Medicare Program:

 
CONTENT

Federal Register: November 29, 2010 (Volume 75, Number 228)

Rules and Regulations

Page 73169-73860

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

DOCID:fr29no10-17

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Part II

Department of Health and Human Services

Center for Medicare & Medicaid Services

42 CFR Parts 405, 409, 410 et al.

Medicare Program; Payment Policies Under the Physician Fee Schedule and

Other Revisions to Part B for CY 2011; Final Rule

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services 42 CFR Parts 405, 409, 410, 411, 413, 414, 415, and 424

CMS-1503-FC

RIN 0938-AP79

Medicare Program; Payment Policies Under the Physician Fee

Schedule and Other Revisions to Part B for CY 2011

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

ACTION: Final rule with comment period.

SUMMARY: This final rule with comment period addresses changes to the physician fee schedule and other Medicare Part B payment policies to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. It finalizes the calendar year (CY) 2010 interim relative value units (RVUs) and issues interim RVUs for new and revised procedure codes for CY 2011. It also addresses, implements, or discusses certain provisions of both the

Affordable Care Act (ACA) and the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). In addition, this final rule with comment period discusses payments under the Ambulance Fee Schedule

(AFS), the Ambulatory Surgical Center (ASC) payment system, and the

Clinical Laboratory Fee Schedule (CLFS), payments to end-stage renal disease (ESRD) facilities, and payments for Part B drugs. Finally, this final rule with comment period also includes a discussion regarding the

Chiropractic Services Demonstration program, the Competitive Bidding

Program for durable medical equipment, prosthetics, orthotics, and supplies (CBP DMEPOS), and provider and supplier enrollment issues associated with air ambulances.

DATES: Effective date: These regulations are effective on January 1, 2011. Comment date: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on January 3, 2011.

ADDRESSES: In commenting, please refer to file code CMS-1503-FC.

Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (please choose only one of the ways listed): 1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the instructions for

``submitting a comment.'' 2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of

Health and Human Services, Attention: CMS-1503-FC, P.O. Box 8013,

Baltimore, MD 21244-8013.

Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services,

Department of Health and Human Services, Attention: CMS-1503-FC, Mail

Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. 4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses: a. For delivery in Washington,

DC--Centers for Medicare & Medicaid Services, Department of Health and

Human Services, Room 445-G, Hubert H. Humphrey Building, 200

Independence Avenue, SW., Washington, DC 20201

(Because access to the interior of the Hubert H. Humphrey 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.) b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid

Services, Department of Health and Human Services, 7500 Security

Boulevard, Baltimore, MD 21244-1850.

If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-9994 in advance to schedule your arrival with one of our staff members.

Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.

FOR FURTHER INFORMATION CONTACT:

Sara Vitolo, (410) 786-5714, for issues related to malpractice RVUs.

Erin Smith, (410) 786-0763, for issues related to end-stage renal disease-related services for home dialysis.

Michael Moore, (410) 786-6830, for issues related to geographic practice cost indices.

Ken Marsalek, (410) 786-4502, for issues related to the physician practice information survey, the multiple procedure payment reduction, and payment for the technical component of pathology services.

Regina Walker-Wren, (410) 786-9160, for issues related to outpatient mental health add-on provision and increased payment for certified nurse-midwife services.

Elizabeth Truong, (410) 786-6005, or Sara Vitolo, (410) 786-5714, for issues related to potentially misvalued services.

Elizabeth Truong, (410) 786-6005, for issues related to the sustainable growth rate or anesthesia or physician fee schedule conversion factors.

Dorothy Shannon, (410) 786-3396, for issues related to outpatient therapy services.

Pamela West, (410) 786-2302, for issues related to payment for diabetes self-management training programs and kidney disease education services.

Ryan Howe, (410) 786-3355, for issues related to direct practice expense inputs and telehealth services.

Sara Vitolo, (410) 786-5714, for issues related to pulmonary rehabilitation services, application of skin substitutes, canalith repositioning, intranasal/oral immunization, and the refinement panel.

Roberta Epps, (410) 786-4503, for issues related to portable x-ray and bone density tests.

Chava Sheffield, (410) 786-2298, for issues related to equipment utilization rate assumption for advanced imaging services.

Chava Sheffield, (410) 786-2298, or Larry Chan, (410) 786-6864, for issues related the physician fee schedule practice expense methodology.

Stephanie Frilling, (410) 786-4507, or Erin Smith, (410) 786-0763, for issues related to the incentive payment programs for primary care and general surgery services, and payment for the annual wellness visit and preventive services.

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

Roechel Kujawa, (410) 786-9111, for issues related to ambulance services.

Glenn McGuirk, (410) 786-5723, for clinical laboratory issues.

Randall Ricktor, (410) 786-4632, for Federally Qualified Health Center

Issues.

Pauline Lapin, (410) 786-6883, for issues related to the chiropractic services demonstration BN issue.

Troy Barsky, (410) 786-8873, or Kristin Bohl, (410) 786-8680, for issues related to physician self-referral.

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Troy Barsky, (410) 786-8873, or Fred Grabau (410) 786-0206, for issues related to timely filing rules.

Henry Richter, (410) 786-4562, or Lisa Hubbard, (410) 786-5472, for issues related to renal dialysis provisions and payments for end-stage renal disease facilities.

Diane Stern, (410) 786-1133, for issues related to the physician quality reporting initiative and incentives for e-prescribing.

Sheila Roman, (410) 786-6004, or Pamela Cheetham, 410-786-2259, for issues related to the Physician Resource Use Feedback Program and value-based purchasing.

Joel Kaiser, (410) 786-4499, for issues related to the DME provisions.

Sandra Bastinelli, (410) 786-3630, for issues related to provider and supplier enrollment issues.

Rebecca Cole, (410) 786-4497, for issues related to physician payment not identified above.

SUPPLEMENTARY INFORMATION: Comment Subject Areas: We will consider comments on the following subject areas discussed in this final rule with comment period that are received by the date and time indicated in the DATES section of this final rule with comment period:

(1) The interim final work, practice expense, and malpractice RVUs

(including the direct practice expense (PE) inputs and the equipment utilization rate assumption, and the applicability of a multiple procedure payment reduction (MPPR)), for new and revised CY 2011 HCPCS codes. These codes and their CY 2011 interim final RVUs are listed in

Addendum C to this final rule with comment period.

(2) The physician self-referral designated health services codes listed in Tables 98 and 99.

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

Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the

Centers for Medicare & Medicaid Services, 7500 Security Boulevard,

Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

Table of Contents

To assist readers in referencing sections contained in this preamble, we are providing a table of contents. Some of the issues discussed in this preamble affect the payment policies, but do not require changes to the regulations in the Code of Federal Regulations

(CFR). Information on the regulations impact appears throughout the preamble and, therefore, is not discussed exclusively in section XI. of this final rule with comment period.

I. Background

A. Development of the Relative Value System 1. Work RVUs 2. Practice Expense Relative Value Units (PE RVUs) 3. Resource-Based Malpractice (MP) RVUs 4. Refinements to the RVUs 5. Adjustments to RVUs Are Budget Neutral

B. Components of the Fee Schedule Payment Amounts

C. Most Recent Changes to Fee Schedule

D. Public Comments Received in Response to the CY 2011 PFS

Proposed Rule

II. Provisions of the Final Rule for the Physician Fee Schedule

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

(RVUs) 1. Overview 2. Practice Expense Methodology a. Direct Practice Expense b. Indirect Practice Expense per Hour Data c. Allocation of PE to Services

(i) Direct costs

(ii) Indirect costs d. Facility and Nonfacility Costs e. Services with Technical Components (TCs) and Professional

Components (PCs) f. Alternative Data Sources and Public Comments on Final Rule for 2010 g. PE RVU Methodology

(1) Setup File

(2) Calculate the Direct Cost PE RVUs

(3) Create the Indirect Cost PE RVUs

(4) Calculate the Final PE RVUs

(5) Setup File Information

(6) Equipment Cost per Minute 3. PE Revisions for CY 2011 a. Equipment Utilization Rate b. HCPCS Code-Specific PE Issues

(1) Biohazard Bags

(2) PE Inputs for Professional Component (PC) Only and Technical

Component (TC) Only Codes Summing to Global Only Codes

(3) Equipment Time Inputs for Certain Diagnostic Tests

(4) Cobalt-57 Flood Source

(5) Venom Immunotherapy

(6) Equipment Redundancy

(7) Equipment Duplication

(8) Establishing Overall Direct PE Supply Price Inputs Based on

Unit Prices and Quantities c. AMA RUC Recommendations in CY 2010 for Changes to Direct PE

Inputs

(1) Electrogastrography and Esophageal Function Test

(2) 64-Slice CT Scanner and Software

(3) Breath Hydrogen Test

(4) Radiographic Fluoroscopic Room

(5) Cystometrogram d. Referral of Existing CPT Codes for AMA RUC Review e. Updating Equipment and Supply Price Inputs for Existing Codes f. Other Issues

B. Malpractice Relative Value Units (RVUs) 1. Background 2. Malpractice RVUs for New and Revised Services Effective

Before the Next 5-Year Review 3. Revised Malpractice RVUs for Selected Disc Arthroplasty

Services

C. Potentially Misvalued Services Under the Physician Fee

Schedule 1. Valuing Services Under the PFS 2. Identifying, Reviewing, and Validating the RVUs of

Potentially Misvalued Services Under the PFS a. Background b. Progress in Identifying and Reviewing Potentially Misvalued

Codes c. Validating RVUs of Potentially Misvalued Codes 3. CY 2011 Identification and Review of Potentially Misvalued

Services a. Codes on the Multispecialty Points of Comparison List b. Codes with Low Work RVUs Commonly Billed in Multiple Units

Per Single Encounter c. Codes with High Volume and Low Work RVUs d. Codes with Site-of-Service-Anomalies e. Codes with ``23-hour'' Stays 4. Expanding the Multiple Procedure Payment Reduction (MPPR)

Policy to Additional Nonsurgical Services a. Background b. CY 2011 Expansion of the Imaging Technical Component MPPR

Policy to Additional Combinations of Imaging Services c. CY 2011 Expansion of the MPPR Policy to Therapy Services 5. High Cost Supplies a. Background b. Future Updates to the Prices of High-Cost Supplies

D. Geographic Practice Cost Indices (GPCIs) 1. Background 2. GPCI Update a. Physician Work GPCIs b. Practice Expense GPCIs

(1) The Affordable Care Act Requirements for PE GPCIs

(A) General Methodology for the CY 2011 GPCIs

(B) Phase-In of PE GPCIs

(C) Data Analysis

(D) Determining the PE GPCI Cost Share Weights

(E) PE GPCI Floor for Frontier States

(2) Summary of CY 2011 PE GPCIs c. Malpractice GPCIs d. Public Comments and CMS Responses on the Proposed 6th GPCI

Update e. Summary of Final CY 2011 GPCIs

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3. Payment Localities

E. PFS Update for CY 2010: Rebasing and Revising of the Medicare

Economic Index (MEI) 1. Background 2. Use of More Current Data 3. Rebasing and Revising Expense Categories in the MEI a. Developing the Weights for Use in the MEI b. Physician's Own Time c. Physician's Practice Expenses

(1) Nonphysician Employee Compensation

(2) Office Expenses

(3) Professional Liability Insurance (PLI) Expense

(4) Medical Equipment Expenses

(5) Medical Supplies Expenses

(6) Other Professional Expenses 4. Selection of Price Proxies for Use in the MEI a. Cost (Expense) Categories in the MEI

