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Centers for Medicare & Medicaid Services (CMS), HHS.
This proposed rule would refine the resource-based practice expense relative value units (PE RVUs) and propose changes to payment based on supplemental survey data for practice expense and revisions to our methodology for calculating practice expense RVUs, as well as make other proposed changes to Medicare Part B payment policy. We are also proposing policy changes related to revisions to malpractice RVUs, in addition to revising the list of telehealth services. In this proposed rule, we also discuss multiple procedure payment reduction for diagnostic imaging, and several coding issues.
We are proposing these changes to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. This proposed rule also discusses geographic locality changes; payment for covered outpatient drugs and biologicals; supplemental payments to federally qualified health centers (FQHCs); payment for renal dialysis services; the national coverage decision (NCD) process; coverage of screening for glaucoma; private contracts; and physician referrals for nuclear medicine services and supplies to health care entities with which they have financial relationships.
In addition, we include discussions on payment for teaching anesthesiologists, the therapy cap, the chiropractic demonstration and the Sustainable Growth Rate (SGR).
Comment Date: Comments will be considered if we receive them at one of the addresses provided below, no later than 5 p.m. on September 30, 2005.
In commenting, please refer to file code CMS-1502-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.
You may submit comments in one of three ways (no duplicates, please):
1. Electronically. You may submit electronic comments on specific issues in this regulation to http://www.cms.hhs.gov/regulations/ecomments. (Attachments should be in Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft Word.)
2. By mail. You may mail written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1502-P, P.O. Box 8017, Baltimore, MD 21244-8017.
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 (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1502-P, 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 one of the following addresses. If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-7197 in advance to schedule your arrival with one of our staff members. Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the HHH Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and 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.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Pam West (410) 786-2302 (for issues related to practice expense).
Rick Ensor (410) 786-5617 (for issues related to the non-physician workpool and supplemental survey data).
Stephanie Monroe (410) 786-6864 (for issues related to the geographic practice cost index).
Craig Dobyski (410) 786-4584 (for issues related to list of telehealth services).
Ken Marsalek (410) 786-4502 (for issues related to multiple procedure reduction for diagnostic imaging services and payment for teaching anesthesiologists).
Henry Richter (410) 786-4562 (for issues related to payments for end stage renal disease facilities).
Angela Mason (410) 786-7452 or Catherine Jansto (410) 786-7762 (for issues related to payment for covered outpatient drugs and biologicals).
Fred Grabau (410) 786-0206 (for issues related to private contracts and opt out provision).
David Worgo (410) 786-5919 (for issues related to Federally Qualified Health Centers).
Vadim Lubarsky (410) 786-0840 (for issues related National Coverage Decision timeframes).
Bill Larson (410) 786-7176 (for issues related to coverage of screening for glaucoma).
Diane Milstead (410) 786-3355 or Gaysha Brooks (410) 786-9649 (for all other issues).End Further Info End Preamble Start Supplemental Information
Submitting Comments: We welcome comments from the public on all issues set forth in this rule to assist us in fully considering issues and developing policies. You can assist us by referencing the file code CMS-1502-P and the specific “issue identifier” that precedes the section 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. CMS posts all electronic comments received before the close of the comment period on its public website as soon as possible after they have been received. Hard copy comments received timely will be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday Start Printed Page 45765through 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.
This Federal Register document is also available from the Federal Register online database through GPO Access a service of the U.S. Government Printing Office. The Web site address is: http://www.access.gpo.gov/nara/index.html.
Information on the physician fee schedule can be found on the CMS homepage. You can access this data by using the following directions:
1. Go to the CMS homepage (http://www.cms.hhs.gov).
2. Place your cursor over the word “Professionals” in the blue areas near the top of the page. Select “physicians” from the drop-down menu.
3. Under “Billing/Payment” select “Physician Fee Schedule”.
To assist readers in referencing sections contained in this preamble, we are providing the following 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. Information on the regulation's impact appears throughout the preamble and is not exclusively in section VI.
Table of Contents
B. Development of the Relative Value System
C. Components of the Fee Schedule Payment Amounts
D. Most Recent Changes to the Fee Schedule
II. Provisions of the Proposed Rule
A. Resource-Based Practice Expense RVUs
1. Current Methodology
2. Practice Expense Proposals for Calendar Year 2006
B. Geographic Practice Cost Indices
C. Malpractice Relative Value Units (RVUs)
D. Medicare Telehealth Services
E. Contractor Pricing of Unlisted Therapy Modalities and Procedures
F. Payment for Teaching Anesthesiologists
G. End Stage Renal Disease (ESRD) Related Provisions
1. Revised Pricing Methodology for Separately Billable Drugs and Biologicals Furnished by ESRD Facilities.
2. Adjustment to Account for Changes in the Pricing of Separately Billable Drugs and Biologicals and the Estimated Increase in Expenditures for Drugs and Biologicals
3. Proposed Revisions to Geographic Designations and Wage Indexes Applied to the End Stage Renal Disease Composite Payment Rate Wage Index
4. Proposed Revisions to § 413.170 (Scope) and § 413.174 (Prospective rates for hospital-based and independent ESRD facilities)
5. Proposed Revisions to the Composite Payment Rate Exceptions Process
H. Payment for Covered Outpatient Drugs and Biologicals
I. Private Contracts and Opt-out Provision
J. Multiple Procedure Reduction for Diagnostic Imaging
K. Therapy Cap
L. Chiropractic Services Demonstration
M. Supplemental Payments to Federally Qualified Health Centers (FQHCs) Subcontracting with Medicare Advantage Plans
N. National Coverage Decisions Timeframes
O. Coverage of Screening for Glaucoma
P. Physician Referrals for Nuclear Medicine Services and Suppliers to Health Care Entities with Which They Have Financial Relationships
Q. Sustainable Growth Rate
III. Collection of Information Requirements
IV. Response to Comments
V. Regulatory Impact Analysis
Addendum A—Explanation and Use of Addendum B
Addendum B—2006 Relative Value Units and Related Information Used in Determining Medicare Payments for 2006
Addendum C—Codes for Which we Received Practice Expense Review Committee (PERC) Recommendations on Practice Expense Direct Cost Inputs.
Addendum D—2006 Geographic Practice Cost Indices By Medicare Carrier and Locality
Addendum E—Proposed 2006 Geographic Adjustment Factors (GAFs)
Addendum F—ESRD Facilities Metropolitan Statistical Areas (MSA)/Core-Based Statistical Areas (CBSA) Crosswalk
Addendum G—List of CPT/HCPCS Codes Used to Describe Nuclear Medicine Designated Health Services Under Section 1877 of the Social Security Act
In addition, because of the many organizations and terms to which we refer by acronym in this proposed final rule, we are listing these acronyms and their corresponding terms in alphabetical order below:
AADA American Academy of Dermatology Association
AAH American Association of Homecare
ACC American College of Cardiology
ACG American College of Gastroenterology
ACR American College of Radiology
AFROC Association of Freestanding Radiation Oncology Centers
AGA American Gastroenterological Association
AMA American Medical Association
AMP Average manufacturer price
ASA American Society of Anesthesiologists
ASGE American Society of Gastrointestinal Endoscopy
ASP Average sales price
ASTRO American Society for Therapeutic Radiation Oncology
ATA American Telemedicine Association
AUA American Urological Association
AWP Average wholesale price
BBA Balanced Budget Act of 1997
BBRA Balanced Budget Refinement Act of 1999
BES (Bureau of the Census') Business Expenditure Survey
BIPA Benefits Improvement and Protection Act of 2000
BLS Bureau of Labor Statistics
BMI Body mass index
BNF Budget neutrality factor
BSA Body surface area
CAP College of American Pathologists
CBSA Core-Based Statistical Area
CF Conversion factor
CFR Code of Federal Regulations
CMA California Medical Association
CMS Centers for Medicare & Medicaid Services
CNS Clinical nurse specialist
CPEP Clinical Practice Expert Panel
CPI Consumer Price Index
CPO Care Plan Oversight
CPT (Physicians') Current Procedural Terminology (4th Edition, 2002, copyrighted by the American Medical Association)
CRNA Certified Registered Nurse Anesthetist
CT Computed tomography
CTA Computed tomographic angiography
CY Calendar year
DHS Designated health services
DME Durable medical equipment
DMERC Durable Medical Equipment Regional Carrier
DSMT Diabetes outpatient self-management training services
E&M Evaluation and management
ESRD End stage renal disease
FI Fiscal intermediary
FQHC Federally qualified healthcare center
FR Federal Register
GAF Geographic adjustment factor
GAO General Accounting Office
GPCI Geographic practice cost index
HCPAC Health Care Professional Advisory Committee
HCPCS Healthcare Common Procedure Coding System
HHA Home health agency
HHS (Department of) Health and Human Services
HOCM High Osmolar Contrast Media
HPSA Health professional shortage area
HRSA Health Resources Services Administration (HHS)
IDTFs Independent diagnostic testing facilities
IPF Inpatient psychiatric facility
IPPS Inpatient prospective payment system
IRF Inpatient rehabilitation facility
ISO Insurance Services Office
IVIG Intravenous immune globulin
JCAAI Joint Council of Allergy, Asthma, and Immunology
JUA Joint underwriting association
LCD Local coverage determination
LTCH Long-term care hospital
LOCM Low Osmolar Contrast Media
MA Medicare Advantage
MCAC Medicare Coverage Advisory Committee
MCG Medical College of Georgia
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index Start Printed Page 45766
MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003
MNT Medical nutrition therapy
MRA Magnetic resonance angiography
MRI Magnetic resonance imaging
MSA Metropolitan statistical area
NCD National coverage determination
NCQDIS National Coalition of Quality Diagnostic Imaging Services
NDC National drug code
NECMA New England County Metropolitan Area
NECTA New England City and Town Area
NP Nurse practitioner
NPP Nonphysician practitioners
OBRA Omnibus Budget Reconciliation Act
OIG Office of Inspector General
OMB Office of Management and Budget
OPPS Outpatient prospective payment system
PA Physician assistant
PC Professional component
PE Practice Expense
PEAC Practice Expense Advisory Committee
PERC Practice Expense Review Committee
PET Positron emission tomography
PFS Physician Fee Schedule
PLI Professional liability insurance
PPI Producer price index
PPO Preferred provider organization
PPS Prospective payment system
PRA Paperwork Reduction Act
PT Physical therapy
RFA Regulatory Flexibility Act
RIA Regulatory impact analysis
RN Registered nurse
RUC (AMA's Specialty Society) Relative (Value) Update Committee
RVU Relative value unit
SGR Sustainable growth rate
SMS (AMA's) Socioeconomic Monitoring System
SNF Skilled nursing facility
SNM Society for Nuclear Medicine
TA Technology assessment
TC Technical component
tPA Tissue-type plasminogen activator
UAF Update adjustment factor
WAC Wholesale acquisition cost
WAMP Widely available market price
[If you choose to comment on issues in this section, please include the caption “BACKGROUND” at the beginning of your comments.]
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 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. Prior to the establishment of the resource-based relative value system, Medicare payment for physicians' services was based on reasonable charges.
B. 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, Pub. L. 101-239, and OBRA 1990, (Pub. L. 101-508). The final rule, published 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. In constructing the code-specific vignettes for the original physician work RVUs, Harvard worked with panels of experts, both inside and outside the government and obtained input from numerous physician specialty groups.
Section 1848(b)(2)(A) of the Act specifies that the RVUs for radiology services are based on relative value scale we adopted under section 1834(b)(1)(A) of the Act, (the American College of Radiology (ACR) relative value scale), which we integrated into the overall PFS. 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 (Pub. L. 103-432), 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 practice expenses.
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) 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. The AMA's SMS data provided aggregate specialty-specific information on hours worked and practice expenses.
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 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 practice expenses of providing a particular service.
Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) directed 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 Start Printed Page 45767published 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.
3. Resource-Based Malpractice RVUs
Section 4505(f) of the BBA amended section 1848(c) of the Act to require us to implement resource-based malpractice RVUs for services furnished on or after 2000. The resource-based malpractice RVUs were implemented in the PFS final rule published November 2, 1999 (64 FR 59380). The malpractice 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 five years. The first 5-year review of the physician work RVUs went into effect in 1997, published on November 22, 1996 (61 FR 59489). The second 5-year review went into effect in 2002, published on November 1, 2001 (66 FR 55246). The next scheduled 5-year review is scheduled to go into effect in 2007.
In 1999, the AMA's RUC established the Practice Expense Advisory Committee (PEAC) for the purpose of refining the direct PE inputs. Through March of 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).
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.
C. Components of the Fee Schedule Payment Amounts
To calculate the payment for every physician service, the components of the fee schedule (physician work, PE, and malpractice RVUs) are adjusted by a geographic practice cost index (GPCI). The GPCIs reflect the relative costs of physician work, practice expenses, and malpractice insurance in an area compared to the national average costs for each component.
Payments are converted to dollar amounts through the application of a CF, which is calculated by the Office of the Actuary and is updated annually for inflation.
The general formula for calculating the Medicare fee schedule amount for a given service and fee schedule area can be expressed as:
Payment = [(RVU work x GPCI work) + (RVU PE x GPCI PE) + (RVU malpractice x GPCI malpractice)] x CF.
D. Most Recent Changes to the Fee Schedule
In the November 15, 2004 PFS final rule (69 FR 66236), we refined the resource-based PE RVUs and made other changes to Medicare Part B payment policy. These policy changes included—
- Supplemental survey data for PE;
- Updated GPCIs for physician work and PE;
- Updated malpractice RVUs;
- Revised requirements for supervision of therapy assistants;
- Revised payment rules for low osmolar contrast media;
- Payment policies for physicians and practitioners managing dialysis patients;
- Clarification of care plan oversight CPO) requirements;
- Requirements for supervision of diagnostic psychological testing services;
- Clarifications to the policies affecting therapy services provided incident to a physician's service;
- Requirements for assignment of Medicare claims;
- Additions to the list of telehealth services;
- Changes to payments for drug administration services; and
- Several coding issues.
The November 15, 2004, final rule also addressed the following provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173):
- Coverage of an initial preventive physical examination.
- Coverage of cardiovascular screening blood tests.
- Coverage of diabetes screening tests.
- Incentive payment improvements for physicians in physician shortage areas.
- Changes to payment for covered outpatient drugs and biologicals and drug administration services.
- Changes to payment for renal dialysis services.
- Coverage of routine costs associated with certain clinical trials of category A devices as defined by the Food and Drug Administration.
- Coverage of hospice consultation service.
- Indexing the Part B deductible to inflation.
- Extension of coverage of intravenous immune globulin (IVIG) for the treatment in the home of primary immune deficiency diseases.
- Revisions to reassignment provisions.
- Payment for diagnostic mammograms.
- Coverage of religious nonmedical health care institution items and services to the beneficiary's home.
In addition, the November 15, 2004 PFS final rule finalized the calendar year (CY) 2004 interim RVUs for new and revised codes in effect during CY 2004 and issued interim RVUs for new and revised procedure codes for CY 2005; updated the codes subject to the physician self-referral prohibition; discussed payment for set-up of portable x-ray equipment; discussed the third 5-year refinement of work RVUs; and solicited comments on potentially misvalued work RVUs.
In accordance with section 1848(d)(1)(E) of the Act, we also announced that the PFS update for CY 2005 would be 1.5 percent; the initial estimate for the sustainable growth rate for CY 2005 is 4.3; and the CF for CY 2005 is $37.8975.
II. Provisions of the Proposed Rule
This proposed rule would affect the regulations set forth at Part 405, Federal Health Insurance for the Aged and Disabled; Part 410, Supplementary Medical Insurance (SMI) Benefits; Part 411, Exclusions from Medicare and Limitations on Medicare Payment; Part 413, Principles of Reasonable Cost Reimbursement, Payment for End-Stage Renal Disease Services, Prospectively Determined Payment Rates for Skilled Nursing Facilities; 414, Payment for Part B Medical and Other Health Services; Part 426, Review of National Coverage Determinations and Local Coverage Determinations. Start Printed Page 45768
A. Resource-Based Practice Expense (PE) RVUs
Based on section 1848(c)(1)(B) of the Act practice expenses are 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 wages of personnel, but excluding malpractice expenses).
Section 121 of the Social Security Amendments of 1994 (Pub. L. 103-432), enacted on October 31, 1994, required us to develop a methodology for a resource-based system for determining PE RVUs for each physician's service. Up until this point, physicians' practice expenses 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 performing the service.
The initial implementation of resource-based PE RVUs was delayed until January 1, 1999, by section 4505(a) of the BBA 1997. In addition, section 4505(b) of the BBA 1997 required 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 called for by the statute was to adjust the PE values for certain services for CY 1998. Section 4505(d) of BBA 1997 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.
- 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 PEs.
Beginning in CY 1999, Medicare began the four year transition to resource-based PE RVUs. In CY 2002, the resource-based PE RVUs were fully transitioned.
1. Current Methodology
The following sections discuss the current PE methodology.
a. Data Sources
There are two primary data sources used to calculate PEs. The American Medical Association's (AMA) Socioeconomic Monitoring System (SMS) survey data are used to develop the PEs per hour for each specialty. The second source of data used to calculate PEs was originally developed by the Clinical Practice Expert Panels (CPEP). The CPEP data include the supplies, equipment and staff times specific to each procedure.
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 Revisions to Payment Policies and Five-Year Review of and Adjustments to the Relative Value Units Under the Physician Fee Schedule for Calendar Year 2002 final rule, published November 1, 2001 (66 FR 55246).) The SMS PE survey data are adjusted to a common year, 1995. The SMS data provide the following six categories of PE costs:
- Clinical payroll expenses, which are payroll expenses (including fringe benefits) for nonphysician 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 expenses 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 mentioned above.
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, the specialty itself). (See the Criteria for Submitting Supplemental Practice Expense Survey Data interim final rule with comment period, published on May 3, 2000 (65 FR 25664).) Originally, the deadline to submit supplementary survey data was through August 1, 2001. This deadline was extended in the November 1, 2001 final rule through August 1, 2003. (See the Revisions to Payment Policies and Five-Year Review of and Adjustments to the Relative Value Units Under the Physician Fee Schedule for Calendar Year 2002 final rule, published on November 1, 2001 (66 FR 55246).) Then, to ensure maximum opportunity for specialties to submit supplementary survey data, we extended the deadline to submit surveys until March 1, 2005. (See the Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2002 final rule, published on November 7, 2003 (68 FR 63196).)
The CPEPs consisted of panels of physicians, practice administrators, and nonphysicians (registered nurses (RNs), for example) 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 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 Practice Expense Advisory Committee (PEAC). Since 1999, and until 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 which we have reviewed and accepted for over 7,600 codes. As a result of this scrutiny, the current CPEP inputs differ markedly from those originally recommended by the CPEPs. The PEAC has now been replaced by the Practice Expense Review Committee (PERC), which acts to assist the RUC in recommending PE inputs.
b. Allocation of Practice Expenses to Services
In order to establish PE RVUs for specific services, it is necessary to establish the direct and indirect PE associated with each service. Our current approach allocates aggregate specialty practice costs to specific procedures and, thus, is often referred to as a “top-down” approach. The specialty PEs are derived from the AMA's SMS survey and supplementary survey data. The PEs for a given specialty are allocated to the services performed by that specialty on the basis Start Printed Page 45769of the CPEP data and work RVUs assigned to each CPT code. The specific process is detailed as follows:
Step 1—Calculation of the SMS Cost Pool for Each Specialty
The six SMS cost categories can be described as either direct or indirect expenses. The three direct expense categories include clinical labor, medical supplies and medical equipment. Indirect expenses include administrative labor, office expense, and all other expenses. We combine these indirect expenses into a single category. The SMS cost pool for each specialty is calculated as follows:
- The specialty PE per hour (PE/HR) for each of the three direct and one indirect cost categories from the SMS is calculated by dividing the aggregate PE per specialty by the specialty's total hours spent in patient care activities (also determined by the SMS survey). The PE/HR is divided by 60 seconds to obtain the PE per minute (PE/MIN).
- Each specialty's PE pools (for each of the three direct and one indirect cost categories) are created by multiplying the PE/MIN for the specialty by the total time the specialty spent treating Medicare patients for all procedures (determined using Medicare utilization data). Physician time on a procedure-specific level is available through RUC surveys of new or revised codes and through surveys conducted as part of the 5 year review process. For codes that the RUC has not yet reviewed, the original data from the Harvard resource-based RVU system survey is used. Physician time includes time spent on the case prior to, during, and after the procedure. The physician procedure time is multiplied by the frequency that each procedure is performed on Medicare patients by the specialty.
- The total specialty-specific SMS PE for each cost category is the sum, for each direct and indirect cost category, of all of the procedure-specific total PEs.
Table 1 illustrates an example of the calculation of the total SMS cost pools for the three direct and one indirect cost categories discussed in step 1. For this specialty, PE/HR for clinical payroll expenses is $9.30 per hour. The hourly rate is divided by 60 minutes to obtain the clinical payroll per minute for the specialty.
The total clinical payroll for providing hypothetical procedure 00001 for this specialty of $3,633,465 is the result of taking the clinical payroll per minute of $0.16; multiplying this by the physician time for procedure 00001 (56 minutes); and multiplying the result by the number of times this procedure was provided to Medicare patients by this specialty (418,602). The total amount spent on clinical payroll in this specialty is $667,457,018. This amount is calculated by summing the clinical payroll expenses of procedure 00001 and all of the other services provided by this specialty.
|Standard methodology||Clinical payroll (A)||Medical supplies (B)||Medical equipment (C)||Indirect expenses (D)||Total * (E)|
|(c) Physician Time—00001||56||56||56||56||56|
|(d) Number of Services||418,602||418,602||418,602||418,602||418,602|
|(f) All Other Services||$663,823,552||$342,618,608||$528,203,687||$3,319,117,762||$4,853,763,609|
|(g) Total—SMS Pool||$667,457,018||$344,493,945||$531,094,831||$3,337,285,089||$4,880,330,883|
|(b) = (a)/60|
|(e) = (b)*(c)*(d)|
|(g) = (e)+(f)|
|* Components may not add to totals due to rounding.|
Step 2—Calculation of CPEP Cost Pool
CPEP data provide expenditure amounts for the direct expense categories (clinical labor, supplies and equipment cost) at the procedure level. Multiplying the CPEP procedure-level PEs for each of these three categories by the number of times the specialty provided the procedure, produces a total category cost, per procedure, for that specialty. The sum of the total expenses from each procedure results in the total CPEP category cost for the specialty.
For example, in Table 2, using CPEP data, the clinical labor cost of procedure 00001 is $65.23. Under the methodology described above in this step, this is multiplied by the number of services for the specialty (418,602), to yield the total CPEP data clinical labor cost of the procedure: $27,305,408. In this example, the clinical labor cost for all other services performed by this specialty is $831,618,600. Therefore, the entire clinical labor CPEP expense pool for the specialty is $858,924,008. Step 2 is repeated to calculate the CPEP supply and equipment costs.
|Standard methodology||Clinical labor (A)||Supplies (B)||Equipment (C)|
|(a) CPT 00001||$65.23||$52.49||$1,556.86|
|(b) Allowed Services||418,602||418,602||418,602|
|(d) All Other Services||$831,618,600||$389,921,779||$5,277,570,148|
|(e) Total CPEP Pool||$858,924,008||$411,894,617||$5,929,275,023|
|(c) = (a)*(b)|
|(e) = (c)+(d)|
Step 3—Calculation and Application of Scaling Factors
This step ensures that the total of the CPEP costs across all procedures performed by the specialty equates with the total direct costs for the specialty as reflected by the SMS data. To accomplish this, the CPEP data are scaled to SMS data by means of a scaling factor so that the total CPEP costs for each specialty equals the total SMS cost for the specialty. (The scaling factor is calculated by dividing the specialty's SMS pool by the specialty's CPEP pool.)
The unscaled CPEP cost per procedure value, at the direct cost level, is then multiplied by the respective specialty scalar to yield the scaled CPEP procedure value. The sum of the scaled CPEP direct cost pool expenditures equals the total scaled direct expense for the specific procedure at the specialty level.
In the Step 3 example shown in Table 3, the SMS total clinical labor costs for the specialty is $667,457,018. This amount divided by the CPEP total clinical labor amount of $858,924,008 yields a scaling factor of 0.78. The CPEP clinical labor cost for hypothetical procedure 00001 is $65.23. Multiplying the 0.78 scaling factor for clinical labor costs by $65.23 yields the scaled clinical labor cost amount of $50.69. Individual scaling factors must also be calculated for supply and equipment expenses. The sum of the scaled direct cost values, $50.69, $43.90 and $139.45, respectively, equals the total scaled direct expense of $234.04.
Step 4—Calculation of Indirect Expenses
Indirect PEs cannot be directly attributed to a specific service because they are incurred by the practice as a whole. Indirect costs include rent, utilities, office equipment and supplies, and accounting and legal fees. There is not a single, universally accepted approach for allocating indirect practice costs to individual procedure codes. Rather allocation involves judgment in identifying the base or bases that are the best measures of a practice's indirect costs.
To allocate the indirect PEs to a specific service, we use the following methodology:
- The scaled direct expenses and the converted work RVU (the work RVU for the service is multiplied by $34.5030, the 1995 CF) are added together, and then multiplied by the number of services provided by the specialty to Medicare patients;
- The total indirect PEs per specialty are calculated by summing the indirect expenses for all other procedures provided by that specialty.
In the Table 4, the physician work RVU for procedure 00001 is 2.36. Multiplying the work RVU by the 1995 CF of $34.5030 equals $81.43. The physician work value is added to the scaled total direct expense from Step 3 ($234.04). The total of $314.47 is a proxy for the indirect PE for the specialty attributed to this procedure. The total indirect expenses are then multiplied by the number of services provided by the specialty (418,602), to calculate total indirect expenses for this procedure of $132,055,728. The process is repeated across all procedures performed by the specialty, and the indirect expenses for each service are summed to arrive at the total specialty indirect PE pool of $6,745,545,434.
|Standard methodology||Physician work*||Total direct expense||Total|
|(a) CPT 00001||$81.43||$234.04||$315.47|
|(b) Allowed Services||418,602|
|(d) All Other Services||$6,613,489,706|
|(e) Total Indirect Expense||$6,745,545,434|
|*Calculated by multiplying work RVU of 2.36 by 1995 conversion factor of $34.5030.|
Step 5—Calculation and Application of Indirect Scaling Factors
Similar to the direct costs, the indirect costs are scaled to ensure that the total across all procedures performed by the specialty equates with the total indirect costs for the specialty as reflected by the SMS data. To accomplish this, the indirect costs calculated in Step 4 (Table 4) are scaled to SMS data. The calculation of the indirect scaling factors is as follows:
- The specialty's total SMS indirect expense pool is divided by the specialty's total indirect expense pool calculated in Step 4 (Table 4), to yield the indirect expense scaling factor.
- The unscaled indirect expense amount, at the procedure level, is multiplied by the specialty's scaling factor to calculate the procedure's scaled indirect expenses.
- The sum of the scaled indirect expense amount and the procedure's direct expenses yields the total PEs for the specialty for this procedure.
In table 5, to calculate the indirect scaling factor for hypothetical procedure 00001, divide the total SMS indirect pool, $3,337,285,089 (calculated in Step 1—Table 1), by the total indirect expense for the specialty across all procedures of $6,745,545,434. This results in a scaling factor of 0.49. Next, the unscaled indirect cost of $315.47 is multiplied by the 0.49 scaling factor, resulting in scaled indirect cost of $156.07. To calculate the total PEs for the specialty for procedure 00001, the scaled direct and indirect expenses are added, totaling $390.12.
Step 6—Weighted Average of RVUs for Procedures Performed by More Than One Specialty
For codes that are performed by more than one specialty, a weighted average PE is calculated based on Medicare frequency data of all specialties performing the procedure as shown in Table 6.
|Standard Methodology||Practice expense value||Percent of total allowed services|
|(a) Specialty Total Practice Expense||$390.12||83|
|(b) Weighted Avg.—All Other Specialties||$929.87||17|
|(c) Weighted Avg.—All Specialties||$481.70||100|
Step 7—Budget Neutrality and Final RVU Calculation
The total scaled direct and indirect inputs are then adjusted by a budget neutrality factor to calculate RVUs. Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments in RVUs 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. Budget neutrality for the upcoming year is determined relative to the sum of PE RVUs for the current year. Although the PE RVUs for any particular code may vary from year-to-year, the sum of PE RVUs across all codes is set equal to the current year. The budget neutrality factor (BNF) is equal to the sum of the current year's PE RVUs, divided by the sum of the direct and indirect inputs across all codes for the upcoming year. The BNF is applied to (multiplied by) the scaled direct and indirect expenses for each code to set the PE RVU for the upcoming year.
In Table 7, the sum of the scaled direct and indirect expenses for hypothetical code 00001 ($481.70) is multiplied by the BNF (0.02 in this example) to yield a PE RVU of 10.60. Start Printed Page 45772
|Total scaled direct and indirect inputs||Budget neutrality factor||Final PE RVU|
|(a) Code 00001||$481.70||0.02||10.60|
c. Other Methodological Issues: Nonphysician Work Pool (NPWP)
As an interim measure, until we could further analyze the effect of the top-down methodology on the Medicare payment for services with no physician work (including the technical components (TCs) of radiation oncology, radiology and other diagnostic tests), we created a separate PE pool for these services. However, any specialty society could request that its services be removed from the nonphysician work pool. We have removed some services from the nonphysician work pool if we find that the requesting specialty provides the service the majority of the time.
NPWP Step 1—Calculation of the SMS Cost Pool for Each Specialty
This step parallels the calculations described above for the standard “top-down” PE allocation methodology. For codes in the nonphysician work pool, the direct and indirect SMS costs are set equal to the weighted average of the PE/HR for the specialties that provide the services in the pool. Clinical staff time is substituted for physician time in the calculation. The clinical staff time for the code is from CPEP data. Otherwise, the calculation is similar to the method described previously for codes with physician time.
The following example in Table 8 illustrates this calculation for hypothetical code 00002. In this example, the average clinical payroll PE/HR for all specialties in the nonphysician work pool is $12.30 and the clinical staff time for code 00002 is 116 minutes.
|Non-Physician work pool methodology (NPWP)||Clinical payroll||Medical supplies||Medical equipment||Indirect expenses||Total*|
|(c) Clinical Staff Time—00002||116||116||116||116||116|
|(d) Number of Services||105,095||105,095||105,095||105,095||105,095|
|(e) Total—NPWP “SMS” Pool||$2,499,159||$1,503,559||$650,188||$9,407,404||$14,019,673|
|(b) = (a)/60|
|(e) = (b)*(c)*(d)|
|* Components may not add to totals due to rounding.|
NPWP Step 2—Calculation of Charge-based PE RVU Cost Pool
The nonphysician work pool calculation uses the 1998 (charge-based) PE RVU value for the code, multiplied by the 1995 CF (25.74 × $34.503 = $888.11). The percentage of clinical labor, supplies and equipment are the percentage that each PE category represents for all physicians relative to the total PE for all physicians (calculated from the SMS data) as shown in Table 9.
|(a) CPT 00002—Charge Based Value||$888.11||$888.11||$888.11|
|(b) Percent Clinical, Supplies, Equipment||0.18||0.11||0.05|
|(c) CPT 00002||158.08||95.03||41.74|
|(d) Number of—NPWP||105,095||105,095||105,095|
|(e) Total NPWP “CPEP” Pool||$16,613,742||$4,386,775||$9,986,912|
|(c) = (a)*(b)|
|(e) = (c)*(d)|
NPWP Step 3—Calculation and Application of Scaling Factors
After the total cost pools for each specialty and code performed by the specialty are calculated, the steps to ensure the total costs for all of the procedures performed by a specialty do not exceed the total costs for the specialty (scaling) are the same as those described previously for codes with physician work.
In Table 10 below, the SMS total clinical labor costs is $2,499,159. This amount divided by the charge-based total clinical labor amount of $16,613,742 yields a scaling factor of 0.15. The charge-based clinical labor cost for hypothetical procedure 00002 is $158.08 (from step 2—Table 2). Multiplying the 0.15 scaling factor for clinical labor costs by $158.08 yields the Start Printed Page 45773scaled clinical labor cost amount of $23.78. Individual scaling factors must be calculated for both supply and equipment expenses. The sum of the scaled direct cost values, $23.78, $32.57 and $2.72, respectively, equals the total scaled direct expense of $59.07.
NPWP Step 4—Calculation of Indirect Expenses
Because codes in the nonphysician work pool do not have work RVUs, indirect expenses are set equal to direct expenses (for codes with physician work, indirect expenses equal the sum of the scaled direct expenses and the converted work RVU). This amount is then multiplied by the number of times the procedure is performed.
In Table 11, the scaled total direct expense from Step 3 (Table 3) ($408.79) is also the proxy for the total indirect expense attributed to the procedure. The total indirect expense is multiplied by the number of services (105,095), to calculate total indirect cost for this procedure of $6,207,961.
|NPWP methodology||Physician work*||Total direct expense||Total|
|(a) CPT 00002||$||$59.07||$59.07|
|(b) Allowed Services—NPWP||105,095|
|(c) Total NPWP Indirect Expense||$6,207,961|
NPWP Step 5—Calculation and Application of Indirect Scaling Factors
Similar to the direct costs, the indirect costs are scaled to ensure that the total of the charge-based PE RVU costs across all procedures equates with the total indirect costs as reflected by the SMS data for the NPWP. To accomplish this, the charge-based data are scaled to SMS data so the total charge-based costs equal the total SMS costs.
In Table 12, to calculate the indirect scaling factor for hypothetical procedure 00002, divide the total SMS indirect expense, $9,407,404 (from Step 1—Table 1), by the total charge-based indirect expense of $6,207,961. This results in a scaling factor of 1.51. Next, the unscaled indirect charge-based cost for procedure 00002 of $59.07 (from step 4—Table 4) is multiplied by the 1.51 scaling factor, resulting in scaled indirect costs for this procedure of $89.19.Start Printed Page 45774
NPWP Step 6—Budget Neutrality and Final RVU Calculation
Similar to the calculation for codes with physician work, the BNF is applied to (multiplied by) the scaled direct and indirect expenses for each code to set the PE RVU for the upcoming year.
In Table 13, the sum of the scaled direct and indirect expenses for hypothetical code 00002 ($148.26) is multiplied by the BNF (0.022 in this example) to yield a PE RVU of 3.26.
|Total scaled direct and indirect inputs||Budget neutrality factor||Final PE RVU|
d. Facility/Non-facility Costs
Procedures that can be performed in a physician's office as well as in a hospital have two PE RVUs; facility and non-facility. The non-facility setting includes physicians' offices, patients' homes, freestanding imaging centers, and independent pathology labs. Facility settings include hospitals, ambulatory surgery centers, and skilled nursing facilities (SNFs). The methodology for calculating the PE RVU is the same for both facility and non-facility RVUs, but is calculated 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 fee schedule), the PE RVUs are generally lower for services provided in the facility setting.
2. PE Proposals for CY 2006
The following discussions outline the specific PE related proposals for CY 2006.
a. Supplemental PE Surveys
The following discussions outline the criteria for supplemental survey submission as well as information we have received for approval.
(1) Survey Criteria and Submission Dates
In accordance with section 212 of the BBRA, we established criteria to evaluate survey data collected by organizations to supplement the SMS survey data normally used in the calculation of the PE component of the PFS. In the Payment Policies Under the Physician Fee Schedule for Calendar Year 2002 final rule, published November 7, 2003 (68 FR 63196), we provided that, beginning in 2004, supplemental survey data had to be submitted by March 1 to be considered for use in computing PE RVUs for the following year. This allows us to publish our decisions regarding survey data in the proposed rule and provides the opportunity for public comment on these results before implementation.
To continue to ensure the maximum opportunity for specialties to submit supplemental PE data, we extended until 2005 the period that we would accept survey data that meet the criteria set forth in the November 2000 PFS final rule. The deadline for submission of supplemental data to be considered in CY 2006 was March 1, 2005.
(2) Submission of Supplemental Survey Data
The following discussion outlines the survey data submitted for CY 2004 and CY 2005.
• Surveys Submitted in 2004
As explained in the November 15, 2004 Physician Fee Schedule final rule (69 FR 66242), we received surveys by March 1, 2004 from the American College of Cardiology (ACC), the American College of Radiology (ACR), and the American Society for Therapeutic Radiation Oncology (ASTRO). The data submitted by the ACC and the ACR met our criteria. However, as requested by the ACC and the ACR, we deferred using their data until issues related to the nonphysician work pool could be addressed. We are proposing to use the ACC and ACR survey data in the calculation of PE RVUs for 2006, but only as specified in the proposals relating to a revised methodology for establishing direct PE RVUs, and a transition period for the revised methodology, as described below.
The survey data from ASTRO did not meet the precision criteria established for supplemental surveys, therefore, we did not use it in the calculation of PE RVUs for 2005.
• Surveys Submitted in 2005
This year we received surveys from the Association of Freestanding Radiation Oncology Centers (AFROC), the American Urological Association (AUA), the American Academy of Dermatology Association (AADA), the Joint Council of Allergy, Asthma, and Immunology (JCAAI), the National Coalition of Quality Diagnostic Imaging Services (NCQDIS) and a joint survey from the American Gastroenterological Association (AGA), the American Society of Gastrointestinal Endoscopy (ASGE) and the American College of Gastroenterology (ACG)
We contract with the Lewin Group to evaluate whether the supplemental Start Printed Page 45775survey data that are submitted meet our criteria and to make recommendations to us regarding their suitability for use in calculating PE RVUs. (The Lewin Group report on the 2005 submissions is available on the CMS Web site at http://www.cms.hhs.gov/physicians/pfs/). The report indicated that, except for the survey from NCQDIS, all met our criteria and we are proposing to accept these. The survey data submitted by the NCQDIS on independent diagnostic testing facilities (IDTFs) did not meet the precision criterion of a 90 percent confidence interval with a range of plus or minus 15 percent of the mean (that is, 1.645 times the standard error of the mean, divided by the mean, is equal to or less than 15 percent of the mean). For the NCQDIS survey, the precision level was calculated at 16.3 percent of the mean PE/HR (weighted by the number of physicians in the practice). However, the Lewin Group has recommended that we accept the data from NCQDIS. The Lewin Group points out that PE data for IDTFs do not currently exist, and suggests that the need for data for the specialty should be weighed against the precision requirement.
We are proposing not to accept the NCQDIS data to calculate the PE RVUs for services provided by IDTFs. As just noted, the NCQDIS data do not meet our precision requirements. We established the minimum precision standards because we believe it is necessary to ensure that the data used are valid and reliable, and the consistent application of the precision criteria is the best way to accomplish that objective.
Section 303(a)(1) of the MMA added section 1848(c)(2)(I) of the Act to require us to use survey data submitted by a specialty group where at least 40 percent of the specialty's payments for Part B services are attributable to the administration of drugs in 2002 to adjust PE RVUs for drug administration services. The statute applies to surveys that include expenses for the administration of drugs and biologicals, and are received by March 1, 2005 for determining the CY 2006 PE RVUs. Section 303(a)(1) of the MMA also amended section 1848(c)(2)(B)(iv)(II) of the Act to provide an exemption from budget neutrality for any additional expenditures resulting from the use of these surveys. In the Changes to Medicare Payment for Drugs and Physician Fee Schedule Payments for Calendar Year 2004 interim final rule published January 7, 2004 (69 FR 1084), we stated that the specialty of urology meets the above criteria, along with gynecology and rheumatology (69 FR 1094). Because we are accepting new survey data from the AUA, we are required to exempt, from the budget neutrality adjustment any impacts of accepting these data for purposes of calculating PE RVUs for drug administration services.
In addition, Lewin recommended blending the radiation oncology data from this year's AFROC survey data with last year's ASTRO survey data to calculate the PE/HR. According to the Lewin Group, the goal of the AFROC survey was to represent the population of freestanding radiation oncology centers only. In order to develop an overall average for the radiation oncology PE pool, the Lewin Group recommended we use the AFROC survey for freestanding radiation oncology centers, and the hospital-based subset of last year's ASTRO survey. We agree that this blending of the AFROC and ASTRO data is a reasonable way to calculate an average PE/HR that fully reflects the practice of radiation oncology in all settings. Therefore, we are proposing to use the new PE/HR calculated in this manner for radiation oncology.
We propose to use the following PE/HR figures (deflated to 1995 values to be consistent with the SMS data):
|Specialty||Clinical staff||Admin. staff||Office expense||Medical supplies||Medical equipment||Other||Total|
The deadline to submit supplemental PE surveys was March 1, 2005. As discussed in detail below, we are proposing to revise our methodology to calculate direct PE RVUs from the current top-down cost allocation methodology to a bottom-up methodology. Although we would continue to use the SMS data and the incorporated supplemental survey data for indirect PEs, we are not proposing to extend the deadline for submitting supplemental survey data at this time. Instead, we are inviting comment on the most appropriate way to proceed to ensure the indirect PEs per hour are accurate and consistent across specialties.
(3) Revisions to the PE Methodology
Since 1997, when we first proposed a resource-based PE methodology, we have had several major goals for this payment system. One has been to encourage the maximum input from the medical community regarding our PE data and methodology. We have worked closely with the PEAC, PERC, RUC and the Health Care Professional Advisory Committee (HCPAC) which are all multi-specialty groups that allow the medical community to participate by making recommendations to us on the PE direct inputs. We also extended the deadline for the submission of supplementary PE surveys to ensure that specialties had the opportunity to submit new aggregate PE data. In addition, we have had scores of meetings with physician, practitioner and industry groups, and have made many modifications to our methodology in response to their comments and input. We look forward to continuing to work with the medical community as we strive to further improve our PE methodology.
We also have had three specific goals for the resource-based PE methodology itself. The following goals have also been supported in numerous comments we have received from the medical community:
- To ensure that the PE payments reflect, to the greatest extent possible, the actual relative resources required for each of the services on the PFS. This could only be accomplished by using Start Printed Page 45776the best available data to calculate the PE RVUs.
- To develop a payment system for PE that is understandable and at least somewhat intuitive, so that specialties could generally predict the impacts of changes in the PE data.
- To stabilize the PE payments so that there are not large fluctuations in the payment for given procedures from year-to-year.
We believe that we have consistently made a good faith effort to ensure fairness in our PE payment system by using the best data available at any one time. The change from the originally proposed “bottom-up” to the “top-down” methodology came about because of a concern that the resource input data developed in 1995 by the CPEP were less reliable than the aggregate specialty cost data derived from the SMS process. The adoption of the top-down approach necessitated the creation of the nonphysician work pool. The nonphysician work pool is a separate pool created to allocate PEs for codes that have only a technical (rather than professional) component, or codes that are not performed by physicians. In the Physician Fee Schedule (CY 2000); Payment Policies and Relative Value Unit Adjustment final rule, published November 2, 1999 (64 FR 59379), we indicated that “the purpose of this pool was only to protect the (TC) services from the substantial decreases * * * until further refinement could take place * * *” (64 FR 59406).
However, the situation has now changed. The PEAC/PERC/RUC has completed the refinement of the original CPEP data and we believe that the refined PE inputs now, in general, accurately capture the relative direct costs of performing PFS services. On the other hand, although we have now accepted supplementary survey data from 13 specialties, we have not received updated aggregate cost data from most specialties. Thus, we believe that, in the aggregate, the refined CPEP data represent, more reliably, the relative direct costs PE inputs for physician services.
