several regulations within the last 3 years and a number of program integrity manual instructions designed to strengthen the enrollment process. However, we continue to believe that CMS must maintain the flexibility to issue regulations in accordance with the Administrative Procedures Act.

Comment: One commenter urged CMS to clarify the apparent inconsistent policies on revalidation as set forth in the April 21, 2006 provider enrollment rule titled, “Medicare Program: Requirements for Providers and Suppliers to Establish and Maintain Medicare Enrollment (CMS-6002-F)” and the June 27, 2008 provider enrollment rule titled, “Medicare Program: Appeals of CMS or CMS Contractor Determinations When a Provider or Supplier Fails to Meet the Requirements for Medicare Billing Privileges (CMS-6003-F).”

Response: In response to comment in the April 21, 2006 final rule (71 FR 20754), we stated, “We expect that a fee-for-service contractor would notify the provider or supplier in writing regarding the need to revalidate its enrollment information. Once notified, providers and suppliers would be expected to review, update, and submit any changes and supporting documentation regarding the enrollment record within 60 days. If no changes have occurred, a provider or supplier would simply sign, date, and return the revalidation application.” In addition, we stated in the provisions of the final rule that, “We will contact all providers and suppliers directly as to when their 5-year revalidation cycle starts beginning with those providers and suppliers currently enrolled in the Medicare program but that have not submitted a completed enrollment application. The revalidation process would ensure that we collect and maintain complete and current information on all Medicare providers and suppliers and ensure continued compliance with Medicare requirements. In addition, this process further ensures that Medicare beneficiaries are receiving items or services furnished only by legitimate providers and suppliers, and strengthens our ability to protect the Medicare Trust Funds.”

In response to a comment in the June 27, 2008 final rule (73 FR 36448), we stated, “Therefore, providers and suppliers that enrolled in the Medicare program prior to 2003, but who have not completed a Medicare enrollment application since then, have had more than 2 years to come into voluntary compliance with our enrollment criteria by submitting a complete enrollment application. With this final rule, we are again notifying physicians, providers, and suppliers that they may voluntarily complete and submit a Medicare enrollment application and the necessary supporting documentation prior to our formal request for revalidation. Accordingly, providers and suppliers who choose not to come into voluntary compliance or fail to respond to a revalidation request in a complete and timely manner fail to satisfy our enrollment criteria and may be subject to revocation of their billing privileges.” Accordingly, we do not believe that these policies are inconsistent. We continue to encourage all physicians, providers, and suppliers to update their enrollment records when a reportable change occurs, and absent a reportable change we encourage all physicians, providers, and suppliers who have not updated their enrollment record within the last 5 years to do so in advance of contractor's revalidation request. Once we initiate revalidation efforts, physicians and other providers and suppliers will only be provided 60 days to respond to a contractor's request.

Comment: One commenter stated that we should monitor, track, and make publicly available the average length of time from submission of an enrollment application for new procedures to the time the Medicare contractors actually process and notify the providers of acceptance of that enrollment application.

Response: While we monitor contractor provider enrollment processing timeliness using PECOS, we do not currently calculate an average length of time for initial enrollments, changes, and reassignments. We will consider calculating the average length of time for initial enrollment applications, changes of information, and reassignments and making this information available to the public.

Comment: One commenter requests that if we finalize these provisions, a notice of onsite review should be provided 14 days in advance to allow the pharmacy to appropriately schedule for the onsite review.

Response: We disagree with this commenter. We believe that onsite reviews provide CMS and our contractors a valuable tool to ensure that providers and suppliers are in compliance.

Comment: Several commenters remain concerned about the failure of CMS to permit the use of electronic signatures and electronic documents which would provide practitioners and practices the opportunity to complete and submit the entire application package online.

Response: This comment is outside the scope of this proposed rule and can not be addressed in this final rule.

Comment: One commenter recommended that we hold an open and thorough dialogue with its contractors and the provider community regarding the enrollment process as it currently stands and the problems encountered by all.

Response: We believe that this issue is outside the scope of the proposed rule and can not be addressed in this final rule.

Comment: One commenter stated that they support CMS and the establishment of an electronic enrollment process but they do not believe it will address the provisions in the rule.

Response: While we do not expect that Internet-based PECOS will remedy all provider enrollment processing issues, we do believe that an Internet-based enrollment process will allow physicians and other providers and suppliers to reduce the time necessary to enroll or make a change in enrollment in the Medicare program.

Comment: One commenter recommended that we establish streamlined and user-friendly procedures that will encourage high rates of physician participation in the Medicare program.

Response: We appreciate this comment and believe that Internet-based PECOS will allow physicians and NPPs the ability to enroll or make changes in their enrollment records faster and more accurately than the paper-based enrollment process.

Comment: One commenter commended CMS for PECOS as it will provide timely ease of use for enrollment as well as updating the enrollment record.

Response: We appreciate this comment.

Comment: One commenter requested that we consider modifying existing provider enrollment applications to include an attestation statement for which an applicant would attest to those certain requisite program requirements having been met prior to the filing of the application.

Response: This recommendation is outside the scope of the proposed rule and can not be addressed in this final rule.

Comment: One commenter stated that we should provide notice 14 days in advance of conducting an onsite review and that reviews on Mondays should be avoided.

Response: This comment is outside the scope of this proposed rule and can not be addressed in this final rule.

Comment: One commenter urged that CMS and the NSC coordinate so that only a single onsite review would be required and the least disruptive to an operation.

Response: This comment is outside the scope of the proposed rule and can not be addressed in this final rule.

After reviewing public comments, we are finalizing the definition of “physician or nonphysician practitioner (NPP) organization” at § 424.502 as “any physician or NPP organization that enrolls in the Medicare program as a sole proprietorship or any organizational entity.” Organizational entities include, but are not limited to, limited liability corporations, Subchapter S corporations, partnerships, professional limited liability corporations, professional corporations, and professional associations.

After reviewing public comments, we are finalizing the provision at § 424.520(d) to state that we will establish an effective date of billing for physicians, NPPs and physician and NPP organizations that would be the later of: (1) The date of filing of a Medicare enrollment application that was subsequently approved by Medicare contractor (that is, carrier, fiscal intermediary or A/B Medicare Administrative Contractor); or (2) the date a physician, NPP or physician and NPP organization first started furnishing services at its new practice location.

In § 424.521, Request for Payment by Physicians, Nonphysician Practitioners, Physician or Nonphysician Organizations, we are finalizing the proposals.

In § 424.521(a)(1), we are finalizing a provision that allows physicians, NPPs, physician or NPP organizations to retrospectively bill for services up to 30 days prior to their effective date of billing when the physician or NPP organization met all program requirements, including State licensure requirements, services were furnished at the enrolled practice location prior to the date of filing and circumstances precluded enrollment in advance of providing services to Medicare beneficiaries. Thus, physicians, NPPs, and physician or NPP organizations would be limited to receiving reimbursement for services for a maximum of 30 days prior to filing an enrollment application that was subsequently approved by a Medicare contractor.

In § 424.521(a)(2), we are finalizing a provision that allows a physician, NPP, and physician or NPP organization to retrospectively bill for services up to 90 days prior to their effective date of billing privileges when the physician or NPP organization met all program requirements, including State licensure requirements, services were furnished at the enrolled practice location prior to the date of filing, and a Presidentially-declared disaster under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. §§ 5121-5206 (Stafford Act) precluded enrollment in advance of providing services to Medicare beneficiaries.

While these changes limit the retrospective payments that a physician, NPP, or physician and NPP organization may obtain from the Medicare program, we believe that this approach will ensure that a Medicare contractor is able to verify that a physician, NPP or physician and NPP organization meets all program requirements at the time of filing, including State licensure. In addition, this approach will afford Medicare beneficiaries the appropriate protections under the statute, regulations, and CMS policy.

To ensure that eligible physicians, NPPs or physician and NPP organizations receive reimbursement for services furnished, we will require that Medicare contractors deny Medicare billing privileges when a Medicare contractor is not able to process an incomplete enrollment application that is submitted by a physician, NPP or physician and NPP organization. This is a change from our earlier final rule, “Medicare Program; Requirements for Providers and Suppliers to Establish and Maintain Medicare Enrollment,” (CMS-6002-F) which was published on April 21, 2006. In this earlier rulemaking effort, we stated that we would reject an incomplete enrollment application. In order to provide physician and NPP organizations and individual practitioners with the opportunity to preserve an initial application filing date, we will deny incomplete applications for these supplier types. We believe that § 424.530(a)(1) permit a Medicare contractor to deny an incomplete enrollment application.

By denying billing privileges for enrollment in the Medicare program or to establish a new practice location, rather than rejecting an enrollment application, physicians, NPPs or physician and NPP organizations will be afforded appeal rights which will preserve the original date of filing the application. Reimbursement for services furnished back to the effective date of billing will be permitted as long as the applicant submits a corrective action plan or appeal in accordance with § 405.874 and submits the necessary information to cure any application deficiencies. However, if the applicant does not submit a corrective action plan or appeal within the timeframe established in § 405.874, then the applicant would not preserve the right to bill the Medicare program for services furnished from the date of the initial filing of the application or the date the practitioner or organization first started furnishing services at its new practice location.

We are also adopting the “date of filing” as the date that the Medicare contractor receives a signed provider enrollment application that the Medicare contractor is able to process to approval. If the Medicare contractor denies an enrollment application that is not later overturned during the appeals process, the new date of filing would be established when a physician or NPP organization submits a new enrollment application that the contractor is able to process to approval.

PECOS is the system that supports the Medicare provider and supplier enrollment process by collecting and storing provider and supplier information obtained from the Medicare enrollment application (that is, the CMS-855). The PECOS database retains enrollment information on Part A providers that bill fiscal intermediaries (FIs) or A/B Medicare Administrative Contractors (A/B MAC) and Part B providers, including physicians and NPPs that bill carriers or A/B MACs.

Medicare contractors use PECOS to establish new enrollment records for providers and suppliers, update provider and supplier information, and process requests from individual health care practitioners for assignment of benefits. PECOS standardized the Medicare enrollment process and supplies enrollment data to the Part A and Part B claims processing systems.

In June 2002 and November 2003, we implemented PECOS for fiscal intermediaries (FIs) and carriers respectively. Today, PECOS is used by carriers, FIs, and A/B MACs to enter data submitted on the Medicare enrollment application. However, by establishing an Internet-based enrollment process, we will allow providers and suppliers (except suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS)) suppliers, the option of enrolling or making a change in their Medicare enrollment information via the Internet.

Internet-based PECOS will allow Medicare providers and suppliers to enroll or make a change in their Medicare enrollment record. The primary objectives for the Web enablement of PECOS are to: (1) Reduce the time necessary for providers and suppliers to enroll or make a change in their Medicare information; (2) streamline the enrollment process for providers and suppliers; (3) allow physicians and NPPs to manage their enrollment information and verify their reassignments of benefits; and (4) reduce the administrative burden associated with completing and submitting enrollment information to Medicare.

Additional information regarding Internet-based PECOS will be made available later this year. This information will be posted on the Medicare provider/supplier enrollment Web site at http://www.cms.hhs.gov/MedicareProviderSupEnroll.

With the implementation of an Internet enrollment process referred to as the Internet-based PECOS, the date of filing for individual practitioners submitted through Internet-based PECOS is the date the Medicare contractor receives both: (1) An electronic version of the enrollment application; and (2) a signature page containing an original signature that the Medicare contractor processes to approval. The date of filing for organizational entities submitted through Internet-based PECOS is the date the Medicare contractor receives all of the following: (1) An electronic version of the enrollment application; (2) a signature page containing an original signature that the Medicare contractor processes to approval.

To address public concerns regarding the burden and complexity associated with the Medicare enrollment process, we will implement Internet-based PECOS in three distinct phases. We will implement Internet-based PECOS for all individual physicians and NPPs enrolling or making a change to an existing enrollment record in Phase I. In Phase II, we will implement Internet-based PECOS for all organizational providers and suppliers, except DMEPOS suppliers, enrolling or making a change to an existing enrollment record. In Phase III, we will implement Internet-based PECOS for DMEPOS suppliers.

Based on current operating assumptions, we expect to begin implementation of Phase I by the end of CY 2008, with full implementation scheduled for completion in January 2009. We also expect to make Internet-based PECOS available to physicians and NPPs in all States, including California, Missouri, and New York.

Phase II is tentatively scheduled for implementation beginning in Spring 2009, with full implementation scheduled for completion by June 30, 2009. Phase III is tentatively scheduled for implementation in CY 2010.

Since Internet-based PECOS is a scenario-driven application process with front-end editing capabilities and built-in help screens, we believe that this new enrollment application process will significantly simplify and streamline the enrollment process for physicians, providers and suppliers, reduce the time necessary to enroll or make a change to a Medicare enrollment record, reduce the administrative burden associated with completing and submitting enrollment information to Medicare, decrease the errors during the application submission process, and allow physicians and NPPs to take personal responsibility for their Medicare enrollment in a timely manner. Moreover, unlike the paper-based enrollment process, Internet-based PECOS' scenario-driven application process will ensure that prospective providers and suppliers or enrolled providers and suppliers only complete and submit the information necessary to apply or make a change in their Medicare enrollment record. Physicians and NPPs will no longer see questions that are not applicable for their supplier-type.

While we will encourage all physicians, NPPs, physicians and NPP organizations and other providers and suppliers to utilize Internet-based PECOS when it is made available for their provider/supplier type and their State, all providers and suppliers will continue to have the option of submitting an enrollment application by paper.

In order to use Internet-based PECOS to enroll or make a change in an enrollment record, physicians and NPPs will be required to use the User ID and user password obtained when applying for or updating their National Provider Identifier (NPI) with the National Plan and Provider Enumeration System (NPPES). Accordingly, physicians and NPPs will need to know their NPPES User ID/password information before trying to enroll or change their enrollment record with Medicare via Internet-based PECOS. To ensure privacy and security for these individual practitioners, we encourage that physicians and NPPs to reset their user password prior to initiating their first enrollment action via Internet-based PECOS, reset their user password at least once a year thereafter, and that physicians and NPPs not share their NPPES User ID/password with billing agents, clearinghouses, academic medical institutions, or staff within their practice.

Physicians and NPPs choosing to use billing agents, clearinghouses, academic medical institutions, etc. will be required to submit a paper enrollment application to enroll or make a change in their Medicare enrollment record.

In order to use Internet-based PECOS to enroll or make a change in an organizational enrollment record, we will verify that the authorized official associated with the Medicare enrollment record is employed by the organization and is authorized by the organization to submit or make changes to the organization enrollment record.

Over the last 2 years, we have stressed the importance of filing a complete application at the time of filing or in response to a contractor's request for additional information. However, Medicare contractors continue to report that a significant number of applications are incomplete at the time of filing or that applicants do not respond timely and completely to a contractor's request for additional information.

Finally, in the April 21, 2006 final rule, physicians, NPPs, and physician and NPP organizations learned about our intent to begin a revalidation process.

Specifically, § 424.515 states that a provider or supplier (other than a DMEPOS supplier), must resubmit and recertify the accuracy of its enrollment information every 5 years. Therefore, physicians, NPPs and physician and NPP organizations that enrolled in the Medicare program prior to 2003, but who have not completed a Medicare enrollment application since then, have had more than 2 years to come into voluntary compliance with our enrollment criteria by submitting a complete enrollment application. To date, approximately 80 percent of the enrolled physicians and 98 percent of NPPs have updated their Medicare enrollment record within the last 5 years.

To ensure that Medicare only pays eligible physicians and NPPs, we are again notifying physicians and NPPs that they may voluntarily complete and submit a Medicare enrollment application and the necessary supporting documentation prior to our formal request for revalidation. In accordance with the existing provision at § 424.535(a)(1)(ii), providers and suppliers who choose not to come into voluntary compliance or fail to respond to a revalidation request within 60 days of the Medicare contractor's request may be subject to the revocation of their billing privileges.

2. Medicare Billing Privileges and Existing Tax Delinquency

The Government Accountability Office (GAO) found that over 21,000 of the physicians, health professionals, and suppliers paid under Medicare Part B during the first 9 months of CY 2005 had tax debts totaling over $1 billion. The GAO report titled, “Medicare, Thousands of Medicare Part B Providers Abuse the Federal Tax System (GAO-07-587T)” found abusive and potentially criminal activity, including failure to remit to IRS individual income taxes or payroll taxes or both withheld from their employees.

While we do not currently consider whether an individual physician, NPP currently enrolled in the Medicare program has delinquent tax debts with the Internal Revenue Service (IRS), we do consider whether a physician or NPP was convicted of a Federal or State felony offense, including income tax evasion, that we have determined to be detrimental to the best interest of the Medicare program. Moreover, if a physician or NPP was convicted of Federal or State felony offense within the 10 years preceding enrollment or revalidation of enrollment that we determined to be detrimental to the best interest of the Medicare program, we could deny or revoke the Medicare billing privileges of the physician or NPP.

The Financial Management Service (FMS), a bureau of the Department of Treasury, initiated the Federal Payment Levy Program (FPLP) portion of the Continuous Levy Program in July 2000 to recover delinquent Federal tax debts. The FPLP is a program whereby delinquent Federal income tax debts are collected by levying non-tax payments, as authorized by the Taxpayer Relief Act of 1997 (Pub. L. 105-34). The FPLP includes vendor and Social Security benefit payments, and Medicare payments. It is accomplished through a process of matching delinquent debtor data with payment record data. This automated collection of debt at the time of payment occurs after the delinquent taxpayer has been afforded due process, in accordance with the Internal Revenue Code.

In July 2000, the IRS in conjunction with the Department of Treasury's FMS started the FPLP which is authorized by section 6331(h) of the Internal Revenue Code as prescribed by section 1024 of the Taxpayer Relief Act of 1997. Through this program, the IRS can collect overdue taxes through a continuous levy on certain Federal payments disbursed by FMS; it generally allows Medicare to match a claim to a delinquent taxpayer, offset the payment, and recover a percentage of the amount due.

The FPLP is a collection and enforcement tool used by the IRS for individuals that have received all requisite notification of tax delinquency and who have either exhausted or neglected to use their respective appeal rights; therefore, the FPLP is only applied after all previous IRS collections efforts have failed. Accordingly, the FPLP is an automated levy program where certain delinquent taxpayers are systematically matched and levied on their Federal payments disbursed by Treasury's FMS.

In 2001, we implemented the FPLP process for Medicare Part C and vendor payments, and in FY 2009, we will implement the FPLP process for payments made to providers and suppliers reimbursed under Part A and Part B of the Medicare program. However, the FPLP does not allow CMS to offset a payment when an individual reassigns his or her benefits to a third-party, such as a group practice where an existing Federal tax delinquency exists.

Consistent with statutory authority found under sections 1866(j)(1)(A) and 1871 of the Act, we believe that we have the authority to establish and make changes to the enrollment process for providers and suppliers of service. Accordingly, to ensure that the Federal government is able to recoup delinquent Federal tax debts from physicians and NPPs who are enrolled in the Medicare program and are receiving payments, we are considering revoking the billing privileges for those individuals for whom a tax delinquency exists and we are unable to directly levy future payments through the FPLP. While we did not propose this change in this year's PFS proposed rule, we will consider proposing this type of change in a future rulemaking effort after we have implemented the FPLP process, monitored and evaluated the implementation of FPLP process, and analyzed the potential impact of this change on physician and NPPs who are subject to the FPLP but for whom we are unable to directly levy future payments through the FPLP. In addition, we expect to conduct outreach regarding our implementation of the FPLP in FY 2009.

We believe that this change, if proposed and adopted, would prohibit an individual with a tax delinquency from shielding their future payments through reassignment of benefits to a third party. Finally, since the tax delinquency would be incurred by an individual who has reassigned his or her benefits to a third party, we do not believe that it is appropriate to take action against the third-party. We believe that this is consistent with the protections already afforded to an individual by the IRS but ensures that Medicare does not enroll or allow continued enrollment to an individual with a serious tax delinquency.

We maintain that it is essential that a physician or NPP resolve any existing Federal tax delinquency before entering the Medicare program. This will ensure that the Medicare program is not making payments to an individual who has not met his or her obligation to pay their tax debts.

Finally, we solicited comments on whether we should consider revoking a physician's billing privileges or taking some other type of administrative action when a physician or NPP has a Federal tax delinquency that can not be levied through the FPLP process. We also solicited comments on whether we should consider revoking the billing privileges of an organizational entity or taking some other type of administrative action against organizational entities when the owners of an organizational entity have a Federal tax delinquency that can not be levied through the FPLP process.

Comment: One commenter recommends an alternative to payment denial where an individual with a tax delinquency has reassigned their benefits to a group. The commenter suggested that the government garnish a portion of the individual practitioner's salary directly, as appropriate. Another commenter does not believe it is appropriate to penalize all of the partners in a practice, when only one individual is guilty of tax evasion. One commenter requests that we define, in greater detail, the term “reliable information,” and also that we assure some formal type of appeals process apart from a simple rebuttal. Another commenter questions if there is a mechanism in place whereby a potential new hire can be held harmless should his or her potential employer find itself in a delinquent status within a 12-month period. One commenter questions whether the burden of reporting an adverse legal action would be placed upon the individual saddled with the action rather than his or her group managing partners, for sometimes the principals are not aware of the actions of their employees. Another commenter stated that at a minimum, the third party involved should be sent notification of the provider's revoked billing privileges 18 months before the date of revocation. One commenter believes that this provision is not logistically possible because it raises too many issues, including taxpayer privacy, equal opportunity employment concerns, and perhaps even whistleblower triggers regarding noncompliance.

Response: Section 189 of the MIPPA requires that CMS take all necessary steps to participate in the Federal Payment Levy Program (FPLP) under section 6331(h) of the Internal Revenue Code of 1986. The FPLP process allows CMS to levy current and future payments until the tax delinquency is eliminated.

After reviewing comments received in response to our solicitation for comments regarding whether we should consider revoking billing privileges or taking some other administrative action when a physician or NPP has a Federal tax delinquency that cannot be levied through the FPLP process, we are considering whether future rulemaking or administrative action is needed in this area. We appreciate the public insight regarding our solicitation for comments and will consider these comments in developing any future rulemaking proposals; however, we continue to maintain that physicians and NPPs should resolve any existing Federal tax delinquency before enrolling in the Medicare program or as soon as practical if the physician is enrolled in Medicare.

3. Denial of Enrollment in the Medicare Program (proposed § 424.530(a)(6) and (a)(7))

Currently, owners, authorized officials, and delegated officials of physician and NPP organizations and individual practitioners, including physicians and NPPs, can obtain additional billing privileges by establishing a new tax identification number (TIN), reassigning benefits to another entity, or by submitting an enrollment application as another provider or supplier type even though the entity for which the provider or supplier furnished services and has had its billing privileges revoked, suspended, or has an outstanding Medicare overpayment. Absent a reason to reject or deny a Medicare enrollment application, the Medicare FFS contractor is required to approve the enrollment application for a provider or supplier who meets all other Federal and State enrollment requirements for their provider or supplier type.

By submitting and having an enrollment application (for example, an initial application or a change of ownership) with a new TIN, some physician and NPP organizations and individual practitioners are able to circumvent existing Medicare revocation, payment suspension, overpayment recovery, and medical review processes by obtaining additional Medicare billing privileges. By obtaining additional billing privileges for multiple locations, these providers and suppliers are able to discontinue the use of the NPI that has an administrative action against it and bill and receive payment under another NPI.

Consistent with existing § 405.371, we will impose a payment suspension when we possess reliable information that an overpayment or fraud, or willful misrepresentation exists, or that payments to be made may not be correct. Suspension procedures give providers and suppliers an opportunity to submit a rebuttal to CMS' payment suspension determination. We believe that it is essential that we resolve the payment suspension determination before we grant additional billing privileges to these providers or suppliers. In concert with § 405.372(c), once a payment suspension has been terminated, providers and suppliers may then apply for billing privileges.

Moreover, we are obligated to recover Medicare overpayments as expeditiously as possible. Providers and suppliers can pay the debt or Medicare can reduce present or future Medicare payments and apply the amount withheld to the indebtedness. When we identify an overpayment and provide notice of the overpayment, physician and NPP organizations and individual practitioners are given an opportunity to appeal the determination. Under certain conditions, the overpayment collection process is suspended during the appeals process. However, if the physician and NPP organization or individual practitioner does not appeal the overpayment determination, or if the overpayment determination is upheld on appeal, we will initiate a recovery action.

Accordingly, we proposed to add a new § 424.530(a)(6) and (a)(7) to deny enrollment applications for additional Medicare billing privileges if the physician or NPP organization or individual practitioner has an active payment suspension or has an existing overpayment that has not been repaid. We proposed to allow a Medicare FFS contractor to deny enrollment applications from those authorized officials, delegated officials, owners, and individual practitioners that own a supplier or provider at the time of filing until such time as the suspension has been terminated or the Medicare overpayment has been repaid in full. Specifically, we proposed to deny enrollment to any current owner (as defined in § 424.502), physician, or NPP, who is participating in the Medicare program and is under a current Medicare payment suspension.

We stated that we believe that the change to our denial policy would help protect the Medicare program from unscrupulous or problematic physician and NPP organizations and individual practitioners. Moreover, we believe this change would: (1) Allow Medicare FFS contractors to improve customer service to all providers and suppliers that are already enrolled in the Medicare program; (2) facilitate the enrollment of all providers and suppliers seeking to enroll in the Medicare program for the first time; and (3) expand on existing efforts to process changes in a timely manner and provide better customer service.

Comment: Several commenters stated that our proposal to deny additional billing privileges to a physician or an NPP when the physician or NPP is suspended or has an outstanding overpayment is a denial of due process and is in conflict with the principle of innocent until proven guilty.

Response: We believe that we have an obligation to protect the Medicare program from inappropriate payments. Conversely, physicians and NPPs have an obligation to the Medicare program to resolve payment suspensions and overpayment actions in a timely manner. Finally, as a payer of health care, we believe that additional billing privileges should not be conveyed to a physician, NPP or owners, authorized and delegated officials who have an existing payment suspension or overpayment. To grant additional billing privileges to individuals with an existing payment suspension or overpayment exposes the Medicare Trust Funds to additional risks.

With Medicare's implementation of the NPI on May 23, 2008, Medicare contractors no longer issue billing numbers to providers and suppliers participating in the Medicare program. However, Medicare contractors do convey billing privileges to providers and suppliers that have an NPI and meet all of the program requirements for their provider or supplier type. Once enrolled, providers and suppliers are required to use their NPI to submit claims to Medicare, and based on the NPI final rule, organizations may obtain one or more NPIs.

After reviewing public comments, we are finalizing the provisions at § 424.530(a)(6) and (a)(7) to deny enrollment applications for additional Medicare billing privileges if a physician, NPP, physician or NPP organization has an existing payment suspension or has an existing overpayment that has not been repaid. We believe that permitting a Medicare contractor to deny enrollment applications submitted by individual practitioners, authorized officials, delegated officials, and owners until such time as the Medicare overpayment has been repaid in full will require providers and suppliers to resolve overpayments in a timely manner. Once CMS has imposed a payment suspension, a provider or supplier may submit a rebuttal to CMS for the purpose of reducing or terminating the payment suspension. As long as the payment suspension is effective, the contractor has the task of making an overpayment determination. Specifically, we are adopting the provision to deny enrollment to any physician, or NPP current owner (as defined in § 424.502), authorized or delegated official who is participating in the Medicare program and is under an existing Medicare payment suspension or has an outstanding overpayment that has not been repaid in full. As adopted, physicians and NPPs will not be allowed to enroll and reassigning payments to a third-party if the individual practitioner has an existing payment suspension or overpayment that have not been repaid.

4. Reporting Requirements for Providers and Suppliers (§ 424.516 and § 424.535(a)(10))

Currently, § 424.520(b) requires that providers and suppliers, except DMEPOS and IDTF suppliers, report to CMS most changes to the information furnished on the enrollment application and furnish supporting documentation within 90 calendar days of the change (changes in ownership must be reported within 30 days). As specified in § 424.57(c)(2), DMEPOS suppliers have only 30 calendar days to submit changes of information to CMS. As specified in § 410.33(g)(2), IDTFs, must report changes in ownership, changes in location, changes in general supervision, and final adverse actions within 30 calendar days. All other changes to the enrollment application must be reported within 90 days.

While physician and NPP organizations and individual practitioners are required to report changes within 90 days of the reportable event, in many cases, there is little or no incentive for them to report a change that may adversely affect their ability to continue to receive Medicare payments. For example, physician and NPP organizations and individual practitioners purposely may fail to report a felony conviction as described in § 424.535(a)(3), or other final adverse action, such as a revocation or suspension of a license to a provider of health care by any State licensing authority, or a revocation or suspension of accreditation, because reporting this action may result in the revocation of their Medicare billing privileges. Thus, unless CMS or our designated contractor becomes aware of the conviction or final adverse action through other means, the change may never be reported by a physician and NPP organization or individual practitioner. Alternatively, if CMS or our designated contractor becomes aware of the conviction or final adverse action after the fact, we have lacked the regulatory authority to collect overpayments for the period in which the physician and NPP organizations and individual practitioners should have had their billing privileges revoked.

Since we believe that physician and NPP organizations and individual practitioners must furnish updates to their Medicare enrollment information in a timely manner, we are adopting a new § 424.516(d) which would establish more stringent reporting requirements for physician NPP organizations and individual practitioners. (We proposed to redesignate § 424.520 as § 424.516 and amend the provisions in new § 424.516.) In addition to a change of ownership (as currently specified in redesignated § 424.516(d)(1)(i)), we proposed to add § 424.516(d)(1)(ii) requiring all physician and NPP organizations and individual practitioners to notify our designated contractor of any final adverse action within 30 days. We stated that final adverse actions include, but are not limited to, felonies, license suspensions, and the HHS Office of the Inspector General (OIG) exclusion or debarment. We believe that a physician and NPP organizations and individual practitioner's failure to comply with the reporting requirements within the time frames described above may result in the revocation of Medicare billing privileges and a Medicare overpayment from the date of the reportable change. Specifically, we believe that a final adverse action may preclude payment, and thus, establish an overpayment from the date of the adverse action. As such, we believe that physician and NPP organizations and individual practitioners should not be allowed to retain any reimbursement they receive after the final adverse action.

In addition, we added the word “final” to the beginning of the term “adverse legal action” in the regulation text in § 424.535 on overpayment. We define the term as a “final adverse action” in the definition section at § 424.502 and want to be consistent with that definition. Also, we want to be consistent with our definition of this term in the Durable medical Equipment prosthetics Orthotics and Supplies surety bond rule (CMS-6006-F). Moreover, we want this term to be consistent with the definition of “final adverse action” found in section 221(g)(1)(A) of the Health Insurance Portability and Accountability Act (HIPAA) of 1996. Finally, we believe that a final adverse action has occurred when the sanction is imposed and not when a supplier has exhausted all of the appeal rights associated with the action itself.

We believe that it is essential that this type of change be reported in a timely manner (that is within 30 days). For example, if CMS or our designated contractor determines in February 2008 that a physician failed to notify Medicare about a final adverse action that occurred on June 30, 2007, that physician may be subject to an overpayment for all Medicare payments beginning June 30, 2007 and have their Medicare billing privileges revoked effective retroactively back to June 30, 2007 as well.

Additionally, we proposed to add a requirement for change in location at § 424.516(d)(1)(iii). Since a change in location may impact the amount of payment for services furnished by placing the physician and NPP organizations and individual practitioners into a new Core Based Statistical Area (CBSA). We believe that it is essential that physician and NPP organizations and individual practitioners report changes in practice location including those that impact the amount of payments they receive within a timely period (that is, 30 days). However, unlike a final adverse action, which may preclude all payments if reported, failure to report a change in practice location may impact the amount of payment, not whether a physician and NPP organizations and individual practitioners may be eligible to receive payments. Accordingly, we believe that failing to report changes in practice location would result in an overpayment for the difference in payment rates retroactive to the date the change in practice location occurred and may result in the revocation of Medicare billing privileges. For example, if a physician and NPP organization moves its practice location in New York, from urban Herkimer County to Hamilton County or Lewis County, which are both rural, but fails to update its provider enrollment information; then it would no longer be able to receive the higher payment rate associated with Herkimer County. We believe that reporting these types of changes is essential for making correct and appropriate payments.

We proposed to add § 424.535(a)(9) which would specify that failure to comply with the reporting requirements specified in § 424.516(d) would be a basis for revocation. Additionally, we proposed in § 424.565, “Failure to comply with the reporting requirements specified in § 424.516(d) would result in a Medicare overpayment from the date of a final adverse action or a change in practice location.” In this situation, an overpayment for failure to timely report these changes would be calculated back to the date of the final adverse action or the date of the change in practice location. Once an overpayment has been assessed, we will follow the overpayment regulations established at 42 CFR part 405 subpart C. We previously addressed these procedures in Chapter 4 of the Medicare Financial Management Manual (IOM Manual 100-06). Lastly, collection of overpayments related to § 424.516(d)(1)(iii) would not begin until after the effective date of the final rule.

Since it is essential that physician and NPP organizations and individual practitioners notify their designated contractor of these types of reportable events in a timely manner and to ensure that the provider or supplier continues to be eligible for payment, we believe that it is essential that we establish an overpayment from the time of the reportable event. We believe that establishing an overpayment and revocation of billing privileges for noncompliance from the time of the reportable event would provide the supplier with a compelling incentive to report reportable changes in the 30-day reporting period.

In addition, if CMS or our designated contractor determines that a physician and NPP organization or an individual practitioner has moved and has not reported the reportable event within the 30-day reporting period, CMS or our designated contractor would impose an overpayment, if applicable, and revoke billing privileges for a period of not less than 1 year.

Comment: One commenter would like to laud CMS for expounding on reporting requirements for the updates regarding address changes, as well as reporting an adverse legal action in a manner to be complete within 30 days. The commenter continued to state that failure to report changes in location, leading to potential overpayment, and revocation of Medicare billing privileges needs to be highlighted for all providers.

Response: We appreciate this comment and will consider expanding this provision to all providers and suppliers in a future rulemaking effort.

Comment: One commenter stated that it disagrees with our assumption that all payments subsequent to an adverse legal action are collectable overpayments.

Response: Since final adverse actions such as Federal exclusion or debarment, felony convictions as described in § 424.535(a)(3) or license suspension or revocation that precluded continued enrollment in the Medicare program.

Comment: One commenter stated that while a CMS representative publicly stated that the proposed rule should have referenced adverse legal actions that have been finally adjudicated, the commenter recommends that CMS clarify this language in the final rule. Several commenters recommended that only adverse legal actions that are relevant to the practice of medicine should be required to be reported to CMS.

Response: Based on these comments, we are adding a definition of a final adverse action to § 424.502(a). Specifically, we have defined a final adverse action to mean one or more of the following actions: (1) A Medicare-imposed revocation of any Medicare billing privileges; (2) Suspension or revocation of a license to provide health care by any State licensing authority; (3) Revocation or suspension by an accreditation organization; (4) A conviction of a Federal or State felony offense (as defined in § 424.535(a)(3)(i)) within the last 10 years preceding enrollment, revalidation, or re-enrollment; or (5) An exclusion or debarment from participation in a Federal or State health care program.

Comment: One commenter suggested that we should clarify in the final rule that with regard to adverse legal actions, the requirements should apply only to notification within 30 days of “final” legal actions that are relevant to or otherwise impact the practice of medicine.

Response: While we understand that physicians and NPPs are afforded different appeal rights depending on the type of final adverse action, we do not believe that it is appropriate to allow physicians and NPPs to continue to furnish services to Medicare beneficiaries if their State medical license has been suspended or revoked, a Federal exclusion or debarment or Medicare revocation has been imposed, or the physician or NPP was found guilty or pled to felony conviction as described in § 424.535(a)(3).

Comment: One commenter believes that if CMS wants to collect alleged overpayments for services paid during the 90 days as if they were performed in a higher-paying locale, then they should also pay the difference for underpayments when a physician provides services for up to 90 days in a higher paying locality prior to notifying CMS of the change in location.

Response: We maintain that it is the responsibility of the physician, NPP or physician or NPP organization to update their enrollment information within the appropriate timeframes. Further, note that CMS will not reprocess claims for the services provided when there has been a failure to report a change in practice location.

Comment: Several commenters stated that a State licensing board is the proper authority to weigh the significance of legal actions against a physician. Another commenter stated that State licensing and other requirements already protect beneficiaries from the most important kinds of issues that could arise in medical care.

Response: While we agree that State licensing boards are responsible for determining whether an individual meets or continues to meet the qualifications for a specific State medical license, we do not agree that a State license is the only criteria that an individual must maintain in order to receive billing privileges from the Medicare program.

Comment: One commenter stated that they do not oppose changing the time period for reporting adverse legal actions from 90 days to 30 days, as generally payments should not be made under these circumstances.

Response: We appreciate this comment.

Comment: One commenter stated that they did not agree that a change in practice location should be treated as an urgent matter that would support a retroactive revocation of billing authority.

Response: We disagree with this commenter. Since physicians and NPPs receive payments in part on locality adjustments based on the place of service, we believe that physicians, NPPs, and physician and NPP organizations are responsible for updating their enrollment record within 30 days of a change in practice location. It is also important to note that we already have existing authority to revoke the billing privileges of a Part B supplier, including physicians and NPPs, if CMS or our contractor determines that upon an on-site review or other reliable evidence that the supplier is not operational (see § 424.535(b)(5)).

Comment: One commenter stated that they oppose changing the time period for reporting a change in location from 90 days to 30 days because the physician is still eligible for payment and Medicare's vulnerability to overpayments is limited.

Response: While we agree that a physician may still be eligible to receive payment, the issue in question is the amount of payment. Moreover, as a payer of health care, we believe that physicians and all other providers and suppliers have a responsibility to update their enrollment record when a change in practice location occurs. This will allow CMS or our contractor to verify that services are actually furnished at the practice locations identified by the medical practices.