(1) Physician's Own Time (Physician Compensation)

(2) Nonphysician Employee Compensation

(3) Utilities

(4) Chemicals

(5) Paper

(6) Rubber and Plastics

(7) Telephone

(8) Postage

(9) All Other Services

(10) All Other Products

(11) Fixed Capital

(12) Moveable Capital

(13) Professional Liability Insurance (PLI)

(14) Medical Equipment

(15) Medical Materials and Supplies

(16) Other Professional Expenses

(b) Productivity Adjustment to the MEI 5. Results of Rebasing 6. Medicare Economic Index Technical Advisory Panel 7. Summaries of Comments and the Associated Responses a. Timing of Rebasing and Revising the MEI b. PPIS Data c. Office Expenses d. Purpose of the MEI e. Technical Panel f. Other 8. Adjustments to the RVU Shares To Match the Proposed Rebased

MEI Weights

F. Allowed Expenditures for Physicians' Services and the

Sustainable Growth Rate 1. Medicare Sustainable Growth Rate 2. Physicians' Services 3. Preliminary Estimate of the SGR for 2011 4. Revised Sustainable Growth Rate for 2010 5. Final Sustainable Growth Rate for 2009 6. Calculation of 2011, 2010, and 2009 Sustainable Growth Rates a. Detail on the CY 2011 SGR

(1) Factor 1 Changes in Fees for Physicians' Services (Before

Applying Legislative Adjustments) for CY 2011

(2) Factor 2 The Percentage Change in the Average Number of Part

B Enrollees From CY 2010 to CY 2011

(3) Factor 3 Estimated Real Gross Domestic Product Per Capita

Growth in 2011

(4) Factor 4 Percentage Change in Expenditures for Physicians'

Services Resulting From Changes in Statute or Regulations in CY 2011

Compared With CY 2010 b. Detail on the CY 2010 SGR

(1) Factor 1 Changes in Fees for Physicians' Services (Before

Applying Legislative Adjustments) for 2010

(2) Factor 2 The Percentage Change in the Average Number of Part

B Enrollees from CY 2009 to CY 2010

(3) Factor 3 Estimated Real Gross Domestic Product Per Capita

Growth in CY 2010

(4) Factor 4 Percentage Change in Expenditures for Physicians'

Services Resulting From Changes in Statute or Regulations in CY 2010

Compared With CY 2009 c. Detail on the CY 2009 SGR

(1) Factor 1 Changes in Fees for Physicians' Services (Before

Applying Legislative Adjustments) for 2009

(2) Factor 2 The Percentage Change in the Average Number of Part

B Enrollees from CY 2008 to CY 2009

(3) Factor 3 Estimated Real Gross Domestic Product Per Capita

Growth in CY 2009

(4) Factor 4 Percentage Change in Expenditures for Physicians'

Services Resulting From Changes in Statute or Regulations in CY 2009

Compared With CY 2008

G. The Update Adjustment Factor (UAF) 1. Calculation under Current Law

H. Physician and Anesthesia Fee Schedule Conversion Factors for

CY 2011 1. Physician Fee Schedule Update and Conversion Factor a. CY 2011 PFS Update b. CY 2011 PFS Conversion Factor 2. Anesthesia Conversion Factor

III. Code-Specific Issues for the PFS

A. Therapy Services 1. Outpatient Therapy Caps for CY 2011 2. Alternatives to Therapy Caps a. Background b. Current Activities c. Potential Short-Term Approaches to Therapy Caps

B. Diabetes Self-Management Training (DSMT) Services (HCPCS

Codes G0108 and G0109) 1. Background 2. Payment for DSMT Services

C. End-Stage Renal Disease Related Services for Home Dialysis

(CPT code 90963, 90964, 90965, and 90966) 1. End-Stage Renal Disease Home Dialysis Monthly Capitation

Payment Services (CPT codes 90963, 90964, 90965, and 90966) 2. Daily and Monthly ESRD-Related Services (CPT Codes 90951 through 90970)

D. Portable X-Ray Set-Up (HCPCS code Q0092)

E. Pulmonary Rehabilitation Services (HCPCS Code G0424)

F. Application of Tissue Cultured Skin Substitutes to Lower

Extremities (HCPCS Codes G0440 and G0441)

G. Canalith Repositioning (CPT code 95992)

H. Intranasal/Oral Immunization Codes (CPT codes 90467, 90468, 90473, and 90474)

I. Refinement Panel Process

J. Remote Cardiac Monitoring Services (CPT codes 93012, 93229, 93268, and 93271)

IV. Medicare Telehealth Services for the Physician Fee Schedule

A. Billing and Payment for Telehealth Services 1. History 2. Current Telehealth Billing and Payment Policies

B. Requests for Adding Services to the List of Medicare

Telehealth Services

C. Submitted Requests for Addition to the List of Telehealth

Services for CY 2011 1. Individual KDE Services 2. Individual DSMT Services 3. Group KDE, MNT, DSMT, and HBAI Services 4. Initial, Subsequent, and Discharge Day Management Hospital

Care Services 5. Initial, Subsequent, Discharge Day Management, and Other

Nursing Facility Care Services 6. Neuropsychological Testing Services 7. Speech-Language Pathology Services 8. Home Wound Care Services 9. Other Issues

D. Summary of CY 2011 Telehealth Policies

E. Telehealth Originating Site Facility Fee Payment Amount

Update

V. Addressing Interim Final Relative Value Units from CY 2010 and

Establishing Interim Relative Value Units for CY 2011

A. Background

B. Addressing Interim Final RVUs from CY 2010 1. CY 2010 Interim Final Work RVUs Referred to the Refinement

Panel 2. CY 2010 Interim Final RVUs for which Public Comments Were

Received a. Insertion of Breast Prosthesis (CPT code 19340) b. Computed Tomographic Colonography (CPT code 74261) c. Myocardial Perfusion Imaging (CPT codes 78451, 78452, 78453, and 78454) d. Nerve Conduction Test (CPT code 95905) e. Kidney Disease Education Services (HCPCS codes G0420 and

G0421) f. Excision of Soft Tissue and Bone Tumors (CPT codes 21011 through 21016, 21552, 21554 through 21558, 21930 through 21933, 21395, 21936, 22900 through 22905, 23071, 23073, 23075 through 23078, 23200, 23210, 23220, 24071, 24073, 24075 through 24077, 24079, 24150 through 24153, 25071, 25073, 25075 through 25078, 25170, 26111, 26113, 26115 through 26118, 26250, 26255, 26260, 26262, 27043, 27045, 27047 through 27049, 27059, 27075 through 27078, 27327 through 27329, 27337, 27339, 27364, 27365, 27615, 27616, 27618, 27619, 27632, 27634, 27619, 27645 through 27647, 28039, 28041, 28043, 28045 through 28047, 28171, 28173, and 28175) g. Cryoablation of Prostate (CPT code 55873) h. Urodynamics Studies (CPT Codes 51728 and 51729) i. Coronary Computed Tomographic Angiography (CPT codes 75571, 75572, 75573, and 75574)

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j. Adjacent Tissue Transfer or Rearrangement (CPT codes 14301 and 14302) k. Insertion of a Temporary Prostatic Urethral Stent (CPT code 53855) l. High Dose Rate Brachytherapy (CPT codes 77785, 77786, and 77787) m. Injection of Facet Joint (CPT codes 64490, 64491, 64492, 64493, 64494, and 64495) n. Knee Arthroscopy (CPT code 29870) 3. Status of Interim Final Work RVUs for Potentially Misvalued

Site-of-Service Anomaly Codes from CY 2009 and CY 2010 4. Other New, Revised, or Potentially Misvalued Codes with CY 2010 Interim Final RVUs Not Specifically Discussed in the CY 2011

Final Rule with Comment Period

C. Establishment of Interim Final RVUs for CY 2011 1. Establishment of Interim Final Work RVUs for CY 2011 a. Background b. CY 2011 Interim Final Work RVUs for New and Revised Codes

(i) CY 2011 New and Revised Codes that Do Not Represent Major

New Comprehensive Services

(1) Excision and Debridement (CPT codes 11010, 11011, 11012, 11042, 11043, 11044, 11045, 11046, 11047, and 97598)

(2) Arthrodesis Including Discectomy (CPT code 22551)

(3) Strapping Lower Extremity (CPT codes 29540 and 29550)

(4) Paraesophageal Hernia Procedures (CPT codes 43333 and 43335)

(5) Vaginal Radiation Afterloading Apparatus for Clinical

Brachytherapy (CPT codes 57155 and 57156)

(6) Vagus Nerve Stimulator (CPT codes 61885, 64568, 64569, and 64570)

(7) Ultrasound of Extremity (CPT codes 76881 and 76882)

(8) Evaluation of Fine Needle Aspirate (CPT code 88172)

(9) Immunization Administration (CPT code 90460 and 90461)

(10) Diabetic Retinopathy Imaging (CPT code 92228)

(11) Speech-Language Pathology Services (CPT codes 92508 and 92606)

(12) Sleep Testing (CPT codes 95806 and 95807)

(13) Subsequent Hospital Observation Care

(ii) Comprehensive Codes for a Bundle of Existing Component

Services

(iii) Work Budget Neutrality for Clinical Categories of CPT

Codes c. CY 2011 Interim Final Work RVUs for Potentially Misvalued

Codes

(1) Excision and Debridement (CPT codes 11043 and 11044)

(2) Strapping Lower Extremity (CPT code 29540)

(3) Control Nasal Hemorrhage (CPT code 30901)

(4) Cystourethroscopy (CPT codes 52281 and 52332)

(5) Vaginal Radiation Afterloading Apparatus for Clinical

Brachytherapy (CPT code 51755)

(6) Obstetrical Care Codes (CPT codes 59440, 59410, 59510, 59515, 59610, 59614, 59618, and 59622)

(7) Vagus Nerve Stimulator (CPT code 61885)

(8) Transforaminal Epidural Injection (CPT code 64483)

(9) CT Thorax (CPT code 71250)

(10) CT Spine (CPT code 72125)

(11) CT Upper and CT Lower Extremity (CPT code 73200 and 73700)

(12) Radiation Treatment Management (CPT code 77427) 2. Establishment of Interim Final Direct PE Inputs for CY 2011 a. Background b. CY 2011 Interim Final Direct PE Inputs for New, Revised, and

Potentially Misvalued Codes

(1) General Equipment Time

(2) Equipment Time and Clinical Labor for Conscious Sedation

(3) Equipment Time for Add-On Codes

(4) Changes in Standard Uses of Certain Supplies

(5) New Supply and Equipment Items

(6) Endovascular Revascularization Stents

(7) Nasal/Sinus Endoscopy Supply and Equipment Items 3. Establishment of Interim Final Malpractice RVUs for CY 2011

VI. Provisions of the Affordable Care Act

A. Section 3002: Improvements to the Physician Quality Reporting

System

B. Section 3003: Improvements to the Physician Feedback Program and Section 3007: Value-based payment modifier under the physician fee schedule 1. Background 2. Effect of the ACA of 2010 on the Program 3. Phase II Proposed Changes 4. Implementation of Sections 3003 and 3007 of ACA 5. Comments Sought on Specific Statistical Issues Related to ACA

Sections 3003 and 3007 a. Risk Adjustment b. Attribution c. Benchmarking and Peer Groups d. Cost and Quality Measures and Compositing Methods

C. Section 3102: Extension of the Work Geographic Index Floor and Revisions to the Practice Expense Geographic Adjustment under the Medicare Physician Fee Schedule, and Protections for Frontier