The major specialties comprising the nonphysician work pool (radiology, radiation oncology and cardiology) have submitted supplemental survey data that we are proposing to accept. (See the discussion on supplementary surveys above.) Now that we have representative aggregate PE data for these specialties, the continued necessity and equity of treating these technical services outside the PE methodology applied to other services is questionable.
We have also taken steps to make our complex top-down PE methodology more understandable. For example, we eliminated the somewhat arcane “linking” of direct cost input data when more than one CPEP panel reviewed a service and did away with the confusing and unhelpful distinction between procedure-specific and indirect equipment. However, we acknowledge that most in the medical community would find our current methodology, as described above, neither clear nor intuitive. For example, because of the need to scale the CPEP/RUC inputs to the SMS PEs under our top-down methodology, the PE RVUs for a procedure do not necessarily change proportionately with changes in the direct inputs. This raises the question as to what would now be the most straightforward and intuitive methodology for calculating the direct PE RVUs.
Due to the ongoing refinement by the RUC of the direct PE inputs, we had expected that the PE RVUs would necessarily fluctuate from year-to-year, frustrating temporarily our efforts to reach the goal of stabilizing the PE portion of the PFS. At the same time, it became apparent that certain aspects of our methodology exacerbated the yearly fluctuations. For example, the need to scale the CPEP costs to equal the SMS costs meant that any changes in the direct PE inputs for one service often leads to unexpected results for other services where the inputs had not been altered. In addition, the services priced by the nonphysician work pool methodology have proved to be especially vulnerable to any change in the pool's composition. We understand the need for stable PE RVUs, so that physicians and other practitioners can anticipate from year-to-year what the relative payments will be for the services they perform. Now, that the CPEP/RUC refinement of existing services is virtually complete, this appears to be an opportunity for us to propose a way to provide stability to the PE RVUs.
Therefore, consistent with our goals of using the most appropriate data, simplifying our methodology, and increasing the stability of the payment system, we are proposing the following changes to our PE methodology:
• Use a Bottom-Up Methodology To Calculate Direct PE Costs
Instead of using the top-down approach to calculate the direct PE RVUs, where the aggregate CPEP/RUC costs for each specialty are scaled to match the aggregate SMS costs, we propose to adopt a bottom-up method of determining the relative direct costs for each service. Under this method, the direct costs would be determined by summing the costs of the resources—the clinical staff, equipment and supplies—typically required to provide the service. The costs of the resources, in turn, would be calculated from the refined CPEP/RUC inputs in our PE database.
• Eliminate the Nonphysician Work Pool
Now that we have new survey data for the major specialties that comprise the nonphysician work pool, we would eliminate the pool and calculate the PE RVUs for the services currently in the pool by the same methodology used for all other services. This would allow the use of the refined CPEP/RUC data to price the direct costs of individual services, rather than utilizing the pre-1998 charge-based PE RVUs.
• Utilize the Current Indirect PE RVUs, Except for Those Services Affected by the Accepted Supplementary Survey Data
As described previously, the SMS and supplementary survey data are the source for the specialty-specific aggregate indirect costs used in our PE calculations. We then allocate to particular codes on the basis of the direct costs allocated to a code and the work RVUs. Although we now believe the CPEP/RUC data are preferable to the SMS data for determining direct costs, we have no information that would indicate that the current indirect PE methodology is inaccurate. We also are not aware of any alternative approaches or data sources that we could use to calculate more appropriately the indirect PE, other than the new supplementary survey data, which we propose to incorporate into our PE calculations. Therefore, we propose to use the current indirect PEs in our calculation incorporating the new survey data into the codes performed by the specialities submitting the surveys. We would welcome any suggestions that would assist us in further refinement of this indirect PE methodology. For example, we are considering whether we should continue to accept supplementary survey data or whether it would be preferable and feasible to have an SMS-type survey of only indirect costs for all specialties, or whether a more formula-based methodology independent of the SMS data should be adopted, perhaps using the specialty-specific indirect-to-total cost percentage as a basis of the calculation. For a prior discussion of many of the issues associated with allocating indirect costs, we would refer the reader to the Physician Fee Schedule (CY 2000); Start Printed Page 45777Payment Policies and Relative Value Unit Adjustment proposed rule, published June 5, 1998 (63 FR 30823).
• Transition the Resulting Revised PE RVUs over a Four-Year Period
A complete analysis of the impacts of these changes is contained in the impact analysis in section V. of this proposed rule. We are concerned that, when combined with an expected negative update factor for CY 2006, the shifts in some of the PE RVUs resulting from our proposals could cause some measure of financial stress on medical practices. Therefore, we are proposing to transition the proposed PE changes over a 4-year period. This would also give ample opportunity for us, as well as the medical specialties and the RUC, to identify any anomalies in the PE data, to make any further appropriate revisions, and to collect additional data, as needed prior to the full implementation of the proposed PE changes.
During the transition period, the PE RVUs will be calculated on the basis of a blend of RVUs calculated using our proposed methodology described above (weighted by 25 percent during CY 2006, 50 percent during CY 2007, 75 percent during CY 2008, and 100 percent thereafter), and the current CY 2005 PE RVUs for each existing code.
We believe that implementing these proposed changes will meet our goals to produce a more accurate, more intuitive and more stable PE methodology.
Now that the direct PE inputs have been refined, we believe that the proposed CPEP/RUC direct input data are superior to the specialty-specific SMS PE/HR data for the purposes of determining the typical direct PE resources required to perform each service on the PFS. First, we have received recommendations on the procedure-specific inputs from the multi-specialty PEAC that were based on presentations from the relevant specialties after being closely scrutinized by the PEAC using standards and packages agreed to by all involved specialties. Second, the refined CPEP/RUC data are more current than the SMS data for the majority of specialties. Third, for direct costs, it appears more accurate to assume that the costs of the clinical staff, supplies and equipment are the same for a given service, regardless of the specialty that is performing it. This assumption does not hold true under the top-down direct cost methodology, where the specialty-specific scaling factors create widely differing costs for the same service.
We also would argue that the proposed methodology is less confusing and more intuitive than the current approach. First, the nonphysician work pool would be eliminated and all services would be priced using one methodology, eliminating the complicated calculations needed to price nonphysician work pool services. Second, the method for calculation of direct costs can now be described in sentences rather than paragraphs. Third, any revisions made to the direct inputs would now have predictable results. Changes in the direct practice inputs for a service would proportionately change the PE RVUs for that service without significantly affecting the PE RVUs for unrelated services.
The proposed methodology would also create a system that would be significantly more stable from year-to-year than the current approach. Specialties should no longer experience the wide fluctuations in payment for a given service due to an aberrant direct cost scaling factor. Direct PEs should only change for a service if it is further refined or when prices are updated, while indirect PEs should change only when there are changes in the mix of specialties performing the service or with the use of any future new survey data for indirect costs.
We recognize that there are still some outstanding issues that need further consideration, as well as input from the medical community. For example, although we believe that the elimination of the nonphysician work pool would be, on the whole, a positive step, some practitioner services, such as audiology and medical nutrition therapy, would be significantly impacted by the proposed change. In addition, there are still services, such as the ESRD visit codes, for which we have no direct input information. Also, as mentioned above, we do not have current SMS or supplementary survey data to calculate the indirect costs for most specialties. Further, we do not yet have accurate utilization for the new drug administration codes that were created in response to the MMA provision on drug administration. Therefore, we are not proposing to change the RVU for these services at this time, but to include them under our proposed methodology in next year's rule when we have appropriate data. The proposed transition period would give us the opportunity to work with the affected specialties to collect the needed survey or other data or to determine whether further revisions to our PE methodology are needed.
We, therefore, welcome all comments on these proposed changes, particularly those concerning additional modifications to the indirect PE methodology that might help us further our intended goals.
(4) PE Recommendations on CPEP Inputs for CY 2006
Since 1999, the PEAC, an advisory committee of the AMA's RUC, provided us with recommendations for refining the direct PE inputs (clinical staff, supplies, and equipment) for existing CPT codes. The PEAC held its last meeting in March 2004 and the AMA established a new committee, PERC, to assist the RUC in recommending PE inputs.
The PERC completed refinement of approximately 200 remaining codes at its meetings held in September 2004 and February 2005. (A list of these codes can be found in Addendum C of this proposed rule.)
We have reviewed the PERC-submitted recommendations and propose to adopt nearly all of them. We have worked with the AMA staff to correct any typographical errors and to make certain that the recommendations are in line with previously accepted standards.
The complete PERC recommendations and the revised PE database can be found on our Web site. (See the “Supplementary Information” section of this proposed rule for directions on accessing our Web site.)
We disagreed with the PERC recommendation for clinical labor time for CPT code 36522, Extracorporeal Photophoresis. In last year's Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2005 final rule, published November 15, 2004 (69 FR 66236) we assigned, on an interim basis, 223 minutes of total clinical labor for the service period based on the typical treatment time of approximately 4 hours. The PERC, however, recommended 122 minutes total clinical labor time for the service period, which allows for 90 minutes of nurse “intra service” time for the performance of the procedure (the society originally proposed 180 minutes). We believe that 135 minutes is a more appropriate estimation of the clinical staff time actually needed for the intra time, as it more closely approximates the time assigned to the other procedures in this family of codes, including CPT codes 36514, 36515, and 36516. Therefore, we are proposing a total clinical labor time of 167 minutes for the service period.
The PERC/RUC also recommended that no inputs be assigned to several codes because the services were not performed in the office setting. However, our utilization data shows that four of these codes (CPT codes Start Printed Page 4577815852, 76975, 78350, and 86585) are currently priced in the office and are performed with sufficient frequency in the office to warrant this. Therefore, we are proposing not to accept the PERC/RUC recommendations for these services at this time, but are requesting comments from the relevant specialties as to whether the recommendations should be accepted.
(5) Payment for Splint and Cast Supplies
In the Physician Fee Schedule (CY 2000); Payment Policies and Relative Value Unit Adjustment final rule, published November 2, 1999 (64 FR 59379) and the Physician Fee Schedule (CY 2002); Payment Policies and Relative Value Units Five-Year Review and Adjustments final rule, published November 1, 2000 (66 FR 55245), we removed cast and splint supplies from the PE database for the CPT codes for fracture management and cast/strapping application procedures. Because casting supplies could be separately billed using Healthcare Common Procedure Coding System (HCPCS) codes that were established for payment of these supplies under section 1861(s)(5) of the Act, we did not want to make duplicate payment under the PFS for these items.
However, in limiting payment of these supplies to the HCPCS codes Q4001 through Q4051, we unintentionally prohibited remuneration for these supplies when they are not used for reduction of a fracture or dislocation, but rather, are provided (and covered) as incident to a physician's service under section 1861(s)(2)(A) of the Act.
Because these casting supplies are covered either through sections 1861(s)(5) of the Act or 1861(s)(2)(A) of the Act, we are proposing to eliminate the separate HCPCS codes for these casting supplies and to again include these supplies in the PE database. This will allow for payment for these supplies whether based on section 1861(s)(5) of the Act or section 1861(s)(2)(A) of the Act, while ensuring that no duplicate payments are made. In addition, by bundling the cost of the cast and splint supplies into the PE component of the applicable procedure codes under the PFS, physicians will no longer need to bill Q-codes in addition to the procedure codes to be paid for these materials.
Because these supplies were removed from the PE database prior to the refinement of these services by the PEAC, we are proposing to add back the original CPEP supply data for casts and splints to each applicable CPT code. For this reason, it is imperative that the relevant medical societies review the “Direct Practice Expense Inputs” on our Web site at http://www.cms.hhs.gov/physicians/pfs (under the supporting documents for the 2006 proposed rule) and provide us with feedback regarding the appropriateness of the type and amount of casting and splinting supplies. We are also requesting specific information about the amount of casting supplies needed for the 10-day and 90-day global procedures, because these supplies may not be required at each follow-up visit; therefore, the number of follow-up visits may not reflect the typical number of cast changes required for each service.
The following cast and splint supplies have been reincorporated as direct inputs: fiberglass roll, 3 inch and 4 inch; cast padding, 4 inch; webril (now designated as cast padding, 3 inch); cast shoe; stockingnet/stockinette, 4 inch and 6 inch; dome paste bandage; cast sole; elastoplast roll; fiberglass splint; ace wrap, 6 inch; and kerlix (now designated as bandage, kerlix, sterile, 4.5 inch) and malleable arch bars. The cast and splint supplies have been added to the following CPT codes: 23500 through 23680, 24500 through 24685, 25500 through 25695, 26600 through 26785, 27500 through 27566, 27750 through 27848, 28400 through 28675, and 29000 through 29750.
Because we are proposing to pay for splint and cast through the PE component of the PFS, we would no longer make separate payment for these items using the HCPCS Q-codes.
(6) Miscellaneous PE Issues
In this section, we discuss our specific proposals related to PE inputs.
• Supply Items for CPT Code 95015
We are proposing to change the supply inputs for CPT code 95015, intracutaneous (intradermal) tests, sequential and incremental, with drugs, biologicals or venoms, immediate type reaction, specify number of tests, based on comments received from the JCAAI. The society reports that “venom” is the most typical test substance used when performing this service and that “antigen”, currently listed in the PE database, is never used. The JCAAI also suggests that the appropriate venom quantity should be 0.3 ml (instead of the 0.1 ml now listed) because of the necessity to use all five venoms (honey bee, yellow jacket, yellow hornet, white face hornet and wasp) to perform this sensitivity testing; that is, 1 ml of each venom type for a total of 5 ml of venom. The diluted venoms are sequentially administered until sensitivity is shown, beginning with the lowest concentration of venom and subsequently administering increasing concentrations of each venom. The JCAAI states that the typical number of tests per session is approximately 17, consistent with the RUC-approved vignette, which represents 0.3 ml of venom per test when divided into the total of 5 ml of venom needed to perform the entire service. We accept the specialty's argument and propose to change the test substance in CPT code 95015 to venom, at $10.70(from single antigen, at $5.18) and the quantity to 0.3 ml (from 0.1 ml).
• Flow Cytometry Services
In the November 15, 2004 final rule (69 FR 66236), we solicited comments on the interim RVUs and PE inputs for new and revised codes, including flow cytometry services. Based on comments received and additional discussions with representatives from the society representing independent laboratories, we are proposing to revise the PE inputs for the flow cytometry CPT codes 88184 and 88185.
The specialty society indicated that a cytotechnologist is the typical clinical staff type to perform the intra portion of this service for both codes. They also provided us with a list of six additional equipment items, along with documented prices, and with the minutes in use for each service. All six equipment items are necessary to perform the flow cytometry services described in CPT code 88184, while only two (the computer and printer) are needed for CPT code 88185. For supplies, the society believes the antibody cost currently reflected in the PE database is too low, and so they provided us with an average antibody cost of $8.50, derived from a survey of laboratories performing these services. Using the vignette for the myeloid/lymphoid panel to represent the typical service, this average cost was based on the cost of the total number of antibodies that are required to report the typical number of reported markers. Based on this information, we are proposing to change the following direct inputs used for PE:
+ Clinical Labor: Change the staff type in the service (intra)period in both CPT codes 88184 and 88185 to cytotechnologist, at $0.45 per minute (currently lab technician, at $0.33 per minute).
+ Supplies: Change the antibody cost for both CPT codes 88184 and 88185 to $8.50 (from $3.544).
+ Equipment: Add a computer, printer, slide strainer, biohazard hood, and FACS wash assistant to CPT code 88184. Add a computer and printer to the equipment for CPT code 88185. Start Printed Page 45779
• Low Osmolar Contrast Media (LOCM) and High Osmolar Contrast Media (HOCM)
HOCM and LOCM are used to enhance images produced by various types of diagnostic radiological procedures. In the November 15, 2004 final rule (69 FR 66356), we eliminated the criteria for the payment of LOCM that had been included at § 414.38. Effective January 1, 2005, providers can be paid for either LOCM or HOCM when used with procedures requiring contrast media. Payment for LOCM is made through the use of separate Q-codes, while payment for HOCM is currently included as part of the PE component under the PFS. Effective January 1, 2006, we will no longer include payment for HOCM under the PFS. When HOCM is used, Q-codes that have been established specifically for HOCM will be used for payment.
We have reviewed the PE database and are proposing to remove the following two supply items which we have identified as HOCM from the PE database:
+ Conray inj. iothalamate 43 percent(supply item #SH026, deleted from 64 procedures).
+ Diatrizoate sodium 50 percent (supply item #SH0238, deleted from 74 procedures).
In reviewing the PE database we also identified 5 CPT codes (specifically CPT codes 42550, 70370, 93508, 93510 and 93526) that include omnipaque as a supply item. Since omnipaque is actually a type of LOCM that is separately billable, we are proposing to remove this supply item from these five CPT codes.
• Imaging Rooms
We include standardized “rooms” for certain services in our PE equipment database, rather than listing each item separately. We received pricing information from the ACR for the following rooms that are included in the database. We have accepted most of the proposed items that meet the $500 threshold for equipment and are proposing to include the items in each specific room, as follows:
+ Basic Radiology Room: $127,750 (x-ray machine @ $125,550 and camera @ $2,200). The recommended viewbox was not included because most codes assigned this room have also been assigned an alternator (automated film viewer) or a 4-panel viewbox.
+ Radiographic-Flouroscopic Room: $367,664 (Radiographic machine @ $365,464 and camera @ $2,200). The recommended viewbox was not included because most codes assigned this room have also been assigned an alternator (automated film viewer) or a 4-panel viewbox.
+ Mammography Room: $168,214 (mammography unit @ $124,900; reporting system @ $16,690; mammography phantom @ $674; densitometer @ $3,660; sensitometer @ $2,750; desktop PC for monitoring @ $1,840; and processor @ $17,700. Separately listed equipment items (densitometer, mammography reporting system, sensitometer, mammography phantom, desktop computer, and the film processor) that duplicated items included in the mammography room were removed from the codes assigned the room, eliminating the reporting system, sensitometer and phantom from the PE database.
+ Computed tomography (CT) Room: $1,284,000 (16-slice CT scanner with power injector and monitoring system)
+ Magnetic Resonance (MR) Room: $1,605,000 (1.5T MR scanner with power injector and monitoring system)
- Equipment Pricing for Select Services and Procedures from the November 15, 2004 final rule (69 FR 66236).
Equipment pricing for certain radiology services was received and supported with sufficient documentation from the ACR. We have accepted the following equipment prices as shown in table 15.
|CAD processor (CPT 76082-83)||$115,000|
|Collimator, cardiofocal set (CPT 78206-07, 78647, 78803, 78807)||8,543|
|Densitometer/DPA (CPT 78351)||150,000|
|Detector Probe (CPT 78455)||19,995|
|IVAC Injection Pump, single channel (CPT 78206-07, 78647, 78803, 78807)||3,000|
|Computer workstation/MRA includes: Includes 2 monitors, volume viewer, advanced x-ray analysis, data export, CD-RW, DICOM Print, 2 GB RAM (CPT 71555, 72159, 72198, 73225, 73727, 74185)||122,000|
We accepted the documentation supplied from the American College of Obstetricians and Gynecologists (ACOG) to price the following equipment for which we assigned an average price from the three sources, as follows:
Ultrasound color Doppler transducers and vaginal probe (CPT 59070, 59074, 76818-19, 76825-28)—$157,897
For CPT 36522, extracorporeal photopheresis, we received and accepted equipment pricing information specific to this procedure, as follows:
Plasma pheresis machine with UV light source (CPT 36522)—$65,000
We received comments from the American Academy of Ophthalmology that included documentation from two sources for the pricing of the EMG botox machine used in CPT code 92265 and we are proposing to accept $16,188 as the average price for this equipment.
• Supply Item for In Situ Hybridization Codes (CPT 88365, 88367, and 88368)
We received comments from the College of American Pathologists (CAP) regarding the number of DNA probes assigned to the in situ hybridization codes, CPT codes 88365, 88367, and 88368. Currently, CPT codes 88365 and 88368 have 1.5 probes assigned, while CPT code 88367 has only .75 of a probe assigned. CAP requested that we also assign 1.5 probes to CPT code 88367, and the comment provided justification for this request. We accept the CAP rationale and propose to change the probe quantity for CPT code 88367 to 1.5.
• Supply Item for Percutaneous Vertebroplasty Procedures (CPT codes 22520 and 22525)
The Society for Interventional Radiology provided us with documentation for the price of the vertebroplasty kit used in CPT codes 22520 and 22525. We propose to accept a new price of $696 for this supply, currently listed as $660.50, a placeholder price from last year's final rule.
• Clinical Labor for G-codes Related to Home Health and Hospice Physician Supervision, Certification and Recertification
It has come to our attention that four G-codes related to home health and hospice physician supervision, certification and recertification, G0179, 180, 181, and 182, are incorrectly valued for clinical labor. These codes are cross-walked from CPT codes 99375 and 99378, which underwent PEAC refinement for the 2004 fee schedule. However, we did not apply the new refinements to these specific G-codes at that time, and are proposing to revise the PE database to reflect the new values.
• Programmers for Implantable Neurostimulators and Intrathecal Drug Infusion Pumps
We received comments from the neurological division of Medtronic Incorporated, the manufacturer of programmers for implantable neurostimulators and intrathecal drug infusion pumps, that the equipment Start Printed Page 45780costs for these programmers are not a direct expense for the physicians performing the programming of these devices. The manufacturer furnishes these devices without cost because the programming device is considered a “necessary, ancillary item to the neurostimulator and drug pump and can only be used to program these devices.” As such, we are proposing to remove the two programmers from the PE database: EQ208 for medication pump from 2 codes (CPT 62367 and 62368) and EQ209 for the neurostimulator from 8 codes (CPT 95970-97979). We are asking for comments from the specialty societies performing these services to let us know if this proposal reflects typical practice.
• Pricing of New Supply and Equipment Items
As part of last year's rulemaking process, we reviewed and updated the prices for equipment items in our PE database and assigned a unique identifier to each equipment item with the first two elements corresponding to one of seven categories. It has come to our attention that we have assigned the same category identifier (ELXXX) for both “lanes/rooms” as well as “laboratory equipment”. To correct this, we are assigning laboratory equipment items the new category identifier “EPXXX”, but the specific numbers associated with each item will remain the same. Supply items were reviewed and updated in the rulemaking process for the 2004 PFS. During subsequent meetings of both the PEAC (now referred to as the PERC) and the RUC, supply and equipment items were added that were not included in the pricing updates. The following two tables (Table 16: Proposed Practice Expense Supply Items and Table 17: Proposed Practice Expense Equipment Items) list the additional supply and equipment items for 2006 and the proposed associated prices that we will use in the PE calculation.
|Supply code||Supply description||Unit||Unit price||*CPT code(s) associated with item||Supply category|
|SJ071||ACD-A anticoagulant||item||6.58||36514, 36515, 36516||Pharmacy, NonRx.|
|SL186||Antibody, flow cytometry (each test)||item||8.5||88184, 88185||Lab.|
|SL187||Balance salt solution (BSS), sterile, 15cc||ml||92265||Lab.|
|SG093||Bandage, Dome paste, 3in||item||14.95||29580||Wound care, dressings.|
|SJ072||Brush, disposable applicator||item||17360||Pharmacy, NonRx.|
|SG094||Cast, padding 3in x 4yd (Webril)||item||1.22||18 codes||Wound care, dressings.|
|SG095||Cast, sole||item||14.74||29355, 29425, 29440||Wound care, dressings.|
|SG096||Casting tape, fiberglass 3in x 4 yds||item||9.2||29065, 29075, 29105, 29365, 29405, 29425||Wound care, dressings.|
|SD216||Catheter, balloon, esophageal or rectal (graded distention test)||item||217.00||91120, 91040||Accessory, Procedure.|
|SK102||Communication book/treatment notebook||item||92510||Office supply, grocery.|
|SB049||Condom, Diapulse, Asepticap||item||0.69||G0329||Gown, drape.|
|SK103||Cork sheet, 1cm x 1cm||item||88355||Office supply, grocery.|
|SD217||Diaphragm fitting set||item||57170||Accessory, Procedure.|
|SJ073||DMV remover||item||92311, 92312, 92313, 92314, 92315, 92317, 92316, 92310||Pharmacy, NonRx.|
|SL188||EM fixative, karnovsky's||ml||0.086||88355, 88356||Lab.|
|SL189||Ethanol, 100%||ml||0.003||88365, 88367, 88368||Lab.|
|SL190||Ethanol, 70%||ml||0.003||88367, 88368, 88365||Lab.|
|SL191||Ethanol, 85%||ml||0.003||88368, 88367, 88365||Lab.|
|SC088||Fistula set, dialysis, 17g||item||36522||Hypodermic, IV.|
|SK104||Foil, aluminum, 10cm x 10cm||item||88355||Office supply, grocery.|
|SL192||Formamide||ml||0.22||88368, 88365, 88367||Lab.|
|SL193||Glycolic acid, 20-50%||ml||17360||Lab.|
|SL194||Hemo-De||ml||0.008||88368, 88367, 88365||Lab.|
|SA089||Kit, boston original system||kit||4.5||92311, 92315, 92310, 92313, 92313, 92314, 92317, 92316||Kit, Pack, Tray.|
|SL195||Kit, FISH paraffin pretreatment||kit||20.85||88367, 88368, 88365||Lab.|
|SL196||Kit, HER-2/neu DNA Probe||kit||105.00||88367, 88368||Lab.|
|SA090||Kit, moulage (implantech)||kit||75.00||19396||Kit, Pack, Tray.|
|SL197||Label for blood tube||item||0.004||36516, 36515, 36514||Lab.|
|SJ074||Lens cleaner||ounce||92342, 92313, 92340, 92341||Pharmacy, NonRx.|
|SL199||Lithium carbonate, saturated||ml||88355, 88356||Lab|
|SH092||LMX 4% anesthetic cream||gm||1.6||96567||Pharmacy, Rx.|
|SJ075||Methoxsalen, 10ml vial||item||49.5||36522||Pharmacy, NonRx.|
|SF044||Micro air burr||item||28755, 28750, 28740, 28760||Cutters, closures, cautery|
|SC089||Needle, Vacutainer||item||0.32||36514, 36515, 36516||Hypodermic, IV.|
|SJ076||Nose pads||item||92370||Pharmacy, NonRx.|
|SG092||Packing, gauze, plain, 1 in (5 yd uou)||item||57180||Wound care, dressings.|
|SJ077||Screws, spectacles||item||0.14||92370||Pharmacy, NonRx.|
|SL200||Sodium bicarbonate spray, 8 oz||item||17360||Lab.|
|Splint, fiberglass, 4in x 15in||item||16.5||29125||Wound care, dressings.|
|SL201||Stain, eosin||ml||0.044||88356, 88355||Lab.|
|SJ078||Temple tips||pair||1.00||92370||Pharmacy, NonRx.|
|SL202||Tissue conditioner, coesoft||item||42280||Lab.|
|SA091||Tray, scoop, fast track system||item||750.00||31730||Kit, Pack, Tray.|
|SC090||Tube, gastrostomy||item||43760||Hypodermic, IV.|
|SC091||Vacutainer||item||5.9||36514, 36515, 36516||Hypodermic, IV.|
|Start Printed Page 45781|
|SL203||Vial, 10 ml, plastic (−70 degree storage)||item||1.016||88355||Lab.|
|SL204||Vial, kimble sample, non sterile glass, 20 ml||item||0.708||88356, 88355||Lab.|
|*CPT codes and descriptions only are copyright 2004 American Medical Association. All Rights Reserved. Applicable FARS/DFARS apply.|
|Equip code||Equipment description||Life||Unit price||*CPT code(s) associated with item||Equipment category|
|EQ269||Blood pressure monitor, ambulatory||5||3000||93786, 93784, 93788||OTHER EQUIP.|
|EP045||Chamber, hybridization||7||7107||88368, 88365, 88367||LABORATORY.|
|EP046||Freezer, ultradeep (−70 degrees)||10||16552||88355||LABORATORY.|
|Light assembly, photophoresis||36522||OTHER EQUIP.|
|EP048||Microfuge, benchtop||7||2410||88368, 88367, 88365||LABORATORY.|
|0EQ270||Plasma pheresis machine w/ UV light||6||65000||36522||OTHER EQUIP.|
|EP049||Oven, isotemp (lab)||10||2383||88368, 88367, 88365||LABORATORY.|
|EQ271||Radiuscope||7||92315, 92317, 92316, 92310, 92314, 92313, 92312, 92311||OTHER EQUIP.|
|EQ272||Sleep diagnostic system, attended||5||46799||95805||OTHER EQUIP.|
|EP051||Slide warmer||7||568||88368, 88365, 88367||LABORATORY.|
|EP053||Wash assistant, FACS||7||38000||88184||LABORATORY.|
|EP054||Water bath, FISH procedures (lab)||7||2111||88367, 88365||LABORATORY.|
|*CPT codes and descriptions only are copyright 2004 American medical Association. All Rights Reserved. Applicable FARS/DFARS apply.|
- Supply and Equipment Items Needing Specialty Input
We have identified certain supply and equipment items for which we were unable to verify the pricing information (see Table 18: Supply Items Needing Specialty Input for Pricing and Table 19: Equipment Items Needing Specialty Input for Pricing). During last year's rulemaking, we listed both supply and equipment items for which pricing documentation was needed from the medical specialty societies and, for many of these items, we received sufficient documentation in the form of catalog listings, vendor websites, and invoices. We have accepted the documented prices for many of these items and have already incorporated them into the PE database. The items listed on Tables 18 and 19 represent the outstanding items from last year and new items added from the RUC recommendations. Therefore, we are requesting that commenters, particularly specialty organizations, provide pricing information on items in these tables along with documentation to support the recommended price.
|Code||2005 Description||Unit||Unit Price||Primary specialties associated with item||*CPT code(s) associated with item||Status of item|
|SK105||Blood pressure recording form, average||Item||0.31||Cardiology||93784, 93786, 93788||See Note A.|
|SJ072||Brush, disposable applicator||Item||Dermatology||17360||See Note A.|
|SK102||Communication book/treatment notebook||Item||Audiology, ENT||92510||See Note A.|
|SK103||Cork sheet, 1 cm x 1 cm||Item||Pathology||88355||See Note A.|
|SJ073||DMV remover||Item||Optometry, Opthalmology||92310-92317||See Note A.|
|SD217||Diaphragm fitting set||Item||Ob-gyn||57170||See Note A.|
|SD053||Electrode, EEG, tin cup (12 pack uou)||Item||Neurology||95812-13, 95816, 95819, 95822, 95950, 95954, 95956||See Note A.|
|SC088||Fistula set, dialysis, 17g||Item||Dermatology||36522||See Note A|
|SK104||Foil, aluminum, 10 cm x 10 cm||Item||Pathology||88355||See Note A.|
|SL193||Glycolic acid, 20-50%||ml||Dermatology||17360||See Note A.|
|SA090||Kit, moulage (implantech)||Item||75.00||Ob-Gyn||19396||See Note A.|
|SJ074||Lens cleaner||oz||Optometry, Opthalmology||92313, 92341, 92342||See Note A.|
|Start Printed Page 45782|
|SL199||Lithium carbonate, saturated||ml||Pathology||88355, 88356||See Note A.|
|SF044||Micro air burr||Item||Podiatry, Orthopedics||28740, 28750, 28755, 28760||See Note A.|
|SJ076||Nose pads||Item||Optometry||92370||See Note A.|
|SG092||Packing, gauze, plain, 1 in (5yd uou)||Item||Ob-Gyn||57180||See Note A.|
|SH087||Pentagastrin||ml||Gastroenterology||91052||See Note A.|
|SD140||Pressure bag||Item||8.925||Cardiology||93501, 93508, 93510, 93526||See Note A.|
|SL119||Sealant spray||oz||Radiation Oncology||77333||See Note A.|
|SL200||Sodium bicarbonate spray, 8 oz||Item||Dermatology||17360||See Note A.|
|SL203||Tissue conditioner, coesoft||Item||Maxillofacial Surgery ENT||42280||See Note A.|
|SA091||Tray, scoop, fast track system||Tray||750.00||ENT||31730||See Note A.|
|SD213||Tubing, sterile, non-vented (fluid administration)||Item||1.99||Cardiology||93501, 93508, 93510, 93526||See Note A.|
|*CPT codes and descriptions only are copyright 2004 American Medical Association. All Rights Reserved. Applicable FARS/DFARS apply.|
|Note A: Additional information required. Need detailed description (including kit contents), source, and current pricing information (including pricing per specified unit of measure in database).|
|Code||2005 Description||Price||Primary specialties associated with item||* CPT code(s) associated with item||Status of item|
|EQ269||Ambulatory blood pressure monitor||3,000.00||Cardiology||93784, 93786, 93788||See Note A.|
|EQ089||cortical bipolar-biphasic stimulating equipment||Neurosurger, neurology||95961, 95962||See Note A.|
|EQ091||Cryo-thermal unit||Anesthesia||64620||See Notes A and C.|
|ER025||densitometry unit, whole body, SPA||22,500.00||Radiology||78350||See Notes A and C.|
|EQ100||dialysis access flow monitor||10,000.00||Nephrology||90940||See Note A.|
|EQ101||diathermy, microwave||anesthesia, GP, podiatry||97020||See Notes A and C.|
|EQ008||ECG signal averaging system||8,250.00||Cardiology, IM||93278||See Note A.|
|EQ112||electromagnetic therapy machine||25,000.00||Physical therapy||G0329||See Note A.|
|EQ122||fetal monitor software||35,000.00||ob-gyn, radiology||76818, 76819||See Note A.|
|ER029||film alternator (motorized film viewbox)||27,500.00||Radiology||329 codes||See Notes A and B.|
|EQ124||generator, constant current||950.00||Neurology, NP||95923||See Note A.|
|EQ131||hyperbaric chamber||125,000.00||FP, IM, EM||99183||See Note A.|
|ER036||hyperthermia system, ultrasound, intracavitary||250,000.00||radiation oncology||77620||See Note A.|
|Light assembly, photopheresis||Dermatology||36522||See Note A.|
|ER045||orthovoltage radiotherapy system||140,000.00||radiation oncology||77401||See Note A.|
|ER008||OSHA ventilated hood||5,000.00||radiation oncology||77334||See Notes A and B.|
|plasma pheresis machine w/UV light source||37,900.00||radiology, dermatology||36481, G0341||See Note A.|
|EQ208||Programmer, for implanted medication pump (spine)||1,975||anesthesiology, physical medicine||62367 and 62368||See Note D.|
|EQ209||Programmer, neurostimulator (w-printer)||1,975||neurology, neuro surgery, anesthesiology||95970, 95971, 95972, 95973, 95974, 95975, 95978, 95979||See Note D.|
|EQ212||pulse oxymetry recording software (prolonged monitoring)||3,660.00||Pulmonary disease, IM||94762||See Note A.|
|EP055||Slide Stainer||9,291.00||Pathology||88184||See Note A.|
|EQ271||Radiuscope||ophthalmology, optometry||92310—92317||See Note A.|
|EQ220||remote monitoring service (neurodiagnostics)||9,500.00||Neurology||95955||See Note A.|
|EQ221||review master||23,500.00||pulmonary disease, neurology||95805, 95807-11, 95816, 95822, 95955-56||See Note A.|
|Start Printed Page 45783|
|EF022||table, cystoscopy||Urology||52204-24, 52265-75, 52310-17, 52327-32||See Note A.|
|EQ253||ultrasound, echocardiography digital acquisition (Novo Microsonics, TomTec)||29,900.00||ob-gyn, cardiology, pediatrics||76825-28, 93303-12, 93314, 93320, 93325, 93350||See Note A.|
|EQ261||vacuum cart||anesthesia||64620||See Notes A and C|
|EP054||Wash assistant, FACS||38,000.00||pathology||88184||See Note A.|
|* CPT codes and descriptions only are copyright 2004 American Medical Association. All Rights Reserved. Applicable FARS/DFARS apply.|
|A. Additional information required. Need detailed description (including system components as specified), source, and current pricing information.|
|B. Proposed deletion as indirect expense.|
|C. Item may no longer be available.|
|D. Proposed deletion as supplied to physicians at no cost.|
B. Geographic Practice Cost Indices (GPCIs)
[If you choose to comment on issues in this section, please include the caption “GPCIs” at the beginning of your comments.]
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. While requiring that the practice expense 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(1)(E) of the Act, as amended by section 412 of the MMA, established a floor of 1.0 for the work GPCI for any locality where the GPCI would otherwise fall below 1.0. This 1.0 work GPCI floor was used for purposes of payment for services furnished on or after January 1, 2004 and before January 1, 2007. This 1.0 floor will remain in effect in 2006.
Section 602 of the MMA added section 1848(e)(1)(G) of the Act, which sets a floor of 1.67 for the work, practice expense, and malpractice GPCIs for services furnished in Alaska between January 1, 2004 and December 31, 2005 for any locality where the GPCI would otherwise fall below 1.67. Effective January 1, 2006, this provision will end and the proposed 2006 GPCIs for Alaska will be 1.017 for physician work, 1.103 for PE, and 1.029 for malpractice.
In the August 15, 2004 PFS rule proposed rule, we discussed the issue of changes to the GPCI payment localities (69 FR 47504). In that proposed rule, we noted that we look for the support of a State medical society as the impetus for changes to existing payment localities. Because the GPCIs for each locality are calculated using the average of the county-specific data from all of the counties in the locality, removing high-cost counties from a locality will result in lower GPCIs for the remaining counties. Therefore, because of this redistributive impact, we have refrained, in the past, from making changes to payment localities unless the State medical association provides evidence that any proposed change has statewide support.
In the November 15, 2004 PFS final rule, we discussed a “placeholder” proposal submitted to us in comments received from the California Medical Association (CMA) (69 FR 66263). The proposal described in CMA's comment would move any county with a county-specific geographic adjustment factor (GAF) that is at least 5 percent greater than its locality GAF to its own individual county payment locality. (The GAF is the weighted average of the GPCIs for each locality. The GPCIs are weighted by the same weighting factors applied to physician work, practice expense, and malpractice in the Medicare Economic Index (MEI) used to update the CF.) However, in order to minimize reductions in the 2005 GAF of the Rest of California locality that would otherwise result from removal of the data for these high-cost counties, the CMA proposed maintaining Rest of California locality payments at the 2004 level by redistributing payments from the existing (and newly created) payment localities.
On October 21, 2004, the CMA Board of Trustees voted without objection to support the placeholder proposal with the amendment that the redistribution of payments designed to maintain 2004 levels of payment for the Rest of California payment locality would occur for two years only, in 2005 and 2006. However, we determined that we do not have the authority under section 1848(e) of the Act to modify the GPCIs of some localities in a State solely in order to offset higher payments to other localities.
After the publication of the November 15, 2004 PFS final rule, the CMA submitted a proposal for a demonstration project that was the same as its proposal discussed in that final rule. There were several aspects of the proposal that made implementation problematic for us under our demonstration authority. For example, physicians whose payments would decrease under the demonstration could challenge the validity of a new locality configuration established without providing them the opportunity to comment through the regulatory process (as is our normal process for making locality changes). In particular, physicians who are not members of county medical societies or the CMA did not agree to participate in the proposed demonstration, and some of them may have challenged its implementation.
Also, the Medicare PFS currently uses identical GPCIs to pay for services provided in an area by both physicians and nonphysician providers such as podiatrists, optometrists, physical therapists, and nurse practitioners (NPs). Changing the locality configuration for medical doctors and doctors of osteopathic medicine, but not for other professionals, would have some peculiar results that were not addressed in the CMA proposal. For example, in areas where the GPCIs would be reduced under the demonstration, some practitioners not Start Printed Page 45784participating under the demonstration (such as physical therapists) could be paid more than physicians in the same locality. Conversely, where the GPCIs would be increased under the demonstration, there would likely be complaints from the nonphysician practitioners (NPP) not included in the demonstration.
Nonetheless, we do recognize the potential impact of wide variations in the practice costs within a single payment locality. In last year's PFS final rule, we noted that we received many comments from physicians and individuals in Santa Cruz County expressing the opinion that Santa Cruz County should be removed from the Rest of California payment locality and placed in its own payment locality. The county-specific GAF of Santa Cruz County is 10 percent higher than the Rest of California locality GAF. Santa Cruz County is adjacent to Santa Clara County and San Mateo County. Santa Clara and San Mateo Counties have two of the highest GAFs in the nation. The published 2006 GAF for the Rest of California payment locality is 24 percent less than the GAFs of Santa Clara and San Mateo.
Sonoma County is also part of the Rest of California payment locality. The county-specific GAF of Sonoma County is 8 percent higher than the Rest of California locality GAF. Sonoma County is bordered by Marin County and Napa County. Using published 2006 values, the payment locality that includes Marin and Napa counties has the fourth highest GAF in the nation, and is 13 percent higher than the GAF of the Rest of California payment locality.
We recognize that changing demographics over time may lead to payment disparities in particular circumstances. We rely upon State medical societies to identify and resolve these disparities because there are redistributive impacts within a State when new localities are created (or existing ones reconfigured). Yet we also recognize that CMS is ultimately responsible for establishing fee schedule areas. We have considered a number of alternative locality configurations including—
- The CMA approach which calculates county-specific GAFs, and compares them to their locality GAF and designating any county with a GAF at least 5 percent higher than its locality GAF as a new locality;
- An approach that sorts counties by descending GAFs and compares the highest county to the second highest county. If the difference between these two counties is 5 percent or less, they are included in the same locality. The third highest county GAF is then compared to the highest county GAF and so on, until the next county GAP is not within 5 percent of the highest county GAF. At that point, the county GAF that is more than 5 percent lower than the highest county GAF becomes the comparison for the next lowest county GAF, to create a second locality. This process is repeated down throughout all of the counties;
- An approach that compares the county with the highest GAF to the statewide average, removing counties that are 5 percent or more than the statewide average; and
- An approach that uses Metropolitan Statistical Ares defined by the Office of Management and Budget.
However, because these reconfigurations would result in significant redistributions across most California counties, we are simply proposing that Santa Cruz and Sonoma Counties (the two counties with the most significant disparity between the assigned Rest of California GAF and the county-specific GAF) be removed from the Rest of California payment locality and that each would be its own payment locality. We invite comments regarding this proposal and possible alternative approaches to address this issue. We are particularly interested in whether the CMA supports this approach.
If implemented, our proposal would change the 2006 GPCIs and GAFs for Santa Cruz County, Sonoma County and the Rest of California. The Santa Cruz GAF would be 1.119, a value 10 percent above the 2005 Rest of California GAF. The Sonoma County GAF would be 1.098, a value 8 percent above the 2005 Rest of California GAF. The Rest of California GAF would be 1.011, a value 0.01 percent below the 2005 Rest of California GAF. We would note that the 2006 Rest of California GAF published in the November 15, 2004 PFS final rule (69 FR 66695) was 1.017. This represents the second year of the transition to the new GPCIs and GAFs incorporating updated data (69 FR 66260). The proposed 2006 Rest of California GAF of 1.011 fully reflects incorporating the updated data.