Comment: One commenter stated that if we finalize our reporting requirements, a better option would be to limit the types of actions that are reportable to similar actions that are required to be reported to the National Practitioner Data Bank (NPDB) which was established by the Congress to address the need to improve the quality of medical care by encouraging State licensing boards, health care entities such as hospitals, and professional societies to identify and discipline those who engage in unprofessional behavior, as well as restrict a practitioner's ability to move from State to State without disclosure of previous adverse action history.

Response: We disagree with this commenter. In considering the types of events that should be reported within 30 days of the reportable event, with this final rule with comment period, we have limited the types of reportable events to three specific types of events: (1) Change in ownership, (2) final adverse actions, and (3) change in practice location. We believe that the failure to report any of these types of reportable events may result in payments to the wrong organization, erroneous payments if the physician or NPP payment no longer meets State licensure requirements, or payments in the wrong amount when a change in practice location impacts the payment to a physician, NPP or physician or NPP organization.

Comment: One commenter stated that our proposal to revoke billing privileges for a period of not less than 1 year for failure to comply with the proposed 30-day reporting period is a harsh and unjust penalty for a minor paperwork offense.

Response: While we understand this commenter's concern, we believe that physicians, NPPs, physician and NPP organizations have an obligation to report certain changes, including State license suspensions and revocations, felony convictions as described in § 424.535(a)(3), Federal debarments and exclusions, within 30 days since these adverse actions may affect a physician, NPP or physician or NPP organization's ability to continue to participate in the Medicare program.

Comment: One commenter urged CMS to consider that the failure to notify Medicare contractors of a change in location is an oversight rather than a true attempt to defraud the Medicare program.

Response: Since physicians, NPPs, and physician and NPP organizations routinely notify State medical societies, vendors, employees, utility companies, leasing companies, and others prior to a change in practice location, we disagree with this commenter that change in location is an oversight.

Comment: One commenter stated that that while there is a need to maintain timely provider records and track Medicare payments, proposed penalties for failure to report an address change promptly are so out of proportion to the offense as to be draconian.

Response: We disagree with this commenter. As stated above, we understand that physicians, NPPs, and physician and NPP organizations routinely notify other payers and affiliated business partners about a change of practice location in advance of the change. In addition, to ensure payment accuracy, it is essential that physicians, NPPs, and physician and NPP organizations report changes in practice locations prior to change, but not later than 30 days after the reportable event.

Comment: One commenter stated that it seemed sufficient to collect any overpayment from providers that file their change of address notice within the traditional 90-day window for updating enrollment records.

Response: As a payer of health care, it is essential that we make every attempt to make correct payments for services furnished by qualified providers and suppliers. To help ensure that we are making the correct payments the first time, we believe that it is necessary that physicians, NPPs, and physician and NPP organizations update their enrollment records when a change in practice location occurs.

Comment: One commenter urges CMS to withdraw the proposal to establish authority to require that physicians report a change in ownership, “any” adverse legal action, or change in practice location within 30 days since these events may be unrelated to the Medicare program and the reporting time frame is unduly burdensome to physicians.

Response: We disagree with this commenter. Since June 20, 2006, physicians and NPP organizations have been required to report a change in ownership within 30 days and changes in practice locations and final adverse actions within 90 days (see § 424.516(d)). Since we are aware of situations where physicians and NPPs have not reported State license suspensions/revocations or final adverse actions which may affect a physician or NPPs eligibility to participate in the Medicare program, we believe that it is essential to establish more stringent reporting requirements than in the past. We believe that these requirements along with corresponding enforcement procedures will encourage physicians, NPPs and physician and NPP organizations to report changes in ownership, final adverse actions, and changes in practice location in a timely manner (that is, 30 days.)

Comment: One commenter stated that “any adverse legal action” is not defined; therefore a 30-day reporting requirement is unreasonable as are the other proposed requirements. The commenter also stated that we should save our severe penalties for proven fraudulent behavior, not minor clerical oversights.

Response: We disagree with this commenter that failure to report a final adverse action is a minor clerical oversight. Since reporting a final adverse action may affect a physician or NPP's ability to continue to participate in the Medicare program, we understand why these actions may not be reported to a Medicare contractor; however, we believe that final adverse actions, including State licensing suspensions and revocations, should be reported within 30 days of the reportable event, even if the physician or NPP plans on appealing the final adverse action. By reporting the final adverse action within 30 days, the Medicare program will carefully review any revocation action and exercise its discretion as to whether to impose a revocation and the length of time of the reenrollment bar.

Comment: One commenter stated that a revocation of billing privileges seems to be a disproportionately severe penalty for infractions such as: (1) Failure to report changes in ownership, adverse legal actions, and changes in practice location, or (2) not maintaining ordering and referring documentation for a 10-year period.

Response: We disagree with this commenter. As stated above, we believe reporting changes in ownership, final adverse actions, and changes in practice locations are essential to ensuring that the Medicare program makes correct payments to eligible practitioners and organizations. We also believe that it is essential that physicians and NPPs maintain ordering and referring documentation to support the claims submissions.

Comment: One commenter stated that levying an overpayment for failure to report a “reportable event,” within 30 days is excessive for what is likely an honest oversight.

Response: We disagree with this commenter that establishing an overpayment is excessive when a physician, NPP or physician and NPP organization fails to report a final adverse action, such as a State license suspension or revocation or adverse legal action, that may preclude participation in the continued participation in the Medicare program in a timely manner (that is, 30 days).

Comment: One commenter stated that Federal regulations regarding overpayments are already established at 42 CFR part 405, therefore, changing the provider enrollment requirements to prevent overpayments is not necessary.

Response: We disagree with this commenter because the existing overpayment regulations do not allow us to assess an overpayment based on the failure of a physician, NPP, or physician or NPP organizations to report certain reportable enrollment events.

Comment: One commenter stated that they were concerned over inconsistency in the verbiage of this section where we state in the CY 2009 PFS proposed rule (73 FR 38538 through 38539) that billing privileges may be revoked in one place and in the other place state that they would be revoked.

Response: We appreciate this comment and have clarified in this final rule to use the word, “may” when referring to the revocation of Medicare billing privileges.

Comment: One commenter recommends that a 60-day limit be imposed rather than the proposed 30 days for notifying CMS about a “reportable event.”

Response: We believe that changes of ownership, adverse legal actions, and changes in practice locations can and should be reported within 30 days of the reportable event. By reporting these types of reportable events within 30 days, the Medicare program can take the necessary steps to ensure that we are paying physicians and NPPs correctly and ensure that only eligible physicians and NPPs are enrolled in the Medicare program.

After reviewing public comments, we are finalizing the provision at proposed § 424.516(d) which would require physicians, NPPs or physician and NPP organizations to notify its Medicare contractor of a change of ownership, change in practice location or any final adverse action within 30 days of the reportable event. In addition, we believe that physician and NPP organizations' and individual practitioners' failure to comply with the reporting requirements within the time frame described above may result in the revocation of Medicare billing privileges and the imposition of a Medicare overpayment from the date of the reportable change. Specifically, we believe that a final adverse action may preclude payment, and thus, establish an overpayment from the date of the adverse legal action. As such, we believe that physician and NPP organizations and individual practitioners should not be allowed to retain any reimbursement they receive after the date of the adverse legal action. In addition, physicians, NPPs, or physician and NPP organizations who voluntarily report a final adverse action that prohibits further payment will have their Medicare billing privileges revoked and have an overpayment assessed back to the date of the reportable event. CMS has the discretion to revoke the supplier's billing privileges. Moreover, revocation affords the supplier appeal rights and by reporting an adverse legal action within 30 days of the reportable event, a physician or NPP or physician or NPP organization may regain billing privileges if the final adverse action no longer impedes the applicant's reenrollment into the Medicare program.

We are also finalizing the provision at § 424.516(d)(1)(iii) which requires physicians, NPPs and physician and NPP organizations to report a change of practice location within 30 days. While we may not revoke the billing privileges of physicians, NPPs and physician and NPP organizations if a change of practice location is reported by the practitioner or organization after the prescribed 30-day timeframe, we will assess an overpayment, if applicable, for the difference in payment rates retroactive to the date the change in practice location occurred. In addition, with limited exceptions such as a Presidentially-declared disaster under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5206 (Stafford Act), physicians, NPPs, and physician and NPP organizations can report a change of practice location in advance of the reportable event. We note that individual practitioners and physician and NPP organizations routinely notify staff, the U.S. Post Office, telephone and electric companies, suppliers, vendors, State medical associations and other practitioner partners prior to a change in practice location. Accordingly, we believe that it is appropriate that physicians and NPP organizations notify the Medicare contractor in advance of any pending change of practice location, but no later than 30 days after the reportable event.

As such, we will not reprocess claims for those individual practitioners and physician and NPP organizations that do not report a change of practice location prior to a change in practice location where the reported change would result in an underpayment, unless the change of location was the direct result of a Presidentially-declared disaster under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5206 (Stafford Act). We believe that this change will create an incentive for physicians, NPPs, and physician and NPP organizations to report changes in practice locations prior to the change of practice location or, at a minimum, within the 30 days of the reportable event.

Moreover, if we determine that a change of practice location occurred and it has not been reported within the 30 days of the reportable event, we may revoke billing privileges and assess any applicable overpayment for the difference in payment rates retroactive to the date the change in practice location occurred. We believe that the authority to revoke billing privileges has already been established in § 424.535(a)(5)(ii).

We are finalizing the provision at proposed § 424.535(a)(9) which would specify that failure to comply with the reporting requirements specified in § 424.516(d) would be a basis for revocation. Additionally, we are also finalizing the provision we proposed in § 424.565(a), “Failure to comply with the reporting requirements specified in § 424.516(d) would result in a Medicare overpayment from the date of a final adverse action or a change in practice location.” In this situation, an overpayment for failure to timely report these changes would be calculated back to the date of the final adverse action or the date of the change in practice location. Once an overpayment has been assessed, we will follow the overpayment regulations established at 42 CFR Part 405 subpart C.

Based on public comments, we are adding a definition of final adverse action to § 424.502(a). A final adverse action means one or more of the following actions: (1) A Medicare-imposed revocation of any Medicare billing privileges; (2) Suspension or revocation of a license to furnish health care by any State licensing authority; (3) Revocation or suspension by an accreditation organization; (4) A conviction of a Federal or State felony offense (as defined in § 424.535(a)(3)(i)) within the last 10 years preceding enrollment, revalidation, or re-enrollment; or (5) An exclusion or debarment from participation in a Federal or State health care program.

5. Maintaining Ordering and Referring Documentation

We proposed to add a new § 424.516(f) that would specify, “A provider or supplier is required to maintain ordering and referring documentation, including the NPI, received from a physician or eligible NPP. Physicians and NPPs are required to maintain written ordering and referring documentation for 10 years from the date of service.” We believe that it is essential that providers and suppliers maintain documentation regarding the specific service ordered or referred to a Medicare beneficiary by a physician or NPP as defined in section 1842(b)(18)(c) of the Act, (which includes but is not limited to nurse practitioners and physician assistants). We believe that ordering and referring documentation maintained by a provider or supplier must match the information on the Medicare claims form. Additionally, we proposed to add § 424.535(a)(10) that would state that failure to comply with the documentation requirements specified in § 424.516(f) would serve as a reason for revocation. For example, a lab submits a claim with Dr. Smith's NPI (1234512345) in the ordering and referring section of the claim form. The number submitted on the claim form should match the documentation in the provider or supplier's records. In addition, we proposed to codify the requirement to maintain ordering and referring documentation as required in the Medicare Program Integrity Manual (PIM) Publication 100-08, Chapter 5. While the PIM currently requires that providers and suppliers maintain ordering and referring documentation for 7 years from the date of payment, we believe that the industry generally maintains documentation from the date of service. Accordingly, since there may be a delay in claims submission and subsequent payment for up to 27 months from the date of service, we believe that it would be administratively less burdensome for providers and suppliers to maintain ordering and referring documentation for 7 years from the date of service, rather than requiring providers and suppliers to maintain ordering and referring documentation associated with the date of payment.

We maintain that a provider or supplier should retain the necessary ordering and referring documentation received from physicians and NPPs as defined in section 1842(b)(18)(C) of the Act to assure themselves that coverage criterion for an item has been met. If the information in the patient's medical record does not adequately support the medical necessity for the item, the supplier would be liable for the dollar amount involved unless a properly executed Advance Beneficiary Notice of possible denial has been obtained.

Comment: One commenter urged CMS to adopt its proposal that would specify that a provider or supplier is required to maintain ordering and referring documentation, including the NPI received from the physician or eligible NPP, for 10 years from the date of service, but that this provision only apply to services furnished on or after the effective date of this final rule with comment period.

Response: We agree with this commenter in that we are basing the ordering and referring record retention requirement based upon the date of service, however we are adopting the provision for 7 years from the date of service. We believe that this approach is administratively consistent with current manual record retention policy that requires that suppliers retain ordering and referring documentation for 7 years from the date of billing. We maintain that it is less burdensome for providers and suppliers to maintain ordering and referring documentation for 7 years from the date of service rather than requiring providers and suppliers to maintain ordering and referring documentation associated with the proposed provision for 10 years after the date of payment.

Comment: One commenter disagrees with increasing the retention of ordering and referring documentation beyond the current 7 years from the date of payment. The commenter continued to state that the provision as proposed may represent an additional cost for 3 years of additional record retention.

Response: As stated above, we are establishing an ordering and referring record retention period as 7 years from the date of service.

Comment: One commenter believes that CMS must understand that in virtually all cases, the only information the laboratory receives is the laboratory requisition submitted by the physician.

Response: We continue to believe that it is necessary that providers and suppliers retain ordering and referring documentation for services furnished 7 years from the date of service. However, we understand that the supplier may not maintain the NPI documentation for each service, but the provider or supplier must maintain sufficient documentation to identify the individual who ordered or referred the beneficiary for their services. In addition, upon review, CMS or our contractor may validate the ordering/referring documentation maintained by the billing provider or supplier with the individual practitioner who ordered/ referred the beneficiary for these services.

Comment: One commenter recommends that CMS defer to the judgment of the State boards of pharmacy regarding the length of record retention, and also allow offsite electronic storage of ordering and referring records.

Response: We appreciate the importance of the requirements of State boards of pharmacy; however, we uphold that Medicare is a national program and it is necessary to establish national standards for maintaining the ordering and referring record retention period. We believe that this approach will lead to consistency. Further, the provisions of the final rule do not preclude offsite or electronic storage as long as these records are readily accessible and retrievable.

Comment: One commenter proposes CMS to abandon its proposal for the 10-year record retention period and allow pharmacies to follow record retention requirements under State law.

Response: We appreciate the importance of the requirements of State boards of pharmacy, however we uphold that Medicare is a national program and it is necessary to establish national standards for maintaining the ordering and referring record retention period. We believe that this approach will lead to CMS consistency. While we are not changing our record retention policy to account for different State pharmacy laws, we are revising the proposed 10-year record retention policy and establishing an ordering and referring record retention period as 7 years from the date of service

Comment: One commenter believes that pharmacies should be allowed to maintain their hard-copy records offsite electronically after a certain time.

Response: The provisions of the final rule do not preclude offsite or electronic storage as long as these records are readily accessible and retrievable.

Comment: Several commenters recommended that pharmacies should maintain the prescription record in written form for the greater of 3 years or the requirements in State law, and then allow the prescription to be stored electronically for the remaining years. The commenter continued to state that this would bring consistency to the Medicare Parts B and D programs, and reduce the need to create new storage capacity for paper prescription records.

Response: Since Medicare is a Federal program that already requires a 7-year retention period from the date of billing, we disagree that this change will create a significant burden.

Comment: One commenter stated that the extension from 7 to 10 years would add a substantial recordkeeping burden.

Response: We agree with this commenter and have revised this final rule with comment period to establish an ordering and referring record retention period as 7 years from the date of service.

Comment: One commenter urged CMS to reconsider our position regarding maintaining ordering and referring documentation. In addition, this commenter stated that this change would constitute an unfunded mandate.

Response: We disagree with this commenter that this change is an unfunded mandate because providers and suppliers are already required by CMS' manual instructions to maintain ordering and referring documentation for 7 years from the date of billing.

Comment: One commenter stated that we should allow offsite and electronic storage of ordering and referring records.

Response: The provisions of the final rule do not preclude offsite or electronic storage as long as these records are readily accessible.

Comment: One commenter urged CMS to adopt the proposed requirement for record retention, but only with a provision that such record retention requirements became effective as of the effective date of the final rule. Further, the commenter states that those providers and suppliers that, until now, have not kept ordering and referring documentation for 10 years from the date of service (and were under no other statutory or regulatory requirement to do so) would not be liable and face possible revocation of billing privileges as long as the provider or supplier was in compliance with currently existing requirements.

Response: We agree with this commenter; however, we have revised this final rule to establish the ordering and referring record retention period as 7 years from the date of service.

After reviewing public comments, we are finalizing the provision at proposed § 424.516(f) that would require providers and suppliers to maintain ordering and referring documentation, including the NPI, received from a physician or eligible NPP. Physicians and NPPs are required to maintain written ordering and referring documentation for 7 years from the date of service. In addition, we are finalizing the provision found at § 424.535(a)(10) that states that failure to comply with the documentation requirements specified in § 424.516(f) is a reason for revocation.

Finally, the aforementioned provisions regarding ordering and referring documentation are effective with services furnished on or after the implementation date of this final rule.

6. Revocation of Enrollment and Billing Privileges in the Medicare Program (§ 424.535(h))

Historically, we have allowed providers and suppliers whose Medicare billing numbers have been revoked to continue billing for services furnished prior to revocation for up to 27 months after the effective date of the revocation. Since we believe this extensive billing period poses significant risk to the Medicare program, we proposed to limit the claims submission timeframe after revocation. In § 424.535(g) (Redesignated as § 424.535(h), we proposed that revoked physician and NPP organizations and individual practitioners, including physicians and NPPs, must submit all outstanding claims not previously submitted within 30 calendar days of the revocation effective date. We stated that this change is necessary to limit the Medicare program's exposure to future vulnerabilities from physician and NPP organizations and individual practitioners that have had their billing privileges revoked. We know that some physician and NPP organizations and individual practitioners are able to create false documentation to support claims payment. Accordingly, we stated that the proposed change would allow a Medicare contractor to conduct focused medical review on the claims submitted during the claims filing period to ensure that each claim is supported by medical documentation that the contractor can verify. We also stated that focused medical review of these claims will ensure that Medicare only pays for furnished services by a physician organization or individual practitioner and that these entities and individuals receive payment in a timely manner. Since a physician organization or individual practitioner generally submits claims on a nexus to the date of service, we stated that the proposed change will not impose a significant burden on physician organizations or individual practitioners. In addition, we also proposed to add § 424.44(a)(3) to account for this provision related to the requirements for the timely filing of claims.

Comment: One commenter supports our proposal to limit, to 30 days, the time frame in which a provider whose billing services have been revoked may continue to submit claims for services furnished prior to such revocation.

Response: We appreciate this comment.

Comment: One commenter appreciated our concern regarding the current period of up to 27 months but offered alternative time periods of 60 or 90 days rather than the proposed time period of 30 days.

Response: We are finalizing the provisions at § 424.535(h) (proposed as § 424.535(g)) that require a revoked physician, NPP or a physician or NPP organization to submit all outstanding claims not previously submitted within 60 calendar days of the effective date of the revocation, (except for revocations identified in § 405.874(b)(2) and § 424.535(f) of this final rule).

Comment: Several commenters encouraged CMS to reset the period of time a provider can submit claims after billing privileges have been revoked from up to 27 months to 6 months, instead of the proposed 30 days.

Response: As stated above, we are finalizing the provisions found at § 424.535(g) (Redesignated as § 424.535(h)) that require a revoked physician, NPP or a physician or NPP organization to submit all outstanding claims not previously submitted within 60 calendar days of the effective date of the revocation, (except for revocations identified in § 405.874(b)(2) and § 424.535(f) (redesignated as § 424.535(g)) of this final rule).

Comment: One commenter stated that 30 days is simply not enough time to wrap up all of the details of a practice, in addition to the other circumstances associated with a revocation of billing privileges.

Response: We are finalizing the provisions found at § 424.535(h) (proposed as § 424.535(g)) that require a revoked physician, NPP or a physician or NPP organization to submit all outstanding claims not previously submitted within 60 calendar days of the effective date of the revocation, (except for revocations identified in § 405.874(b)(2) and § 424.535(f) (redesignated as § 424.535(g)) of this final rule).

After reviewing public comments, we are finalizing the provisions found at § 424.535(h) (proposed as § 424.535(g)) that require a revoked physician, NPP or a physician or NPP organization to submit all outstanding claims not previously submitted within 60 calendar days of the effective date of the revocation. Since the physician, NPP or a physician or NPP organization is already afforded approximately 30 days notification before the effective date of revocation (except for revocations identified in § 405.874(b)(2) and § 424.535(f) (redesignated as § 424.535(g)) of this final rule), we believe that almost 90 days is more than sufficient time to file any outstanding claims with the Medicare program.

In addition, we are amending § 424.44(a) to account for this provision related to the requirements for the timely filing of claims. We are revising the § 424.44(a) to clarify that this provision is consistent with § 424.521 which limits the ability of physicians, NPPs and physician and NPP organizations to bill retrospectively. The timely filing requirements in § 424.44(a)(1) and (a)(2) will no longer apply to physician, NPPs, or physician or NPP organizations or IDTFs.

7. Technical Changes to Regulations Text

We proposed to make the following technical changes:

  • Existing § 424.510(d)(8) would be redesignated as § 424.517. This revision would separate our ability to conduct onsite reviews from the provider and supplier enrollment requirements.
  • Existing § 424.520 would be revised and redesignated as § 424.516. This redesignation would move the additional provider and supplier enrollment requirements so that these requirements immediately follow the provider and supplier enrollment requirements.
  • In new § 424.520, we proposed to specify the effective dates for Medicare billing privileges for the following entities: Surveyed, certified, or accredited providers and suppliers; IDTFs; and DMEPOS suppliers.
  • In § 424.530, we proposed to add the phrase “in the Medicare program” to the section heading to remain consistent with other headings in the subpart.

After reviewing public comments, we are finalizing the following technical changes:

  • Existing § 424.510(d)(8) has been redesignated as § 424.517. This revision would separate our ability to conduct onsite reviews from the provider and supplier enrollment requirements.
  • Existing § 424.520 has been revised and redesignated as § 424.516. This redesignation would move the additional provider and supplier enrollment requirements so that these requirements immediately follow the provider and supplier enrollment requirements.
  • In new § 424.520, we are adopting the effective dates for Medicare billing privileges for the following entities: Surveyed, certified, or accredited providers and suppliers; IDTFs; and DMEPOS suppliers.
  • In § 424.530, we are adding the phrase “in the Medicare program” to the section heading to remain consistent with other headings in the subpart.

K. Amendment to the Exemption for Computer-Generated Facsimile (Fax) Transmissions From the National Council for Prescription Drug Programs (NCPDP) SCRIPT Standard for Transmitting Prescription and Certain Prescription-Related Information for Part D Covered Drugs Prescribed for Part D Eligible Individuals

1. Legislative History

Section 101 of the MMA amended title XVIII of the Act to establish a voluntary prescription drug benefit program. Prescription Drug Plan (PDP) sponsors and Medicare Advantage (MA) organizations offering Medicare Advantage-Prescription Drug Plans (MA-PDs) and other Medicare Part D sponsors are required to establish electronic prescription drug programs to provide for electronic transmittal of certain information to the prescribing provider and dispensing pharmacy and dispenser. This includes information about eligibility, benefits (including drugs included in the applicable formulary, any tiered formulary structure and any requirements for prior authorization), the drug being prescribed or dispensed and other drugs listed in the medication history, as well as the availability of lower cost, therapeutically appropriate alternatives (if any) for the drug prescribed. Section 101 of the MMA established section 1860D-4(e)(4)(D) of the Act, which directed the Secretary to issue uniform standards for the electronic transmission of such data.

There is no requirement that prescribers or dispensers implement e-prescribing. However, prescribers and dispensers who electronically transmit prescription and certain other prescription-related information for covered drugs prescribed for Medicare Part D eligible individuals, directly or through an intermediary, are required to comply with any applicable final standards that are in effect. For a complete discussion of the statutory basis for the e-prescribing portions of this final rule with comment period and the statutory requirements at section 1860D-4(e) of the Act, please refer to the “Background” section of the E-Prescribing and the Prescription Drug Program proposed rule published in the February 4, 2005 Federal Register (70 FR 6256)

2. Regulatory History

a. Foundation Standards and Exemption for Computer-Generated Facsimiles (Facsimiles)

In the E-Prescribing and the Prescription Drug Program final rule (70 FR 67568, November 7, 2005), we adopted the National Council for Prescription Drug Programs (NCPDP) SCRIPT standard, Implementation Guide, Version 5, Release 0 (Version 5.0), May 12, 2004, excluding the Prescription Fill Status Notification Transaction (and its three business cases which include the following: Prescription Fill Status Notification Transaction-Filled; Prescription Fill Status Notification Transaction-Not Filled; and Prescription Fill Status Notification Transaction-Partial Fill) hereafter referred to as “NCPDP SCRIPT 5.0,” as the standard for communicating prescriptions and prescription-related information between prescribers and dispensers. Subsequently, in the June 23, 2006 Federal Register (71 FR 36020), we published an interim final rule with comment period (IFC) that maintained NCPDP SCRIPT 5.0 as the adopted standard, but allowed for the voluntary use of a subsequent backward compatible version of the standard, NCPDP SCRIPT 8.1. In the April 7, 2008 Federal Register, we published a final rule (73 FR 18918) that finalized the June 23, 2006 IFC; effective April 1, 2009, we will retire the NCPDP SCRIPT 5.0 and adopt NCPDP SCRIPT 8.1 as the standard. Hereafter we refer to these standards as “NCPDP SCRIPT.”

The November 7, 2005 final rule also established an exemption to the requirement to utilize the NCPDP SCRIPT standard for entities that transmit prescriptions or prescription-related information for Part D covered drugs prescribed for Part D eligible individuals by means of computer-generated facsimiles (facsimiles generated by one computer and electronically transmitted to another computer or facsimile machine which prints out or displays an image of the prescription or prescription-related information). Providers and dispensers who use this technology are not compliant with the NCPDP SCRIPT standard. The exemption was intended to allow such providers and dispensers time to upgrade to software that utilizes the NCPDP SCRIPT standard, rather than forcing them to revert to paper prescribing.

b. Amendment of Exemption

In the CY 2008 PFS proposed rule (72 FR 38194), we proposed to revise § 423.160(a)(3)(i) to eliminate the computer-generated facsimile exemption to the NCPDP SCRIPT standard for the communication of prescription or certain prescription-related information between prescribers and dispensers for the transactions specified in § 423.160(b)(1)(i) through (xii).

Since computer-generated facsimiles retain some of the disadvantages of paper prescribing (for example, the administrative cost of keying the prescription into the pharmacy system and the related potential for data entry errors that may impact patient safety), we believed it was important to take steps to encourage prescribers and dispensers to move toward use of NCPDP SCRIPT. We believed the elimination of the computer-generated facsimile exemption would encourage prescribers and dispensers using this computer-generated facsimile technology to, where available, utilize true e-prescribing (electronic data interchange using the NCPDP SCRIPT standard) capabilities.

We proposed to eliminate the computer-generated facsimile exemption effective 1 year after the effective date of the CY 2008 PFS final rule (that is, January 1, 2009). We believed that this would provide sufficient notice to prescribers and dispensers who would need to implement or upgrade e-prescribing software to look for products and upgrades that are capable of generating and receiving transactions that utilize NCPDP SCRIPT. It would also afford current e-prescribers time to work with their trading partners to eventually eliminate computer-to-facsimile transactions.

We solicited comments on the impact of the proposed elimination of this exemption. Several commenters concurred with our proposal to eliminate the exemption for computer-generated facsimiles, indicating that eliminating the exemption for computer-generated facsimiles would act as an incentive to move prescribers and dispensers toward true e-prescribing (electronic data interchange using the NCPDP SCRIPT standard), although many commenters suggested that we continue to allow for the use of computer-generated facsimiles in the case of transmission failure and network outages. Less than half of the commenters disagreed with our proposal to eliminate the exemptions for computer-generated facsimiles, citing concerns about increased hardware/software costs, transaction fees, certification, and other activation costs.

Several commenters indicated that the elimination of the exemption could be problematic in certain e-prescribing transactions, namely prescription refill requests, but only one of those commenters offered substantiation to support this assertion. Absent receipt of substantial industry data on the impact of the elimination of the computer-generated facsimile exemption on prescription refill requests, and not considering the industry's comments about prescription refill requests to constitute widespread concern regarding the prescription refill request function, in the CY 2008 PFS final rule with comment period (72 FR 66396), we amended the exemption to permit the use of computer-generated facsimiles only in cases of temporary/transient network transmission failures, effective January 1, 2009.

3. Proposal for CY 2009

Following the publication of the CY 2008 PFS final rule with comment period, we received additional information regarding how the modification of the exemption for computer-generated faxing to eliminate use of computer-generated faxing in all instances other than temporary/transient network transmission failures would adversely impact the electronic transmission of prescription refill requests. The submitted information offered additional support to the claim that in all instances other than temporary/transient network transmission problems, elimination of the use of computer-generated facsimiles would adversely impact the electronic transmission of prescription refill requests. These later materials substantiated the earlier claims that the elimination of the exemption in all instances other than temporary/transient network transmission failures would force dispensers who e-prescribe and use these transactions to revert to paper prescribing. These materials offered more specific information regarding the economic and workflow impacts associated with the elimination of the exemption for computer-generated facsimiles in all instances other than temporary/transient network transmission failures that was not forthcoming in the prior public comment period for the CY 2008 PFS proposed rule. We also received unsolicited comments on this issue during the comment period for the November 16, 2007 Part D e-prescribing proposed rule (proposing the adoption of certain final Part D e-prescribing standards and the use of NPI in Part D e-prescribing transactions) (72 FR 64900). As a result of the new information, we reexamined this issue and proposed additional modifications to the computer-generated facsimile exemption in the CY 2009 PFS proposed rule (73 FR 38502).

Dispensers have indicated that they use computer-generated facsimiles for the majority of prescription refill requests, in particular when communicating with prescribers that have not adopted e-prescribing. Currently, regardless of how the initial prescription was received by the pharmacy (that is, orally, via e-prescribing, telephone, paper, or facsimile) nearly all prescription refill requests from chain pharmacies to prescribers are sent electronically, either via an e-prescribing application or via computer-generated facsimile. When a prescription is received by a dispenser electronically, the prescription refill request is sent to the prescriber via the same technology. However, where the dispenser knows that the prescriber lacks e-prescribing capability or has not activated it, or where the prescriber does not respond to the request sent to his or her prescribing device, the prescription refill request is sent or resent via computer-generated facsimile. Commenters stated that the vast majority of computer-generated facsimiles sent today from prescribers to pharmacies are not electronic data interchange (EDI) transmissions, but usually prescription refill requests sent from pharmacies to prescribers who do not conduct true e-prescribing and, in many cases, do not engage in any electronic transactions at all. One national drug store chain estimates that it produces approximately 150,000 computer-generated facsimile prescription refill requests every day.

The workflow and process for filling prescriptions would be significantly disrupted if these computer-generated facsimile transmissions were prohibited. Dispensers and other staff would be forced to revert back to making phone calls or using a stand-alone facsimile machine to contact prescribers each time a refill is requested. Commenters indicated that not only would this be counterproductive to the advances and efficiencies made in pharmacy practice, it would impose an undue administrative burden on dispensing pharmacies and pharmacists.

As a result of this additional information regarding the larger than anticipated impact of the elimination of computer-generated facsimiles for the prescription refill request transaction, we proposed to further amend the computer-generated facsimile exemption to also allow for an exemption from the NCPDP SCRIPT standards for electronic prescription refill request transactions that are conducted by computer-generated facsimiles when the prescriber is incapable of receiving electronic transmissions using the NCPDP SCRIPT standard. We proposed to retain the computer-generated facsimile exemption in instances of transient/temporary network transmission failures, effective January 1, 2009. We also proposed to revisit the computer-generated facsimile exemption for the purpose of ultimately eliminating it for the prescription refill request transaction found at § 423.160(b)(1)(vii), and specifically solicited industry and interested stakeholder comments regarding what would constitute an adequate time to allow the industry to transition to the use of the NCPDP SCRIPT standard.

We also solicited industry input on any other e-prescribing transaction that might be similarly adversely impacted by the elimination of computer-generated facsimiles in all instances other than transient/temporary network transmission failures.

We received 52 relevant and timely public comments on our proposal to further amend the exemption of computer-generated facsimiles from the NCPDP SCRIPT standard for Part D e-prescribing to include an exemption for refill request transactions with prescribers who are not capable of e-prescribing using the adopted NCPDP SCRIPT standard as detailed in the CY 2009 PFS proposed rule (73 FR 38600). While the comments were few in number, they tended to provide multiple detailed comments on what had been proposed.

Comment: Several commenters recommended that we reinstate the exemption for computer-generated facsimiles in its entirety. The commenters referenced the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) and its potential to help drive e-prescribing adoption, stating that the e-prescribing incentives contained in the MIPPA provide a better, more transitional path towards that goal.

One commenter recommended that the elimination of the computer-generated facsimile exemption coincide with the incentive provisions contained in the MIPPA legislation. The commenter noted the eventual penalty for Medicare providers who do not adopt e-prescribing by the year 2012. The commenter also stated that structuring the elimination of the computer-generated facsimile exemption to coincide with this date would allow organizations the time needed to appropriately implement e-prescribing.

Other commenters recommended that we adopt a computer-generated facsimile exemption for pharmacies in areas where prescribers who do not e-prescribe fall under the “significant hardship” exception contained in the MIPPA. Commenters also recommended that the computer-generated facsimile exemption be further modified so as to allow for use of the computer-generated facsimile exemption that was adopted in the November 7, 2005 final rule (the “original” computer-generated facsimile exemption) until 2014, when provider disincentives/penalties are maximized under the MIPPA, at which time a study could be conducted to determine the number of prescriptions being e-prescribed. We assume that the commenters' intent would be to use the information gleaned from such a study as an indicator of whether or not e-prescribing had reached an acceptable level of adoption among providers and pharmacies, and that if an acceptable level of adoption among providers and pharmacies had been demonstrated, that the computer-generated facsimile exemption could be eliminated.

Similarly, other commenters suggested that the exemption should be eliminated in 2012 when disincentives under the MIPAA e-prescribing incentive program go into effect, or in 2014, when e-prescribing provider disincentives/penalties are maximized under the MIPPA. Another commenter urged that we reinstate the original (from the November 7, 2005 final rule (70 FR 67568)) exemption for computer-generated facsimiles in its entirety, not just for prescription refill requests and transmission failures.

Response: We agree with the commenters regarding the impact of the MIPPA. In general, the MIPPA provides payment incentives for eligible professionals who are “successful electronic prescribers” as that term is defined in the law. The incentive payments are 2 percent of the eligible professional's allowed charges under the PFS for CY 2009 through CY 2010; 1.5 percent in CY 2011 through CY 2012, and a 0.5 percent in CY 2013. Conversely, the MIPPA calls for payment reductions, or disincentives, for those who are not successful electronic prescribers beginning in CY 2012. For CY 2012, the payment amount under the PFS will be reduced by 1 percent for eligible professionals who are not successful electronic prescribers. In subsequent years, the payment reduction is increased by 0.5 percent each year through CY 2014, and then is fixed at 2 percent for later years. For more information on the e-prescribing provisions of the MIPPA, please see section 132 of the MIPPA legislation enacted on July 15, 2008 (Pub. L. 110-275, http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_public_lawsdocid=f:publ275.110.pdf).

We envision that the MIPPA-created incentive payments for those prescribers who successfully implement electronic prescribing in accordance with MIPPA guidelines will provide the “tipping point”—an adequate level of industry adoption of e-prescribing using electronic data interchange (EDI) that would in turn move the entire industry toward widespread e-prescribing adoption. We believe that data from the e-prescribing incentive program under the MIPPA and eventually from Part D e-prescribing will offer evidence of the rate of e-prescribing adoption, therefore making a study of e-prescribing for purposes of determining e-prescribing adoption rates unnecessary.

We analyzed the industry feedback that we received in response to the computer-generated facsimile exemption proposals in the CY 2009 PFS proposed rule in light of the recent MIPPA legislation. While the MIPPA legislation was not yet been enacted at the time of the CY 2009 PFS proposed rule's publication, it was enacted in time for commenters to discuss its provisions in their comments to our proposals. Based on MIPPA-based and other comments received in response to our proposal to further modify the computer-generated facsimile exemption, and taking into consideration the potential positive impact on the industry of the Part D e-prescribing incentives included in the recently-enacted MIPPA legislation, we are reinstating the original exemption for computer-generated facsimiles effective January 1, 2009. We also agree with those commenters who suggested that the computer-generated facsimile exemption should be eliminated (in all instances other than transient/temporary network transmission failures) once provider e-prescribing disincentives under the MIPAA program are initiated.

Although several commenters suggested that we should wait until the disincentives are maximized in 2014, we feel that it is more appropriate to eliminate the reinstated exemption (in all instances other than temporary/transient network transmission problems) sooner, when the MIPPA e-prescribing program disincentives for those who are not successful electronic prescribers begin in 2012. We believe that the January 1, 2012 compliance date for the elimination of the computer-generated facsimile exemption (in all instances other than temporary/transient transmission problems) will take advantage of the momentum that will be built by the e-prescribing incentive program under the MIPPA, and affords the industry an additional 3 years from the effective date of this final rule with comment period to move toward true e-prescribing. We also believe that the January 1, 2012 date will enable the industry to begin taking advantage of the benefits of e-prescribing sooner, and in so doing pass those advantages on to their patients in the way of increased patient safety and convenience. Therefore effective January 1, 2012, we will eliminate the reinstated exemption to the requirement to utilize the NCPDP SCRIPT standard for entities that transmit prescriptions or prescription-related information for Part D covered drugs prescribed for Part D eligible individuals by means of computer-generated facsimiles in all instances other than transient/temporary network transmission failures.