States as amended by Section 10324

D. Section 3103: Extension of Exceptions Process for Medicare

Therapy Caps

E. Section 3104: Extension of Payment for Technical Component of

Certain Physician Pathology Services

F. Section 3105 and 10311: Extension of Ambulance Add-Ons 1. Amendment to Section 1834(l)(13) of the Act 2. Amendment to Section 146(b)(1) of MIPAA 3. Amendment to Section 1834(l)(12) of the Act

G. Section 3107: Extension of Physician Fee Schedule Mental

Health Add-On

H. Section 3108: Permitting Physician Assistants to Order Post-

Hospital Extended Care Services

I. Section 3111: Payment for Bone Density Tests

J. Section 3114: Improved Access for Certified Nurse-Midwife

Services

K. Section 3122: Extension of Medicare Reasonable Costs Payments for Certain Clinical Diagnostic Laboratory Tests Furnished to

Hospital Patients in Certain Rural Areas

L. Section 3134: Misvalued Codes Under the Physician Fee

Schedule

M. Section 3135: Modification of Equipment Utilization Factor for Advanced Imaging Services 1. Adjustment in Practice Expense to Reflect Higher Presumed

Utilization 2. Adjustment in Technical Component ``Discount'' on Single-

Session Imaging to Consecutive Body Parts

N. Section 3136: Revision for Payment for Power-Driven

Wheelchairs 1. Payment Rules for Power Wheelchairs 2. Revision of Payment Amounts for Power Wheelchairs 3. Elimination of Lump Sum Payment for Standard Power

Wheelchairs

O. Section 3139: Payment for Biosimilar Biological Products

P. Section 3401: Revision of Certain Market Basket Updates and

Incorporation of Productivity Improvements into Market Basket

Updates That Do Not Already Incorporate Such Improvements 1. ESRD Market Basket Discussion 2. Productivity Adjustment regarding Ambulatory Surgical Center,

Ambulance, Clinical Laboratory and DMEPOS Fee Schedules a. Ambulatory Surgery Centers (ASCs) b. Ambulance Fee Schedule (AFS) c. Clinical Lab Fee Schedule d. DMEPOS Fee Schedule

Q. Section 4103: Medicare Coverage of Annual Wellness Visit

Providing a Personalized Prevention Plan 1. Background and Statutory Authority a. Medicare Coverage of Preventive Physical Examinations and

Routine Checkups b. Requirements for Coverage of an Annual Wellness Visit 2. Regulatory Revisions--Summary of Proposed Rule and Comments a. Revisions to Sec. 411.15, Particular Services Excluded from

Coverage b. Revisions to Part 410, Subpart B--Medical and Other Health

Services

(1) Definitions

(2) Requirements of the First Annual Wellness Visit Providing

Personalized Prevention Plan Services

(3) Requirements of Subsequent Annual Wellness Visits Providing

Personalized Prevention Plan Services 3. Payment for the Annual Wellness Visit Providing Personalized

Prevention Plan Services (PPPS)

R. Section 4104: Removal of Barriers to Preventive Services in

Medicare 1. Definition of ``Preventive Services'' 2. Deductible and Coinsurance for Preventive Services 3. Extension of Waiver of Deductible to Services Furnished in

Connection With or in Relation to a Colorectal Cancer Screening Test that Becomes Diagnostic or Therapeutic

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S. Section 5501: Expanding Access to Primary Care Services and

General Surgery Services 1. Section 5501(a): Incentive Payment Program for Primary Care

Services a. Background b. Primary Care Incentive Payment Program (PCIP)

(1) Primary Specialty Designation

(2) Primary Care Percentage Calculation

(3) Period of Claims Data for Primary Care Percentage

Calculation

(4) PCIP Payment

(5) Summary of Final PCIP Policies 2. Section 5501(b): Incentive Payment Program for Major Surgical

Procedures Furnished in Health Professional Shortage Areas a. Background b. HPSA Surgical Incentive Payment Program (HSIP) 3. Sections 5501(a) and (b) of the Affordable Care Act and

Payment for Critical Access Hospital Professional Services Under the

Optional Method

T. Section 6003: Disclosure Requirements for In-Office Ancillary

Services Exception to the Prohibition on Physician Self-Referral for

Certain Imaging Services 1. Background 2. Disclosure Requirement a. Services the Trigger the Disclosure Requirement b. General Disclosure Requirements c. List of Alternate Suppliers d. Documentation of Disclosure e. Effective Date f. Other comments

U. Section 6404: Maximum Period for Submission of Medicare

Claims Reduced to Not More than 12 Months 1. Background 2. Provisions of ACA

V. Section 6410 of the Affordable Care Act and Section 154 of

MIPPA: Adjustments to the Metropolitan Statistical Areas (MSA) for

Medicare Durable Medical Equipment, Prosthetics, Orthotics, and

Supplies Competitive Acquisition Program 1. Background 2. Subdividing Large MSAs under Round 2 3. Exclusions of Certain Areas after Round 2 and Prior to 2015 4. Expansion of Round 2

W. Section 10501(i)(3): Collection of HCPCS data for Development and Implementation of a Prospective Payment System for the Medicare

Federally Qualified Health Center Program

VII. Other Provisions of the Final Rule

A. Part B Drug Payment: Average Sales Price (ASP) Issues 1. ``Carry Over'' ASP 2. Partial Quarter ASP Data 3. Determining the Payment Amount for Drugs and Biologicals

Which Include Intentional Overfill 4. WAMP/AMP 5. AMP Threshold and Price Substitutions 6. Out of Scope Comments

B. Ambulance Fee Schedule: Policy for Reporting Units when

Billing for Ambulance Fractional Mileage 1. History of Medicare Ambulance Services a. Statutory Coverage of Ambulance Services b. Medicare Regulations for Ambulance Services 2. Mileage Reporting--Summary of the Provisions of the CY 2011

Proposed Rule a. Background and Current Process for Reporting Ambulance

Mileage b. Concerns Regarding the Potential for Inaccuracies in

Reporting Units and Associated Considerations c. Billing of Fractional Units for Mileage 3. Analysis of and Responses to Public Comments a. Basis for Reconsideration of the Ambulance Mileage Reporting

Requirements b. Appropriateness of Fractional Mileage Reporting Policy

(1) Financial Impact of Fractional Mileage Policy c. Administrative Impact

(2) Technical and Other Considerations

(A) Ability to Measure Fractional Miles

(B) Ambulance Provider versus Supplier Billing

(C) Billing Software

(D) Enforcement and Compliance

(E) Air Ambulance

(F) Miscellaneous Comments 4. Applicability of the Fractional Billing Policy to Other

Services 5. Final Fractional Mileage Billing Policy

C. Clinical Laboratory Fee Schedule: Signature on Requisition

D. Discussion of Budget Neutrality for the Chiropractic Services

Demonstration

E. Provisions Related to Payment for Renal Dialysis Services

Furnished by End-Stage Renal Disease (ESRD) Facilities

(1) Update to the Drug Add-on Adjustment to the Composite Rate

(2) Estimating Per Patient Growth

(3) Update to the Drug Add-on Adjustment

(4) Update to the Geographic Adjustments to the Composite Rate

(5) Updates to Core-Based Statistical Area (CBSA) Definitions

(6) Updated Wage Index Values

(7) Wage index Values for Areas With No Hospital Data

(8) Reduction to the ESRD Wage Index Floor

(9) Budget Neutrality Adjustment

(10) ESRD Wage Index Tables

F. Issues Related to the Medicare Improvements for Patients and

Providers Act of 2008 (MIPPA) 1. Section 131: Physician Payment, Efficiency, and Quality

Improvements--Physician Quality Reporting System a. Program Background and Statutory Authority b. Incentive Payments for the 2011 Physician Quality Reporting

System c. 2011 Reporting Periods for Individual Eligible Professionals d. 2011 Physician Quality Reporting System Reporting Mechanisms for Individual Eligible Professionals

(1) Final Requirements for Individual Eligible Professionals Who

Choose the Claims-based Reporting Mechanism

(2) Final Requirements for Individual Eligible Professionals Who

Choose the Registry-based Reporting Mechanism

(3) Final Requirements for Individual Eligible Professionals Who

Choose the EHR based Reporting Mechanism

(4) Final Qualification Requirements for Registries

(5) Final Qualification Requirements for EHR Vendors and Their

Products e. Criteria for Satisfactory Reporting of Individual Quality

Measures for Individual Eligible Professionals f. Criteria for Satisfactory Reporting Measures Groups for

Individual Eligible Professionals g. Reporting Option for Satisfactory Reporting on Quality

Measures by Group Practices

(1) Background and Authority

(2) Definition of ``Group Practice''

(3) Process for Physician Group Practices to Participate as

Group Practices and Criteria for Satisfactory Reporting

A. Group Practice Reporting Option for Physician Group Practices with 200 or More NPIs GPRO I

B. Group Practice Reporting Option for Group Practices of 2-199

NPIs--GPRO-II h. Statutory Requirements and Other Considerations for 2011

Physician Quality Reporting System Measures

(1) Statutory Requirements for 2011 Physician Quality Reporting

System Measures

(2) Other Considerations for 2011 Physician Quality Reporting

System Measures

(3) Summary of Comments and Responses i. The Final 2011 Physician Quality Reporting System Quality

Measures for Individual Eligible Professionals

(1) 2011 Individual Quality Measures Selected From the 2010

Physician Quality Reporting System Quality Measures Set Available for Claims based Reporting and Registry-based Reporting

(2) 2011 Individual Quality Measures Selected From the 2010

Physician Quality Reporting System Quality Measures Set Available for Registry-based Reporting Only

(3) New Individual Quality Measures for 2011

(4) 2011 Measures Available for EHR-based Reporting

(5) Measures Proposed for Inclusion in 2011 Measures Groups j. 2011 Physician Quality Reporting System Quality Measures for

Group Practices Selected to Participate in the Group Practice

Reporting Option (GPRO I) k. Public Reporting of Physician Quality Reporting System Data l. Other Relevant ACA Provisions

(1) Section 3002 (b)--Incentive Payment Adjustment for Quality

Reporting

(2) Section 3002(c)--Maintenance of Certification Programs and

Section 10327 Improvements to the Physician Quality Reporting System

(3) Section 3002(d)--Integration of Physician Quality Reporting and EHR Reporting

(4) Section 3002(e)--Feedback

(5) Section 3002(f)--Appeals 2. Section 132: Incentives for Electronic Prescribing (eRx)- The

Electronic Prescribing Incentive Program

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a. Program Background and Statutory Authority b. The 2011 eRx Incentive

(1) The 2011 Reporting Period for the eRx Incentive Program

(2) Criteria for Determination of Successful Electronic

Prescriber for Eligible Professionals

(A) Reporting the Electronic Prescribing Measure

(B) The Reporting Denominator for the Electronic Prescribing

Measure

(C) Qualified Electronic Prescribing System--Required

Functionalities and Part D eRx Standards

(D) The Reporting Numerator for the Electronic Prescribing

Measure

(E) Criteria for Successful Reporting of the Electronic

Prescribing Measure

(3) Determination of the 2011 Incentive Payment Amount for

Individual Eligible Professionals Who Are Successful Electronic

Prescribers

(4) Reporting Option for Satisfactory Reporting of the

Electronic Prescribing Measure by Group Practices

(A) Definition of ``Group Practice''

