Skip to Content


Medicare Program; February 15, 2006 Town Hall Meeting on the Practice Expense Methodology Including the Proposal From the Physician Fee Schedule Proposed Rule for Calendar Year 2006

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble


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


Notice of meeting.


This notice announces a Town Hall meeting on our methodology for establishing practice expense (PE) values for services paid under the physician fee schedule (PFS). The purpose of this meeting is to: (1) Clarify our proposed revisions to the PE methodology contained in the PFS calendar year (CY) 2006 proposed rule; and (2) receive comments and opinions from individuals of the medical community regarding ideas for the CY 2007 PFS proposed rule. This meeting is open to the public, but attendance is limited to space available.


The Town Hall meeting is scheduled for Tuesday, February 15, 2006 from 1:30 p.m. to 4:30 p.m. e.s.t.


The Town Hall meeting will be held at the Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244-1850 in the auditorium in the central building.

Meeting Registration: Persons wishing to attend this meeting must register by contacting Debbie Cooley at Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Mail stop C4-03-06, Baltimore, MD 21244-1850, or, by FAX at 410-786-4490 to the attention of Debbie Cooley. Please include the name of the attendee and the organization he or she represents, if applicable. This information must be received by 5 p.m., e.s.t, on Friday, February 10, 2006.

This meeting will be held in a Federal Government building, the Centers for Medicare and Medicaid Services; therefore, persons attending this meeting will be required to show a government-issued photo identification and a copy of their confirmation of registration for the meeting. Access may be denied to persons without proper identification. In planning your arrival time, we recommend allowing additional time to clear security.

Security measures include: Inspection of vehicles, inside and out, at the entrance to the grounds; passing through a metal detector; and, the inspection of all items brought into the building. Laptops and other computer equipment must be registered with the security desk upon entry. Please note that CMS headquarters is a smoke-free complex.

Start Further Info


Debbie Cooley, (410)786-0007 or Dorothy Shannon, (410)786-3396.

End Further Info End Preamble Start Supplemental Information


I. Background

Since January 1, 1992, Medicare has paid for services of physicians and other practitioners under a physician fee schedule. This schedule sets payment rates for 7,000 services based on the resources used to provide those services and is updated annually. To construct the fee schedule, we assign values called relative value units (RVUs) to each service. The total RVUs for a service are the sum of the work RVUs (which include the physician's time and effort); the practice expense RVUs (which cover expenses such as overhead, staff, and supplies); and the malpractice expense RVUs (which cover malpractice premiums).

In the CY 2006 PFS proposed rule (70 FR 45764), we outlined our plans to revise the practice expense (PE) methodology. There were three major parts to our proposal:

1. Changing from a “top-down” methodology for calculating direct PE to a “bottom-up” approach. Currently, on a specialty-specific basis, we derive a PE per physician hour from aggregate survey data, create a cost pool using Medicare utilization data, and then allocate the pool to all the services performed by the specialty. This methodology is complex, often not intuitive, and produces some PE values that can change significantly from year-to-year. The proposed bottom-up approach would use the sum of the typical resource costs for clinical staff, supplies, and equipment required for each service. These typical costs for each service would be determined based primarily on recommendations we reviewed and accepted from the American Medical Association's Relative Value Update Committee (RUC). We would then convert these costs into direct cost PE RVUs. We believe this methodology is easier to understand and more intuitive than the current top-down approach, and should also improve the stability of the PE RVUs over time. In addition, because most of the inputs that would be used in the bottom-up calculation have been approved by the multi-specialty RUC, the medical community has already agreed to their accuracy.

2. Accepting the supplementary PE surveys from seven specialties—allergy, dermatology, urology, gastrointestinal, cardiology, radiology, and radiation oncology—and using these in the calculation of indirect PE.

3. Calculating, on a code-specific basis, the higher of the current portion of the PE RVU for indirect costs (the indirect PE RVU) or the indirect PE RVU resulting from acceptance of the supplementary surveys.

This proposal was to have the effect of mitigating the redistributive effects of accepting the seven supplementary surveys by ensuring that, before application of PE budget neutrality, the indirect PE RVUs for each service were Start Printed Page 4591no lower than the current indirect PE RVUs.

In comments on the CY 2006 PFS proposed rule, commenters indicated that they did not understand the mechanics of our proposals and that there was not enough information for specialties to analyze them. Many commenters requested a 1-year delay in implementation of our proposals to allow time for CMS to provide further information and to give other specialties an additional opportunity to submit their own supplementary survey.

After reviewing the CY 2006 PFS proposed rule comments, we determined that the proposal for revising the indirect PE was confusing to the public because the published PE values and impacts were incorrect. Therefore, in the CY 2006 PFS final rule (70 FR 70116), we withdrew the proposed PE revision for 2006 and used the 2005 PE RVUs for most services. The only exceptions were to price the codes that were new in 2006 and, as required by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L 108-173), to use the new urology PE data in the calculation of the drug administration codes used by their specialty.

As we indicated when we issued the CY 2006 PFS final rule (70 FR 70116), we intend to work with the medical community to ensure that any future proposals to change the PE methodology are understandable and informed by input from the medical community. As the initial step in this process, we are holding this Town Hall meeting to provide this opportunity.

II. Meeting Format

This meeting will begin with an overview of the objectives of the meeting along with an introduction of the topics to be discussed during the meeting which include:

  • Clarifying our efforts to revise the PE methodology in the CY 2006 PFS proposed rule which include:

+ The change from a “top-down” methodology for calculating direct PE to a “bottom-up” approach utilizing the direct cost inputs;

+ The use of the accepted supplementary PE surveys from the seven specialties in the calculation of indirect PE;

+ The intended method of obtaining the indirect PE values; and

+ The elimination of the nonphysician workpool and the related impacts.

  • A question and answer session that offers the meeting attendees an opportunity to clarify further the topics discussed.
  • Soliciting input from individual attendees on each facet of our methodology: direct PE, indirect PE, supplementary surveys, and nonphysician workpool. The comments provided during this meeting will assist us in the preparation of the physician fee schedule proposed rule for CY 2007.

To provide a basis of understanding before the meeting we will be posting information concerning the PE methodology on our Web site at​PhysicianFeeSched/​. This information will include current PE values, examples for deriving PE values using the bottom-up methodology, and projected impacts of these revisions. We encourage individuals to familiarize themselves with this material before the meeting. Copies of this information will be available on the day of the meeting.


(Catalog of Federal Domestic Assistance Program No. 93.774, Medicare—Supplementary Medical Insurance Program).

Start Signature

Dated: January 19, 2006.

Mark B. McClellan,

Administrator, Centers for Medicare & Medicaid Services.

End Signature End Supplemental Information

[FR Doc. 06-747 Filed 1-26-06; 8:45 am]