The issue of payment locality designation in light of changing economic and population trends will be of importance to us for the foreseeable future. We are interested in other solutions to the problem, and will work with anyone who presents an idea or makes a suggestion that will help resolve the problems associated with the designation and revision of payment localities.
C. Malpractice Relative Value Units (RVUs)
[If you choose to comment on issues in this section, please include the caption “Malpractice RVUs” at the beginning of your comments.]
As discussed in the Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2005 final rule, published November 15, 2004 (69 FR 66236), we revised the resource-based malpractice expense RVUs using specialty-specific malpractice premium data because those data represent the actual malpractice expense to the physician and are widely available. Based upon discussions with the medical community, we concluded that the primary determinants of malpractice liability costs are physician specialty, level of surgical involvement, and the physician's malpractice history.
Malpractice premium data were collected for the 20 Medicare physician specialties with the largest share of malpractice RVUs. We collected data based on premiums for a $1 million/$3 million mature claims-made policy (a policy covering claims made, rather than services provided during the policy term). We collected premium data from all 50 States, Washington, DC, and Puerto Rico. Data were collected from commercial and physician-owned insurers and from joint underwriting associations (JUAs). The premium data collected represented at least 50 percent of total physician malpractice premiums paid in each State. For a more detailed description of the methodology utilized in the development of resource based malpractice RVUs, refer to the November 15, 2004 final rule.
1. Five Percent Specialty Threshold
As discussed in the November 15, 2004 final rule, we are concerned that the malpractice RVUs could be inappropriately inflated or deflated due to aberrant data based upon incorrectly reported specialty classifications. Therefore, we examined the impact of establishing a minimum percentage threshold for any procedure performed by any specialty before the risk factor of that specialty is included in the malpractice RVU calculation of a particular code.
We conducted an analysis excluding data for any specialty that performs less than 5 percent of a particular service or procedure from the malpractice RVU calculation for that service or procedure. The purpose of applying the minimum threshold was to identify and remove from the data specialties listed infrequently as performing a certain procedure. The assumption was that the Start Printed Page 45785infrequent instances of these specialties in our data represent aberrant occurrences and removing the associated risk factor from the malpractice RVU calculation would improve accuracy and stability of the RVUs.
We excluded evaluation and management (E&M) services from the analysis. Medicare claims data show that E&M codes are performed by virtually all physician specialties. Therefore, in the case of E&M codes, it is likely that even the low relative percentages of performance by some specialties would accurately represent the provision of the service by those specialties.
For all services other than E&M services, we believe removing data attributable to specialties that occur in our data less than 5 percent of the time would most appropriately balance the objective to identify aberrant data (claims with a specialty identified that is highly unlikely to have performed a particular procedure) while including specialties that perform a procedure a small percentage of the time. We believe a higher threshold would result in the removal of data for specialties actually performing the procedure, while a lower threshold would likely fail to remove some aberrant data, particularly for low-volume codes (fewer than 100 occurrences, where each claim represent 1 or more percentage points).
The overall impact of removing the risk factor for specialties that occur less than 5 percent of the time in our data for a procedure is minimal. There is no impact on the malpractice RVUs for over 5,280 codes, and there is an impact of less than 1 percent on the malpractice RVUs for over 1,300 additional codes. Only 16 codes decrease by at least 0.1 RVUs, with the biggest decrease being a negative 0.28 impact on the malpractice RVU for CPT code 17108, Destruction of skin lesions, from a current RVU of 0.82 to a proposed RVU of 0.54.
Conversely, there are 219 codes for which RVUs increase by at least 0.1, the largest increase being a positive 0.81 RVU increase for CPT code 61583, Craniofacial approach, skull, from a current RVU of 8.32 to a proposed RVU of 9.13. Among codes whose malpractice RVUs would increase under our proposal, 646 have increases of less than 1 percent. The impact analysis section of this proposed rule examines the effects of this proposed change by specialty.
2. Specialty Crosswalk Issues
Malpractice insurers generally use five-digit codes developed by the Insurance Services Office (ISO), an advisory body serving property and casualty insurers, to classify physician specialties into different risk classes for premium rating purposes. ISO codes classify physicians not only by specialty, but in many cases also by whether or not the specialty performs surgical procedures. A given specialty could thus have two ISO codes, one for use in rating a member of that specialty who performs surgical procedures and another for rating a member who does not perform surgery.
Medicare uses its own system of specialty classification for payment and data purposes. Therefore, to calculate the malpractice RVUs, it was necessary to map Medicare specialties to ISO codes and insurer risk classes. For some physician specialties, NPP, and other entities (for example, IDTFs) paid under the PFS, there was not a clear ISO assignment available. In these instances, we crosswalked these unassigned specialties to the most approximate existing ISO codes and risk classes based upon their relationship to those specialties for which we did have clear ISO crosswalks. The crosswalks we used to establish the 2005 malpractice RVUs were displayed in the November 15, 2004 PFS final rule (69 FR 66268). In most instances, when an appropriate crosswalk could not be identified we utilized the average for all physicians category, which is a weighted average of all specialty premium data.
Differences among specialties in malpractice premiums are a direct reflection of the malpractice risk associated with the services performed by a given specialty. The relative differences in national average premiums between various specialties can be expressed as a specialty risk factor. These risk factors are an index calculated by dividing the national average premium for each specialty by the national average premium for nephrology, which is the specialty with the lowest average premium among the 20 specialties for which data were collected.
We stated in the November 15, 2004 PFS final rule that we would continue to work with the AMA RUC's Professional Liability Insurance (PLI) Workgroup to address any potential inconsistencies that may still exist in our methodology. Based upon this commitment, the RUC PLI Workgroup has forwarded various recommendations for our consideration. The RUC developed its recommendations based upon comments submitted to them by physician specialty organizations.
The RUC PLI Workgroup provided all specialty societies and the HCPAC with the opportunity to submit comments on the crosswalks listed in the November 15, 2004 final rule. Based on the comments, the Workgroup believes the risk factors assigned to certain professions overestimate the insurance premiums for these professions. We crosswalked clinical psychology, licensed clinical social work, and psychology to the nonsurgical risk factor for psychiatry (risk factor of 1.11). We crosswalked occupational therapy to occupational medicine (risk factor of 1.11). The PLI Workgroup recommends crosswalking these professions to allergy and immunology, with a risk factor of 1.00 (although the Workgroup suggests the actual risk factor for these professions may be below the risk factor for allergy and immunology and encourages the collection of malpractice premium data for these professions).
The Workgroup also believes that opticians and optometrists should be assigned this risk factor of 1.0, as opposed to being crosswalked to ophthalmology (nonsurgical risk factor of 1.24, surgical risk factor of 2.31). The Workgroup further suggests that it would be more appropriate to assign the risk factor of 1.0 to the chiropractic and physical therapy specialties rather than their current crosswalk to physical medicine and rehabilitation (nonsurgical and surgical risk factors of 1.26). The Workgroup felt that these specialties will not incur PLI premiums in excess of the current base premiums associated a risk factor of 1.0.
We examined the risk factors assigned to these professions, and agree that the PLI associated with them should reflect the lowest physician specialty risk factor (absent actual premium data for these professions). Therefore, we propose assigning these specialties a risk factor of 1.00. We invite comment from representatives of the affected specialties and others regarding the appropriateness of this proposal, as well as other specialty crosswalks and suggestions for reliable sources of actual malpractice premium data for nonphysician groups.
The RUC PLI Workgroup also felt that a number of professions that were assigned to the average for all physicians risk factor should be removed from the calculation of malpractice RVUs altogether. The PLI Workgroup believes that it would be more appropriate to exclude data from the following professions: Certified clinical nurse specialist (CNS), clinical laboratory, multispecialty clinic or group practice, NP, physician assistant (PA), and physiological laboratory (independent). In calculating the malpractice RVUs applicable for 2005, Start Printed Page 4578634 Medicare specialties were excluded from the calculation because they could not be otherwise assigned or crosswalked. The RUC recommends the above specialties and professions be similarly excluded. We agree and propose to establish malpractice RVUs based upon the mix of specialties exclusive of the above specialties and professions.
The PLI Workgroup also made the following recommendations that we are not accepting: Certified registered nurse anesthetists (CRNAs) should be crosswalked to anesthesiology which is 2.84 rather than to the “all physicians” which is 3.04; colorectal surgeons should be crosswalked to general surgery (the current risk factor is based on actual data); and gynecologists and oncologists (currently 5.63) should be crosswalked to surgical oncology (currently 6.13). We believe the current crosswalks we are using for these specialties appropriately reflect the types of services they provide. However, we would welcome comments on these proposals as well.
3. Cardiac Catheterization and Angioplasty Exception
In response to a comment received on our proposed methodology at the time, in the November 2, 1999 final rule (64 FR 59384), we applied surgical risk factors to the following cardiology catheterization and angioplasty codes: 92980 to 92998 and 93501 to 93536. This exception was established because these procedures are quite invasive and more akin to surgical than nonsurgical procedures.
In the November 15, 2004 final rule (69 FR 66275), we discussed changes in those codes that would fall under the exception. Based on a recommendation by the RUC, we revised the list of codes to which this exception applies. The RUC's PLI Workgroup requests that we correct a clerical error made by the RUC in identifying those codes that would fall under the exception. We agree with the RUC PLI Workgroup recommendation and propose that the following CPT codes be added to the existing list of codes under the exception: 92975; 92980 to 92998; and 93617 to 93641.
4. Dominant Specialty for Low-Volume Codes
The final recommendation from the PLI Workgroup is to use the dominant specialty approach for services or procedures with fewer than 100 occurrences. The Workgroup supplied a list of 1,844 services for our review and recommends that we utilize only the dominant specialty in calculating the final malpractice RVUs for these services. The PLI Workgroup worked in conjunction with various specialty organizations to identify the dominant specialty that performs each service.
We recognize and appreciate the efforts of the Workgroup to review these codes. We have considered the data that was presented to us and the argument for using the dominant specialty to establish the malpractice RVUs for these 1,844 codes.
We have previously registered our concerns with the dominant specialty approach. We believe that basing payment on all specialties that perform a particular service ensures that the actual PLI costs of all specialties are included in the calculation of the malpractice RVUs. Therefore, we do not believe it would appropriate, even for these low-volume services, to include only the dominant specialty if other specialties regularly provide the service.
However, as noted previously in our proposal to remove data for specialties that make up less than 5 percent of the total volume for that service, we also recognize the need to take steps to minimize the risk that aberrant data would inappropriately skew the malpractice RVU calculation. We believe that, for most services, the proposal to remove specialties making up less than 5 percent of the occurrences will ensure that aberrant data are removed. Yet for those services with especially low volumes, the malpractice RVUs may be especially susceptible to the influence of aberrant data in only a very few cases (but more than 5 percent, that is, 2 cases in a service with 20 occurrences). We will continue to evaluate ways to ensure these low-volume services are not skewed by a few occurrences of aberrant data, but we are concerned that including only the dominant specialty performing these services would exclude data from other specialties that are actually performing them.
We are not proposing to adopt this methodology at this time. We would note that low volume procedures or services are not necessarily performed by only one specialty. As noted above, we would distinguish between excluding data presumed to be erroneous from data reflecting utilization by specialties that perform a service but are not the dominant specialty. However, we acknowledge that there may be instances where aberrant data exist that would not be identified and removed by our proposed 5 percent threshold discussed previously. We will continue to work with the RUC PLI Workgroup examine this issue in the future.
D. Medicare Telehealth Services
[If you choose to comment on issues in this section, please include the caption “TELEHEALTH” at the beginning of your comments.]
1. Requests for Adding Services to the List of Medicare Telehealth Services
Section 1834(m) of the Act defines telehealth services as professional consultations, office and other outpatient visits, and office psychiatry services identified as of July 1, 2000 by CPT codes 99241 through 99275, 99201 through 99215, 90804 through 90809, and 90862. In addition, the statute requires 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 or deleting services to 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 office and other outpatient visits, consultation, 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 psychiatric diagnostic interview examination and ESRD services with 2 to 3 visits per month and 4 or more visits per month to the list of Medicare telehealth services (although we require at least one visit a month by a physician, CNS, NP, or PA to examine the vascular access site). Start Printed Page 45787
Requests for adding services to the list of Medicare telehealth services must be submitted and received no later than December 31st of each CY to be considered for the next proposed rule. For example, requests submitted before the end of CY 2004 are considered for the CY 2006 proposed rule. For more information on submitting a request for an addition to the list of Medicare telehealth services, visit our Web site at http://www.cms.hhs.gov/physicians/telehealth.
2. Submitted Requests for Addition to the List of Telehealth Services
We received the following public requests for additional approved services in CY 2004: (1) Diabetes outpatient self-management training services and medical nutritional therapy; and (2) modification of the definition of an interactive telecommunications system for purposes of furnishing a telehealth service. The following is a discussion of the requests submitted in CY 2004.
a. Medical Nutrition Therapy and Diabetes Self-Management Training
The American Telemedicine Association (ATA) and an individual practitioner submitted a request to add medical nutrition therapy (MNT) (as represented by HCPCS codes G0270, G0271 and 97802 through 97804) and diabetes outpatient self-management training services (DSMT) (as defined by HCPCS codes G0108 and G0109). The requestors believe that MNT and DSMT are similar to the services currently on the list of Medicare telehealth services and, therefore, should be added to the list of Medicare telehealth services.
Section 1861(s)(2) of the Act authorizes coverage and payment of MNT for certain beneficiaries who have diabetes or a renal disease. Individual MNT typically involves obtaining a nutrition history, counseling, the formulation of a treatment plan, implementation of a treatment plan through discussion with the patient, and follow-up with the patient. These components would be comparable to E&M office or other outpatient visits which are currently Medicare telehealth services. Additionally, the interactive dynamic of individual MNT is similar in nature to an E&M office visit because the nutrition professional is able to have a direct one-on-one discussion with the beneficiary and the beneficiary is able to ask immediate questions regarding his or role in following the treatment plan. Therefore, we propose to add individual MNT as represented by HCPCS codes G0270, 97802 and 97803 to the list of Medicare telehealth services.
Practitioners Who May Furnish Medical Nutrition Therapy Services
Section 1834(m) of the Act specifies that practitioners defined in section 1842(b)(18)(C) of the Act may receive payment for furnishing telehealth services at the distant site. Effective January 1, 2002, section 1842(b)(18)(C) of the Act includes a registered dietitian or nutrition professional as a Medicare practitioner. As a condition of Medicare Part B payment, the statute allows only a registered dietitian or nutrition professional to furnish medical nutrition therapy services (subject to referral made by the treating physician) for the purpose of managing diabetes or renal disease. Medicare practitioners who are not a licensed or certified registered dietitian or other nutrition professional, as defined in § 410.134, may not furnish and receive payment for MNT services.
We propose to revise § 410.78 and § 414.65 to include individual MNT as a Medicare telehealth service. Additionally, since a certified registered dietitian or other nutrition professional are the only practitioners permitted by law to furnish MNT, we propose to revise § 410.78 to add a registered dietitian and nutrition professional as defined in § 410.134 to the list of practitioners that may furnish and receive payment for a telehealth service.
Group Medical Nutritional Therapy (MNT)
We believe that 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 the current list of Medicare telehealth services. We do not currently have other group counseling services as telehealth services and do not believe that group MNT falls within the first category of requests. Category 1 requests must be similar to the current list of Medicare telehealth services in order to be added to the list.
For instance, office and other outpatient visits, consultation and the current office psychiatry services involve an individual professional encounter between the physician or practitioner and beneficiary. Through direct discussion with the beneficiary, the physician or practitioner provides patient counseling regarding diagnostic test results, recommendations for further studies, prognosis, treatment options, and other follow-up instructions. In this interactive dynamic, the patient is able to ask immediate questions and the physician or practitioner is able to discern whether the beneficiary understands his or her responsibilities in following the treatment plan. However, group therapy services do not allow for the same degree of direct patient interaction as compared with individual therapy services.
As such, we were not able to conclude that the roles of and interaction among the physician or practitioner at the distant site and beneficiary at the originating site are similar to the existing Medicare telehealth services. Furthermore, the requestors did not submit comparative analyses illustrating that the use of a telecommunications system is an adequate substitute for the face-to-face delivery of group MNT services (which is a requirement for category 2). Therefore, we propose to not add group MNT (as described by HCPCS codes G0271 and 97804) to the list of Medicare telehealth services. However, we invite specific public comments on whether the use of an interactive telecommunications system is clinically adequate for furnishing group MNT. Additionally, if the requestors were to submit data showing that the use of a telecommunications system does not change the diagnosis or treatment plan as compared to face-to-face delivery, we would consider approving group MNT as a category 2 service.
Diabetes Outpatient Self-Management Training Services (DSMT)
The DSMT benefit, described at section 1861(qq) of the Act, is a comprehensive diabetes training program (one component of which is MNT). We consider DSMT as a category 2 request because the major portion of DSMT is furnished in the group setting and, as explained above, we believe group therapy has a different interactive dynamic than the current list of Medicare telehealth services. Additionally, the statute requires the training content for DSMT to include teaching beneficiaries the skills necessary for the self-administration of injectable drugs. We question the merits of providing beneficiary training to administer insulin injections via telehealth. For example, teaching a patient how to inject insulin requires consideration and instruction regarding factors such as the type of needle to be used, the anatomic location of the injection, the injection technique, and possible complications of the injection, all of which we believe, absent evidence to the contrary, require the physical presence of the teaching practitioner. Start Printed Page 45788
These components are typically not part of the services currently on the list of telehealth services and the requestor did not provide any comparative analyses illustrating that the use of a telecommunications system is an adequate substitute for the in-person, collaborative, skill-based training required for DSMT services. Therefore, we propose to not add DSMT (as described by HCPCS codes G0108 and G0109) to the list of Medicare telehealth services.
b. Definition of an Interactive Telecommunications System
The Medical College of Georgia (MCG) requested that we modify our definition of an interactive telecommunications system for purposes of furnishing a telehealth consultation. The MCG uses an interactive audio and one-way, real-time video telecommunications system, over an internet-based protocol, to furnish consultations for acute ischemic stroke patients. The physician at the distant site (typically a neurologist) can see the patient; however, the patient and physician (or practitioner) in the emergency room who is with the patient cannot see the neurologist. Under this model, the neurologist at the distant site examines the stroke patient in real-time video and reviews CT scans and other critical laboratory data to assess the stroke patient's suitability for tissue-type plasminogen activator (tPA) treatment. The requestor noted that the use of tPA treatment is restricted to 3 hours after onset of stroke, and argued that rapid evaluation by a neurologist for stroke patients located in outlying rural hospitals is crucial. The requestor believes that the use of an interactive two-way video system does not provide added benefit to the consulting neurologist, would be unnecessarily cumbersome, and noted that the use of one-way video currently prohibits billing as a telehealth consultation.
As noted previously, consultations are included on the list of approved telehealth services. However, as a condition of payment, § 410.78 of the regulations requires the use of an interactive two-way audio and video telecommunications system to furnish a telehealth consultation. The use of one-way video does not meet the current interactive telecommunications system requirements for telehealth services and, therefore, the requestor cannot bill for a consultation service based on the model described above.
We have concerns with modifying our definition of an interactive telecommunications system to permit one-way video in place of an interactive two-way video system. The use of an interactive audio and video telecommunications system permitting two-way real-time interaction between the physician or practitioner at the distant site and the beneficiary and telepresenter (if necessary) at the originating site is a substitute for the face-to-face examination requirements of a consultation under Medicare.
We are concerned that the use of one-way video may not be clinically adequate for the evaluation of certain types of patients. Since telehealth services are intended as a substitute for services that traditionally require a face-to-face interaction between a physician (or practitioner) and a patient, we believe that the use of a two-way video communication is much less of a departure from this standard than a one-way video communication, because the face-to-face interaction between a physician and a patient allows two-way interactive communication, both verbally and physically. We are concerned that, without two-way video, communication of many subtle but important nuances of the interaction between the physician at the distant site and patient or clinical staff at the originating site would be lost, leading to reduced diagnostic accuracy and the possibility of unfavorable medical outcomes.
However, we recognize that a timely neurological evaluation is critical for determining suitability for tPA treatment. Given the potential for adverse affects, such as the increased risk of bleeding, the decision to administer tPA (or not to administer) is crucial in determining the course of management for the stroke patient. Therefore, we are currently reviewing the definition of an interactive telecommunications system and request specific public comments regarding the added clinical value of two-way interactive video as compared to one-way video for the purpose of furnishing telehealth services. We are also interested in receiving comments as to whether an interactive audio and one-way video telecommunications system that permits the physician at the distant site to examine the patient in real-time is clinically adequate for a broad range of specialty consultations.
c. Definition of a Telehealth Originating Site
Section 418 of the MMA required the Health Resources Services Administration (HRSA) within the Department of Health and Human Services (HHS), in consultation with CMS, to conduct an evaluation of demonstration projects under which SNFs, as defined in section 1819(a) of the Act, are treated as originating sites for Medicare telehealth services. The MMA also required HRSA to submit a report to the Congress that would include recommendations on “mechanisms to ensure that permitting a SNF to serve as an originating site for the use of telehealth services or any other service delivered via a telecommunications system does not serve as a substitute for in-person visits furnished by a physician, or for in-person visits furnished by a PA, NP or CNS, as is otherwise required by the Secretary.” This report is currently under development.
The MMA provides us with the authority to include a SNF as a Medicare telehealth originating site under section 1834(m) of the Act effective January 1, 2006, if the Secretary concludes in the report that it is advisable to do so and that mechanisms could be established to ensure that the use of a telecommunications system does not substitute for the required in-person physician or practitioner SNF visits. We will review and consider the recommendations of the report to determine whether to add SNFs to the list of approved originating sites. We are also soliciting public comments on this topic.
E. Contractor Pricing of Unlisted Therapy Modalities and Procedures
[If you choose to comment on issues in this section, please include the caption “CODING—CONTRACTOR PRICING” at the beginning of your comments.]
We recognize that there may be services or procedures performed that have no specific CPT codes assigned. In these situations, it is appropriate to use one of the CPT codes designated for reporting unlisted procedures. These unlisted codes do not typically have RVUs assigned to them.
For services coded using these unlisted codes, the provider includes a description of specific procedures that were furnished. The contractor uses this information to determine an appropriate valuation.
Currently, there are two unlisted CPT codes with assigned RVUs, CPT 97039, Unlisted modality (specify and time if constant attendance), and 97139 Unlisted therapeutic procedure. Given the variability of the services that could be provided using these nonspecific codes, use of assigned RVUs may not accurately reflect the resources actually associated with the provided services. This may result in an inappropriate Start Printed Page 45789payment (overpayment or underpayment) for the service provided.
Other unlisted services that are under the PFS are contractor priced. To make the pricing methodology consistent with our policy for other unlisted services, and to more appropriately match payments with the actual resources expended to deliver the services provided, we propose to have the contractors value CPT codes 97039 and 97139.
F. Payment for Teaching Anesthesiologists
[If you choose to comment on issues in this section, please include the caption “TEACHING ANESTHESIOLOGISTS” at the beginning of your comments.]
The following discussion summarizes the current policy for the payment for services provided by teaching anesthesiologists and solicits public comments on possible revisions to the current payment policy.
1. Payment for Anesthesia Services
Anesthesia services are paid under the PFS, but on a different basis than other physician services. Payments for anesthesia services are calculated using a “base unit” that is specific to the anesthesia code plus the anesthesia time units. As noted in our regulations at § 414.46(a)(1), the base unit reflects all activities other than anesthesia time and includes the usual pre-operative and post-operative care. Anesthesia time units are computed (in 15 minute increments) from the actual elapsed time for the anesthesia procedure.
Anesthesia services may be personally performed by the anesthesiologist, or the anesthesiologist may medically direct qualified individuals involved in up to four concurrent anesthesia cases. Qualified individuals can include anesthesiologist assistants (AAs), certified registered nurse anesthetists (CRNAs), interns, or residents, and, under certain circumstances, student nurse anesthetists. When the anesthesiologist medically directs an anesthesia case, the payment for the physician's medical direction service is 50 percent of the allowance otherwise recognized if the anesthesiologist personally performed the service. The physician would have to fulfill each of the medical direction criteria in § 415.110(a) to bill under the medical direction policy.
2. Teaching Physician Payment Policy
Under the teaching physician payment policy for complex surgery, the full fee schedule payment can be made for the services of the teaching physician as long as the teaching physician is present with the resident for the critical or key portions of the service. In order to bill for two overlapping surgeries, the teaching surgeon must be present during the key or critical portions of both operations.
Beginning in 1994, the teaching physician payment policy has been applied to anesthesiologists only when the teaching anesthesiologist is involved in one anesthesia case with a resident. If the teaching physician is involved with two concurrent cases, then the rules for “medical direction” of anesthesia apply.
In August 2002, we released a Medicare Carriers Manual transmittal relating to the involvement of a non-medically directed teaching CRNA with two student nurse anesthetists. The new policy allowed the teaching CRNA to be paid for his or her involvement with two concurrent cases with student nurse anesthetists, but not at the full fee level. If a teaching CRNA is involved with two concurrent cases with student nurse anesthetists, payment may be based on the base unit plus the time of each case that the teaching CRNA is present with the student nurse anesthetist. To bill the base unit, the teaching CRNA must be present with the student nurse anesthetist throughout the pre- and post-anesthesia care.
In the Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2004 final rule, published November 7, 2003 (68 FR 63196-63395), we revised § 414.46 of our regulations to allow teaching anesthesiologists to bill in a similar manner to teaching CRNAs for the teaching anesthesiologist's involvement in two concurrent cases involving residents. This policy took effect for services furnished on or after January 1, 2004. This was intended as an alternative to the “medical direction” payment policy applicable to concurrent cases involving teaching anesthesiologists and residents.
Under this policy, teaching anesthesiologists can bill and be paid the full fee schedule for the base unit portion of the payment if they are present with the resident during the pre- and post-anesthesia care included in the base units. Teaching anesthesiologists can also bill and be paid the full fee schedule amount for anesthesia time based on the amount of time the physician is present with the resident during each of the two concurrent cases. Payment to a teaching anesthesiologist for two concurrent cases involving residents under this policy would be greater than under the medical direction payment policy. However, if the teaching anesthesiologist is not present with the resident during the pre- and post-anesthesia care for both concurrent cases, the physician could only bill the cases as “medically directed.”
Despite the higher level of payment available under this policy, the American Society of Anesthesiologists (ASA) has informed us that it is not aware of any teaching anesthesia programs that have arranged their practices to meet the conditions necessary to bill under the revised policy. The ASA suggests that the teaching physician regulations for teaching anesthesiologists should be similar to those for teaching surgeons for overlapping complex surgery procedures. The ASA thinks that anesthesia is similar to complex surgery in terms of critical periods, overlap, and availability of teaching physicians. However, the critical portions of the teaching anesthesia service and the critical portions of the teaching surgeon service are not the same. The ASA believes that inadequate payment levels have contributed to the loss of teaching anesthesiologists and an inability to recruit new faculty.
We are requesting comments on a teaching physician policy for anesthesiologists that could build on the policy announced in the November 7, 2003 PFS final rule, but provide the appropriate revisions that would allow it to be more flexible for teaching anesthesia programs. We would also be interested in receiving data and studies relevant to this issue as well as any offsetting savings that could be made to account for any potential costs that could be incurred if there was a policy change.
G. End Stage Renal Disease (ESRD) Related Provisions
On November 15, 2004, we published the Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2005 final rule in the Federal Register (69 FR 66319), revising payments to ESRD facilities in accordance with provisions of the MMA. This final rule implemented section 1881(b) of the Act, as amended by section 623 of the MMA, which directed the Secretary to make a number of revisions to the composite rate payment system, as well as payment for separately billable drugs furnished by ESRD facilities. Changes that were implemented January 1, 2005 included a revision to payments for drugs billed separately by ESRD facilities whereby the top ten ESRD drugs are paid based on acquisition costs (as determined by the Office of Inspector General (OIG)) and other separately billed drugs are paid average sales price (ASP) +6 percent. Start Printed Page 45790
Also, in accordance with section 623 of the MMA, an adjustment of 8.7 percent was made to the composite payment rate to account for the difference between previous payments for separately billed drugs and biologicals and the revised pricing that took effect January 1, 2005. As required by section 623 of the MMA, we are proposing to update this add-on adjustment to reflect changes in ESRD drug utilization. In addition, we are proposing to revise the add-on adjustment to reflect the methodology we will be using for ESRD drugs.
Section 623 of the MMA also required the establishment of basic case-mix adjustments to the composite payment rate for a limited number of patient characteristics. The November 15, 2004 final rule implemented three categories of patient characteristic adjustments (age, low body mass index (BMI), and body surface area (BSA)) that were implemented April 1, 2005. We are proposing to maintain these categories and patient characteristics as established in the November 15, 2004 final rule (69 FR 66238).
Also, section 1881(b)(12) of the Act as amended by section 623 of the MMA provided authority to revise the geographic adjustment applied to the composite payment rate. Accordingly, we are proposing to revise the geographic classifications and wage indexes currently in effect for adjusting composite rate payments. As required by section 623 of the MMA, these proposed changes will be phased in over time.
In addition, we are proposing revisions to the regulations applicable to the composite rate exceptions process to reflect section 623 of the MMA provisions that restrict exceptions to pediatric facilities.
1. Revised Pricing Methodology for Separately Billable Drugs and Biologicals Furnished by ESRD Facilities
[If you choose to comment on issues in this section, please include the caption “ESRD-Pricing Methodology” at the beginning of your comments.]
In the Revisions to Payment Policies under the Physician Fee Schedule for Calendar Year 2005 final rule, published on November 15, 2004, we determined that for CY 2005, payment for the top 10 separately billable ESRD drugs billed by freestanding facilities would be based on the acquisition cost of the drug, as determined by the OIG, updated by the Producer Price Index (PPI). The remaining separately billable ESRD drugs would be paid at the ASP +6 percent for freestanding facilities. We also determined that hospital-based facilities would continue cost reimbursement for all drugs with the exception of erythopoeitin (EPO) which would be paid the acquisition cost, as determined by the OIG, updated by the PPI.
As discussed in section II.H. of this proposed rule, for CY 2006, we are proposing that payment for a drug furnished in connection with renal dialysis services and separately billed by freestanding renal dialysis facilities will be based on section 1874A of the Act. We are also proposing to update the payment allowances quarterly based on the ASP reported to us by drug manufacturers. For CY 2006, we are proposing to continue cost reimbursement for hospital-based facilities; while, proposing to pay for EPO in hospital-based facilities at the ASP +6 percent.
2. Adjustment to Account for Changes in the Pricing of Separately Billable Drugs and Biologicals, and the Estimated Increase in Expenditures for Drugs and Biologicals.
[If you choose to comment on issues in this section, please include the caption “ESRD—Drugs and Biologicals” at the beginning of your comments.]
Section 623(d) of the MMA, added section 1881(b)(12) of the Act which contains two provisions that describe how the drug add-on adjustment will be implemented in the ESRD payment system. First, that the add-on adjustment reflects the difference between payment methodology for separately billed drugs under the drug price in effect in CY 2004 and current drug pricing and, second, the aggregate payments for CY 2005 must equal aggregate payments absent this MMA provision.
In the November 15, 2004 final rule (69 FR 66322), we described in detail the methodology that we used for developing the drug add-on adjustment to the composite rate to account for the difference between estimated drug payments under the average wholesale price (AWP) payment system and the acquisition costs as determined by the OIG. This adjustment was developed so that aggregate spending for composite rate plus separately billed drugs would remain budget neutral for CY 2005.
Section 1881(b)(12) of the Act also contains two provisions related to adjustments to payments for drugs and biologicals for CY 2006. First, section 1881(b)(12)(C)(ii) of the Act provides that we recalculate the add-on adjustment to reflect the drug pricing methodology applied by the Secretary under section 1881(b)(13)(A)(iii) of the Act. That is, we must compute the drug add-on adjustment based on the difference between estimated payments using the AWP payment methodology and the proposed new payment methodology using ASP +6 percent.
In addition, section 1881(b)(12)(F) of the Act requires that, beginning in 2006, we establish an annual update adjustment to reflect estimated growth in expenditures for separately billable drugs and biologicals furnished by ESRD facilities. This update would be applied only to the drug add-on portion of the composite rate. In order to meet both requirements, we are proposing to develop the CY 2006 drug add-on adjustment in two steps.
First, we would recalculate the CY 2005 add-on adjustment to reflect the difference in drug payments using 95 percent AWP pricing and payments using ASP +6 pricing. This calculation would replace the current 8.7 percent adjustment and would be budget neutral to CY 2005 payments. The next step would be to develop a proposed annual update methodology that we would use in CY 2006 to reflect the estimated growth in drug expenditures each year. As mentioned above, this update would be applied only to the drug add-on portion of the composite payment rate. The following sections discuss the recomputation of the drug add-on adjustment followed by a discussion of the update of the adjustment for CY 2006.
a. Proposed Recalculation of the CY 2005 Drug Add-on Adjustment
For CY 2006, we are proposing to use the same method that we used to develop the drug add-on adjustment for CY 2005 to recalculate the adjustment to reflect the proposed revision to the ESRD drug payment methodology from acquisition costs to ASP +6 percent. That is, we propose to calculate the spread based on the difference in aggregate payments between estimated payment based on AWP pricing and estimated payment based on ASP +6 pricing. As discussed in detail below, we propose to use pricing data from the second quarter of CY 2005. All of the data used to develop the proposed add-on adjustment will be updated for the final rule, as more current data, including ASP data, will be available.
(1) Historical Drug Expenditure Data
To develop the drug add-on adjustment we used historical total aggregate payments for separately billed ESRD drugs for half of CY 2000 and all of CY 2001, CY 2002 and CY 2003. For EPO, these payments were broken down according to type of ESRD facility Start Printed Page 45791(hospital-based versus independent). We also used the number of dialysis treatments performed by these two types of facilities over the same period.
(2) ASP +6 Percent Prices
We obtained the ASP +6 percent prices, for the second quarter of CY 2005, as shown in the following table. For purposes of this proposed rule, we have used the latest ASP pricing available, which are second quarter prices. For the final rule, we will have prices for all 4 quarters of CY 2005 and plan to develop prices representing the average CY 2005 ASP payments for the drugs listed in Table 20 below.
|Drugs||Second quarter ASP +6 percent|
(3) Estimated Medicare Payments Using 95 Percent of AWP
In order to estimate AWP payments we used the first quarter 2005 AWP prices and updated them to the second quarter by applying, for drugs other than EPO, an estimated AWP quarterly growth of approximately 0.74 percent (annual growth factor of 3 percent). This growth factor is based on historical trends of AWP pricing (for all drugs) for the year 1997-2003. We did not increase the payment rate for Epogen since payment was maintained at $10.00 per thousand units prior to MMA. (See Table 21.)
|Drugs||AWP rates for the second quarter of 2005|
|* Statutory rate.|
(4) Dialysis Treatments
We updated the number of dialysis treatments by the actuarial projected growth in the number of ESRD beneficiaries. Since Medicare covers a maximum of three treatments per week, utilization growth is limited, and, therefore, any increase in the number of treatments should be due to beneficiary enrollment. In CY 2005, we estimate there will be a total of 34.5 million treatments performed. We note that this represents the most current actuarial projection and differs slightly from the projection published in the November, 15, 2004 final rule. (69 FR 66323)
(5) Drug Payments
We updated the total aggregate Epogen drug payments for both hospital-based and independent facilities by using historical trend factors. For CY 2004 and CY 2005, the CY 2003 payment level was increased each year by trend factor of 9.0 percent.
Using the 9 percent growth factor for Epogen, we updated the aggregate spending for separately billable drugs, other than EPO, for independent facilities. Aggregate payments in this category show extremely varied growth between 2000 and 2003, and, for this reason, we felt that trend analysis was not sufficient. Therefore, we believe it would be reasonable to correlate the growth of Epogen and separately billable drugs in an independent facility, since Epogen constitute the largest amount of drugs dispensed in an independent facility. Additionally, we deducted 50 cents for each administration of Epogen from the total Epogen spending for both hospital-based and independent facilities, to account for spending on syringes that were included in the EPO payments prior to the implementation of the MMA drug payment provisions. In CY 2005, we estimate payments for these syringes will amount to $1.6 million for hospital-based facilities and $26.8 million for independent facilities. For CY 2005, we estimate that total spending, after the deduction of payments for syringes, will reach $246 million for Epogen provided in hospital-based facilities, and $2.850 million for drugs provided in independent facilities ($1.960 million for Epogen and $890 million for other drugs). We note that all other drugs provided in hospital-based ESRD facilities continue to be paid at cost.
(6) Add-On Calculation and Budget Neutrality
For each of the top 10 drugs (as explained below), we calculated the percent by which ASP +6 percent is projected to be less than payment amounts under the 95 percent of AWP pricing system for CY 2005. For Epogen, this amount is 7.5 percent. We applied this 7.5 percent figure to the total aggregate drug payments for Epogen in hospital-based facilities, resulting in a difference of $18 million.
We then calculated a weighted average of the percentages by which ASP +6 percent would be below 95 percent of AWP payment prices, for the top 10 ESRD drugs for independent facilities. We weighted these percentages by using the CY 2005 estimated Medicare payment amounts for the top 10 drugs. This procedure resulted in a weighted average payment reduction of 12 percent. We note that in the previous calculation for the CY 2005 add-on adjustment, we had used CY 2002 values from the OIG. (See Table 22 for the calculated drug weights, and Table 23 for the percentage by which ASP prices are lower than AWP prices.) The CY 2003 data projected forward to CY 2005 indicated a significant drop in payments for drugs other than Epogen that are provided in an independent facility. This trend, which we expect will continue when we obtain CY 2004 historical data for the final rule, decreases the weights of the drugs, other than Epogen and increases the weight of Epogen. The overall effect is to lower the weighted average by several percentage points. Start Printed Page 45792
|Drugs||CY 2005 estimated drug payments as a percentage of total drug expenditures (percent)||CY 2002 OIG drug payments as a percentage of total drug expenditures (percent)|
|* Compared to the $10.00 statutory price.|
|Drugs||Percent by which ASP+6 percent rates are below 95 percent of AWP prices (except EPO) (percent)|
|* Compared to the $10.00 statutory price.|
We estimate that these ten drugs represent nearly 92 percent of total CY 2005 drug payments to independent facilities. To account for the drug spread related to the 8 percent of drug expenditures for which we do not have pricing data, we applied the weighted average to 100 percent of aggregate drug spending projections for independent facilities, producing a projected difference of $343 million. The weighted average is applied to 100 percent of drug spending projections for independent facilities to account for the drug spread related to the 8 percent of drugs expenditures for which we do not have pricing data.
We combined the CY 2005 figures of $18 million for the hospital-based facilities and $343 million for the independent facilities, for a total of $362 million. We distributed this over a total projected 34.5 million treatments resulting in a revised CY 2005 add-on to the per treatment composite rate of 8.1 percent. By making this adjustment to the composite rate, we estimate that the aggregate payments to both independent and hospital-based ESRD facilities would be budget neutral with respect to drug payments for CY 2005, as required by the MMA. We note that this 8.1 percent adjustment replaces the current 8.7 percent adjustment for CY 2005 in our calculations.
b. Calculation of the Proposed CY 2006 Update to the Drug Add-On Adjustment
This section describes the approach that we are proposing to use to update the drug add-on adjustment.
(1) Drug Payments and Dialysis Treatments
Similar to the process discussed in the previous section, we updated the total aggregate Epogen drug payments for each hospital-based and independent facility using historical trend factors. For CY 2006, the payment level was increased from CY 2005 by a trend factor of 9.0 percent.
We also updated aggregate spending for separately billable drugs, other than EPO, for independent facilities using the 9 percent growth factor for Epogen. As discussed earlier, payments in this category have shown extremely varied growth in recent history and historical data between CY 2002 and CY 2003 showed a significant drop in aggregate spending. We felt it was reasonable to use trend analysis and correlate the growth of Epogen and other separately billable drugs. We expect that we will have further data for the final rule. This procedure resulted in projected expenditures of $268 million for Epogen provided in hospital-based facilities and $3.107 million for drugs provided in independent facilities ($2.137 million for Epogen and $970 million for other drugs). These numbers include an estimated reduction for the 50 cent payment for syringes of $1.6 million for hospital-based facilities and $27.5 million for independent facilities. We also updated the projected number of dialysis treatments using CMS actuarial enrollment projections. This resulted in a projected 35.4 million treatments for CY 2006.
(2) Adjustment to Composite Rate Add-On
We then applied the 9 percent growth between projected CY 2005 and CY 2006 aggregate drug expenditures to the CY 2005 expected drug spread figures of $18 million for Epogen provided in hospital-based facilities and $343 million for drugs provided in independent facilities. This resulted in an incremental increase in the drug spread in CY 2006 of $2 million for Epogen provided in hospital-based facilities and $31 million for drugs provided in independent facilities. We distributed the combined $33 million over 35.4 million projected treatments, resulting in an additional 0.7 percent addition to the CY 2005 add-on of 8.1 percent.
(3) Proposed Drug Add-On Adjustment for CY 2006
With the recalculated CY 2005 add-on to the per treatment composite rate being 8.1 percent and with the additional increment for expenditures in CY 2006 being 0.7 percent, we combine them to produce one drug add-on adjustment for CY 2006 that would be 8.9 percent.
(4) Add-On for Spread for Drugs Furnished in Hospital-Based Facilities
In its June 2005 Report to Congress, MedPAC recommended that payment differences be eliminated for separately billed drugs furnished in independent and hospital-based facilities and that all these drugs be paid under the ASP +6 percent system. While we agree with MedPAC that paying the same rates in both settings would be the preferable Start Printed Page 45793policy, we have not proposed this policy because data on dosing units for drugs furnished by hospital-based facilities are not available. This data is needed to estimate the drug payments using ASP +6 percent pricing. That is a key component of the calculation of the drug add-on adjustment. In their report, MedPAC acknowledges these data issues and recommends that CMS take steps to collect data on acquisition costs and payment per unit for drugs provided in hospital-based ESRD facilities. We are currently examining approaches for obtaining these data. However, we seek comment about a potential method to estimate the drug add-on amount for drugs furnished in hospital-based facilities, and we seek comment about alternative estimation methodologies, data, or both.
One estimation approach could be an approach where the pricing spread for drugs other than EPO furnished in hospital based facilities would be assumed to be the same as for those drugs in independent facilities. This aggregate approach would assume that the add-on amount for drugs other than EPO furnished in hospital-based facilities results in the same relative amount of drugs furnished as for those drugs in independent facilities. Using aggregate ratios, the drug add-on amounts calculated for drugs other than EPO furnished in independent facilities might be extrapolated for drugs other than EPO furnished in hospital-based facilities.
Use of this approach could allow calculation of a reasonable estimate of aggregate drug add-on amount for drugs other than EPO furnished in hospital-based facilities until the time that data becomes available to more accurately calculate the drug add-on adjustment. This approach would allow payment of all drugs furnished in hospital-based facilities under the ASP +6 percent payment methodology, achieve consistent payments for ESRD separately billed drugs regardless of setting, and provide a reasonable estimation of the drug add-on amount needed to adjust the composite rates for drugs other than EPO furnished in hospital-based facilities. We seek comment about this potential method to estimate spread for drugs furnished in hospital-based facilities, as well as alternative estimation methodologies, data, or both.