(B) Process for Group Practices to Participate as Group

Practices and Criteria for Successful Reporting of the Electronic

Prescribing Measure by Group Practices c. The 2012 eRx Payment Adjustment

(1) The eRx Payment Adjustment Reporting Period

(2) Criteria for Determining Applicability of the 2012 eRx

Payment Adjustment to Individual Eligible Professionals

(3) Criteria for Determining Applicability of the 2012 eRx

Payment Adjustment to Group Practices

(4) Significant Hardship Exemption d. The 2013 eRx Payment Adjustment e. Public Reporting of Names of Successful Electronic

Prescribers

G. DMEPOS Provisions 1. Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP) a. Legislative and Regulatory History of DMEPOS CBP b. Implementation of a National Mail Order DMEPOS Competitive

Bidding Program (CBP) for Diabetic Testing Supplies

(1) Future Competitions for Diabetic Testing Supplies

(2) Definition of Mail Order Item

(3) Special Rule in Case of Competition for Diabetic Testing

Strips

(4) Anti-switching Rule in Case of Competition for Diabetic Test

Strips c. Off-the-Shelf (OTS) Orthotics Exemption d. Grandfathering Rules Resulting in Additional Payments to

Contract Suppliers under the DMEPOS Competitive Bidding Program

(CBP) e. Appeals Process

(1) Purpose and Definitions: (Sec. 414.402)

(2) Applicability

(3) Contract Termination

(4) Notice of Termination

(5) Corrective Action Plan

(6) Right to Request a Hearing by the CBIC Hearing Officer (HO)

(7) Scheduling of the Hearing

(8) Burden of Proof

(9) Role of the Hearing Officer (HO)

(10) CMS's Final Determination

(11) Effective Date of the Contract Termination

(12) Effect of Contract Termination 2. Changes to Payment Rules for Oxygen and Oxygen Equipment a. Background b. Furnishing Oxygen Equipment after the 36-Month Rental Period

(CAP) c. Furnishing Oxygen Equipment during the 36-Month Rental Period

(CAP)

H. Provider and Supplier Enrollment Issue: Air Ambulance

Provision

I. Technical Corrections 1. Physical Therapy, Occupational Therapy and Speech-language

Pathology 2. Scope of Benefits

J. Physician Self-Referral Prohibition: Annual Update to the

List of CPT/HCPCS Codes 1. General 2. Annual Update to the Code List a. Background b. Response to Comments c. Revisions Effective for 2011

VIII. Waiver of Proposed Rulemaking and Delay in Effective Date

IX. Collection of Information Requirements

A. ICRs Regarding Diagnostic X-ray Tests, Diagnostic Laboratory

Tests, and Other Diagnostic Tests: Conditions (Sec. 410.32)

B. ICRs Regarding General Exceptions to the Referral Prohibition

Related to Both Ownership/Investment and Compensation (Sec. 411.355)

C. ICRs Regarding Appeals Process for Termination of Competitive

Bidding Contract (Sec. 414.423)

D. ICRs Regarding Additional Provider and Supplier Requirements for Enrolling and Maintaining Active Enrollment status in the

Medicare Program (Sec. 424.516)

E. Additional Information Collection Requirements 1. Part B Drug Payment 2. Physician Quality Reporting Initiative (PQRI) 3. Electronic Prescribing (eRx) Incentive Program

X. Response to Comments

XI. Regulatory Impact Analysis

A. RVU Impacts 1. Resource Based Work, PE, and Malpractice RVUs 2. CY 2011 PFS Impact Discussion a. Changes in RVUs b. Combined Impact

B. Geographic Practice Cost Indices (GPCIs)

C. Rebasing and Revising of the MEI

D. The Affordable Care Act Provisions 1. Section 3002: Improvements to the Physician Quality Reporting

System 2. Sections 3003 and 3007: Improvements to the Physician

Feedback Program and Value-Based Payment Under the Physician Fee

Schedule 2. Section 3103: Extension of Exceptions Process for Medicare

Therapy Caps 3. Section 3102: Extension of the Work Geographic Index Floor and Revisions to the Practice Expense Geographic Adjustment under the Medicare Physician Fee Schedule, and Protections for Frontier

States as amended by Section 10324 4. Section 3103: Extension of Exceptions Process for Medicare

Therapy Caps 5. Section 3104: Extension of Payment for Technical Component of

Certain Physician Pathology Services 6. Sections 3105 and 10311: Extension of Ambulance Add-Ons 7. Section 3107: Extension of Physician Fee Schedule Mental

Health Add-On 8. Section 3108: Permitting Physician Assistants to Order Post-

Hospital Extended Care Services 9. Section 3111: Payment for Bone Density Tests 10. Section 3114: Improved Access for Certified Nurse-Midwife

Services 11. Section 3122: Extension of Medicare Reasonable Costs

Payments for Certain Clinical Diagnostic Laboratory Tests Furnished to Hospital Patients in Certain Rural Areas 12. Section 3134: Misvalued Codes Under the PFS 13. Section 3135: Modification of Equipment Utilization Factor

For Advanced Imaging Services 14. Section 3136: Revisions in Payments for Power Wheelchairs 15. Section 3139: Payment for Biosimilar Biological Products 16. Section 3401: Revisions of Certain Market Basket Updates and

Incorporation of Productivity Adjustments 17. Section 4103: Medicare Coverage of Annual Wellness Visit

Providing a Personalized Prevention Plan 18. Section 4104: Removal of Barriers to Preventive Services in

Medicare 19. Section 5501: Expanding Access to Primary Care Services and

General Surgery Services 20. Section 6003: Disclosure Requirements for In-office

Ancillary Services Exception to the Prohibition of Physician Self- referral for Certain Imaging Services 21. Section 6404: Maximum Period for Submission of Medicare

Claims Reduced to Not More Than 12 Months 22. Section 6410 of Patient Accountability and Affordable Care

Act and Section 154 of MIPPA: Adjustments to the Metropolitan

Statistical Areas (MSA) for Medicare Durable Medical Equipment,

Prosthetics, Orthotics, and Supplies Competitive Acquisition Program 23. Section 10501(i)(3): Collection of HCPCS Data for the

Development and Implementation of a Prospective Payment System for the Medicare FQHC Program

E. Other Provisions of the Proposed Regulation 1. Part B Drug Payment: ASP Issues 2. Ambulance Fee Schedule: Proposed Policy for Reporting Units when Billing for Ambulance Fractional Mileage 3. Chiropractic Services Demonstration 4. Renal Dialysis Services Furnished by ESRD Facilities 5. Section 131(b) of the MIPPA: Physician Payment, Efficiency, and Quality Improvements--Physician Quality Reporting System 6. Section 132 of the MIPPA: Incentives for Electronic

Prescribing (eRx)--The eRx Incentive Program

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7. Durable Medical Equipment-Related Issues a. Off-the-Shelf (OTS) Orthotics Exemption b. Changes to Payment for Oxygen Equipment c. Diabetic Testing Supplies d. Metropolitan Statistical Areas 8. Air Ambulance

F. Alternatives Considered

G. Impact on Beneficiaries

H. Accounting Statement

Regulations Text

Addendum A--Explanation and Use of Addendum B

Addendum B--Relative Value Units and Related Information Used In

Determining Medicare Payments for CY 2011

Addendum C--Codes With Interim RVUS

Addendum D--Final 2011 Geographic Adjustment Factors (GAFS)

Addendum E--Final 2011****Geographic Practice Cost Indicies (GPCIS)

By State and Medicare Locality

Addendum F--CY 2011 Diagnostic Imaging Services Subject To The

Multiple Procedure Payment Reduction

Addendum G--CPT/HCPCS Imaging Codes Defined By Section 5102(B) of the DRA

Addendum H--CY 2011 ``Always Therapy'' Services* Subject to the

Multiple Procedure Payment Reduction

Addendum I--[Reserved]

Addendum J--List of CPT1/HCPCS Codes Used to Define Certain

Designated Health Service Categories \2\ Under Section 1877 of the

Social Security Act Effective January 1, 2011

Addendum K--CY 2011 ESRD Wage Index For Urban Areas Based On CBSA

Labor Market Areas

Addendum L-- CY 2011 Wage Index For Rural Areas Based On CBSA Labor

Market Areas

Acronyms

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

AA Anesthesiologist assistant

AACVPR American Association of Cardiovascular and Pulmonary

Rehabilitation

AANA American Association of Nurse Anesthetists

ABMS American Board of Medical Specialties

ABN Advanced Beneficiary Notice

ACA ``Affordable Care Act''

ACC American College of Cardiology

ACGME Accreditation Council on Graduate Medical Education

ACLS Advanced cardiac life support

ACP American College of Physicians

ACR American College of Radiology

ACS American Community Survey

AED Automated external defibrillator

AFROC Association of Freestanding Radiation Oncology Centers

AFS Ambulance Fee Schedule

AHA American Heart Association

AHFS-DI American Hospital Formulary Service-Drug Information

AHRQ [HHS] Agency for Healthcare Research and Quality

AMA American Medical Association

AMA-DE American Medical Association Drug Evaluations

AACE American Association of Clinical Endocrinologists

AADE American Association of Diabetes Educators

AMP Average manufacturer price

AO Accreditation organization

AOA American Osteopathic Association

APA American Psychological Association

APC Administrative Procedures Act

APTA American Physical Therapy Association

ARRA American Recovery and Reinvestment Act (Pub. L. 111-5)

ASC Ambulatory surgical center

ASP Average sales price

ASRT American Society of Radiologic Technologists

ASTRO American Society for Therapeutic Radiology and Oncology

ATA American Telemedicine Association

AWP Average wholesale price

AWV Annual Wellness Visit

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

BBRA [Medicare, Medicaid and State Child Health Insurance Program]

Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)

BPM Benefit Policy Manual

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection

Act of 2000 (Pub. L. 106-554)

BLS Bureau of Labor Statistics

BN Budget neutrality

BPM Benefit Policy Manual

CABG Coronary artery bypass graft

CAD Coronary artery disease

CAH Critical access hospital

CAHEA Committee on Allied Health Education and Accreditation

CAP Competitive acquisition program

CARE Continuity Assessment Record and Evaluation

CBIC Competitive Bidding Implementation Contractor

CBP Competitive Bidding Program

CBSA Core-Based Statistical Area

CDC Centers for Disease Control and Prevention

CEM Cardiac Event Monitoring

CF Conversion factor

CFC Conditions for Coverage

CFR Code of Federal Regulations

CKD Chronic kidney disease

CLFS Clinical laboratory fee schedule

CMA California Medical Association

CMD Contractor Medical Director

CMHC Community mental health center

CMP Civil money penalty

CMS Centers for Medicare & Medicaid Services

CNS Clinical nurse specialist

CoP Condition of participation

COPD Chronic obstructive pulmonary disease

CORF Comprehensive Outpatient Rehabilitation Facility

COS Cost of service

CPEP Clinical Practice Expert Panel

CPI Consumer Price Index

CPI-U Consumer price index for urban consumers

CPR Cardiopulmonary resuscitation

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

CR Cardiac rehabilitation

CRNA Certified registered nurse anesthetist

CRP Canalith repositioning

CRT Certified respiratory therapist

CSW Clinical social worker

CT Computed Tomography

CTA Computed Tomography Angography

CSC Computer Sciences Corporation

CWF Common Working File

CY Calendar year

DEA Drug Enforcement Agency

DOTPA Development of Outpatient Therapy Alternatives

DHS Designated health services

DHHS Department of Health and Human Services

DME Durable medical equipment

DMEPOS Durable medical equipment, prosthetics, orthotics, and supplies

DOQ Doctors Office Quality

DOS Date of service

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

DSMT Diabetes self-management training

EGC Electrocardiogram

E/M Evaluation and management

EDI Electronic data interchange

EEG Electroencephalogram

EHR Electronic health record

EKG Electrocardiogram

EMG Electromyogram

EMTALA Emergency Medical Treatment and Active Labor Act

EOG Electro-oculogram

EPO Erythopoeitin eRx Electronic Prescribing

ESO Endoscopy Supplies

ESRD End-stage renal disease

FAA Federal Aviation Administration

FAX Facsimile

FDA Food and Drug Administration (HHS)