We do not believe that a computer-generated facsimile exemption is needed for pharmacies in areas where prescribers who do not have access to the technology that would allow them to e-prescribe under the “significant hardship” exception contained in the MIPPA. We would expect that by the year 2012, the effective date of the elimination of the computer-generated facsimile exemption (in all instances other than temporary and transient network transmission failures), that most areas would have the telecommunication and/or Internet connectivity capacity to allow providers to conduct e-prescribing, and an exemption is not warranted in the rare instance where this may not be the case.

Comment: We received feedback from 19 commenters who agreed with the proposal to extend the exemption to computer-generated facsimiles for the prescription refill request transaction in cases where the physician is not NCPDP SCRIPT enabled.

Response: We agree with commenters. This issue will be resolved with this final rule's reversal of the CY 2008 PFS final rule's e-prescribing provisions that would have eliminated the computer-generated faxing exemption (in all instances other than temporary and transient network transmission failures) effective on January 1, 2009, and concurrent reinstatement of the original exemption for computer-generated facsimiles from the November 7, 2005 final rule effective January 1, 2009. However, we will eliminate the reinstated exemption for computer-generated facsimiles (in all instances other than transient/temporary network transmission failures) effective when the MIPPA e-prescribing program disincentives take effect on January 1, 2012.

Comment: Some commenters expressed opposition to the proposed elimination of the exemption for computer-generated facsimiles in all instances other than temporary/transient network transmission failures. One commenter erroneously identified January 1, 2010 as the proposed compliance date, but still asked for additional time for NCPDP SCRIPT-noncompliant providers to become compliant with the NCPDP SCRIPT standard.

Another commenter stated that the overall e-prescribing adoption rate has not met a critical mass to justify a January 2009 deadline for the elimination of the computer-generated facsimile exemption in all instances other than transient/temporary network transmission failures. The commenter noted that with the effective date fast approaching, unless the computer-generated facsimile exemption is modified once again, many organizations will have to hastily implement e-prescribing solutions or revert back to paper prescribing.

Response: We agree with commenters that it is in the best interests of the industry and consumers that the CY 2008 PFS final rule's modifications to the computer-generated facsimile exemption be reversed and the broad exemption originally created in the November 7, 2005 final rule for computer-generated facsimiles in Part D e-prescribing be reinstated to prevent a reversion by providers to paper prescriptions, and a reversion by pharmacies to traditional paper faxing. Therefore, by this rule we have reinstated the original exemption for computer-generated facsimiles effective January 1, 2009. However, we will eliminate the reinstated computer-generated facsimiles exemption in all instances other than transient/temporary network transmission failures effective when the MIPPA e-prescribing program disincentives take effect on January 1, 2012.

Comment: Some commenters requested clarification of our proposed amendment to the exemption for computer-generated facsimiles. One commenter stated that their customers believe that all Part D prescriptions, without exception, must be sent via electronic transmission as of January 1, 2009, and otherwise they may be liable for conducting an “illegal” transaction. To avoid undue hardship, costs, and confusion, the commenter asked that CMS clearly specify that e-prescribing is preferred but still voluntary for providers and dispensers; and those prescribers not currently e-prescribing under the Medicare Part D pharmacy benefit program may still write paper prescriptions, or call in or fax their prescriptions using a traditional paper fax machine to a pharmacy.

Another commenter asked CMS to clarify that providers who use prescription writing systems that enable computer based facsimiles but do not enable NCPDP SCRIPT transactions are not subject to the provisions of the computer-generated facsimile exemption. One commenter asked CMS to clarify the definition of a “true” e-prescribing system.

Response: We recognize that there might be some confusion for prescribers and dispensers with the elimination of certain portions of the computer-generated facsimile exemption. In the November 7, 2005 e-prescribing final rule (70 FR 67568), we defined “e-prescribing” to mean the transmission, using electronic media, of prescription or prescription-related information, between a prescriber, dispenser, PBM, or health plan, either directly or through an intermediary, including an e-prescribing network.

As we noted above, section 101 of the MMA amended title XVIII of the Act to establish the Part D prescription drug benefit program. As part of that program, the Congress required the establishment of a “voluntary” e-prescribing program. It is voluntary in that providers and dispensers are not required to conduct e-prescribing for Medicare covered drugs prescribed for Medicare Part D eligible beneficiaries, but if they do conduct such e-prescribing, they must do so using the applicable standards that are in effect at the time of the transmission. Part D sponsors, in turn, must support e-prescribing so that providers and dispensers who wish to conduct e-prescribing transactions with plans will be able to do so using the adopted standards that are in effect at the time of the transaction. We refer those commenters with questions regarding the creation and scope of the Medicare Part D e-prescribing program to the “Background” section of the E-Prescribing and the Prescription Drug Program proposed rule published in the February 4, 2005 Federal Register (70 FR 6256)

In the CY 2008 PFS proposed rule (72 FR 38194), we proposed to revise § 423.160(a)(3)(i) to eliminate the computer-generated facsimile exemption to the NCPDP SCRIPT standard for the communication of prescription or certain prescription-related information between prescribers and dispensers for the transactions specified in § 423.160(b)(1)(i) through (xii). In keeping with the comments that we received, we finalized modifications that required prescribers and dispensers to use NCPDP SCRIPT compliant e-prescribing software when they conduct e-prescribing transactions for Part D covered drugs that are prescribed for Part D eligible individuals in all instances other than transient/temporary network transmission failures, effective January 1, 2009. Those prescribers who choose not to e-prescribe Part D covered drugs for Part D eligible individuals can continue to use non-computer-generated facsimiles as a means to deliver such prescriptions to a dispenser.

Providers who use electronic prescription writing systems that are only capable of producing computer-generated facsimiles are not in conformance with the adopted standards because they do not transmit information using the adopted NCPDP SCRIPT standard. Those who utilize their NCPDP SCRIPT enabled systems to produce computer-generated facsimiles are likewise not in compliance with the adopted standards because computer-generated facsimiles on these systems also do not use the adopted standard. We believed that eliminating the exemption (in all instances other than transient/temporary network transmission failures) might encourage those with NCPDP SCRIPT capabilities that have not been activated to use the NCPDP SCRIPT standard in electronic data interchanges, and those without such capabilities to upgrade their current software products, or, where upgrades are not available, to switch to new products that would enable such true e-prescribing.

We believe that eliminating the computer-generated facsimile exemption in 2012 would provide sufficient notice to prescribers and dispensers who would need to implement or upgrade e-prescribing software to look for products and upgrades that are capable of generating and receiving transactions that utilize NCPDP SCRIPT. Eliminating the reinstated computer-generated facsimile exemption in 2012 would also afford current e-prescribers time to work with their trading partners to eventually eliminate the use (in all instances other than transient/temporary network transmission failures) of computer-generated facsimiles in e-prescribing transactions.

From our analysis of the public comments that asked that the elimination of the computer-generated facsimile exemption (in all instances other than temporary/transient network transmission failures) be reversed, and in view of the recent MIPPA legislation that provides a more powerful incentive to providers to e-prescribe in accordance with the standards adopted under Medicare Part D, we are reversing the modifications to the computer-generated facsimile exemption that were made in the CY 2008 PFS final rule with comment period and reinstating the original computer-generated facsimile exemption that was adopted in the November 7, 2005 e-prescribing final rule in its entirety, effective January 1, 2009. However, we will eliminate the reinstated exemption for computer-generated facsimiles in all instances other than transient/temporary network transmission failures when the MIPPA e-prescribing program disincentives take effect on January 1, 2012.

Comment: Several commenters who agreed with our proposal to eliminate the computer-generated facsimile exemption (in all instances other than transient/temporary network transmission failures) suggested that we delay the January 1, 2009 effective date stated in the CY 2008 PFS final rule with comment period. One commenter urged CMS to conduct studies on the barriers to use of NCPDP SCRIPT compliant systems, and then work with stakeholders to identify pathways toward more widespread use of e-prescribing systems. Another commenter noted that the recent merger of the two major e-prescribing information exchange networks still may hold unforeseen consequences for those vendors who have been previously certified or are in the process of being certified by either of those two networks. The commenter stated that any software changes that the network may demand as a result of their merger may take time to develop, and as a result, the effective date should be delayed.

A few commenters said that we should tie the computer-generated facsimile exemption compliance to the April 1, 2009 compliance date of the most recent round of final e-prescribing standards. One commenter suggested that we delay the effective date of the CY 2008 PFS final rule with comment period modifications to the computer-generated facsimile exemption to 2012, when wireless broadband upload connectivity is expected to achieve a speed of faster than 1MB/second.

Response: We do not see a correlation between the e-prescribing network certification process, and the commenter's request to delay the elimination of the computer-generated facsimile exemption based on what may or may not take place in that process. Additionally, the process for vendors to certify their products to an e-prescribing information exchange network is a marketplace issue to which we are not a party.

We understand that some prescribers and dispensers may not have been prepared to e-prescribe using the adopted standards by the January 1, 2009 effective date of the CY 2008 PFS final rule's e-prescribing provisions. However, with this final rule's reversal of those modifications and reinstatement of the original computer-generated facsimile exemption that was adopted in the November 7, 2005 e-prescribing final rule in its entirety, effective January 1, 2009, we believe we have addressed commenters' concerns regarding effective dates. However, we will eliminate the reinstated exemption for computer-generated facsimiles in all instances other than transient/temporary network transmission failures when the MIPPA e-prescribing program disincentives take effect on January 1, 2012.

Comment: A comment concerning the computer-generated facsimile exemption issue relative to non-NCPCP SCRIPT enabled pharmacies (including many independent pharmacies) stated that there are still significant segments of the retail pharmacy market not yet in a position to receive electronic prescriptions because they are only facsimile-enabled. The commenter cited national prescription information exchange network data showing that only about 42,000 of the nation's pharmacies are NCPDP SCRIPT e-prescribing enabled, and about 20,000 of the nation's pharmacies are only manual (traditional paper-based) facsimile or computer-generated facsimile-enabled.

One commenter stated that e-prescribing technology has not yet been perfected by its developers, and that the receiving parties (that is, pharmacies) have not fully integrated this technology into their workflows. The commenter also indicated that use of e-prescribing technology is dependent on the availability of telecommunications services and Internet connectivity, and this is problematic especially in rural areas where there may be a lack of such telecommunications and/or Internet connectivity services needed to support e-prescribing systems.

A vendor expressed concern that their client pharmacies that rely solely on computer-generated facsimiles may not be able to send or receive computer-generated facsimile transmissions through national prescription information exchange networks after January 1, 2009.

Response: We recognize that pharmacies that are not now conducting e-prescribing transactions using the NCPDP SCRIPT standard will incur costs to implement this capability, and that pharmacies will likely experience an increase in e-prescribing transaction volumes and costs as utilization of such transactions increases.

We agree that independent pharmacies and pharmacies that employ only computer-generated facsimile capabilities need to be given the opportunity to upgrade their systems and that elimination of the computer-generated facsimile exemption (in all instances other than transient/temporary network transmission failures) would place them at a disadvantage at a time when the MIPPA incentive program is expected to generate increased e-prescribing volumes. Therefore, for this reason and the other reasons stated herein, we are reversing the modifications to the computer-generated facsimile exemption that were made in the CY 2008 PFS final rule with comment period and reinstating the original computer-generated facsimile exemption that was adopted in the November 7, 2005 e-prescribing final rule in its entirety, effective January 1, 2009. However, we will eliminate the exemption for computer-generated facsimiles in all instances other than transient/temporary network transmission failures when the MIPPA e-prescribing program disincentives take effect on January 1, 2012.

Comment: We received comments requesting confirmation that the proposed revisions to the computer-generated facsimile exemption would not now apply to long term care providers. Another asked that CMS allow long term care facilities to continue to transmit prescriptions via computer-generated facsimile to pharmacies that are not yet using systems capable of receiving NCPDP SCRIPT transactions appropriate to this setting (NCPDP SCRIPT Version 10.2 or higher). A professional association noted that eliminating the exemption for computer-generated facsimiles (in all instances other than transient/temporary network transmission failures) is unlikely to spur adoption among long term care providers and could, if left standing, force some facilities to resort to manual facsimiles. The commenter also urged CMS to eliminate the e-prescribing exemption for long term care facilities.

Response: In § 423.160(a)(3)(iii), long term care facilities were specifically exempted from the requirement to use the adopted standards in e-prescribing under Medicare Part D due to their unique workflows and complexities associated with prescribing for patients in long term care settings. This exemption remains in effect for long term care facilities. Therefore, long term care facilities may continue to use computer-generated facsimiles, and such facilities will continue to be exempt from the requirement to use the NCPDP SCRIPT Standard in prescription transactions between prescribers and dispensers where a non-prescribing provider is required by law to be a part of the overall transaction process.

Comment: Comments regarding other issues relevant to e-prescribing in general, and the elimination of the computer-generated facsimile exemption (in all instances other than transient/temporary network transmission failures) specifically included comments requesting amendments to the computer-generated facsimile exemption that would address when a prescriber or dispenser is prohibited from using the NCPDP SCRIPT standard for e-prescribing. The commenter noted that the Drug Enforcement Administration's (DEA) prohibition of e-prescribing of controlled substances would prevent a provider from prescribing such controlled substances under the Part D program in accordance with the adopted standards. One commenter stated that vendors would have to disable electronic communication of prescriptions from their client prescribers through the prescription information exchange network to those pharmacies that are only computer-generated facsimile-enabled. The vendor assumed that if their client prescriber attempts to send those prescriptions electronically that the prescription will be rejected by the prescription information exchange network because the pharmacy is not activated with the network for electronic transactions using the NCPDP SCRIPT standard. This same commenter noted that the network has heretofore insulated the prescriber from having to be concerned with whether or not the patient's choice of pharmacy was enabled to receive prescriptions in a particular way. After the proposed January 2009 compliance date, the commenter felt that additional burdens would be placed on the prescriber to obtain this information from the patient up front, or could compel patients to make different pharmacy choices which could result in lost business for pharmacies that are only facsimile-enabled.

Response: The DEA has authority through the Controlled Substances Act over the electronic prescribing of controlled substances, and does not currently allow for the electronic prescribing of Schedule II drugs. As such substances currently may not be prescribed electronically, there is no conflict of law at this time. As noted previously, e-prescribing under Medicare Part D is voluntary for prescribers and dispensers—they are not required to issue prescriptions in electronic form. Although the DEA has published a notice of proposed rulemaking to allow for the electronic prescribing of controlled substances, we have no indication as to when the DEA will make a final determination on this issue. We continue to work with the DEA to help facilitate a solution that addresses both their enforcement requirements with respect to the electronic prescribing of controlled substances, and the needs of the healthcare community for a solution that is interoperable with existing e-prescribing systems, scalable and commercially viable.

After reviewing these comments, in the interest of patient care and safety, and to foster the adoption of true e-prescribing among prescribers and dispensers, we are reversing the modifications to the computer-generated facsimile exemption that were made in the CY 2008 PFS final rule with comment period and reinstating the original computer-generated facsimile exemption that was adopted in the November 7, 2005 e-prescribing final rule, effective January 1, 2009. However, we will also eliminate the reinstated exemption for computer-generated facsimiles in all instances other than transient/temporary network transmission failures when the MIPPA e-prescribing program disincentives take effect on January 1, 2012.

L. Comprehensive Outpatient Rehabilitation Facilities (CORF) and Rehabilitation Agency Issues

Comprehensive outpatient rehabilitation facilities (CORFs) and rehabilitation agencies are Medicare providers that are certified to provide certain rehabilitation services. Currently covered CORF clinical services and rehabilitation agency services are paid through the PFS.

In the CY 2008 PFS final rule with comment period (72 FR 66399), we revised the CORF regulations at 42 CFR parts 410 and 413 to ensure that the regulations reflected the statutory requirements applicable to CORFs under sections 1834(k) and 1861(cc) of the Act. Many of these changes were technical in nature. Specifically, the regulatory changes: (1) Revised the definitions of “physicians' services,” “respiratory therapy services,” “social and psychological services,” “nursing services,” “drugs and biologicals,” and “supplies and durable medical equipment,” and “home environment evaluation”; (2) amended the payment provisions for CORF services; and (3) made other clarifications and changes to the conditions for coverage for CORF services.

In the CY 2009 PFS proposed rule, we addressed the comments received in response to the CY 2008 PFS final rule with comment period (72 FR 66222), proposed new provisions, and proposed revising other provisions. We solicited comments on all of the proposed changes.

1. Personnel Qualifications

We stated in the CY 2008 PFS final rule with comment period that we would propose updated qualifications for respiratory therapists in future rulemaking (72 FR 66297). It has been our policy that only the respiratory therapist (and not the respiratory therapy technician), who possesses the educational qualifications necessary to provide the level of respiratory therapy services required, is permitted to provide respiratory therapy in a CORF setting.

In the CY 2008 PFS final rule with comment period, we received a comment indicating that our regulations were outdated and did not conform to current respiratory therapy professional standards. Specifically, the American Association for Respiratory Care (AARC) stated that the terms “certified respiratory therapist (CRT)” and the “registered respiratory therapist (RRT)” have replaced the terms “respiratory therapy technician” and “respiratory therapist,” respectively. In addition, the qualifications for CRTs and RRTs differ from those applicable to respiratory therapy technicians and respiratory therapists. The CRT designation is awarded after an individual successfully passes the entry-level respiratory therapy examination. In order to be eligible for the RRT examination, an individual must be a graduate of an advanced level respiratory therapy educational program and have obtained the RRT credential.

We proposed to revise § 485.70(j) of the Conditions of Participation of CORF services—setting forth the personnel qualifications for respiratory therapists in CORFs—to be consistent with current qualification requirements for RRTs, as recommended by AARC. We also proposed to delete § 485.70(k), which sets forth personnel qualifications for CRTs (previously referred to as respiratory therapy technicians) in CORFs. In the past, we have not reimbursed CORFs for respiratory therapy services provided by respiratory therapy technicians or CRTs, and we believe that removing the technician definition would clarify our position. We stated that we believed that current medical standards continue to require that the provision of skilled respiratory therapy services to patients in the CORF setting be furnished by RRTs. While CRTs furnish general respiratory care procedures and may assume some clinical responsibility for specified respiratory care modalities involving the application of therapeutic techniques under the supervision of an RRT or a physician, the educational qualifications that a RRT possesses allow him or her to evaluate, treat, and manage patients of all ages with respiratory illnesses. RRTs participate in patient education, implement respiratory care plans, apply patient-driven protocols, follow evidence-based clinical practice guidelines, and participate in health promotion, disease prevention, and disease management. RRTs also may be required to exercise considerable independent judgment.

This was implemented in the CY 2002 PFS final rule with comment period (66 FR 55246 and 55311) and the CY 2003 PFS final rule with comment period (67 FR 79966 and 79999) when we developed and discussed G codes, CORF respiratory therapy services, and specifically recognized the RRT as the appropriate level of personnel to provide these CORF services. Finally, the CORF regulations at § 485.58(d)(4) state that as a condition of participation for CORFs, CORF personnel must meet the qualifications described at § 485.70.

For CY 2009, to maintain consistency in the conditions of participation for both CORFs, home health agencies (HHAs), and other outpatient service providers, we proposed to amend the material addressing personnel qualifications in § 485.70. Specifically, we proposed to amend paragraphs § 485.70(c) and § 485.70(e) by referencing the personnel qualifications for HHAs at § 484.4. This change would align CORF personnel requirements not only with HHA requirements, but also with other regulations in Part 485 addressing provision of physical therapy, speech-language pathology, and occupational therapy services.

Also, at 485.58(a)(1)(i), we proposed to amend the duties of a CORF physician to include medical supervision of nonphysician staff. This change conforms to changes made to the CORF conditions for coverage in the CY 2008 PFS final rule with comment period. We believe that adding medical supervision of nonphysician staff to the duties of CORF physicians more accurately reflects the duties and responsibilities of the CORF physician. We also believe that this change could increase the quality of care provided to patients of CORFs.

The following is a summary of the comments received concerning Personnel Qualifications and our responses.

Comment: Commenters generally supported our proposed changes. We received a comment that supported the spirit of our proposed changes to the definitions of respiratory therapists and provided further clarification regarding current professional standards. Specifically, in previous comments, the commenter noted that the term “respiratory therapy technician” is an obsolete term. This is because today's curriculum and educational standards are no longer structured to teach at a technician level.

The commenter noted that, in our discussion of the issue in the proposed rule, we stated that it was AARC's belief that the term “certified respiratory therapist” (CRT) had replaced the obsolete term “respiratory therapy technician” and the term “registered respiratory therapist” (RRT) has replaced the term “respiratory therapist.” The commenter informed us that our statement was incorrect. According to the commenter, today's educational programs prepare students for the registry (RRT) examinations administered by the National Board for Respiratory Care (NBRC). Before graduates are eligible to sit for the RRT examinations they must first pass the NBRC's entry-level examination, which results in the CRT credential. Thus the CRT-credentialed individual is considered an “entry-level respiratory therapist,” but unlike other allied health professions, the terms “technician” or “assistant” are not used in the respiratory therapy profession.

According to AARC, in the profession today, it is accepted clinical and medical terminology that individuals holding the credentials of both CRT and RRT are known simply as “respiratory therapists.” Also, most State laws that require licensing of respiratory therapists make no distinction in the license as to whether the individual holds a credential of CRT or RRT. They are both licensed as “respiratory therapists.” To the best of AARC's knowledge, there are only six States that require a separate license for a CRT or a RRT. AARC recommended that the proposed definition be revised.

Since CMS uses the term “respiratory therapist” in other regulatory provisions and manual instructions where applicable, AARC recommended that CMS delete the word “registered” from the proposed definition. This would also be consistent with the terms “physical therapist” and “occupational therapist” used to define qualified personnel in those professions.

AARC also believes that CMS can ensure that only registered respiratory therapists, and not individuals holding only the CRT, meet the personnel qualifications by revising the curriculum requirements to require that respiratory therapists have passed the registry examination administered by the NBRC. AARC also noted that the name of the Board administering the certification and registry exams is the NBRC, not the National Board for Respiratory Therapy, Inc.

Response: We thank the commenters for their support of our proposed revisions. We believe that the comments provided by AARC reflect and further clarify our intent to provide appropriate respiratory care to patients served by CORFs. We want to ensure that only respiratory therapists with the highest level of education and training can furnish respiratory therapy services in a CORF. Therefore, only those individuals holding the credential of registered respiratory therapist (RRT) conferred by the NBRC would qualify. Qualifying by being “eligible to take the registry examination,” as we proposed, results in the unintended consequence of permitting CRTs who have not yet taken the registry exam to meet the personnel qualifications.

As a result of the public comments, we are finalizing the proposed revisions that reference personnel qualifications for HHAs at § 485.70(c) and (e). We are also finalizing our proposed revision to § 485.58(a)(i)(1) that amends the duties of CORF physicians to include medical supervision of nonphysician staff (we received no comments on this provision). We are adopting the revisions to the personnel qualifications for respiratory therapists at § 485.70(j) as suggested by AARC, to read as follows:

(j) A respiratory therapist must—

(1) Be licensed by the State in which practicing, if applicable; and

(2) Have successfully completed a nationally-accredited educational program that confers eligibility for the National Board for Respiratory Care (NBRC) registry exams, and have passed the registry examination administered by the NBRC, or

(3) Have equivalent training and experience as determined by the National Board for Respiratory Care (NBRC) and passed the registry examination administered by the NBRC.

2. Social and Psychological Services

In the CY 2008 PFS final rule with comment period (72 FR 66297), we clarified that all CORF services, including social and psychological services, must directly relate to or further the rehabilitation goals established in the physical therapy, occupational therapy, speech-language pathology, or respiratory therapy plan of treatment. We believe that using a full range of clinical social and psychological CPT codes to describe CORF social and psychological services is inappropriate because social and psychological CORF services do not include independent clinical treatment of mental, psychoneurotic, and personality disorders. CPT codes 96150 through 96154 and CPT codes 90801 through 90899 are inappropriate for CORF use because all of these CPT codes represent full-scale clinical treatment for these disorders. As we stated in the CY 2008 PFS final rule with comment period, we believe that for purposes of providing care in a CORF, social and psychological services should represent only case management and patient assessment components as they relate to the rehabilitation treatment plan (72 FR 66297 through 66298). Consequently, after notice and comment, we changed our policy and payment for CORF social and psychological services; these services may no longer address a CORF patient's mental health diagnoses except insofar as they relate directly to other services provided by the CORF.

We specified in the CY 2008 final rule with comment period (72 FR 66298) that only the CPT code 96152 for health and behavior intervention (with the patient) could be used to bill for CORF social and psychological services. This code was part of a series of codes that was created by CPT in 2002 to address health and behavior assessment issues. These services are offered to patients who present with established illnesses or symptoms, who are not diagnosed with mental illness, and may benefit from evaluations that focus on the biopsychosocial factors related to the patient's physical health status, such as patient adherence to medical treatment, symptom management and expression, health-promoting behaviors, health-related risk-taking behaviors, and overall adjustment to medical illness. We also adopted the more limited definition of CORF social and psychological services in § 410.100(h) (72 FR 66399). The regulations state that social and psychological services include the assessment and treatment of an individual's mental and emotional functioning and the response to and rate of progress as it relates to the individual's rehabilitation plan of treatment, including physical therapy services, occupational therapy services, speech-language pathology services, and respiratory therapy services.

We also noted that a HCPCS G-code could more accurately describe these unique CORF services, but believed that it was inappropriate to create such a G-code in the final rule with comment period without first proposing to do so in proposed rulemaking.

Therefore, we proposed to create a CORF specific G-code, GXXX5, Social work and psychological services, directly relating to and/or furthering the patient's rehabilitation goals, each 15 minutes, face-to-face; individual (services provided by a CORF-qualified social worker or psychologist in a CORF), to accurately describe the unique social and psychological services provided by CORF staff and to establish appropriate payment for these services. We proposed to use salary and wage data from the Bureau of Labor Statistics to institute a blended social worker/psychologist clinical labor category using a price per minute rate of $0.45 for the PE component of GXXX5. We proposed to assign a malpractice RVU of 0.01. Because the services described by GXXX5 are solely furnished by a CORF social worker or clinical psychologist, and not by a physician, we did not propose to allocate a work RVU for these services.

We also proposed to revise § 410.100(h) to delete the reference to “and treatment.” As discussed above and in the CY 2008 PFS final rule with comment period (72 FR 66297), we believe all CORF services, including social and psychological services, must directly relate to or further the rehabilitation goals established in the physical therapy, occupational therapy, speech-language pathology, or respiratory therapy plan of treatment. Accordingly, social and psychological CORF services do not include clinical treatment of mental, psychoneurotic, and personality disorders. We stated that we are concerned that the phrase “and treatment” currently included in the definition of CORF social and psychological services may be misconstrued to include social and psychological services for the independent clinical treatment of mental illness. Therefore, we proposed to delete this language in order to clarify that only those social and psychological services that relate directly to a rehabilitation plan of treatment and the associated rehabilitation goals are considered CORF social and psychological services.

In addition, we proposed to remove § 410.155(b)(1)(ii) regarding the application of mental health limitations to CORF social and psychological services. As we previously stated, CORF services, including social and psychological services, must directly relate to or further the rehabilitation goals established in the physical therapy, occupational therapy, speech-language pathology, or respiratory therapy plan of treatment. In the CY 2008 PFS final rule with comment period (72 FR 66400), we stated that CORF services must be furnished under a written plan of treatment that indicates the diagnosis and rehabilitation goals, and prescribes the type, amount, frequency, and duration of the skilled rehabilitation services, including physical therapy, occupational therapy, speech-language pathology and respiratory therapy services. Section 410.155(b) specifies that the mental health payment limitation applies when there is a diagnosis of mental, psychoneurotic, and personality disorders (mental disorders identified by a diagnosis code within the range of 290 through 319) prior to beginning services. Under our revised definition, CORF social and psychological services must directly relate to the physical therapy or other rehabilitation plan of treatment and its associated goals. Since these patients are receiving CORF services because they have a need for skilled rehabilitation services, any social and psychological services provided in a CORF under § 410.100(h) must include an assessment of the individual's mental and emotional functioning exclusively as such functioning relates to their rehabilitation plan of treatment. In our view, such services provided in a CORF would not be “treatment of mental, psychoneurotic, and personality disorders of an individual” as set out in section 1833(c) of the Act, so that the statutory mental health payment limitations would not apply. We proposed changes to § 410.155(b) to reflect our view regarding the limited nature of these services.

The following is a summary of the comments received concerning our proposal to create a HCPCS G-code to describe the unique CORF social and psychological services and our responses.

Comment: One commenter stated that the G-code is more specific to rehabilitation services and its implementation will support future adoption as a CPT code. Another commenter stated that occupational therapy services are a core CORF service. The commenter requested that CMS clarify that the new G-code would not have a negative impact on the provision of occupational therapy services to meet patient needs that are similar to those addressed by the G-code. The commenter stated that occupational therapy, as with all therapy services, includes assessment of the patient level of functioning as an integral part of the therapy services. Other commenters suggested that therapists and psychologists assess and treat mental, cognitive, and emotional functioning as they relate to a patient's rehabilitation plan of care. The commenters further suggested that CMS revisit its decision not to allow CORF therapists and psychologist to bill the Health and Behavioral Assessment/Intervention codes (CPT codes 96150 through 96155), which are used to identify and treat “biopsycholosocial factors important to physical health problems.” One commenter also requested that the new G-code include physician work in the RVUs since all other codes billed by psychologist include physician work. Another commenter stated that the statute clearly defines social and psychological services so there is no need for the development of a G-code.

Response: Section 1861(cc)(2)(B) of the Act defines the term CORF to mean a facility which provides at least physician services (as defined at § 410.100(a)), physical therapy services and social or psychological services. As such, occupational therapy services are not considered one of the core CORF services but are optional. The CORF must provide the core CORF services. In addition it may furnish any of the optional covered and medically necessary services and items such as occupational therapy, speech-language pathology, or respiratory therapy services. These optional services must directly relate to, and be consistent with, the rehabilitation plan of treatment, and must be necessary to achieve the rehabilitation goals. Occupational therapy services include assessment of an individual's level of independent functioning, selection and teaching of task-oriented therapeutic activities to restore sensory-integrative functions, teaching of compensatory techniques to permit an individual with a physical or cognitive impairment or limitation to engage in daily activities. The patient's plan of treatment will document all the covered and medically necessary items and services that the patient requires which will include the core CORF services as well as any of the optional services such as occupational therapy.

In the CY 2007 PFS final rule with comment period, we revised § 410.100(h) states that CORF social and psychological services include the assessment and treatment of a CORF patient's mental health and emotional functioning and the patient's response to/and rate of improvement and progress towards the rehabilitation plan of treatment. In our view, social and psychological services must contribute to the improvement of the individual's rehabilitation condition and may not relate to a mental health diagnoses. In the CY 2008 PFS final rule (72 FR 66298), we discussed the use of CPT codes 96150 through 96155 for health and behavior assessment and treatment, which represent full-scale clinical treatment of mental, psychoneurotic, personality disorders and biopsychosocial functioning. We revised the previous definition of CORF social and psychological services and instructed that these services should be limited to those described by CPT code 96152. We stated that provision of other therapeutic services was outside of the scope of coverage for CORFs. Since these CPT codes were not a part of the proposed regulation, we will not revisit the use of these CPT codes in this final regulation.

We are finalizing our proposal to create the CORF specific G-code which will be G0409. The description of this G-code will be G0409, Social work and psychological services. This code will directly relate to and/or further the patient's rehabilitation goals, each 15 minutes, face-to face; individual (services provided by a CORF-qualified social worker or psychologist in a CORF), to accurately describe the unique social and psychological services provided by CORF staff and to establish appropriate payment for these services. The code does not include any physician work RVUs because the social and psychological services are performed by a CORF social worker with a Bachelor of Science degree or a Masters-level psychologist and not by a physician as defined in the statute at section 1861(r) of the Act.

We did not receive any comments on our proposal to eliminate the mental health limitation requirement. The mental health limitation is no longer applicable because under our revised definition, CORF social and psychological services must directly relate to the physical therapy or other rehabilitation plan of treatment and its associated goals and do not relate to a general diagnosis of mental, psychoneurotic, and personality disorders which the mental health limitation addresses. Therefore, we are finalizing our proposed change to remove § 410.155(b)(1)(ii) regarding the application of mental health limitations to CORD social and psychological services.

3. CORF Conditions of Participation

In the CY 2008 final rule with comment period (72 FR 66400), we finalized changes to the CORF coverage and payment rules. However, all conforming regulations in the CORF Conditions of Participation (CoPs) were not updated at that time.

In the CY 2009 PFS proposed rule, we proposed to revise § 485.58(e)(2). Section 485.58(e) currently provides that as a CoP, a CORF facility must provide all CORF services on its premises with the exception of—(1) physical therapy, occupational therapy, and speech-language pathology services furnished away from the premises of the CORF, if Medicare payment is not otherwise made for these services; and (2) a single home visit for the purpose of evaluating the potential impact of the patient's home environment on the rehabilitation goals. We proposed to clarify that the alternate premises for provision of physical therapy, occupational therapy, and speech-language pathology services may be the patient's home.

The following is a summary of the comments received concerning CORF CoPs and our responses.

Comment: Commenters concurred with the proposed clarification regarding the patient's home as an alternate premise for provision of physical therapy, occupational therapy, and speech-language pathology services.

Response: We thank the commenters for their support of this provision. As a result of the public comments, we are finalizing the revisions to § 485.58(e)(2) as proposed.

4. Extension Location

We proposed to add a definition for an “extension location” of a rehabilitation agency to the definitions at § 485.703. While there are currently no provisions that allow rehabilitation agencies to offer services in an extension location, there are currently 2,875 rehabilitation agency primary locations and 2,486 rehabilitation agency offsite practice locations. While our State Operations Manual recognizes that these rehabilitation agency extension locations exist, it also includes language stating that the extension locations must meet applicable rehabilitation agency CoPs. However, it is difficult to apply CoP requirements to a location that currently is not identified in the CoPs. Creating a definition in the CoPs that applies to the extension locations will allow us to survey and monitor the care provided in these extension locations on a consistent basis.

Therefore, we proposed to define an “extension location” as: (1) A location or site from which a rehabilitation agency provides services within a portion of the total geographic area served by the primary site; (2) is part of the rehabilitation agency; and (3) is located sufficiently close to share administration, supervision, and services in a manner that renders it unnecessary for the extension location to independently meet the conditions of participation as a rehabilitation agency.

The following is a summary of the comments received concerning an extension location and our responses.

Comment: Some commenters supported our proposed revisions and suggested that we add additional clarifying information. One commenter suggested that we clarify the status of space that a rehabilitation agency may use within another facility (for example, a room used by the agency within a nursing facility). Another commenter suggested that we specify a mile radius from the rehabilitation agency's primary site within which an extension location may exist.

Response: We thank the commenters for their input. Regarding a mile radius, mileage, and travel times from the primary location to the extension location are significant factors to consider because they are implicitly referenced in the proposed regulation. However, each alone would not be the single issue in determining appropriateness as a sole means for approving an extension location. We have decided to leave it to the rehabilitation agency to prove to the State survey agency that the rehabilitation agency is close enough to the extension location to provide supervision of staff during its hours of operation. Supervision of the extension location staff must be adequate to support the care needs of the patients. We believe that our proposed definition for an extension location is adequate, as it has been used successfully in our State Operations Manual for other provider types. We are not making any changes to our proposed revisions based on public comments, and are finalizing them as proposed.

5. Emergency Care

We proposed to revise § 485.711(c), Standard: Emergency care, to reflect current medical practice. We proposed to remove the requirement that the rehabilitation agency provide for one or more doctors of medicine or osteopathy to be available on call to furnish necessary medical care in case of an emergency. We do not believe that the patients serviced by rehabilitation agencies regularly experience medical emergencies that necessitate the retention of an on-call physician.

Therefore, we proposed that each rehabilitation agency establish procedures to be followed by personnel in an emergency that cover immediate care of the patient, persons to be notified, and reports to be prepared.

The following is a summary of the comments received concerning Emergency care and our responses.

Comment: Most commenters concurred with our proposed changes to the emergency care standard. Specifically, the commenters supported our proposed elimination of the requirement that rehabilitation agencies retain a physician on call for emergencies. The commenters cited difficulty in recruiting physicians for this role, and stated that it is often impractical to contact a physician in the rare case of an emergency. One commenter also supported the revisions to the emergency provisions because they allow facilities to develop emergency care plans most appropriate for an individual facility's location and patient population.

Response: We thank the commenters for their support, and agree that these revisions will allow facilities to plan for, and respond to, emergency care situations in appropriate ways. As a result of the public comments, we are finalizing the provision as proposed with slight non-policy revisions for grammatical purposes. We are also revising the stem statement to remove the reference to the physician's presence in emergency situations.

6. Technical Changes for Rehabilitation Agencies

Under section 1861(p) of the Act, rehabilitation agencies are tasked with furnishing outpatient physical therapy and speech-language pathology services. Unlike CORFs, which provide comprehensive outpatient rehabilitation services, rehabilitation agencies primarily provide physical therapy services. Some of the other services offered by CORFs, such as respiratory therapy and social services are outside the scope of rehabilitation agency practice.

The current definition of “rehabilitation agency” at § 485.703 (paragraph (2)(ii) of the definition) requires that rehabilitation agencies provide social or vocational adjustment services. This requirement is outside of the rehabilitation agency's scope of practice and has caused confusion for these providers because we do not reimburse rehabilitation agencies for furnishing social or vocational services. Accordingly, in § 485.703, we proposed to delete the requirement in paragraph (2)(ii) of the rehabilitation agency definition requiring a rehabilitation agency provide social or vocational services.

The following is a summary of the comments received concerning the technical change and our responses.