3. Proposed Revisions to Geographic Designations and Wage Indexes Applied to the ESRD Composite Payment Rate
[If you choose to comment on issues in this section, please include the caption “ESRD-Composite Payment Rate Wage Index” at the beginning of your comments.]
Because of the significance of labor costs in determining the total cost of care, the prospective payment systems (PPSs) which we administer traditionally have used a wage index to account for differences in area wage levels. The labor-related shares of costs used to develop the composite rates were 36.78 percent for hospital-based facilities and 40.65 percent for independent facilities. The current composite payment rates are calculated using a blend of two wage indexes, one based on hospital wage data for fiscal years ending in CY 1982, and the other developed from CY 1980 data from the Bureau of Labor Statistics (BLS). The wage indexes are calculated for each urban and rural area based on 1980 U.S. Census definitions of metropolitan statistical areas (MSAs) or their equivalents, and areas outside of MSAs in each State, respectively. (51 FR 29411)
Section 4201(a)(2) of OBRA 1990 (Pub. L. 101-508) froze the composite payment rates, and the basis for their calculation, at the level in effect as of September 30, 1990 (except for subsequent statutory updates that did not affect the data used to calculate wage indexes). The OBRA 1990 restriction on revising the ESRD composite payment rates has had another effect. ESRD facilities located in counties classified as rural based on the 1980 Census, but which subsequently are classified as urban, are still considered rural for purposes of determining whether urban or rural composite payment rates apply. The rural rates are generally lower than those for urban ESRD facilities.
In addition, restrictions also apply to the wage index values used to compute the ESRD composite payment rates. Payments to facilities in areas where labor costs fall below 90 percent of the national average, or exceed 130 percent of that average, are not adjusted beyond the 90 percent or 130 percent level. (See the Prospective Reimbursement for Dialysis Services and Approval of Special Purpose Renal Dialysis Facilities final rule (48 FR 21254) and the Composite Rates and Methodology for Determining the Rates final notice (51 FR 29404)). This effectively means that ESRD facilities located in areas with wage index values less than 0.9000 are paid more than they would otherwise receive if we fully adjusted for area wage differences. Conversely, facilities in locales with wage index values greater than 1.3000 are paid less than they would receive if we fully adjusted the rates based on actual wage levels.
Section 1881(b)(12)(D) of the Act, as amended by section 623(d) of the MMA, gave the Secretary the discretionary authority to revise the current wage index. That provision also requires that any revised measure be phased-in over a multiyear period. In the November 15, 2004 final rule establishing new case-mix adjusted composite payment rates (69 FR 66332), we stated that we were deferring replacing the current wage index pending further assessment. We have completed our review, and believe that modernizing the current ESRD wage index is a matter of some urgency. After further analysis we are proposing to use OMB's revised geographic definitions announced in OMB Bulletin No. 03-04, issued June 6, 2003. These new definitions are known as Core-Based Statistical Areas (CBSAs). In conjunction with the CBSAs, we are also proposing to recalculate the ESRD wage indexes based on acute care hospital wage and employment data for FY 2002, as reported to us in connection with the development of the wage index used in the inpatient hospital prospective payment system (IPPS). In addition, we are also proposing to update the labor portion of the ESRD composite rate to which the wage index is applied. The basis for our proposed revisions to the current ESRD composite rate wage index to reflect these changes is set forth in the following sections.
a. Current Urban and Rural Locales Based on MSAs
We currently adjust the labor-related share of the composite payment rates to account for differences in area wage levels using a wage index which is a blend of two wage index values, one based on hospital wage data from FY 1982, and the other developed from 1980 hospital data from the BLS. The hospital and BLS proportions of the blended wage index are 40 percent and 60 percent, respectively. The hospital and BLS wage index values used to compute the blended wage index were published in the Federal Register on August 15, 1986 (51 FR 29412).
The use of a blended wage index results from our effort to transition ESRD facilities from composite payment rates using a wage index based on BLS data, to one developed from hospital wage and employment data obtained from Medicare cost reports (“the hospital wage index”). A major limitation of the BLS wage index was its inability to distinguish area differences in the use of part-time hospital workers. In order to mitigate the impact of changes in facility payment rates as a Start Printed Page 45794result of our adoption of the new hospital wage index, we began a five-year phase-in of the new measure. During the phase-in period, we had intended to use a weighted wage index, under which the BLS portion would decrease 20 percent and the share represented by the hospital wage index would increase 20 percent each year. During the second year of the phase-in, for which the hospital and BLS portions of the wage index were 40 percent and 60 percent, respectively, the wage index was frozen as a result of the OBRA 1990 prohibition on composite payment rate revisions.
The wage indexes are calculated for each urban and rural area. In general, an urban area is a MSA or New England County Metropolitan Area as defined by OMB based on 1980 U.S. Census definitions. A rural area consists of all counties within each State outside of an urban area. The counties which comprise the urban locales currently used to compute the wage index values incorporated in the urban composite payment rates were last published in the Federal Register on May 30, 1986 (51 FR 19738-19739). Although OMB has revised the definitions of the MSAs since that time, the composite payment rate urban/rural designations have not been changed due to the prohibition on revising the ESRD payment methodology established under section 4201(a)(2) of OBRA 1990. More current MSAs are used in connection with several other non-acute care Medicare PPSs that we administer, including those for SNFs, long-term care hospitals (LTCHs), inpatient psychiatric facilities (IPFs), home health agencies (HHAs), and inpatient rehabilitation facilities (IRFs).
b. Revision of Geographic Classifications
On June 6, 2003, OMB issued Bulletin 03-04 that announced new geographic area designations based on the 2000 Census. The bulletin established revised definitions for the nation's MSAs, designated county based Metropolitan Divisions within the MSAs that have a single core with a population of at least 2.5 million, created two new sets of statistical areas (Micropolitan Statistical Areas and Combined Statistical Areas), and defined New England City and Town Areas. The bulletin may be accessed on the Internet at: http://www.whitehouse.gov/omb/bulletins/bo3-04.html.
Section 623 of the MMA gave the Secretary the authority to revise the geographic areas used to develop the wage indexes currently reflected in the composite payment rates, removing the OBRA 1990 restriction. Although we published revised composite payment rates in the November 15, 2004 final rule implementing MMA mandated revisions to those rates, we did not propose revising the wage indexes, or the geographic areas on which they are based at that time. For reasons discussed below, we are proposing to use OMB's list of geographic designations for purposes of adjusting the urban and rural composite payment rates. Facilities located in counties within MSAs or Metropolitan Divisions within CBSAs would be considered urban, while facilities located in micropolitan counties or other counties outside of the CBSAs would be classified as rural. We point out that these are the same urban and rural definitions used in connection with the Medicare IPPS, and are discussed in the August 11, 2004 final rule establishing the IPPS FY 2005 payment rates (69 FR 49026).
c. Core-Based Statistical Areas (CBSAs)
OMB reviews its metropolitan area definitions preceding each decennial census. As explained in the August 11, 2004 IPPS final rule (69 FR 49026), OMB chartered the Metropolitan Standards Review Committee to examine the metropolitan area standards and develop recommendations for possible changes to those standards. Three notices related to the review of the standards, providing an opportunity for public comment on the recommendations of the Committee, were published in the Federal Register on December 21, 1998 (63 FR 70526), October 20, 1999 (64 FR 56628), and August 22, 2000 (65 FR 51060).
In the December 27, 2000 Federal Register (65 FR 82228), OMB published a notice announcing its new standards. According to that notice, OMB defines a CBSA beginning in 2003 as “a geographic entity associated with at least one core of 10,000 or more population, plus adjacent territory that has a high degree of social and economic integration with the core as measured by commuting ties.” The standards designate and define two categories of CBSAs: MSAs and Micropolitan Statistical Areas (65 FR 82235).
According to OMB, MSAs are based on urbanized areas of 50,000 or more population, and Micropolitan Statistical Areas (referred to hereafter as Micropolitan Areas) are based on urban clusters with at least 10,000, but less than 50,000 population. Counties that do not fall within CBSAs are deemed “Outside CBSAs”. Previously OMB defined MSAs around areas with a minimum core population of 50,000, and smaller areas were “Outside MSAs”. On June 6, 2003 OMB announced the new CBSAs, consisting of MSAs and the new Micropolitan Areas based on the results of the 2000 Census.
d. Adoption of MSAs as Urban Areas for Composite Payments
In its June 6, 2003 announcement, OMB cautioned that its new metropolitan area definitions “should not be used to develop and implement Federal, State, and local nonstatistical programs and policies without full consideration of the effects of using these definitions for these purposes. These areas should not serve as a general purpose geographic framework for nonstatistical activities, and they may or may not be suitable for use in program funding formulas.”
We point out that Medicare's PPSs, including the ESRD composite payment rate, historically have used the metropolitan area definitions developed by OMB. While the hospital IPPS is the most significant of these, the OMB geographic designations are also used to define labor market areas for purposes of recognizing area differences in labor costs under the SNF, inpatient rehabilitation, IPFs, and home health PPSs. In discussing the adoption of the OMB geographic designation for the IPPS area labor adjustment, the FY 1985 IPPS proposed rule published July 3, 1984 (49 FR 27426) noted as follows:
[i]n administering a national payment system, we must have a national classification system built on clear, objective standards. Otherwise the program becomes increasingly difficult to administer because the distinction between rural and urban hospitals is blurred. We believe that the MSA system (developed by OMB) is the only one that currently meets the requirements for use as a classification system in a national payment program. The MSA classification system is a statistical standard developed for use by Federal agencies in the production, analysis, and publication of data on metropolitan areas. The standards have been developed with the aim of producing definitions that will be as consistent as possible for all MSAs nationwide.
The logic represented in the statement above still applies today. The process used by OMB to develop the geographic designations resulted in the creation of geographic locales that we believe also reflect the characteristics of unified labor market areas. The CBSAs contain a core population plus adjacent areas that reflect a high degree of social and economic integration. This integration is measured by commuting patterns, thus demonstrating that the areas likely draw workers from the same general locale. In Start Printed Page 45795addition, the CBSAs reflect the most up-to-date information, based on the 2000 Census. OMB reviews its metropolitan area definitions preceding each decennial census to ensure consideration of the most recent population changes. Finally, in the context of the IPPS, we have reviewed alternative methods for determining geographic areas for purposes of the wage index. In each case, we have concluded that it was preferable to retain the independently developed OMB designations rather than replace them with alternatives. (See the August 11, 2004 final IPPS rule at 69 FR 49027-49028.)
Aside from the long established precedent of using OMB geographic designations to adjust for differing area wage levels in the PPSs that we administer, we also point out that the Congress has recognized the propriety of the OMB definitions in distinguishing among geographic areas for making Medicare payments. For example, section 1886(d)(2)(D) of the Act defines an “urban area” as “an area within a MSA (as defined by the OMB) or within a similar area as the Secretary has recognized.” Similarly, in the sections of the Act governing the guidelines to be used by the Medicare Geographic Classification Review Board for hospital reclassification, the Congress directed the Secretary to create guidelines for “determining whether the county in which the hospital is located should be treated as being a part of a particular [MSA]”. (See sections 1886(d)(10)(A) and (D)(i)(II) of the Act.) The Congress has accepted the use of MSAs as a reasonable basis for dividing the nation into labor market areas for purposes of Medicare payments. Accordingly, we are proposing to revise the ESRD composite payment system labor market areas based on OMB's geographic designations. Facilities located in counties within MSAs (including those in the MSA category of CBSA) would be classified as urban. We are proposing that facilities located in Micropolitan Areas (the other category of CBSA) or in other counties outside of CBSAs in each State, would be considered rural.
e. Revised OMB Geographic Areas
In the following sections we discuss the classification of facilities located in New England MSAs, within Metropolitan Divisions of MSAs, and our proposed treatment of the CBSA classification of Micropolitan Areas.
(1) New England MSAs
Under the current composite payment system, urban areas in New England reflect county-based locales known as New England County Metropolitan Areas (NECMAs), rather than MSAs. We use NECMAs in New England to provide consistency in labor market definitions compared to the MSAs used in the rest of the country, which are also based on counties. Under the new CBSAs, OMB has defined MSAs and Micropolitan Areas in New England on the basis of counties. OMB has also established a new classification, New England City and Town Areas (NECTAs), which are similar to the previous New England MSAs, but which are not used in the geographic area revisions proposed in this proposed rule.
In the interest of consistency among all urban labor market areas, we are proposing to use the county-based definitions for all MSAs in the nation. As a result of the 2000 Census, we now have county-based MSAs in New England. We believe that adopting county-based definitions for all urban areas in the country provides consistency and stability, and minimizes administrative complexity in the Medicare program. We point out that our use of MSAs in New England comports with the implementation of the CBSA designations under the IPPS for New England urban locales. (See the August 11, 2004 Federal Register, 69 FR 49208.) Accordingly, under the revised composite payment rates discussed in this proposed rule, we are proposing to use New England MSAs along with MSAs in the rest of the nation to define urban areas. As a result, urban locales in New England would no longer be based on NECMAs.
(2) Metropolitan Divisions
Under OMB's new CBSA designations, a Metropolitan Division is a county or group of counties within a CBSA that contains a core population of at least 2.5 million, representing an employment center, plus adjacent counties associated with the main county or counties through commuting ties. A county qualifies as a main county if 65 percent or more of its employed residents work within the county, and the ratio of the number of jobs located in the county to the number of employed residents is at least 75 percent. A county qualifies as a secondary county if at least 50 percent, but less than 65 percent, of its employed residents work within the county, and the ratio of the number of jobs located in the county to the number of employed residents is at least 75 percent. After all the main and secondary counties are identified and grouped, each additional county that already has qualified for inclusion in the MSA falls within the Metropolitan Division associated with the main or secondary county or counties with which the county at issue has the highest employment interchange measure. Counties in a Metropolitan Division must be contiguous (See the December 27, 2000 Federal Register, Standards for Defining Metropolitan and Micropolitan Statistical Areas, (65 FR 82236)).
Under the CBSA definitions, there are 11 MSAs containing Metropolitan Divisions: Boston; Chicago; Dallas; Detroit; Los Angeles; Miami; New York; Philadelphia; San Francisco; Seattle; and Washington, DC. We believe that these MSAs may be too large to accurately reflect the local labor costs prevailing within each of these areas. For example, the Chicago-Naperville-Joliet IL-IN-WI MSA consists of 14 counties classified among 3 Metropolitan Divisions: Chicago-Naperville-Joliet IL (8 counties); Lake County-Kenosha County IL-WI (2 counties); and Gary IN (4 counties). Similarly, the New York-Newark-Edison NY-NJ-PA MSA consists of 23 counties classified among 4 Metropolitan Divisions: New York-Wayne-White Plains NY-NJ (11 counties); Newark-Union NJ-PA (6 counties); Edison NJ (4 counties); and Suffolk County-Nassau County NY (2 counties). Accordingly, for the 11 MSAs with Metropolitan Divisions, we are proposing to use the Metropolitan Division as the urban area for purposes of constructing the wage index and applying revised composite payment rates.
We believe that the proposed use of Metropolitan Divisions would result in a more accurate adjustment accounting for local variation in labor costs within each of the 11 MSAs with those Divisions. We are proposing to recognize each county-based Metropolitan Division within the 11 affected MSAs as a separate urban area for purposes of applying revised composite payment rates. Each Metropolitan Division would have its own wage index and its own urban composite payment rate. This proposed methodology is consistent with the new CBSA-based labor market definitions under the IPPS. (See the August 11, 2004 Federal Register, 69 FR 49029.)
(3) Micropolitan Statistical Areas
In its June 6, 2003 bulletin, OMB also designated another classification of metropolitan area, Micropolitan Statistical Areas, which we will refer to as Micropolitan Areas. That bulletin listed 565 Micropolitan Areas. Of the 3142 counties in the United States, 1090 are in MSAs and 674 are in Start Printed Page 45796Micropolitan Areas, with the remaining 1378 outside of either classification. As discussed in greater detail in the August 11, 2004 IPPS final rule (69 FR 49029-49032), the way that Micropolitan Area counties are classified in connection with developing revised wage indexes has a substantial impact on the wage index adjustment. Specifically, whether or not Micropolitan Areas are included in computing the statewide rural wage indexes has a significant effect on the rural wage index in any State that contains these locales. Consistent with the IPPS final rule, we are proposing that each Micropolitan Area county continue to be considered part of each State's rural labor market area. That is, we would continue to classify all Micropolitan counties as rural.
To facilitate an understanding of our proposed policies relating to the revisions to the ESRD facility labor market areas discussed in this proposed rule, we have provided addendum F in the Addendum section to this proposed rule. Addendum F is a crosswalk table that contains a listing of each SSA State and county location code; state and county name; existing 1980 MSA based labor market area designation; and CBSA-based labor market area. Addendum F also contains the new wage indexes for each urban and rural area.
f. Proposed Revisions to the Labor Component of the Composite Rate
The current labor-related portions of the hospital-based and independent composite payment rates (in other words, the portion adjusted by each facility's area wage index) are 36.78 percent and 40.65 percent, respectively. These labor-related shares have not been revised since the inception of the ESRD composite payment system in 1983.
When the composite rates were established in 1983, we developed the labor-related share of the rate based on 1978 and 1979 cost data collected from 110 ESRD facilities; 40 independent and 70 hospital-based. For other PPSs administered by us, the labor-related shares are determined based on the labor components established in the relevant market baskets for each provider type.
The basis for determining the current labor shares is based on outdated data from very few facilities relative to the current number of ESRD facilities (110 versus approximately 4300 facilities). We are proposing to establish a single labor-related share applicable to all ESRD facilities based on the labor-related categories included in the ESRD composite rate market basket. This change will bring the methodology for the ESRD composite rate labor-related share more in line with that for determining the labor-related shares for other Medicare PPSs.
(1) ESRD Composite Rate Market Basket
In the following sections, we present a brief background on market baskets, provide a reference to the detailed methodology used to develop the ESRD composite rate market basket, and outline the methodology used to determine the proposed ESRD labor share.
As required by section 422(b) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), Pub. L. 106-554, we developed an ESRD composite rate market basket. Each of the PPSs that we administer utilizes a market basket that reflects each type of provider's production patterns used to furnish patient care. The market baskets capture the rate of price inflation for a fixed quantity of inputs (both goods and services used to provide medical services) relative to a base year. Each of the PPS market baskets distinguishes between labor-related and non-labor costs. Similar to other PPSs, we believe the ESRD composite rate market basket index is an appropriate measure for revising the labor-related portion of the composite payment rate. The detailed methodology used to develop the ESRD composite rate market basket, including data sources, cost categories, and price proxies, is set forth in the Secretary's May 2003 report to the Congress, Toward a Bundled Outpatient Medicare ESRD Prospective Payment System. That report is available on the Internet at http://qa.cms.hhs.gov/providers/esrd and we recommend it to interested readers. We used CY 1997 as the base year for the development of the ESRD composite rate market basket cost categories. Source data included CY 1997 Medicare cost reports (Form CMS-265-94), supplemented with 1997 data from the U.S. Department of Commerce, Bureau of the Census' Business Expenditure Survey (BES). Analysis of Medicare cost reports for CYs 1996, 1997, 1998, and 1999 showed little difference in cost weights compared to CY 1997. Medicare cost reports from independent ESRD facilities were used to construct the market basket because data from independent ESRD facilities tend to reflect the actual cost structure faced by the ESRD facility itself, and are not influenced by the allocation of overhead over the entire institution as in hospital-based facilities. This approach is consistent with our standard methodology used in the development of other market baskets, particularly those used for updating the SNF and home health PPSs. We expect that the cost structure in both hospital-based and independent ESRD facilities and units would be similar. Therefore, we are proposing to base the labor-related share of the composite payment rates on data from freestanding facilities only.
In Table 24, we have reproduced Table 2 from the May 2003 report to the Congress containing the ESRD composite rate market basket cost categories, weights, and price proxies in this proposed rule. This table lists all of the expenditure categories in the ESRD composite rate market basket.
|Cost category||Price/wage variable||Base-year: CY 1997 weights (percent)|
|Wages and Salaries||ECI—Health Care Workers||38.808|
|Employee Benefits||ECI—Benefits Health Care Workers||8.580|
|Professional Fees||ECI—Compensation Prof. & Tech. (Priv.)||0.903|
|Electricity||WPI—Commercial Electric Power||0.818|
|Natural Gas||WPI—Commercial Natural Gas||0.113|
|Water and Sewerage||CPI—Water & Sewage||0.593|
|Start Printed Page 45797|
|Supplies||PPI—Surgical, Medical and Dental*||17.748|
|Housekeeping and Operations||PPI—Building, cleaning, and maintenance||1.247|
|Administrative and Other Costs||CPI—All items less food and energy||14.886|
|Capital Related—Building and Equipment||CPI—Residential Rent||9.071|
|Capital Related—Machinery||PPI—Electrical Machinery and Equipment||4.957|
The labor-related share of a market basket is determined by identifying the national average proportion of operating costs that are related to, influenced by, or vary with the local labor market. The labor-related share is typically the sum of wages and salaries, fringe benefits, professional fees, labor-intensive services, and a portion of the capital share from the appropriate market basket.
We used the 1997-based ESRD composite rate market basket costs to determine the proposed labor-related share for ESRD facilities. The proposed labor-related share for ESRD facilities is 53.711, as shown in Table 25. It is the sum of wages and salaries, employee benefits, professional fees, housekeeping and operations, and 46 percent of the weight for capital-related building and equipment (the portion of capital that we have determined to be influenced by local labor markets). The following section describes each of the categories that make up the proposed labor-related share for the ESRD composite rate payment system and how they were derived.
|Cost category||Proposed CY 1997-based ESRD composite rate labor share (percent)|
|Wages and salaries||38.808|
|Housekeeping and operations||1.247|
|Labor-related share of capital costs||4.173|
(2) Wage and Salaries
The wages and salaries weight for the ESRD composite rate labor-related share includes salaries for both direct and indirect patient care. We computed a weight for wages and salaries for direct patient care from Worksheet B of the Medicare cost report. However, Worksheet B only includes direct patient care salaries. We had to derive an estimate for non-direct patient care salaries in order to calculate the market basket weight. We first computed the ratio of salaries to total cost in each cost center from the trial balance of the cost report (Worksheet A). We applied these ratios to the costs reported on Worksheet B for the corresponding cost centers to obtain the total wages and salaries for each composite rate cost center. These salaries were then summed and added to the direct patient care salary amount that is reported separately. When divided by total composite rate costs, the result is a cost weight for total salaries. This increased the expenditure weight from 34.154 percent for direct patient care salaries to 38.808 percent for total salaries.
(3) Employee Benefits
The benefits weight was derived from the BES since a benefit share for all employees is not available for the ESRD Medicare cost reports. The cost reports only reflect benefits for direct patient care. We applied the benefits proportion of wages and salaries for kidney dialysis centers from the BES to the salary amount calculated from the cost reports as described above. This resulted in a benefit weight that was 1.758 percentage points larger (8.850 versus 6.822) than the benefits for direct patient care calculated from the cost reports. To avoid double counting and to ensure all of the market basket weights still totaled 100 percent, we removed this additional 1.758 percentage points for benefits from pharmaceuticals, administrative and general, supplies, laboratory services, housekeeping and operations, and the capital components. This calculation reapportions the benefits expense for each of these categories using a method similar to the method used for distributing non-direct patient care salaries as described above. This method approximates the proportion of each cost center's costs that are benefits using available salary expenditure data.
(4) Professional Fees
Professional fees include accounting, bookkeeping, and legal expenses. We derived the weight for professional fees from the BES since the Medicare cost reports do not include this level of detail. We first calculated the ratio of BES professional fees for kidney dialysis centers to total BES wages and salaries for kidney dialysis centers. We applied this ratio to the total wages and salaries share calculated from the cost reports to estimate the proportion of ESRD facility professional fees. The resulting weight was 0.903 percent. To avoid double counting, this proportion was deducted from the calculated weight for the administrative and other expenditure category, where the fees would have been reported on the Medicare cost reports.
(5) Housekeeping and Operations
The housekeeping and operations cost category includes expenses such as janitorial and building services costs. We developed a market basket weight for this category using data from both Worksheets A and B of the cost reports. Worksheet B combines the capital-related costs for buildings and fixtures with the operation and maintenance of plant (operations) and housekeeping cost centers, so we were unable to calculate a weight directly from Worksheet B. Accordingly, we computed the proportion of housekeeping and operations costs, to the combination of total capital-related costs for buildings and fixtures and housekeeping and operations costs Start Printed Page 45798using Worksheet A because these categories are individually reported on this worksheet. We then subtracted this share from the proportion of Worksheet B total capital-related costs to yield a weight for housekeeping and operations. To avoid double counting, we subtracted utilities expenditures (which are included in the utilities weight shown in Table 24) from the housekeeping and operations weight, as well as the non-direct patient care salaries and benefits share associated with the operations and housekeeping cost centers from Worksheet A. The resulting market basket weight for housekeeping and operations was 1.247 percent.
(6) Labor-Related Share for Capital-Related Expenses
The labor-related share for capital-related expenses (46 percent of ESRD facilities' adjusted capital-related building and equipment expenses) reflects the proportion of ESRD facilities' capital-related building and equipment expenses that we believe varies with local area wages.
Capital-related expenses are affected in some proportion by local area labor costs (such as construction worker wages) that are reflected in the price of the capital asset. However, many other inputs that determine capital costs are not related to local area wage costs, such as interest rates. Thus, it is appropriate that capital-related expenses would vary less with local wages than would the operating expenses for ESRD facilities. The 46 percent figure is based on regressions run for the Prospective Payment System for Inpatient Hospital Capital-Related Costs in 1991 (56 FR 43375).
We use a similar methodology to calculate capital-related expenses for the labor-related shares for rehabilitation facilities, psychiatric facilities, long-term care facilities, and SNFs. (See Rehabilitation Facility Prospective Payment System for FY 2006, Part II (70 FR 30233) and Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities-Update (66 FR 39585)).
Table 26 provides a comparison of the current and proposed labor/nonlabor portions of the ESRD base composite rate.
|Base Composite Rate||$132.41||$128.35|
|Current Labor Share||48.70||52.17|
|Current NonLabor Share||83.71||76.18|
|Proposed Labor Share (53.711 percent)||71.12||68.94|
|Proposed NonLabor Share||61.29||59.41|
As indicated earlier in this discussion, the ESRD market basket was derived from CY 1997 data. As with other payment systems, we would propose updating the labor share of the composite payment when the components of the ESRD market basket are rebased to reflect more recent data.
g. Implementation of Revised Composite Wage Indexes
In the section below, we explain how each ESRD facility's new composite payment rate would be determined to reflect the proposed 2 year transition, based on section 623(d)(1) of the MMA's requirement that the application of any revised geographic index be phased in over a multi-year period.
(1) Hospital Data Used
In this proposed rule, for purposes of adjusting the labor-related portion of the ESRD composite rate beginning January 1, 2006, we propose to use acute care hospital inpatient wage index data. This data was generated from cost reporting periods beginning FY 2002, and is the most recent complete data available.
To determine the applicable ESRD wage index values, we are proposing to use the acute care hospital inpatient wage data without regard to any approved geographic reclassification under section 1886(d)(8) or (d)(10) of the Act, which only applies to hospitals that are paid under the IPPS. We note this policy is consistent with the area wage adjustments used in all other non-acute care facility PPSs (such as, SNFs, IPPSs, HHAs, and IRFs).
The proposed wage index values that would be applicable to the ESRD composite rate for services furnished on or after January 1, 2006, are shown in Tables 27 and 28 in this proposed rule.
(2) Labor Market Areas With No Hospital Wage Data
In adopting OMB's CBSA designations, we identified a small number of ESRD facilities in both urban and rural geographic areas where there were no hospitals, and, thus, no hospital wage index data on which to base the calculations of the FY 2006 ESRD wage index. The first situation is rural Massachusetts. Because there is no reasonable proxy for rural data within Massachusetts, we are proposing to use last year's acute care hospital wage index value for rural Massachusetts.
The second situation involves ESRD facilities in urban areas in Hinesville, GA (CBSA 25980) and Mansfield, OH (CBSA 31900). We propose to use a wage index based on the wage indexes in all of the other urban areas within the state to serve as a reasonable proxy for the urban areas without hospital wage index data. Specifically, we are proposing to use the average wage index for all urban areas within the State as the urban wage index value for purposes of the ESRD wage index for these areas. We solicit comments on these approaches to calculating the wage index values for areas without hospitals (and, thus, without hospital wage data) for FY 2006 and subsequent years.
(3) Use of Floor/Ceiling Values
As discussed in this preamble, the current wage index values applied to the labor share of the ESRD composite payment rate are restricted at the high and low ends with a floor of 0.9000 and a cap of 1.3000. The effects of these restrictions have been to overpay facilities in low wage areas and underpay facilities in high wage areas. The floor and cap were originally intended to remain in effect only until the transition from use of BLS wage date to hospital wage data ended. However, since the transition was never completed because of the statutory restrictions discussed above in this Start Printed Page 45799preamble, the floor and cap have remained in effect since 1983.
The basis for the 1.3000 wage index cap was to ensure that we did not pay any more than the allowable reasonable charge per treatment that was in effect before the composite payment rate system was implemented. Since the allowable reasonable charge screen no longer has any relevance to the current composite rate, and because of the effect it has had on restricting payment in high cost wage areas, we are proposing to eliminate the wage index cap.
However, because of the potential adverse impact that removing the wage index floor could have on access to dialysis for ESRD beneficiaries, we are proposing to maintain a wage index floor at this time. We note that when we established the 0.9000 floor beginning in 1983, it was intended that the floor would be phased out by the end of the transition. Because the floor has been in place for so long, we are concerned that eliminating the floor entirely could decrease payments to facilities in some areas significantly. However, we believe that a floor of 0.9000 may be too high under the proposed revision to the labor market areas, since a substantial number of wage areas (172 out of 481 wage areas) have wage index values less than 0.9000. The current wage areas used for adjusting composite rate payments have only 83 areas with wage index values below 0.9000.
Given that the distribution of wage index values has changed so significantly, we are proposing to reduce the floor to 0.8500 for CY 2006 and to 0.8000 for CY 2007 as we transition to the new geographic areas and wage indexes. This would result in application of the wage index floor to 17.7 percent of facilities that would otherwise have been subject to the current 0.9000 floor in CY 2006 and to 10.0 percent of facilities in CY 2007. It would also protect 86 geographic areas at a floor of 0.8500 in CY 2006 and 36 geographic areas at a floor of 0.8000 in CY 2007.
Although we are proposing to maintain a wage index floor through CY 2007, our goal is to eliminate the wage index floor in the future. Therefore, for CY 2008 we would re-evaluate the need for continuing the floor. We are soliciting comment on this issue, especially in light of the fact the any wage index changes must be budget neutral for aggregate payments to facilities.
(4) Transition Period
Section 623(d) of MMA added section 1881(b)(12)(D) of the Act which requires that any revisions to the geographic adjustments applied to the composite payment rate must be phased-in over a multiyear period. In determining the best approach to phasing-in the proposed new wage index adjustments, we considered not only the immediate impact on payments from revising the wage index values, but also the impact on payments over time because of our inability to update the wage index. Facilities in areas where wages have increased at a higher rate than the national average may have been disadvantaged by the continued use of outdated wage data and geographic designations to adjust the composite payment rate.
With both of these considerations in mind, we are proposing a two-year transition under which facilities would be paid the higher of the new wage-adjusted composite rate, or a 50-50 blend of the current wage adjusted composite rate and the new wage-adjusted composite rate. This proposed transition would allow facilities that may have been disadvantaged under the current wage index adjustment to move immediately to the new wage adjustment. It also provides for a reasonable transition period for other facilities. Given the age of the current wage index adjustments, we believe it is appropriate to move as quickly as possible to the revised updated wage adjustments. Since we are proposing to maintain the wage index floor during the transition period, we believe the overall impact to facilities will be mitigated. Also, as discussed in the following section, the proposed budget neutrality adjustment will ensure that the level of aggregate payments to ESRD facilities is maintained. We note that our proposal to allow some facilities to move directly to the new wage-adjusted composite rate will have some impact on the level of the budget neutrality adjustment. However, we estimate that the overall effect on total payments to facilities would not be significant. For example, the impact on aggregate payments to rural facilities would be a decrease of about 0.2 percent and an increase of about 0.1 percent for urban facilities. This occurs because all of the facilities that are currently subject to the 1.300 wage index cap are located in urban areas.
We also considered alternative approaches for transitioning facilities to the proposed updated wage adjustments. Another approach would be to apply the proposed 50-50 transition to all facilities, whether or not they do better using the updated wage index adjustment. This approach would treat all facilities equally for transition purposes, but would mean that those facilities that are currently underpaid because of the current outdated wage index adjustment would have to wait until the transition was completed to receive the higher payment to which they are entitled.
An alternative to the proposed two-year transition would be to adopt a three-year transition. This would allow facilities that would receive lower payments using the revised wage adjustment to have an additional year to adapt to the lower payment amount. This approach, if coupled with allowing facilities that do better to move immediately to the new wage index, would have a more significant impact on the budget neutrality adjustment required by MMA. (See budget neutrality discussion below.).
We are specifically seeking comments on the proposed transition or any of the alternative approaches mentioned above.
(5) ESRD Wage Index Budget Neutrality
Section 623(d) of MMA amended section 1881(b)(12)(E)(i) of the Act which 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 2006 should be the same as aggregate payments would have been if we had not made any changes to the geographic adjusters. In order to achieve budget neutrality, we are proposing to apply a budget neutrality adjustment factor directly to the revised ESRD wage index values, rather than applying the adjustment to the base composite payment rates. For payment purposes, we believe this is the simplest approach since it allows us to maintain a base composite rate for hospital-based facilities and one for independent facilities during the transition from the current wage adjustments to the revised wage adjustments.
In order to compute the proposed wage index budget neutrality adjustment factor, we used treatment counts from the CY 2004 billing data and facility-specific 2005 composite payment rates. We note that this file is currently only about 85 percent complete. For the final rule, we expect to use the most complete CY 2004 file available. Using the CY 2004 billing data, we first computed the estimated total dollar amount that ESRD facilities would have received in CY 2006 had there been no changes to the ESRD wage index. This amount becomes the estimated target amount of expenditures for all ESRD facilities. Then we Start Printed Page 45800computed the estimated dollar amount that would be paid to the same ESRD facilities using the revised ESRD wage index. After comparing these two dollar amounts, we calculate an adjustment factor to the ESRD wage index as the factor that when multiplied by the revised ESRD wage index will result in the target amount of expenditures for all ESRD facilities. Since the revised wage index values are only applied to the labor-related portion of the composite payment rate, we computed the adjustment based on that proportion (that is, 53.711 percent). We applied the estimated budget neutrality adjustment factor to the revised wage index values and then simulated payments for CY 2006 to ensure that estimated aggregate payments to ESRD facilities would remain budget neutral. This proposed adjustment factor would be 1.023024.
Each ESRD wage index value has been adjusted by this factor to establish the budget neutral wage index values that we propose to use to adjust the labor portion of the composite payment rate beginning January 1, 2006. (See Tables 27 and 28.) By using these adjusted ESRD wage index values, the estimated aggregate payments to ESRD facilities will meet the estimated target expenditure amount.
This calculation becomes more complex because of our proposed transition policy. Under that policy an ESRD facility that would receive a higher composite rate payment using the new geographic adjustment would receive 100 percent of that rate in the first year of transition. However, if an ESRD facility's composite rate using the new geographic adjustment is less than its current rate, then that facility will receive 50 percent of the composite rate payment it would have received using the current wage index and 50 percent of the composite rate using the revised wage index. To account for the differential payments, we compare the target amount of expenditures for all ESRD facilities in an iterative fashion until the time that the ESRD wage index adjustment factor would result in the target amount of expenditures for all ESRD facilities. This is shown in column 4 of Table 37 in section V. (Regulatory Impact Analysis) of this proposed rule. In aggregate the change to all ESRD facilities would be 0.0 percent. The distributive effect of the revised ESRD wage index can be seen in the various impact table groupings in column 4 of Table 37 in section V. of this proposed rule.
Another element of the proposed transition policy would be a proposed wage index floor of 0.8500. Using the method described above to compute the budget neutrality factor, makes it necessary to apply the budget neutrality factor to this floor which would result in a proposed adjusted floor of 0.8696.
(6) Transition Examples
In the following examples, we show the application of revised wage adjusted composite payment rates during the proposed two year transition period:
- Example 1—Neighborhood Dialysis Center is an independent dialysis facility located in Baltimore County, Maryland. As the Crosswalk Table (see addendum F) reveals, Baltimore County was previously classified as part of the Baltimore MSA, and is still classified as an urban county under the new CBSA classification system. The current wage-adjusted composite payment rate for Neighborhood Dialysis Center is $134.93.
Because Neighborhood Dialysis Center is located within the Baltimore-Towson MD CBSA (code 12580), its new wage index, which has been adjusted for budget neutrality, is 1.0135. Applying the wage index of 1.0135 to the revised labor-related component of the base composite rate for independent facilities shown in Table 26, yields a labor adjusted payment rate of $129.28.
($68.94 × 1.0135) + $59.41 = $129.28
This labor adjusted payment rate of $129.28 is less than the wage-adjusted composite rate of $134.93 currently applicable to Neighborhood Dialysis Center. In accordance with our proposed two year transition, this facility would receive a wage-adjusted composite payment rate beginning January 1, 2006 equal to 50 percent of its current wage-adjusted rate plus 50 percent of its new wage-adjusted rate. The CY 2006 blended wage-adjusted rate for this facility would be $132.11.
($0.50 × $134.93) + (0.50 × $129.28) = $132.11
The 8.9 percent drug add-on adjustment and relevant case-mix adjustments (related to the budget neutrality adjustment) would be applied to this blended rate.
- Example 2—Serve U Well is a hospital-based dialysis facility located in Morrow County, Ohio. The Crosswalk table (see Addendum F) reveals that Morrow County was previously classified as rural, but is now classified urban as part of the Columbus, OH CBSA, code 18140. The new CBSA wage index applicable to Serve U Well, adjusted for budget neutrality, is 1.0077. Applying the wage index of 1.0077 to the revised labor related component of the base composite rate for hospital-based facilities shown in Table 26 yields a wage-adjusted composite rate of $132.96.
($71.12 × 1.0077) + $61.29 = $132.96
Serve U Well's current rural Ohio wage-adjusted composite payment rate is $128.66. Because the revised wage-adjusted composite payment rate of $132.96 is greater than $128.66, Serve U Well would receive 100 percent of its new wage-adjusted composite payment rate of $132.96 beginning January 1, 2006.
As in the previous example, the 8.9 percent drug add-on adjustment and relevant case-mix adjustments (related to the budget neutrality adjustment) would be applied to this new wage-adjusted composite rate.
(7) Frequency of Update
Section 623(d)(1) of the MMA provides that any revised wage index used in connection with the composite payment rates must be phased-in over a multiyear period. We are proposing a two-year transition period to the new wage indexes based on CBSAs. An issue remains as to how frequently the new wage index values should be updated to reflect changes in area wage levels. These changes would be detected through our receipt of hospital wage and employment data obtained from the Medicare hospital cost reports subsequent to FY 2005. In order to keep payments to ESRD facilities as up-to-date as possible, we propose to update the wage index on an annual basis, as part of the overall ESRD payment update.
(8) Wage Index Table
The following two tables show the proposed ESRD wage index for urban areas (Table 27) and rural areas (Table 28).Start Printed Page 45801 Start Printed Page 45802 Start Printed Page 45803 Start Printed Page 45804 Start Printed Page 45805 Start Printed Page 45806 Start Printed Page 45807 Start Printed Page 45808 Start Printed Page 45809 Start Printed Page 45810 Start Printed Page 45811 Start Printed Page 45812 Start Printed Page 45813 Start Printed Page 45814 Start Printed Page 45815 Start Printed Page 45816 Start Printed Page 45817 Start Printed Page 45818 Start Printed Page 45819 Start Printed Page 45820 Start Printed Page 45821 Start Printed Page 45822 Start Printed Page 45823 Start Printed Page 45824 Start Printed Page 45825 Start Printed Page 45826 Start Printed Page 45827 Start Printed Page 45828 Start Printed Page 45829 Start Printed Page 45830 Start Printed Page 45831 Start Printed Page 45832 Start Printed Page 45833 Start Printed Page 45834 Start Printed Page 45835 Start Printed Page 45836 Start Printed Page 45837 Start Printed Page 45838 Start Printed Page 45839 Start Printed Page 45840
|CBSA code||Nonurban area||Wage index|
(9) Crosswalk Table
The crosswalk table for the MSA and CBSA can be found in Addendum F to this proposed rule.
4. Proposed Revisions to § 413.170 (Scope) and § 413.174 (Prospective Rates for Hospital-Based and Independent ESRD Facilities)
Under section 623 of the MMA, we propose to revise § 413.170(b) to specify that this subpart provides procedures and criteria under which only a pediatric facility may receive an exception.
Also under section 623 of the MMA, we propose to revise § 413.174 to reflect the changes in the additional payment for separately billable drugs.
5. Proposed Revisions to the Composite Payment Rate Exceptions Process
[If you choose to comment on issues in this section, please include the caption “ESRD-Exceptions Process” at the beginning of your comments.]
The current regulations at § 413.180 through § 413.192 contain the procedures for requesting exceptions to ESRD facility composite payment rates, and establish five criteria for approval of exception requests. The five criteria are as follows:
- Atypical service intensity (§ 413.184).
- Isolated essential facility (§ 413.186).
- Extraordinary circumstances (§ 413.188).
- Self-dialysis training costs (§ 413.190).
- Frequency of dialysis (§ 413.192).
Under section 1881(b)(7) of the Act, when a facility's costs were higher than the prospectively determined composite rate, we could, under certain conditions, grant the facility an exception to its composite payment rate and set a higher prospective rate. The facility had to show, on the basis of projected cost and utilization trends, that it would have an allowable cost per treatment higher than its prospective composite payment rate and that any excess costs were attributable to one or more of the specific exception criteria.
As explained further below, ESRD facility exception rates in effect on December 31, 2000, or those that were subsequently approved based on an application under section 422(a)(2)(B) of BIPA, (collectively hereinafter termed “existing exception rates”), will remain in effect under section 422(a)(2)(C) of BIPA as long as the exception rate exceeds the facility's updated composite payment rate.
Section 623 of the MMA amended BIPA to provide that the prohibition on exceptions to the ESRD composite rate does not apply to pediatric facilities that do not have an exception rate in effect on October 1, 2002. As a result, only pediatric facilities can now qualify for exception rates. We do not intend for the proposed regulation changes detailed below to limit the exception criteria under which a pediatric facility may qualify. However, we believe that pediatric facilities would not qualify for an exception under most of the existing exception criteria because of the uniqueness of their pediatric patient population (at least 50 percent) and, in the past, ESRD facilities with high percentages of pediatric patients only qualified for exceptions under the “atypical patient mix” criterion. Therefore, we are proposing to revise the regulations by eliminating the other exception criteria (Isolated essential facilities, Extraordinary circumstances, and Frequency of dialysis) specified in § 413.182(b), (c), and (e). However, we are proposing to retain the exception criterion for self-dialysis training costs under § 413.182(d) because some pediatric facilities may qualify for an exception on that basis.
a. Statutory Changes
Section 422 of BIPA 2000, prohibited us from providing for any further composite rate exceptions on or after December 31, 2000; allowed one final opportunity for ESRD facilities that did not apply for an exception during 2000 to apply for one by July 1, 2001; and provided for approved exceptions (either those in effect or those that were approved based on subsequent applications) to continue in effect as long as the rate exceeds the updated composite rate.