FFS Fee-for-service

FOTO Focus On Therapeutic Outcomes

FQHC Federally Qualified Health Center

FR Federal Register

GAF Geographic adjustment factor

GAO General Accounting Office

GEM Generating Medicare [Physician Quality Performance Measurement

Results]

GFR Glomerular filtration rate

GPRO Group Practice Reporting Option

GPO Group purchasing organization

GPCI Geographic practice cost index

GPS Geographic Positioning System

GSA General Services Administration

HAC Hospital-acquired conditions

HBAI Health and behavior assessment and intervention

HCC Hierarchal Condition Category

HCPAC Health Care Professional Advisory Committee

HCPCS Healthcare Common Procedure Coding System

HCRIS Healthcare Cost Report Information System

HEMS Helicopter Emergency Medical Services

HDRT High dose radiation therapy

Page 73177

HH PPS Home Health Prospective Payment System

HHA Home health agency

HHRG Home health resource group

HHS [Department of] Health and Human Services

HIPAA Health Insurance Portability and Accountability Act of 1996

(Pub. L. 104-191)

HIT Health information technology

HITECH Health Information Technology for Economic and Clinical

Health Act (Title IV of Division B of the Recovery Act, together with Title XIII of Division A of the Recovery Act)

HITSP Healthcare Information Technology Standards Panel

HIV Human immunodeficiency virus

HOPD Hospital outpatient department

HPSA Health Professional Shortage Area

HRA Health Risk Assessment

HRSA Health Resources Services Administration (HHS)

HSIP HPSA Surgical Incentive Program

HUD Housing and Urban Development

IACS Individuals Access to CMS Systems

ICD International Classification of Diseases

ICF Intermediate care facilities

ICF International Classification of Functioning, Disability and

Health

ICR Intensive cardiac rehabilitation

ICR Information collection requirement

IDTF Independent diagnostic testing facility

IGI IHS Global Insight, Inc.

IFC Interim final rule with comment period

IMRT Intensity-Modulated Radiation Therapy

IOM Internet Only Manual

IPCI indirect practice cost index

IPPE Initial preventive physical examination

IPPS Inpatient prospective payment system

IRS Internal Revenue Service

ISO Insurance services office

IVD Ischemic Vascular Disease

IVIG Intravenous immune globulin

IWPUT Intra-service work per unit of time

TJC Joint Commission

JRCERT Joint Review Committee on Education in Radiologic Technology

KDE Kidney disease education

LCD Local coverage determination

MA Medicare Advantage

MA-PD Medicare Advantage-Prescription Drug Plans

MAC Medicare Administrative Contractor

MAV Measure Applicability Validation

MCMP Medicare Care Management Performance

MCP Monthly Capitation Payment

MDRD Modification of Diet in Renal Disease

MedCAC Medicare Evidence Development and Coverage Advisory

Committee (formerly the Medicare Coverage Advisory Committee (MCAC))

MedPAC Medicare Payment Advisory Commission

MGMA Medical Group Management Association

MEI Medicare Economic Index

MIEA-TRHCA Medicare Improvements and Extension Act of 2006 (that is, Division B of the Tax Relief and Health Care Act of 2006 (TRHCA)

(Pub. L. 109-432)

MIPPA Medicare Improvements for Patients and Providers Act of 2008

(Pub. L. 110-275)

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

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

MNT Medical nutrition therapy

MOC Maintenance of certification

MP Malpractice

MPC Mulitspecialty Points of Comparison

MPPR Multiple procedure payment reduction

MQSA Mammography Quality Standards Act of 1992 (Pub. L. 102-539)

MRA Magnetic Resonance Angiography

MRI Magnetic Resonance Imaging

MSA Metropolitan Statistical Area

MSP Medicare Secondary Payer

MUE Medically Unlikely Edit

NCCI National Correct Coding Initiative

NCD National Coverage Determination

NCQA National Committee for Quality Assurance

NCQDIS National Coalition of Quality Diagnostic Imaging Services

NDC National drug code

NF Nursing facility

NISTA National Institute of Standards and Technology Act

NP Nurse practitioner

NPI National Provider Identifier

NPP Nonphysician practitioner

NQF National Quality Forum

NBRC National Board for Respiratory Care

NRC Nuclear Regulatory Commission

NTSB National Transportation Safety Board

NUBC National Uniform Billing Committee

OACT [CMS] Office of the Actuary

OBRA Omnibus Budget Reconciliation Act

OCR Optical Character Recognition

ODF Open door forum

OES Occupational Employment Statistics

OGPE Oxygen generating portable equipment

OIG Office of Inspector General

OMB Office of Management and Budget

ONC [HHS] Office of the National Coordinator for Health IT

OPPS Outpatient prospective payment system

OSCAR Online Survey and Certification and Reporting

PA Physician assistant

PACE Program of All-inclusive Care for the Elderly

PAT Performance assessment tool

PC Professional component

PCI Percutaneous coronary intervention

PCIP Primary Care Incentive Payment Program

PDP Prescription drug plan

PE Practice expense

PE/HR Practice expense per hour

PEAC Practice Expense Advisory Committee

PECOS Provider Enrollment Chain and Ownership System

PERC Practice Expense Review Committee

PFS Physician Fee Schedule

PGP [Medicare] Physician Group Practice

PHI Protected health information

PHP Partial hospitalization program

PIM [Medicare] Program Integrity Manual

PLI Professional liability insurance

POA Present on admission

POC Plan of care

PPI Producer price index

PPIS Physician Practice Information Survey

PPPS Personalized Prevention Plan Services

PPS Prospective payment system

PPTA Plasma Protein Therapeutics Association

PQRI Physician Quality Reporting Initiative

PR Pulmonary rehabilitation

PRA Paperwork Reduction Act

PSA Physician scarcity areas

PT Physical therapy

PTCA Percutaneous transluminal coronary angioplasty

PTA Physical therapy assistant

PVBP Physician and Other Health Professional Value-Based Purchasing

Workgroup

QDCs (Physician Quality Reporting System) Quality Data Codes

RA Radiology assistant

RAC Medicare Recovery Audit Contractor

RBMA Radiology Business Management Association

RFA Regulatory Flexibility Act

RHC Rural health clinic

RHQDAPU Reporting Hospital Quality Data Annual Payment Update

Program

RIA Regulatory impact analysis

RN Registered nurse

RNAC Reasonable net acquisition cost

RPA Radiology practitioner assistant

RRT Registered respiratory therapist

RUC [AMAs Specialty Society] Relative (Value) Update Committee

RVRBS Resource-Based Relative Value Scale

RVU Relative value unit

SBA Small Business Administration

SCHIP State Children's Health Insurance Programs

SDW Special Disability Workload

SGR Sustainable growth rate

STATS Short Term Alternatives for Therapy Services

SLP Speech-language pathology

SMS [AMAs] Socioeconomic Monitoring System

SNF Skilled nursing facility

SOR System of record

SRS Stereotactic radiosurgery

SSA Social Security Administration

SSI Social Security Income

STARS Services Tracking and Reporting System

STATS Short Term Alternative Therapy Services

TC Technical Component

TIN Tax identification number

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

TTO Transtracheal oxygen

UAF Update Adjustment Factor

UPMC University of Pittsburgh Medical Center

URAC Utilization Review Accreditation Committee

USDE United States Department of Education

USP-DI United States Pharmacopoeia-Drug Information

VA Veterans Administration

VBP Value-based purchasing

WAC Wholesale Acquisition Cost

Page 73178

WAMP Widely available market price

WHO World Health Organization

CPT (Current Procedural Terminology) Copyright Notice

Throughout this final rule with comment period, we use CPT codes and descriptions to refer to a variety of services. We note that CPT codes and descriptions are copyright 2010 American Medical Association.

All Rights Reserved. CPT is a registered trademark of the American

Medical Association (AMA). Applicable FARS/DFARS apply.

I. Background

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) are based on national uniform relative value units (RVUs) based on the relative resources used in furnishing a service. Section 1848(c) of the Act requires that national RVUs be established for physician work, practice expense (PE), and malpractice expense. Before the establishment of the resource-based relative value system, Medicare payment for physicians' services was based on reasonable charges. We note that throughout this final rule with comment period, unless otherwise noted, the term ``practitioner'' is used to describe both physicians and eligible nonphysician practitioners (such as physician assistants, nurse practitioners, clinical nurse specialists, certified nurse-midwives, psychologists, or social workers) that are permitted to furnish and bill Medicare under the PFS for the services under discussion.

A. Development of the Relative Value System 1. Work RVUs

The concepts and methodology underlying the PFS were enacted as part of the Omnibus Budget Reconciliation Act (OBRA) of 1989 (Pub. L. 101-239), and OBRA 1990, (Pub. L. 101-508). The final rule, published on November 25, 1991 (56 FR 59502), set forth the fee schedule for payment for physicians' services beginning January 1, 1992. Initially, only the physician work RVUs were resource-based, and the PE and malpractice RVUs were based on average allowable charges.

The physician work RVUs established for the implementation of the fee schedule in January 1992 were developed with extensive input from the physician community. A research team at the Harvard School of

Public Health developed the original physician work RVUs for most codes in a cooperative agreement with the Department of Health and Human

Services (DHHS). In constructing the code-specific vignettes for the original physician work RVUs, Harvard worked with panels of experts, both inside and outside the Federal government, and obtained input from numerous physician specialty groups.

Section 1848(b)(2)(B) of the Act specifies that the RVUs for anesthesia services are based on RVUs from a uniform relative value guide, with appropriate adjustment of the conversion factor (CF), in a manner to assure that fee schedule amounts for anesthesia services are consistent with those for other services of comparable value. We established a separate 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 our review of 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 physicians' service beginning in 1998. We were to consider general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising PEs.

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

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

This resource-based system was based on two significant sources of actual PE data: the Clinical Practice Expert Panel (CPEP) data; and the

AMA's Socioeconomic Monitoring System (SMS) data. The CPEP data were collected from panels of physicians, practice administrators, and nonphysicians (for example, registered nurses (RNs)) nominated by physician specialty societies and other groups. The CPEP panels identified the direct inputs required for each physicians' service in both the office setting and out-of-office setting. We have since refined and revised these inputs based on recommendations from the RUC.

The AMA's SMS data provided aggregate specialty-specific information on hours worked and PEs.

Separate PE RVUs are established for procedures that can be performed in both a nonfacility setting, such as a physician's office, and a facility setting, such as a hospital outpatient department

(HOPD). The difference between the facility and nonfacility RVUs reflects the fact that a facility typically receives separate payment from Medicare for its costs of providing the service, apart from payment under the PFS. The nonfacility RVUs reflect all of the direct and indirect PEs of providing a particular service.

Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA)

(Pub. L. 106-113) directed the Secretary of Health and Human Services

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

March 1, 2005.

In the calendar year (CY) 2007 PFS final rule with comment period

(71 FR 69624), we revised the methodology for calculating direct PE

RVUs from the top-down to the bottom-up methodology beginning in CY 2007 and provided for a 4-year transition for the new PE RVUs under this new methodology. This transition ended in CY 2010 and direct PE

RVUs are calculated in CY 2011 using this methodology, unless otherwise noted.