Comment: Most commenters responded in support of this proposed revision. Some commenters stated that this requirement, which is an unfunded mandate, is burdensome, and that patients often resent being required to release their personal information to a social worker they will likely never meet or work with. The commenters also agreed that social and vocational services are outside the scope of practice for rehabilitation agencies.

Response: We thank the commenters for their support of this change. As a result of the public comments, we are finalizing the provision as proposed.

We also proposed to make a conforming change at § 485.717, the Condition of participation: Rehabilitation program. At 485.711(b)(3), we proposed to remove the reference to § 410.61(e), since § 410.61(e) no longer exists in regulation.

The following is a summary of the comments received concerning this technical change and our responses.

Comment: Some commenters concurred with this conforming change while others objected to this conforming change because the commenters believe that we did not also address the statement in § 485.711(b)(3) that states that the patient plan of care must be reviewed by a physician, nurse practitioner, clinical nurse specialist, or physician assistant at least every 30 days. The commenters believe that this conflicts with CMS payment policy, which requires recertification of the plan of care at least every 90 days. We also received several unsolicited comments requesting that we correct this perceived discrepancy.

Response: We did not propose to revise the language to conform to changes in the timing for recertification of outpatient therapy plans of care as discussed in the CY 2008 PFS final rule with comment period (72 FR 66396). Currently, § 485.711(b)(3) requires that the plan of care and results of treatment be reviewed by the physician or by the individual who established the plan at least as often as the patient's condition requires, and the indicated action is taken, which for Medicare patients being treated in rehabilitation agencies must be at least every 30 days. We believe that this requirement is in the best interests of rehabilitation agency patients, and note that by meeting this condition of participation, facilities would automatically meet the CMS payment policy requiring review at least every 90 days.

We are not making any changes to our proposed revisions as a result of public comments, and are finalizing the conforming change as proposed.

M. Technical Corrections for Therapy-Related Issues

We proposed the following technical changes to the regulations concerning therapy services:

  • In § 409.17(a), we proposed to delete the reference to paragraph (a)(1)(ii) which no longer exists.
  • In § 409.23, we proposed to revise the title of this section from “Physical, occupational and speech therapy” to “Physical therapy, occupational therapy and speech-language pathology services.”

Commenters voiced no objections to these technical corrections, and we are finalizing these technical corrections as proposed.

Several commenters brought to our attention changes made to the text of a regulation in the CY 2008 PFS final rule with comment period that did not reflect our policy as expressed in the preamble discussion. We intended to modify our regulations to make the policies for therapy services consistent across all settings. We added § 485.635(e) for the purpose of conforming the policies for physical therapy, occupational therapy and speech-language pathology in the critical access hospitals (CAHs) to the policies for therapy services in § 409.17. Section 485.635(e) describes therapy services when furnished at the CAH as those that “are provided as direct services by staff qualified under State law, and consistent with the requirements for therapy services described in § 409.17.” The reference in the regulation to “direct services” was not intended to address the employment status of staff providing those services, but we now recognize that it could be interpreted as such. Therefore, we are making a technical correction to the regulatory language at § 485.635(e) to remove the words “as direct services.”

N. Physician Self-Referral and Anti-Markup Issues

1. Exception for Incentive Payment and Shared Savings Programs (§ 411.357(x))

a. Introduction

In the CY 2009 PFS proposed rule (73 FR 38502), we proposed a new exception to the physician self-referral law for incentive payment and shared savings programs. The proposed exception covered various types of hospital-sponsored pay-for-performance (P4P), shared savings (for example, gainsharing), and similarly-styled programs that offer financial incentives to physicians intended to foster high quality, cost-effective care. The exception, as proposed, would provide more flexibility than existing physician self-referral exceptions available for such programs (73 FR 38548).

When establishing a new exception to the physician self-referral law, we rely on the authority granted to us in section 1877(b)(4) of the Act, which mandates that financial relationships permitted under an exception, such as the types of compensation arrangements contemplated by the proposed exception, not pose a risk of program or patient abuse. As described more fully in the CY 2009 PFS proposed rule, in order to ensure that we did not exceed this authority, the proposed exception was targeted and relatively narrow. We acknowledged that it was unlikely to cover as many arrangements as interested stakeholders would like, and sought comments on ways that we might expand the proposed exception without a risk of program or patient abuse.

We received approximately 55 timely public comment letters regarding the proposed exception for incentive payment and shared savings programs. The majority of commenters supported the establishment of the following: (1) An exception for incentive payment and shared savings programs; or (2) two exceptions—one for incentive payment programs and one for shared savings programs. However, most of these commenters urged us to finalize such an exception or exceptions only if substantial modifications were made to the conditions proposed. We also received a number of comment letters urging us not to finalize an exception for incentive payment and shared savings programs, some of which asserted that we lack statutory authority to do so and contended that any such exception necessarily would pose a risk of program or patient abuse.

As we stated in the CY 2009 PFS proposed rule (73 FR 38548):

In reviewing various programs and industry suggestions, we have been struck by the considerable variety and complexity of existing arrangements, and the likelihood of continued future innovation in the structure and method of these programs. This variety and complexity make it difficult to craft a “one-size-fits-all” set of conditions that are sufficiently “bright line” to facilitate compliance and enforceability, yet sufficiently flexible to permit innovation without undue risk of program or patient abuse.

Our goal in establishing an exception or exceptions for incentive payment and shared savings programs is “to promulgate an exception that is as broad as possible” yet consistent with the statutory requirement that any arrangement excepted under an exception issued using our authority in section 1877(b)(4) of the Act pose no risk of program or patient abuse (73 FR 38548). Although we received thoughtful and instructive comments, we did not receive through the initial public comment process sufficient information or agreement among commenters regarding possible modifications to the proposal to allow us to finalize an exception that expands the proposed exception in any meaningful way. Therefore, we are reopening the public comment period to obtain the specific information described below. We believe that, if ultimately provided through the extended public comment process, the additional information we are requesting will assist us in finalizing an exception or exceptions for incentive payment and shared savings programs. The comment period will be reopened for an additional 90 days following publication of this final rule with comment period in the Federal Register. Information regarding the submission of public comments can be found in the ADDRESSES section of this final rule with comment period. We will summarize and respond to all comments received in response to our proposal (or any future proposal for an exception (or exceptions) to the physician self-referral law for incentive payment and shared savings programs), including the 55 comment letters noted above, in a final rulemaking.

For ease of reference, we are numbering our solicitations of comments in a continuous sequential order, and we encourage commenters to refer to these numbers in their submissions to us. Although we have offered many specific solicitations of comments in an effort to stimulate and focus discussion, we do not mean to imply that we are interested in receiving comments only on the specific questions noted below; rather, we encourage comments on any and all relevant issues to an exception or exceptions for incentive payment and shared savings programs. In addition, we request that commenters consider all of the issues in context and in conjunction with each other, as well as consider the exception holistically rather than piecemeal. Many of the specific solicitations below are related to each other and may be better addressed if grouped together.

We urge commenters to respond with specificity and to include detailed, practical examples whenever possible. Commenters are encouraged to consider the requirement under section 1877(b)(4) of the Act that any new regulatory exception pose no risk of program or patient abuse. Although the following discussion segregates individual issues, commenters are encouraged to comment on and recommend combinations of conditions for an exception or exceptions that would meet the “no risk” standard, would be sufficiently bright line to be enforceable and to facilitate compliance, and would be sufficiently flexible to foster beneficiary arrangements. Commenters should consider suggesting alternative safeguards when recommending the elimination or modification of a proposed condition or when recommending adoption of an alternative to a proposed condition. As an initial matter, we are interested in comments that address the best ways in an exception or exceptions for incentive payment or shared savings programs to achieve transparency and accountability, ensure quality of care, and prevent disguised payments for referrals. We request that commenters address these goals in their comments.

To better understand and address the variety of incentive payment and shared savings programs that exist in the industry or that parties would like to implement, we are interested in detailed descriptions of incentive payment programs and shared savings programs that include specific descriptions of the structure and operations of the programs and payments. We are also interested in views addressing the likely evolution of these programs.

b. Background: Incentive Payment and Shared Savings Programs

As we discussed in both the CY 2009 PFS proposed rule, and the FY 2009 IPPS proposed rule, the term “gainsharing” is commonly used to describe certain programs that seek to align physician behavior with the goals of a hospital by rewarding physicians for reaching predetermined performance outcomes. Several types of programs exist (including, but not limited to, gainsharing) for the purpose of achieving quality standards, generating cost savings, and reducing waste. We refer to these programs as “incentive payment” and “shared savings” programs. Within the category of “incentive payment” programs, we include P4P, also known as quality-based purchasing, and other quality-focused programs that do not involve the sharing of cost savings from the reduction of waste or changes in administrative or clinical practice. Within the category of “shared savings” programs, we include programs that involve the sharing of cost savings attributable to physicians' efforts in controlling the costs of providing patient care, as well as hybrid programs that involve both the sharing of cost savings and payment for improvement or maintenance of patient care quality. For a discussion of incentive payment and shared savings programs, DHHS initiatives with respect to such programs, and our proposed exception for incentive payment and shared savings programs, we refer the reader to our solicitation of comments in the FY 2009 IPPS proposed rule regarding the necessity of an exception to the physician self-referral law for gainsharing programs (73 FR 23692 through 23695) and the CY 2009 PFS proposed rule (73 FR 38548 through 38552).

In the CY 2009 PFS proposed rule, we described our concerns regarding potential program and patient abuse from the implementation of improperly structured incentive payment and shared savings programs. Specifically, we stated:

Although properly structured incentive payment programs can enhance health care quality and efficiency, improperly structured programs pose significant risks of program or patient abuse, including adversely affecting patient care. Moreover, such programs could be vehicles to disguise payments for referrals, including incentives to steer healthier patients to the hospital offering the incentive payment program. Programs that cannot be adequately and accurately measured for quality would also pose a high risk of program or patient abuse (73 FR 38549).

We stated further:

Although properly structured shared savings programs may increase efficiency and reduce waste, thereby potentially increasing a hospital's profitability and contributing to quality of care, improperly designed or implemented programs pose the same risks of program or patient abuse described above in connection with incentive payment programs. Additional risk is posed by shared savings programs that reward physicians based on overall cost savings (for example, the amount by which the total costs attributable to a particular hospital department decreased from 1 year to the next) without accountability for specific cost reduction measures (73 FR 38550).

In addition, we expressed our continued concern about stinting (limiting the use of quality-improving but more costly devices, tests or treatments), cherry-picking (treating only healthier patients as part of an incentive payment or shared savings program), steering (avoiding sicker patients at the hospital sponsoring the incentive payment or shared savings program), and quicker-sicker discharges (discharging patients earlier than clinically indicated either to home or to post-acute care settings).

c. Solicitation of Additional Public Comments

i. Distinguishing between “incentive payment” and “shared savings programs”

In the CY 2009 PFS proposed rule, we sought comments regarding “whether separate exceptions for incentive payment and shared savings programs would be preferable and, if so, how they should be structured, and which requirements should appear in each” (73 FR 38552). Most commenters in support of establishing an exception for incentive payment and shared savings programs recommended that we establish two separate exceptions. Here, we are requesting specific comments regarding how [1] to define the terms “incentive payment program” and “shared savings program.” We also request comments regarding [2] whether the terminology “incentive payment” and “shared savings” programs is appropriate or whether different terminology would better describe the range of nonabusive programs we intend to cover under the proposed exception(s). Whatever terminology we employ, we must define the terms with sufficient clarity to enable parties to determine which exception, if more than one is finalized, would be applicable to the specific arrangement being analyzed.

Commenters in support of the adoption of two separate exceptions frequently asserted that many of the conditions in the proposed exception are not applicable, or need not be applicable, to incentive payment programs, asserting that incentive payment programs do not pose the same risk of program or patient abuse as traditional gainsharing programs or shared savings programs. We are seeking comments that [3] identify with specificity which conditions should be made applicable to incentive payment programs (and why), [4] identify which conditions need not or should not be made applicable to incentive payment programs (and why), and [5] indicate why it would not be necessary to impose the same safeguards against program or patient abuse on both types of programs. For example, we seek comments on [6] whether a program involving cost savings measures that also improve quality should be treated as an incentive payment or shared savings program.

ii. Risk of Program or Patient Abuse

As noted above, several commenters questioned our ability to promulgate an exception for shared savings programs that satisfies the mandate under section 1877(b)(4) of the Act that any exception issued using that authority pose no risk of program or patient abuse. The commenters asserted that, because gainsharing implicates sections 1128A(b)(1) and (b)(2) of the Act, commonly referred to as the Civil Monetary Penalty (CMP) statute, any exception to the physician self-referral law for incentive payment and shared savings programs would necessarily pose a risk of program or patient abuse and would be outside the scope of our authority under section 1877(b)(4) of the Act. We disagree with these commenters. We believe that it is possible within the meaning of section 1877(b)(4) of the Act to establish a set of safeguards to guard against program and patient abuse. Moreover, it is our understanding that many incentive payment programs would not involve payments to physicians to reduce or limit services to hospital patients. However, we are interested in comments that [7] specifically address this issue in greater detail, including [8] how we can satisfy the requirements of section 1877(b)(4) of the Act if we do not include a condition prohibiting payment to a physician (under the incentive payment or shared savings program) for reducing or limiting items or services furnished to Medicare or Medicaid beneficiaries under the physician's direct care. In addition, we are interested in comments regarding [9] the utility of an exception that incorporates conditions that are the same as or similar to conditions that have appeared in favorable advisory opinions issued by the OIG on gainsharing arrangements.

iii. Design of the Program

In the CY 2009 PFS proposed rule, we proposed protecting documented programs that seek to achieve the improvement of quality of hospital patient care services through changes in physician clinical or administrative practices or actual cost savings for the hospital resulting from the reduction of waste or changes in physician clinical or administrative practices (73 FR 38553). To be protected, the program must achieve one or both of these goals without an adverse effect on, or diminution in, the quality of hospital patient care services.

(1) Objective Medical Evidence and Independent Review

Under the proposed exception, incentive payment and shared savings programs must be supported by objective, independent medical evidence indicating that the applicable cost-savings or quality performance measures would not adversely affect patient care. We also proposed that patient care quality measures must derive from CMS' Specifications Manual for National Hospital Quality Measures. Many commenters objected to this limitation; however, the comments, for the most part, did not contain suggestions regarding other appropriate lists of quality measures or whether (and in what manner or under what circumstances) we should permit parties to establish their own quality measures for inclusion in a protected incentive payment or shared savings program. We are seeking comments on this issue, including [10] how we might avoid protecting payments based on sham measures or measures that do not reflect objective quality outcomes or standards but instead may be vehicles to reward referrals.

We proposed in the CY 2009 PFS proposed rule that an incentive payment or shared savings program must be reviewed prior to implementation of the program and at least annually thereafter to ascertain the program's impact on the quality of patient care services provided by the hospital. We proposed that this review must be performed by an independent medical reviewer; that is, the review must be conducted by a person or organization with relevant clinical expertise that is not affiliated with the hospital operating the program under review and not affiliated with any physician participating in the program or with any physician organization with which a participating physician is affiliated. We also proposed that the reviewer could not be participating (at the time of the review) in any incentive payment or shared savings program operated by the hospital (73 FR 38553 through 38554). A substantial number of commenters objected to the requirement of independent medical review, claiming that the expense of independent medical review would likely be significant, and that many hospitals may not be able to find an “independent” medical reviewer. Commenters also contended that the impact on patient care can best be ascertained through individuals associated with the hospital, because hospital personnel and medical staff physicians are intimately aware of hospital operations and patient populations.

We seek comments on [11] whether, assuming that there is a need for independent medical review, the need would be greater if the exception were to include outcome measures that are not on the CMS-approved list. We also seek comments on an alternative to independent medical review that would provide an objective, accurate and complete review. Specifically, we request comments addressing [12] how, if no independent medical review is required, we could ensure that a hospital is objective in the review of its incentive payment and shared savings program, that programs operate appropriately to improve (or maintain) patient care quality, and that the incentive payment or shared savings program results in no diminution of patient care quality or inappropriate reduction in care. Finally, and irrespective of whether we would require independent medical review or permit “in-house” review, we seek comments on: [13] How, when and what type of (for example, further review, corrective action, or termination of the incentive payment or shared savings program) recommendations should be made by the reviewer when the program review identifies concerns with patient care quality or the diminution in patient care quality resulting from the implementation of the incentive payment or shared savings program; and [14] requirements (including timeframes) for the hospital to take corrective action based on the reviewer's recommendations.

(2) Participating Physicians and Payment Amounts

The proposed exception included a requirement that the incentive payment or shared savings program be structured to require physician participation in the program in pools of five or more physicians, with payments being distributed to members of each pool on a per capita basis. Under the proposed exception, all physicians participating in the program must be on the medical staff of the sponsoring hospital at the commencement of the program. Most commenters objected to these requirements, but did not provide clear suggestions regarding how to address our concern regarding disguised payments that reward referrals or other business generated by the physician in the absence of such structural requirements. Therefore, we are seeking specific comments on alternatives to these participation and payment restrictions, as well as other safeguards that we could include in an exception(s) if we were to omit the “five-physician pool,”per capita payment distribution, and/or medical staff membership requirements. We request comments as to [15] whether, if pools of less than five physicians are permitted, what the minimum number of physicians should be; [16] whether all participating physicians must be in the same specialty, and, if not, what issues are raised by protecting arrangements between hospitals and multi-specialty physician groups; [17] whether participating physicians should be required to be on the medical staff at the hospital at the commencement of the program and, if not, how we should address the risk that programs will be used inappropriately as recruiting tools; and [18] whether medical staff members may be added during an ongoing program and, if so, how we should address the risk that payments would be made to recruit physicians from other area hospitals, especially hospitals that might not be able to afford to offer a similar program.

We also seek comments with respect to limitations on payments under an incentive payment or shared savings program. Specifically, we are interested in comments regarding whether: [19] We should impose a cap on the payment made per participating physician, regardless of the amount of cost savings or achievement of patient care quality goals attributable to a particular physician; [20] whether payments should be limited in duration and, if so, whether 3 years or some other period should be the maximum time period for payments; and [21] whether protected payments should be reasonably related to the measure that is achieved and, if so, how a reasonable relationship should be determined, and, if not, how we could protect against excessive payments that might induce referrals. In this regard, we are interested in comments addressing [22] methods for protecting against excessive payments to referring physicians who participate in the program but may contribute little or no work or expertise to the program. We are further interested in comments on [23] the types of physicians who should be protected participants and what it should mean to be a “participating” physician. Finally, we are interested in comments addressing [24] the concept of restricting physicians from receiving payments for previously achieved cost savings or for meeting quality improvement goals that are, or have become over time, standard practice (for example, we are concerned about payments that amount to little more than supplemental payments to physicians to do nothing more than what they are already doing) (73 FR 38555 through 38556).

In the CY 2009 PFS proposed rule, as described above, we proposed that payments to physicians be made (whether directly to the physician or to his or her qualifying physician organization) on a per capita basis. We also solicited comments that would “outline alternate approaches to the per capita payment model for the distribution of incentive payments or shared savings payments, such as paying a physician more or less according to whether he or she contributed more or less to the achievement of the performance measures” included in the program (73 FR 38555). Although many commenters stated support for permitting payments to physicians that directly correlate to their personal efforts and achievement of performance measures in an incentive payment or shared savings program, few comments provided sufficient detail regarding how we could incorporate this expansion into the exception without risk of program or patient abuse. We are interested in comments that [25] outline with specificity how a hospital would track or otherwise determine the “personal efforts” of a physician and correlate the achievement of performance measures to a particular physician's personal efforts and, in turn, to the amount of the payment.

We also proposed a condition that would prevent physicians from being paid in a manner that reflected increased volumes of Federal health care program patients or services. Commenters generally opposed this proposed restriction. We recognize as we stated in the CY 2009 PFS proposed rule that volume changes can occur due to market forces and physician practice growth, rather than from changes in referral patterns due to financial incentives available to physicians participating in an incentive payment or shared savings program (73 FR 38555). Where changes in the volume of Federal health care patients or services occur because of financial incentives, a risk of abuse exists. We are soliciting comments that [26] specifically address how to account for legitimate fluctuations in the volume of Federal health care patient procedures or services and consider the potential that volume increases can indicate altered referral patterns when a physician is participating in an incentive payment or shared savings program. In addition, we are seeking comments regarding [27] possible ways to ensure against increases in total Medicare expenditures for patients for whom services are provided under an incentive payment or shared savings program.

We proposed to require hospitals to make payments directly to participating physicians or to a “qualified physician organization,” which we proposed to define as a physician organization composed entirely of physicians participating in the incentive payment or shared savings program (73 FR 38553). We sought comments regarding possible expansion of this condition to allow payments to a physician organization even if all of its affiliated physicians were not participating in the incentive payment or shared savings program under which the payment is made. We reiterate our concern that payments made to physician organizations with nonparticipating physicians could be used to reward such nonparticipating physicians for their referrals. Many commenters objected to the strict limitations on the parties to whom a hospital may make a payment under an incentive payment or shared savings program. Commenters generally urged greater flexibility in the distribution of payments. We are seeking here specific information regarding [28] conditions that could be imposed to ensure no risk of program or patient abuse including, for example, conditions on the use and distribution of payments made to physician organizations on behalf of participating physicians.

(3) Costs Savings for Shared Savings Programs

With respect to shared savings programs, we proposed various methods and sought comments on other methods for limiting or capping the total amount of cost savings available under the program. We proposed a flat, 50 percent limit on the amount of cost savings eligible for sharing with participating physicians, and also proposed requiring rebasing of the baseline statistics against which reduction in waste and cost savings would be measured. In the alternative, we proposed a surrogate method of capping total available payments that would be actuarially equivalent to a 50 percent cap with annual rebasing of baseline statistics. Many commenters responded that we should impose no limits on how a hospital determines the amount available for shared savings payments, while other commenters objected to the 50 percent cap and/or the rebasing requirement. As we noted in the CY 2009 PFS proposed rule and above, our goal is to finalize an exception (or exceptions) that provide sufficient flexibility for hospitals to structure and implement a variety of nonabusive incentive payment and shared savings programs. We are seeking comments that specifically address: [29] What safeguards we could include in an exception if we do not include a cap on the total amount of cost savings available for distribution to participating physicians; [30] What safeguards we could include in an exception to ensure that physicians are not paid for achieving performance measures they achieved in prior periods of the program if we do not require rebasing of the baseline against which reductions in waste or costs are measures; [31] whether it is appropriate to permit payments for continued achievement (or maintenance) of performance measures, waste reduction or cost savings and, if so, what safeguards we could include in an exception if we were to do so (for example, reduced payments for maintenance of patient care quality compared with payments for the achievement of targets); and [32] whether the answer to [33] differs for incentive payment programs as opposed to shared savings programs.

We have had limited opportunity to review incentive payment and shared programs for compliance with the physician self-referral law, and we lack familiarity with the specifics of measuring achievements and calculating payments under such programs. We received insufficient information in the public comments to set forth with enough specificity conditions regarding the calculation of cost savings so as to enable parties to evaluate compliance with the exception. We proposed to require that payments that result from cost savings be calculated based on acquisition costs for the items at issue, as well as the costs involved in providing the specified services, and that they be calculated on the basis of all patients, regardless of insurance coverage (73 FR 38556). Many commenters stated that the term “acquisition costs” was unclear or that it is difficult to determine the actual costs involved in providing specified services, and suggested that we provide additional guidance regarding these concepts if we were to finalize this condition on payments. We are seeking additional and specific comments regarding [34] the calculation of the amount of total cost savings available for distribution under a shared savings program, including a discussion of formulae used by parties to existing arrangements.

(4) Protecting Quality of Care

We proposed that, under an exception for incentive payment and shared savings programs, no payments could be made if the program resulted in a diminution of patient care quality. Additional issues were raised in the public comments, and we seek further comments on the following: [35] Whether and, if so, how we should address the situation in which the implementation of an incentive payment or shared savings program results in a diminution in patient care quality measures not included in the incentive payment or shared savings program; [36] whether we should permit payments based on the global improvement in patient care quality instead of individually identified and tracked patient care quality measures; [37] if a program is structured to result in payments when global quality improves, whether and, if so, how should we permit payments to be made if only some of the quality measures are met; [38] whether payments should be permitted for the maintenance of patient care quality (as opposed to the improvement of patient care quality) [39] whether payments should be permitted for the achievement of intermediate targets for patient care quality and how intermediate targets should be defined and measured; [40] what types of medical evidence should support quality measures, and how we can ensure that quality measures are supported by credible medical evidence; and [41] whether measures must have some relation to the patient populations and practices at the hospital and, if so, what the relation should be, and, if not, how we could protect against programs that are structured to reward physicians for reaching subjective or limited goals that do not substantially benefit the hospital's patients.

We seek additional information on how parties measure patient care quality and determine appropriate payment amounts for the achievement of targets for patient care quality measures. For example, we request comments on: [42] How quality improvement should be measured, including how a baseline (that is, starting point) should be set from which to measure the improvement, how recent the baseline should be, and whether the targets should reflect regional data, national data, or some other data; [43] whether we should recognize a difference between “quality improvement” and “quality maintenance” and, if so, how we should define those terms in relation to each other, whether an exception should protect payments for both, and whether they should be valued differently (based on the supposition that improving quality may require more effort than maintaining it); and [44] how we can prevent protecting payments for programs that are not meeting their quality goals or for measures that, when achieved, result in a diminution of patient care quality.

iv. Structure of the Arrangement Between the Hospital Sponsoring the Program and the Physicians Participating in the Program

(1) Documentation

In the CY 2009 PFS proposed rule, we included in the proposed exception for incentive payment and shared savings programs a requirement that the sponsoring hospital maintain certain documentation regarding the program that must be made available to the Secretary upon request. Many commenters supported this requirement, while others stated that it presented an undue administrative burden. We are seeking comments regarding [45] possible ways to reduce the administrative burden and cost for hospitals that would not hinder the government's ability to enforce the physician self-referral law and ensure compliance with a final exception (or exceptions). We are also seeking additional comments regarding [46] the inclusion of an audit requirement with respect to the calculations of cost savings and payment amounts under the incentive payment or shared savings program. Many commenters supported such a requirement, and stated that we should permit the audit to be performed “in-house.” We are seeking comments here regarding [47] whether such an audit could satisfy our concerns regarding the objectivity and accuracy of the audit. Specifically, we seek comments on [48] whether parties should be required to monitor and track each cost savings or quality measure and, if so, how we should address the need for transparency and accountability.

(2) Sharing of Global Savings

Of particular concern from a fraud and abuse perspective is the sharing of total (or global) savings for a particular department or service line. Many commenters urged us to permit hospitals to share with physicians a percentage or share of the total savings in a particular department or service line, calculated from one period to another. The calculation and sharing of such global savings would not involve individually-tracked and measured performance measures, a cornerstone of the programs that have received favorable advisory opinions from the OIG to date. We seek comments regarding [49] necessary safeguards to ensure that a final exception for shared savings programs, when considered in its totality, would not present a risk of program or patient abuse if we permitted the sharing of departmental or service line global cost savings. In addition, we are interested in [50] the impact that sharing such savings with physicians would have on other potential requirements of a final exception, such as the requirement that the calculation of cost savings and physician payments be audited.

(3) Miscellaneous

We request comments on [51] whether the exception should protect contracts/arrangements between hospitals and physician groups or only contracts/arrangements between hospitals and individual referring physicians (and, if the exception should allow contracts/arrangements between hospitals and physician groups, how we could protect against payments to physicians who do not actively participate in the program and who might be rewarded merely for making referrals). Also, we seek comments on [52] whether, if a physician group participates, the physician group may be paid if some of its physicians fail to make quality improvements; and [53] whether all physicians in the physician group should be required to participate in the same measures.

v. Availability of Other Physician Self-Referral Exceptions

We note that there are many exceptions for compensation arrangements in § 411.355 and § 411.357 of our regulations, including exceptions for bona fide employment relationships (§ 411.357(c)), personal service arrangements (§ 411.357(d)), arrangements involving fair market value compensation (§ 411.357(l)), arrangements involving indirect compensation (§ 411.357(p)), and services provided by an academic medical center (§ 411.355(e)). We believe that properly structured arrangements involving physician participation in an incentive payment or shared savings program may meet the requirements of one or more of the existing physician self-referral exceptions for compensation arrangements. (An arrangement that implicates the physician self-referral statute need not satisfy more than one exception.) We request comments on [54] the extent to which a “stand-alone” exception(s) for incentive payment and shared savings programs is necessary given the existence of other compensation exceptions, including the ones mentioned above. We request comments on [55] whether it would preferable for us to modify aspects of the existing exceptions to protect a broader range of beneficial, nonabusive incentive payment and shared savings programs.

d. Conclusion

It is evident from the variety of comments that we received and the detailed descriptions from some commenters of existing or “ideal” incentive payment or shared savings programs that such programs can be structured in a multitude of ways. Experience with one program model does not ensure an understanding of the impact of another program model. The structures of programs with similar positive outcomes do not necessarily resemble each other.

We intend to continue working toward finalizing an exception (or exceptions) for incentive payment and shared savings programs. We do not believe, as several commenters suggested, that we must or should delay the issuance of a final exception until the completion of the gainsharing demonstrations authorized by section 1866C of the Act and section 5007 of the DRA. (See 73 FR 38550 for a description of these initiatives.) However, without the additional information discussed in this preamble, our efforts to finalize an exception(s) will be hindered. By soliciting additional public comments on the proposed exception for incentive payment and shared savings programs, we hope to acquire information that will better inform the development of an exception that is sufficiently flexible to encourage the development and implementation of beneficial, nonabusive incentive payment and shared savings programs that foster high quality, cost-effective care for our beneficiaries.

2. Changes to Reassignment Rules Related to Diagnostic Tests (Anti-Markup Provisions)

Section 1842(n)(1) of the Act requires us to impose a payment limitation on certain diagnostic tests where the physician performing or supervising the test does not share a practice with the physician or other supplier that bills for the test. We implemented section 1842(n)(1) of the Act by applying an “anti-markup” payment limitation to technical components (TCs) of diagnostic tests purchased from an outside supplier, which has long appeared in our regulations in § 414.50 and which is applicable to diagnostic tests covered under section 1861(s)(3) of the Act and paid for under 42 CFR part 414 (other than clinical diagnostic laboratory tests paid under section 1833(a)(2)(D) of the Act, which are subject to the special billing rules set forth in section 1833(h)(5)(A) of the Act). In the CY 2008 PFS final rule with comment period (72 FR 66222), relying on section 1842(n)(1) of the Act, our general rulemaking authority under sections 1102(a) and 1871(a) of the Act, and authority under section 1842(b)(6) of the Act, we amended the anti-markup provision in § 414.50. Specifically, we revised the anti-markup provision to apply to the TC of diagnostic tests that are ordered by the billing physician or other supplier (or ordered by a party related by common ownership or control to such physician or other supplier) when the TC is outright purchased or when the TC is not performed in the “office of the billing physician or other supplier.” We revised § 414.50(a)(2)(iii) to define the “office of the billing physician or other supplier” as medical office space where the physician or other supplier regularly furnishes patient care. For a billing physician or other supplier that is a physician organization, as defined at § 411.351, the “office of the billing physician or other supplier” is space in which the physician organization provides substantially the full range of patient care services that the physician organization provides generally. We also imposed an anti-markup payment limitation on the professional component (PC) of diagnostic tests that are ordered by the billing physician or other supplier (or ordered by a party related by common ownership or control to such physician or other supplier group) if the PC is outright purchased or if the PC is not performed in the office of the billing physician or other supplier. Under the CY 2008 PFS final rule with comment period, if a physician or other supplier bills for the TC or PC of a diagnostic test that was ordered by the physician or other supplier (or ordered by a party related to such physician or other supplier through common ownership or control) and the diagnostic test is either purchased from an outside supplier or performed at a site other than the office of the billing physician or other supplier, the payment to the billing physician or other supplier (less the applicable deductibles and coinsurance paid by the beneficiary or on behalf of the beneficiary) for the TC or PC of the diagnostic test may not exceed the lowest of the following amounts:

  • The performing supplier's net charge to the billing physician or other supplier;
  • The billing physician or other supplier's actual charge; or
  • The fee schedule amount for the test that would be allowed if the performing supplier billed directly.

In the CY 2009 PFS proposed rule (73 FR 38502), we proposed revisions to the anti-markup provisions in § 414.50, and solicited comments on how best to implement these approaches. We proposed that the anti-markup provisions would apply in all cases where the TC or the PC of a diagnostic testing service is either: (i) Purchased from an outside supplier; or (ii) performed or supervised by a physician who does not share a practice with the billing physician or other supplier. We proposed two alternative approaches to determining whether the performing or supervising physician “shares a practice” with the billing physician or other supplier. We also solicited comments regarding other possible approaches to address our concerns regarding overutilization that can occur when a physician or physician organization is able to profit from diagnostic testing services not actually performed by or supervised by a physician who “shares a practice” with the billing physician or other supplier.

In what we designate here as “Alternative 1,” we proposed that a physician who is employed by or contracts with a single physician or physician organization “shares a practice” with that physician or physician organization. We stated that, when a physician provides his or her efforts for a single physician organization (whether those efforts are full-time or part-time), he or she has a sufficient nexus with that practice to justify not applying the anti-markup provision as contemplated under section 1842(n)(1) of the Act. In light of this proposal, we also requested comments on how to consider locum tenens and other arrangements under which a physician provides occasional services outside of his or her physician organization, as we recognized that circumstances may exist under which it is beneficial or necessary for a physician to provide diagnostic testing services to more than one physician practice.

We proposed a second alternative proposal, which we designate here as “Alternative 2,” which would maintain much of the current regulation text, and its “site-of-service” approach to determining whether a physician “shares a practice” with the billing physician or other supplier, that was finalized in the CY 2008 PFS final rule with comment period. In other words, we reproposed to apply the anti-markup payment limitation to non-purchased TCs and PCs that are performed outside the office of the billing physician or other supplier. We also solicited comments on whether this is the best anti-markup approach or whether we should employ a different approach.

Specifically, in Alternative 2, we proposed to amend § 414.50 to: (1) Clarify that the “office of the billing physician or other supplier” includes space in which diagnostic testing is performed that is located in the same building in which the billing physician or other supplier regularly furnishes patient care (and to make two other revisions to the definition); (2) clarify that, with respect to TCs, the anti-markup provision applies if the TC is either conducted or supervised outside the office of the billing physician or other supplier; (3) clarify when we consider the TC of a diagnostic test to be purchased from an outside supplier; (4) clarify that, for purposes of applying the payment limitation in § 414.50(a)(1)(i) only, with respect to the TC, the “performing supplier” is the physician who supervised the TC and, with respect to the PC, the “performing supplier” is the physician who performed the PC; and (5) include an exception for diagnostic tests ordered by a physician in a physician organization (as defined at § 411.351) that does not have any owners who have the right to receive profit distributions. Finally, we solicited comments on how to define “net charge” and on whether we should delay beyond January 1, 2009, the application of the revisions made by the CY 2008 PFS final rule with comment period, or the proposed revisions (to the extent they are finalized), or both.

We received numerous comments in response to the proposals related to the anti-markup provisions. Some commenters requested that we withdraw both the CY 2008 PFS rulemaking and the current proposals. Other commenters offered varied support or criticism for one or both of the proposed alternatives. Some commenters expressed concerns about eliminating legitimate, nonabusive arrangements that serve Medicare beneficiaries. Quality concerns were raised by commenters both in favor of and opposed to the proposals.

Commenters in support of Alternative 1 believe that it would be more straightforward and easier to implement than Alternative 2. Some commenters responded to Alternative 1 by requesting that a physician be able to “share a practice” with up to 3 physicians or physician organizations in order to accommodate arrangements that currently exist among many part-time physicians and the groups for whom they work. These commenters also stated that they would no longer be able to support an in-office laboratory employing part-time physicians if the Alternative 1 approach was implemented as proposed.

Some commenters offered support for Alternative 2 and its “site-of-service” approach, which they argued would curb abusive overutilization while granting physicians more flexibility in how to structure arrangements to provide care as they see fit. Commenters opposed to Alternative 2 were concerned that this approach focuses only on where the test is performed and not by whom. Some commenters did not support our proposal to clarify “office of the billing physician or other supplier” as including diagnostic testing performed in the “same building,” but not in a “centralized building,” preferring that “office of the billing physician or other supplier” also encompass diagnostic testing performed in a “centralized building.”

Most commenters agreed with our proposed clarification that the TC of a diagnostic test is not “purchased from an outside supplier” if the TC is both conducted by the technician and supervised by the physician within the office of the billing physician or other supplier. We received a few comments, some in favor of and some opposed to, the proposed exception for diagnostic tests ordered by physicians in a physician organization with no owners who have the right to receive profit distributions. Most of the comments that we received in response to the “net charge” solicitation expressed dissatisfaction regarding the disallowance of overhead costs in the calculation of the “net charge.” Other commenters, however, agreed that these costs should not be included and that only those charges that are incurred from paying the physician providing the PC or supervising the TC should be included.

We received a number of comments addressing issues outside the scope of this rulemaking, in particular, the in-office ancillary services exception to the physician self-referral law, which is codified in § 411.355(b) of our regulations. Commenters believed that we must curtail the types of arrangements currently permitted under the in-office ancillary services exception in order to curb overutilization through the ordering of unnecessary diagnostic tests.