By prohibiting future exceptions to the composite rate for ESRD facilities, we believe the Congress intended to make the ESRD composite rate payment system more compatible with other Medicare PPSs that do not allow exceptions to their payment rates. By providing for the continuation of existing exception rates as long as those rates exceed the updated case-mix adjusted composite rate, we believe the Congress intended, in effect, to provide for the transition of most ESRD facilities to payment under the composite rate payment system.
In response to ESRD facility concerns about the current composite rate payment methodology, the Congress enacted section 623 of the MMA, which revised ESRD facility prospective composite payment rates. As a result, effective January 1, 2005, ESRD facility prospective composite payment rates were increased 1.6 percent and include a drug add-on of 8.7 percent. These increases were implemented in the PFS final rule published on November 15, 2004 (69 FR 66319-66320). Section 623 also amended section 422(a)(2) of BIPA to provide that the prohibition on exceptions to the ESRD composite rates does not apply as of October 1, 2002, to pediatric facilities that do not have an exception rate in effect on October 1, 2002—in effect restoring the exception process for pediatric facilities. Pediatric facilities are defined as “renal facilities at least 50 percent of whose patients are individuals under 18 years of age.”
Existing exception rates are protected under section 422(a)(2)(C) of BIPA 2000. Start Printed Page 45841The “protection” clause for existing exception rates provides that exception rates in effect on December 1, 2000 (or approved based on an application by July 1, 2001) shall remain in effect as long as the facility's exception rate is higher than the updated composite rate. Pediatric ESRD facility exception rates granted under the provisions of section 623 of the MMA are not subject to the “protection” clause for existing exception rates.
b. Summary of Proposed Changes to Part 413, Subpart H
As a result of the statutory changes discussed above, we are proposing to revise both the content and the organization of the existing regulations at 42 CFR part 413, subpart H (Payment for ESRD Services and Organ Procurement Costs) by limiting certain qualifications and clarifying the regulations. Currently, all of the Medicare rules for requesting exceptions to composite rate payments for covered outpatient maintenance dialysis treatments can be found at § 413.180 through § 413.192. We propose to revise the current regulations at part 413, subpart H by—
- Adding a definition of a “pediatric facility” (in accordance with section 422(a)(2)of BIPA 2000, as amended by section 623(b) of the MMA) to mean a renal facility at least 50 percent of whose patients are individuals under 18 years of age;
- Removing existing exception criteria that are no longer applicable; and
- Adjudicating future exception requests in accordance with the proposed revised exception criteria.
(1) Proposed Revisions to § 413.180 (Procedures for Requesting Exceptions to Payment Rates)
In response to the changes made by section 422 of BIPA 2000 and section 623 of MMA, we are proposing significant changes to the existing regulations at § 413.180 through § 413.192 regarding ESRD exception criteria and application procedures. Under our current regulations, existing exception rates that were approved prior to December 31, 2000 (or those approved during the window that closed on July 1, 2001) would remain in effect as long as the conditions under which the exception was granted have not changed and as long as the facility files a request to retain the exception rate with its fiscal intermediary during the 30-day period before the opening of an exception cycle (and the request is approved by the fiscal intermediary.) Even though pediatric exceptions are not subject to the “protection” clause under section 422(a)(2)(C) of BIPA, we propose to continue all exception rates in effect on the same basis. Since section 422(a)(2)(B) of BIPA allows existing exception rates to continue in effect as long as the exception rate exceeds the facility's updated composite payment rate, we expect that the facilities will compare their existing exception rates to their basic case-mix adjusted composite rates to determine which is the best payment rate for their facility. We expect that each ESRD facility would choose to be paid at the higher of its existing exception rate or its basic case-mix composite rate (which includes all the payment adjustments required under section 623 of the MMA). If the facility retains its exception rate, the rate is not subject to any of the adjustments specified in section 623 of the MMA. We believe the determination as to whether an ESRD facility's exception rate per treatment will exceed its average case-mix adjusted composite rate per treatment is best left to the affected entity. An ESRD facility that has an existing exception rate may give up that rate if it determines that it should be paid instead under the case-mix adjusted composite rate methodology.
In § 413.180, we propose to revise our regulations to provide that each ESRD facility must notify its fiscal intermediary (in writing) if it wishes to give up its exception rate. The facility would be paid based on its case-mix adjusted composite payment rate beginning thirty days after the intermediary's receipt of written notification that the facility wishes to give up its exception rate. Once a facility notifies its fiscal intermediary that it wishes to give up its exception rate, that decision could not be subsequently rescinded or reversed. We also propose to revise paragraph (b) of this section to provide that ESRD facilities that retain their existing exception rates do not need to notify their intermediaries. Therefore, we propose to remove the last sentence from paragraph (b) that states, “However, a facility may only request an exception or seek to retain its previously approved exception rate when authorized under the conditions specified in paragraphs (d) and (e) of this section.”
In the past, an ESRD facility could request an exception to its prospective composite payment rate within 180 days of the effective date of its new composite rate(s) or the date on which we opened a specific exception window. Because only pediatric facilities can now file for exceptions, we expect to receive a minimal number of exception applications. In this section, we propose to revise paragraph (d) to remove the requirement that an application for an exception be filed within the 180-day window because we believe the small volume of applications will make it administratively feasible for us to accept applications on a rolling basis. Further, we are proposing to revise paragraph (d) to state that a pediatric ESRD facility may request an exception to its composite payment rate at any time after it is in operation for at least 12 consecutive months.
We are proposing to permit pediatric ESRD facilities to file exception requests at any time. We also propose to change our regulations to continue pediatric facility exception rates granted under section 623 of the MMA (hereinafter referred to as “pediatric facility exception rates”) in the same way as existing exception rates. Specifically, we are proposing that pediatric facility exception rates would remain in effect until the facility notifies its fiscal intermediary that it wishes to give up its rate because its case-mix adjusted composite rate is higher. Therefore, we propose to eliminate paragraph (e) of this section, entitled “Criteria for retaining a previously approved exception request” and replace it with paragraph (f) (Completion of requirements and criteria) of this section. We are proposing to eliminate paragraph (e) because ESRD facilities that have an approved exception rate (either an existing exception rate or a pediatric facility exception rate) and elect to retain it do not need to notify their intermediaries. Current paragraph (f), entitled, “Documentation for a payment rate exception request”, would be redesignated as proposed paragraph (e). We are proposing to clarify existing regulations by indicating that the applicant must include in its documentation a copy of the most recent cost report filed in accordance with § 413.198. As a result of these proposed changes to this section, we propose to revise the remaining paragraphs as follows:
- Current paragraph (g) would be redesignated as proposed paragraph (f).
- Current paragraph (h) would be redesignated as proposed paragraph (g).
- Current paragraph (i) would be redesignated as proposed paragraph (h).
- Current paragraph (j) provides the period of an exception approval. We would redesignate paragraph (j) as proposed paragraph (i). We propose to revise the redesignated paragraph to state that an approved exception payment rate applies for the period from the date the complete exception request Start Printed Page 45842was filed with the facility's fiscal intermediary until thirty days after the intermediary's receipt of the facility's letter notifying the intermediary of the facility's request to give up its exception rate and become subject to the current composite payment rate methodology. Once a facility decides not to retain its current exception rate (and puts that decision in writing), that decision cannot be subsequently rescinded or reversed.
- Current paragraph (k) would be removed.
- Current paragraph (l) would be redesignated as proposed paragraph (j).
- Current paragraph (m) would be redesignated as proposed paragraph (k). In the past, a pediatric facility denied an exception rate would have to wait until a subsequent exception window opened to file a new request. We are proposing to revise redesignated paragraph (m) to state that a pediatric ESRD facility that has been denied an exception rate may immediately file another exception request. Any subsequent exception request would be required to address and document the issues cited in our denial letter.
(2) Proposed Revisions to § 413.182 (Criteria for Approval of Exception Requests)
We propose to revise this section to state that CMS may approve exceptions to a pediatric ESRD facility's prospective payment rate if the pediatric facility did not have an approved exception rate as of October 1, 2002. The proposed revised section would also state that the pediatric facility would be required to demonstrate, by convincing objective evidence, that its total per treatment costs are reasonable and allowable under the relevant cost reimbursement principles of part 413 and that its per treatment costs in excess of its payment rate would be directly attributable to any of the following criteria:
- Pediatric patient mix, as specified in § 413.184.
- Self-dialysis training costs in pediatric facilities, as specified in § 413.186.
In the future, pediatric facilities would file for an exception under the proposed revised exception criteria in revised § 413.184 (Payment exception: Pediatric patient mix) and redesignated § 413.190 (Payment exception: Self-dialysis training costs in pediatric facilities). (We are proposing to revise § 413.190 and redesignate it as § 413.186, see discussion below.).
(3) Proposed Revisions to § 413.184 (Payment Exception: Atypical Service Intensity (Patient Mix))
Because only pediatric ESRD facilities (those with at least a 50 percent patient mix) may qualify for an exception rate, we are proposing to rename § 413.184 to read, “Payment exception: Pediatric patient mix”. We also propose to revise paragraph (a) of this section to specify that to qualify for an exception to its prospective payment rate based on its pediatric patient mix, a facility would be required to demonstrate that—
- At least 50 percent of its patients are individuals under 18 years of age;
- Its nursing personnel costs are allocated properly between each mode of care;
- The additional nursing hours per treatment are not the result of an excess number of employees;
- Its pediatric patients require a significantly higher staff-to-patient ratio than typical adult patients; and
- These services, procedures, or supplies and its per treatment costs are clearly prudent and reasonable when compared to those of pediatric facilities with a similar patient mix.
The “Atypical service intensity” criterion is the one under which exceptions for facilities that treated a high proportion of pediatric patients were granted in the past. In order to receive approval for an exception rate, pediatric facilities would still need to meet many of the same criteria previously required under § 413.184 for “Atypical service intensity.”
To better match the patient listing documentation requirements to the characteristics of pediatric ESRD facilities, we are proposing to eliminate five categories currently required in § 413.184(b) (Documentation) and replace those items with a revised list. Under the proposed revised paragraph, a facility would be required to submit a listing of all outpatient dialysis patients (including all home patients) treated during its most recently completed and filed cost report (cost reporting requirements under § 413.198) showing—
- Age of patients, and the percentage of patients under the age of 18;
- Individual patient diagnosis;
- Home patients and ages;
- In-facility patients, staff assisted, or self-dialysis;
- Diabetic patients; and
- Patients isolated because of contagious disease.
(4) Proposed Removal of § 413.186 (Payment Exception: Isolated Essential Facility)
Since pediatric facilities are the only ESRD facilities that can now apply for exceptions, we are proposing to remove § 413.186 to conform with the elimination of § 413.182(b), (c) and (e) as discussed above and redesignate § 413.190 as the new § 413.186. We would also rename the section to read, “Payment exception: Self-dialysis training costs in pediatric facilities”. No further changes are proposed to § 413.186.
(5) Proposed Removal of § 413.188 (Payment Exception: Extraordinary Circumstances)
We are proposing to remove this § 413.188 to conform with the elimination of elimination of § 413.182(b), (c) and (e) as discussed above.
(6) Proposed Redesignation of § 413.190 (Payment Exception: Self-Dialysis Training Costs)
We propose to continue to recognize exceptions for self-dialysis training costs under § 413.190 only for pediatric facilities, and to rename this section, “Payment exception: Self-dialysis training costs in pediatric facilities.” We are proposing to change the name to conform with the current statute that prohibits exceptions for facilities other than pediatric ESRD facilities. We are also proposing to redesignate this section as § 413.186. (As discussed above, we are proposing to remove existing § 413.186.) The current regulatory language in § 413.190 (proposed to be redesignated as § 413.186) would remain unchanged.
(7) Proposed Removal of § 413.192 (Payment Exception: Frequency of Dialysis)
We are proposing to remove this section to conform with the elimination of § 413.182(b), (c) and (e) as discussed above.
H. Payment for Covered Outpatient Drugs and Biologicals
[If you choose to comment on issues in this section, please include the caption “Payment for Covered Outpatient Drugs and Biologicals” at the beginning of your comments.]
Medicare Part B covers a limited number of prescription drugs and biologicals. For the purposes of this proposed rule, the term “drugs” will hereafter refer to both drugs and biologicals. Medicare Part B covered drugs not paid on a cost or prospective Start Printed Page 45843payment basis generally fall into three categories:
- Drugs furnished incident to a physician's service.
- DME drugs.
- Drugs specifically covered by statute (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 dispensing fee for inhalation drugs, a furnishing fee for blood clotting factors, and a supplying fee for certain Part B drugs.
This section of the preamble discusses proposed changes and issues related to the determination of the payment amounts for covered Part B drugs and the separate payments allowable for dispensing inhalation drugs, furnishing blood clotting factor, and supplying certain other Part B drugs. This section of the preamble also discusses proposed changes in how manufacturers calculate and report ASP data to us.
1. ASP Issues
[If you choose to comment on issues in this section, please include the caption “ASP Issues” at the beginning of your comments.]
Section 303(c) of the MMA amended Title XVIII of the Act by adding new section 1847A. This new section establishes the use of the ASP methodology for payment for most drugs and biologicals not paid on a cost or prospective payment basis furnished on or after January 1, 2005. The ASP reporting requirements are set forth in section 1927(b) of the Act. Manufacturers must submit ASP data to us quarterly. The manufacturers' submissions are due to us not later than 30 days after the last day of each calendar quarter. The methodology for developing Medicare drug payment allowances based on the manufacturers' submitted ASP data is specified in the regulations in part 414, subpart K. Based on the data we receive, we update the Part B drug payment amounts quarterly.
In this section of the preamble, we discuss issues and propose changes related to the methodology manufacturers use to apply the estimate of lagged price concessions in the ASP calculation. We also discuss the submission of ASP data, including WAC, and our intent to propose, in a separate notice, the collection of additional information from manufacturers, using a revised reporting format, to ensure more accurate calculation of the Medicare payment amounts.
Also, included in this section is a discussion of the weighting methodology we follow to establish the Medicare payment amounts using the ASP data.
a. Estimation Methodology for Lagged Price Concessions
Section 1847A(c)(5)(A) of the Act states that the ASP is to be calculated by the manufacturer on a quarterly basis. As a part of that calculation, manufacturers are to take into account price concessions such as—
- Volume discounts.
- Prompt pay discounts.
- Cash discounts.
- Free goods that are contingent on any purchase requirement.
- Rebates (other than rebates under the Medicaid drug rebate programs).
If the data on these price concessions are lagged, then the manufacturer is required to estimate costs attributable to these price concessions. Specifically, the manufacturer sums the price concessions for the most recent 12-month period available associated with all sales subject to the ASP reporting requirements. The manufacturer then calculates a percentage using this summed amount as the numerator and the corresponding total sales data as the denominator. This results in a 12-month rolling average price concession percentage that is applied to the total in dollars for the sales subject to the ASP reporting requirement for the quarter being submitted to determine the price concession estimate for the quarter. The methodology is specified in § 414.804(a)(3) and was published in the Manufacturer Submission of Manufacturer's ASP Data for Medicare Part B Drugs and Biologicals final rule published on September 16, 2004 (69 FR 55763).
Our goal is to ensure that the ASP data submitted by manufacturers reflects an appropriate estimate of lagged price concessions. Since publication of the September 16, 2004 final rule, we have identified a refinement of the ASP calculation and lagged price concession estimation methodology related to chargebacks that we believe will improve the accuracy of the estimate. As a result, we are proposing to clarify the ASP calculation in this proposed rule.
b. Price Concessions: Wholesaler Chargebacks
Wholesaler chargebacks are a type of price concession, generally paid on a lagged basis, that apply to sales to customers (for example, physicians) via a wholesaler (or distributor). Wholesaler chargeback arrangements may vary in scope and complexity. However, simply put, the wholesaler administers contract prices negotiated between the manufacturer and end purchasers (for example, physician or other health care providers), or otherwise implements pricing terms established by the manufacturer (for example, pricing that varies by type of purchaser or class of trade). The wholesaler charges the customer a certain price and charges back the manufacturer an agreed upon amount for the purposes of making up the difference between the wholesaler's price (for example, WAC) and the customer's price.
Under the current estimation methodology for lagged price concessions, total lagged price concessions, including lagged wholesaler chargebacks, for the 12-month period are divided by total sales for that same period to determine a ratio that is applied to the total sales for the reporting period. The ratio of lagged price concessions to sales is calculated over all sales, both indirect sales (sales to wholesalers and distributors and other similar entities that sells to others in the distribution chain) and direct sales (sales directly from manufacturer to providers, such as hospitals or HMOs). To the extent that the relationship between total dollars for indirect sales and total dollars for all sales is different for the reporting quarter and the 12-month period used, the current ratio methodology for estimating lagged price concessions may overstate or understate wholesaler chargebacks expected for the reporting period. A more accurate estimation of lagged price concessions would minimize the effect of quarter to quarter variations in the relationship between indirect sales and all sales.
As a result, we propose to revise § 414.804 to require manufacturers to calculate the ASP for direct sales independently from the ASP for all other sales subject to the ASP reporting requirement (indirect sales). Then, the manufacturer would calculate a weighted average of the direct sales ASP and the indirect sales ASP to submit to us. For example, for a National Drug Code (NDC), the manufacturer has 100 direct sales and 200 indirect sales. Taking into account applicable price concessions for direct sales and those for indirect sales, including use of the ratio methodology for estimating lagged price concessions, the direct sales ASP is $25, and the indirect sales ASP is $27. Start Printed Page 45844The weighted average of the ASPs would be as shown in this example.
We believe the weighted average of direct sales ASP and indirect sales ASP improves the overall accuracy of the ASP calculation, particularly for NDCs with significant fluctuations in the percentage of sales that are direct sales.
We are proposing conforming changes to § 414.804 for the methodology for calculating the lagged price concessions percentage. We are also proposing to revise the regulation text to clarify that the estimation ratio methodology relates to lagged price concessions. We also are proposing to define direct sales and indirect sales in § 414.802, and seek to develop definitions for these terms so that all sales subject to the ASP reporting requirement are included under these two definitions.
We seek comments about the advisability of requiring manufacturers to calculate the ASP for direct sales, including price concessions, independently from the ASP for indirect sales and then calculating a weighted average of these ASPs to submit to CMS. We also seek comments about the potential affects of this approach on the ASP as well as our proposed definitions of direct sales and indirect sales (that is, that direct sales are from manufacturer to provider or supplier, and indirect sales are the remaining sales subject to the ASP reporting requirement).
c. Determining the Payment Amount Based on ASP Data
We have received inquiries related to the formula we use to calculate the payment amount for each billing code. We posted a Frequently Asked Question on this subject on our Web site (http://www.questions.cms.hhs.gov) earlier this year. We are including this section in this preamble to ensure greater public access to this information. Our approach to calculating the payment amounts is as follows:
- For each billing code, we calculate a weighted ASP using the ASP data submitted by manufacturers.
- Manufacturers submit ASP data at the 11-digit NDC level.
- Manufacturers submit the number of units of the 11-digit NDC sold and the ASP for those units.
- We convert the manufacturers' 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. For example, a manufacturer sells a box of 4 vials of a drug. Each vial contains 20 milligrams (mg). The billing code is per 10 mg. The conversion formula is: Manufacturer's ASP/[(4 vials × 20 mg)/10 mg = 8 billable units per NDC].
- Then, the ASP per billing unit and the number of units (11-digit NDCs) sold for each NDC assigned to the billing code are used to calculate a weighted ASP for the billing code. We sum the ASP per billing unit times the number of 11-digit NDCs sold for each NDC assigned to the billing code, and then divide by the total number of NDCs sold. The ASP per billing unit for each NDC is weighted equally regardless of package size.
d. Reporting WAC
In response to manufacturer's questions about reporting WAC, we posted a Frequently Asked Question on this subject on our Web site (http://www.questions.cms.hhs.gov) last year. In the posting on the Web site, we state that manufacturers must report the WAC for a single source drug or biological if it is less than the ASP for a quarter and in cases where the ASP during the first quarter of sales is unavailable. Upon further review, we have determined that the WAC must be reported each quarter if required for payment to be made under section 1847A of the Act, in addition to the ASP, if available.
Section 1927(b)(3)(A)(iii) of the Act specifies the ASP data manufacturers must report. Section 1927(b)(3)(A)(iii)(II) of the Act specifies that the manufacturer must report the WAC, if it is required in order for payment to be made under section 1847A of the Act. Under section 1847A of the Act, the payment is based on WAC (as opposed to ASP) in the following cases:
- For a single source drug or biological, when the WAC-based calculated payment is less than the ASP-based calculated payment for all NDCs assigned to such drug or biological product. (See section 1847A(b)(4) of the Act.)
- During an initial period in which data on the prices for sales for the drug or biological is not sufficiently available from the manufacturer to compute an ASP. (See section 1847A(c)(4) of the Act.)
In these instances, we must make the determination of whether the payment amount is based on ASP or WAC. Therefore, WAC is required for payment in all of these instances.
On April 6, 2004, we published the ASP reporting regulations in the Manufacturer Submission of Manufacturer's ASP Data for Medicare Part B Drugs and Biologicals interim final rule with comment (66 FR 17935-17941). In that interim final rule, we specified that manufacturers must report the ASP data to us using the template provided in Addendum A of that interim final rule. That template included the manufacturer's name, NDC, manufacturer's ASP, and number of units. The WAC was not included in the template. Therefore, in order to report the WAC, manufacturers have used several approaches. Some manufacturers have appended the WAC to the template; others have noted it in their written cover letters to their submissions. Still others have sent the WAC to us using electronic mail. Because a place for the WAC was not included in the template, it is possible that manufacturers may not have submitted the WAC even though it was required. On a few occasions, we have contacted the manufacturer to obtain the WAC when it was needed to determine the payment amount. Therefore, because of the requirement to submit the WAC and the confusion manufacturers have experienced in submitting the WAC data we will propose, in a separate information collection notice, to revise the reporting template to include a place to report WAC. See the discussion in section e. below for further details about potential changes to the reporting format.
To clarify the instances when manufacturers are required to report the WAC, in this proposed rule we are clarifying that manufacturers are required to report quarterly both the ASP and the WAC for NDCs assigned to a single source drug or biological billing code. Manufacturers are also required to report the WAC for use in determining the payment during the initial period under section 1847A(c)(4) of the Act. That is, the WAC is reported for the reporting period prior to reporting the ASP based on a full quarter of sales.
Because the WAC could change during a reporting period, we are proposing that in reporting the WAC, manufacturers would be required to report the WAC in effect on the last day of the reporting period.
e. Revised Format for Submitting ASP Data
As specified in the April 6, 2004 interim final rule, manufacturers are required to report the ASP data to us in Microsoft Excel using the specified template. As discussed above, the current template does not provide adequate instructions for manufacturers to report both the ASP and the WAC. Therefore, in a separate information collection notice that will be published at or about the same time as this Start Printed Page 45845proposed rule, we will propose to revise the ASP reporting format to accommodate submission of both the ASP and the WAC. We will also propose to collect the following additional information:
- Drug name.
- Package size (strength of product, volume per item, and number of items per NDC).
- Expiration date for last lot manufactured.
- Date the NDC was first marketed (for products first marketed on or after October 1, 2005).
- Date of first sale for products first sold on or after October 1, 2005.
We are mentioning the separate information collection notice in this proposed rule in order to broaden public awareness of the separate notice. The separate notice will be posted at http://www.cms.hhs.gov/regulations/pra/. The current reporting format is an approved information collection. The OMB control number is 0938-0921.
f. Limitations on ASP
Section 1847A(d)(1) of the Act states that “the Inspector General of the Department of Health and Human Services shall conduct studies, which may include surveys to determine the widely available market prices 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 widely available market price for such drugs and biologicals (if any); and
- The average manufacturer price (as determined under section 1927(k)(1) for such drugs and biologicals.”
Section 1847A(d)(3)(A) of the Act states that “The Secretary may disregard the ASP for a drug or biological that exceeds the widely available market price or the average manufacturer price for such drug or biological by the applicable threshold percentage (as defined in subparagraph (B)).” The applicable threshold is specified as 5 percent for CY 2005. For CY 2006 and subsequent years, section 1847A(d)(3)(B)of the Act establishes that the applicable threshold is “the percentage applied under this subparagraph subject to such adjustment as the Secretary may specify for the widely available market price or the average manufacturer price, or both.”
For CY 2006, we propose to specify an applicable threshold percentage of 5 percent for both the widely available market price (WAMP) and average manufacturer price (AMP). The OIG is conducting its first review. However, we did not receive the OIG's final report in time for consideration before developing this proposed rule. Thus, we believe that continuing the CY 2005 threshold percentage applicable to both the WAMP and AMP is most appropriate.
2. Payment for Drugs Furnished During CY 2006 in Connection With the Furnishing of Renal Dialysis Services if Separately Billed by Renal Dialysis Facilities
[If you choose to comment on issues in this section, please include the caption “Payment for ESRD Drugs” at the beginning of your comments.]
Section 1881(b)(13)(A)(iii) of the Act indicates that payment for a drug furnished during CY 2006 and subsequent years in connection with the furnishing of renal dialysis services, if separately billed by renal dialysis facilities, will be based on the acquisition cost of the drug as determined by the OIG report to the Secretary as required by section 623(c) of the MMA or, the amount determined under section 1847A of the Act for the drug, as the Secretary may specify. In the report entitled, “Medicare Reimbursement for Existing End Stage Renal Disease Drugs,” the OIG obtained the drug acquisition costs for the top 10 ESRD drugs for the 4 largest ESRD chains as well as a sampling of the remaining independent facilities. Based on the information obtained from this report, for CY 2005, payment for the top 10 ESRD drugs billed by freestanding facilities and payment for EPO billed by hospital-based facilities was based on acquisition costs as determined by the OIG. Due to the lag in the data obtained by the OIG, we updated the acquisition costs for the top 10 ESRD drugs to 2005 by the PPI. The separately billable ESRD drugs not contained in the OIG report were paid at the ASP +6 percent for freestanding facilities. The payment allowances for these remaining drugs were updated on a quarterly basis during 2005.
Section 1881(b)(13)(A)(iii) of the Act gives the Secretary the authority to establish the payment amounts for separately billable ESRD drugs beginning in 2006 based on acquisition costs or the amount determined under section 1847A of the Act. For reasons discussed below, we do not believe that it is appropriate to continue to use 2002 acquisition costs updated by the PPI for another year as the basis for payment. The acquisition costs are based on 2002 data which, despite updates by the PPI, do not necessarily reflect current market conditions. As discussed below, the chances increase that Medicare payments will either overpay or underpay for drugs, thus, resulting in payments that are inconsistent with the goal of making accurate payments for drugs. We also considered whether actual acquisition cost data could be periodically updated. However, we do not believe that it would be feasible to base Medicare payments over the long term on continually acquiring data on actual acquisition costs from ESRD facilities. This approach would provide incentives for manufacturers and facilities to increase acquisition costs without constraint. It also would not necessarily provide data regarding current market rates. Therefore, we believe it is appropriate for the payment methodology for all ESRD drugs when separately billed by freestanding ESRD facilities during CY 2006 to be paid the amount determined under section 1847A of the Act. This payment amount is the ASP +6 percent rate.
In reaching the conclusion about establishing payment using the amount determined under section 1847A of the Act rather than actual acquisition costs, we analyzed the ASP +6 percent payment rates for all separately billable ESRD drugs, including the top 10, for both the first and second quarters of CY 2005. (We note that the ASP payment rates are updated quarterly. The new rates are made available each quarter at the following Web site: http://www.cms.hhs.gov/providers/drugs/asp.asp.). Additionally, we analyzed the CY 2005 payment rates, based on OIG data, updated by the PPI to reflect inflation as well as the potential CY 2006 payment rates, based on the OIG data, also updated by the PPI to reflect inflation for the top 10 separately billable ESRD drugs. As indicated in the “Top 10 Separately Billable ESRD Drugs” chart, the payment rates for the top 10 separately billable ESRD drugs based on the acquisition costs (as determined by the OIG), updated by the PPI would increase by 7 percent for CY 2006. In contrast, the percentage change in the ASP +6 percent payment rates for the top 10 separately billable ESRD drugs based on the first and second quarters of CY 2005 varied on a drug-by-drug basis. Start Printed Page 45846
|Drug name||2005 Payment rate||Estimated 2006 payment rate based on OIG data (2003 data inflated 16.2% to 2006 by the estimated PPI)||Estimated 2006 payment rate based on ASP+6 (2nd quarter 2005 rates)||Percent change in ASP +6 rates between 1st quarter and 2nd quarter 2005 (percent)|
|Sodium Ferric Gluconate||$4.950||$5.290||$4.726||−2|
However, the percentage increases or decreases in the ASP +6 percent payment rates are relatively minimal. For example, the payment allowance for Alteplase, recombinant, J2997, decreased from first quarter 2005 to second quarter 2005 by less than 1 percent. Based on an analysis of the 2002 acquisition costs for the top 10 separately billable ESRD drugs, when updated by the PPI for CY 2006, it is our contention that relying on 2002 acquisition cost data updated for a number of years as would be necessary to establish a payment amount for 2006 is not the most appropriate option for determining Medicare payment rates when other drug-specific pricing is available. Further, we contend that relying on the ASP +6 percent as the payment rate for all separately billable ESRD drugs when billed by freestanding ESRD facilities for CY 2006 is a more reliable indicator of the market transaction prices for these drugs. The ASP is reflective of manufacturer sales for specific drug products and is more indicative of market and sales trends for those specific products than the 2002 OIG acquisition cost data.
We also note MedPAC's recommendation in its June 2005 report that the ASP be the basis of payment for all separately billable ESRD drugs provided by both freestanding and hospital-based facilities in CY 2006 (MedPAC, “Report to the Congress: Issues in a Modernized Medicare Program,” June 2005). In making this recommendation, MedPAC states that the ASP data are more current (updated quarterly), and, thus, more likely to reflect actual transaction prices, compared with acquisition cost data which are not regularly collected by the OIG or CMS. Furthermore, the report indicated that utilizing the same payment policy for both freestanding and hospital-based facilities would ensure uniformity across the various settings irrespective of the site of care. In addition, MedPAC recommends in its report that we obtain, “* * * data to estimate hospitals' costs and Medicare's payment per unit for these drugs. No published source identifies the unit payment for these drugs because Medicare pays hospitals their reasonable costs.” MedPAC further states: “We attempted to calculate the unit payment from 2003 claims data, but the accuracy of the data fields we needed to make this calculation was unclear, particularly the number of units furnished and Medicare's payment to the hospital.” MedPAC also recommends that CMS and/or OIG collect acquisition cost data periodically in the future to gauge the appropriate percentage of ASP for the payment amount.
While we acknowledge MedPAC's recommendations, we are proposing to make payment using the ASP +6 percent methodology for all separately billed ESRD drugs furnished in freestanding facilities and for EPO furnished in hospital-based facilities. Paying for EPO furnished in hospital-based facilities using the ASP +6 percent methodology is consistent with past practices where we have paid for EPO in hospital-based facilities consistent with freestanding facilities. That is, in 2005, we paid for EPO in hospital-based facilities based on acquisition costs consistent with freestanding facilities. While we are not proposing to pay for drugs other than EPO furnished in hospital-based facilities under the ASP +6 percent methodology at this time, we are interested in moving to this approach. We believe that it is more appropriate to pay for separately billed drugs furnished in hospital-based facilities under the ASP +6 percent methodology rather than on a reasonable cost basis, as we believe that there should be consistency across sites in payment for the same item or service. However, we have not made this proposal due to the lack of data regarding drug costs and expenditures associated with hospital-based ESRD payments. We have discussed a potential approach to making estimates of these costs and units. We seek comments about the estimation method discussed in section II.G. of this proposed rule or other methods or data that could be used.
Therefore, for CY 2006, we propose that payment for a drug furnished in connection with renal dialysis services and separately billed by freestanding renal dialysis facilities and EPO billed by hospital-based facilities be based on section 1847A of the Act. We propose to update the payment allowances quarterly based on the ASP reported to us by drug manufacturers. We seek comment on our proposed decision to revise the payment methodology for separately billable ESRD drugs. While we have not proposed to pay hospital-based facilities under the ASP +6 percent methodology for 2006, we seek comments about the potential method we have discussed to accomplish this policy. We also seek comment on how this proposed decision could affect beneficiaries or providers access to these drugs.
3. Clotting Factor Furnishing Fee
[If you choose to comment on issues in this section, please include the caption “Clotting Factor” at the beginning of your comments.]
Section 303(e)(1) of the MMA added section 1842(o)(5) of the Act which requires the Secretary, beginning in CY 2005 to pay a furnishing fee, in an amount the Secretary determines to be appropriate, to hemophilia treatment Start Printed Page 45847centers and homecare companies for the items and services associated with the furnishing of blood clotting factor. In the Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2005 final rule, published November 15, 2004 (69 FR 66236) we established a furnishing fee of $0.14 per unit of clotting factor for CY 2005. Section 1842(o)(5) of the Act specifies that the furnishing fee for clotting factor for years after CY 2005 will be equal to the fee for the previous year increased by the percentage increase in the consumer price index (CPI) for medical care for the 12-month period ending with June of the previous year. The CPI data for the 12-month period ending in June 2005 is not yet available. As a point of reference, we note that the percent change in the CPI for medical care for the 12-month period ending June 2004 was 5.1 percent. In the final rule, we will include the actual figure for the percent change in the CPI medical care for the 12-month period ending June 2005, and the updated furnishing fee for CY 2006 calculated based on that figure.
4. Payment for Inhalation Drugs and Dispensing Fee
[If you choose to comment on issues in this section, please include the caption “Inhalation Drugs and Dispensing Fee” at the beginning of your comments.]
Medicare Part B pays for inhalation drugs administered via a nebulizer, a covered item of DME. Medicare Part B pays for DME and associated supplies, including inhalations drugs that are necessary for the operation of the nebulizer. Metered-dose inhalers (MDIs) are another mode of delivery for inhalation drugs. MDIs are considered disposable medical equipment (for which there is no current Medicare Part B benefit category), and consequently are not currently covered under Part B. Beginning in CY 2006, coverage for MDIs will generally be available through the Medicare Part D benefit. This represents an important expansion in the options available to beneficiaries for inhalation drug coverage under Medicare. With Medicare coverage of both delivery methods available, we anticipate that physicians will choose the option that best suits a patient's particular needs consistent with the applicable standards of medical practice. We expect that both modes of inhalation drug delivery will play an important role in the Medicare program in the years to come.
Prior to CY 2004, most Medicare Part B covered drugs, including inhalation drugs, were paid at 95 percent of the AWP. Numerous studies by the OIG and General Accounting Office (GAO) indicated that 95 percent of AWP substantially exceeded suppliers' acquisition costs for Medicare Part B drugs, particularly for the high volume nebulizer drugs, albuterol and ipratropium bromide. For example, supplier's acquisition costs were estimated to be 34 percent of AWP for ipratropium bromide and 17 percent of AWP for albuterol based on averaging results from a GAO and an OIG study. The MMA changed the Medicare payment methodology for many Part B covered drugs. As an interim step, in CY 2004, Medicare paid a reduced percentage of AWP, 80 percent of AWP in the case of albuterol and ipratropium bromide. Beginning with CY 2005, Medicare paid for nebulizer drugs at 106 percent of the ASP. The move to the ASP system represented a substantial reduction in reimbursement for the high volume nebulizer drugs.
In addition to paying for the cost of the drug itself, Medicare has paid a dispensing fee for inhalation drugs. Prior to CY 2005, Medicare paid a monthly $5 dispensing fee for each covered nebulizer drug or combination of drugs used. In the Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2005 proposed rule, published August 5, 2004, we proposed to continue to pay a dispensing fee for these drugs. In that proposed rule, we sought comment on an appropriate dispensing fee level to cover the shipping, handling, compounding, and other pharmacy activities required to get these medications to beneficiaries.
In response to last year's proposed rule, we received a number of comments that varied substantially in terms of the dispensing fee amount that commenters thought was adequate. We received comments from a retail pharmacy that indicated that a dispensing fee of five to six times the prior $5 fee was necessary to cover costs. Another retail pharmacy indicated that a dispensing fee of $25 would be an adequate amount and would be profitable.
We also received several comments that asserted that a substantially higher fee was needed and that the dispensing fee should cover a variety of services. A number of commenters referenced an August 2004 report prepared for the American Association of Homecare (AAH) by a consultant that surveyed 104 home care agencies, which indicated that in order to maintain the CY 2004 levels of service to Medicare beneficiaries and provide an operating margin of 7 percent, Medicare would have to pay a dispensing fee of $68.10 per service encounter (service encounters they estimate occur on average every 42 days). The survey included costs for a wide range of activities including activities associated with getting the drug to the beneficiary, as well as other additional services. More specifically, the AAH data included the following cost categories:
- Clinical intake.
- Establishing and revising the plan of care.
- Care coordination.
- Patient education.
- Caregiver training.
- Compliance monitoring/refill calls.
- In-home visits.
- Delivery of services.
- Other costs (not specified by AAH).
As an example, the AAH data indicated that inhalation drug suppliers spent on average about 29 minutes per new patient on patient education and caregiver training and continued to spend on average about 17 minutes per month for each established patient on patient education and caregiver training. The data also indicated that suppliers spent on average about 23 minutes per patient each month on in-home visits, with there being substantial variation in the provision of this service. A number of commenters asserted that these and other services included in the AAH data were important to the provision of inhalation drugs, and should be paid for by Medicare.
Between publication of the August 5, 2004 proposed rule and the November 15, 2004 final rule, the GAO released a report based on a survey of 12 inhalation therapy companies, representing 42 percent of the market, which indicated wide variation across companies in the patient monthly cost of dispensing inhalation drugs from a low of $7 to a high of $204. The GAO report indicated that the wide variation in supplier costs is due, in part, to variation in the services suppliers offer and that some of the costs incurred by suppliers may not be necessary to dispense inhalation drugs, for example, Start Printed Page 45848marketing, overnight shipping, and 24-hour hotlines.
In light of the substantial changes occurring in inhalation drug reimbursement in 2005, we viewed 2005 as a transitional year. With the wide variation in the reported costs and services provided by inhalation drug suppliers suggested by the comments and the GAO study, we stated in last year's final rule that we would establish an interim dispensing fee for inhalation drugs applicable for CY 2005 and reconsider the issue for CY 2006. The 2005 dispensing fee for a 30-day supply of inhalation drugs was based on the industry recommended $68 fee from AAH study, excluding certain costs that Medicare generally does not reimburse regardless of the scope of the Medicare benefit (that is, sales and marketing, bad debt, and an explicit profit margin). The resulting fee established for a 30-day supply of inhalation drugs was $57 for CY 2005. This CY 2005 fee substantially exceeded some providers' costs as reflected in a few comments on last year's proposed rule and the GAO study. For example, as noted previously, we received comments from two retail pharmacy companies indicating that a fee of $25 or a fee of five to six times the prior $5 fee was adequate to cover costs. Because the AAH study did not include cost data for a 90-day supply, we applied the methodology used in the GAO report to convert the 30-day fee to a 90-day fee. The 2005 fee established for a 90-day supply was $80. In using the AAH data to establish an interim fee for dispensing for CY 2005, we indicated in last year's final rule that we were concerned that some of the services included in the AAH study may be outside the scope of a dispensing fee and that we would consider this issue further in order to establish an appropriate dispensing fee for CY 2006.
Authority for a dispensing fee for inhalation drugs is based on section 1842(o)(2) of the Act. This section of the Act stipulates that if payment is made to a licensed pharmacy for a drug or biological under Medicare Part B, the Secretary may pay a dispensing fee (less the applicable deductible and coinsurance) to the pharmacy. The statute does not define “dispensing fee.” As noted above, the AAH data on which the 2005 dispensing fee is based includes a wide range of cost categories. The cost categories include basic pharmacy services such as delivery of drugs, as well as other services such as in-home visits. We are soliciting comments on what services appropriately fall within the scope of a dispensing fee, the cost of providing those services, and whether any of the services being provided by inhalation drug suppliers may be covered through another part of the Medicare program, such as the physician fee schedule or the DME benefit. We intend to establish a dispensing fee amount for 2006 that is adequate to cover the costs of those services that appropriately fall within the scope of a dispensing fee, and we think that it is likely that this fee amount will be lower than the 2005 level. As discussed previously, we believe that 2005 was a transition year. Payment for inhalation drugs in 2005 was reduced from a percentage of AWP to 106 percent of ASP and the 2005 dispensing fee was set at a much higher level than previously paid based on the limited information available and taking into account the transition. Additional changes will occur in 2006 because the implementation of the Medicare prescription drug benefit will expand coverage options for inhalation drugs to include metered dose inhalers under Medicare Part D. As noted above, we expect that physicians will choose the treatment option that best suits a particular beneficiary's needs and that both nebulizers and metered-dose inhalers will play an important role in the Medicare program. We do not know what the effect will be of this upcoming expansion of inhalation drug coverage options, but we believe it is important that this second transitional year be as smooth as possible. We are seeking comments on an appropriate dispensing fee level for 2006. We also seek data and information on the various services inhalation drug suppliers are currently providing to Medicare beneficiaries and the associated costs. Furthermore, we are also soliciting comments on how inhalation drug suppliers have utilized the newly available 90-day scripts in order to reduce unit shipping costs and any reasons as to why 90-day supplies may not have been utilized. We also seek information on how revised guidelines regarding the time frame for delivery of refills has affected the need for overnight delivery services. We are interested in comments that detail the extent to which suppliers have shifted their shipping to ground services.
CMS takes quality of care seriously and we have been implementing a number of quality initiatives such as the chronic care improvement program. We expect that Medicare beneficiaries receive high quality care, and we seek data and information on any efforts by inhalation drug suppliers to measure patient outcomes. Furthermore, we seek comments and additional information about what are typical dispensing costs for an efficient, high-quality supplier. Finally, we seek comment on the potential impact on beneficiaries and providers of possible changes to the inhalation drug dispensing fee in 2006, as well as the impact of the new drug benefit on inhalation drug access.
5. Supplying Fee
[If you choose to comment on issues in this section, please include the caption “Supplying Fee” at the beginning of your comments.]
Section 303(e)(2) of the MMA added section 1842(o)(6) of the Act that requires the Secretary to pay a supplying fee (less applicable deductible and coinsurance) to pharmacies for certain Medicare Part B drugs and biologicals, as determined appropriate by the Secretary. The types of Medicare Part B drugs and biologicals eligible for a supplying fee are immunosuppressive drugs described in section 1861(s)(2)(J) of the Act, oral anticancer chemotherapeutic drugs described in section 1861(s)(2)(Q) of the Act, and oral anti-emetic drugs used as part of an anticancer chemotherapeutic regimen described in section 1861(s)(2)(T) of the Act.