In the CY 2010 PFS final rule with comment period, we updated the

PE/hour (HR) data that are used in the

Page 73179

calculation of PE RVUs for most specialties (74 FR 61749). For this update, we used the Physician Practice Information Survey (PPIS) conducted by the AMA. The PPIS is a multispecialty, nationally representative, PE survey of both physicians and nonphysician practitioners (NPPs) using a survey instrument and methods highly consistent with those of the SMS and the supplemental surveys used prior to CY 2010. We note that in CY 2010, for oncology, clinical laboratories, and independent diagnostic testing facilities (IDTFs), we continued to use the supplemental survey data to determine PE/HR values

(74 FR 61752). 3. Resource-Based Malpractice (MP) RVUs

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

States, the District of Columbia, and Puerto Rico. 4. Refinements to the RVUs

Section 1848(c)(2)(B)(i) of the Act requires that we review all

RVUs no less often than every 5 years. The first Five-Year Review of the physician work RVUs was published on November 22, 1996 (61 FR 59489) and was effective in 1997. The second Five-Year Review was published in the CY 2002 PFS final rule with comment period (66 FR 55246) and was effective in 2002. The third Five-Year Review of physician work RVUs was published in the CY 2007 PFS final rule with comment period (71 FR 69624) and was effective on January 1, 2007.

(Note: Additional codes relating to the third Five-Year Review of physician work RVUs were addressed in the CY 2008 PFS final rule with comment period (72 FR 66360).) The fourth Five-Year Review of physician work RVUs was initiated in the CY 2010 PFS final rule with comment period where we solicited candidate codes from the public for this review (74 FR 61941). Changes due to the fourth Five-Year Review of physician work RVUs will be effective January 1, 2012.

In 1999, the AMA RUC established the Practice Expense Advisory

Committee (PEAC) for the purpose of refining the direct PE inputs.

Through March 2004, the PEAC provided recommendations to CMS for over 7,600 codes (all but a few hundred of the codes currently listed in the

AMAs Current Procedural Terminology (CPT) codes). As part of the CY 2007 PFS final rule with comment period (71 FR 69624), we implemented a new bottom-up methodology for determining resource-based PE RVUs and transitioned the new methodology over a 4-year period. A comprehensive review of PE was undertaken prior to the 4-year transition period for the new PE methodology from the top-down to the bottom-up methodology, and this transition was completed in CY 2010. In CY 2010, we also incorporated the new PPIS data to update the specialty-specific PE/HR data used to develop PE RVUs. Therefore, the next Five-Year Review of

PE RVUs will be addressed in CY 2014.

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

Minor modifications to the methodology were addressed in the CY 2006

PFS final rule with comment period (70 FR 70153). The second Five-Year

Review and update of resource-based malpractice RVUs was published in the CY 2010 PFS final rule with comment period (74 FR 61758) and was effective in CY 2010. 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 revisions to the 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.

For CY 2010, we adopted a number of new payment policies for which we estimated the potential for a redistributive effect under the PFS, including the use of the new PPIS data to develop the specialty- specific PE/HR used for the PE RVUs (74 FR 61749 through 61752) and the elimination of the reporting of all CPT consultation codes in order to allow for correct and consistent coding and appropriate payment for evaluation and management services under the PFS (74 FR 61767 through 61775). In the CY 2011 PFS proposed rule (75 FR 40047), we acknowledged that clinical experience with these new PFS policies has been growing over the first 6 months of CY 2010 and noted that as we seek to improve future PFS payment accuracy for services, we were interested in public comments on the perspectives of physicians and nonphysician practitioners caring for Medicare beneficiaries under the current PFS coding and payment methodologies for physicians' services.

Comment: Many commenters expressed various concerns regarding new

Medicare coding and payment methodologies adopted for CY 2010 and continuing in CY 2011. Some commenters indicated that the effects of using PPIS data to develop the specialty-specific practice expense per hour (PE/HR) significantly reduced the payment for certain services and procedures. Commenters were concerned that the reductions in practice costs reflected in the PPIS data were inaccurate and that CMS reliance on the PPIS data caused undue hardship to certain specialties. Some commenters requested that CMS utilize new PE survey data for specific specialties.

A number of commenters were also particularly concerned with the decision by CMS to no longer recognize the CPT consultation codes for

Part B payment of evaluation and management (E/M) services beginning in

CY 2010. Many commenters recommended resuming payment for consultation codes under the PFS to recognize the unique physician work and practice expenses when consultation services are furnished at the request of other practitioners. Several commenters argued that consultation services were especially important to ensuring high-quality, coordinated care for complex patients and to prevent unnecessary, expensive tests. Based on findings from a survey of affected specialties, these commenters expressed concern that CMS policy decision to no longer recognize the CPT consultation codes for PFS payment purposes resulted in: (1) A reduction in the number of new

Medicare patients seen by specialists; (2) a reduction in overall specialist time spent with individual Medicare patients; (3) a reduction in the number of consultations provided to hospital inpatients; (4) diminished continuity and coordination of care; and (5) the elimination of physicians' office staff and postponement of physicians purchasing new equipment because of practice cost concerns.

Finally, other commenters requested that, in the absence of recognition of the CPT consultation codes for PFS payment, CMS should revise the current prolonged services and new patient definitions in order to allow for higher payments for services that, prior to CY 2010, would have been billed using the CPT consultation codes. Specifically,

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the commenters believe that CMS should adopt the current CPT policy of identifying patients seen by physicians in a different subspecialty within a group practice as ``new'' patients, rather than continuing to use the same physician specialty as the decision point. In addition, some commenters encouraged CMS to adopt the CPT inpatient setting guidelines for determining whether a service meets the prolonged service criteria, which allow physicians to include time spent on a patients floor or unit performing tasked related to the patients care, rather than just face-to-face time as specified under current CMS policy.

Response: We appreciate the concerns of the commenters regarding current PFS coding and payment methodologies. We welcome the perspective of physicians and nonphysician practitioners caring for

Medicare beneficiaries. We understand that in some cases, recent policy changes under the PFS reduced payments for certain professional services, albeit with the goal of providing payment for services that appropriately reflects their relative value in the context of PFS payment for all other services. It is in the nature of any budget neutral payment system for changes, such as the use of PPIS data and the elimination of PFS payment for the CPT consultation codes, to have a somewhat differential impact on various groups of physicians and/or nonphysician practitioners. Furthermore, we note that all physicians benefited from the budget neutral increase in the payment levels for the other evaluation and management (E/M) CPT codes that resulted from the consultation code policy change.

For CY 2010, we adopted the PPIS data for developing the PE RVUs as the most recent data on physicians office practice expenses that used a consistent survey instrument across all specialty and healthcare professional groups. The PPIS was a nationally representative survey providing the most up-to-date and comprehensive data available from 51 specialties, using a survey instrument that was carefully designed, tested, and implemented. As discussed in the CY 2010 PFS final rule with comment period (75 FR 61751), because we recognized that some specialties would likely experience significant payment reductions with the use of the PPIS data, we adopted a 4-year transition from the previous PE RVUs to the PE RVUs developed using the new PPIS data in order to allow physicians and others time to adjust to the payment changes. We note that CY 2010 was the first year of the transition, with payment based upon 75 percent of the previous PE RVUs and 25 percent of the PE RVUs using the new PPIS data. This blend will move to 50/50 in CY 2011, and we intend to continue to closely monitor Medicare

PFS utilization data to detect any emerging issues that may be of concern during this transition period, such as access problems for

Medicare beneficiaries. To date, we have identified no specific problems that would warrant our proposal of a change with respect to the final CY 2010 policy regarding development of the PE RVUs based on the PPIS data. Going forward, as discussed further in section II.A.2.f. of this final rule with comment period, we remain interested in the thoughts of stakeholders regarding the MedPAC comment that ``CMS should consider alternatives to collecting specialty-specific cost data or options to decrease the reliance on such data.'' We encourage interested parties to contact us at any time if they have information to share or discuss in this regard.

In response to extensive public comment on the CY 2010 PFS proposal to eliminate payment for the CPT consultation codes, we explained our rationale in detail in the CY 2010 PFS final rule with comment period

(75 FR 61767 through 61775). Prior to the CY 2010 PFS rulemaking cycle, we had made numerous attempts to resolve issues related to the reporting of the CPT consultation codes, including developing and implementing relevant guidance and educating physicians regarding documentation, transfer of care, and consultation policy. Despite these efforts, there was still substantial disagreement and inconsistency within the physician community regarding these issues. In addition, we believe that in most cases there is no substantial difference in physician work between E/M visits and services that would otherwise be reported with CPT consultation codes. Therefore, we continue to believe that E/M services that could previously have been reported using the

CPT consultation codes may now be appropriately reported and paid using other E/M codes, specifically office and other outpatient, initial hospital and nursing facility care, and subsequent hospital and nursing facility care E/M codes. This policy allows for correct and consistent coding for E/M services furnished by physicians and nonphysician practitioners, as well as provides for appropriate payment for the specific services that were previously billed using the CPT consultation codes.

While we continue to believe that promoting effective coordination of care must be an essential goal of our payment systems, we are currently not aware of any evidence that the CY 2010 policy change to no longer recognize the CPT consultation codes is creating problems regarding care coordination and communication among physicians that negatively impact the health of Medicare beneficiaries. As we stated in the CY 2010 PFS final rule with comment period in response to similar hypothetical concerns expressed by some commenters (75 FR 61774), if we become aware of such evidence in the future, we would certainly consider whether there is an appropriate policy response to promote more effective coordination of care. However, we continue to believe it is premature to consider what the appropriate responses might be unless specific evidence of an issue affecting the health of Medicare beneficiaries comes to our attention. We will continue to be attentive to any concerns that develop about the effects of the policy on the goal of promoting effective coordination of care.

In the CY 2010 PFS final rule with comment period (75 FR 61772), we explained that, although we estimated that there would be redistributional effects among specialties, we did not believe the estimated impacts of the change in consultation code policy were disproportionate to the goals we sought to achieve in finalizing the proposal. While we understand that commenters are concerned with the effects of this policy change and that these comments were submitted after only a half year's experience with the revised policy, the commenters on the CY 2011 proposed rule did not fundamentally address the underlying issues that led to our decision to no longer recognize the consultation codes for PFS payment purposes.

We appreciate the suggestions of the commenters regarding policy changes to the definitions of new patients and prolonged services.

Regarding the definition of ``new'' patient, we note that we continue to consider requests on an ongoing basis for new Medicare physician specialty codes and may establish new codes upon evaluating the submissions based on the criteria listed in the Medicare Claims

Processing Manual, Pub. 100-04, chapter 26, section 10.8. In fact, we have approved four new Medicare physician specialty codes in the past 2 years. These additions allow more patients of those subspecialties to be considered new based on the narrower range of services provided by the subspecialty within a broader specialty group practice. We encourage interested stakeholders to submit requests for new specialty codes

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if they desire a specific code for a different medical specialty or subspecialty. We do not believe it is necessary to change our current policy to one that would routinely adopt the CPT policy of identifying patients seen by physicians in a different subspecialty as ``new'' patients because our current criteria for establishing new Medicare physician specialty codes already accounts for many of these scenarios.

Medicare physician specialty codes describe the unique types of medicine that physicians practice. Therefore, we believe our current definition of ``new'' for reporting office visits to a group practice appropriately relies upon the Medicare definition of a different specialty so that that the differential physician resources required to care for a patient who is truly new to the physician's unique type of medical practice are appropriately recognized.