After careful consideration of the comments that we received, we are adopting a flexible approach that incorporates both proposed alternatives. We are finalizing Alternative 1 with some modifications, and retaining with some modifications the present “site-of-service” approach (Alternative 2) to allow physicians to consider both approaches in determining if the anti-markup provisions apply to particular diagnostic testing services. Arrangements should be analyzed first under Alternative 1. Thus, where the performing physician (that is, the physician who supervises the TC or performs the PC, or both) performs substantially all (at least 75 percent) of his or her professional services for the billing physician or other supplier, none of the services furnished by the physician on behalf of the billing physician or other supplier will be subject to the anti-markup payment limitation in § 414.50. If the performing physician does not meet the “substantially all” services requirement of Alternative 1, an analysis under the Alternative 2 requirements may be applied on a test-by-test basis to determine whether the anti-markup payment limitation applies. Under the Alternative 2 “site-of-service” approach, only TCs conducted and supervised in and PCs performed in the office of the billing physician or other supplier by an employee or independent contractor physician will avoid application of the anti-markup payment limitation. Both the “substantially all professional services” and “site-of-service” tests are measures of whether a performing/supervising physician “shares a practice” with the billing physician or other supplier. With respect to Alternative 2, we believe that restrictions regarding the location of the conducting and supervising of the TC are essential to ensure that, if the test is to be billed as performed by the billing physician or other supplier, the billing physician or other supplier exercise sufficient control and a proper nexus to the individuals conducting and supervising the test. Requiring that the TC be conducted and supervised in the office of the billing physician or other supplier, under Alternative 2, creates this control and nexus. We believe that allowing billing physicians and other suppliers that cannot satisfy Alternative 1 to comply with the requirements of Alternative 2 on a case-by-case basis affords physicians flexibility while addressing our concerns regarding the ordering of unnecessary diagnostic tests.

As we noted above, we have made one modification to Alternative 1 in response to comments we received. Rather than requiring that a physician work exclusively for one physician practice, in order to “share a practice” with a particular physician or physician organization, a physician must provide “substantially all” of his or her professional services for that practice. For purposes of Alternative 1, we are defining “substantially all” as “at least 75 percent.” In this regard we note that “substantially all,” as used in certain of our physician self-referral rules, is defined as “at least 75 percent” (see § 411.352(d) and § 411.356(c)(1)). Although the anti-markup provisions in § 414.50 and the physician self-referral rules in § 411.350 through § 411.389 are separate and distinct, we believe that “at least 75 percent” is an appropriate test within the context of Alternative 1, and we also wish to avoid any unnecessary confusion that could result from having one numerical test for the anti-markup provisions and another numerical test for the physician self-referral rules. Thus, for purposes of determining whether the anti-markup provisions apply, the performing physician (that is, the physician supervising the TC or performing the PC, or both) is considered to share a practice with a physician group for which he or she provides at least 75 percent of his or her professional services—even if the physician works for one or more billing physician groups or other health care entities. The final rule provides at revised § 414.50(a)(2)(ii) that the “substantially all” requirement is satisfied if the billing physician or other supplier has a reasonable belief at the time it submits a claim that: (1) The performing physician has furnished substantially all of his or professional services through the billing physician or other supplier for the period of 12 months prior to and including the month in which the service was performed; or (2) the performing physician is expected to furnish substantially all of his or her professional services through the billing physician or other supplier during the following 12 months (including the month the service is performed).

We believe that our modification to the proposal for Alternative 1 will satisfy the concerns regarding locum tenens arrangements (and part-time and other on-call or similar arrangements), provided that the performing physician is not furnishing more than 25 percent of his or her professional services as a locum tenens physician (or in some other capacity, such as a part-time physician for another billing group or moonlighting at a hospital).

We are also retaining the present site-of-service approach to determining whether a physician “shares a practice” with the billing physician or other supplier. This approach was reproposed as Alternative 2, with a proposed clarification that diagnostic testing performed in the “same building” (as defined at § 411.351) in which the “office of the billing physician or other supplier” is located would not be subject to the anti-markup provisions (provided that the testing was not purchased from an outside supplier). We are adopting this clarification, but deleting the references to purchased TCs and PCs from § 414.50, for the reasons explained below. We are also adopting certain proposed clarifications and definitions. Specifically, a physician or other supplier may have more than one “office of the billing physician or other supplier,” and the “office of the billing physician or other supplier” is defined as space in which the ordering physician or other ordering supplier regularly furnishes care (and with respect to physician organizations, is the space in which the ordering physician performs substantially the full range of patient care services that the ordering physician provides generally). We are adding to Alternative 2 the requirement, with respect to the TC, that the physician supervising the TC be an owner, employee, or independent contractor of the billing physician or other supplier, and, with respect to the PC, that the physician performing the PC be an employee or independent contractor of the billing physician or other supplier. We are doing this in order to simplify our rules and to avoid having a separate basis for imposing an anti-markup payment limitation for TCs supervised and PCs performed by outside suppliers. We explain our rationale for this change in the next paragraph.

We are not finalizing a definition of outside supplier, and instead we are deleting references to a “purchased” test or interpretation in § 414.50 because they are unnecessary, as explained below. We note that section 1842(n)(1) of the Act requires us to impose an anti-markup payment limitation on diagnostic tests that are performed or supervised by a physician who does not share a practice with the billing physician or other supplier. Traditionally, we have interpreted section 1842(n)(1) of the Act as applying to purchased TCs from an outside supplier. Our longstanding policy of having an anti-markup payment limitation on purchased TCs was codified in § 414.50, and retained in the CY 2008 PFS final rule with comment period. (Similarly, we imposed an anti-markup payment limitation on purchased PCs in the CY 2008 PFS final rule with comment period and we proposed in the CY 2009 PFS proposed rule to retain status as a purchased PC as a separate basis imposing an anti-markup payment limitation.) Based on our decision to adopt Alternative 1 and to allow arrangements that do not meet the requirements of Alternative 1 to nevertheless avoid the anti-markup payment limitation if diagnostic testing services meet the requirements of Alternative 2, we believe that it is not necessary, and unduly complex, to use purchased tests and purchased interpretations as separate bases for imposing an anti-markup payment limitation. We provide a fuller explanation below, at section N.2.h., for deleting from § 414.50 references to TCs and PCs purchased from an “outside supplier.”

We are not creating an exception for tests ordered by a physician in a physician organization with no physician owners who have the right to receive profit distributions. By finalizing both proposed alternatives, we believe that our concern that the Alternative 2 approach could disadvantage nonproblematic arrangements involving nonprofit multi-specialty groups that have campus-based treatment facilities (and thus do not perform diagnostic testing in the same building as where patients are seen) largely becomes moot, as most such arrangements should be able to be structured to fit into Alternative 1, or failing that, Alternative 2.

With respect to our specific solicitations of comments, we are not revising the meaning of “net charge” at this time. Moreover, we are not requiring at this time direct billing instead of permitting reassignment under certain circumstances; however, we may propose to do so in a future notice of proposed rulemaking. We considered the various recommendations commenters offered for the effective date for our revisions. We have decided to not deviate from the effective date that is generally applicable to this final rule with comment period and, thus, the revisions to § 414.50 will become effective on January 1, 2009.

Finally, we did not propose to make changes to the in-office ancillary services exception and are not making any changes to that exception in this final rule; however, we are aware of the commenters' concerns and may propose rulemaking on this issue in the future.

a. General comments

Comment: Some commenters were concerned with their perceived complexity of the anti-markup provisions and requested that we delay making any revisions to the rule. A commenter argued that extending the application of the anti-markup payment limitation only adds another layer of unnecessary complexity and confusion to an area where physicians want to provide high quality services in a cost efficient manner. Some commenters, including a large medical association, requested that we withdraw the proposals of this rule, as well as the proposals contained in the CY 2008 PFS final rule with comment period. In contrast, one commenter stated that the anti-markup provisions are consistent with the aforementioned medical association's code of ethics, which states that a physician should not charge a markup, commission, or profit on services rendered by others. A second commenter noted that the same medical association and many hospital bylaws strongly discourage fee-splitting. Other commenters urged us to not weaken or dilute last year's important anti-markup provision.

Response: We believe that the anti-markup provisions in § 414.50, as revised by this final rule with comment period, are not inordinately complex. We agree that it would be simpler to not have any anti-markup provisions beyond what existed prior to the CY 2008 PFS final rule with comment period, but we remain convinced that additional rulemaking is necessary to address the potential for overutilization through unnecessary testing. Likewise, we agree that it would be simpler to adopt the approach, as suggested by one commenter, that we not allow any reassignment of diagnostic testing services and, instead, require direct billing, but, without studying that approach further, we have concerns that doing so may unnecessarily prevent nonabusive arrangements. Thus, the resulting rule presents some complexity in order to both allow flexibility for the industry while implementing statutory intent and addressing our concerns of the potential for overutilization and patient abuse. To some extent, we have simplified the anti-markup provisions in § 414.50 by deleting superfluous references to purchased TCs and PCs as bases for imposing an anti-markup payment limitation, for the reasons discussed above and more fully below at II.N.2.h.

Comment: A commenter recommended that we finalize a combination of both Alternative 1 and Alternative 2, so that in order for the anti-markup provision to not apply, an employee or contractor physician should work solely for the billing group and meet the “site-of-service” requirements. Two other commenters recommended that we finalize both approaches and allow arrangements to avoid application of the anti-markup provisions if they comply with either approach.

Response: We have adopted an “either or” approach to the two proposed alternative approaches. Diagnostic testing services furnished by physicians who meet the requirements of Alternative 1 (the “substantially all” services approach) will not be subject to an anti-markup payment limitation. However, arrangements that do not meet the requirements of the Alternative 1 approach nevertheless will avoid application of the anti-markup provisions if they comply with Alternative 2 (the “site-of-service” approach), as clarified in this final rule. We believe that compliance with either one of the two approaches finalized in this rule will implement statutory intent and address our concerns regarding overutilization and abusive billing by establishing a sufficient nexus with the billing entity to justify not applying an anti-markup payment limitation.

Comment: One commenter noted that the application of some of the proposed changes, both with respect to the anti-markup provisions in § 414.50 and with respect to the IDTF standards in § 410.33, may restrict the diagnostic testing services that physicians perform for Medicare beneficiaries and may result in more physicians electing to not accept new Medicare patients. A commenter stated that the proposed revisions to the anti-markup provisions threaten cooperative ventures and arrangements and, consequently, beneficiary access to quality Medicare services, including ultrasound and other diagnostic testing services. Other commenters asserted that both proposed approaches are misguided and do not acknowledge the way that physicians provide care under practical circumstances. A commenter contended that both proposals would hamper the ability of large groups to provide diagnostic services. Essentially, physician groups may have to bill differently for some physicians, resulting in an administrative burden for physician groups, and possibly curtailing the locations that a Medicare beneficiary can receive diagnostic tests and thus affecting patient care. Several commenters argued that the adoption of this rule will have the effect of eliminating many legitimate, nonabusive arrangements that serve to expand access to care to Medicare beneficiaries, while resulting in little or no countervailing benefit to the Medicare program

Response: We do not believe that the revisions included in this final rule with comment period will discourage significantly or negatively impact significantly legitimate, nonabusive arrangements. We believe that the revisions strike an appropriate balance between allowing billing physicians and other suppliers flexibility in structuring their arrangements while protecting against program abuse caused by unnecessary diagnostic testing. As explained in section II.I. of this final rule, we are not finalizing our proposals at this time to require physician offices to comply with the IDTF standards in § 410.33.

Comment: Some commenters stated that there is no evidence that bringing diagnostic services into a physician practice automatically leads to overutilization; rather, many practices do so in order to improve quality of patient care and efficiency and not for financial gain.

Response: We disagree with the commenters' statement that there is no evidence that self-referral of diagnostic services leads to overutilization. We cited several studies in the CY 2008 PFS final rule with comment period that supported the proposition that physician self-referral (that is, the referral of diagnostic tests provided within the physician practice) leads to overutilization (72 FR 66311 through 66312). Additionally, since publication of that rule, the Government Accountability Office (GAO) has published a study indicating the overuse of some diagnostic testing when performed in a physician's office. The GAO report, Rapid Spending Growth and Shift to Physician Offices Indicate Need for CMS to Consider Additional Management Practices, (GAO-08-452), showed that spending for imaging services paid under the PFS more than doubled over a 6-year period from 2000 through 2006. The report's findings reflect a link between spending growth and the provision of imaging services in physician offices. The proportion of Medicare spending on imaging services performed in-office rose from 58 percent to 64 percent and physicians received an increased share of their total Medicare revenue from imaging services. We recognize that not all arrangements necessarily lead to overutilization. However, we are not able to regulate per individual practice and instead must issue rules of general applicability to implement statutory intent and address our concerns regarding the potential for overutilization through unnecessary diagnostic testing.

b. Statutory Authority

Comment: A commenter noted that the anti-markup provisions in section 1842(n)(1) of the Act are limited to “diagnostic tests described in section 1861(s)(3) [of the Act].” According to the commenter, the physician interpretation of a diagnostic test is not a service described in section 1861(s)(3) of the Act, as physician services are described in section 1861(s)(1) of the Act. Other commenters stated that, in enacting section 1842(n) of the Act, the Congress specifically limited the applicability of the anti-markup provisions to diagnostic tests. Commenters expressed concern that applying an anti-markup payment limitation to the PC of diagnostic tests is inconsistent with the plain meaning of the law and Congressional intent.

Response: As explained in the preamble to the CY 2008 PFS final rule with comment period (72 FR 66308 through 66309), despite the fact that we implemented section 1842(n)(1) of the Act to impose an anti-markup payment limitation only on the TC of diagnostic tests, we are not prevented from applying an anti-markup payment limitation to the PC of a diagnostic test.

We believe that our general rulemaking authority under sections 1102(a) and 1871(a) of the Act provides us with authority to effectuate fully the Congress's intent in enacting section 1842(n)(1) the Act to remove the profit incentive for ordering unnecessary diagnostic tests. As we indicated in the preamble to the CY 2008 PFS final rule with comment period, the profit incentive to order unnecessary diagnostic tests remains if the billing physician or other supplier may markup the PC of the test (72 FR 66315). Moreover, and as also discussed in the preamble of the CY 2008 PFS final rule with comment period, section 1842(b)(6) of the Act authorizes us, but does not command us, to allow reassignment of physician services, including the PC of a diagnostic test (72 FR 66309). At this time, we are not prohibiting reassignment of PCs and instead requiring direct billing, but we are imposing restrictions on the reassignment of PCs. That is, a PC that is reassigned by the performing physician to the billing physician or other supplier that ordered the PC may not be marked up by the billing physician or other supplier, unless the performing physician shares a practice with the billing physician or other supplier. If a physician or other supplier that orders a PC does not find that billing for the PC under an arrangement that is subject to the anti-markup provisions is profitable or financially worthwhile, that physician or other supplier is free to not accept reassignment and instead have the performing physician or other supplier bill directly for the PC.

Comment: Several commenters questioned the appropriateness or the legality of imposing an anti-markup payment limitation on the TC supervised by, or the PC personally performed by, a physician in the same group practice as the ordering physician. Some commenters asserted that, because the anti-markup provision in section 1842(n) of the Act, with its relatively general language, came first, and the much more specific requirements of the physician self-referral law in section 1877 of the Act came later, the Congress has defined specifically what it means for physicians to “share a practice” for Medicare purposes and we should not interpret these provisions differently, particularly without providing a clear rationale for doing so. One commenter contended that the “share a practice” concept in section 1842(n) of the Act simply was the Congress' short-hand version of what later became the lengthy definition of “group practice” in section 1877(h)(4) of the Act. Other commenters asserted that, through the anti-markup provisions, we are overlaying a new and inconsistent set of requirements for providing diagnostic testing, with respect to bona fide group practices meeting the physician self-referral law requirements. According to these commenters, we are doing so by relying on the “anti-mark-up” language of section 1842(n)(1) of the Act, even though that language pre-dates the physician self-referral law and explicitly exempts testing performed by physicians who “share a practice.” One commenter stated that our proposals, if adopted, would impose a new and untenable burden on physician practices that have already taken pains to comply with the complex and onerous strictures imposed by the physician self-referral law. Two commenters stated that developing policies under one law only to make them largely irrelevant under another law represents arbitrary government action.

Response: Section 1877(h) of the Act expressly states that the definitions it sets forth apply only for purposes of section 1877 of the Act. There is no indication in either the text or the legislative history of section 1877(h) of the Act that the Congress intended the definition of “group practice” to correlate with the term “shares a practice” in section 1842(n)(1) of the Act. Also, we note that the definition of group practice in section 1877(h) of the Act is relatively narrow. That is, the definition of “group practice” in section 1877(h) of the Act refers only to “members” of a group practice, which could be construed to mean only physicians with an ownership or investment interest in the group. (Note also that the definition of “group practice” in section 1877(h) of the Act allows the Secretary to impose other standards by regulation.) Likewise, the text of the in-office ancillary services exception in section 1877(b) of the Act, which allows referrals within a group practice, can be read as being restricted to services referred and performed by members of the group (and services performed by employees who are supervised by a member of the group). Therefore, even if the Congress did intend the definition of “group practice” in section 1877(h) of the Act for purposes of the physician self-referral law to correlate with “shares a practice” in section 1842(n)(1) of the Act for purposes of the statutory anti-markup provision, and also intended that individuals whose referrals are protected under the statutory in-office ancillary services exception to the physician self-referral law necessarily “share[] a practice” for purposes of the statutory anti-markup provision (and we agree with neither proposition), we would not be required to take an expansive view of what it means to “share[] a practice” for purposes of the statutory anti-markup provision. We also note that section 1842(n)(1) of the Act does not prohibit us from using other authority to impose an anti-markup payment limitation on TCs and PCs.

As a policy matter, we do not agree with the commenters that suggested that we should except from the anti-markup provisions any arrangement that complies with the physician self-referral rules. The anti-markup provisions, when applied, limit only how much a physician or other supplier may bill Medicare, whereas the physician self-referral rules, when implicated and not satisfied, prevent a physician or other supplier (or provider) from billing Medicare (for any amount). Accordingly, we approach physician self-referral rulemaking with added caution, lest we prohibit a broad class of arrangements that in some cases and under certain circumstances do not pose a risk of abuse. Thus, using our general rulemaking authority and authority in section 1877(b)(2) of the Act, we have provided some flexibility, with respect to which referrals are protected under the in-office ancillary services exception and the definition of a “centralized building,” for purposes of our physician self-referral rules. However, the fact that the physician self-referral law, as interpreted or implemented by us, does not prohibit a certain type of arrangement does not mean that we should not take measures, through an anti-markup approach, to address the potential for overutilization or other abuse that exists with certain arrangements that seek to take advantage of our definitions of “group practice” and “centralized building” that are used for purposes of the physician self-referral exception for in-office ancillary services.

c. Alternative 1 (“Substantially All” Professional Services)

Comment: Under Alternative 1 as proposed, which we referred to in the proposed rule as the “shares a practice” approach (although the second alternative was also designed to ensure, through a site-of-service methodology, that performing physicians “share a practice” with the billing physician or other group), the anti-markup payment limitation would not apply if a service is provided or supervised by a physician who “shares a practice” with the billing physician or other supplier by virtue of working exclusively with that physician or other supplier. Several commenters noted that this alternative mirrors the statutory language, but contended that the definition of “shares a practice” suggested by the preamble of the proposed rule (that is, if a physician contracts with more than one group, he or she does not “share a practice” with any group) is inconsistent with a common sense interpretation of that term. A commenter stressed that even a physician who spends 1 percent of his or her time interpreting echocardiograms for an area hospital but spends the remainder of his or her time working for his or her group practice would not be considered to “share a practice” with the group under the proposed approach. Some commenters suggested that physicians should be able to have two or three relationships with physician organizations and still be deemed to share a practice with each one and not be subject to the anti-markup provisions. Some commenters requested that the anti-markup provisions not apply when a physician works for a physician group and also works for another type of health care provider or supplier, such as a hospital, independent lab, or medical school. Another commenter proposed that a physician who spends more than 40 percent of his “total time spent on patient care services” (as defined at § 411.352(d)) as a physician in any group practice should be considered to “share a practice” with that group practice for purposes of the anti-markup provisions. According to the commenter, this requirement would ensure that a physician has a meaningful level of actual economic and professional integration with a group practice for which the physician provides DHS from which the group can profit, but it would not penalize a physician for providing professional and supervisory services to others. The commenter suggested that we should permit a physician to share a practice with no more than two groups and require extensive integration with each group.

A commenter stated that, if a physician is a full-time or part-time employee of a physician group, that employment relationship in and of itself should establish a sufficient nexus with that group to justify not applying the anti-markup payment limitation to his or her professional services for the physician group. This commenter also noted that, under the proposed IDTF revisions in the CY 2009 PFS proposed rule (73 FR 38533 through 38535), a physician may serve as an IDTF medical director for no more than three IDTFs, and suggested that a similar standard could be used for the application of the anti-markup provisions by not allowing physicians to contract to provide services for more than three physician organizations.

One commenter stated its belief that compliance with the proposed requirements of the Alternative 1 approach may be possible by some medical practices, such as those with the capital and testing volumes sufficient to warrant engaging or contracting for exclusive physician services needed to perform or supervise diagnostic testing. However, the commenter also asserted that the proposal may be burdensome to many physician offices. Another commenter asserted that some practices do not have sufficient patient volume to support a full-time pathologist or radiologist. A commenter representing an oncology practice noted that the practice currently can bill a global fee for the TC and PC, but the Alternative 1 proposal would apply the anti-markup payment limitation to the PC. The commenter stated that use of a part-time radiologist does not encourage overutilization, and, therefore, the anti-markup payment limitation should not apply.

Response: We are modifying the proposed Alternative 1 approach so that a performing physician (that is, a physician who supervises the TC or performs the PC, or both) will be considered to share a practice with a physician, physician organization, or other supplier if the physician furnishes “substantially all” (at least 75 percent) of his or her professional services through that physician, physician organization, or other supplier. This means that a physician may furnish up to 25 percent of his or her professional services through any number of physicians (including himself or herself), physician organizations or other suppliers, through acting as a locum tenens physician, or in other circumstances without disqualifying himself or herself from sharing a practice with the physician or physician organization for which he or she provides the bulk (that is, at least 75 percent) of his or her professional services. For example, suppose Physician A furnishes at least 75 percent of her services through Physician Organization B, and furnishes 25 percent of her professional services through Physician C and Laboratory Supplier D. Under this example, Physician A would be considered to be sharing a practice with Physician Organization B.

Revised § 414.50(a)(2)(ii) provides that the “substantially all” requirement is satisfied if the billing physician or other supplier has a reasonable belief, when submitting a claim, that: (1) The performing physician has furnished substantially all of his or her professional services through the billing physician or other supplier for the period of 12 months prior to and including the month in which the service was performed; or (2) the performing physician will furnish substantially all of his or professional services through the billing physician or other supplier during the following 12 months (including the month the service is performed).

Comment: In response to our request for comments on how to address locum tenens relationships under Alternative 1, several commenters recommended that the locum tenens relationships should not count in calculating whether a physician shares a practice with another physician or other supplier. Another commenter suggested that abuse of locum tenens arrangements could be avoided through requirements for these arrangements in the Medicare Claims Processing Manual, 100-04, Chapter 1, § 30.2.11. One commenter stated that, provided that locum tenens physicians satisfy Medicare's requirements governing the use of and billing for such physicians, the anti-markup payment limitation should not apply to tests performed or supervised by such physicians.

One commenter enumerated additional circumstances in which group practice physicians provide services to or through entities other than their primary group affiliation. These circumstances included: (1) Covering for another practice while it recruits to replace a retired or deceased physician; (2) providing specialty services at hospitals or primary care clinics in areas (often rural, but not always) that would otherwise not have those specialties available and convenient to patients; and (3) providing specialty services to a different practice that has only a part-time need for the service.

Another commenter noted the potential for situations where a non-radiology practice contracts with a radiologist as a locum tenens physician to circumvent the anti-markup provision. The commenter recommended that we exclude only same-specialty locum tenens arrangements from the anti-markup provision.

Response: In the CY 2009 PFS proposed rule, we requested comments on how, under Alternative 1, we could permit a physician to provide occasional services outside of his or her physician organization without the secondary arrangement precluding the physician from sharing a practice with the physician organization for purposes of applying the anti-markup provisions. To accommodate such temporary physician arrangements, we have modified Alternative 1 so that a physician will be considered to share a practice with a physician, physician organization, or other supplier if the physician furnishes at least 75 percent of his or her professional services through that physician, physician organization, or other supplier. Thus, the final rule allows a physician to furnish up to 25 percent of his or her professional services through other arrangements (including for the purpose of acting as a locum tenens physician) without disqualifying himself or herself from sharing a practice with his or her primary physician practice. We believe that our modification provides assurance that the performing physician has a sufficient nexus with the billing physician or other supplier so as to share a practice with such physician or other supplier. We are not persuaded that we should disqualify the performing physician from sharing a practice with the billing physician or other supplier if his or her locum tenens or part-time arrangements do not involve performing work for a billing physician or other supplier engaged in the same specialty as the performing physician.

Immediately above, we address the issue of whether a physician may share a practice with a billing physician or other supplier despite furnishing some services through other arrangements, including acting as a locum tenens physician. In this paragraph, we address the “flip side” of this issue, that is, whether a billing physician or other supplier can avoid application of the anti-markup payment limitation where a locum tenens physician is substituting for a physician who does in fact perform “substantially all” of his or her professional services through the billing physician or other supplier. We wish to clarify that, with respect to locum tenens situations only, whether an arrangement satisfies Alternative 1 depends on whether the permanent physician (that is, the physician for whom the locum tenens physician is substituting) performs “substantially all” of his or her professional services through the billing physician or other supplier. For example, assume Physician A contracts with Group Practice C to render services in place of Physician B, who is on vacation. Physician B performs 100 percent of her professional services through Group Practice C. This arrangement meets the requirements of Alternative 1, because Physician B performs at least 75 percent of her professional services through Group Practice C. It is irrelevant whether, or the extent to which, Physician A furnishes professional services for Group Practice C outside the locum tenens arrangements, for purposes of determining whether the anti-markup payment limitation applies to the services provided by Physician A under the locum tenens arrangement.

Comment: Many commenters were opposed to the proposed Alternative 1 approach to determining whether a physician shares a practice with the billing physician or other supplier. Some commenters stated that they employ a pathologist in-house in order to improve quality of care by: (1) Using specialized pathologists for digestive diseases; (2) forming normative standards based on the practices of the physicians in the practice; and (3) decreasing the turnaround time for diagnostic tests. Other commenters, who are physicians, stated that they were unhappy with the professional services provided by commercial laboratory companies due to slow turnaround time on pathology reports or difficulty in asking follow-up questions of pathologists at remote laboratories. According to these commenters, by employing a pathologist, a group practice is able to ensure that the pathologist is a specialist in a particular practice area (for example, gastroenterology), something the commenters asserted they were unable to do with commercial laboratories.

A commenter expressed concern regarding Alternative 1 because, in the commenter's view, it would unfairly limit a specialty practice (such as gastroenterology or urology) from billing and collecting the full global reimbursement from the Medicare program for services rendered by an in-office pathologist unless that pathologist works only for that physician group. The commenter stated that it should not matter if the pathologist works for more than one group practice. This commenter expressed concern that eliminating the in-office laboratory model would be a detriment to Medicare beneficiaries. Another commenter objected to our assertion that anatomic pathology services provided in a physician's office can result in overutilization. The commenter expressed its view that gastroenterologists do not overutilize anatomic pathology, even when profiting from it, because a colon biopsy is much more invasive than clinical laboratory tests such as fingerstick for hematocrit or a dipstick urine.

Response: Billing physicians and other suppliers will continue to be able to employ a physician specialist on a part-time basis. Under Alternative 1, if the specialist furnishes “substantially all” (at least 75 percent) of his or her professional services through the billing physician or other supplier, the specialist “shares a practice” with the billing physician or other supplier. Because this rule finalizes both proposed approaches, if an arrangement does not satisfy the “substantially all” test of Alternative 1, the billing of a TC or PC may still avoid application of the anti-markup payment limitation if it meets, as determined on a case-by-case basis, the “site-of-service” requirements of Alternative 2. Alternatively, part-time physicians can bill Medicare directly.

Comment: Some commenters contended that adoption of Alternative 1 would interfere unfairly with the practice of medicine by severely limiting physician practices' right to organize themselves as they see fit to deliver quality care to their patients. These commenters stated that adoption of Alternative 1 would prevent a group from hiring a part-time pathologist, as is common for gastroenterology practices that provide pathology services to their patients. According to the commenters, the elimination of full reimbursement (that is, the PFS amount) for pathology services provided by part-time pathologists would interfere with the multidisciplinary approach that the commenters have chosen to best serve patients. One commenter asserted that, despite the fact that the pathologist simply may bill the Medicare program directly, Alternative 1 interferes with the practice of medicine. The commenter asserted that our proposal is equivalent to saying that a physician group cannot hire a part-time pathologist as part of its practice. The commenter contended that finding a pathologist who would travel to its offices was not easy, and that informing a pathologist that he or she can bill Medicare directly from the group's office provides no incentive to the pathologist. This commenter predicted that the approach outlined in Alternative 1 would force pathology to revert to the traditional model of referring physicians sending specimens to a laboratory and receiving pathology reports, rather than communicating with the pathologist directly. One commenter stated its belief that, if we permit a pathologist to bill for professional services directly, there is no reason for the pathologist to travel to different physician's offices if he or she can collect the same amount for professional fees while working in his or her own office. This commenter also suggested that our proposal would discriminate against small groups that cannot afford to employ a full-time pathologist. The commenter asserted that full-time pathologists based in small communities do not have the resources to bill and collect on their own and working for one group on a part-time basis is not sufficient.

One commenter stated that it would support Alternative 1 if it was extended to allow a physician to be employed by or under contract with up to three physicians or physician organizations. Commenters recommended that the “one practice” requirement be eliminated so as not to harm small and mid-sized practices that cannot afford to employ a full-time pathologist. Two commenters stated that a physician should be allowed to maintain “two or three” independent contractor or employee relationships with physician organizations and be viewed as sharing a practice with each. In the commenters' view, this less restrictive approach would account for different practice situations while still providing considerable protection against Medicare program abuse. Another commenter requested that, in drafting any final rule, we permit physicians to provide services in rural health or medically underserved areas without the secondary arrangement precluding the physician from sharing a practice with his or her physician organization.

Response: We have modified Alternative 1 so that a physician group will be allowed to hire a part-time physician who will “share a practice” with that group, provided that the part-time physician furnishes “substantially all” (at least 75 percent) of his or her professional services through the group. Again, in order to avoid application of the anti-markup payment limitation under this final rule, billing physicians and other suppliers have the option of satisfying either the requirements of Alternative 1 (the “substantially all” professional services approach), or the requirements of Alternative 2 (the “site-of-service” approach).

Comment: One commenter suggested that Alternative 1 may be simpler and more effective if we clarify that the anti-markup provisions apply only when the billing physician or physician organization generated the referral for the pathology services. The commenter noted that, in States that prohibit the corporate practice of medicine, independent clinical laboratories contract with pathology groups to perform pathology services. Because such pathologists have employment or contractual relationships with both a pathology group and an independent lab, the anti-markup provisions could be triggered under Alternative 1 as proposed. The commenter cited the CY 2008 PFS final rule with comment period, where we stated that independent laboratories and pathologists do not trigger the initial order for pathology services. Thus, the commenter suggested that we clarify that, under the CY 2009 PFS proposals, anti-markup provisions still would only apply if the physician billing for the services was also the physician or supplier who provided the initial order for the service. Several commenters were concerned that we did not mention this in our commentary on the proposal.

Response: As finalized in the CY 2008 PFS final rule, and as retained in this final rule with comment period, the anti-markup provisions for the TC or PC of a diagnostic test apply only when the billing physician or other supplier has ordered the TC. For example, if a laboratory contracts with a pathologist instead of employing the pathologist to perform the PC of a diagnostic test (because the laboratory is located in a State that has a prohibition on the corporate practice of medicine), the anti-markup payment limitation would not apply to the lab if the lab chooses to bill for the pathologist's interpretation, if the lab (or a party related to the lab by common ownership or control) did not order the test. For example, Physician Group A orders the TC and PC of a diagnostic test. Laboratory B performs TC and contracts with Physician C to perform the PC, and Laboratory B bills for the TC and the PC. In this example, the anti-markup provisions would not apply to the TC or the PC billed by Laboratory B. However, if the interpreting pathologist decides to order additional tests that are then performed and/or interpreted by another pathologist, the anti-markup payment limitation potentially would apply if the ordering pathologist wishes to bill for the additional interpretations performed by the different pathologist. Whether the anti-markup payment limitation in fact would apply would depend on whether the arrangement between the ordering/billing pathologist and the pathologist performing or supervising the TC/performing the PC satisfies the requirements of Alternative 1 (and, if not, whether it satisfies, on a case-by-case basis, the requirements of Alternative 2).

Comment: Some commenters offered support for Alternative 1. The commenters believed that this alternative has greater potential to limit self-referral arrangements by requiring that a physician practice should not be able to mark up anatomic pathology tests unless the physician who performs and supervises the pathology services is dedicated solely to that physician practice. Another commenter strongly urged us to focus on this alternative to apply the anti-markup provision to all TCs and PCs of diagnostic tests that are ordered by the billing physician or other supplier unless the physician who performs and supervises the pathology services is dedicated solely to that physician practice or physician organization. According to the commenter, this would protect legitimate multi-specialty group practices that employ their pathologists on a full-time basis.

One commenter expressed support for not allowing a pathologist to work for more than one group (pathology or subspecialty) in order to maintain the quality and integrity of anatomic pathology. Other remedies proposed by this commenter included disallowing any profit made from anatomic pathology by the physician taking the biopsy, or allowing “upcharging” only on tests that can be reported that same day.

Response: We believe that it is not necessary to go so far as requiring a physician not to work for more than one physician organization, because requiring a physician to furnish “substantially all” (at least 75 percent) of his or her professional services through a billing physician or other supplier addresses our concerns regarding overutilization and abusive billing and also allows physicians the flexibility to work for other physician groups or health care entities or to work as a locum tenens physician.

Comment: A commenter requested that, if Alternative 1 is finalized, we clarify that a physician employee would be considered to be sharing a practice with a physician or a physician group whether the physician is hired directly or is a leased employee, whereas other commenters stated that employment and contractual arrangements might not be enough for determining whether a physician “shares a practice” as this could be circumvented via shareholder, ownership, or joint partnership arrangements.

A commenter asked that we consider including physicians who are employed by affiliated (common ownership) organizations. This would allow affiliated organizations to share physician resources and expertise when interpreting tests via teleradiology. The commenter also noted a concern that employers may not have knowledge of all independent physician and supplier contracts and may not have sufficient mechanisms to ensure sole employment. This commenter requested clarification on how to manage independent physician and supplier contracts to ensure that physicians are employed by only one organization.

Response: As finalized, any physician (that is, regardless of employment status or whether he or she is an owner of the billing entity) who performs “substantially all” (at least 75 percent) of his or her professional services for a billing physician or other supplier will be deemed to share a practice with that billing physician or other supplier.

d. Alternative 2 (“Site-of-Service”)

Comment: One commenter opposed our reproposal of the existing “site-of-service” approach for determining whether the physician performing or supervising the TC or PC of a diagnostic test shares a practice with the billing physician or other supplier, asserting that it will do little to stifle the growth of self-referral in lab arrangements. According to the commenter, this alternative focuses only on where the test is performed and not by whom, and, thus, specialty practices could profit from their referrals simply by bringing “pod labs” in-house to the location where the group provides physician services. The commenter advocated for the rule to require clearly a greater connection and integration between the performing physician and the practice before the practice can profit from lab tests ordered by physicians in the group.

Response: We recognize the potential for arrangements that may be troublesome to be restructured so that the diagnostic testing is performed in the same building as where the testing is ordered; however, we are also concerned that adopting Alternative 1 without leaving in place the site-of-service approach of § 414.50 (which we reproposed as Alternative 2) may unnecessarily disrupt some arrangements that do not appear problematic to us. We will continue to monitor arrangements and may propose further changes if necessary. Also, we continue to examine industry use of the in-office ancillary services exception of the physician self-referral rules, and may propose changes to that exception in a future rulemaking.

Comment: Some commenters did not believe that site-of-service distinctions are relevant to determining the appropriate scope of section 1842(n) of the Act. According to the commenters, it should not matter if physicians are in a bona fide group practice that has one building or ten, and, if ten, the particular geographic configuration of the ten buildings should not matter. The commenters questioned the legal or policy justification for applying different site-of-service rules for purposes of the anti-markup provision than those that are employed in the physician self-referral regulations. Of particular concern for these commenters are distinctions that treat groups differently from solo practitioners and that discriminate between different types of groups. The commenter gave the example of a solo practitioner with five offices with an x-ray machine in each: provided that he or she regularly practiced in each office, he could order diagnostic tests at all five locations, or from any one of them, and the tests would be treated as “furnished” inside the practice rather than “purchased.” According to the commenter, a group practice, on the other hand, that has primary care physicians in one building and specialists in another either has to have x-ray machines in both buildings, to be used only by the physicians in each building, or do diagnostic testing in only one building and treat the group practice members in the other building as “purchasing” the tests. The commenter also described its understanding of the proposed rule, stating that, when diagnostic tests are provided in a centralized building by a non-profit multi-specialty group, they would be considered “furnished,” but the same tests provided by a physician-owned group that is otherwise comparable in size and scope would be considered “purchased.” The commenter questioned the relevance of these distinctions related to quality, convenience, efficiency, utilization, or potential abuse.

Response: Because the definition of “centralized building” at § 411.351 contains no requirements for minimum size, proximity to the billing group's office, or staffing, and because our current policy under the physician self-referral rules is to allow billing groups to have more than one centralized building, we are concerned that the potential exists for overutilization of diagnostic testing through arrangements involving a billing group and physicians who have little or no real connection to the billing group other than to serve as a point of referral to generate profits for the billing group. We believe that a site-of-service approach, employing the “same building” test, is a reasonable means of determining whether a physician shares a practice and has a sufficient nexus with the billing physician or other supplier.