Beginning with CY 2005, we established a supplying fee of $24 per prescription for these categories of drugs, with a higher fee of $50 for the initial oral immunosuppressive prescription supplied in the first month after a transplant. When multiple drugs are supplied to a beneficiary, a separate supplying fee is paid for each prescription, except when different strengths of the same drug are supplied on a single day. In the November 15, 2004 final rule, we indicated that we were establishing a supplying fee that was higher than that of other payers due to the lack of on-line claims adjudication for Medicare Part B oral drugs. Other than the cost of billing Medicare Part B, we indicated that we did not believe there were any other significant cost differences between Medicare and other payers that justified a higher Medicare supplying fee for these drugs. We noted in last year's final rule that many other payers with online adjudication have dispensing fees in the range of $5 to $10 per prescription. We also indicated that we had received comments that the average cost to a pharmacy to dispense a non-Medicaid third party or cash prescription for those drugs ranges anywhere from $7.50 to $8.00.
When multiple drugs are supplied to a beneficiary on the same day or in the same month, current policy is to pay a full supplying fee for each additional drug. As mentioned previously, we established a supplying fee higher than Start Printed Page 45849that of other payers to compensate for the added costs associated with our lack of online claims adjudication. However, in situations where multiple drugs are supplied to a beneficiary during the same month, many of which are likely to be supplied on the same day, we are concerned that we are overpaying for the costs associated with our lack of online claims adjudication. We believe that there are likely to be substantial economies of scale and that the burden associated with our lack of online claims adjudication would be relatively similar whether one prescription or multiple prescriptions were supplied during the same month.
Consequently, in § 414.1001 (Basis of payment), we are proposing changes to the supplying fee for multiple prescriptions supplied during the same month. We would continue paying $24 for the first prescription supplied during a month (or $50 for the first oral immunosuppressive prescription supplied in the first month after a transplant). We believe that this $24 supplying fee for the first prescription would adequately compensate a supplier for the billing costs associated with the lack of on-line claims adjudication, and that the cost of supplying additional prescriptions in the same month should be comparable to that of other payers. Therefore, in that same section, we are proposing to pay a supplier an $8 supplying fee per prescription for any prescription, after the first one, that that supplier provided to a beneficiary during a month. If a beneficiary obtained prescriptions at two separate pharmacies during a one-month period, each pharmacy would be paid a $24 fee for the first drug it supplied and an $8 fee per prescription for any subsequent prescriptions during the month.
We are also proposing to expand the circumstances under which we pay supplying fees for multiple prescriptions filled on the same day. Currently, we pay a supplying fee for each prescription supplied on the same day as long as the prescriptions are for different drugs. We are now proposing to pay a supplying fee for each prescription, even if the prescriptions are for different strengths of the same drug. This change is intended to recognize the costs involved in filling separate prescriptions for different strengths of a drug. For example, if two prescriptions were supplied on a single day and they were for different strengths of the same drug, we are proposing to pay a supplying fee of $24 for the first prescription and a supplying fee of $8 for the second prescription.
Our goal is to ensure that each beneficiary who needs covered oral drugs has access to those medications while maintaining our fiduciary responsibility to pay appropriately for Medicare covered services. We seek comments about the appropriateness of our proposed supplying fee for multiple prescriptions supplied during a single month. We also seek data and information about the incremental costs of supplying additional prescriptions to a Medicare beneficiary during a single month, as well as data and information about how pharmacy costs and reimbursement for supplying oral drugs under Medicare compares to that of other payers.
I. Private Contracts and Opt-Out Provision
[If you choose to comment on issues in this section, please include the caption “PRIVATE CONTRACTS AND OP-OUT” at the beginning of your comments.]
Section 4507 of the BBA of 1997 amended section 1802 of the Act to permit certain physicians and practitioners to opt-out of Medicare if certain conditions were met, and to provide through private contracts services that would otherwise be covered by Medicare. Under these private contracts, the mandatory claims submission and limiting charge rules of section 1848(g) of the Act would not apply. The amendments to section 1802 of the Act, which were effective on January 1, 1998, made the provisions of the Medicare statute that would ordinarily preclude physicians and practitioners from contracting privately with Medicare beneficiaries to pay without regard to Medicare limits inapplicable if the conditions necessary for an effective “opt-out” are met.
When a physician or practitioner fails to maintain the conditions necessary for opt-out and does not take good faith efforts to correct his or her failure to maintain opt-out, current regulations at § 405.435(b) specify the consequences to that physician or practitioner for the remainder of that physician's or practitioner's 2-year opt-out period. However, § 405.435(b) describes a situation where the Medicare carrier notifies the physician or practitioner that he or she is violating the regulations and the statute. The current regulations do not address the consequences to physicians and practitioners in situations when a condition resulting in failure to maintain opt-out occurs during the 2-year opt-out period, but a Medicare carrier does not discover or give notice of a physician's or practitioner's failure to maintain opt-out during the 2-year opt-out period. Therefore, we are proposing to amend § 405.435 in order to clarify that the consequences specified in § 405.435(b) for the failure on the part of a physician or practitioner to maintain opt-out will apply regardless of whether or when a carrier notifies a physician or practitioner of the failure to maintain opt-out. We are also proposing to add a new paragraph (d) to clarify that in situations where a violation of § 405.435(a) is not discovered by the carrier during the 2-year opt-out period when the violation actually occurred, then the requirements of § 405.435(b)(1) through (b)(8) would be applicable from the date that the first violation of § 405.435(a) occurred until the end of the opt-out period during which the violation occurred (unless the physician or practitioner takes good faith efforts to restore opt-out conditions, for example, by refunding the amounts in excess of the charge limits to beneficiaries with whom he or she did not sign a private contract). These good faith efforts must be made within 45 days of any notice by the carrier that the physician or practitioner has failed to maintain opt-out (where the carrier discovers the failure after the two-year opt-out period has expired), or within 45 days after the physician or practitioner has discovered the failure to maintain opt-out, whichever is earlier.
J. Multiple Procedure Reduction for Diagnostic Imaging
[If you choose to comment on issues in this section, please include the caption “MULTIPLE PROCEDURE REDUCTION” at the beginning of your comments.]
Medicare has a longstanding policy of reducing payment for multiple surgical procedures performed on the same patient, by the same physician, on the same day. In those cases, full payment is made for the highest priced procedure and each subsequent procedure is paid at 50 percent. Effective January 1, 1995, the multiple procedure policy, with the same reductions, was extended to nuclear medicine diagnostic procedures (CPT codes 78306, 78320, 78802, 78803, 78806 and 78807). In the Medicare Program Physician Fee Schedule for Calendar Year 1995 final rule, published on December 8, 1994 (59 FR 63410), we indicated that we would consider applying the policy to other diagnostic tests in the future.
Under the PFS, diagnostic imaging procedures are priced in the following three ways:
- The professional component (PC) represents the physician work, that is, the interpretation. Start Printed Page 45850
- The TC represents practice expense, that is, clinical staff, supplies, and equipment.
- The global service represents both PC and TC. Generally, diagnostic imaging procedures even those performed on contiguous body parts are paid at 100 percent for each procedure. For example, the TC payment is approximately $978 for a magnetic resonance imaging (MRI) of the abdomen (without and with dye), and $529 for an MRI of the pelvis (with dye) (CPT codes 74183 and 72196, respectively), even when both procedures are performed in a single session.
Under the resource-based PE methodology, specific PE inputs of clinical labor, supplies and equipment are used to calculate PE RVUs for each individual service. We do not believe these same inputs are needed to perform subsequent procedures. When multiple images are acquired in a single session, most of the clinical labor activities and most supplies are not performed or furnished twice. Specifically, we consider that the following clinical labor 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 consider that supplies, with the exception of film, are not duplicated for subsequent procedures. Equipment time and indirect costs are allocated based on clinical labor time; therefore, these inputs should be reduced accordingly.
Excluding the above practice expense inputs, along with the corresponding portion of equipment time and indirect costs, supports a 50 percent reduction in the payment for the TC of subsequent procedures. Applying this reduction to the two procedures indicated above would result in a full payment of $978 for the highest priced procedure, and a reduced payment of $264.50 (50 percent × $529) for the second procedure. This same calculation is currently used for the multiple procedure payment reduction for surgery. We are not proposing to apply a multiple procedure reduction to PC services at this time because we believe physician work is not significantly affected for multiple procedures.
The global service payment equals the combined PC and TC components. When the global service code is billed for these procedures, the TC would be reduced the same as above, but the PC would be paid in full at $117 and $90 for codes 74183 and 72196, respectively.
In our view, duplicate payment is currently being made for the TC of multiple diagnostic imaging services, particularly when contiguous body parts are viewed in a single session. The Medicare Payment Advisory Commission (MedPAC) supports this reduction in its March 2005 Report to the Congress on Medicare Payment Policy.
We have identified 11 families of imaging procedures by imaging modality (ultrasound, CT and computed tomographic angiography (CTA), MRI and magnetic resonance angiography (MRA) and contiguous body area (for example, CT and CTA of Chest/Thorax/Abdomen/Pelvis). MedPAC pointed out that Medicare's payment rates are based on each service being provided independently and that the rates do not account for efficiencies that may be gained when multiple studies using the same imaging modality are performed in the same session. Those efficiencies are more likely when contiguous body areas are the focus of the imaging because the patient and equipment have already been prepared for the second and subsequent procedures, potentially yielding resource savings in areas such as clerical time, technical preparation, and supplies. Using billing data, we identified a number of contiguous body areas for which imaging is performed during the same session. Next, because our proposed discounting policies are based on the expectation that facilities will achieve savings by not having to expend more than once, many of the resources associated with performance of a second, and any subsequent procedures, we organized the families by imaging modality.
We propose extending the multiple procedure payment reduction to TC only services and the TC portion of global services for the procedures in Table 29, below. At this time, we propose applying the reduction only to procedures involving contiguous body parts within a family of codes, not across families. For example, the reduction would not apply to an MRI of the brain (CPT 70552) in code family 5, when performed in the same session as an MRI of the neck and spine (CPT 72142) in code family 6. When multiple procedures within the same family are performed in the same session, we propose making full payment for the TC of the highest priced procedure and payment at 50 percent of the TC for each additional procedure. The following is an example of the current and proposed payments:
|74183||72196||Total current payment||Total proposed payment||Payment calculation|
|TC||$978.00||$530.00||$1,507.00||$1,243||$978 + (.5 × $530)|
|Global||$1,095.00||$620.00||$1,714.00||$1,450||$207 + $978 + (.5 × $530)|
|Family 1 Ultrasound (Chest/Abdomen/Pelvis—Non-Obstetrical|
|76604||Ultrasound exam, chest, b-scan|
|76645||Ultrasound exam, breast(s)|
|76700||Ultrasound exam, abdom, complete|
|76705||Echo exam of abdomen|
|76770||Ultrasound exam abdo back wall, comp|
|76775||Ultrasound exam abdo back wall, lim|
|76778||Ultrasound exam kidney transplant|
|76830||Transvaginal Ultrasound, non-ob|
|76831||Echo exam, uterus|
|76856||Ultrasound exam, pelvic, complete|
|76857||Ultrasound exam, pelvic, limited|
|Family 2 CT and CTA (Chest/Thorax/Abd/Pelvis)|
|71250||CT thorax w/o dye|
|71260||CT thorax w/ dye|
|71270||CT thorax w/o & w/ dye|
|72191||CTA, pelv w/o & w/ dye|
|72192||CT pelvis w/o dye|
|72193||CT pelvis w/ dye|
|72194||CT pelvis w/o & w/ dye|
|74150||CT abdomen w/o dye|
|74160||CT abdomen w/ dye|
|Start Printed Page 45851|
|74170||CT abdomen w/o & w/ dye|
|74175||CTA, abdom w/o & w/ dye|
|75635||CTA abdominal arteries|
|0067T||CT colonography; dx|
|Family 3 CT and CTA (Head/Brain/Orbit/Maxillofacial/Neck)|
|70450||CT head/brain w/o dye|
|70460||CT head/brain w/ dye|
|70470||CT head/brain w/o & w/ dye|
|70480||CT orbit/ear/fossa w/o dye|
|70481||CT orbit/ear/fossa w/ dye|
|70482||CT orbit/ear/fossa w/o & w/ dye|
|70486||CT maxillofacial w/o dye|
|70487||CT maxillofacial w/ dye|
|70488||CT maxillofacial w/o & w/ dye|
|70490||CT soft tissue neck w/o dye|
|70491||CT soft tissue neck w/ dye|
|70492||CT soft tissue neck w/o & w/ dye|
|Family 4 MRI and MRA (Chest/Abd/Pelvis)|
|71550||MRI chest w/o dye|
|71551||MRI chest w/ dye|
|71552||MRI chest w/o & w/ dye|
|71555||MRI angio chest w/ or w/o dye|
|72195||MRI pelvis w/o dye|
|72196||MRI pelvis w/ dye|
|72197||MRI pelvis w/o &w/ dye|
|72198||MRI angio pelvis w/ or w/o dye|
|74181||MRI abdomen w/o dye|
|74182||MRI abdomen w/ dye|
|74183||MRI abdomen w/o and w/ dye|
|74185||MRI angio, abdom w/ or w/o dye|
|Family 5 MRI and MRA (Head/Brain/Neck)|
|70540||MRI orbit/face/neck w/o dye|
|70542||MRI orbit/face/neck w/ dye|
|70543||MRI orbit/face/neck w/o & w/dye|
|70544||MRA head w/o dye|
|70545||MRA head w/dye|
|70546||MRA head w/o & w/dye|
|70547||MRA neck w/o dye|
|70548||MRA neck w/dye|
|70549||MRA neck w/o & w/dye|
|70551||MRI brain w/o dye|
|70552||MRI brain w/dye|
|70553||MRI brain w/o & w/dye|
|Family 6 MRI and MRA (spine)|
|72141||MRI neck spine w/o dye|
|72142||MRI neck spine w/dye|
|72146||MRI chest spine w/o dye|
|72147||MRI chest spine w/dye|
|72148||MRI lumbar spine w/o dye|
|72149||MRI lumbar spine w/dye|
|72156||MRI neck spine w/o & w/dye|
|72157||MRI chest spine w/o & w/dye|
|72158||MRI lumbar spine w/o & w/dye|
|Family 7 CT (spine)|
|72125||CT neck spine w/o dye|
|72126||CT neck spine w/dye|
|72127||CT neck spine w/o & w/dye|
|72128||CT chest spine w/o dye|
|72129||CT chest spine w/dye|
|72130||CT chest spine w/o & w/dye|
|72131||CT lumbar spine w/o dye|
|72132||CT lumbar spine w/dye|
|72133||CT lumbar spine w/o & w/dye|
|Family 8 MRI and MRA (lower extremities)|
|73718||MRI lower extremity w/o dye|
|73719||MRI lower extremity w/dye|
|73720||MRI lower ext w/ & w/o dye|
|73721||MRI joint of lwr extre w/o dye|
|73722||MRI joint of lwr extr w/dye|
|73723||MRI joint of lwr extr w/o & w/dye|
|73725||MRA lower ext w or w/o dye|
|Family 9 CT and CTA (lower extremities)|
|73700||CT lower extremity w/o dye|
|73701||CT lower extremity w/dye|
|73702||CT lower extremity w/o & w/dye|
|73706||CTA lower ext w/o & w/dye|
|Family 10 Mr and MRI (upper extremities and joints)|
|73218||MRI upper extr w/o dye|
|73219||MRI upper extr w/dye|
|73220||MRI upper extremity w/o & w/dye|
|73221||MRI joint upper extr w/o dye|
|73222||MRI joint upper extr w/dye|
|73223||MRI joint upper extr w/o & w/dye|
|Family 11 CT and CTA (upper extremities)|
|73200||CT upper extremity w/o dye|
|73201||CT upper extremity w/dye|
|73202||CT upper extremity w/o & w/dye|
|73206||CTA upper extr w/o & w/dye|
K. Therapy Cap
[If you choose to comment on issues in this section, please include the caption “THERAPY CAP” at the beginning of your comments.]
Section 1833(g)(1) of the Act applies an annual, per beneficiary combined cap on outpatient physical therapy (PT) and speech-language pathology services, and a similar separate cap on outpatient occupational therapy services under Medicare Part B. This cap was added by section 4541 of the BBA 1997, Pub. L. 105-33. However, the application of the caps was suspended from CY 2000 through CY 2002 under section 1833(g)(4) of the Act by section 221 of the of BBRA 1999, Pub. L. 106-113, and extended by section 421 of BIPA 2000, Pub. L. 105-551. The caps were implemented from September 1, 2003 through December 7, 2003. Section 624 of the MMA reinstated the moratorium on the application of these caps from December 8, 2003 through December 31, 2005. Thus, the caps will again become effective beginning January 1, 2006.
Section 1883(g)(2) of the Act provides that, for 1999 through 2001, the caps were both $1500, and for years after 2001, the caps are equal to the preceding year's cap increased by the percentage increase in the MEI (except that if an increase for a year is not a multiple of $10, it is rounded to the nearest multiple of $10). We will publish the dollar amount for therapy caps in the final rule, when the MEI is available. Based on the April 4, 2005 MEI estimate, the estimated value of therapy caps for 2006 would be $1,750.
L. Chiropractic Services Demonstration
[If you choose to comment on issues in this section, please include the caption “CHIROPRACTIC SERVICES” at the beginning of your comments.]
Section 1861(r)(5) of the Act limits current Medicare coverage for chiropractic treatment by means of the manual manipulation of the spine for the purpose of correcting a subluxation, defined generally as a malfunction of the spine. Specifically, Medicare covers three CPT Codes provided by chiropractors: 98940 (manipulative treatment, 1-2 regions of the spine), 98941 (manipulative treatment, 3-4 regions of the spine), and 98942 (manipulative treatment, 5 regions of the spine). Treatment must be provided for an active subluxation only, and not for prevention or maintenance. Additionally, treatment of the subluxation must be related to a neuromusculoskeletal condition where there is a reasonable expectation of recovery or functional improvement.
Section 651 of the MMA provides for a 2-year demonstration to evaluate the feasibility and advisability of covering chiropractic services under Medicare. These services extend beyond the current coverage for manipulation to care for neuromusculoskeletal conditions typical among eligible beneficiaries, and will cover diagnostic and other services that a chiropractor is legally authorized to perform by the State or jurisdiction in which the treatment is provided. Physician approval will not be required for these services. The demonstration must be budget neutral and will be conducted in Start Printed Page 45852four sites, two rural and two urban. One site of each area type must be a health professional shortage area (HPSA).
On January 28, 2005, we published a notice in the Federal Register (70 FR 4130) describing the covered services and site selection for this demonstration. As recognized in the notice, the statute requires the Secretary to ensure that aggregate payments made under the Medicare program do not exceed the amount that would have been paid under the Medicare program in the absence of this demonstration.
Ensuring budget neutrality requires that the Secretary develop a strategy for recouping funds should the demonstration result in costs higher than would occur in the absence of the demonstration. In this case, we stated we would make adjustments in the national chiropractor fee schedule to recover the costs of the demonstration in excess of the amount estimated to yield budget neutrality. We indicated that we will assess budget neutrality by determining the change in costs based on a pre/post comparison of costs and the rate of change for specific diagnoses that are treated by chiropractors and physicians in the demonstration sites and control sites. We will not limit our analysis to reviewing only chiropractor claims, because the costs of the expanded chiropractor services may have an impact on other Medicare costs.
We anticipate that any necessary reduction will be made in the 2010 and 2011 fee schedules because it will take approximately 2 years to complete the claims analysis. If we determine that the adjustment for budget neutrality is greater than 2 percent of spending for the chiropractor fee schedule codes (comprised of the 3 currently covered CPT codes 98940, 98941 and 98942), we will implement the adjustment over a 2-year period. However, if the adjustment is less than 2 percent of spending under the chiropractor fee schedule codes, we will implement the adjustment over a 1-year period. We will include the detailed analysis of budget neutrality and the proposed offset in the 2009 Federal Register publication of the PFS.
PT services that are performed by chiropractors under the demonstration will be included under the PT cap described in section J above. We are including these services under the cap because chiropractors are subject to the same rules as medical doctors for therapy services under the demonstration. Therefore these services should be included under the therapy cap. See our Web site http://www.cms.hhs.gov/researchers/demos/eccs/ for additional information concerning the chiropractic services demonstration.
M. Supplemental Payments to Federally Qualified Health Centers (FQHCs) Subcontracting With Medicare Advantage Plans
[If you choose to comment on issues in this section, please include the caption “SUPPLEMENTAL PAYMENTS—FQHCS” at the beginning of your comments.]
Title II of the MMA established the Medicare Advantage (MA) program. The MA program replaces the Medicare+Choice (M+C) program established under Part C of the Act. Although the MA program retains many key features of the M+C program, it includes several new features, such as the availability of a regional MA plan option. Regional MA plans must be preferred provider organization (PPO) plans.
Section 237 of the MMA amended section 1833(a)(3) of the Act to provide supplemental payments to FQHCs that contract with MA organizations to, in general, cover the difference, if any, between the payment received by the health center for treating enrollees in MA plans offered by the MA organization and the payment that the FQHC is entitled to receive under the cost-based all-inclusive payment rate as set forth in part 405, subpart X. This new supplemental payment for covered Medicare FQHC services furnished to MA enrollees augments the direct payments made by MA Plans to FQHCs for covered Medicare FQHC services. Medicare's obligation to provide supplemental payments to FQHCs applies to centers with direct or indirect subcontract arrangements following a written agreement with MA organizations.
Centers eligible for supplemental payments under section 1833(a)(3) of the Act, as revised by Section 237 of the MMA, include any facility qualified to furnish FQHC services described in section 1832(a)(2)(D) of the Act. Only the following entities are qualified to furnish FQHC services: (1) entities receiving a grant under section 330 (other than subsection (h)) of Public Health Services Act or receiving funding from this grant under a contract with its recipient and meets the requirements to receive this grant; (2) entities determined by the Secretary to meet the requirements for receiving this grant; (3) entities treated by the Secretary, for purposes of Part B, as a comprehensive Federally funded health center as of January 1, 1990; or (4) an outpatient health program or facility operated by a tribe or tribal organization receiving funds under title V of Indian Health Care Improvement Act.
In order to implement this new payment provision, CMS must determine whether the Medicare cost-based payments that the FQHC would be entitled to exceed the amount of payments received by the center from the MA organization and, if so, pay the difference to the FQHC at least quarterly. In determining the supplemental payment, the statute also excludes in the calculation of the supplemental payments any financial incentives provided to FQHCs under their MA arrangements, such as risk pool payments, bonuses, or withholds.
Managed care organizations frequently use financial incentives in their contracts with providers to reduce unnecessary utilization of services. These incentives may be negative, such as withholding a portion of the capitation payments, if utilization goals are not satisfied. Incentives may also be positive, such as a bonus payment if utilization outcomes are achieved. In both cases, these incentives (whether positive or negative) are separate from the MA organization's payment for services provided under its direct or indirect contract with the FQHC and are prohibited by statute from being included in our calculation of supplemental payments due to the Medicare FQHC. In other words, in determining the difference between payments from the MA organization to the FQHC and what the FQHC will receive on a cost basis, we are precluded from using the incentive payments in the calculation of the FQHC supplemental payment. Only capitated per month per beneficiary or fee-for-service payments from the MA plan for services furnished to MA enrollees are included in the calculations of the rate differential.
Under original Medicare, each center is paid an all-inclusive per visit rate based on its reasonable costs as reported in the FQHC cost report. The payment is calculated, in general, by dividing the center's total allowable cost by the total number of visits for FQHC services. At the beginning of the rate year, the Medicare Fiscal Intermediary (FI) calculates an interim rate based on estimated allowable costs and visits from the center if it is new to the FQHC program or actual costs and visits from the previous cost reporting period for existing FQHCs. The center's interim rate is reconciled to actual reasonable costs at the end of the cost reporting period. Start Printed Page 45853
Proposed Payment Methodology
We are proposing a supplemental payment method based on a per visit calculation subject to an annual reconciliation. The supplemental payment for FQHC covered services rendered to MA enrollees is equal to the difference between 100 percent of the FQHC's all-inclusive cost-based per visit rate and the average per visit rate received by the center from the MA plan in which the enrollee is enrolled, less any amount the FQHC may charge as described in section 1857(e)(3)(B) of the Act. Each center will be required to submit (for the first rate year) to the intermediary an estimate of the average MA payment per visit for covered FQHC services. Every eligible center will be required to submit a detailed estimate of its average per visit payment for enrollees in each MA plan offered by the MA organization and any other information as may be required to enable the intermediary to accurately establish an interim supplemental payment, which will be the difference between the estimated MA per visit payment rate and the center's interim all-inclusive cost-based per visit rate. Expected payments from the MA plan will only be used until actual MA revenue and visits can be collected on the center's FQHC cost report. The interim and final supplemental payment amount will vary by center depending on its current Medicare reimbursement rates and its contractual arrangements with MA plans.
Effective January 1, 2006, eligible FQHCs will report actual revenue received from the MA plan and visits on their cost reports. At the end of the cost reporting period the FI would use actual MA revenue and visit data along with the FQHCs' final all-inclusive payment rate, to determine the center's final actual supplemental per visit payment for enrollees in the relevant MA plan. This will serve as the interim rate for the subsequent rate year. Actual aggregated supplemental payments will then be reconciled with aggregated interim supplemental payments, and any underpayment or overpayment thereon will then be accounted for in determining final Medicare FQHC program liability at cost settlement. Necessary changes will be made to the FQHC cost report to effectuate the calculation of the supplemental rate.
A supplemental payment will be made every time a face-to-face encounter occurs between a MA enrollee and any one of the following FQHC covered core practitioners: physicians, NPs, PAs, clinical nurse midwives, clinical psychologists, or clinical social workers. The supplemental payment is made directly to each qualified center through the Medicare FI. Each center is responsible for submitting Medicare claims with the proper codes for these visits. Necessary changes will be made to the instructions for the FQHC claim form to effectuate the billing and payment of supplemental payments.
To conform our regulations to the statute, we are proposing to add § 405.2469 to specify the per visit payment methodology for making supplemental payments to FQHCs under contract (directly or indirectly) with MA organizations.
N. National Coverage Decisions Timeframes
[If you choose to comment on issues in this section, please include the caption “NCD TIMEFRAMES” at the beginning of your comments.]
We have established requirements concerning the administrative review of local coverage determinations (LCDs) and National Coverage Determinations (NCDs) at 42 CFR part 426, with subpart C specifically addressing the general provisions for the review of LCDs and NCDs. Under our existing regulations in part 426, subpart C, the Departmental Appeals Board may stay the adjudicatory proceedings in certain circumstances to allow CMS to consider significant new evidence that is submitted in the context of a challenge to an NCD. Our previous regulations at § 426.340(e), permitted a brief stay of the adjudicatory proceedings (not more than 90 days), for CMS to complete its reconsideration of the NCD. Those time frames, although short, were consistent with the previous process for making NCDs that did not require publication of a proposed decision memorandum and an opportunity for public comment on the proposed decision memorandum.
Section 731 of the MMA of 2003 modifies certain timeframes in the NCD review process. Specifically, the MMA amended section 1862(l) of the Act to specify that for NCD requests not requiring an external technology assessment (TA) or Medicare Coverage Advisory Committee (MCAC) review, the decision on the request shall be made not later than 6 months after the date the request is received. For those NCD requests requiring either an external TA or MCAC review, where a clinical trial is not requested, the decision on the request must be made not later than 9 months after the date the request is received.
Furthermore, section 731 of the MMA stipulates that not later than the end of the 6 or 9 month period described above, a draft of the proposed decision must be made available on the CMS website (or other appropriate means) for public comment. This comment period will last 30 days. Comments will be reviewed and a final decision will be issued not later than 60 days after the conclusion of the comment period. A summary of the public comments received and responses to the comments will continue to be included in the final NCD.
In light of the procedural change made by section 731 of the MMA that requires a public comment period before we can issue a final determination for NCDs, we are proposing to amend § 426.340 to reflect the new timeframes in the MMA. The regulation is amended to state that if the CMS informs the Board that a revision or reconsideration was or will be initiated, then the Board will stay the proceedings and set appropriate timeframes by which the revision or reconsideration will be completed, that reflects sufficient time for the publication of a proposed determination, a thirty day public comment period, and time for CMS to prepare a final determination that responds to public comments as specified in section 1862(l) of the Act. Subsequently, the reference to the 90 day reconsideration period in § 426.340(e)(3) will be eliminated for NCD appeals to reflect the new timeframes in the MMA. The LCD timeframes will not be affected by this change.
O. Coverage of Screening for Glaucoma
[If you choose to comment on issues in this section, please include the caption “COVERAGE OF SCREENING—GLAUCOMA” at the beginning of your comments.]
On January 1, 2002, we implemented regulations at § 410.23(a)(2), Conditions for and limitations on coverage of screening for glaucoma, requiring that the term “eligible beneficiary” be defined to include individuals in the following high risk categories: (i) Individual with diabetes mellitus; (ii) Individual with a family history of glaucoma; or (iii) African-Americans age 50 and over. Based on our review of the current medical literature, we believe that there are other beneficiaries who are at risk for glaucoma and should be included in the definition of eligible beneficiary for purposes of the glaucoma screening benefit.
The Eye Diseases Prevalence Research Group recently reviewed the literature on the prevalence of glaucoma in adults in the United States (Arch Ophthalmol 2004; 122:532-538) and provided separate data for Hispanic persons. They Start Printed Page 45854reported that Hispanic subjects had a marked higher prevalence in the oldest age group. After controlling for age and gender, rates of open angle glaucoma in Hispanic persons did not differ significantly from that among whites, except for those age 65 years and older. The prevalence of open angle glaucoma in Hispanic persons age 65 years and older was significantly higher than among whites. Overall, Hispanic subjects had a significantly lower prevalence of open angle glaucoma than African-Americans. One notable limitation of this review article is that the data on Hispanic persons came from a single study of mostly Mexican-born Hispanics from Arizona (Quigley HA et al. The prevalence of glaucoma in a population based study of Hispanic subjects: proyecto VER. Ann Ophthalmol 2001; 119:1819-1825). We believe the evidence is adequate to conclude that Hispanic persons age 65 and older are at high risk and could benefit from glaucoma screening.
Therefore in § 410.23(a)(2), we are proposing to revise the definition of an eligible beneficiary to include Hispanic Americans age 65 and over. If this proposal is adopted in the final rule, effective January 1, 2006, Hispanic Americans age 65 and older would qualify for Medicare coverage and payment for glaucoma screening services, if the applicable condition and limitations on coverage of screening for glaucoma specified in § 410.23(b) and (c) are met.
In view of the possibility that it may be appropriate to include other individuals in the statutory definition of those at “high risk” for glaucoma, we are requesting comments on this issue. Specifically, we request that anyone providing us with specific recommendations on this issue provide documentation in support of them from the peer-reviewed medical literature.
P. Physician Referrals for Nuclear Medicine Services and Supplies to Health Care Entities With Which They Have Financial Relationships
[If you choose to comment on issues in this section, please include the caption “NUCLEAR MEDICINE SERVICES” at the beginning of your comments.]
Under section 1877 of the Act, a physician may not refer a Medicare patient for certain designated health services (DHS) to an entity with which the physician (or an immediate family member of the physician) has a financial relationship, unless an exception applies. Section 1877 of the Act also prohibits the DHS entity from submitting claims to Medicare or billing the beneficiary or any other entity for Medicare DHS that are furnished as a result of a prohibited referral. Sections 1877(h)(6)(D) and (E) of the Act define DHS to include “[r]adiology services, including magnetic resonance imaging, computerized axial tomography and ultrasound services” and “[r]adiation therapy services and supplies.” This proposed rule would include diagnostic and therapeutic nuclear medicine procedures under the DHS categories for radiology and certain other imaging services and radiation therapy services and supplies, respectively.
On January 9, 1998, we published a proposed rule (63 FR 1659) that, among other things, proposed regulatory definitions for the various DHS categories listed in the statute. In that proposed rule, we proposed to include nuclear medicine services in the definition of radiology services. In the January 4, 2001 physician self-referral Phase I final rule (66 FR 856), we defined “radiology and certain other imaging services” and “radiation therapy services and supplies” at § 411.351. We did not include nuclear medicine services in either definition because, at that time, we believed that diagnostic nuclear medicine services were not commonly considered to be radiology services and that therapeutic nuclear medicine services were not commonly considered to be radiation therapy services. We received one comment urging us to include nuclear medicine services in the definition of radiology services. In the Phase II final rule, published on March 26, 2004 (69 FR 16054), we indicated that we were concerned with the issues raised by the commenter and that we might revisit the issue of nuclear medicine in a proposed rule.
2. Proposal To Include Nuclear Medicine
Our knowledge of nuclear medicine, which is based in part on our awareness of the health care community's view of nuclear medicine, has changed significantly since we published the Phase I final rule. As a result, we have reconsidered the question of whether nuclear medicine services should be considered a DHS. We are proposing to amend § 411.351 to include diagnostic nuclear medicine services in the definition of “radiology and certain other imaging services” and to include therapeutic nuclear medicine services in the definition of “radiation therapy services and supplies.” We believe this change is needed in light of the statute's inclusion of radiology and radiation therapy as DHS. We also believe this change is appropriate, given the current manner in which these services are covered and paid under the Medicare program. As noted in the Phase I final rule (66 FR 860) and the Phase II final rule (69 FR 16071), we interpret the self-referral prohibition in a manner that is consistent with existing Medicare coverage and payment rules. In addition, we believe nuclear medicine services (both diagnostic and therapeutic services and supplies) pose the same risk of abuse that the Congress intended to eliminate for other types of radiology, imaging, and radiation therapy services and supplies. In § 411.351 (Definitions), we would revise the definition of “Radiation therapy services and supplies” to remove the language that excluded therapeutic nuclear medicine services and supplies from the definition. We would also revise the definition of “Radiology and certain other imaging services” to remove the language that excluded diagnostic nuclear medicine services from the definition. In addition, we would revise the list of radiology services on our website and in annual updates to include CPT and HCPCS codes that include the diagnostic uses of nuclear medicine, and the list of radiation therapy services and supplies to include the therapeutic use of nuclear medicine. For purposes of this proposed rule, we have attached Addendum G, which contains the codes for all diagnostic nuclear medicine procedures, all therapeutic nuclear medicine procedures, and the nuclear medicine radiopharmaceuticals. In the final rule, we intend to include the diagnostic nuclear medicine services in the list of codes for “Radiology and Certain Other Imaging Services” and the therapeutic nuclear medicine services in the list of “Radiation Therapy Services and Supplies.” Each radiopharmaceutical would be included in each category in which it is used, that is, some may be included in both categories. We welcome comment on whether the list is accurate and complete.
Section 1877(h)(6)(D) of the Act provides that “radiology services, including magnetic resonance imaging, computerized axial tomography scans, and ultrasound services” are DHS. We believe it is appropriate to include nuclear diagnostic services as radiology services within the meaning of this statute.
Dorland's Illustrated Medical Dictionary, 29th Edition, 2000, at 1512, defines radiology as “that branch of the health sciences dealing with radioactive substances and radiant energy and with the diagnosis and treatment of disease by means of both ionizing (that is, Start Printed Page 45855x-rays) and non-ionizing (that is, ultrasound) radiations.”  Nuclear medicine uses very small amounts of radioactive materials (radiopharmaceuticals) to diagnose and treat disease. In nuclear imaging, the radiopharmaceuticals are detected by special types of cameras that work with computers to provide very precise pictures about the area of the body being imaged. In treatment or therapy, the radiopharmaceuticals go directly to the organ being treated. The amount of radiation in a typical nuclear imaging procedure is comparable to that received during a diagnostic x-ray. The Society for Nuclear Medicine (SNM) states that the science of nuclear medicine, particularly nuclear medicine imaging, provides physicians with information about both structure and function of certain internal body organs. SNM further states that “unlike a diagnostic X-ray where radiation is passed through the body, nuclear medicine tracers are taken internally; external detectors measure the radiation that they emit.” (http://www.snm.org) The ACR, in its March 26, 2004 letter to us, stated that nuclear medicine is considered a part of the specialty of radiology. It noted that the American Board of Radiology certifies diagnostic radiologists through an examination process that includes nuclear medicine in both the written and oral exams. The AMA also recognizes nuclear medicine as a subspecialty of radiology. The AMA's “Current Procedural Terminology CPT 2005”, (2004), identifies its “Radiology Guidelines (including Nuclear Medicine and Diagnostic Ultrasound)” as CPT codes in the 70000-79999 series. In its radiology section, at 273-302, the AMA includes both diagnostic imaging procedures (including diagnostic nuclear medicine), and therapeutic procedures. The radiology subsections are as follows: Diagnostic Radiology (Diagnostic Imaging) is comprised of CPT codes 70010-76499. Diagnostic Ultrasound is comprised of CPT codes 76506-76999. Radiation Oncology is comprised of CPT codes 77261-77799. Nuclear Medicine (Diagnostic) is comprised of CPT codes 78000-78999, and Nuclear Medicine (Therapeutic) is comprised of CPT codes 79005-79999.
We also note that the Medicare statute places diagnostic nuclear medicine in the same category as diagnostic radiology for coverage and payment purposes. That is, we cover diagnostic nuclear medicine under our authority in section 1861(s)(3) of the Act, the same statutory section that authorizes coverage for diagnostic X-rays, CT scans, MRIs, and ultrasound services. In addition, section 1833(t) of the Act sets forth Medicare payment for “outpatient hospital radiology services (including diagnostic and therapeutic radiology, nuclear medicine and CAT scan procedures, magnetic resonance imaging, and ultrasound and other imaging services, but excluding screening mammography)” as described in section 1833(a)(2)(E)(i) of the Act.
For these reasons, we believe that the Congress intended “radiology services” in section 1877(h)(6) of the Act to include diagnostic and therapeutic nuclear medicine. While we believe that diagnostic nuclear medicine is a subset of radiology, even if it is not, it is an imaging service covered by 1861(s)(3) of the Act, and of the type that the Congress intended to prohibit.
Similarly, we believe it is proper to interpret the DHS category described in section 1877(h)(6)(E) of the Act, “radiation therapy services and supplies” to include therapeutic nuclear medicine services. Radiation therapy is the treatment of disease (especially cancer) by exposure to radiation from a radioactive substance. Therapeutic nuclear medicine employs radioactive substances known as radionuclides. Medicare covers therapeutic nuclear medicine services and other forms of radiation therapy under section 1861(s)(4) of the Act, which authorizes coverage and payment for “X-ray, radium, and radioactive isotope therapy.”
Although our proposal to include as DHS diagnostic nuclear medicine services and therapeutic nuclear medicine services and supplies is based primarily on our view that nuclear medicine services are radiology and radiation therapy within the meaning of section 1877(h)(6) of the Act, we would resolve any doubt on the matter in favor of our proposal because of the risk of abuse and anti-competitive behavior inherent in physician self-referrals for nuclear medicine services. The risk of abuse and anti-competitiveness is exacerbated by the greater affordability of nuclear medicine equipment, by our expansive coverage of nuclear medicine services, and by the setting in which mostly diagnostic and some therapeutic nuclear medicine services now are primarily performed.
At the time we were preparing the Phase I final rule, the vast majority of nuclear medicine procedures were already subject to the physician self-referral prohibition because they were primarily performed in hospital facilities rather than in physician-owned freestanding facilities. Thus, they were performed as inpatient or outpatient hospital services and were therefore DHS subject to the self-referral prohibition in accordance with section 1877(h)(6)(K) of the Act. Since publication of the Phase I final rule, however, many more nuclear medicine procedures have been performed in physician offices or in physician-owned freestanding facilities. This has occurred for several reasons. First, positron emission tomography (PET) scanners may be used outside of a hospital setting. Second, there have been significant technological advances; an entity does not have to own a particle accelerator to produce the radioactive tracer necessary for a PET scan because a small network of pharmacies now distribute radioactive tracer. Third, our coverage of PET scans has increased dramatically. We began covering PET scans in December 2000. This initial, limited, coverage was for only a few types of cancers. Since December 2001, we have significantly expanded our coverage to include an increased number of cancers and other conditions. In his March 17, 2005 testimony before the Congress concerning imaging services, the Executive Director of the MedPAC noted that diagnostic imaging services paid under Medicare's PFS grew more rapidly than any other type of physician service between 1999 and 2003. Whereas physician services grew 22 percent in those years, imaging services grew twice as fast, by 45 percent. This measure is the growth in the volume and intensity of services per beneficiary. However, not all imaging services grew at that rate, and some grew even faster. Nuclear medicine grew 85 percent between those years (1999 and 2003).
Under Medicare, almost all imaging services have two distinct parts: (1) The performance of the test; and (2) the interpretation of the results by a physician. If the study is performed in a physician office, the physician submits a TC claim and the interpreting physician submits a PC claim. Tests performed in a hospital result in a facility payment rather than a TC claim. Start Printed Page 45856Thus, if more imaging services are performed in physician offices, TC claims will increase as a share of all fee schedule imagining claims. An increase in TC claims occurred between 1999 and 2002, which indicates that imaging procedures shifted to physician offices. Because the TC of an imaging service generally is assigned a higher payment rate than the PC, growth of TC claims as a share of all imaging claims leads to additional payments under the PFS. These additional payments accounted for about 20 percent of the growth in the volume and intensity of imaging services between 1999 and 2002 (MedPAC 2004).
Recent studies and articles indicate that risk of abuse for radiology services (and diagnostic nuclear medicine) will continue if not specifically prohibited. The Journal of Radiology reported what happened after a managed care organization halted reimbursement to non-radiologists for some forms of imaging (other than CT scans, MRIs, sonography or nuclear medicine) but left the physicians free to refer their patients to radiologists if they believe the imaging they had been conducting on their patients was needed. The following specialties were not allowed to perform any imaging services: Gastroenterologists, general surgeons, nephrologists, neurosurgeons, oncologists, pediatric surgeons, and physiatrists. The study found that imaging declined 20 to 25 percent from what was expected given the previous trend of imaging growth, and an absolute decline of 6 percent. Prior to these prohibitions, non-radiologists were performing 39 percent of outpatient radiographs. The 20 to 25 percent decline from the trend was roughly half of this 39 percent initial share. That is, the research showed that approximately half of the imaging performed by self-referrers ceased when these self-referrers lost their financial interest in the services. (The Effect of Imaging Guidelines on the Number and Quality of Outpatient Radiographic Examinations. AJR 2000; 175:9-15. Harold Moskowitz, Jonathan Sunshine, Donald Grossman, Leslie Adams, Lynn Gelinas. See also Recent Rapid Increase in Utilization of Radionuclide Myocardial Perfusion Imaging and Related Procedures; 1996-1998 Practice Patterns. Radiology 2002; 222:144-148. David C. Levin, MD, Laurence Parker, PhD, Charles M. Intenzo, MD, Jonathan H. Sunshine, PhD.) (Growth in utilization of Radionuclide Myocardial Perfusion Imaging (MPI) between 1996 and 1998 was almost 10 times higher among cardiologists than radiologists). Although the Moskowitz study did not include nuclear imaging, we do not see a basis for assuming that physician behavior would be different for nuclear imaging than it is for other imaging services. To the contrary, we believe financial relationships related to diagnostic and therapeutic nuclear medicine, including joint ventures and leases, pose a risk of anti-competitive behavior and risk of abuse comparable to that associated with investment interests in CT, MRI, ultrasound, other radiology ventures, and radiation therapy facilities.