Finally, we note that our prolonged service criterion that allows counting only of face-to-face time for inpatients, as it does for outpatients, is longstanding. Given that the highest level initial hospital care E/M visit by a physician typically extends for 70 minutes, in order to report the prolonged physician service CPT code in the inpatient setting, a physician would need to spend at least an additional 30 minutes caring for the patient. We are uncertain whether many inpatient E/M services that would otherwise be reported as CPT consultation codes extend beyond 100 minutes, even if we were to consider adopting a policy change to allow counting of unit/floor time in addition to face-to-face time. If we were to consider such a policy change in the counting of physician time, we are also concerned that available documentation in the medical record could make evaluating the medical necessity of a prolonged service especially problematic.

Therefore, we do not believe it would be appropriate to modify our interpretation of the counting of time for purposes of reporting the prolonged service inpatient codes. In most cases, we believe that the additional time that may be required for an E/M visit to a hospital inpatient that would otherwise be reported by a CPT consultation code may be appropriately paid through the Medicare payment for the level of initial or subsequent hospital care E/M code that is reported that takes into consideration the face-to-face time the consulting physician spends with the patient.

We appreciate the commenters' varied perspectives on caring for

Medicare beneficiaries under the recent PFS coding and payment changes adopted for CY 2010 and continuing in CY 2011. While we did not make CY 2011 proposals to modify our established policies regarding the use of the PPIS data to calculate the PE RVUs or the reporting of E/M visits that would otherwise be reported under the CPT consultation codes, and we are not modifying them for CY 2011, we will continue to monitor the impact of these policies. We look forward to continuing our dialogue with stakeholders regarding these and future policy changes under the

PFS.

B. Components of the Fee Schedule Payment Amounts

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

RVUs are converted to dollar amounts through the application of a

CF, which is calculated by CMS Office of the Actuary (OACT).

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

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

C. Most Recent Changes to the Fee Schedule

The CY 2010 PFS final rule with comment period (74 FR 61738) implemented changes to the PFS and other Medicare Part B payment policies. It also finalized some of the CY 2009 interim RVUs and implemented interim RVUs for new and revised codes for CY 2010 to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. The CY 2010 PFS final rule with comment period also addressed other policies, as well as certain provisions of the MIPPA.

As required by the statute at the time of its issuance on October 30, 2009, the CY 2010 PFS final rule with comment period announced the following for CY 2010: The PFS update of -21.2 percent; the initial estimate for the sustainable growth rate of -8.8 percent; and the CF of

$28.4061.

On December 10, 2009, we published a correction notice (74 FR 65449) to correct several technical and typographical errors that occurred in the CY 2010 PFS final rule with comment period. This correction notice announced a revised CF for CY 2010 of $28.3895.

On December 19, 2009, the Department of Defense Appropriations Act, 2010 (Pub. L. 111-118) was signed into law. Section 1011 of Public Law 111-118 provided a 2-month zero percent update to the CY 2010 PFS effective only for dates of service from January 1, 2010 through

February 28, 2010.

On March 2, 2010, the Temporary Extension Act of 2010 (Pub. L. 111- 144) was signed into law. Section 2 of Public Law 111-144 extended through March 31, 2010 the zero percent update to the PFS that was in effect for claims with dates of service from January 1, 2010 through

February 28, 2010.

In addition, on April 15, 2010, the Continuing Extension Act of 2010 (Pub. L. 111-157) was signed into law. Section 4 of Public Law 111-157 extended through May 31, 2010 the zero percent update to the

PFS that was in effect for claims with dates of services from January 1, 2010 through March 31, 2010. The provision was retroactive to April 1, 2010.

In the May 11, 2010 Federal Register (75 FR 26350), we published a subsequent correction notice to correct several technical and typographical errors that occurred in the CY 2010 PFS final rule with comment period and the December 10, 2009 correction notice. The May 11, 2010 correction notice announced a revised CF for CY 2010 of $28.3868.

On June 25, 2010, the Preservation of Access to Care for Medicare

Beneficiaries and Pension Relief Act of 2010 (Pub. L. 111-192) was signed into law. This law required application of a 2.2 percent update to the PFS for claims with dates of services from June 1, 2010 through

November 30, 2010. As a result of this change, the PFS conversion factor was revised to $36.8729 for services furnished during this time period.

On March 23, 2010 the Patient Protection and Affordable Care Act

(Pub. L. 111-148) was signed into law. Shortly thereafter, on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) was signed into law. These two laws are discussed in this final rule with comment period and are collectively referred to as the

``Affordable Care Act'' (ACA) throughout this final rule with comment period.

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D. Public Comments Received in Response to the CY 2011 PFS Proposed

Rule

We received approximately 8,500 timely pieces of correspondence containing multiple comments on the CY 2011 PFS proposed rule. We note that we received some comments that were outside the scope of the CY 2011 PFS proposed rule, including public comments on new CY 2011 HCPCS codes that were not presented in the CY 2011 PFS proposed rule and existing CY 2010 HCPCS codes with final values for which we made no proposals for CY 2011. These comments are not addressed in this CY 2011

PFS final rule with comment period. New and revised CY 2011 HCPCS codes and their CY 2011 interim PFS work, malpractice, and PE RVUs are displayed in Addendum C to this final rule with comment period, and these values are open to public comment on this final rule with comment period. Summaries of the public comments that are within the scope of the proposals and our responses to those comments are set for the in the various sections of this final rule with comment period under the appropriate headings.

II. Provisions of the Final Rule for the Physician Fee Schedule

A. Resource-Based Practice Expense (PE) Relative Value Units (RVUs) 1. Overview

Practice expense (PE) is the portion of the resources used in furnishing the service that reflects the general categories of physician and practitioner expenses, such as office rent and personnel wages but excluding malpractice expenses, as specified in section 1848(c)(1)(B) of the Act. Section 121 of the Social Security Amendments of 1994 (Pub. L. 103-432), enacted on October 31, 1994, required CMS to develop a methodology for a resource-based system for determining PE

RVUs for each physician's service. We develop PE RVUs by looking at the direct and indirect physician practice resources involved in furnishing each service. Direct expense categories include clinical labor, medical supplies, and medical equipment. Indirect expenses include administrative labor, office expense, and all other expenses. The sections that follow provide more detailed information about the methodology for translating the resources involved in furnishing each service into service-specific PE RVUs. In addition, we note that 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. Therefore, if revisions to the 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. We refer readers to the CY 2010 PFS final rule with comment period (74 FR 61743 through 61748) for a more detailed history of the PE methodology. 2. Practice Expense Methodology a. Direct Practice Expense

We use a bottom-up approach to determine the direct PE by adding the costs of the resources (that is, the clinical staff, equipment, and supplies) typically required to provide each service. The costs of the resources are calculated using the refined direct PE inputs assigned to each CPT code in our PE database, which are based on our review of recommendations received from the American Medical Association's

(AMA's) Relative Value Update Committee (RUC). For a detailed explanation of the bottom-up direct PE methodology, including examples, we refer readers to the Five-Year Review of Work Relative Value Units

Under the PFS and Proposed Changes to the Practice Expense Methodology proposed notice (71 FR 37242) and the CY 2007 PFS final rule with comment period (71 FR 69629). b. Indirect Practice Expense per Hour Data

We use survey data on indirect practice expenses incurred per hour worked (PE/HR) in developing the indirect portion of the PE RVUs. Prior to CY 2010, we primarily used the practice expense per hour (PE/HR) by specialty that was obtained from the AMA's Socioeconomic Monitoring

Surveys (SMS). These surveys were conducted from 1995 through 1999. For several specialties that collected additional PE/HR data through supplemental surveys, we incorporated these data in developing the PE/

HR values used annually.

While the SMS was not specifically designed for the purpose of establishing PE RVUs, we found these data to be the best available at the time. The SMS was a multispecialty survey effort conducted using a consistent survey instrument and method across specialties. The survey sample was randomly drawn from the AMA Physician Master file to ensure national representativeness. The AMA discontinued the SMS survey in 1999.

As required by the Balanced Budget Refinement Act of 1999 (BBRA)

(Pub. L. 106-113), we also established a process by which specialty groups could submit supplemental PE data. In the May 3, 2000 Federal

Register, we issued the Medicare Program; Criteria for Submitting

Supplemental Practice Expense Survey Data interim final rule (65 FR 25664) in which we established criteria for acceptance of supplemental data. The criteria were modified in the CY 2001 and CY 2003 PFS final rules with comment period (65 FR 65380 and 67 FR 79971, respectively).

In addition to the SMS, we previously used supplemental survey data for the following specialties: Cardiology; dermatology; gastroenterology; radiology; cardiothoracic surgery; vascular surgery; physical and occupational therapy; independent laboratories; allergy/immunology; independent diagnostic testing facilities (IDTFs); radiation oncology; medical oncology; and urology.

Because the SMS data and the supplemental survey data were from different time periods, we historically inflated them by the Medicare

Economic Index (MEI) to put them on as comparable a time basis as we could when calculating the PE RVUs. This MEI proxy was necessary in the past due to the lack of contemporaneous, consistently collected, and comprehensive multispecialty survey data.

The AMA administered a new survey in CY 2007 and CY 2008, the

Physician Practice Expense Information Survey (PPIS), which was expanded (relative to the SMS) to include nonphysician practitioners

(NPPs) paid under the PFS. The PPIS was designed to update the specialty-specific PE/HR data used to develop PE RVUs. The AMA and the

CMS contractor, The Lewin Group (Lewin), analyzed the PPIS data and calculated the PE/HR for physician and nonphysician specialties, respectively. The AMA's summary worksheets and Lewin's final report are available on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/

PFSFRN/itemdetail.asp?filterType=none&filterByDID=- 99&sortByDID=4&sortOrder=descending&itemID=CMS1223902&intNumPerPage=10.

(See downloads labeled AMA PPIS Worksheets 1-3 and Physician Practice

Expense non MDDO Final Report)

The PPIS is a multispecialty, nationally representative, PE survey of both physicians and NPPs using a consistent survey instrument and methods highly consistent with those used for the SMS and the supplemental surveys. The PPIS gathered information

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from 3,656 respondents across 51 physician specialty and healthcare professional groups.

We believe the PPIS is the most comprehensive source of PE survey information available to date. Therefore, we used the PPIS data to update the PE/HR data for almost all of the Medicare-recognized specialties that participated in the survey for the CY 2010 PFS. When we changed over to the PPIS data beginning in CY 2010, we did not change the PE RVU methodology itself or the manner in which the PE/HR data are used in that methodology. We only updated the PE/HR data based on the new survey. Furthermore, as we explained in the CY 2010 PFS final rule with comment period (74 FR 61751), because of the magnitude of payment reductions for some specialties resulting from the use of the PPIS data, we finalized a 4-year transition (75/25 for CY 2010, 50/ 50 for CY 2011, 25/75 for CY 2012, and 0/100 for CY 2013) from the previous PE RVUs to the PE RVUs developed using the new PPIS data.

Section 303 of the Medicare Prescription Drug, Improvement, and

Modernization Act of 2003 (MMA) (Pub. L. 108-173) added section 1848(c)(2)(H)(i) of the Act, which requires us to use the medical oncology supplemental survey data submitted in 2003 for oncology drug administration services. Therefore, the PE/HR for medical oncology, hematology, and hematology/oncology reflects the continued use of these supplemental survey data.

We do not use the PPIS data for reproductive endocrinology, sleep medicine, and spine surgery since these specialties are not separately recognized by Medicare, and we do not know how to blend these data with

Medicare-recognized specialty data.