We reiterate that, in addition to section 1842(n) of the Act (and our general rulemaking authority in sections 1102(a) and section 1871(a) of the Act to “gapfill” in order to effectuate fully the Congress's intent in section 1842(n) of the Act to impose an anti-markup provision on certain diagnostic tests), we have authority under section 1842(b)(6) of the Act to prescribe limitations on the reassignment of tests and test interpretations. However, in this final rule with comment period, we have adopted an “either/or” approach to the two proposed alternatives. That is, a billing physician or other supplier can avoid application of the anti-markup provisions by meeting either the “substantially all” professional services approach of Alternative 1 or, on a case-by-case basis, the “site-of-service” approach of Alternative 2, which are set forth in revised § 414.50(a)(2)(ii) and (iii). We believe that compliance with either one of the two approaches finalized in this rule will further our goal of reducing the potential for overutilization and other program or patient abuse while providing sufficient flexibility for the industry.

Comment: One commenter contended that a “one building” “site-of-service” standard is not a realistic means of ensuring proper billing arrangements, as large single specialty practices often span beyond one building. Another commenter remarked that the site-of-service alternative should not be finalized because it would be problematic for groups where specimens are collected at multiple sites but pathology diagnostic testing services are done at a separate location owned or leased by the group (the “hub-and-spoke” arrangement). Some cardiologists also expressed concern that interpretations of EKGs and other diagnostic testing services may be limited by the proposed site-of-service approach. One commenter provided the example of a group that has three offices but only one with a CT scanner. The commenter noted that under the site-of-service approach, the anti-markup provision would apply to tests ordered and supervised by physicians employed by the group unless the physicians worked in the same office where the CT scanner was located.

Response: We believe that allowing billing physicians and other suppliers to comply with either the “substantially all” professional services approach of Alternative 1 or the “site-of-service” approach of Alternative 2 will address our concerns while providing sufficient flexibility for the industry. In the situations described by the commenters, if the performing physician furnished substantially all of his or her professional services through the billing group, the anti-markup payment limitation would not apply.

Comment: A commenter stated that the Alternative 2 site-of-service approach is useful in deterring program abuse at locations other than the office of the billing physician, and may benefit from being merged with Alternative 1. However, the commenter asserted that we must address the issue of the level of supervision that is required for the TC of a pathology service. According to the commenter, it is unclear what level of supervision of the TC must be furnished and where it must be furnished, as CLIA does not govern the TC of a pathology service. The commenter suggested that we require that the TC be supervised by a physician who meets, at a minimum, the general supervisor requirements under CLIA, including the requirements for the subspecialties of histopathology or dermatopathology, as necessary.

Another commenter expressed concerns about supervision requirements, noting that “the physician who supervised the TC” is not defined in the proposed rule or CLIA. The commenter suggested that the supervising physician should meet the requirements for a laboratory director under CLIA or use IDTF requirements. The commenter noted that, in a separate proposal in the CY 2009 PFS proposed rule (73 FR 38533 through 38535), we proposed to require physicians performing testing in their offices to enroll as IDTFs and meet the IDTF requirements. Among the applicable requirements of that proposal are that the supervising physicians have proficiency in the testing service being supervised and meet the specific requirements established by medical specialty groups or carriers.

Response: With respect to our proposal to revise the anti-markup provisions in § 414.50, we did not propose to impose special standards or qualifications on the physician supervising the TC, and decline to do so here. Section 410.32 establishes the level of supervision (general, direct, or personal) for diagnostic tests potentially subject to the anti-markup provisions (that is, services covered under section 1861(s)(3) of the Act and paid under part 414 of this chapter (other than clinical diagnostic laboratory tests paid under section 1833(a)(2)(D) of the Act, which are subject to the special billing rules set forth in section 1833(h)(5)(A) of the Act)).

Comment: A commenter requested that if we adopt the Alternative 2 approach, we clarify that block leases meeting the in-office ancillary services exception “same building” test would not trigger the anti-markup provision. Another commenter stated that it favored the Alternative 2 “site-of-service” approach and that the anti-markup provisions should apply to any shared facility in the “same building.”

Response: We are adopting, in part, the position favored by the first commenter. Specifically, we are finalizing the Alternative 2 approach, which employs the definition of “same building” as defined at § 411.351 (as we proposed). However, we are not incorporating each element of the same building “location” test from the in-office ancillary services exception as set forth in § 411.355(b)(2). A TC that is performed (that is, both conducted by the technician and supervised by the physician) in the “office of the billing physician or other supplier” will not be subject to the anti-markup payment limitation. Likewise, a PC that is performed in the “office of the billing physician or other supplier” will not be subject to the anti-markup payment limitation. Diagnostic testing services are performed or interpreted in the “office of the billing physician or other supplier” if they are performed or interpreted in the “same building” (as defined in § 411.351) as the space in which the ordering physician or other ordering supplier regularly furnishes patient care. In the CY 2008 PFS, we stated that various stakeholders informed us that a physician organization, such as a multi-specialty group, may not provide substantially its full range of services for a certain specialty at any one location, but rather may provide substantially the full range of services for a certain specialty in one location, substantially the full range of services for a second specialty in a second location, and so forth. In order to address this situation, we proposed to focus on the medical office space where the ordering physician provides substantially the full range of patient care services that the ordering physician provides generally.

We are not adopting the approach suggested by the second commenter. The fact that diagnostic testing services are performed or interpreted in a space that is leased by two or more groups (but which is located in the same building as the space in which the billing physician or other supplier regularly furnishes patient care) does not cause the testing to be subject to the anti-markup provisions. Example: Physician A has an office located on the first floor of Medical Office Building. In his office, Physician A performs the full range of services that he provides generally (and thus the space meets the criteria for the “office of the billing physician or other supplier” under § 414.50(a)(2)(iii). Physician A orders a diagnostic test, which is conducted by a technician and supervised by Physician B in a diagnostic testing facility located in the basement of Medical Office Building. Physician B also performs the PC of the test in the diagnostic testing facility. Physician B reassigns her right to bill for the TC and the PC of the test to Physician A. The diagnostic testing facility is shared, under block-time exclusive use leases, by Physicians A, C and D. Neither the TC, nor the PC, is subject to the anti-markup payment limitation, because the TC and the PC were performed in the “office of the billing physician or other supplier.” We are permitting shared space arrangements for diagnostic testing services that occur in the “same building” because we believe that such arrangements can promote efficiency without raising the same concerns for overutilization or other abuse as arrangements that involve centralized buildings for diagnostic testing. We reiterate however, that we continue to have concerns with the present use of the in-office ancillary services exception and that we may issue a proposed rulemaking at a future date to address those concerns.

Comment: One commenter supported the Alternative 2 “site-of-service” approach as a reasonable approach to curbing potential overutilization. One commenter characterized the “site-of-service” approach as more fair than the Alternative 1 approach, even though, according to the commenter, Alternative 1 may control perceived overutilization while respecting the rights of pathologists and clinicians to practice medicine in the best manner possible. Another commenter generally was supportive of both alternatives but favored the Alternative 2 “site-of-service” approach because, in the commenter's view, it would better protect against physicians who wish to profit from their own referrals by preventing a multi-specialty physician organization with several practice locations from benefiting from its referrals to one central anatomic pathology laboratory. The commenter acknowledged that these “hub-and-spoke” arrangements may offer the advantage of patient convenience where diagnostic testing occurs following an office visit with the patient present (for example, an x-ray), but, in the context of anatomic pathology services, these arrangements do not benefit the patient and may result in overutilization and the provision of lower quality, less specialized services.

Response: We received support for both alternatives regarding when to apply the anti-markup provision to the TC and PC of diagnostic tests. After reviewing all the comments, we have decided to finalize, with some modification, both approaches. (As explained elsewhere in this preamble, we have modified the Alternative 1 approach so that the performing physician shares a practice with the billing physician or other supplier if the performing physician furnished “substantially all” (that is, at least 75 percent) of his or her professional services through the billing physician or other supplier, and we have modified the Alternative 2 approach by clarifying that the performing physician must be an employee or independent contractor of the billing physician or other supplier (which has enabled us to delete the references to purchased tests from an outside supplier.) Thus, billing physicians and other suppliers may satisfy the Alternative 1 “substantially all” professional services approach or, on a case-by-case basis, the Alternative 2 “site-of-service” approach in order to avoid application of the anti-markup payment limitation. We believe that complying with either approach will address our concerns regarding potential overutilization and other abuse by establishing a sufficient nexus with the billing entity.

e. Exception for Physician Organizations That Do Not Have Any Owners Who Have the Right To Receive Profit Distributions

Comment: We proposed an exception to the requirement that diagnostic testing be performed in the “office of the billing physician or other supplier” in order to avoid application of the anti-markup payment limitation. We proposed that (except for the purchase of a TC from an outside supplier) the anti-markup provisions would not apply to diagnostic tests ordered by a physician in a physician organization that does not have any owners who have the right to receive profit distributions. Some commenters supported adopting the proposed exception. One commenter requested clarification regarding whether the exception would apply only where the physician organization does not have any owners who have the right to receive profit distributions, or whether it would apply provided that the physician organization does not have any physician owners who have the right to receive profit distributions. In the commenter's view, if a physician organization without physician owners is a non-profit entity with a member that is another non-physician non-profit entity with typical membership rights, the proposed exception still would apply to avoid application of the anti-markup provisions. Another commenter stated that an exception for diagnostic tests ordered by a physician in a physician organization that does not have any physician owners with a right to receive profit distributions is a bright-line approach and consistent with program safeguards. Another commenter also asked that physician practices with “titular” owners not be subject to the final rule and that the definition be consistent with the definition of “titular” ownership in the FY 2009 IPPS Final Rule (73 FR 48434, 48693).

One commenter questioned whether there is evidence suggesting tax-paying medical groups behave, or are likely to behave, in a manner substantially different than tax exempt medical groups. The commenter also stated that it was unaware of any instances where the Medicare program differentiates policies based solely on institutional mode of ownership, incorporation, or tax status, and questioned if we have statutory authority to create such an exception based on type of ownership.

Response: We have determined that it is not necessary to finalize an exception for diagnostic tests ordered by a physician in a physician organization that does not have any owners who have the right to receive profit distributions. By finalizing both proposed alternative approaches to avoiding application of the anti-markup payment limitation we believe that our concern that the Alternative 2 approach could hinder arrangements involving nonprofit multi-specialty groups that have campus-based treatment facilities (and, thus, do not perform diagnostic testing in the same building where patients are seen) largely becomes moot, as most such arrangements should be able to be structured (or are already structured) to meet the requirements of either the Alternative 1 or Alternative 2 approach finalized here. Similarly, there is no need to create an exception for titular owners.

f. Definition of the “Office of the Billing Physician or Other Supplier”

Comment: One commenter, generally supportive of our proposed clarification of the definition of “office of the billing physician or other supplier”, questioned its application in Example 2 from the proposed rule (73 FR 38547) which would allow two separate physician organizations to share space used for diagnostic testing that is located in the same building in which the physician organizations have their respective offices. The commenter asserted that allowing two or more providers to share a laboratory undermines the anti-markup payment limitation, essentially enabling “pod labs” to regain their ability to facilitate markups by the referring physician or physician organization. The same commenter also requested clarification regarding Example 3 in the proposed rule (73 FR 38547), in which a “group practice treats patients in Buildings A, B, and C. In each of its offices in Buildings A and B, the group practice provides substantially the full range of patient care services that it provides generally, but that is not true for space located in Building C. The group practice provides diagnostic testing services in Buildings B and C.” We noted in this example that, under the proposed definition of the “office of the billing physician or other supplier,” the anti-markup payment limitation would not apply to diagnostic testing services provided in Building B, but would apply to those services provided in Building C. The commenter stated that it agreed with our conclusion, if the ordering physician or supplier's services were provided in Building B. According to the commenter, if the ordering physician provided his or her services in Building A, the anti-markup provisions should apply.

Response: We do not agree with the commenter's assertion that our revisions to § 414.50(a)(2)(iv) undermine the anti-markup provisions and enable “pod labs” to regain their ability to facilitate markups. In particular, we refer the reader to the definition of the “office of the building physician or supplier” at § 414.50(a)(2)(iv), which includes space in which diagnostic testing services are performed, that is in the “same building,” (as defined at § 411.351), in which the ordering physician or ordering supplier regularly furnishes patient care (and more specifically, for physician organizations, in the same building in which the ordering physician provides substantially the full range of patient care services that the ordering physician provides generally). Many of the potentially abusive pod lab arrangements that led to our extension of the anti-markup provisions to the PC of diagnostic testing services involved independent contractor pathologists who performed services in off-site pathology labs. Those arrangements did not have the type of nexus with the group practice required under § 414.50(a)(2) (that is, the pod labs were not within the same building in which the ordering physician provided substantially the full range of patient care services).

We do agree with the commenter's analysis of Example 3 given in the proposed rule.

Comment: One commenter requested that, if adopted, the proposal for Alternative 2 should include detailed examples that provide clear definitions for several key terms, including “office of the billing physician or other supplier,” “conducting and supervising the TC,” and “full range of services.” The commenter believes that, without these definitions, our intent will be misconstrued and subject to potential abuse.

Response: We do not provide a definition for “conducting and supervising the TC” in the regulation text, as we believe that the meaning of “conducting” is clear on its face; that is, the term “conducting the TC” refers to the technician's (or physician's) performance of the test. Nor do we believe that it is necessary to define the term “supervising.” For a service to be covered by Medicare, the regulations at § 410.32 define and specify various levels of supervision (that is general, direct, or personal supervision). The anti-markup provisions, when applied, limit the amount a physician or other supplier may bill Medicare. In the context of the applicability of the anti-markup provisions, we are requiring that the physician supervising the TC be present in the same building (as defined at § 411.351); however, this has no impact on other Medicare billing requirements, which may require a specific level of supervision as described above. We decline to define the term “full range of services,” because this would vary greatly based on factors such as the specialty of the ordering physician, the types of services within the physician's specialty, and the focus of services at the specified practice.

Comment: According to one commenter, the “office of the billing physician or other supplier” for multi-specialty groups should include medical office space in which the physician group provides substantially the full range of services of one or more of the specialties of the group. The commenter contended that this requirement would ensure an adequate nexus between the physician practice and the testing being conducted in the building. The commenter asserted that limiting the location to a building in which the ordering physician provides substantially the full range of services that the ordering physician typically provides imposes unnecessary restrictions that are overly burdensome when compared to the purpose of the proposed rule. Another commenter, in similar comments, urged us to consider replacing “ordering physician” with the words “ordering physician or a member of the ordering physician's group practice.” According to the commenter, this revision would permit any physician member of a group practice to utilize the group's centralized designated health service (“DHS”) facility (and bill under the normal physician fee schedule), provided that the facility is located in the same building where the group practice provides patient care services on a full-time basis. To avoid the potential problem presented by a group practice with multiple offices, none of which provide the full range of patient care services provided by the group as a whole, the group proposed that we eliminate the requirement that the group practice provide in the same building “substantially the full range of patient care services that [it] provides generally.” The commenter suggested replacing this requirement with a requirement that the group practice provide in the same building “physician services unrelated to the provision of DHS on a full time basis.” According to the commenter, this revision would be consistent with the physician self-referral law and regulations, would permit all physician members of a group practice to utilize the group's centralized DHS facility (provided that the facility is located in the same building where the group provides other physician services), and would permit the group to bill for all DHS provided in such a facility under the Medicare physician fee schedule.

Response: We believe that the changes recommended by the commenters would not guard adequately against potential overutilization. In addition, we believe that sufficient flexibility is afforded multi-specialty groups and others by allowing arrangements to satisfy the requirements of either the Alternative 1 or the Alternative 2 approach, as revised.

Comment: One commenter expressed concern that the provision is more complicated than necessary and, rather than a definition of “office of the billing physician or other supplier,” a definition of an “outside entity” is needed to determine which services would be affected by the anti-markup provisions. The commenter suggested “outside entity” should be defined as an entity with a different identification number (for example, tax identification number) than the billing entity. The commenter asserted that our attempt to define “office of the billing physician or other supplier” results in “nonsensical situations” in which the anti-markup provisions do not apply if the diagnostic test is done on a different floor of the same building but do apply if it is done in a different building, even if the two buildings are closer together than the two floors.

Several commenters argued that the “same building” test is unworkable and contrary to longstanding CMS policy concerning testing performed in a “centralized building.” According to the commenters, the “same building” proposal assumes an old-fashioned health care delivery system—that is, that all physician services are still delivered in a single practice location. According to these commenters, given market demands for services in multiple urban, suburban and rural locations, the idea that diagnostic testing services should be provided only in a building where “substantially the full range” of other physician services also are provided is anachronistic. The commenters opposed the implementation of the “same building” test as it relates to the proposed anti-mark-up provisions due to the alleged economic losses and decreased operating efficiencies that will result. The commenters contended that the fact that the diagnostic equipment is located in a separate building does not support an inference that the diagnostic services are not an integral part of the practice, as our proposal assumes.

Response: Under this final rule, the anti-markup provisions will not apply to the TC or PC of a diagnostic test where the performing physician shares a practice with the billing physician or other supplier. With respect to a TC or PC of a diagnostic testing service, the performing physician is considered to share a practice with the billing physician or other supplier if: (1) He or she furnishes substantially all (at least 75 percent) of his or her professional services through the billing physician or other supplier; or (2) the TC is conducted and supervised, or the PC is performed, in the office of the billing physician or other supplier. We believe that, in the situation where an arrangement would otherwise be subject to the anti-markup payment limitation because the performing physician does not furnish at least 75 percent of his or her professional services through the billing physician or other supplier, services that satisfy the site-of-service approach indicate a sufficient nexus between the performing physician and the billing physician or other supplier. We proposed clarifying that the “office of the billing physician or other supplier” protects diagnostic testing that takes place in the “same building” (as defined at § 411.351) in which the ordering physician sees patients because, following publication of the CY 2008 PFS final rule with comment period, stakeholders expressed concern that arrangements in which the diagnostic testing takes place on one floor of a building, but the billing physician or other supplier sees patients on another floor, could be subject to the anti-markup provisions. We agree with those stakeholders that it would be unnecessarily disruptive to impose the anti-markup payment limitation on those types of arrangements, but we do not believe that it is appropriate to go further and define “office of the billing physician or other supplier” as including diagnostic testing space that is in a separate building from where the ordering physician sees patients. Specifically, we are unwilling to define “office of the billing physician or other supplier” as including diagnostic testing space in a “centralized building” due to the potential overbreadth of that definition with respect to some arrangements. We also reject a square footage test in lieu of using the “same building” definition because the former may be more difficult to enforce and the latter is an already-existing, well-defined concept.

Comment: Several commenters responded to our solicitation for comments that would describe current business arrangements, such as those that take place on a “campus,” and that would suggest any additional or alternative criteria to permit such arrangements to avoid application of the anti-markup provisions. We received a few comments suggesting that we exempt arrangements taking place on a campus, and suggesting criteria for how we would define “campus.” For example, one commenter suggested that, to be considered “on campus,” the diagnostic center/building/entity must be located within the main building(s), or located in the physical area immediately proximate to the provider's main building(s). Alternatively, the commenter suggested, the diagnostic testing could be performed in other areas or buildings that are not proximate to the main building(s) but which are fully integrated (that is, financially integrated and administered in concert with overall operations standards, guidelines, rules and directives), with governance and operations functions determined by central administrative processes and structures. Another commenter encouraged us to consider the “office of the billing physician or other supplier” to encompass all buildings on a campus or within a multi-campus organization and the area of the entire legally-owned organization, regardless of where the service is performed. Another commenter noted that physician practices currently are required to list each practice location with the Part B carrier, and asserted that, because of this, there is adequate information for CMS (through the carrier) to monitor the campus arrangement to assure that the geographic layout of the physician practice is a bona fide campus.

Response: We believe that, at this time, providing a definition of “campus” that would be both workable for the industry yet address our concerns of potential overutilization would be difficult and may add unnecessary complexity to the final rule. We believe that the commenters' concerns will be alleviated by allowing arrangements to satisfy the requirements of either the Alternative 1 or the Alternative 2 approach, as revised.

Comment: A commenter questioned whether we intended “ordering physician” to mean an individual physician or any physician in the group. According to the commenter, in many specialty groups, a particular ordering physician will work at only one location, but the diagnostic services are provided at another location, where other physicians in the same group and in the same specialty provide substantial physician services. The commenter asserted that, if we mean that, in order to avoid application of the anti-markup payment limitation, a specific individual physician must provide the substantial physician services in that particular location where the diagnostic services are provided, the proposal would render unprofitable many existing lawful arrangements for single-specialty practices with multiple locations. The commenter further asserted that our proposal would require physicians in multi-practice locations to rearrange schedules so as to rotate through practice locations where the diagnostic testing services are provided.

One commenter contended that the focus on where the ordering physician regularly furnishes care will affect all physician groups where all the physicians are not located in the same building and diagnostic testing services are only offered in a few of the group's locations. According to the commenter, the physician self-referral law requires a group practice with multiple locations to function as one group, and group practices have structured their arrangements to meet existing governmental requirements and to serve patients. The commenter asserted that changing these requirements may make it impossible for some groups to continue to provide these services to Medicare beneficiaries.

Response: We believe that the commenters' concerns that physician practices with multiple locations will not be able to meet the “site-of-service” approach are adequately addressed by allowing billing physicians and other suppliers to comply with either the requirements of Alternative 1 or Alternative 2.

Comment: A commenter requested that the definition of “office of billing physician or other supplier” be modified to include a mobile van that is used in the parking lot of a building in which the physician group sees patients. Otherwise, the commenter argued, the use of mobile MRI essentially will be barred. According to the commenter, physician groups that use mobile MRI on an exclusive basis because of the nature of their practices are not committing any abuse that we should address in the anti-markup provisions. Another commenter noted that alternative 2, as proposed, would not allow groups to operate mobile diagnostic testing services performed in mobile vehicles, vans or trailers because they are specifically excluded from the definition of “same building” at § 411.351.

Response: We are not modifying the definition of the “office of the billing physician or other supplier” to include a mobile van that is used in the parking lot of a building in which the physician group sees patients. “Same building,” as defined at § 411.351 of the physician self-referral regulations, specifically excludes a mobile vehicle, van, or trailer. Therefore, unless provided in a mobile unit that qualifies as a “centralized building” (as defined at § 411.351), diagnostic services provided in the parking lot of a building in which a physician group sees patients already would be subject to the physician self-referral restrictions and would not be protected under the in-office ancillary services exception. In the January 4, 2001 Phase I final rule with comment period, we discussed our specific reasons for declining to include within the definition of “same building” a mobile van or other unit (66 FR 889 through 892). We are concerned with the potential for confusion if we were to have one definition of “same building” for physician self-referral purposes and another, more expansive definition for purposes of applying the anti-markup payment limitation. Moreover, we decline to expand the definition of “same building” for purposes of applying the anti-markup provisions given the potential we see for overutilization through arrangements that take place outside the “same building.” Again, arrangements that do not satisfy the requirements of the Alternative 2 “site-of-service” approach may fit under the requirements of the Alternative 1 “substantially all” professional services approach.

g. Services Performed at a Site Other Than the Office of the Billing Physician or Other Supplier

Comment: A commenter offered strong support for the proposed clarification that “if the TC is conducted outside the office of the billing physician or other supplier, the anti-markup provision applies irrespective of whether the supervision takes place in the office of the billing physician or other supplier.” The same commenter also supported our proposal that the anti-markup payment limitation would apply if “either the conducting of the TC or the supervising of the TC takes place outside the office of the billing physician or other supplier.” Another commenter supported the proposed change that the anti-markup payment limitation would apply if the TC is either conducted or supervised outside the office of the billing physician or other supplier in order to eliminate confusion among providers when determining whether the TC is deemed to be provided by an outside supplier for purposes of the anti-markup provisions. Another commenter expressed concern that the TC will be considered to be performed outside the office of the billing supplier if the physician is not in the office when the test is being performed. According to the commenter, this runs counter to long standing Medicare regulation and policy regarding the supervision of diagnostic tests, as many of these tests do not require physician presence during the performance of the test. The commenter argued that changing this, requiring physicians to be present, would only inflate healthcare costs.

A commenter recommended that TCs and PCs of non-purchased items performed outside the office of the billing physician or other supplier not be subject to the anti-markup provisions, noting that many audiologists are self-employed and perform testing services for off-site physicians. The commenter further asserted that audiology services do not require physician supervision, and per CMS transmittal 84 (issued February 29, 2008 and effective April 1, 2008), these services are to be billed by the provider of the service and benefits reassigned to the employer. The commenter contended that there has been no evidence of abuse with respect to billed audiology services, so no change is warranted.

Response: We are adopting our proposal that, for purposes of satisfying the requirements of Alternative 2 with respect to the TC, the TC must be both conducted and supervised in the office of the billing physician or other supplier. Although the requirement that the supervising physician be present in the office of the billing physician or other supplier may be more restrictive than some Medicare coverage and payments regulations governing supervision of tests, we believe that our amendment to § 414.50(a)(2)(iii) is necessary in order to minimize the potential for overutilization and program abuse. We do not believe that healthcare costs would be inflated if physicians were required to be present in the office of the billing physician or other supplier. If the test was not conducted within the office of the billing physician or other supplier, and/or the physician supervision did not occur within the office of the billing physician or other supplier, the service would still be payable by Medicare.

We recognize that where audiologist services are performed by an audiologist, no physician supervision is necessary, and therefore the anti-markup provisions do not apply (because § 414.50 applies to tests performed by a physician). We note further, however, that the TC of some audiological tests can be conducted by a technician and supervised by a physician, in which case, the anti-markup provisions potentially are applicable to the TCs and PCs of such tests. Although the commenter stated that there is no evidence of abuse with respect to billed audiology services, we are not required to demonstrate that fraud or abuse has occurred in order to finalize our proposals, but rather we attempt to guard against the potential for overutilization or patient abuse, and we strive to make distinctions between specific types of diagnostic services only when there is a persuasive reason to do so. We are unpersuaded to make such a distinction here. As noted above at section II.N.2., and as discussed more fully below at section II.N.2.h. in response to a comment, we are deleting references to purchased TCs and PCs from § 414.50.

Comment: Commenters expressed concern that the anti-markup provisions would apply when cardiologists perform the PC of a diagnostic testing service procedure in a hospital or other facility, as is often the case for complex or high risk procedures, because the test is conducted outside the office of the billing physician. Commenters asserted that cardiology groups that provide outreach services in rural areas and are the only providers of certain cardiac subspecialty services in such areas are concerned that their provision of hospital-based cardiac diagnostic tests to rural patients could become financially impossible under the anti-markup provisions, thereby reducing access to care for this already underserved population.

Response: We do not expect the anti-markup payment limitation would apply in the situation described by the commenter, because, under Alternative 1 as finalized in this final rule with comment period, the performing cardiologist likely would share a practice with the cardiology group billing for the PC (or would be billing for the PC himself or herself). If the cardiologist reassigns payment to the hospital which then bills for the PC, the anti-markup payment limitation would not apply because the hospital did not order the PC.

h. Definition of Outside Supplier

Comment: We proposed that the TC of a diagnostic test is not purchased from an outside supplier if the TC is both conducted and supervised in the office of the billing physician or other supplier and the supervising physician is an employee or independent contractor of the billing physician or other supplier. (For ease of reference, we refer to this below as the “primary proposed definition”.) In the alternative, we proposed that: (1) If the TC is conducted by a technician who is not an employee of the billing supplier, the TC is considered to be purchased from an outside supplier, regardless of where the technician conducts the TC, and notwithstanding the employment status of the supervising physician and the fact that the test is supervised in the office of the billing physician or other supplier; and (2) where the TC is conducted by a non-employee of the billing physician or other supplier and outside the office of the billing physician or other supplier, the TC nevertheless will not be considered a purchased test if the supervising physician is an employee or independent contractor of the billing physician or other supplier and performs the supervision in the office of the billing physician or other supplier. Several commenters offered support of the primary proposed definition of outside supplier. One such commenter also requested that the final rule make clear that, for anti-markup purposes only, the performing supplier with respect to the TC would be the physician who supervised the TC, even when the technician is not an employee of the billing physician or other supplier.

One commenter supported the first alternative proposed definition of outside supplier. This commenter suggested that the physician organization should be permitted to mark up the TC only if the technician is an employee and the supervising physician is on-site and is also an employee of the billing physician or physician organization. One commenter supported adoption of the second alternative proposed definition. The commenter expressed its view that this definition provides sufficient flexibility to ensure that the anti-markup provisions will not be applied unless there is an inadequate relationship between the individual who performs or supervises the test and the billing entity.

Response: As explained above at II.N.2., we are deleting from § 414.50 purchased tests and interpretations from an “outside supplier” as separate bases for imposing an anti-markup payment limitation. After reviewing the comments, we have concluded that employing the concept of a purchased TC or PC as a separate basis for imposing an anti-markup payment limitation is unnecessary, redundant, and potentially confusing in light of our decision to finalize Alternative 1 and to allow arrangements that do not meet the requirements of Alternative 1 to avoid application of the anti-markup provisions if they meet, on a case-by-case basis, the requirements of Alternative 2. If we were to adopt any of our proposals for the definition of “outside supplier,” it would mean we would effectively impose an anti-markup payment limitation on some arrangements that meet the “substantially all” services requirement of Alternative 1. We believe that a physician who performs “substantially all” of his services through a particular billing physician or other supplier “shares a practice” not only within the meaning of Alternative 1, but also within the meaning of section 1842(n)(1) of the Act. Moreover, although we considered adopting the second proposed alternative definition of “outside supplier” so that a TC would not be a purchased test if the supervising physician is an employee or independent contractor of the billing physician or other supplier and performs the supervision in the office of the billing physician or other supplier (regardless of the employment status of the technician or where the technician conducts the test), this too would be problematic in light of our decision to adopt Alternative 1 but also allow arrangements that do not meet the requirements of Alternative 1 to avoid application of the anti-markup provisions by meeting, on a case-by-case basis, the site-of-service criteria of Alternative 2. That is, with respect to arrangements that do not meet the requirements of Alternative 1 and thus must meet the site-of-service requirements of Alternative 2, adopting our second alternative definition of “outside supplier” would have been superfluous because, under Alternative 2, the TC must be both conducted and supervised within the office of the billing physician or other supplier. We retain the requirement, present in all of the proposed definitions of “outside supplier,” that the physician must be an employee or independent contractor of the billing physician or other supplier by incorporating the requirement into the Alternative 2 criteria. Similarly, we believe that an anti-markup payment limitation on purchased PCs is unnecessary with respect to diagnostic testing services that meet the requirements of Alternative 2, because we are adding the requirement to Alternative 2 that the physician performing the PC is an employee or independent contractor of the billing physician or other supplier. Thus, as finalized, we are deleting the references in § 414.50 to purchased tests and interpretations from an outside supplier. As finalized, the anti-markup payment limitation will apply to TCs and PCs that meet neither the requirements of Alternative 1 nor Alternative 2, without regard to whether the TC or PC was purchased from an outside supplier.

Comment: A commenter requested that we clarify our use of the term “conducted or supervised” because a physician may “supervise” an imaging procedure, for instance, even though he or she is not necessarily the physician who will be interpreting a test. According to the commenter, Medicare's determination as to the level of supervision required for a specific test supports this conclusion. The commenter stated that a CT scan, for instance, when performed without contrast requires only general supervision, whereas the same test performed with contrast requires direct supervision. The commenter asserted that this difference is due to the relative levels of medical risk to a patient during a test, not the interpretation of results. The commenter requested that we clarify that a “supervising” physician need not be the physician responsible for interpreting test results or images.

Response: The commenter is correct that the supervising physician need not be the physician responsible for interpreting test results or images.

Comment: For purposes of the anti-markup payment limitation only, we proposed to define the “performing physician” with respect to the TC as the physician who supervised the TC and, with respect to the PC, as the physician who performed the PC. One commenter supported this proposal, but requested several clarifications. The commenter understood the proposal to mean that the performing supplier of the TC is the physician who supervised the TC rather than the technician who actually conducted the test. The commenter inquired whether, if the anti-markup provision were applied in this instance, the group could recover only the fees it paid to the physician for the TC and not any amounts paid directly to the histotechnologist who furnished the TC. The commenter also requested clarification regarding application of the rule where a group purchases the TC directly from an outside supplier or histotechnologist, without any physician involvement.

Response: The commenter is correct in that the performing supplier of the TC is the physician who supervised the TC. Where the anti-markup payment limitation applies, the billing physician or other supplier may bill for the lowest of the following amounts: (1) The performing supplier's net charge to the billing physician or other supplier; (2) the billing physician or other supplier's actual charge; or (3) the fee schedule amount for the test that would be allowed if the performing supplier billed directly. With respect to the commenter's question regarding whether a TC purchased from a supplier “without any physician involvement,” as noted in this section II.N.2.h., we have deleted the references to purchased tests or interpretations from an “outside supplier.” The anti-markup payment limitation will apply if a TC is supervised by a physician who does not, within the meaning of Alternative 1, share a practice with the billing physician or other supplier and the TC does not meet the site-of-service requirements of Alternative 2 (that is, the TC was not conducted in the “office of the billing physician or other supplier” or was not supervised in the “office of the billing physician or other supplier” by a physician who is an owner, employee, or contractor of the billing physician or other supplier). If the TC does not require physician supervision under our rules, the anti-markup provisions are inapplicable.

i. Specific Solicitation of Comments

(1) Net Charge

Comment: We stated that we were interested in receiving comments concerning the calculation of the “net charge” when the anti-markup provisions apply (73 FR 38548). In response, many commenters expressed concern that we did not propose to allow practices to which the anti-markup provisions apply to recoup at least their direct practice costs where the practice is limited to billing Medicare its “net charge” for the testing service. One commenter asserted that if a group provides diagnostic tests at a site other than the “office of the billing physician or other supplier,” the calculation of a net charge is difficult and punitive because a group practice cannot consider all of the actual components of costs incurred, thereby compelling the group practice to lose money. Another commenter argued that it is “grossly unfair” to not allow physicians to recover any overhead costs. The commenter further contended that, although we may be concerned about physicians who may “pad” their charges with illegitimate amounts, this does not justify penalizing providers who incur appropriate and often costly overhead costs. According to the commenter, it would go against well-established Medicare policy to not allow physicians to include legitimate costs in calculating a net charge. Another commenter stated that many suppliers would incur a loss, not just fail to profit, if these “confusing and hyper-technical rules” are adopted. For example, the commenter asserted, a billing physician would be prohibited from billing for the costs incurred when a technician performs the TC of a test because the physician group may bill only for the cost of the physician who supervised the test. The commenter also stated that the proposal effectively prohibits the payment for qualified technicians in the performance of the TC of diagnostic tests, or, in the alternative, requires that physicians who choose to provide their patients with such tests do so at a loss.

One commenter explained that it is common practice for physician groups to provide pathologists with office space, equipment, administrative services, billing and collection services, and other services and then bill for the PC itself. The commenter urged that net charges should be defined to include these overhead costs rather than just the amount the physician group pays the pathologist to perform the PC. According to this commenter, it is critical that physicians be able to recoup actual and readily allocable costs attributable to these services. If they cannot, the commenter predicted, gastroenterology groups will be forced to stop utilizing their labs for Medicare-reimbursed services, and patient care will suffer.

Another commenter suggested that we allow a group practice to include in the calculation of “net charge” actual additional incremental costs incurred by the group which are directly allocable to the provision of the service, for example, rental charges for a facility used exclusively to provide diagnostic tests. If billing or administrative staff are hired by the group solely to provide billing services related to the provision of diagnostic tests, such costs should appropriately be considered in calculating net charge. The commenter contended that requiring that such costs be associated exclusively with providing the diagnostic tests for which payment is sought will ensure that only costs actually needed to provide the tests are included in the calculation of net charge. The commenter further asserted that this will permit groups to provide better diagnostic health care services for their clients without losing substantial money on every test performed.

A commenter stated that, without a proposed definition for “net charge,” it did not understand how the anti-markup provisions could be applied fairly and consistently to testing provided by physician groups. The commenter stated that physician groups have standard fees for diagnostic test components that they charge to patients and payers and that, in order to determine an “inside” charge the group's usual and customary external charges would have to be recognized. According to the commenter, a fair net charge calculation would need to include the cost of equipment, supplies, technical personnel, related benefits, and allocated space, utilities, taxes and general overhead, which vary between practitioners.

Another commenter stated that there should not be an allowance made to recover overhead expenses, such as billing expenses, rental charges, or equipment expenses, as these expenses will only help underwrite the cost of the laboratory and will be contrary to the goal of reducing overutilization. According to this commenter, the only costs that should be included in the calculation of “net charge” are those directly paid to the pathologist performing the PC or supervising the TC and should be limited to the W-2 salary income of the pathologist, not including any bonus.

Response: After considering the issue further, we decline at this time to make any changes to what we allow to be included in the calculation of “net charge.” As we stated in the preamble to the CY 2008 PFS final rule (72 FR 66319 through 66320), we are concerned that, allowing billing physicians and other suppliers to recoup costs such as overhead in situations in which the anti-markup provisions apply, would undermine a purpose of the anti-markup payment limitation because the incentive to overutilize (to recover capital outlays and other costs) would still be present. Therefore, where the billing physician or other supplier pays the performing supplier a fixed fee for the TC or the PC, the “net charge” is the fixed fee (exclusive of any charge that is intended to reflect the cost of equipment or space leased to the performing supplier by or through the billing physician or other supplier, per § 414.50(a)(2)(i)). Where a fixed fee is not paid, the billing physician or other supplier is limited to the salary and benefits it paid to the performing supplier for the TC or PC. As we indicated in the CY 2008 PFS final rule, it is the responsibility of the billing entity to ascertain the amount it paid for the TC or PC. The billing entity should maintain contemporaneous documentation of the methodology and information used to calculate the net charge, and may do so in any reasonable manner (72 FR 66318).