Thus, we believe our proposal to include nuclear medicine as a DHS is consistent with the intent of the Congress to prevent over-utilization of health care services covered by Medicare and to prohibit physicians from selecting treatment modalities based on financial incentives.
We have been told that consultants and others have been actively encouraging physicians to participate in joint ventures to purchase diagnostic nuclear medicine machines for investment because Phase I did not include nuclear medicine services. We have received many inquiries from physicians and attorneys asking whether physician ownership of, and referral to, nuclear medicine facilities complies with the physician self-referral provisions. We are mindful that our previous guidance, particularly that provided in the Phase I final rule, may have encouraged physician investment in nuclear medicine equipment and ventures, particularly PET scanners, which are very expensive and often require a substantial financial investment on the part of physician-owners. We are aware that including nuclear medicine services as DHS will require that physician-investors in nuclear medicine equipment (including PET scanners) divest their ownership or investment interests or be precluded from submitting claims to Medicare or billing the beneficiary or any entity for the nuclear medicine DHS referred by physician-owners and performed with the physician-owned equipment (unless the arrangement falls within an exception to section 1877 of the Act).
We are soliciting comments as to whether, or how, to minimize the impact on physicians who are currently parties to arrangements that involve nuclear medicine services and supplies (that is, by specifying a delayed effective date or by grandfathering certain arrangements).
Q. Sustainable Growth Rate
[If you choose to comment on issues in this section, please include the caption “SGR” at the beginning of your comments.]
1. Current Estimate
Sections 1848(d) and (f) of the Act require the Secretary to set the physician fee schedule update under the SGR system. We are currently forecasting an update of −4.3 percent for 2006, and anticipate further negative updates in later years. As in the past, we will include a complete discussion of our methodology for calculating the SGR in the final rule.
Underlying the projected rate reductions is substantial growth in Medicare spending. The vast majority of spending growth in 2004 is attributable to the following five areas:
- An increase in spending for office visits, with a shift toward longer and more intense visits.
- Greater utilization of minor procedures, including physical therapy and drug administration.
- More patients receiving more frequent and more complex imaging services, such as MRIs and echocardiograms.
- More laboratory and other physician-ordered tests.
- Higher utilization of physician-administered prescription drugs.
We would like to understand these trends further, including which changes in utilization are likely to be associated with important health improvements and which ones may have more questionable health benefits. Consequently, we have had discussions on these topics with numerous physician and nonphysician groups, as well as other Medicare stakeholders such as the Congress and the Medicare Payment Advisory Commission (MedPAC).
The AMA has provided us with several illustrations of recent trends in medical practice that it believes contribute to the overall growth in spending on physicians' services. For example, the AMA points out that some payers are encouraging physicians to determine the left ventricular valve function of their patients with congestive heart failure using an echocardiogram. Also, five years ago, statin therapy to lower cholesterol levels was only recommended for patients as old as 79. Now, patients as old as 86 may receive statin therapy, resulting in additional laboratory tests.
The AMA provided many other examples, and we are evaluating them to better understand their impact on physician spending. With regard to the specific examples mentioned above, we agree the utilization of these services has increased. However, in the case of Start Printed Page 45857echocardiograms, the 19 percent rate of increase from 2003 to 2004 is similar to the increase observed for all imaging services. There was also a 17 percent rate of increase in laboratory tests (lipid panels) consistent with more patients receiving statin therapy (new prescriptions require more frequent visits and more lab tests). However, total spending for the service was only $42 million.
2. Ongoing Issues
In addition to providing adequate payments, Medicare's physician payment system should encourage physicians to provide quality care and prevent avoidable health care costs. We support MedPAC's recommendation for the development of measures related to the quality and efficiency of care furnished by physicians. Physicians' decisions are central to the health care their patients receive, and there are substantial variations across geographic areas and among similar specialties in the use of services, including those accounting for most of the spending growth. We want to work with physicians in this effort to better understand the consequences of these differences in the use of follow-up visits, imaging procedures, laboratory testing, minor therapeutic procedures, and physician-administered drugs for the health of beneficiaries, and to identify ways to provide better support for utilization decisions that clearly increase the quality of care while avoiding unnecessary costs for beneficiaries and the Medicare program.
We are already engaged with the physician community in developing useful quality measures, and we expect to intensify these efforts given the rapid growth in spending. As an early step in using such measures to improve care, we are now exploring means of sharing information related to quality of care and use of resources with individual physicians. We anticipate that only data showing the quality of care and resource use in the aggregate would be released to the public. Some measures can be derived from claims data with little or no collection burden (for example, information on the frequency and complexity of minor therapy procedures, imaging procedures, lab test, and visits for their patients with chronic illnesses.) We believe that by providing feedback to physicians individually and by working with physician groups to understand and respond to the overall trends, we can provide more useful information and support physicians' efforts to run more efficient practices.
Finally, we continue to work closely with the medical community, Congress, MedPAC, and others toward a long-term approach ensuring adequate physician payments in the future while also ensuring Medicare's payments are made only for care that is necessary and beneficial. We are particularly interested in comments that build on recent progress on payment reforms to promote higher quality and avoid unnecessary costs, and that are consistent with the President's budgetary goal of paying for better value in Medicare without increasing overall Medicare costs. For example, we are interested in ways to promote higher-quality ambulatory care that can achieve offsetting savings by avoiding complications or unnecessary services. In addition, it has been suggested that we have the authority to make certain administrative adjustments in the SGR methodology, such as removing Part B drug payments from the calculation of both projected and actual expenditures (retroactive to 1996) that are used to set the spending target. We encourage comments regarding possible changes to the SGR methodology, including the legal theories that support them. We are particularly interested in comments on steps to promote physician payment adequacy without increasing overall Medicare costs.
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to provide 60-day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues:
- The need for the information collection and its usefulness in carrying out the proper functions of our agency.
- The accuracy of our estimate of the information collection burden.
- The quality, utility, and clarity of the information to be collected.
- Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.
We are soliciting public comment on each of these issues for the following sections of this document that contain information collection requirements:
Section 413.180 Procedures for Requesting Exceptions to Payment Rates
Paragraph (b) specifies the criteria for a pediatric ESRD facility requesting an exception to payment rates.
Paragraph (e) outlines the documentation that a pediatric ESRD facility must submit to CMS when requesting an exception to its payment rates. Paragraph (i) discusses the period of approval for payment exception requests. A prospective exception payment rate approved by CMS applies for the period from the date the complete exception request was filed with its intermediary until thirty days after the intermediary's receipt of the facility's letter notifying the intermediary of the facility's request to give up its exception rate.
The burden associated with the requirements in paragraph (e) is the time and effort required by the facility to prepare and submit the exception request to CMS. The burden associated with the requirement in paragraph (i) is the time and effort required by the facility to draft and mail the letter that notifies the intermediary of the facilities request to give up its exception rate.
The collection requirement in this section has not changed. While this requirement is subject to the PRA, this requirement is currently approved in OMB No. 0938-0296.
Section 413.184 Payment Exception: Pediatric Patient Mix
Paragraph (b) specifies the documentation requirements that a pediatric ESRD facility must meet in order to qualify for an exception to its prospective payment rate based on its pediatric patient mix. In addition to the other qualifications specified in this section, this section states that a facility must submit a listing of all outpatient dialysis patients (including all home patients) treated during the most recently completed and filed cost report.
The burden associated with this requirement is the time and effort for the facility to submit a listing of all outpatient dialysis patients (including all home patients) treated during the most recently completed and filed cost report.
The collection requirement in this section has not changed. While this requirement is subject to the PRA, this requirement is currently approved in OMB No. 0938-0296.
Section 413.186 Payment Exception: Self-Dialysis Training Costs in Pediatric Facilities
In summary, this section outlines the requirements a pediatric ESRD facility Start Printed Page 45858must meet to qualify for an exception to the prospective payment rate based on self-dialysis training costs. Paragraph (e) states that a facility must provide specific information to support its exception request. Paragraph (f) states that in addition to the other qualifications outlined in this section, pediatric ESRD facility must submit with its exception request a list of patients, by modality, trained during the most recent cost report period, in order to justify its accelerated training exception request.
The burden associated with these requirements is the time and effort for the facility to prepare and submit the required information to support its exception request, and the time and effort for the pediatric ESRD facility to prepare and submit with its exception request a list of patients, by modality, trained during the most recent cost report period.
The collection requirements in this section have not changed. While these requirements are subject to the PRA, they are currently approved in OMB No. 0938-0296.
Section 414.804 Basis of Payment
In summary, this section requires manufacturers to report ASP data to CMS. This section details the process a manufacturer must follow to calculate the ASP. The ASP reporting requirements are discussed in further detail in the interim final rule with comment, Medicare Program; Manufacturer Submission of Manufacturer's Average Sales Price (ASP) Data for Medicare Part B Drugs and Biologicals, that published on April 2, 2004 in the Federal Register (69FR17935-17941).
The burden associated with these requirements is the time and effort required by manufacturers of Medicare Part B Drugs and biologicals to prepare and submit to the required ASP data to CMS.
While these requirements are subject to the PRA, the requirements are currently approved in OMB No. 0938-0921, with a current expiration date of September 30, 2007.
We intend to revise this information collection to include adequate instructions for manufacturers to report the ASP, the WAC, and other data elements. These revisions will be addressed in detail in a revised information collection request in accordance with the Paperwork Reduction Act of 1995.
We have submitted a copy of this proposed rule to OMB for its review of the information collection requirements described above. These requirements are not effective until they have been approved by OMB.
If you comment on these information collection and recordkeeping requirements, please mail copies directly to the following:
Centers for Medicare & Medicaid Services, Office of Strategic Operations and Regulatory Affairs, Regulations Development Group, Attn: Jim Wickliffe, [CMS-1502-P], Room C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850; and
Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10235, New Executive Office Building, Washington, DC 20503, Attn: Christopher Martin, CMS Desk Officer, CMS-1502-P, Christopher_Martin@omb.eop.gov. Fax (202) 395-6974.
IV. Response to Comments
Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowledge or respond to them individually. We will consider all comments we receive by the date and time specified in the DATES section of this preamble, and, when we proceed with a subsequent document, we will respond to the comments in the preamble to that document.
V. Regulatory Impact Analysis
[If you choose to comment on issues in this section, please include the caption “IMPACT” at the beginning of your comments.]
We have examined the impact of this rule as required by Executive Order 12866 (September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 16, 1980 Pub. L. 96-354), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
Executive Order 12866 (as amended by Executive Order 13258, which merely reassigns responsibilities of duties) directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis must be prepared for proposed rules with economically significant effects (that is, a proposed rule that would have an annual effect on the economy of $100 million or more in any one year, or would adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities). As indicated in more detail below, we estimate that the PFS provisions included in this proposed rule will redistribute more than $100 million in one year. We are considering this proposed rule to be economically significant because its provisions are estimated to result in an increase, decrease or aggregate redistribution of Medicare spending that will exceed $100 million. Therefore, this proposed rule is a major rule and we have prepared a regulatory impact analysis.
The RFA requires that we analyze regulatory options for small businesses and other entities. We prepare a regulatory flexibility analysis unless we certify that a rule would not have a significant economic impact on a substantial number of small entities. The analysis must include a justification concerning the reason action is being taken, the kinds and number of small entities the rule affects, and an explanation of any meaningful options that achieve the objectives with less significant adverse economic impact on the small entities.
Section 1102(b) of the Act requires us to prepare a regulatory impact analysis for any proposed rule that may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside a Metropolitan Statistical Area and has fewer than 100 beds. We have determined that this proposed rule would have minimal impact on small hospitals located in rural areas. Of 213 hospital-based ESRD facilities located in rural areas, only 40 are affiliated with hospitals with fewer than 100 beds.
For purposes of the RFA, physicians, nonphysician practitioners, and suppliers are considered small businesses if they generate revenues of $6 million or less. Approximately 95 percent of physicians are considered to be small entities. There are about 875,000 physicians, other practitioners and medical suppliers that receive Medicare payment under the PFS.
For purposes of the RFA, approximately 90 percent of suppliers of durable medical equipment (DME) and prosthetic devices are considered small businesses according to the Small Business Administration's (SBA) size standards. We estimate that 106,000 entities bill Medicare for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) each year. Total annual estimated Medicare Start Printed Page 45859revenues for DME suppliers exceed approximately $8.5 billion in 2004. Of this amount, approximately $1.4 billion were for nebulizer drugs in 2004. The vast majority, 95 percent, of retail pharmacy companies are small businesses as measured by the SBA size standard. Approximately, 16,000 pharmacies billed Medicare for immunosuppressive, oral anti-cancer, or oral anti-emetic drugs in 2004. Pharmacies received Medicare revenues for those drugs of approximately $350 million in 2004.
In addition, most ESRD facilities are considered small entities, either based on nonprofit status or by having revenues of $29 million or less in any year. We consider a substantial number of entities to be affected if the proposed rule is estimated to impact more than 5 percent of the total number of small entities. Based on our analysis of the 896 nonprofit ESRD facilities considered small entities in accordance with the above definitions, we estimate that the combined impact of the proposed changes to payment for renal dialysis services included in this proposed rule would have a 1.3 percent increase in overall payments relative to current overall payments.
The analysis and discussion provided in this section, as well as elsewhere in this proposed rule, complies with the RFA requirements.
Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule that may result in expenditures in any year by State, local, or tribal governments, in the aggregate, or by the private sector, of $110 million. Medicare beneficiaries are considered to be part of the private sector for this purpose.
We have examined this proposed rule in accordance with Executive Order 13132 and have determined that this regulation would not have any significant impact on the rights, roles, or responsibilities of State, local, or tribal governments. A discussion concerning the impact of this rule on beneficiaries is found later in this section.
We have prepared the following analysis, which, together with the information provided in the rest of this preamble, meets all assessment requirements. It explains the rationale for and purposes of the rule; details the costs and benefits of the rule; analyzes alternatives; and presents the measures we propose to use to minimize the burden on small entities. As indicated elsewhere in this proposed rule, we propose to change our methodology for calculating resource-based practice expense RVUs and make a variety of other changes to our regulations, payments, or payment policies to ensure that our payment systems reflect changes in medical practice and the relative value of services. We provide information for each of the policy changes in the relevant sections of this proposed rule. We are unaware of any relevant Federal rules that duplicate, overlap or conflict with this proposed rule. The relevant sections of this proposed rule contain a description of significant alternatives if applicable.
A. Resource-Based PE RVUs
Table 30 below shows the specialty level impact on payment of changes to the PE methodology being proposed for CY 2006. The columns in the table demonstrate the estimated impacts on payments (relative to estimated 2006 payments, absent any adjustment for inflation or utilization) during each year of the transition. For example, the first column displays the impact of blending 25 percent of the PE RVUs calculated using the methodology we are proposing with current PE RVUs. The percent of the RVUs based on the proposed method increase until the transition is complete in 2009.
Our estimates of changes in physician Medicare revenues for PFS services compare payment rates for CY 2006 with payment rates for CY 2005 using CY 2004 Medicare utilization for both years. In general, updating the utilization data has little or no impact on total payments to a specialty, but the practice expense values for a new code may change because we did not initially have Medicare utilization data to determine the specialty mix for the service. In these cases, we either assigned the code to a particular specialty's practice expense pool based on the specialty most likely to provide the service, or we used the “all physician” practice expense pool to determine the code's practice expense RVUs. While we try to minimize instability in the practice expense RVUs for new services by assigning the specialty that is most likely to perform the service until such time as we have actual utilization data, the addition of actual utilization data may still result in some change to the practice expense RVUs during the first few years a code is in existence.
The estimated payment impacts reflect the averages for each specialty based on Medicare utilization. To the extent that there are year-to-year changes in the volume and mix of services provided by a specialty, the actual impact on total Medicare revenues may be different than those shown here. Also, the payment impact for an individual physician may be different from the specialty average impact, based on the mix of services the physician provides. Because physicians, practitioners and suppliers, furnish services to both Medicare and non-Medicare patients and they may receive substantial Medicare revenues for services that are not paid under the PFS, the average change in total revenues for any specialty, practitioner or supplier, would be less than the impacts displayed here. For instance, independent laboratories receive approximately 80 percent of their Medicare revenues from clinical laboratory services that are not paid under the PFS. The table shows only the payment impacts on PFS services.
We modeled the impact of the proposed changes to the practice expense methodology and illustrated the effect in Table 30 below.
|Specialty||2006 (25% Blend)||2007 (50% Blend)||2008 (75% Blend)||2009 (100% Blend)|
|Colon and Rectal Surgery||0.7%||1.5%||2.2%||3.0%|
|Start Printed Page 45860|
|Clinical Social Worker||−0.6%||−1.2%||−1.8%||−2.4%|
|Diagnostic Testing Facility||−2.4%||−4.7%||−7.0%||−9.2%|
|Portable X-Ray Supplier||0.4%||0.8%||1.1%||1.5%|
The table shows the effect of the proposed refinements to the PE methodology. As described in section II.A.2. in the preamble of this proposed rule, we are proposing to use the updated practice expense per hour data from the accepted supplementary surveys only in the calculation of indirect PE, and to utilize a “bottom-up” methodology to calculate direct PE.
Even if no other changes were made to our PE calculation methodology, a significant redistribution of PE RVUs would still be produced by the acceptance of the supplementary PE surveys from seven specialties and the corresponding increases in the direct and indirect PE per hour for these specialties. As noted in the preamble discussion regarding our proposal to change the PE methodology, the nonphysician work pool was created to protect codes without physician work components until further refinement could occur. Removing these codes from the nonphysician work pool generally has a negative impact on these codes (although we note that we have consistently indicated this methodology was an interim approach until we had better data available). In addition, the limited number of codes remaining in the nonphysician work pool would also experience significant impacts. Eliminating the nonphysician work pool would generally negatively impact these codes remaining in the pool (for example, certain codes used by audiology and portable x-ray suppliers). We believe that much of this impact is due to the change in the scaling of the inputs when codes move from the nonphysician work pool to the individual specialty pool.
We believe that, in addition to the increased accuracy and simplicity that result from using a “bottom-up” approach for direct costs, this proposed approach also helps mitigate some of the potentially inequitable redistribution of practice expense RVUs Start Printed Page 45861resulting from the acceptance of new specialty-specific survey data. However, several of the impacts that are shown require further consideration.
Audiology is clearly negatively impacted when its services are removed from the nonphysician work pool, though the impact is cut nearly in half when the “bottom-up” approach is used for the direct costs. This impact is in large part driven by the decrease in the PE RVUs for audiology CPT codes 92557, 92567 and 92588, which we believe may now be more appropriately priced in our proposal than they were in the nonphysician work pool that uses historic charge-based RVUs to determine the direct practice expense for a service. However, we would welcome discussions with audiologists regarding this impact, so that we can ensure that the relative costs are reflected appropriately.
Despite submitting a supplementary survey that showed higher PE costs per hour, cardiology is shown to have an impact of −2.1 percent in the last column of Table 30. This is largely due to the decrease in direct PE for several high-volume services resulting from the adoption of the “bottom up” approach. For example, the RVUs for the complete electrocardiogram service, CPT code 93000, decline by 43 percent. The RVUs for multiple 3-D heart imaging, CPT Code 78465, decline by 32 percent. However, it should be noted that, if the new survey data had not been used to calculate indirect PE, cardiology would have had a significantly larger (11 percent) negative impact.
Both physical/occupational therapy and independent laboratory show significant positive impacts in the last column of 6.0 and 28.0 percent, respectively. For therapy services, we had previously applied an adjustment that assigned all therapy services the therapy practice expense per hour, even when billed by specialties with higher costs. Under the top-down methodology, this adjustment was applied to both direct and indirect costs. However, under our proposed methodology, the practice expense per hour data would not be used to calculate direct expenses and this would eliminate the adjustment for direct practice expense costs.
The total CPEP/RUC dollars for supplies and equipment for the services performed by independent laboratories are significantly higher than the aggregate dollars shown by the recent supplementary survey for these cost pools. Therefore, under the current top-down methodology, the CPEP/RUC dollars are scaled down to equal the survey dollars, and the practice expense RVUs are consequently reduced. Under our proposed methodology, the direct costs would no longer be scaled, resulting in higher practice expense RVUs for these services. (This also results in a positive 5.2 percent impact for pathologists, who also perform these services.) Although, as discussed above, we generally believe the refined CPEP/RUC data to be more accurate for calculating direct costs than the SMS or supplementary survey data, we are concerned that there is such a discrepancy between the refined direct cost inputs and a recent survey. We will want to discuss this issue with both the specialty and the RUC to ensure that the refined CPEP/RUC data accurately reflect the typical resources needed for these services. However, as we indicated above, independent laboratories receive only approximately 20 percent of their total Medicare revenues from PFS services, and there should not be significant impact on other specialties from this increase for independent laboratory services.
As discussed in section II.C. of this proposed rule, we are proposing technical changes to the calculation of the malpractice RVUs. We are proposing to remove the malpractice data for specialties that occur less than 5 percent of the time in our data for a procedure code. In addition, the RUC practice liability workgroup has written to us recommending several changes to the crosswalks used to assign risk factors to specialties for which we did not have data otherwise. We are proposing to accept these recommendations, and, as also recommended, we are proposing to use the lowest risk factor of 1.00 for specialties such as clinical psychology, licensed clinical social work, chiropractors, and physical therapists. We are also proposing to add cardiology catheterization and angioplasty codes to the list of codes for which we apply surgical rather than nonsurgical risk adjustment factors. Table 31 below shows the impacts of these proposed changes. Because the malpractice RVUs account for less than 4 percent of total payments, the overall impacts on any particular specialty are negligible.
|Speciality||Impact of removing aberrant malpractice data (percent)||Impact of crosswalk changes (percent)||Combined impacts * (percent)|
|Colon and Rectal Surgery||0.0||0.0||0.0|
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|Clinical Social Worker||0.0||0.0||−0.4|
|Diagnostic Testing Facility||0.0||0.0||0.0|
|Portable X-Ray Supplier||0.0||0.0||0.0|
|*Sum of the columns may be different due to rounding.|
As discussed in section II.J. of this proposed rule, we are proposing to reduce payments for technical components of certain multiple imaging procedures performed in the same session within the same imaging families. In order to calculate the impact of this proposed change, we examined 2004 PFS carrier claims processed through March 31, 2005. We extracted all claims that were billed on the same day, for the same beneficiary, at the same provider, for multiple diagnostic imaging procedures within the same family of codes. For each subset of claims, the procedures were arrayed based on the pricing of the technical component of these services. We simulated the effect of the multiple procedure payment reduction by accounting for 100 percent of the highest priced technical component, and 50 percent of all other technical components. Note that if the procedure was billed globally, the professional component was always calculated at 100 percent of the professional component (modifier-26) value.
The simulated total allowed charges for each family of codes includes all global, technical, and professional utilization for the family of codes (for example, the sum of claims where the multiple procedure payment reduction would have been in effect, in addition to claims that would not have been subject to the multiple procedure payment reduction). These simulated totals were then compared to the actual allowed charges for each family of codes within the same time period to calculate the impacts of the proposed change.
Table 32 below shows the actual 2004 allowed charges by family of imaging procedures and lists the percentage impact by family if this proposed policy had been in effect. Family 2 has the largest (−18.9 percent) impact, while Family 11 has the smallest (−1.3 percent) impact.
|Family||Description of family of imaging procedures||2004 Medicare allowed charges ($ in millions)||Percentage impact (percent)|
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|02||CT and CTA (Chest/Thorax/Abd/Pelvis)||563||−18.9|
|03||CT and CTA (Head/Brain/Orbit/Maxillofacial/Neck)||97||−2.6|
|04||MRI and MRA (Chest/Abd/Pelvis)||105||−4.7|
|05||MRI and MRA (Head/Brain/Neck)||532||−6.2|
|06||MRI and MRA (spine)||540||−4.3|
|08||MRI and MRA (lower extremities)||166||−3.2|
|09||CT and CTA (lower extremities)||5||−2.0|
|10||MR and MRI (upper extremities and joints)||107||−2.7|
|11||CT and CTA (upper extremities)||2||−1.3|
|Total for all procedures subject to multiple imaging reductions||2,276||−8.3|
Using the same data, we also summarized the dollar value of the reductions by specialty. Specialty-specific percentage impacts were calculated by comparing each specialty's 2004 allowed charges for all Medicare allowed services to the reduced allowed charges that would have occurred had this proposal been in effect. As expected, the most significant impacts occur among radiologists, who would experience a −2.1 percent impact. Diagnostic testing facilities experience a −2.9 percent impact. Most other specialties experience a 0.2 percent payment increase as a result of the budget neutrality adjustment. (Because this multiple procedure reduction adjustment would otherwise reduce overall payments by 0.2 percent, it is necessary to include a budget neutrality adjustment to the RVUs, resulting in positive impacts for most specialties.) Table 33 below shows the percentage impact by specialty in combination with other proposed changes.
Table 33 below shows the estimated change in average payments by specialty, nonphysician practitioner, and supplier, resulting from proposed changes to the calculation of practice expense and malpractice RVUs, and the multiple imaging procedure discount. The first column displays Medicare allowed charges during 2004 for each specialty, practitioner, and supplier. The practice expense changes shown in the second column represent the first year impact of a 4-year transition resulting from all practice expense revisions including the adoption of the bottom-up approach and the elimination of the nonphysician work pool. The impact shown is identical to the first column of Table 30. The malpractice impacts shown in the third column are identical to those displayed above in Table 31. The fourth column in Table 33 below demonstrates the impacts for each specialty of the proposed multiple imaging procedure discount. The fifth column shows the combined impact of all proposed changes by specialty.
The largest impacts in this column are attributable to the proposed changes to the PE methodology. The final column includes the current estimate of the 2006 PFS update factor of −4.3 percent. It also combines the impacts of the previous three columns. In addition, this column reflects the expiration of the transitional adjustment required by section 303 of the MMA for drug administration services. This adjustment was set at 32 percent for 2004 and 3 percent for 2005.
Section 1848(d) and (f) of the Act requires the Secretary to set the PFS update under the SGR system. We are currently forecasting a negative update of −4.3 percent for 2006 and negative updates for the next few years. As in the past, we will include a complete discussion of our methodology for calculating the SGR in the final rule.
|Specialty||Medicare allowed charges for 2004 ($ in millions)||Impact of PE RVU changes (percent)||Impact of malpractice RVU changes (percent)||Impact of multiple imaging discount (percent)||Impact of all proposed changes (percent)||Combined impact: includes update and drug admin. trans. (percent)|
|Colon and Rectal Surgery||118||0.7||0.0||0.2||1.0||−3.3|
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|Clinical Social Worker||345||−0.6||−0.4||0.2||−0.8||−5.1|
|Diagnostic Testing Facility||1,087||−2.4||0.0||−2.9||−5.3||−9.6|
|Portable X-Ray Supplier||96||0.4||0.0||0.1||0.5||−3.8|
Table 34 below shows the impact on total payments for selected high-volume procedures of all of the changes previously discussed. We selected these procedures because they are the most commonly provided by a broad spectrum of physician specialties. There are separate columns that show the change in the facility rates and the nonfacility rates. For an explanation of facility and nonfacility practice expense refer to section II.A. in the preamble of this proposed rule. If we change any of the proposed provisions following the consideration of public comments, these figures may change.
|Old||New||Percent change||Old||New||Percent change|
|11721||Debride nail, 6 or more||$39.79||$38.77||−3||$31.08||$29.60||−5|
|17000||Destroy benign/premlg lesion||60.64||62.54||3||44.34||44.39||0|
|27130||Total hip arthroplasty||N/A||N/A||N/A||1,396.14||1,321.88||−5|
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|27244||Treat thigh fracture||N/A||N/A||N/A||1,134.65||1,073.62||−5|
|27447||Total knee arthroplasty||N/A||N/A||N/A||1,507.94||1,427.92||−5|
|33533||CABG, arterial, single||N/A||N/A||N/A||1,923.30||1,813.54||−6|
|35301||Rechanneling of artery||N/A||N/A||N/A||1,128.59||1,072.23||−5|
|43239||Upper GI endoscopy, biopsy||333.50||336.27||1||162.20||159.18||−2|
|66821||After cataract laser surgery||248.23||233.25||−6||230.42||216.83||−6|
|66984||Cataract surg w/iol, 1 stage||N/A||N/A||N/A||684.05||649.50||−5|
|67210||Treatment of retinal lesion||599.54||568.15||−5||573.39||544.48||−5|
|76091||Mammogram, both breasts||97.40||101.39||4||N/A||N/A||N/A|
|76091||26||Mammogram, both breasts||45.10||43.77||−3||45.10||43.77||−3|
|77427||Radiation tx management, x5||172.05||168.64||−2||172.05||166.10||−3|
|78465||26||Heart image (3d), multiple||77.31||74.92||−3||77.31||74.92||−3|
|88305||26||Tissue exam by pathologist||42.07||40.14||−5||42.07||40.14||−5|
|90801||Psy dx interview||153.11||147.29||−4||144.01||137.12||−5|
|90935||Hemodialysis, one evaluation||N/A||N/A||N/A||73.14||69.37||−5|
|92012||Eye exam established pat||65.18||61.63||−5||37.14||35.32||−5|
|92014||Eye exam & treatment||96.26||91.31||−5||60.64||57.66||−5|
|92980||Insert intracoronary stent||N/A||N/A||N/A||809.11||786.38||−3|
|93015||Cardiovascular stress test||108.01||107.55||0||N/A||N/A||N/A|
|93307||26||Echo exam of heart||49.27||47.67||−3||49.27||47.67||−3|
|93510||26||Left heart catheterization||257.32||252.61||−2||257.32||252.61||−2|
|99203||Office/outpatient visit, new||97.02||93.33||−4||72.38||69.11||−5|
|99213||Office/outpatient visit, est||52.68||50.65||−4||35.62||33.96||−5|
|99214||Office/outpatient visit, est||82.62||79.62||−4||59.12||56.30||−5|
|99222||Initial hospital care||N/A||N/A||N/A||112.93||107.79||−5|
|99223||Initial hospital care||N/A||N/A||N/A||157.27||150.29||−4|
|99231||Subsequent hospital care||N/A||N/A||N/A||34.11||32.60||−4|
|99232||Subsequent hospital care||N/A||N/A||N/A||55.71||53.31||−4|
|99233||Subsequent hospital care||N/A||N/A||N/A||79.21||75.74||−4|
|99236||Observ/hosp same date||N/A||N/A||N/A||223.22||213.40||−4|
|99239||Hospital discharge day||N/A||N/A||N/A||96.64||92.53||−4|
|99253||Initial inpatient consult||N/A||N/A||N/A||98.91||94.99||−4|
|99254||Initial inpatient consult||N/A||N/A||N/A||142.12||136.30||−4|
|99261||Follow-up inpatient consult||N/A||N/A||N/A||22.36||21.43||−4|
|99262||Follow-up inpatient consult||N/A||N/A||N/A||45.48||43.50||−4|
|99263||Follow-up inpatient consult||N/A||N/A||N/A||67.46||64.57||−4|
|99283||Emergency dept visit||N/A||N/A||N/A||62.15||59.30||−5|
|99284||Emergency dept visit||N/A||N/A||N/A||97.02||92.54||−5|
|99291||Critical care, first hour||256.57||243.87||−5||207.68||198.33||−4|
|99292||Critical care, addï'l 30 min||113.69||108.60||−4||103.84||99.17||−4|
|99302||Nursing facility care||87.92||84.00||−4||87.92||84.00||−4|
|99303||Nursing facility care||108.39||103.43||−5||108.39||103.43||−5|
|99312||Nursing fac care, subseq||56.47||54.03||−4||56.47||54.03||−4|
|99313||Nursing fac care, subseq||79.58||76.18||−4||79.58||76.18||−4|
|99348||Home visit, est patient||72.01||68.65||−5||N/A||N/A||N/A|
|99350||Home visit, est patient||164.48||156.46||−5||N/A||N/A||N/A|
|G0317||ESRD related svs 4+mo 20+yrs||307.73||294.91||−4||307.73||294.91||−4|
|G0344||Initial preventive exam||97.40||93.69||−4||72.76||69.47||−5|
|G0366||EKG for initial prevent exam||26.91||24.23||−10||N/A||N/A||N/A|
|G0367||EKG tracing for initial prev||17.81||15.42||−13||N/A||N/A||N/A|
|G0368||EKG interpret & report preve||9.10||8.81||−3||9.10||8.81||−3|
In the November 15, 2004 PFS final rule, we showed the combined impact of PFS and drug payment changes on the total revenues for specialties that perform a significant volume of drug administration services. (69 FR 66406) Although we have not performed a similar combined impact analysis this year for all of the specialties considered Start Printed Page 45866last year, we have undertaken a similar analysis of hematology/oncology. In last year's final rule, we announced a one-year demonstration to collect information about symptoms for cancer patients receiving chemotherapy (69 FR 66308). Although this demonstration was implemented through the Secretary's authority under sections 402(a)(1)(B) and 402(a)(2) of the Social Security Act Amendments of 1967 (Pub. L. 90-248) and not through administrative rulemaking, we discussed the impacts of the additional payments from this demonstration in last year's final rule impact analysis.
Therefore, we are also including an analysis of the impact on payments to hematology/oncology as this demonstration project ends. As indicated in Table 35 below, PFS services account for approximately 28 percent of Medicare revenues for hematology/oncology. Medicare payments for all PFS services provided by the specialties of hematology/oncology are projected to decrease by 5.2 percent for 2006. We estimate the impact of the one-year demonstration was 15 percent higher payments relative to PFS payments during 2005. We estimate that approximately 69 percent of total Medicare revenues for hematology/oncology are attributed to drugs, and, for purposes of this analysis, we are assuming no change in the payment levels for Part B drugs during 2006. Assuming no changes in utilization for 2006, we project total Medicare revenues to oncologists would decline by 5.6 percent. However, if the volume of drugs and PFS services increased at historical rates, total Medicare revenues for hematology/oncology would increase by 8.1 percent between 2005 and 2006.
|Physician Fee Schedule||Drugs||All Revenues|
|Specialty||Percent of total medicare revenues from fee schedule (percent)||Change medicare physician fee schedule revenues (percent)||Change one-year demonstration project (percent)||Percent of total medicare revenues from drugs||Change medicare drug revenues (percent)||Combined percent change all medicare revenues*||Combined percent change all medicare revenues with utilization increase**|
|*Note: Reflects changes in total Medicare revenues assuming no changes in utilization. Calculation reflects average changes in fee schedule payments and for drugs weighted by percent of Medicare revenues.|
|** Note: We estimate that Medicare payments to oncologists would increase by 8% between 2005 and 2006 if growth in the volume of drugs and physician fee schedule services were to grow at historical rates, despite the effect of the end of the one-year demonstration project.|
B. Geographic Practice Cost Indices (GPCI)—Payment Localities
As discussed in section II.B. of the preamble to this proposed rule, we are proposing two changes to the California GPCI payment localities. We are proposing to remove both Santa Cruz County and Sonoma County from the Rest of California payment locality, and make both of those counties separate payment localities.
In the November 15, 2004 final rule, we published 2005 and 2006 GPCI and GAF values reflecting the 2 year phase-in of the updated GPCI data. For the Rest of California payment locality that included Santa Cruz and Sonoma counties, the 2005 GAF is 1.012, and the 2006 GAF published at that time was 1.017. After removing Santa Cruz County from the Rest of California locality, its proposed 2006 GAF increases to 1.119. Removing Sonoma County from the Rest of California locality results in a proposed 2006 GAF of 1.098 for the new Sonoma County payment locality. The Rest of California proposed 2006 GAF is 1.011. Table 36 below shows the impacts of the proposed changes in the GPCIs and GAFs. Although only Santa Cruz and Sonoma Counties and the Rest of California locality are specifically impacted by the proposed change, in Table 36, we are showing the GPCIs and GAFs for all California payment localities (the changes from the 2005 to 2006 GAFs for these counties represent the second year of the transition to updated GPCIs). Start Printed Page 45867
|Locality name||County||Work GPCI||2005 GPCI||GAF||2006 Proposed GPCI||Percent change from 2005 GAFs|
|PE GPCI||MP GPCI||Work GPCI||PE GPCI||MP GPCI||GAF|
|Los Angeles||Los Angeles||1.049||1.147||0.954||1.088||1.041||1.156||0.954||1.088||0.0|
|Marin\Napa\Solano||Marin, Napa, Solano||1.025||1.294||0.651||1.128||1.035||1.34||0.651||1.154||2.3|
|Oakland\Berkley||Alameda, Contra Costa||1.048||1.303||0.651||1.144||1.054||1.371||0.651||1.177||2.9|
|San Francisco||San Francisco||1.064||1.501||0.651||1.239||1.06||1.543||0.651||1.256||1.4|
|San Mateo||San Mateo||1.061||1.484||0.639||1.23||1.073||1.536||0.639||1.259||2.4|
|Santa Clara||Santa Clara||1.073||1.46||0.604||1.224||1.083||1.54||0.604||1.265||3.3|
|Santa Cruz||Santa Cruz||1.007||1.043||0.733||1.012||1.014||1.218||0.717||1.119||10.6|
|Rest of California*||1.007||1.043||0.733||1.012||1.007||1.042||0.717||1.011||−0.1%|
|*Alpine, Amador, Butte, Calaveras, Colusa, Del Norte, El Dorado, Fresno, Glenn, Humboldt, Imperial, Inyo, Kern, Kings, Lake, Lassen, Madera, Mariposa, Mendocino, Merced, Modoc, Mono, Monterey, Nevada, Placer, Plumas, Riverside, Sacramento, San Benito, San Bernardino, San Joaquin, San Diego, San Luis Obispo, Santa Barbara, Shasta, Sierra, Siskiyou, Stanislaus, Sutter, Tehama, Trinity, Tulare, Tuolumne, Yolo, Yuba|
C. Medicare Telehealth Services
In section II.D. of this proposed rule, we are proposing to add individual medical nutrition therapy, as represented by HCPCS codes G0270, 97802, and 97803, to the list of telehealth services. We believe that this change will have little effect on Medicare expenditures.
D. Contractor Pricing of CPT Codes 97039 and 97139
As discussed earlier in the preamble of this proposed rule (section II.E.), we are proposing to have the contractors value CPT codes 97039 and 97139. This will make the pricing methodology for these services consistent with our policy for other unlisted services and we believe it will have no significant impact on Medicare expenditures.
E. ESRD-MMA Related Provisions
The ESRD related provisions in this proposed rule are discussed in section II.G. In order to understand the impact of the proposed changes affecting payments to different categories of ESRD facilities, it is necessary to compare estimated payments under the current payment system (current payments) to estimated payments under the proposed revisions to the composite rate payment system as set forth in this proposed rule (proposed payments). To estimate the impact among various classes of ESRD facilities, it is imperative that the estimates of current payments and proposed payments contain similar inputs. Therefore, we simulated payments only for those ESRD facilities for which we are able to calculate both current 2005 payments and proposed 2006 payments.
Due to data limitations, we are unable to estimate current and proposed payments for 77 facilities that bill for ESRD dialysis treatments. ESRD providers were grouped into the categories based on characteristics provided in the Online Survey and Certification and Reporting (OSCAR) file and the most recent cost report data from the Healthcare Cost Report Information System (HCRIS). We also used the December 2004 update of CY 2004 Standard Analytical File (SAF) claims as a basis for Medicare dialysis treatments and separately billable drugs and biologicals. While the December 2004 update of the 2004 SAF file is not complete, we wanted to use the most recent data available, and plan to use an updated version of the 2004 SAF file for the final rule.
|Number of facilities||Number of Dialysis treatments (in millions)||Effect of changes in wage index1||Effect of changes in drug payments2||Overall effect3|
|Small < than 5000 treatments per year||1,714||4.9||−0.5||1.1||0.1|
|Medium 5000 to 9999 treatments per year||1,724||12.4||0.1||1.3||0.6|
|Large > than 10000 treatments per year||855||12.1||0.2||1.2||0.6|
|Type of Ownership:|
|East North Central||651||4.6||−1.9||0.9||−0.8|
|West North Central||333||1.6||−0.9||1.0||−0.2|
|East South Central||342||2.2||−1.6||1.1||−0.4|
|West South Central||585||4.1||−1.3||1.1||−0.3|
|1 This column shows the effect of wage changes to composite rate payments to ESRD providers. Composite rate payments computed using the current wage index are compared to composite rate payments using the proposed wage index changes.|
|2 This column shows the effect of the changes in drug payments to ESRD providers. These include proposed changes In payment for separately billable drugs (2006 ASP+6) and the 8.9% drug add-on compared to current payment for separately billable drugs (2005 AAP) and the current 8.7 percent drug add-on.|
|3 This column shows the percent change between proposed and current payments to ESRD facilities. The proposed payments include the wage adjusted composite rate, and the 8.9% drug add-on times treatments plus proposed payment for separately billable drugs. The current payment to ESRD facilities includes the current wage adjusted composite rate times treatments plus current drug payments for separately billable drugs.|
Table 37 above shows the impact of this year's proposed changes to payments to hospital based and independent ESRD facilities. We have included both composite rate payments as well as payments for separately billable drugs and biologicals because both are affected by the proposed changes. The first column of Table 37 identifies the type of ESRD provider, the second column indicates the number of ESRD facilities for each type, and the third column indicates the number of dialysis treatments.
The fourth column shows the effect of proposed changes to the ESRD wage index as it affects the composite rate payments to ESRD facilities. The fourth Start Printed Page 45869column compares aggregate wage adjusted composite rate payments using the proposed ESRD wage index compared to the current ESRD wage adjusted composite rate payments. The overall effect to all ESRD providers in aggregate is zero because the proposed ESRD wage index has been multiplied by a budget neutrality factor to comply with the statutory requirement that any wage index revisions be done in a manner that results in the same aggregate amount of expenditures as would have been made without any changes in the wage index. The percent changes shown in the fifth and sixth columns are the result of the increase to the drug add-on and the changes in drug prices which are explained in section G below.
The fifth column shows the effect of the proposed changes in drug payments to ESRD providers. Current payments for drugs represent 2005 Medicare reimbursement using AAP prices for the top ten drugs (as discussed earlier in this preamble). Current Medicare spending for the top ten drugs is estimated using 2005 AAP prices times actual drug utilization from 2004 claims. (EPO units are estimated using payments because the units field on bills represents the number of EPO administrations rather than the number of EPO units). Spending under the proposed change is 2005 ASP +6 percent for the top ten drugs times actual drug utilization from 2004 claims. The proposed prices for these top ten drugs are discussed earlier in this preamble. In order to simulate what ASP +6 percent pricing will be in 2006 we inflated the 2005 first quarter ASP +6 prices by a forecast of the PPI for prescription drugs (5.7 percent annual growth from 2005 to 2006).
Proposed payment for drugs in 2006 also includes the 8.9 percent drug add-on to the composite rate. This amount is computed by multiplying the wage adjusted composite rate for each provider times dialysis treatments from 2004 claims. Column 5 is computed by comparing spending under the proposed payment for drugs (ASP +6 percent inflated to 2006) including the 8.9 percent drug add-on amount to spending under current payments for drugs with the current drug add-on of 8.7 percent. In order to make column 5 comparable with rest of Table 38, current composite rate payments to ESRD facilities were included in both current and proposed spending calculations.