(2) Direct Billing

Comment: In the CY 2009 PFS proposed rule, we solicited comments on whether, in addition to or in lieu of the anti-markup provisions, we should prohibit reassignment in certain situations and require the physician supervising the TC or performing the PC to bill Medicare directly (73 FR 38548). One commenter opposed any requirement that a physician performing either the TC or the PC of diagnostic tests directly bill for such services. The commenter stated that the Congress enacted the anti-markup provisions in section 1842(n) of the Act rather than adopt the already established direct billing requirement for clinical laboratory services. The commenter argued that we should not second-guess the Congress' decision and choose to eliminate the system of assignment and reassignment that is currently in place. Another commenter agreed with the first commenter and stated that reassignment is beneficial to both physicians and patients because physicians gain flexibility to establish the most appropriate employment or contractual relationships for their lives and lifestyles and patients benefit by having medical services combined on one bill, which avoids confusion and additional paperwork. A commenter opposed to direct billing stated that, with respect to the situation in which multiple suppliers are engaged in the treatment of a patient, a prohibition on reassignment would force suppliers to bill Medicare directly only for the services provided directly by each supplier, resulting in a doubling of the claims that are submitted, with an increase in billing expenses. The commenter asserted that this prohibition would also be a concern for locum tenens physicians who are, by agency definition, independent contractors. According to the commenter, it does not have the infrastructure to submit and collect payments from Medicare, and thus its contracts are based on the ability to reassign its Medicare claims to the physician or practice it is supporting.

Some commenters were in favor of direct billing, stating that itemized billing encourages transparency relative to the amounts paid for the TC and PC of tests ordered by the billing physician or group. The commenters stated that an itemized bill would identify the PC and TC providers, the services provided, and associated charges as separate line items on a single Medicare claim form. The commenters further asserted that we would be able to reconcile TC and PC components without an increase in billing expenses to either the providers or Medicare. One commenter expressed its view that the most straightforward way to address potential overutilization caused by physicians being able to profit by billing for diagnostic services performed by others would be to implement a direct billing requirement. The commenter suggested that this would be a simple, understandable, bright-line rule that could be effectively implemented and monitored. Another commenter supported the establishment of direct billing for anatomic and clinical pathology services for all payers, public and private, so that payment should be made only to the person or entity that performed or supervised the service, except for referrals between laboratories independent of a physician's office. According to this commenter, this policy would be consistent with ethics principles that discourage fee-splitting.

Response: We appreciate the comments on whether, in addition to or in lieu of the anti-markup provision, we should prohibit reassignment in certain situations and require the physician supervising the TC or performing the PC to bill Medicare directly. The issues raised and the suggestions made by the commenters will be taken into consideration for purposes of future rulemaking. As we noted above in section II.N.2.a., we agree that it would be simpler to adopt the approach, as suggested by one commenter, that we not allow any reassignment of diagnostic testing services and, instead, require direct billing. However, without studying that approach further, we have concerns that doing so may unnecessarily prevent nonabusive arrangements.

(3) Effective Date

Comment: In the CY 2009 PFS proposed rule, we solicited comments on whether revisions made by the CY 2008 PFS final rule with comment period (but which were delayed until January 1, 2009 through a final rule published on January 3, 2008 (73 FR 404)) should go into effect on January 1, 2009, and whether any proposals from the CY 2009 PFS proposed rule that we may finalize should go into effect on that date, or whether some or all of the revisions should be delayed past January 1, 2009. One commenter urged us to implement the anti-markup provisions without delay, as we have been studying this issue since 2004. The commenter asserted that sufficient time has passed for consideration of comments on the issue. The commenter also expressed its view that the anti-markup payment limitation will not affect access to critical patient services, only the ability of ordering providers to profit from their referrals.

One commenter suggested an effective date of July 1, 2009, to provide sufficient time to restructure affected relationships. Another commenter, opposed to the anti-markup proposals, suggested that, if we revise the provisions currently in effect, the new provisions should not be effective until December 31, 2010 at the earliest. The commenter asserted that such a delay would ensure providers a reasonable amount of time to restructure their service and billing arrangements for consistency with the new provisions.

Another commenter asserted that the delayed portions of last year's rule should not go into effect on January 1, 2009, and that neither of the alternative approaches discussed in this year's proposal should be finalized. The commenter stated that we achieved our goal of regulating so-called “pod labs,” and asserted that extending similar rules based on site-of-service beyond the pathology laboratory context risks disruption to a wide variety of diagnostic testing services that are genuinely “inside” group practices. Commenters claimed that these proposals have made it virtually impossible for physician practices or suppliers potentially subject to these rules to plan for compliance or alternative arrangements by January 1, 2009. One commenter requested that, if we do proceed with the extension of the anti-markup provision, the effective date of the rule be delayed until regulatory language can be proposed for each of the alternatives under consideration and there has been additional time to understand the impact of each proposal.

A commenter recommended that we delay beyond January 1, 2009, the application of any further revisions until we can fully evaluate the effect of such revisions on physician groups and work with the medical community to simplify and streamline the anti-markup provisions, so that their application is clear to all involved. One commenter requested that we consider delaying the proposals until further evaluation is completed on the impact of recent changes affecting physicians such as MIPPA, DRA, “Bottom-Up Methodology” and the proposed IDFT requirements. Another commenter recommended that implementation should be delayed and that we should use the process set forth by the Congress in MIPPA to establish accreditation requirements for medical imaging to assess the appropriate use of imaging services and to examine the perceived overutilization of in-office imaging. A commenter recommended that we defer to the Congress regarding concerns of overutilization of diagnostic testing services. According to the commenter, the directives in MIPPA, released after the current proposed rule, are much clearer on this issue. The commenter noted that the Congress did not amend the anti-markup provision, choosing instead to direct the agency to develop a demonstration project to determine the appropriateness of advanced diagnostic imaging services furnished to Medicare beneficiaries and require accreditation of advanced diagnostic imaging suppliers by 2012.

Response: We do not agree with the commenters that suggested a delayed effective date beyond January 1, 2009 for either the revisions made by the CY 2008 PFS final rule with comment period or the revisions that we are making in this CY 2009 PFS final rule with comment period. We have decided to make the finalized revisions effective as of January 1, 2009. When we delayed, until January 1, 2009, the application of the revisions to § 414.50 we made in the CY 2008 PFS final rule with comment period (except with respect to certain diagnostic testing arrangements involving anatomic pathology performed in a “centralized building” for which the revisions were applicable January 1, 2008), we stated that we planned to issue clarifying guidance as to what constitutes the “office of the billing physician or other supplier” within the following 12 months (73 FR 405). We proposed the clarification and other revisions in the CY 2009 PFS proposed rule in order to introduce the possible changes under consideration. The revisions being finalized in this regulation stem from that proposal and we believe that sufficient time has been given for consideration of and response to the anti-markup revisions.

Irrespective of whether “pod lab” arrangements otherwise would continue to exist or proliferate, we believe that the anti-markup provisions are needed in order to address potential program and patient abuse through the ordering of unnecessary diagnostic tests. Although several commenters made mention of MIPPA and the impact that it may have, we are not swayed by these arguments. MIPPA is a separate authority with a different focus than that of the anti-markup provisions. If, in the future, the anti-markup provisions are impacted through our implementation of MIPPA, we will address this in subsequent rulemaking.

j. Miscellaneous

Comment: One commenter, a professional association of pathologists, suggested an exception from the anti-markup provisions for single-specialty pathology physician groups and independent laboratories. The commenter suggested that such entities be defined as those in which all physicians within the group are pathologists and for which 75 percent of all CPT codes billed by the entity are pathology and laboratory CPT codes. According to the commenter, such an exception would “clarify” that dedicated pathology groups and independent laboratories are not subject to the anti-markup provisions for certain purchased diagnostic tests and interpretations or the ordering of special stains to perform better the tests ordered by outside, independent physicians. The commenter asserted that its proposed exception would be consistent with the physician self-referral's exclusion from the definition of “referral” for services ordered by pathologists (and radiologists and radiation oncologists) pursuant to a consultation with another physician. According to the commenter, the exclusion from the definition of “referral” reflects the Congress's recognition that services ordered by such physicians pursuant to a consultation with another physician do not pose the same risk of abuse that physician self-referral generally poses. The commenter also suggested an alternative to its proposed exception, for independent laboratories for which at least 75 percent of the diagnostic tests have been ordered by physicians outside the laboratory. A second commenter representing pathologists also suggested an exception for pathology practices (which it would define as any entity for which at least 75 percent of all CPT codes billed by the entity are pathology and laboratory codes). The commenter also cited the exclusion from the definition of “referral” in the physician self-referral rules for services ordered by pathologists pursuant to a consultation, and asserted that there should not be a self-referral or mark-up concern when pathology groups order special stains or other tests. A third commenter stated that the “rapid rise” in special stains in the last eight years is not a result of in-office pathology services or TC/PC arrangements, but rather is a result of the failure of national, regional, and hospital-based pathology laboratories to follow standard protocol for tissue biopsies. The commenter contended that over-utilization of anatomic pathology testing can be managed by imposing tighter controls on such laboratory-based pathologists with respect to what stains they order and the reasons for ordering them.

Response: We are not establishing an exception that would be applicable to pathology practices or independent laboratories, to the anti-markup provisions. We note that we did not propose such an exception and, thus, question whether we would have the authority to provide for such an exception in this final rule. Moreover, we are not convinced of the need for or wisdom of such an exception. We believe that the same potential that exists for the overutilization of diagnostic tests ordered by single-specialty physician groups and other suppliers, due to the profit motive, also exists for the ordering of special stains or other tests by pathology groups or independent laboratories.

Comment: An association that represents physician group practices suggested that we establish a multi-specialty medical group “carve out” for “merit,” that is, an exemption from the anti-markup provisions based on delivery of high-quality health care services in the multi-specialty/organized system of care model. According to the commenter, the potential and risk for inappropriate actions is outweighed by the attributes and meritorious actions of multi-specialty groups. The commenter noted that, in section 131 of MIPPA, the Congress recognized the coordinated approach to patient care that multi-specialty medical groups provide.

A different commenter requested that multi-specialty group practices not be permitted to use the employment or independent contractor arrangements to bring pathology services in-house and then claim that a referral is exempt from the physician self-referral prohibition because it meets the requirements of the in-office ancillary services exception or some other exception. The commenter stated that pathology is a separate physician specialty and the provision of these services is not ancillary to the provision of urology or gastroenterology. According to the commenter, pathology services provided in-office do not serve the patient's convenience or increase access to these services as they are too time consuming and complex to perform, as the patient has always left the doctor's office by the time the pathology examination is complete and the report issued. The commenter argued that not allowing pathology services to be protected by the in-office ancillary services exception would be consistent with the physician self-referral law and would eliminate the incentive for overutilization that currently exists.

Response: For the same reasons expressed in the response to the previous comment, we are not establishing an exception to the anti-markup payment limitation, for multi-specialty groups. We also note that because we have adopted the first proposed alternative with modification, whereby the anti-markup provisions will not apply to TCs and PCs supervised or performed by a physician who performs “substantially all” of his or her professional services for the billing physician or other supplier, “hub and spoke” arrangements of multi-specialty groups should not have significant difficulty avoiding application of the anti-markup provisions. We understand the commenter's concerns about the use of the in-office ancillary services exception and may propose rulemaking on this issue in the future.

Comment: A commenter stated that dermatologic surgeons who order and read their own diagnostic tests should not be penalized for doing so by the addition of new and overly cumbersome regulations that the commenter argued are inconsistent with the existing physician self-referral law. According to the commenter, a dermatopathologist has the expertise to diagnose and monitor diseases of the skin, which entails the examination and interpretation of specially prepared tissue sections, cellular scrapings, and smears of skin lesions by means of routine and special (electron and fluorescent) microscopes. The commenter was also concerned that patient access to care in rural and underserved areas will be affected. The commenter urged that practices that order and interpret their own diagnostic tests in these areas should have the same ability to recoup the costs of equipment, space, and medical records management for services performed within their practices as those practices that utilize an outside supplier for the TCs or PCs of their tests.

Response: We are unclear as to what the commenter is suggesting. We did not propose to, and this final rule does not, impose tighter billing restrictions on TCs and PCs ordered by dermatologic surgeons than for other specialties, and does not impose tighter billing restrictions for dermatologic surgeons who perform TCs and PCs than it does for those physician practices that purchase TCs and PCs from an outside supplier. We note that the commenter did not provide an explanation of why patient access to care in rural or underserved areas would be affected by our proposed revisions.

Comment: A letter writing campaign expressed concern regarding the proposals to the anti-markup provisions, contending that it would limit the ability of allergists to provide services on a part-time basis with more than one group and, in particular, would limit access to allergy care (including allergy diagnostic tests), to Medicare beneficiaries in rural or underserved areas. The commenters urged that our proposals not be implemented.

Response: We have adopted the first proposed alternative with modification, whereby the anti-markup provisions will not apply to TCs and PCs supervised or performed by a physician who performs “substantially all” (at least 75 percent) of his or her professional services for the billing physician or other supplier, which provides some flexibility for the performing physician to work for more than one billing physician or other supplier. Moreover, this final rule provides additional flexibility by allowing arrangements that do not come within the protection of the “substantially all” test to avoid the application of the anti-markup payment limitation by complying on a case-by-case basis with the existing site-of-service approach (as clarified by this final rule with comment period). We believe that this addresses the commenters' concerns.

O1. Physician Quality Reporting Initiative (PQRI)

a. Program Background and Statutory Authority

i. Division B of the Tax Relief and Health Care Act of 2006—Medicare Improvements and Extension Act of 2006 (MIEA-TRHCA) and the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA): Requirements for the PQRI Program Prior to Enactment of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA)

Section 101(b) of the MIEA-TRHCA (Pub. L. 109-432) amended section 1848 of the Act by adding subsection (k). Section 1848(k)(1) of the Act requires the Secretary to implement a system for the reporting by eligible professionals of data on quality measures as described in section 1848(k)(2) of the Act. Section 1848(k)(1) of the Act authorizes the Secretary to specify the form and manner for data submission by program instruction or otherwise which may include submission of such data on Part B claims. Section 1848(k)(3)(B) of the Act specifies that for the purpose of the quality reporting system, eligible professionals include physicians, other practitioners as described in section 1842(b)(18)(C) of the Act, physical and occupational therapists, and qualified speech-language pathologists. Section 101(c) of the MIEA-TRHCA, as amended by the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-173) (MMSEA), authorizes “Transitional Bonus Incentive Payments for Quality Reporting” in 2007 and 2008, for satisfactory reporting of quality data, as defined by section 101(c)(2) of the MIEA-TRHCA. We have named this quality reporting system the “Physician Quality Reporting Initiative (PQRI)” for ease of reference.

The MMSEA required the Secretary to establish alternative reporting periods and alternative criteria for satisfactorily submitting data on quality measures through medical registries and for reporting groups of measures for 2008 and 2009.

For 2009, section 1848(k)(2)(B)(ii) of the Act, as amended by the MMSEA, requires the Secretary to publish a proposed set of quality measures that would be appropriate for eligible professionals to use to submit data in 2009 in the Federal Register by August 15, 2008. Such measures shall be measures that have been endorsed or adopted by a consensus organization, such as the National Quality Forum (NQF) or the AQA (formerly the Ambulatory Care Quality Alliance), that include measures that have been submitted by a physician specialty, and that the Secretary identifies as having used a consensus-based process for developing such measures. In addition, the measures shall include structural measures, such as the use of electronic health records (EHRs) and electronic prescribing (e-prescribing) technology. The Secretary must publish the final set of measures in the Federal Register no later than November 15, 2008, as required by section 1848(k)(2)(B)(iii) of the Act, as amended by the MMSEA.

Although section 101(c) of the MIEA-TRHCA, as amended by the MMSEA, authorized the Secretary to make incentive payments for satisfactorily reporting quality measures data on covered professional services furnished by eligible professionals during the reporting period for 2007 and 2008, neither MIEA-TRHCA nor MMSEA authorized an incentive payment for PQRI for 2009. Also unlike the 2007 or 2008 PQRI, neither the MIEA-TRHCA nor the MMSEA defined a specific reporting period for the 2009 PQRI.

ii. Extension of and Enhancements to the PQRI Program Authorized by the MIPPA

The MIPPA, which was enacted after the publication of the CY 2009 PFS proposed rule, included a number of provisions that impact the 2009 PQRI. Prior to enactment of the MIPPA, the MIEA-TRHCA, as amended by the MMSEA, was the authorizing legislation for PQRI. The MIPPA codifies the PQRI under sections 1848(k)(2) and 1848(m) of the Act. First, the MIPPA makes the PQRI a permanent program and authorizes us to make incentive payments for satisfactorily reporting data on quality measures for covered professional services furnished by eligible professionals during the 2009 PQRI reporting period equal to 2.0 percent of the estimated total allowed charges for all covered professional services furnished during the reporting period that are submitted no later than 2 months after the end of the reporting period. In addition, the reporting period for the 2009 PQRI is defined as the entire year, or January 1, 2009 through December 31, 2009. Therefore, for the 2009 PQRI, eligible professionals who satisfactorily report data on quality measures for covered professional services furnished between January 1, 2009 through December 31, 2009 will receive an incentive payment equal to 2.0 percent of the total estimated allowed charges submitted by no later than February 28, 2010 for all covered professional services furnished between January 1, 2009 and December 31, 2009.

Beginning with the 2009 PQRI, the MIPPA also amended the definition of “eligible professional” to include qualified audiologists (as defined in section 1861(11)(3)(B) of the Act). Thus, for purposes of the 2009 PQRI, eligible professionals include physicians, other practitioners as described in section 1842(b)(18)(C) of the Act, physical and occupational therapists, qualified speech-language pathologists, and qualified audiologists.

In addition, section 1848(k)(2)(D) of the Act, as added by the MIPPA, requires that for each 2009 PQRI quality measure, “the Secretary shall ensure that eligible professionals have the opportunity to provide input during the development, endorsement, or selection of measures applicable to services they furnish.”

Section 1848(m)(3)(A) of the Act, as amended and redesignated by the MIPPA, also requires that for years after 2008, the PQRI quality measures shall not include e-prescribing quality measures. Even with the removal of the e-prescribing measure, we continue to meet the requirements under section 1848(k)(2)(B)(ii) of the Act to include the use of structural measures.

Section 131(b)(6) of the MIPPA also specifies that none of the amendments to the Social Security Act resulting from the MIPPA will impact the operation of the PQRI for 2007 or 2008. Additional information regarding the MIPPA provisions can be found in section III of this final rule with comment period.

iii. General Program Comments and Responses

In the CY 2009 PFS proposed rule (73 FR 38558 through 38559), we provided a longer summary of the history of the PQRI and a more detailed discussion of the pertinent MIEA-TRHCA and MMSEA requirements than is provided above in this section. We proposed to define the 2009 PQRI reporting period to be the entire CY 2009, but also proposed alternative reporting periods and alternative criteria for satisfactorily reporting quality measures data for measures groups and registry-based reporting as required by the MMSEA (73 FR 38559 through 38564). The CY 2009 PFS proposed rule (73 FR 38564 through 38565) also included proposed reporting options and reporting periods for satisfactorily reporting quality measures data extracted from EHRs.

To satisfy section 1848(k)(2)(B) of the Act, as amended by the MMSEA, we published 175 proposed 2009 PQRI quality measures in the CY 2009 PFS proposed rule (73 FR 38565 through 38572). We also proposed 9 measures groups for the 2009 PQRI on which eligible professionals may report (73 FR 38572 through 38574) and described potential uses of the PQRI information (73 FR 38574 through 38575).

In the CY 2009 PFS proposed rule (73 FR 38558 through 38575), we solicited comments on the following areas:

  • Implications of including or excluding any given measure from the set of proposed 2009 quality measures.
  • The new measures groups proposed for 2009 including suggestions for other measures groups based on individual measures included in the proposed 2009 PQRI measure set.
  • The proposed use of the consecutive patient reporting criteria for measures groups.
  • The proposed use of 30 consecutive patients as the required sample under the consecutive patient reporting criteria during the full-year 2009 reporting period.
  • The proposed options and planned use of registries for registry-based quality measures results and numerator and denominator data on quality measures data reporting to PQRI in 2009.
  • The advisability of expanding the number of PQRI quality measures beyond the 119 measures in the 2008 PQRI quality measure set given that there is no specific authorization for an incentive payment for the 2009 PQRI and beyond.
  • Various issues that we identified in the proposed rule to help us determine the most appropriate uses of PQRI data.

We received 161 comments from the public on the CY 2009 PFS proposed rule related to the PQRI. In this section of the final rule with comment period, we first summarize the comments about the PQRI program in general and our responses to those comments immediately below. The remaining comments received and our responses to those comments are discussed under the relevant topic areas of this section of the final rule with comment period.

Comment: Several comments commended CMS and the PQRI program for providing more flexibility and were generally supportive of the program including the proposed addition of measures in the 2009 PQRI and the continued development and implementation of a variety of reporting periods and reporting methodologies.

Response: We appreciate the commenters' positive feedback.

Comment: Several commenters suggested that we conduct an independent, formal evaluation of the PQRI program's processes and to analyze and validate the data that has been gathered to date. One of the major reasons cited for needing an evaluation component was the fact that a relatively small percentage of those eligible professionals who participated in the 2007 PQRI actually received an incentive payment. Other common reasons cited include to assess the range of specialties reporting information to ensure that most eligible professionals have the opportunity to participate, to better understand why some eligible professionals did not participate, and to fully understand how improvements affect participation rates prior to expansion of the PQRI.

Response: We are continuing to evaluate the results of the 2007 PQRI and will evaluate the results of the 2008 PQRI as they become available as we develop and implement strategies for enhancing the PQRI in the future.

Comment: A number of commenters also offered to assist us in improving physician quality measure design and to help us better understand the barriers to and the stimuli for participating by requesting to review the data files used for calculating the 2007 and/or 2008 incentive payments.

Response: Information about individuals that is retrieved by the individuals' names or other personal identifiers is subject to the Privacy Act of 1974 (that is, the Privacy Act), Freedom of Information Act and other Federal government rules and regulations. As such, the information cannot be released without the individual's written consent, unless the Privacy Act permits release. See 5 U.S.C. 552a(b).

We employ strict security measures to appropriately safeguard individual privacy and seek to ensure that files containing physician and/or beneficiary identifiers are used only when necessary and in accordance with disclosure provisions of the Privacy Act. The Privacy Act, as well as the notice that is published in the Federal Register for each CMS System of Records (SOR), provide the permitted disclosures of individually identifiable information and explain the procedures that need to be followed to safeguard the information. The notices that describe each CMS SOR can be found on the CMS Web site at http://www.cms.hhs.gov/PrivacyActSystemofRecords/SR/list.asp#TopOfPage.

All research requests for individually identifiable data must be submitted to the Research Data Assistance Center (ResDAC) for initial review. More information on the policies and procedures for data requests for data that are protected by the Privacy Act can be found on the CMS Web site at http://www.cms.hhs.gov/ PrivProtectedData/01_Overview.asp#TopOfPage.

Comment: Many commenters recommended we redesign the PQRI section of the CMS Web site, including suggestions to provide an updated listing of measures under formal consideration by the various measure developers, as well as to provide more detailed information about the PQRI measures.

Response: We concur with commenters' suggestions to redesign the PQRI section of the CMS Web site. We are currently working to make the Web site more user-friendly and will consider the commenters' suggestions.

Comment: A few commenters suggested we establish a multi-stakeholder advisory council or that we actively engage more stakeholders, such as consumers and hospitals. Active engagement of stakeholders could be used for a variety of purposes, such as to help understand why some eligible professionals may not have participated; to engage and obtain feedback and observations from those who will be measured as well as those who successfully participated; to ensure that the PQRI measures provide clinically-significant information while being structured in the least administratively-burdensome manner possible; or to advise us as we proceed with making information derived from the PQRI publicly available.

Response: We plan to continue our dialogue with the stakeholder community and will consider their and PQRI participants' input as we continue to evaluate the results from the PQRI and to develop and implement strategies for enhancing the PQRI in the future.

Comment: One commenter recommended different incentives that we could employ to increase participation, such as reducing eligible professionals' costs for collecting Medicare payments.

Response: We are bound by statute with respect to the types of incentives that we can provide to eligible professionals, how those incentives are calculated, and the amount of the incentive. The only incentives we are authorized to provide eligible professionals are an incentive for eligible professionals who satisfactorily report quality measures data through the PQRI as discussed below and the new incentive that we are implementing in 2009 for eligible professionals who are successful electronic prescribers as discussed in section II.O2. below.

Comment: Other specific suggestions for improving the PQRI provided by commenters include renaming the PQRI the “Provider” or “Practitioner” Quality Reporting Initiative to acknowledge potential participation of all types of Medicare providers; separating the quality reporting from the billing process by removing the requirement that “G” codes are reported on the same claim as the denominator service; developing guidelines on which measures are appropriate for reporting by different medical specialties; designing reporting options in a manner that would allow smaller providers to more easily participate; considering assigning all measures to clinical area groups; providing an appeal process for eligible professionals who participate but are not deemed to be successful; and ensuring greater transparency in all aspects of the program including, but not limited to, in the measure selection process, in the provision of feedback, and in the implementation of the pertinent MIPPA provisions.

Response: We appreciate and value the constructive feedback that we have received from the wide variety of commenters who have provided insights and information and partnered with us to disseminate information about PQRI. As reflected in the variety of reporting options that we are making available for the 2009 PQRI and the expansion of measures groups, it is our desire to allow as many eligible professionals to participate with as little additional burden as possible. To the extent that we find it practical, feasible, and appropriate to implement the commenters' suggestions, we would do so via notice and comment rulemaking for future years' PQRI.

With respect to the commenters' suggestion to provide an appeals process for eligible professionals who participate but are not deemed to be successful, we note that section 1848(m)(5)(e) of the Act, as amended by MIPPA, provides that with respect to the PQRI there shall be no administrative or judicial review under sections 1869 or 1879 of the Act, or otherwise of (1) the determination of measures applicable to services furnished by eligible professionals; (2) the determination of satisfactory reporting; and (3) the determination of any incentive payment. Therefore, we have no authority to establish an appeals process for the subject of eligible professionals “not deemed to be successful” which we read to fall within the determination of satisfactory reporting.

Comment: We received numerous comments providing general recommendations for enhancing the Medicare program, such as suggestions to transition the PQRI from a pay-for-reporting program to a pay-for-performance program as quickly as possible; addressing problems of underuse, overuse, and misuse of services; assuring that all Americans receive the right care by reducing health care disparities and encouraging that quality care be provided to at-risk populations; encouraging care coordination and support for the integration and delivery of services across providers and across care settings; and providing payment that supports the re-engineering of care, such as providing payment for e-visits and efficiency-enhancing forms of telemedicine. One commenter expressed a desire to see the development of a quality reporting mechanism similar to the PQRI that is applicable to a pediatric population and Medicaid.

Response: While we appreciate these suggestions for enhancing the Medicare and Medicaid programs mentioned, we note that those programs are beyond the scope of this section of the final rule with comment period. This section of the final rule with comment period is limited to the 2009 PQRI.

Comment: Many commenters also commented on the MIPPA provisions that were not directly related to the PQRI. For example, we received many comments related to the plan for transitioning to a value-based purchasing program for physicians' services that we are required to submit to the Congress by May 1, 2010 under the MIPPA.

Response: While we appreciate the commenters' input for implementing the MIPPA provisions, we note that MIPPA provisions that are not directly related to the PQRI program are beyond the scope of this section of the final rule with comment period. This section of the final rule with comment period is limited to the 2009 PQRI.

Comment: Several commenters expressed confusion about participation requirements and recommended that we implement an aggressive education and outreach campaign on how to successfully participate, to help eligible professionals who did not receive a bonus understand why, and that provides participating eligible professionals with confidential interim and final feedback and compliance reports.

Response: We agree that with increased flexibility comes more potential for confusion about participation requirements. Section 1848(k)(6) of the Act requires the Secretary to provide for education and outreach to eligible professionals on the operation of the PQRI.

To minimize any potential confusion, we have hosted monthly national provider calls on the PQRI in which our PQRI subject matter experts are available to answer questions on the PQRI. We have also provided guidance on specific topics on these calls, such as accessing the 2007 PQRI feedback reports, how the 2007 incentive payments were calculated, and the various 2008 reporting options.

In addition to the national provider calls, we have worked with various medical specialty societies, such as the American Academy of Family Physicians, the American College of Physicians, American Academy of Ophthalmology, American Optometric Association, and the American Gastroenterological Association Institute to host Special Open Door Forums to educate their membership on the PQRI. We anticipate continuing these education and outreach activities as we implement the 2009 PQRI.

Information about these CMS-sponsored calls, including information about upcoming calls, can be found on the PQRI section of the CMS Web site at http://www.cms.hhs.gov/PQRI. The Web site itself also serves as a useful resource for obtaining the most up to date information on the PQRI. For example, the PQRI Tool Kit found on the PQRI section of the CMS Web site at http://www.cms.hhs.gov/PQRI/31_PQRIToolKit.asp#TopOfPage contains valuable resources to help eligible professionals in the successful integration of PQRI into their practices. We encourage eligible professionals to visit this Web site and to review the frequently asked questions found on this Web site.

Comment: Many commenters stated they were pleased the Congress extended PQRI and authorized a 2.0 percent incentive payment for 2009, but others noted that the incentive payment was not enough to outweigh the burden of participating or noted concern about the number of “quality and efficiency” measures imposed on physicians without evidence of improved health outcomes, health status, and reduced system costs. One commenter recommended that we base the incentive payment on RVUs rather than the amount billed to Medicare.

Response: We do not have the authority to change the basis for calculation of the incentive payment. Section 1848(m)(1) of the Act, as redesignated and amended by the MIPPA, authorizes us to make incentive payments for satisfactorily reporting data on quality measures for covered professional services furnished by eligible professionals during the 2009 PQRI reporting period equal to 2.0 percent of the estimated total allowed charges for all covered professional services furnished during the reporting period that are submitted no later than 2 months after the end of the reporting period. However, we are committed to exploring and supporting practical, effective mechanisms for quality-of-care data submission that promote efficiency by streamlining participants' and our data collection and handling. As such, and as described below in this section of the final rule with comment period, we have developed and are implementing options for registry-based submission of quality measures data and plan to implement options for EHR-based submission of quality measures data after some additional testing.

In addition, we have increased the number of measures groups and individual PQRI quality measures available for the 2009 PQRI in an effort to expand opportunities for eligible professionals to participate in PQRI.

Comment: We received many comments urging us to ensure that all eligible professionals have meaningful opportunities to participate in the PQRI. Some commenters were specifically concerned that funding for the Quality Insights of Pennsylvania (QIP) project to develop nonphysician quality measures has ended and hoped that CMS will continue to extend funding in the future for the development and implementation of quality measures for nonphysicians as well as to move measures already developed by the QIP through the NQF endorsement and/or AQA approval process.

Several commenters were also concerned that therapists who work in certain outpatient settings (for example, acute care hospitals, skilled nursing facilities, comprehensive outpatient rehabilitation facilities, or rehabilitation agencies) are unable to participate in PQRI since they do not use the 1500 or 837-P claim form and instead submit claims on the UB-04 or 837-I form where there is no place to report the individual National Provider Identifier (NPI) of the eligible professional furnishing the service. The commenters recommended registry-based alternatives for PQRI participation.

A few commenters noted that pathologists who bill via independent laboratories are also not able to participate in the PQRI because we are not yet able to capture this billing situation.

Response: We agree with the goal of providing as many eligible professionals the opportunity to participate in the PQRI as is practical and feasible. As we stated in the CY 2009 PFS proposed rule (73 FR 36566), one of the considerations we employed in the selection of measures for the 2009 PQRI is to select measures that increase the scope of applicability of measures to services furnished to Medicare beneficiaries and expand opportunities for eligible professionals to participate in PQRI. We seek to increase the circumstances where eligible professionals have at least three measures applicable to their practice.

For the 2008 PQRI, we supported, via contract with QIP, the development of structural measures and measures applicable to a broad cross-section of PQRI eligible professionals, including some NPPs who had few or no measures available in the 2007 PQRI. We prioritized development of these measures available or otherwise in development and on a need to address as broad a cross-section of eligible professions or specialties as possible within the limited volume of measures for which we could support development in time for inclusion in the 2008 PQRI. As the contracted measure developer, QIP was responsible for supporting the measures through the AQA adoption process. CMS funded a project with the NQF which reviewed the measures for endorsement.

We plan to continue working to fill gaps in available consensus endorsed or adopted measures consistent with available time and resources. However, we largely depend on and encourage the development of measures by professional organizations and other measure developers. Ideally, in the future, there will be a sufficient number of clinician-level quality measures that meet the statutory requirements that CMS would be able to just select PQRI measures from these existing measures rather than needing to fund the development of additional clinician-level quality measures.

Regarding the concerns cited by therapists unable to participate in PQRI since they do not use the 1500 or 837-P claim form, we note as we did in the CY 2008 PFS final rule with comment period (73 FR 66337) that our analysis of claims-based alternatives to enable participation determined that extensive modifications to the claims processing systems of CMS and providers would be required. Such modifications would represent a material administrative burden to us and providers and/or modifications to the industry standard claims formats, which would require substantial time to effect via established processes and structures that we do not maintain or control.

Our analysis of the two registry-based alternatives suggested by the commenters indicate that it would be possible for therapists in this situation to participate in a registry because there are registries “qualified” to participate in our 2008 PQRI program that intended to report all of the PQRI measures and that are open to all eligible professionals who would like to participate with them. However, it would not be possible to calculate an incentive payment for the therapists' participation since our claims processing systems do not allow us to attribute services furnished by therapists who bill through fiscal intermediaries to an individual eligible professional to calculate the incentive amount. As required by section 1848(1)(A)(ii) of the Act, as redesignated and added by the MIPPA, the 2009 PQRI incentive must be calculated based on each eligible professional's allowed charges for covered professional services that are based on or paid under the Medicare PFS. Although we are in the process of evaluating the impact of making the changes to the fiscal intermediary claims processing systems needed to be able to accept the PQRI quality data codes and attribute them to an eligible professional, it is unknown at this time whether these changes can be made without undue burden to our systems or what the timeline for potential implementation would be.

Regarding the concern that pathologists who bill through independent laboratories are unable to participate in the PQRI, we note that only eligible professionals as defined in section 1848(k)(3)(B) of the Act are eligible to participate in PQRI. As discussed in section II.O1.a.ii. above, “eligible professional” is defined to include physicians, other practitioners as described in section 1842(b)(18)(C) of the Act, physical and occupational therapists, qualified speech-language pathologists, and qualified audiologists for the purposes of the 2009 PQRI. As noted in the comment, independent laboratories are suppliers and are therefore not eligible to participate in PQRI. Pathologists who bill directly to Medicare, however, are eligible to participate in PQRI.

Comment: Several commenters noted the mechanism for viewing the feedback reports was too cumbersome and were concerned about the lack of timely feedback (both in terms of when the feedback reports are received and when incentive payments are received). Several commenters requested that more detailed information be provided in the feedback reports so that eligible professionals can reconcile CMS' data with their own claims information to ensure that codes were submitted accurately, captured by the Medicare Administrative Contractor (MAC), transferred to the PQRI data system, and result in meaningful data that corresponds to the eligible professional's own experience.

Response: Although, as discussed in sections II.SG.6. and III. of this final rule with comment period, section 1848(n) of the Act, as added by the MIPPA, requires the Secretary to establish a Physician Feedback Program to provide confidential reports to physicians (and, if determined appropriate by the Secretary, groups of physicians) that measure the resources involved in furnishing care to Medicare Part B patients, we are not statutorily required to provide participants with feedback reports on the quality measures data submitted for the PQRI and are not committing to provide feedback reports for claims-based submission of quality measures data for the 2009 PQRI. For registry-based reporting in 2009, we would rely on the participating registries to provide feedback to participating eligible professionals.

We do, however, understand the value of receiving meaningful feedback reports and, to the extent that we continue to provide PQRI participants with feedback reports for claims-based submission of quality measures data for the 2009 PQRI, we will consider such concerns as part of our ongoing dialogue with stakeholders in order to collaboratively identify ways to enhance the program's value to its participants and to the Medicare program. We note though that information on all aspects of care billed to Medicare, including quality data codes, is found on the remittance advice that eligible professionals receive. We urge PQRI participants to review the information received on the remittance advice along with their own records (such as their own claims information) to ensure that PQRI quality information is being accurately submitted and captured on claims. We also note that 2007 was the first broad scale implementation of quality data submission through the claims process. We are aware that practice management systems have the capability to analyze information received on the remittance advice. We anticipate that practice management systems may be adapted in the future for analysis of quality data code submission, as well. Such systems could provide contemporaneous feedback and analysis for physicians.

With respect to the timeframe when incentive payments are received, it is unlikely that we will be able to issue incentive payments for participation in PQRI for a particular year much sooner than the middle of the following year because of the way in which the incentive payments are calculated. The incentive payments are calculated based on the total estimated allowed charges for the reporting period. As required by section 1848(m)(1)(A)(ii) of the Act, as redesignated and added by the MIPPA, we must wait until 2 months after the end of the reporting period to allow eligible professionals to submit claims for covered professional services furnished during the reporting period.

Comment: The MIPPA requires that by January 1, 2010, the Secretary shall establish and have in place a process under which eligible professionals in a group practice shall be treated as satisfactorily submitting data on quality measures for the PQRI. A few commenters welcomed this option and offered to assist CMS in defining “group practice.” Another commenter noted that it would be more cost-effective for multi-specialty group practices to participate under this new option.

Response: We welcome the commenters' interest in our plans for implementing future enhancements to the PQRI based on the MIPPA. However, we note that the scope of this section of the final rule is limited to the 2009 PQRI. Our plans for future years' PQRI, including our plans for implementing the MIPPA provisions that affect future program years, will be discussed in future notice and comment rulemaking. Thus, commenters can expect to see a discussion of our plans for implementing the physician group practice option for the 2010 PQRI in the CY 2010 PFS proposed rule next year.

b. Satisfactory Reporting Criteria and Reporting Periods—Reporting Options in the 2009 PQRI

In the CY 2009 PFS proposed rule (73 FR 38559), we proposed to define the reporting period for the 2009 PQRI as the entire year (January 1, 2009-December 31, 2009) and proposed two alternative reporting periods for reporting measures groups and for registry-based reporting: (1) January 1, 2009 through December 31, 2009; and (2) July 1, 2009 through December 31, 2009.

As discussed in section III. of this final rule with comment period, the MIPPA defines the reporting period for the 2009 PQRI to be the entire year. Therefore, for the 2009 PQRI the reporting period will be January 1, 2009 through December 31, 2009. We are retaining the two alternative reporting periods, which were unaffected by MIPPA, for reporting measures groups and registry-based reporting (that is, January 1, 2009 through December 31, 2009 and July 1, 2009 through December 31, 2009) as proposed. These reporting periods result in several reporting options available to eligible professionals that vary by the reporting mechanism selected. The reporting mechanisms and criteria for satisfactorily reporting quality measures data for the 2009 PQRI are described in the following section.

i. Claims-Based Submission of Data for Reporting Individual Measures

Under section 1848(m)(3) of the Act, as redesignated and added by the MIPPA, the criteria for satisfactorily submitting data on individual quality measures through claims-based submission require the reporting of at least three applicable measures in at least 80 percent of the cases in which the measure is reportable. If fewer than three measures are applicable to the services of the professional, the professional may meet the criteria by reporting on all applicable measures (that is, one to two measures) for at least 80 percent of the cases where the measures are reportable. It is assumed that if an eligible professional submits quality data codes for a particular measure, the measure applies to the eligible professional. These criteria were proposed for the January 1, 2009 through December 31, 2009 reporting period.

We received a few comments on the proposed reporting period and criteria for satisfactorily submitting quality data through claims for reporting individual measures, as discussed below.

Comment: A few commenters encouraged CMS to establish alternative reporting periods for claims-based submission of individual quality measures. One commenter specifically requested us to extend the alternative reporting period of July 1, 2009 through December 31, 2009 to eligible professionals participating in PQRI through claims-based reporting of individual quality measures. The commenter stated that measures groups and/or registries are not always an option for eligible professionals.

Response: We appreciate the commenter's suggestions, which are intended to enhance the claims-based reporting of individual measures by providing greater flexibility. However, as discussed above and in section III. of this final rule with comment period, the MIPPA defines the reporting period for the 2009 PQRI to be the entire year and, as discussed in section II.O1.a.i. above, the MMSEA authorizes the Secretary to establish alternative reporting periods for registry-based reporting and for reporting on measures groups only. We note, however, that for years after 2009, the MIPPA authorizes the Secretary to revise the reporting period for claims-based submission of quality measures data if it is determined that such revision is appropriate, produces valid results on measures reported, and is consistent with the goals of maximizing scientific validity and reducing administrative burden.

Additionally, there are registries currently participating in the 2008 PQRI that report or are able to report all of the PQRI quality measures. Alternative reporting periods are available for registry-based submission of quality measures data, which enables all eligible professionals who wish to participate in PQRI to do so through a registry. For the 2008 PQRI, there are 32 registries “qualified” to submit quality measure results and numerator and denominator data on quality measures on behalf of eligible professionals.

Based on our review of this comment, we are retaining the reporting option for claims-based submission of data on individual quality measures as summarized in Table 11. That is an eligible professional can meet the criteria for satisfactorily reporting quality data by reporting at least three applicable measures (or one to two measures if fewer than three measures apply) for at least 80 percent of the cases in which each measure is reportable, during January 1, 2009 through December 31, 2009.

Table 11—Final 2009 PQRI Claims-Based Reporting Options for Individual Measures Back to Top
Reporting mechanism Reporting criteria Reporting period
Claims-based reporting At least 3 PQRI measures, or 1-2 measures if less than 3 apply to the eligible professional, for 80 percent of applicable Medicare Part B FFS patients of each eligible professional January 1, 2009-December 31, 2009.

ii. Satisfactory Reporting of Data on Quality Measures and Reporting Periods for Measures Groups, Through Claims-Based Reporting and Registry-Based Reporting

As described in the CY 2009 PFS proposed rule, section 101(c)(5)(F) of the MIEA-TRHCA, as added by the MMSEA and redesignated by the MIPPA as section 1848(m)(5)(F) of the Act, requires that the Secretary establish alternative reporting periods and alternative criteria for satisfactorily reporting groups of measures. In establishing these alternatives, we have labeled these groups of measures “measures groups.” We define “measures groups” as a subset of PQRI measures that have a particular clinical condition or focus in common. The denominator definition and coding of the measures group identifies the condition or focus that is shared across the measures within a particular measures group.

For the 2009 PQRI, we proposed to expand the available measures groups to a total of nine measures groups. We proposed to carry forward three of the four 2008 measures groups for the 2009 PQRI: (1) Diabetes Mellitus; (2) Chronic Kidney Disease (CKD); and (3) Preventive Care. In addition, we proposed to add six new measures groups for the 2009 PQRI:

(1) Coronary Artery Bypass Graft (CABG) Surgery;

(2) Coronary Artery Disease (CAD);

(3) Rheumatoid Arthritis;

(4) Human Immunodeficiency Virus (HIV)/Acquired Immune Deficiency Syndrome (AIDS);

(5) Perioperative Care; and

(6) Back Pain.

We proposed to allow measures groups to be reported through claims-based or registry-based submission for the 2009 PQRI.

We proposed that the form and manner of quality data submission for 2009 measures groups would be posted on the PQRI section of the CMS Web site at http://www.cms.hhs.gov/pqri no later than December 31, 2008, and will detail specifications and specific instructions for reporting measures groups via claims and registry-based reporting.

The final 2009 PQRI measures groups and the measures selected for inclusion in each of the 2009 measures groups are listed in section II.O1.d.v. of this final rule with comment period.

We proposed (73 FR 38561) establishing three options for satisfactorily reporting measures groups using claims-based reporting and three options for satisfactorily reporting measures groups using registry-based submission for the 2009 PQRI. We proposed two basic criteria for satisfactory reporting of measures groups for both claims-based submission and registry-based submission. For claims-based reporting, the two criteria were: (1) The reporting of quality data for 30 consecutive Medicare Part B FFS patients for one measures group for which the measures group is applicable during a full-year reporting period; or (2) the reporting of quality data for at least 80 percent of Medicare Part B FFS patients for whom the measures group is applicable (with a minimum number of patients commensurate with the reporting period duration). For registry-based submission, the two criteria were: (1) The reporting of quality measures results and numerator and denominator data for 30 consecutive patients for one measures group for which the measures group is applicable during a full-year reporting period; or (2) the reporting of quality measures results and numerator and denominator data for at least 80 percent of patients for whom the measures group is applicable (with a minimum number of patients commensurate with the reporting period duration).

We proposed that the 30 consecutive patients reporting criteria apply only to the entire year (January 1, 2009 through December 31, 2009) reporting period, but would apply to both claims-based submission and registry-based submission mechanisms.

We proposed that the alternative criteria for measures groups based on reporting on 80 percent of patients for which one measures group would be applicable for the January 1, 2009 through December 31, 2009 reporting period (with a minimum of 30 patients) and to the July 1, 2009 through December 31, 2009 reporting period (with a minimum of 15 patients). These alternative criteria would also be applicable for either claims-based or registry-based reporting of measures groups.

In the CY 2009 PFS proposed rule (73 FR 38561), we requested comments on the proposed use of the consecutive patient reporting criteria and on the use of 30 consecutive patients (for claims-based reporting, the consecutive patients must all be Medicare FFS patients) as the required minimum sample under these criteria during the full-year 2009 reporting period.

We received numerous comments on the proposed alternative reporting periods and alternative criteria for satisfactory reporting of data on measures groups, including the proposed use of the consecutive patient reporting criteria and proposed use of 30 consecutive patients. These comments are summarized and addressed below.

Comment: Some commenters suggested that we establish general rules governing measures groups reporting involving multiple providers from separate entities.

Response: To qualify for the PQRI incentive, each individual professional must separately qualify, based on the criteria for reporting measures groups and the services rendered by the individual professional. The reporting by other professionals and the establishment of rules relating to the reporting of multiple providers from separate entities is not germane to satisfactory reporting at the individual level. Each individual professional must qualify based on that individual's satisfactory reporting. No later than December 31, 2008, we will post the detailed specifications and specific instructions for reporting measures groups at http://www.cms.hhs.gov/pqri. This document is intended to promote an understanding of how to implement and facilitate satisfactory reporting of quality measures results and numerator and denominator data by individual eligible professionals who wish to participate in PQRI via measures group reporting.

Comment: Many commenters strongly supported the continued use of measures groups, the expansion of measures groups, registry-based submissions of measures groups, and alternative reporting periods for measures groups.

Response: We are pleased that many commenters are supportive of the measures groups concept, the expansion of measures groups, registry-based submissions for measures groups, and alternative reporting periods. These options provide for program efficiency, flexibility and opportunities for physicians and other eligible professionals to more broadly demonstrate their clinical performance for particular services and provide a better basis for comparison among professionals. We plan to continue a dialogue with stakeholders to discuss opportunities for program efficiency and flexibility.

Comment: Many commenters were in support of the 30 consecutive patient reporting option for the full year 2009 reporting period. One commenter noted that a sample consisting of consecutive patients would result in a nonrandom sample of patients. Another commenter requested clarification on which 30 patients should be included in the consecutive patient sample.

Response: We are pleased that many commenters found the 30 consecutive patient reporting option to be useful and were supportive of this option. We agree that a sample of 30 consecutive patients would be a nonrandom sample, but it is our intention to allow physicians and other eligible professionals greater flexibility and opportunities to participate in PQRI. In addition, requiring consecutive patients would prevent eligible professionals from being able to selectively report cases to enhance their performance rates.

While we do not have the results of the 2008 PQRI reporting, we believe that a minimum sample size of 30 consecutive patients is sufficient to calculate comparable performance rates across eligible professionals furnishing comparable services. Patient sample sizes of 30 are commonly considered to be a reasonable minimum threshold for being able to reliably report health care performance measurement results. Results from our Better Quality Information for Medicare Beneficiaries (BQI) pilot project indicate that minimum patient sample sizes of between 30 through 50 patients per physician are needed to make reliable distinctions between physicians' performance. (Delmarva Foundation for Medical Care. Enhancing Physician Quality Performance Measurement and Reporting Through Data Aggregation: The BQI Project. October 2008.) We expect additional experience with PQRI reporting to clarify optimal sample sizes and reporting criteria for use in future reporting periods. We will continually evaluate our policies on sampling and notify the public through future notice and comment rulemaking if we make substantive changes. As we evaluate our policies, we plan to continue a dialogue with stakeholders to discuss opportunities for program efficiency and flexibility.

As described in Table 12, for claims-based reporting of measures groups, eligible professionals wishing to report data on measures groups using the consecutive patient criteria should include only Medicare Part B FFS patients in the consecutive patient sample. For registry-based reporting of measures groups, eligible professionals wishing to report data on measures groups using the consecutive patient criteria may include some non-Medicare FFS patients. However, there must be more than one Medicare Part B FFS patient included in this patient sample as well.

Comment: We received a large volume of comments in support of discontinuing the 15 consecutive patients for a 6-month reporting period (that is, July 1 through December 31). We also received a few comments suggesting we continue the option of allowing eligible professionals to report data on 15 consecutive patients for a 6-month reporting period.

Response: Unlike in the 2008 PQRI, we will not include a reporting option for 15 consecutive patients for a 6-month reporting period. While we do not have the results of the 2008 reporting, we are concerned that samples of fewer than 30 consecutive patients may be insufficient to calculate comparable performance rates across eligible professionals furnishing comparable services. We expect additional experience with PQRI reporting to clarify optimal sample sizes and reporting criteria for use in future reporting periods.

Comment: We received comments recommending that, regardless of the reporting mechanism selected, the criteria for satisfactorily reporting data on measures groups and individual quality measures be expanded to include the reporting data on measures groups and/or individual quality measures for 100 percent of patients for whom the measures group and/or individual quality measures are applicable. One commenter thought that we should specifically require eligible professionals who report via registries to report on 100 percent of their eligible patients. Another commenter suggested that for the option to report on 80 percent of patients for registry-based reporting of measures groups we accept quality measures results and numerator and denominator data on quality measures on all patients, regardless of payer, rather than quality measures results and numerator and denominator data on quality measures on Medicare Part B FFS beneficiaries only. The commenter, however, opposed requiring a minimum number of Medicare FFS patients be included in the data submitted from the registry. Another commenter thought that registry reporting and claims-based reporting requirements should be the same.

Response: While we would encourage eligible professionals to report data on measures groups and/or individual quality measures for all patients who qualify for a measure they are reporting and eligible professionals are not precluded from reporting data on measures groups and/or individual quality measures for 100 percent of their eligible patients, satisfactory reporting was established by the MIEA-TRHCA to include reporting in at least 80 percent of the cases for which the respective measure is reportable. Analysis of the 80 percent reporting threshold has indicated it to be a sufficiently large sample size to be representative of an eligible professional's patient population. That is, 80 percent is a sufficiently large reporting rate that the performance rates calculated from the 80 percent sample are substantially the same as the performance rates calculated from 100 percent of applicable cases. Although a 100 percent sample of cases for which individual quality measure or measures groups are applicable would eliminate any sampling error, requiring 100 percent reporting of applicable cases would cause eligible professionals to be ineligible for an incentive payment based on a failure to report data on a single missed case that falls into the quality measure's denominator.

Additionally, the 80 percent reporting criteria for individual quality measures is statutorily required through 2009 for individual quality measures reported through claims. While the Secretary is authorized to establish a different reporting threshold for measures groups and registry-based reporting, we believe that it is necessary and desirable to maintain consistency and to achieve a balance amongst the reporting options in order to promote a successful program.

With respect to requiring a minimum number of Medicare Part B FFS patients in the sample for registry-based reporting options for reporting on measures groups for at least 80 percent of applicable cases, our primary interest is in improving the quality of care Medicare beneficiaries receive. If we do not specify a minimum number of Medicare Part B FFS on which eligible professionals should report, it is feasible that an eligible professional could meet the 80 percent threshold by treating just one or two beneficiaries. Thus, for those eligible professionals who treat few Medicare beneficiaries, the sample size would be too small to do any meaningful analysis of the eligible professional's performance on that particular measure even though the sample consists of 80 percent of the eligible professional's Medicare beneficiaries to whom the measure applies.

Comment: One commenter suggested that registries “facilitate quality measures reporting for measures groups reporting regardless of the relationship of the reporting provider to the registry.” The commenter suggested that we further clarify that in order to become qualified to submit quality measures results and numerator and denominator data on quality measures to the PQRI on behalf of eligible professionals, a registry must assure a mechanism by which multiple providers who collectively report the individual measures comprising a measures group can do so and that there are no barriers to the reporting of such information by any provider regardless of the provider's relationship to the registry.

Response: Registries provide an alternative to claims-based reporting. Regardless of the reporting mechanism (that is, claims or registries), there is no provision for reporting by multiple professionals under the PQRI since each individual eligible professional must separately meet the criteria for satisfactory reporting of PQRI quality measures. Registries have no responsibility to establish a relationship with any particular professional. An eligible professional who does not have a relationship with a qualified registry has the option of submitting data on measures groups through claims or establishing a relationship with a qualified registry unless he or she wishes to report the CABG surgery measures group. The measures in the CABG surgery measures group are reportable only through a registry.

Comment: One commenter thought we should allow satisfactory reporting of measures groups via registries to count for 2 years of PQRI reporting.

Response: Our statutory authority authorizes an annual PQRI program. For each year, there are established specific reporting periods and reporting criteria. The incentive payment for PQRI must be for covered professional services furnished during a given reporting period. We do not have the authority to allow satisfactory reporting of measures groups via registries for a 1-year reporting period to count as satisfactory reporting for another year or reporting period.

Based on the comments received, we are finalizing the six options proposed for satisfactorily reporting on measures groups as described in Table 12. The details of the requirements for registries are contained in section II.O1.b.iii.

Table 12—Final 2009 PQRI Reporting Options for Measures Groups Back to Top
Reporting mechanism Reporting criteria Reporting period
Claims-based reporting One Measures Group for 30 Consecutive Medicare Part B FFS Patients January 1, 2009-December 31, 2009.
Claims-based reporting One Measures Group for 80 percent of applicable Medicare Part B FFS patients of each eligible professional (with a minimum of 30 patients during the reporting period) January 1, 2009-December 31, 2009.
Claims-based reporting One Measures Group for 80 percent of applicable Medicare Part B FFS patients of each eligible professional (with a minimum of 15 patients during the reporting period) July 1, 2009-December 31, 2009.
Registry-based reporting One Measures Group for 30 Consecutive Patients. Patients may include, but may not be exclusively, non-Medicare patients January 1, 2009-December 31, 2009.
Registry-based reporting One Measures Group for 80% of applicable Medicare Part B FFS patients of each eligible professional (with a minimum of 30 patients during the reporting period) January 1, 2009-December 31, 2009.
Registry-based reporting One Measures Group for 80% of applicable Medicare Part B FFS patients of each eligible professional (with a minimum of 15 patients during the reporting period) July 1, 2009-December 31, 2009.

While claims are submitted to CMS on Medicare patients only (for claims-based reporting), the 30 consecutive patients option for registry-based submission for the January 1, 2009 through December 31, 2009 reporting period may include some, but may not be exclusively, non-Medicare patients. We include this limited option to report quality measures results and numerator and denominator data on quality measures that includes non-Medicare patients for registry-based submission because of the desirability of assessing the overall care provided by a professional rather than just that provided to a certain subset of patients, and the benefit of having a larger number of patients on which to assess quality.

iii. Registry-Based Submission for Reporting Individual Measures

As discussed in the CY 2009 PFS proposed rule (73 FR 38562), section 101(c)(5)(F) of the MIEA-TRHCA, as added by MMSEA and redesignated by the MIPPA as section 1848(m)(5)(F) of the Act, requires us to establish alternative criteria for satisfactorily reporting PQRI quality measures data through medical registries. For 2009, we proposed that eligible professionals would be able to report 2009 PQRI quality measures results and numerator and denominator data on quality measures through a qualified clinical registry by authorizing or instructing the registry to submit quality measures results and numerator and denominator data on quality measures to CMS on their behalf (73 FR 38562). Similar to the 2008 PQRI, we proposed (73 FR 38562) that the data to be submitted for the 2009 PQRI would include the reporting and performance rates on PQRI measures or PQRI measures groups, as well as the numerators and denominators for the reporting rates and performance rates.

For the 2009 PQRI, we proposed (73 FR 38562) to continue the PQRI reporting criteria for satisfactorily reporting through registry-based submission of 3 or more individual PQRI quality measures data that are described in the “2008 PQRI: Establishment of Alternative Reporting Periods and Reporting Criteria” document (http://www.cms.hhs.gov/PQRI/Downloads/2008PQRIalterrptperiods.pdf). That is, we proposed to accept quality measures results and numerator and denominator data on quality measures from registries that qualify as data submission vendors. We proposed that these criteria would be available for each of the two alternative reporting periods.

We also proposed (73 FR 38563) to require registries to complete a self-nomination process based on meeting specific technical and other requirements to submit on behalf of eligible professionals pursuing incentive payment for reporting clinical quality information on services furnished during 2009 for reporting both on individual measures and measures groups. We proposed that this self-nomination would be required regardless of whether or not the registry participated in any way in PQRI in 2008 (73 FR 38563).

In the CY 2008 PFS proposed rule (73 FR 38564), we requested comments on the proposed options for registry-based PQRI reporting of data on measures and measures groups for services furnished in 2009. We received several comments on the proposed options for registry-based PQRI reporting of data on measures and measures groups for services furnished in 2009. Comments related to the proposed options for registry-based PQRI reporting of data on measures groups were summarized and addressed above in section II.O1.b.ii of this final rule with comment period. A summary of the comments received related to our proposed use of registries and the proposed options for registry-based PQRI reporting of data on individual quality measures and our responses to those comments are discussed below.

Comment: We received numerous comments in support of continuing to allow registries to report quality measures results and numerator and denominator data on quality measures to CMS on behalf of eligible professionals who submit quality data to them. Some commenters thought permitting registry reporting would allow us to better track patient outcomes by looking at results over a period of time rather than only track processes of care and that registry reporting is less burdensome. Additionally, one commenter suggested we allow those registries that were “qualified” to report to PQRI in 2008 be “qualified” to report to PQRI in 2009.

Response: For the 2009 PQRI, we are finalizing our proposal to accept quality measures results and numerator and denominator data on quality measures from registries as described in the proposed rule (73 FR 38562 through 38564). The specifications and qualifications for registries to participate in the 2009 PQRI will be listed on the PQRI section of the CMS Web site at http://www.cms.hhs.gov/pqri under the reporting tab, by November 15, 2008.

Based on the commenter's suggestion that registries that were “qualified” to report to PQRI in 2008 be “qualified” to report to PQRI in 2009, registries that were “qualified” for 2008 will not need to be “re-qualified” for 2009 unless they are unsuccessful at submitting PQRI data for 2008 (that is, fail to submit 2008 PQRI data per the 2008 PQRI registry requirements). By March 31, 2009, registries that were “qualified” for 2008 and wish to continue to participate in 2009 should indicate their desire to continue participation for 2009 and their compliance with the 2009 PQRI registry requirements using the process described below.

If a qualified 2008 registry is unsuccessful at submitting 2008 PQRI data (that is, fails to submit 2008 PQRI data per the 2008 PQRI registry requirements), the registry will need to go through the full qualification process similar to the qualification process that took place for the 2008 PQRI. By March 31, 2009, registries that are unsuccessful submitting quality measure results and numerator and denominator data for the 2008 PQRI will need to be able to meet the specifications listed below and in the document on the Web site and send a letter of self-nomination to us.

Registries that were not qualified for the 2008 PQRI will need to be able to meet the specifications listed below and in the document on the Web site and send a letter of self-nomination to us by January 31, 2009.

Comment: One comment supported registry use if they were open to all providers.

Response: We assume that by “providers” the commenter was referring to eligible professionals. As we stated previously, registry reporting is voluntary. There are “qualified” registries in our 2008 PQRI program that intend to report all of the PQRI measures. These registries are accepting eligible professionals who wish to sign up as new clients of the registry and are open to all eligible professionals who would like to participate with them. There may be costs associated with participating through registries but this is outside of the purview of PQRI.

We note that although registries are not required to report all PQRI measures, eligible professionals who wish to report PQRI quality measures data through registries are required to report on at least 3 quality measures when reporting on individual quality measures or to report all measures in at least one measures group when reporting on measures groups. Thus, the eligible professional is responsible for ensuring that the registry that he or she selects has the ability to report the measures that the eligible professional intends to report for PQRI.

Comment: We received one comment requesting eligible professionals with only 1 or 2 measures to be able to report via registries.

Response: We did not propose to allow registry reporting of 1 or 2 measures if less than 3 measures apply. Analytically it would be difficult to implement in that if an eligible professional submits fewer than 3 measures via registries, we would not know whether the eligible professional did so because only 2 measures applied or because the registry only accepts data for 2 of the provider's measures and he or she is reporting their third measure via claims. The amount of cross-checking via different submission options that would be necessary makes it impractical to implement the commenter's suggestion.

Comment: A few comments were received regarding the process for correcting data that was sent in via registries that is incorrect.

Response: We highly discourage eligible professionals from changing data once it is submitted to CMS from the registry. Allowing data to be resubmitted for one or more professionals would not only be time-consuming and delay reports and payment, but it could also result in duplicating or erroneously leaving out some professionals' quality measures results and/or numerator and denominator data on quality measures.

Comment: Two commenters requested that we specify what constituted an acceptable validation strategy for registries.

Response: As a result of the MMSEA, which was enacted in December 2007, and modified the PQRI, we implemented registry-based submission for the 2008 PQRI. Thus, for 2008, we required registry vendors to supply CMS with their validation strategy that would detail how the registry would ensure that the data the registry reported to CMS was accurate. We found that there are several variations for this process that registries use. We do not believe we have enough experience with registries to specify a single validation strategy that all should employ and we believe we are benefited from allowing a variety of such techniques to be employed based on our approval at this point. Therefore, for the 2009 PQRI, registry vendors will again be required to supply us with their validation strategy that details how the registry would ensure that the data the registry reports to us is accurate. In addition, we note that registries are required to sign an attestation statement to CMS vouching for the accuracy of the data that they submit to CMS on behalf of their eligible professionals.

As we gain more experience with registry submission, we would expect to further specify through rulemaking qualification requirements for registries that may include more comprehensive validation requirements. As we evaluate our policies, we plan to continue a dialogue with stakeholders to discuss opportunities for program efficiency and flexibility.

Comment: One commenter requested that the registry record layout and requirements be published by December 31, 2008. Similarly, many commenters requested that the registry record layout and requirements be published in this final rule with comment period.

Response: We intend to have the requirements posted on the PQRI section of the CMS Web site at http://www.cms.hhs.gov/pqri by November 15, 2008. However, the technical specifications (that is, specifications for the XML file format that registries would need to use to submit PQRI quality measures results and numerator and denominator data on quality measures to CMS) are not finalized and will be made available to a registry after the registry passes an initial qualification process. This will prevent registries that cannot satisfy the requirements listed on the Web site from expending resources trying to meet the technical specifications. Meeting only the technical specifications would not in and of itself qualify the registry to participate.

Comment: A commenter requested that CMS work with standards development organizations to align our measures and specifications for registries and EHRs with the standards development organizations' standards.

Response: We agree with the commenter's suggestion and do actively interact with standards development organizations. We desire to use such standards when available and to promote the adoption and use of such standards.

Based on the comments received, the 2009 reporting options for registry-based submission of at least three individual PQRI measures are finalized as proposed and are listed in Table 13.

Table 13—Final 2009 PQRI Registry-Based Submission Reporting Options for Individual Measures Back to Top
Reporting mechanism Reporting criteria Reporting period
Registry-based reporting At least 3 PQRI measures for 80% of applicable Medicare Part B FFS patients of each eligible professional January 1, 2009-December 31, 2009.
Registry-based reporting At least 3 PQRI measures for 80% of applicable Medicare Part B FFS patients of each eligible professional July 1, 2009-December 31, 2009.

As discussed in section II.O1.b.ii. of this final rule with comment period, we are also establishing the three reporting options for registry-based submission of quality measures results and numerator and denominator data on PQRI measures groups summarized in Table 12.

To report quality measures results and numerator and denominator data on quality measures or measures groups through registries, eligible professionals will need to enter into and maintain an appropriate legal arrangement with an eligible clinical registry. As we described in the CY 2009 PFS proposed rule (73 FR 38562), such arrangements will provide for the registry's receipt of patient-specific data from the eligible professional and the registry's disclosure of quality measures results and numerator and denominator data on behalf of the eligible professional to CMS for the PQRI. Thus, the registry would act as a Health Insurance Portability and Accountability Act of 1996 (Pub. L. 104-191) (HIPAA) Business Associate and agent of the eligible professional. Such agents are referred to as “data submission vendors.” Such “data submission vendors” would have the requisite legal authority to provide clinical registry data on behalf of the eligible professional to the Quality Reporting System developed in accordance with the statute. The registry, acting as such a data submission vendor, will submit registry-derived measures information to the CMS designated database within the Quality Reporting System, using a CMS-specified record layout.

To maintain compliance with applicable statutes and regulations, including but not limited to the HIPAA, our program and its data system must maintain compliance with HIPAA requirements for requesting, processing, storing, and transmitting data. Eligible professionals that conduct HIPAA covered transactions also must maintain compliance with the HIPAA requirements.

To submit on behalf of eligible professionals pursuing incentive payment for reporting clinical quality information on services furnished during 2009 for reporting both on individual measures and measures groups, registries that were “qualified” for 2008 will not need to be “re-qualified” for 2009 unless they are unsuccessful at submitting 2008 PQRI data (that is, fail to submit 2008 PQRI data per the 2008 PQRI registry requirements). Registries that were “qualified” for 2008 and wish to continue to participate in 2009 should indicate their desire to continue participation for 2009 by submitting a letter indicating their continued interest in being a PQRI registry for 2009 and their compliance with the 2009 PQRI registry requirements by March 31, 2009. Such letters should be sent to: 2009 PQRI Registry Nomination, Centers for Medicare Medicaid Services, Office of Clinical Standards and Quality, Quality Measurement and Health Assessment Group, 7500 Security Blvd., Mail Stop S3-02-01, Baltimore, MD 21244-1850.

If a qualified 2008 registry is unsuccessful at submitting 2008 PQRI data (that is, fails to submit 2008 PQRI data per the 2008 PQRI registry requirements), the registry will need to go through the full self-nomination process again. By March 31, 2009, registries that are unsuccessful submitting quality measure results and numerator and denominator data for 2008 will need to be able to meet the specifications listed in this final rule with comment period and in the document on the Web site and send a letter of self-nomination to the above address. Registries that were not “qualified” for 2008 will need to be able to meet the specifications listed in this final rule with comment period and in the document on the Web site and send a letter of self-nomination to the above address by January 31, 2009.

As we stated in the CY 2009 PFS proposed rule (73 FR 38563), we will make every effort to ensure that registries that are “qualified” will be able to successfully submit quality measures results and numerator and denominator data on PQRI quality measures or measures groups, but we cannot assume responsibility for the successful submission of data on PQRI quality measures or measures groups, by the registry.

The 2009 registry technical requirements will be posted on the PQRI section of the CMS Web site at http://www.cms.hhs.gov/pqri by November 15, 2008. In general, to be considered qualified to submit individual quality measures on behalf of professionals wishing to report under the 2009 PQRI, a registry must:

  • Have been in existence as of January 1, 2009.
  • Be able to collect all needed data elements and calculate results for at least three measures in the 2009 PQRI program (according to the posted 2009 PQRI Measure Specifications).
  • Be able to calculate and submit measure-level reporting rates by NPI/Taxpayer Identification Number (TIN).
  • Be able to calculate and submit measure-level performance rates by NPI/TIN.
  • Be able to separate out and report on Medicare Fee for Service (Part B) patients only.
  • Provide the Registry name.
  • Provide the Reporting period start date (covers dates of services from).
  • Provide the Reporting period end date (covers dates of services through).
  • Provide the measure numbers for the PQRI quality measures on which the registry is reporting.
  • Provide the measure title for the PQRI quality measures on which the registry is reporting.
  • Report the number of eligible instances (reporting denominator).
  • Report the number of instances of quality service performed (numerator).
  • Report the number of performance exclusions.
  • Report the number of reported instances, performance not met (eligible professional receives credit for reporting, not for performance).
  • Be able to transmit this data in a CMS-approved XML format.
  • Comply with a secure method for data submission.
  • Submit an acceptable “validation strategy” to CMS by March 31, 2009. A validation strategy ascertains whether eligible professionals have submitted accurately and on at least the minimum number (80 percent) of their eligible patients, visits, procedures, or episodes for a given measure. Acceptable validation strategies often include such provisions as the registry being able to conduct random sampling of their participants' data, but may also be based on other credible means of verifying the accuracy of data content and completeness of reporting or adherence to a required sampling method.
  • Enter into and maintain with its participating professionals an appropriate legal arrangement that provides for the registry's receipt of patient-specific data from the eligible professionals, as well as the registry's disclosure of quality measure results and numerator and denominator data on behalf of eligible professionals who wish to participate in the PQRI program.
  • Obtain and keep on file signed documentation that each NPI whose data is submitted to the registry has authorized the registry to submit quality measures results and numerator and denominator data to CMS for the purpose of PQRI participation. This documentation must meet the standards of applicable law, regulations, and contractual business associate agreements.
  • Provide CMS access (if requested) to review the Medicare beneficiary data on which 2009 PQRI registry-based submissions are founded.
  • Provide the reporting option (reporting period and reporting criteria) that the eligible professional has satisfied or chosen.
  • Registries must provide CMS an “attestation statement” which states that the quality measure results and numerator and denominator data provided to CMS are accurate and complete.

In addition to the above, registries that wish to submit 2009 quality measures information on behalf of their participating eligible professionals seeking to participate in the 2009 PQRI based on satisfying the criteria applicable to reporting of measures groups must be able to:

  • Indicate whether each eligible professional within the registry who wishes to submit PQRI using the measures groups will be doing so for the 6- or 12-month period.
  • Base reported information only on patients to whom services were furnished during the 12-month reporting period of January through December 2009 or the 6-month reporting period of July 2009 through December 2009.
  • Agree that the registry's data may be inspected by CMS under our health oversight authority if non-Medicare patients are included in the consecutive patient group.
  • Be able to report data on all of the measures in a given measures group and on either 30 consecutive patients from January 1 through December 31, 2009 (note this consecutive patient count must include some Medicare Part B FFS beneficiaries) or on 80 percent of applicable Medicare Part B FFS patients for each eligible professional (with a minimum of 30 patients during the January 1, 2009 through December 31, 2009 reporting period or a minimum of 15 patients during the July 1, 2009 through December 31, 2009 reporting period).
  • If reporting consecutive patients, provide the beginning date of service that initiates the count of 30 consecutive patients.
  • Be able to report the number of Medicare Fee for Service patients and the number of Medicare Advantage patients that are included in the consecutive patients reported for a given measures group.

Registries that were “qualified” for 2008 and wish to continue to participate in 2009 must indicate their compliance with the above requirements for 2009 at the time that they indicate their desire to continue participation for 2009.

We will provide the technical specifications (that is, specifications for the XML file format that registries would need to use to submit PQRI quality measures results and numerator and denominator data on quality measures to CMS) to registries after a registry passes an initial qualification process for the 2009 PQRI. This will prevent registries that cannot satisfy the requirements listed on the Web site from expending resources trying to meet the technical specifications. Meeting only the technical specifications would not in and of itself qualify the registry to participate.

iv. EHR-Based Submission for Reporting Individual Measures

In addition to the testing of registry-based submission, we also described in the CY 2009 PFS proposed rule (73 FR 38564 through 38565) our plans to test the submission of clinical quality data extracted from EHRs for five 2008 PQRI measures and proposed to accept PQRI data from EHRs and to pay the incentive payment based on that submission for a limited subset of the proposed 2009 PQRI quality measures.

We proposed to begin accepting submission of clinical quality data extracted from EHRs on January 1, 2009 or as soon thereafter as is technically feasible, based upon our completion of the 2008 EHR data submission testing process and our determination that accepting data from EHRs on quality measures for the 2009 PQRI is practical and feasible. We proposed in the CY 2009 PFS proposed rule (73 FR 38564) that the date on which we will begin to accept quality data submission on services furnished in 2009 would depend on having the necessary information technology infrastructure components and capacity in place and ready to accept data on a scale sufficient for national implementation of PQRI submission through this mechanism.

We proposed that EHR vendors that would like to enable their customers to submit data on PQRI that is extracted from their customers' EHRs to the CMS-designated clinical warehouse should update or otherwise assure that their EHR products capture and can submit the necessary data elements identified for measure specifications and technical specifications for EHR-based submission. We proposed that we would use Certification Commission for Healthcare Information Technology (CCHIT) criteria and the Healthcare Information Technology Standards Panel (HITSP) interoperability standards where possible and we encouraged vendors to do so also. We encouraged the use of EHRs that have been certified by the CCHIT for data submission, but recognized that there would be some eligible professionals who are using systems in specialties for which there are no appropriate CCHIT certified EHR systems, or who purchased and implemented their EHR prior to the availability of CCHIT certification.

We proposed as criteria for satisfactory submission of data for quality measures for covered professional services by EHR-based submission for the 2009 PQRI the same criteria for satisfactory reporting and the same reporting period that we proposed for claims-based submission of data for individual 2009 PQRI measures. The proposed reporting criteria for EHR-based submission of individual PQRI measures are summarized in Table 14.

Table 14—Proposed 2009 PQRI EHR-Based Submission Reporting Options for Individual Measures Back to Top
Reporting mechanism Reporting criteria Reporting period
EHR-based reporting At least 3 PQRI measures, or 1-2 measures if less than 3 apply to the eligible professional, for 80% of applicable Medicare Part B FFS patients of each eligible professional January 1, 2009-December 31, 2009.

In the CY 2008 PFS proposed rule (73 FR 38565), we invited comments on the proposed use of EHR-based data submission for PQRI. We received numerous comments on the proposed use of EHR-based data submission for PQRI, which are summarized and addressed below.

Comment: We received many comments in favor of accepting quality measures data through EHRs in 2009. These commenters cited EHRs as a means for increasing PQRI participation and being able to report more accurate data. There were a few commenters who, while favoring EHR data submission in general, thought that it was premature to begin this process in 2009.

Response: We proposed to begin EHR data submission for PQRI in 2009 based on anticipation that we would have sufficient testing completed to be confident that systems would be in place and operational by January 1, 2009. At this point, the testing process is incomplete. As a result, we agree with the commenter's suggestion that it is premature to begin EHR submission as part of the 2009 PQRI. Rather, we believe that it is more prudent to allow the 2008 testing process to be completed.

Furthermore, we are aware of the importance of promoting and aligning with the work of health information technology (HIT) standards development organizations. By postponing implementation of EHR submissions for PQRI, we believe this alignment with and promotion of the adoption and uses of HIT standards will be enhanced.

Finally, we believe it would benefit eligible professionals to know in advance of the start of a PQRI reporting period which EHR vendors are qualified to submit clinical quality data extracted from their EHR to CMS. At this point, we would be unable to identify such vendors in view of the incomplete testing process.

Rather than implement EHR reporting for the 2009 PQRI, and in order to prepare for possible implementation of EHR reporting for the 2010 PQRI, we will complete the 2008 testing and continue additional testing in 2009. In addition, upon completion of satisfactory testing, we intend to qualify EHR vendors and their specific products to submit clinical quality data extracted from their EHR products to the CMS quality data warehouse. As vendors qualify, we would post the names on the PQRI section of the CMS Web site at http://www.cms.hhs.gov/pqri for informational purposes.

It should be noted, however, that qualification of vendors for EHR data submission does not assure that we will include EHR data submission as an option for satisfactorily reporting data on quality measures for the 2010 PQRI. Rather, this will be the subject of future notice and comment rulemaking.

The process we will use to qualify EHR vendors and their specific products is described below.

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