We did not simulate any case mix in this impact table because 2004 claims data do not include the new data fields (height and weight) that are needed to calculate case mix. These data fields were not required be reported by providers until January 1, 2005. However, we have not proposed any changes to case mix for calendar year 2006.
Column 6 shows the overall effect of all changes in drug and composite rate payments to ESRD providers. The overall effect is measured as the difference between proposed payment with all MMA changes as proposed in this rule and current payment. Proposed payment is computed by multiplying the composite rate for each provider (with both the proposed wage index and the 8.9 percent drug add-on) times dialysis treatments from 2004. In addition, the proposed payment includes payments for separately billable drugs under the ASP +6 drug pricing inflated to 2006 levels. Current payment is the current wage adjusted composite rate for each provider times dialysis treatments from 2004 claims plus current AAP priced drug payments for separately billable drugs with the current 8.7 percent drug add-on.
The overall impact to ESRD providers in aggregate is 0.5 percent. Among the two separately shown effects, the effect of changes to the wage index has the most variation among provider type but is budget neutral in aggregate. The effect of change in drug payments contributes most to the overall effect, but varies little among provider types.
We also note that the proposed revisions to the composite rate exceptions process will have no impact on payments to ESRD providers since we have only proposed changes in process and these changes do not affect which providers will be eligible for exceptions nor the amount of the exception.
F. Payment for Covered Outpatient Drugs and Biologicals
As discussed in section II.H. of this proposed rule, the proposal to pay a reduced supplying fee for each Medicare Part B oral drug prescription, after the first one, supplied to a beneficiary during a month is estimated to reduce total Federal expenditures by $8 million in 2006, and $30 million over the five-year period, CY 2006 to 2010. The preamble seeks comment on an appropriate inhalation drug dispensing fee amount for 2006. The effect on Federal expenditures of a potential change to the inhalation drug dispensing fee would depend on the dispensing fee amount established.
G. Private Contracts and Opt-Out Provision
The changes discussed in section II.I. of this proposed rule, with respect to private contracts and the opt-out provision, are currently estimated to have no significant impact on Medicare expenditures. However, we believe the changes will clarify that the consequences for the failure to maintain opt-out will apply regardless of whether the physician or practitioner was notified by the carrier.
H. FQHC Supplemental Payment Provision
Section 237 of the MMA amended section 1833(a)(3) of Act to provide supplemental payments to FQHCs that contract with Medicare Advantage (MA) organizations to cover the difference, if any, between the payment received by the health center for treating MA enrollees and the payment to which the FQHC would be entitled to receive under its cost-based all-inclusive payment rate. We estimate that this new MMA payment provision for FQHC services will not increase Medicare payments. In other words, this MMA provision would have no budgetary impact on the Medicare trust fund due to the fact that a supplemental payment would only be made when the MA payment to the health center is less than its original FQHC cost based rate. Consequently, no additional Medicare expenditures would be needed to pay the center up to what it would have received under original Medicare.
I. National Coverage Decisions Timeframes
The proposed changes to § 426.340 discussed in section II.N. of this proposed rule, are made in order to conform certain timeframes in the regulation to meet legislative changes made by the MMA of 2003. These changes to the regulation will meet Congressional intent in the development of NCDs, and will conform the regulation to the overall NCD process. There will be no budget implications as a result of these changes.
J. Coverage of Screening for Glaucoma
As discussed in section II.O. of the preamble to this proposed rule, we would expand the definition of an eligible beneficiary under the glaucoma screening benefit to include Hispanic Americans age 65 and over, effective January 1, 2006, subject to certain frequency and other limitations on coverage. At present, § 410.23(a)(2) (Conditions for and limitations on coverage of screening for glaucoma) defines the term “eligible beneficiary” Start Printed Page 45870to include individuals in the following high risk categories:
- Individual with diabetes mellitus.
- Individual with a family history of glaucoma.
- African-Americans age 50 and over.
Based on the projected utilization of these screening services and related medically necessary follow-up tests and treatment that may be required for the additional beneficiaries screened, we estimate that this expanded benefit will result in an increase in Medicare payments to ophthalmologists or optometrists who will provide these screening tests and related follow-up tests and treatment. However, this is not expected to have a significant cost impact on the Medicare program.
K. Physician Referral for Nuclear Medicine Services
This proposal, which is discussed in section II.P. of this proposed rule, would primarily affect physicians and health care entities that furnish items and services to Medicare beneficiaries. We have attempted to minimize its effect by interpreting the law in a practical and realistic manner. We are unable to quantify the number of physicians who have either an ownership or an investment interest in entities that furnish nuclear medicine services and/or supplies. Even if we assume that a substantial number of physicians have ownership or investment interests in these types of entities, we believe that, in general, the economic impact on these physicians would not necessarily be substantial, for the reasons stated below.
Physician owners/investors of entities that furnish nuclear medicine services and supplies in a manner that satisfies the requirements of the in-office ancillary services exception would not be affected by this proposed rule. In addition, physician ownership of or investment in entities that furnish nuclear medicine services and supplies to residents of rural areas would not be affected by this requirement.
If a physician's ownership or investment interest would lead to a prohibition on his or her referrals to that entity, the physician has two options. First, he or she can stop making referrals to that entity and make referrals to another entity. Second, the physician can divest himself or herself of the interest. While the impact on an individual physician may be significant, we do not believe that physicians, in general, will be significantly affected if they have to stop making referrals to an entity in which they have an ownership interest. We have come to this conclusion because we assume that the majority of physicians receive most of their income from the services they personally furnish, not from nuclear medicine services performed by entities that they own. In addition, we assume that, unless the physician established the entity to serve only his or her patients, the entity receives referrals from other physicians. Thus, the physician may still receive a return on the ownership or investment. We do not believe that the second option (divestiture of the ownership interest) would necessarily have a significant economic effect. However, we assume, that, at least from an economic standpoint, most physicians invest in entities because they are income producing. If an investment is successful, a physician may have little difficulty finding new investors willing to take over the physician's investment. The physician, in turn, can then invest the monies received in some other investment. We believe the cost of divestiture will vary from situation to situation.
We also do not believe that beneficiary access to medically necessary nuclear medicine services would be threatened simply because most physician ownership of entities that furnish nuclear medicine services would be prohibited. As indicated above, we see no reason why medically necessary nuclear medicine services could not be furnished by entities owned by those not in a position to refer such services.
We expect that this proposed rule may result in savings to both the Medicare and Medicaid programs by minimizing anti-competitive business arrangements as well as financial incentives that encourage over-utilization of costly nuclear medicine services. (See David Armstrong, “MRI and CT Centers Offer Doctors Way to Profit on Scans,” Wall Street Journal, May 2, 2005, et al.) We cannot gauge with any certainty the extent of these savings to either program at this time.
L. Alternatives Considered
This proposed rule contains a range of policies, including some proposals related to specific MMA provisions. The preamble provides descriptions of the statutory provisions that are addressed, identifies those policies when discretion has been exercised, presents rationale for our decisions and, where relevant, alternatives that were considered.
M. Impact on Beneficiaries
There are a number of changes made in this proposed rule that would have an effect on beneficiaries. In general, we believe these changes will improve beneficiary access to services that are currently covered or will expand the Medicare benefit package to include new services. As explained in more detail below, the regulatory provisions may affect beneficiary liability in some cases. Any changes in aggregate beneficiary liability from a particular provision will be a function of the coinsurance (20 percent if applicable for the particular provision after the beneficiary has met the deductible) and the effect of the aggregate cost (savings) of the provision on the calculation of the Medicare Part B premium rate (generally 25 percent of the provision's cost or savings).
To illustrate this point, as shown in Table 34, the 2005 national payment amount in the nonfacility setting for CPT code 99203 (Office/outpatient visit, new), is $97.02 which means that currently a beneficiary is responsible for 20 percent of this amount, or $19.40. Under this proposed rule the 2006 national payment amount in the nonfacility setting for CPT code 99203, as shown in Table 34, is $93.33 which means that, in 2006, the beneficiary coinsurance for this service would be $18.66.
Very few of the changes we are proposing impact overall payments and therefore will affect Medicare beneficiaries' coinsurance liability. Proposals discussed above that do affect overall spending would similarly impact beneficiaries' coinsurance.
For example, we have tried to ensure that the proposal concerning physician self-referral for nuclear medicine services would not adversely impact the medical care of Medicare or Medicaid patients. While we recognize that these proposed revisions may have an impact on current arrangements under which patients are receiving medical care, there are other ways to structure these arrangements so that patients may continue to receive medically necessary nuclear medicine services. In almost all cases, we believe this proposal concerning physician referral for nuclear medicine services should not require substantial changes in delivery arrangements and would help minimize anti-competitive behavior that can affect where a beneficiary receives health care services and possibly the quality of the services furnished. We also believe it will minimize the number of medically unnecessary nuclear medicine procedures billed to the Medicare and Medicaid programs.
N. Accounting Statement
As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Start Printed Page 45871Table 38 below, we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this proposed rule. This table includes the impact of the proposed changes in this rule on providers and suppliers and encompasses the anticipated negative update to the physician fee schedule based on the statutory SGR formula.
Expenditures are classified as transfers to Medicare providers/or suppliers (that is, ESRD facilities and physicians, other practitioners and medical suppliers that receive payment under the physician fee schedule or Medicare Part B).
|Annualized Monetized Transfers||Negative transfer-Estimated decrease in expenditures ($1,860).|
|From Whom To Whom?||Federal Government To ESRD Medicare Providers; physicians, other practitioners and suppliers who receive payment under the Medicare Physician Fee Schedule; and Medicare Suppliers billing for Part B drugs.|
In accordance with the provisions of Executive Order 12866, this final rule was reviewed by the Office of Management and Budget.Start List of Subjects
List of Subjects
- Administrative practice and procedure
- Health facilities
- Health professions
- Kidney diseases
- Medical devices
- Reporting and recordkeeping requirements
- Rural areas
- Health facilities
- Health professions
- Kidney diseases
- Reporting and recordkeeping requirements
- Rural areas
- Kidney diseases
- Physician Referral
- Reporting and recordkeeping requirements
- Health facilities
- Kidney diseases
- Reporting and recordkeeping requirements
- Administrative practice and procedure
- Health facilities
- Health professions
- Kidney diseases
- Reporting and recordkeeping requirements
- Administrative practice and procedure
- Reporting and recordkeeping requirements
For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services proposes to amend 42 CFR chapter IV as set forth below:Start Part
PART 405—FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED
1. The authority citation for part 405 continues to read as follows:
Subpart D—Private Contracts
2. Section 405.435 is amended by—
A. Revising introductory text in paragraph (b).
B. Adding paragraph (d).
The revision and addition read as follows:
(b) If a physician or practitioner fails to maintain opt-out in accordance with paragraph (a) of this section, then, for the remainder of the opt-out period, except as provided by paragraph (d) of this section—
(d) If a physician or practitioner demonstrates that he or she has taken good faith efforts to maintain opt-out (including by refunding amounts in excess of the charge limits to beneficiaries with whom he or she did not sign a private contract) within 45 days of a notice from the carrier of a violation of paragraph (a) of this section, then the requirements of paragraphs (b)(1) through (b)(8) of this section are not applicable. In situations where a violation of paragraph (a) of this section is not discovered by the carrier during the 2-year opt-out period when the violation actually occurred, then the requirements of paragraphs (b)(1) through (b)(8) of this section are applicable from the date that the first violation of paragraph (a) of this section occurred until the end of the opt-out period during which the violation occurred (unless the physician or practitioner takes good faith efforts, within 45 days of any notice from the carrier that the physician or practitioner failed to maintain opt-out, or the physician's or practitioner's discovery of the failure to maintain opt-out, whichever is earlier, to correct his or her violations of paragraph (a) of this section, for example, by refunding the amounts in excess of the charge limits to beneficiaries with whom he or she did not sign a private contract).
Subpart X—Rural Health Clinic and Federally Qualified Health Center Services
3. Add § 405.2469 to read as follows:
Federally Qualified Health Centers under contract (directly or indirectly) with Medicare Advantage plans are eligible for supplemental payments for covered Federally Qualified Health Center services furnished to enrollees in Medicare Advantage plans offered by the Medicare Advantage organization to cover the difference, if any, between their payments from the Medicare Advantage plan and what they would receive under the cost-based Federally Qualified Health Center payment system.
(a) Calculation of supplemental payment. (1) The supplemental payment for Federally Qualified Health Center covered services provided to Medicare patients enrolled in Medicare Advantage plans is based on—
(i) The difference between payments received by the center from the Medicare Advantage plan as determined on a per visit basis; Start Printed Page 45872
(ii) The Federally Qualified Health Center's all-inclusive cost-based per visit rate as set forth in this subpart;
(iii) Less any amount the FQHC may charge as described in section 1857(e)(3)(B) of the Act.
(2) Any financial incentives provided to Federally Qualified Health Centers under their Medicare Advantage contracts, such as risk pool payments, bonuses, or withholds, are prohibited from being included in the calculation of supplemental payments due to the Federally Qualified Health Center.
(b) Per visit supplemental payment. A supplemental payment required under this section is made to the Federally Qualified Health Center when a covered face-to-face encounter occurs between a Medicare Advantage enrollee and a practitioner as set forth in § 405.4563.
PART 410—SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS
4. The authority citation for part 410 continues to read as follows:
Subpart B—Medical and Other Health Services
5. Section 410.23 is amended by revising paragraph (a)(2)(i) through (iv) to read as follows:
(a) * * *
(2) * * *
(i) Individual with diabetes mellitus.
(ii) Individual with a family history of glaucoma.
(iii) African-Americans age 50 and over.
(iv) Hispanic-Americans age 65 and over.
6. Section 410.78 is amended by—
A. Revising paragraph (b) introductory text.
B. Adding paragraph (b)(2)(viii).
The revision and addition read as follows:
(b) General rule. Medicare Part B pays for office and other outpatient visits, professional consultation, psychiatric diagnostic interview examination, individual psychotherapy, pharmacologic management, end stage renal disease related services included in the monthly capitation payment (except for one visit per month to examine the access site), and individual medical nutrition therapy furnished by an interactive telecommunications system if the following conditions are met:
(2) * * *
(viii) A registered dietician or nutrition professional as described in § 410.134.
PART 411—EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE PAYMENT
7. The authority citation for part 411 continues to read as follows:
Subpart J—Financial Relationships Between Physicians and Entities Furnishing Designated Health Services
8. Section 411.351 is amended by—
A. Revising the definition “Radiation therapy services and supplies”.
B. Revising the definition “Radiology and certain other imaging services”.
The revisions read as follows:
Radiation therapy services and supplies means those particular services and supplies so identified on the List of CPT/HCPCS Codes. All services and supplies identified on the List of CPT/HCPCS Codes are radiation therapy services and supplies for purposes of this subpart. Any service or supply not specifically identified as radiation therapy services or supplies on the List of CPT/HCPCS Codes is not a radiation therapy service or supply for purposes of this subpart. The list of codes identifying radiation therapy services and supplies are those covered under section 1861(s)(4) of the Act and § 410.35 of this chapter.
Radiation and certain other imaging services means those particular services so identified on the List of CPT/HCPCS Codes. All services so identified on the List of CPT/HCPCS Codes are radiology and certain other imaging services for purposes of this subpart. Any service not specifically identified as radiology and certain other imaging services on the List of CPT/HCPCS Codes, is not a radiology or certain other imaging service for purposes of this subpart. The list of codes identifying radiology and certain other imaging services includes the professional and technical components of any diagnostic test or procedure using x-rays, ultrasound, or other imaging services, computerized axial tomography, or magnetic resonance imaging, or diagnostic nuclear medicine, as covered under section 1861(s)(3) of the Act and § 410.32 and § 410.34 of this chapter, but does not include—
(1) X-ray, fluoroscopy, or ultrasound procedures that require the insertion of a needle, catheter, tube, or probe through the skin or into a body orifice.
(2) Radiology procedures that are integral to the performance of a non-radiological medical procedure and performed—
(i) During the nonradiological medical procedure; or
(ii) Immediately following the non-radiological medical procedure where necessary to confirm placement of an item placed during the nonradiological medical procedure.
PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES
9. The authority citation for part 413 continues to read as follows:
Subpart H—Payment for End-Stage Renal Disease (ESRD) Services and Organ Procurement Costs
10. Section 413.170 is amended by revising paragraph (b) to read as follows:
(b) Providing procedures and criteria under which a pediatric ESRD facility (an ESRD facility with at least a 50 percent pediatric patient mix) may receive an exception to the prospective payment rates; and
11. Section 413.174 is amended by—
A. Revising paragraph (f).
B. Removing paragraph (g).
The revisions read as follows:
(f) Additional payment for separately billable drugs. CMS makes an additional payment for certain drugs furnished to ESRD patients by a Medicare-approved ESRD facility. CMS makes this payment directly to the ESRD facility. Payment for these drugs is made—
(1) Only on an assignment basis, directly to the facility which must Start Printed Page 45873accept, as payment in full, the amount that CMS determines;
(2) Subject to the Part B deductible and coinsurance;
(3) To hospital-based facilities in accordance with the cost reimbursement rules set forth in this part, except for erythropoietin/epogen (commonly called EPO), which is paid the same amount as independent facilities; and
(4) To independent facilities in accordance with the methodology set forth in § 405.517 of this chapter.
12. Section 413.180 is amended by—
A. Revising paragraphs (b) and (d)
B. Removing paragraphs (e) and (k).
C. Redesignating paragraphs (f) through (j) as paragraphs (e) through (i).
D. Redesignating paragraphs (l) and (m) as paragraphs (j) and (k).
The amendment reads as follows:
(b) Criteria for requesting an exception. If a pediatric ESRD facility projects on the basis of prior year costs and utilization trends that it has an allowable cost per treatment higher than its prospective rate set under § 413.174, and if these excess costs are attributable to one or more of the factors in § 413.182, the facility may request, in accordance with paragraph (e) of this section, that CMS approve an exception to that rate and set a higher prospective payment rate.
(d) Payment rate exception request. Effective October 1, 2002, CMS may approve exceptions to a pediatric ESRD facility's updated prospective payment rate, if the pediatric ESRD facility did not have an approved exception rate as of October 1, 2002. A pediatric ESRD facility may request an exception to its payment rate at any time after it is in operation for at least 12 consecutive months.
13. Section 413.182 is revised to read as follows:
(a) CMS may approve exceptions to a pediatric ESRD facility's prospective payment rate if the pediatric ESRD facility did not have an approved exception rate as of October 1, 2002.
(b) The pediatric ESRD facility must demonstrate, by convincing objective evidence, that its total per treatment costs are reasonable and allowable under the relevant cost reimbursement principles of part 413 and that its per treatment costs in excess of its payment rate are directly attributable to any of the following criteria:
(1) Pediatric patient mix, as specified in § 413.184.
(2) Self-dialysis training costs in pediatric facilities, as specified in § 413.186
14. Section 413.184 is amended by revising paragraphs (a) and (b)(1) to read as follows:
(a) Qualifications. To qualify for an exception to its prospective payment rate based on its pediatric patient mix a facility must demonstrate that—
(1) At least 50 percent of its patients are individuals under 18 years of age;
(2) Its nursing personnel costs are allocated properly between each mode of care;
(3) The additional nursing hours per treatment are not the result of an excess number of employees;
(4) Its pediatric patients require a significantly higher staff-to-patient ratio than typical adult patients; and
(5) These services, procedures, or supplies and its per treatment costs are clearly prudent and reasonable when compared to those of pediatric facilities with a similar patient mix.
(b) Documentation. (1) A pediatric ESRD facility must submit a listing of all outpatient dialysis patients (including all home patients) treated during the most recently completed and filed cost report (in accordance with cost reporting requirements under § 413.198) showing—
(i) Age of patients and percentage of patients under the age of 18;
(ii) Individual patient diagnosis;
(iii) Home patients and ages;
(iv) In-facility patients, staff-assisted, or self-dialysis;
(v) Diabetic patients; and
(vi) Patients isolated because of contagious disease.
15. Section 413.186 is removed.
16. Section 413.188 is removed.
17. Redesignate § 413.190 as § 413.186 and revise the newly designated § 413.186 to read as follows:
(a) Qualification. To qualify for an exception to the prospective payment rate based on self-dialysis training costs, the pediatric ESRD facility must establish that it incurs per treatment costs for furnishing self-dialysis and home dialysis training that exceed the facility's payment rate for the training sessions.
(b) Justification. To justify its exception request, a facility must—
(1) Separately identify those elements contributing to its costs in excess of the composite training rate; and
(2) Demonstrate that its per treatment costs are reasonable and allowable.
(c) Criteria for determining proper cost reporting. CMS considers the pediatric ESRD facility's total costs, cost finding and apportionment, including its allocation of costs, to determine if costs are properly reported by treatment modality.
(d) Limitation of exception requests. Exception requests for a higher training rate are limited to those cost components relating to training such as technical staff, medical supplies, and the special costs of education (manuals and education materials). These requests may include overhead and other indirect costs to the extent that these costs are directly attributable to the additional training costs.
(e) Documentation. The pediatric ESRD facility must provide the following information to support its exception request:
(1) A copy of the facility's training program.
(2) Computation of the facility's cost per treatment for maintenance sessions and training sessions including an explanation of the cost difference between the two modalities.
(3) Class size and patients' training schedules.
(4) Number of training sessions required, by treatment modality, to train patients.
(5) Number of patients trained for the current year and the prior 2 years on a monthly basis.
(6) Projection for the next 12 months of future training candidates.
(7) The number and qualifications of staff at training sessions.
(f) Accelerated training exception. (1) A pediatric ESRD facility may bill Medicare for a dialysis training session only when a patient receives a dialysis treatment (normally three times a week for hemodialysis). Continuous cycling peritoneal dialysis (CCPD) and continuous ambulatory peritoneal dialysis (CAPD) are daily treatment modalities; ESRD facilities are paid the equivalent of three hemodialysis treatments for each week that CCPD and CAPD treatments are provided.
(2) If a pediatric ESRD facility elects to train all its patients using a particular treatment modality more often than during each dialysis treatment and, as a result, the number of billable training dialysis sessions is less than the number of actual training sessions, the facility Start Printed Page 45874may request a composite rate exception, limited to the lesser of the—
(i) Facility's projected training cost per treatment; or
(ii) Cost per treatment the facility receives in training a patient if it had trained patients only during a dialysis treatment, that is, three times per week.
(3) An ESRD facility may bill a maximum of 25 training sessions per patient for hemodialysis training and 15 sessions for CCPD and CAPD training.
(4) In computing the payment amount under an accelerated training exception, CMS uses a minimum number of training sessions per patient (15 for hemodialysis and 5 for CAPD and CCPD) when the facility actually provides fewer than the minimum number of training sessions.
(5) To justify an accelerated training exception request, an ESRD facility must document that a significant number of training sessions for a particular modality are provided during a shorter but more condensed period.
(6) The facility must submit with the exception request a list of patients, by modality, trained during the most recent cost report period. The list must include each beneficiary's—
(ii) Age; and
(iii) Training status (completed, not completed, being retrained, or in the process of being trained).
(7) The total treatments from the patient list must be the same as the total treatments reported on the cost report filed with the request.
18. Section 413.192 is removed.
PART 414—PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES
19. The authority citation for part 414 continues to read as follows:
Subpart B—Physicians and Other Practitioners
20. Section 414.65 is amended by revising paragraph (a)(1) to read as follows:.
(a) * * *
(1) The Medicare payment amount for office or other outpatient visits, consultation, individual psychotherapy, psychiatric diagnostic interview examination, pharmacologic management, end stage renal disease related services included in the monthly capitation payment (except for one visit per month to examine the access site), and individual medical nutrition therapy furnished via an interactive telecommunications system is equal to the current fee schedule amount applicable for the service of the physician or practitioner.
21. Section 414.802 is amended by adding definitions of “direct sales” and “indirect sales” to read as follows:
Direct Sales means sales directly from the manufacturer to the provider (for example, physician or other health care provider) or supplier.
Indirect Sales means from the manufacturer to a wholesaler, distributor, or similar entity that sells to others in the distribution chain. Indirect sales also include any sale subject to the average sales price reporting requirement that is not a direct sale.
22. Section 414.804(a) is amended by:
A. Redesignating paragraphs (a)(3), (a)(4), (a)(5), and (a)(6), as paragraphs (a)(4), (a)(5), (a)(6), and (a)(7).
B. Adding a new paragraph (a)(3).
C. Revising newly redesignated paragraph (a)(4).
The redesignations and revisions read as follows:
(a) * * *
(3) In calculating the manufacturer's average sales price, a manufacturer must—
(i) Calculate the average sales price for direct sales;
(ii) Calculate the average sales price for indirect sales; and
(iii) Calculate the weighted average of the results from paragraphs (a)(3)(i) and (a)(3)(ii). Example. [(ASP for direct sales × direct sales units) + (ASP for indirect sales × indirect sales units)]/(direct sales units + indirect units sales units).
(4) To the extent that data on price concessions, as described in paragraph (a)(2) of this section, are available on a lagged basis, the manufacturer must estimate this amount in accordance with the methodology described in paragraphs (a)(4)(i) through (a)(4)(iv) of this section, for each of the amounts calculated under paragraphs (a)(3)(i) and (a)(3)(ii) of this section, before calculating the weighted average described in paragraph (a)(3)(iii) of this section.
(i) For each National Drug Code, the manufacturer calculates a percentage equal to the sum of the price concessions for the most recent 12-month period available associated with sales subject to the average sales price reporting requirement divided by the total in dollars for the sales subject to the average sales price reporting requirement for the same 12-month period.
(ii) The manufacturer then multiplies the percentage described in paragraph (a)(4)(i) of this section by the total in dollars for the sales subject to the average sales price reporting requirement for the quarter being submitted. (The manufacturer must carry a sufficient number of decimal places in the calculation of the price concessions percentage in order to round accurately the net total sales amount for the quarter to the nearest whole dollar.) The result of this multiplication is then subtracted from the total in dollars for the sales subject to the average sales price reporting requirement for the quarter being submitted.
(iii) The manufacturer then uses the result of the calculation described in paragraph (a)(4)(ii) of this section as the numerator and the number of units sold in the quarter as the denominator to calculate the manufacturer's average sales price for the National Drug Code in the quarter being submitted.
(iv) Example. The total lagged price concessions (discounts, rebates, etc.) over the most recent 12-month period available associated with direct sales for National Drug Code 12345-6789-01 subject to the ASP reporting requirement equal $200,000. The total in dollars for the direct sales subject to the average sales price reporting requirement for the same period equals $600,000. The lagged price concessions percentage for this period equals 200,000/600,000 = .33333. The total in dollars for the direct sales subject to the average sales price reporting requirement for the quarter being reported equals $50,000 for 10,000 direct sales units sold. Assuming no non-lagged price concessions apply, the manufacturer's average sales price calculation for direct sales for this National Drug Code for this quarter is: $50,000—(0.33333 × $50,000) = $33,334 (net total direct sales amount); $33,334/10,000 = $3.33 (average sales price for direct sales). The average sales price for indirect sales is calculated independently.
Subpart L—Supplying and Dispensing Fees
23. Section 414.1001 is amended by revising paragraph (a) as follows:
(a) A supplying fee of $24 is paid to a supplier for the first prescription of drugs and biologicals described in sections 1861(s)(2)(J), 1861(s)(2)(Q), and 1861(s)(2)(T) of the Act that that supplier provided to a beneficiary during a month. A supplying fee of $8 is paid to a supplier for each prescription of drugs and biologicals described in sections 1861(s)(2)(J), 1861(s)(2)(Q), and 1861(s)(2)(T) of the Act, after the first one, that that supplier provided to a beneficiary during a month.
PART 426—REVIEW OF NATIONAL COVERAGE DETERMINATIONS AND LOCAL COVERAGE DETERMINATIONS
24. The authority citation for part 426 continues to read as follows:
25. The heading for part 426 is revised to read as set forth above.
Subpart C—General Provisions for the Review of LCDs and NCDs
26. Section 426.340 is amended by—
A. Revising paragraph (e)(2).
B. Adding paragraph (e)(3).
C. Revising paragraph (f)(2).
D. Adding paragraph (f)(3).
The revisions and additions read as follows:
(e) * * *
(2) For LCDs, sets a reasonable timeframe, not more than 90 days, by which the contractor completes the reconsideration.
(3) For NCDs, sets a reasonable timeframe, in compliance with the timeframes specified in section 1862(1) of the Act, by which CMS completes the reconsideration.
(f) * * *
(2) For LCDs, the 90-day reconsideration timeframe is not met.
(3) For NCDs, the reconsideration timeframe as specified by the Board, in compliance with section 1862(1) of the Act, is not met.
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical Assistance Program).
(Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance; and Program No. 93.774, Medicare—Supplementary Medical Insurance Program).
Dated: July 12, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.Approved: July 18, 2005.
Michael O. Leavitt,
These addenda will not appear in the Code of Federal Regulations.
Addendum A—Explanation and Use of Addenda B
The addenda on the following pages provide various data pertaining to the Medicare fee schedule for physicians' services furnished in 2006. Addendum B contains the RVUs for work, non-facility practice expense, facility practice expense, and malpractice expense, and other information for all services included in the physician fee schedule.
In previous years, we have listed many services in Addendum B that are not paid under the physician fee schedule. To avoid publishing as many pages of codes for these services, we are not including clinical laboratory codes and most alpha-numeric codes (Healthcare Common Procedure Coding System (HCPCS) codes not included in CPT) in Addendum B.
Addendum B—2006 Relative Value Units and Related Information Used in Determining Medicare Payments For 2006
This addendum contains the following information for each CPT code and alphanumeric HCPCS code, except for alphanumeric codes beginning with B (enteral and parenteral therapy), E (durable medical equipment), K (temporary codes for nonphysicians' services or items), or L (orthotics), and codes for anesthesiology.
1. CPT/HCPCS code. This is the CPT or alphanumeric HCPCS number for the service. Alphanumeric HCPCS codes are included at the end of this addendum.
2. Modifier. A modifier is shown if there is a technical component (modifier TC) and a professional component (PC) (modifier -26) for the service. If there is a PC and a TC for the service, Addendum B contains three entries for the code: One for the global values (both professional and technical); one for modifier -26 (PC); and one for modifier TC. The global service is not designated by a modifier, and physicians must bill using the code without a modifier if the physician furnishes both the PC and the TC of the service.
Modifier -53 is shown for a discontinued procedure. There will be RVUs for the code (CPT code 45378) with this modifier.
3. Status indicator. This indicator shows whether the CPT/HCPCS code is in the physician fee schedule and whether it is separately payable if the service is covered.
A = Active code. These codes are separately payable under the fee schedule if covered. There will be RVUs for codes with this status. The presence of an “A” indicator does not mean that Medicare has made a national coverage determination regarding the coverage of the service. Carriers remain responsible for coverage decisions in the absence of a national Medicare policy.
B = Bundled code. Payment for covered services is always bundled into payment for other services not specified. If RVUs are shown, they are not used for Medicare payment. If these services are covered, payment for them is subsumed by the payment for the services to which they are incident. (An example is a telephone call from a hospital nurse regarding care of a patient.)
C = Carrier-priced code. Carriers will establish RVUs and payment amounts for these services, generally on a case-by-case basis following review of documentation, such as an operative report.
D = Deleted/discontinued code. These codes are deleted effective with the beginning of the calendar year.
E = Excluded from physician fee schedule by regulation. These codes are for items or services that CMS chose to exclude from the physician fee schedule payment by regulation. No RVUs are shown, and no payment may be made under the physician fee schedule for these codes. Payment for them, if they are covered, continues under reasonable charge or other payment procedures.
F = Deleted/discontinued codes. (Code not subject to a 90-day grace period.) These codes are deleted effective with the beginning of the year and are never subject to a grace period. This indicator is no longer effective with the 2006 physician fee schedule as of January 1, 2006.
G = Code not valid for Medicare purposes. Medicare does not recognize codes assigned this status. Medicare uses another code for reporting of, and payment for, these services. (Code subject to a 90 day grace period.) This indicator is no longer effective with the 2006 physician fee schedule as of January 1, 2006.
H = Deleted modifier. For 2000 and later years, either the TC or PC component shown for the code has been deleted and the deleted component is shown in the data base with the H status indicator.
I = Not valid for Medicare purposes. Medicare uses another code for the reporting of, and the payment for these services. (Code NOT subject to a 90-day grace period.)
N = Noncovered service. These codes are noncovered services. Medicare payment may not be made for these codes. If RVUs are shown, they are not used for Medicare payment.
P = Bundled or excluded code. There are no RVUs for these services. No separate payment is made for them under the physician fee schedule.End Part
—If the item or service is covered as incident to a physician's service and is furnished on the same day as a physician's service, payment for it is bundled into the payment for the physician's service to which it is incident (an example is an elastic bandage furnished by a physician incident to a physician's service).
—If the item or service is covered as other than incident to a physician's service, it is excluded from the physician fee schedule (for example, colostomy supplies) and is paid under the other payment provisions of the Act.
R = Restricted coverage. Special coverage instructions apply. If the service is covered and no RVUs are shown, it is carrier-priced.
T = Injections. There are RVUs for these services, but they are only paid if there are no other services payable under the physician fee schedule billed on the same date by the same provider. If any other services payable under the physician fee schedule are billed on the same date by the same provider, these services are bundled into the service(s) for which payment is made.
X = Exclusion by law. These codes represent an item or service that is not within the definition of “physicians' services” for physician fee schedule payment purposes. No RVUs are shown for these codes, and no payment may be made under the physician fee schedule. (Examples are ambulance services and clinical diagnostic laboratory services.)
4. Description of code. This is an abbreviated version of the narrative description of the code.
5. Physician work RVUs. These are the RVUs for the physician work for this service in 2005. Codes that are not used for Medicare payment are identified with a “+.”
6. Non-facility practice expense RVUs. These are the fully implemented resource-based practice expense RVUs for non-facility settings.
7. Facility practice expense RVUs. These are the fully implemented resource-based practice expense RVUs for facility settings.
8. Malpractice expense RVUs. These are the RVUs for the malpractice expense for the service for 2005.
9. Facility total. This is the sum of the work, fully implemented facility practice expense, and malpractice expense RVUs.Start Printed Page 45877
10. Non-facility total. This is the sum of the work, fully implemented non-facility practice expense, and malpractice expense RVUs.
11. Global period. This indicator shows the number of days in the global period for the code (0, 10, or 90 days). An explanation of the alpha codes follows:
MMM = The code describes a service furnished in uncomplicated maternity cases including antepartum care, delivery, and postpartum care. The usual global surgical concept does not apply. See the 1999 Physicians' Current Procedural Terminology for specific definitions.
XXX = The global concept does not apply.
YYY = The global period is to be set by the carrier (for example, unlisted surgery codes).
ZZZ = Code related to another service that is always included in the global period of the other service. (Note: Physician work and practice expense are associated with intra service time and in some instances the post service time.)
—————————— 1 CPT codes and descriptions only are copyright 2005 American Medical Associaiton. All rights reserved. Applicable FARS/DFARS apply. 2 Copyright 2005 American Dental Association. All rights reserved. 3 +Indicates RVUs are not used for Medicare payment. Start Printed Page 45878
|CPT 1 HCPCS 2||Mod||Status||Description||Physician work RVUs 3||Non- facility PE RVUs||Facility PE RVUs||Mal- practice RVUs||Non- facility total||Facility total||Global|
|0008T||C||Upper gi endoscopy w/suture||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0010T||C||Tb test, gamma interferon||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0016T||C||Thermotx choroid vasc lesion||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0017T||C||Photocoagulat macular drusen||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0018T||C||Transcranial magnetic stimul||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0019T||I||Extracorp shock wave tx, ms||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0020T||C||Extracorp shock wave tx, ft||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0021T||C||Fetal oximetry, trnsvag/cerv||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0023T||C||Phenotype drug test, hiv 1||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0024T||C||Transcath cardiac reduction||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0026T||C||Measure remnant lipoproteins||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0027T||C||Endoscopic epidural lysis||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0028T||C||Dexa body composition study||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0029T||C||Magnetic tx for incontinence||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0032T||C||Speculoscopy w/direct sample||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0033T||C||Endovasc taa repr incl subcl||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0034T||C||Endovasc taa repr w/o subcl||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0035T||C||Insert endovasc prosth, taa||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0036T||C||Endovasc prosth, taa, add-on||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0037T||C||Artery transpose/endovas taa||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0038T||C||Rad endovasc taa rpr w/cover||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0039T||C||Rad s/i, endovasc taa repair||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0040T||C||Rad s/i, endovasc taa prosth||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0041T||C||Detect ur infect agnt w/cpas||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0042T||C||Ct perfusion w/contrast, cbf||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0043T||C||Co expired gas analysis||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0044T||C||Whole body photography||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0045T||C||Whole body photography||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0046T||C||Cath lavage, mammary duct(s||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0047T||C||Cath lavage, mammary duct(s)||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0048T||C||Implant ventricular device||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0049T||C||External circulation assist||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0050T||C||Removal circulation assist||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0051T||C||Implant total heart system||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0052T||C||Replace component heart syst||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0053T||C||Replace component heart syst||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0054T||C||Bone surgery using computer||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0055T||C||Bone surgery using computer||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0056T||C||Bone surgery using computer||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0058T||C||Cryopreservation, ovary tiss||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0060T||C||Electrical impedance scan||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0061T||C||Destruction of tumor, breast||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0062T||C||Rep intradisc annulus;1 lev||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0063T||C||Rep intradisc annulus;>1lev||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0064T||C||Spectroscop eval expired gas||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0065T||C||Ocular photoscreen bilat||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0068T||C||Interp/rept heart sound||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0069T||C||Analysis only heart sound||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0070T||C||Interp only heart sound||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0071T||C||U/s leiomyomata ablate <200||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0072T||C||U/s leiomyomata ablate >200||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0073T||A||Delivery, comp imrt||0.00||16.71||NA||0.13||16.84||NA||XXX|
|0074T||N||Online physician e/m||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0075T||C||Perq stent/chest vert art||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0075T||26||C||Perq stent/chest vert art||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0075T||TC||C||Perq stent/chest vert art||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0076T||C||S&i stent/chest vert art||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0076T||26||C||S&i stent/chest vert art||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0076T||TC||C||S&i stent/chest vert art||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0077T||C||Cereb therm perfusion probe||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0078T||C||Endovasc aort repr w/device||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0079T||C||Endovasc visc extnsn repr||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0080T||C||Endovasc aort repr rad s&i||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0081T||C||Endovasc visc extnsn s&i||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|Start Printed Page 45879|
|0082T||C||Stereotactic rad delivery||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0083T||C||Stereotactic rad tx mngmt||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0084T||C||Temp prostate urethral stent||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0085T||C||Breath test heart reject||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0086T||C||L ventricle fill pressure||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0087T||C||Sperm eval hyaluronan||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0088T||C||Rf tongue base vol reduxn||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0500F||I||Initial prenatal care visit||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0501F||I||Prenatal flow sheet||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0502F||I||Subsequent prenatal care||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|0503F||I||Postpartum care visit||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|1000F||I||Tobacco use, smoking, assess||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|1001F||I||Tobacco use, non-smoking||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|10021||A||Fna w/o image||1.27||2.11||0.53||0.10||3.48||1.90||XXX|
|1002F||I||Assess anginal symptom/level||0.00||0.00||0.00||0.00||0.00||0.00||XXX|
|10060||A||Drainage of skin abscess||1.17||1.27||0.94||0.12||2.56||2.24||010|
|10061||A||Drainage of skin abscess||2.40||1.90||1.49||0.26||4.56||4.15||010|
|10080||A||Drainage of pilonidal cyst||1.17||2.98||1.07||0.11||4.27||2.36||010|
|10081||A||Drainage of pilonidal cyst||2.45||3.91||1.48||0.24||6.60||4.17||010|
|10120||A||Remove foreign body||1.22||2.14||0.94||0.12||3.49||2.28||010|
|10121||A||Remove foreign body||2.70||3.47||1.75||0.33||6.49||4.77||010|
|10140||A||Drainage of hematoma/fluid||1.53||1.83||1.29||0.19||3.56||3.01||010|
|10160||A||Puncture drainage of lesion||1.20||1.62||1.08||0.14||2.96||2.43||010|
|10180||A||Complex drainage, wound||2.25||2.95||1.93||0.35||5.55||4.53||010|
|11000||A||Debride infected skin||0.60||0.61||0.21||0.07||1.28||0.88||000|
|11001||A||Debride infected skin add-on||0.30||0.24||0.11||0.04||0.58||0.45||ZZZ|
|11004||A||Debride genitalia & perineum||10.33||NA||3.80||0.67||NA||14.80||000|
|11005||A||Debride abdom wall||13.78||NA||5.42||0.96||NA||20.16||000|
|11006||A||Debride genit/per/abdom wall||12.64||NA||4.73||1.28||NA||18.64||000|
|11008||A||Remove mesh from abd wall||5.01||NA||1.97||0.61||NA||7.59||ZZZ|
|11010||A||Debride skin, fx||4.20||6.68||2.57||0.66||11.54||7.43||010|
|11011||A||Debride skin/muscle, fx||4.95||7.80||2.29||0.74||13.49||7.98||000|
|11012||A||Debride skin/muscle/bone, fx||6.88||11.37||3.73||1.16||19.41||11.78||000|
|11040||A||Debride skin, partial||0.50||0.55||0.21||0.06||1.11||0.77||000|
|11041||A||Debride skin, full||0.82||0.68||0.32||0.10||1.60||1.24||000|
|11055||R||Trim skin lesion||0.43||0.60||0.17||0.05||1.08||0.65||000|
|11056||R||Trim skin lesions, 2 to 4||0.61||0.68||0.23||0.07||1.36||0.91||000|
|11057||R||Trim skin lesions, over 4||0.79||0.78||0.29||0.10||1.68||1.18||000|
|11100||A||Biopsy, skin lesion||0.81||1.38||0.39||0.03||2.22||1.23||000|
|11101||A||Biopsy, skin add-on||0.41||0.37||0.20||0.02||0.80||0.63||ZZZ|
|11200||A||Removal of skin tags||0.77||1.11||0.78||0.04||1.92||1.59||010|
|11201||A||Remove skin tags add-on||0.29||0.17||0.12||0.02||0.48||0.43||ZZZ|
|11300||A||Shave skin lesion||0.51||1.05||0.21||0.03||1.59||0.75||000|
|11301||A||Shave skin lesion||0.85||1.22||0.39||0.04||2.11||1.28||000|
|11302||A||Shave skin lesion||1.05||1.43||0.46||0.05||2.53||1.57||000|
|11303||A||Shave skin lesion||1.24||1.73||0.52||0.07||3.04||1.83||000|
|11305||A||Shave skin lesion||0.67||0.91||0.27||0.07||1.65||1.01||000|
|11306||A||Shave skin lesion||0.99||1.20||0.42||0.07||2.27||1.48||000|
|11307||A||Shave skin lesion||1.14||1.41||0.49||0.07||2.63||1.70||000|