Supplemental survey data on independent labs, from the College of

American Pathologists, were implemented for payments in CY 2005.

Supplemental survey data from the National Coalition of Quality

Diagnostic Imaging Services (NCQDIS), representing IDTFs, were blended with supplementary survey data from the American College of Radiology

(ACR) and implemented for payments in CY 2007. Neither IDTFs nor independent labs participated in the PPIS. Therefore, we continue to use the PE/HR that was developed from their supplemental survey data.

Finally, consistent with our past practice, the previous indirect

PE/HR values from the supplemental surveys for medical oncology, independent laboratories, and IDTFs were updated to CY 2006 using the

MEI to put them on a comparable basis with the PPIS data. In the CY 2010 PFS final rule with comment period (74 FR 61753), we miscalculated the indirect PE/HR for IDTFs as part of this update process. Therefore, for CY 2011, we are using a revised indirect PE/HR of $479.81 for

IDTFs, consistent with our final policy to update the indirect PE/HR values from prior supplemental survey data that we are continuing to use in order to put these data on a comparable basis with the PPIS data. This revision changes the IDTF indirect percentage from 51 percent to 50 percent for CY 2011.

Previously, we had established PE/HR values for various specialties without SMS or supplemental survey data by crosswalking them to other similar specialties to estimate a proxy PE/HR. For specialties that were part of the PPIS for which we previously used a crosswalked PE/HR, we instead use the PPIS-based PE/HR. We continue previous crosswalks for specialties that did not participate in the PPIS. However, beginning in CY 2010 we changed the PE/HR crosswalk for portable x-ray suppliers from radiology to IDTF, a more appropriate crosswalk because these specialties are more similar to each other with respect to physician time.

In the CY 2010 PFS final rule with comment period (74 FR 61752), we agreed that, under the current PE methodology, the PPIS data for registered dieticians should not be used in the calculation of PE RVUs since these dieticians are paid 85 percent of what a physician would be paid for providing the service. To include their survey data in the PE calculation would influence the ratesetting by incorporating what the services would be paid if performed by registered dieticians and not strictly what the payment rates would be if provided by physicians. We further stated that we would utilize the ``All Physicians'' PE/HR, as derived from the PPIS, in the calculation of resource-based PE RVUs in lieu of the PE/HR associated with registered dieticians. In the resource-based PE methodology for CY 2010, while we removed the specialty of registered dieticians from the ratesetting step we did not assign the ``All Physicians'' PE/HR to services furnished by registered dieticians. Instead, we allowed the PE/HR for those services to be generated by a weighted average of all the physician specialties that also furnished the services. This method was consistent with our policy to not use the registered dietician PPIS PE/HR in calculating the PE

RVUs for services furnished by registered dieticians but we did not actually crosswalk the specialty of registered dietician to the ``All

Physicians'' PE/HR data as we had intended according to the final policy. Nevertheless, we are affirming for CY 2011 that the final resource-based PE RVUs have been calculated in accordance with the final policy adopted in the CY 2010 PFS final rule with comment period

(74 FR 61752) for registered dietician services that crosswalks the specialty to the ``All Physicians'' PE/HR data.

As provided in the CY 2010 PFS final rule with comment period (74

FR 61751), CY 2011 is the second year of the 4-year transition to the

PE RVUs calculated using the PPIS data. Therefore, in general, the CY 2011 PE RVUs are a 50/50 blend of the previous PE RVUs based on the SMS and supplemental survey data and the new PE RVUS developed using the

PPIS data as described above. Note that the reductions in the PE RVUs for expensive diagnostic imaging equipment attributable to the change to an equipment utilization rate assumption of 75 percent (see 74 FR 61753 through 61755 and section II.A.3. of this final rule with comment period) are not subject to the transition.

CMS' longstanding policy in a PFS transition payment year is that if the CPT Editorial Panel creates a new code for that year, the new code would be paid at its fully implemented PFS amount and not at a transition rate for that year. Consistent with this policy, all new CY 2011 CPT codes will not be paid based on transitional PE RVUs in CY 2011. Instead, we will pay these services based on the fully implemented PE RVUs in CY 2011. Additionally, existing CPT codes for which the global period has changed in CY 2011 will not be subject to the PPIS PE RVU transition. We believe that changing the global period of a code results in the CPT code describing a different service to which the previous PE RVUs would no longer be relevant when the code is reported for a service furnished in CY 2011. The five CY 2011 existing

CPT codes with global period changes from CY 2010 to CY 2011 are: 11043

(Debridement, muscle, and/or fascia (includes epidermis, dermis, and subcutaneous tissue, if performed); first 20 sq cm or less); 11044

(Debridement, bone (includes epidermis, dermis, subcutaneous tissue, muscle and/or fascia, if performed); first 20 sq cm or less); 57155

(Insertion of uterine tandems and/or vaginal ovoids for clinical brachytherapy); 97597 (Debridement (e.g., high pressure waterjet with/ without suction, sharp selective debridement with scissors,

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scalpel and forceps), open wound, (e.g., fibrin, devitalized epidermis and/or dermis, exudate, debris, biofilm), including topical application(s), wound assessment, use of a whirlpool, when performed and instruction(s) for ongoing care, per session, total wound(s) surface area; first 20 square centimeters or less); and 97598

(Debridement (e.g., high pressure waterjet with/without suction, sharp selective debridement with scissors, scalpel and forceps), open wound,

(e.g., fibrin, devitalized epidermis and/or dermis, exudate, debris, biofilm), including topical application(s), wound assessment, use of a whirlpool, when performed and instructions(s) for ongoing care, per session, total wound(s) surface area; each additional 20 square centimeters, or part thereof (List separately in addition to code for primary procedure)). c. Allocation of PE to Services

To establish PE RVUs for specific services, it is necessary to establish the direct and indirect PE associated with each service.

(i) Direct costs. The relative relationship between the direct cost portions of the PE RVUs for any two services is determined by the relative relationship between the sum of the direct cost resources

(that is, the clinical staff, equipment, and supplies) typically required to provide the services. The costs of these resources are calculated from the refined direct PE inputs in our PE database. For example, if one service has a direct cost sum of $400 from our PE database and another service has a direct cost sum of $200, the direct portion of the PE RVUs of the first service would be twice as much as the direct portion of the PE RVUs for the second service.

(ii) Indirect costs. Section II.A.2.b. of this final rule with comment period describes the current data sources for specialty- specific indirect costs used in our PE calculations. We allocate the indirect costs to the code level on the basis of the direct costs specifically associated with a code and the greater of either the clinical labor costs or the physician work RVUs. We also incorporate the survey data described earlier in the PE/HR discussion. The general approach to developing the indirect portion of the PE RVUs is described below.

For a given service, we use the direct portion of the PE

RVUs calculated as described above and the average percentage that direct costs represent of total costs (based on survey data) across the specialties that perform the service to determine an initial indirect allocator. For example, if the direct portion of the PE RVUs for a given service were 2.00 and direct costs, on average, represented 25 percent of total costs for the specialties that performed the service, the initial indirect allocator would be 6.00 since 2.00 is 25 percent of 8.00.

We then add the greater of the work RVUs or clinical labor portion of the direct portion of the PE RVUs to this initial indirect allocator. In our example, if this service had work RVUs of 4.00 and the clinical labor portion of the direct PE RVUs was 1.50, we would add 6.00 plus 4.00 (since the 4.00 work RVUs are greater than the 1.50 clinical labor portion) to get an indirect allocator of 10.00. In the absence of any further use of the survey data, the relative relationship between the indirect cost portions of the PE RVUs for any two services would be determined by the relative relationship between these indirect cost allocators. For example, if one service had an indirect cost allocator of 10.00 and another service had an indirect cost allocator of 5.00, the indirect portion of the PE RVUs of the first service would be twice as great as the indirect portion of the PE

RVUs for the second service.

We next incorporate the specialty-specific indirect PE/HR data into the calculation. As a relatively extreme example for the sake of simplicity, assume in our example above that, based on the survey data, the average indirect cost of the specialties performing the first service with an allocator of 10.00 was half of the average indirect cost of the specialties performing the second service with an indirect allocator of 5.00. In this case, the indirect portion of the PE RVUs of the first service would be equal to that of the second service. d. Facility and Nonfacility Costs

For procedures that can be furnished in a physician's office, as well as in a hospital or facility setting, we establish two PE RVUs:

Facility and nonfacility. The methodology for calculating PE RVUs is the same for both the facility and nonfacility RVUs, but is applied independently to yield two separate PE RVUs. Because Medicare makes a separate payment to the facility for its costs of furnishing a service, the facility PE RVUs are generally lower than the nonfacility PE RVUs. e. Services With Technical Components (TCs) and Professional Components

(PCs)

Diagnostic services are generally comprised of two components: A professional component (PC) and a technical component (TC), each of which may be performed independently or by different providers, or they may be performed together as a ``global'' service. When services have

PC and TC components that can be billed separately, the payment for the global component equals the sum of the payment for the TC and PC. This is a result of using a weighted average of the ratio of indirect to direct costs across all the specialties that furnish the global components, TCs, and PCs; that is, we apply the same weighted average indirect percentage factor to allocate indirect expenses to the global components, PCs, and TCs for a service. (The direct PE RVUs for the TC and PC sum to the global under the bottom-up methodology.) f. Alternative Data Sources and Public Comments on Final Rule for 2010

In the CY 2010 PFS final rule with comment period (74 FR 61749 through 61750), we discussed the Medicare Payment Advisory Commission's

(MedPAC's) comment that in the future, ``CMS should consider alternatives to collecting specialty-specific cost data or options to decrease the reliance on such data.'' We agreed with MedPAC that it would be appropriate to consider the future of the PE RVUs moving forward. We sought comments from other stakeholders on the issues raised by MedPAC for the future. In particular, we requested public comments regarding MedPAC's suggestion that we consider alternatives for collecting specialty-specific cost data or options to decrease the reliance on such data. We noted MedPAC's comment that, ``CMS should consider if Medicare or provider groups should sponsor future data collection efforts, if participation should be voluntary (such as surveys) or mandatory (such as cost reports), and whether a nationally representative sample of practitioners would be sufficient for either a survey or cost reports.'' MedPAC also stated that one option for decreasing the reliance on specialty-specific cost data would be the elimination of the use of indirect PE/HR data in the last step of establishing the indirect cost portion of the PE RVUs as described previously.

Almost all of the commenters on the CY 2010 PFS final rule with comment period that addressed this issue expressed a general willingness to work with CMS on methodological improvements or future data collection efforts. Although no commenters detailed a comprehensive overall alternative methodology, several commenters did provide suggestions regarding future data collection efforts

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and specific aspects of the current methodology.

The commenters on the CY 2010 PFS final rule with comment period that addressed the issue of surveys supported the use of surveys if they yielded accurate PE information. The few commenters that addressed the issue of cost reports were opposed to physician cost reports. The commenters varied with respect to their opinions regarding whether data collection efforts should be led by organized medicine, individual specialty societies, or CMS. Several commenters that addressed the issue of voluntary versus mandatory data collection efforts supported voluntary data collection efforts and opposed mandatory data collection efforts.

Some commenters recommended no changes to the methodology or PE data in the near future. Other commenters indicated that the methodology and data changes needed to be made for CY 2011. Although most commenters did not directly address the use of the indirect PE/HR data, those that did predominately opposed the elimination of the use of these data.

Many commenters addressed specifics of the PE methodology (as further described in section II.A.2.c. of this final rule with comment period). Some were opposed to the scaling factor applied in the development of the direct PE portion of the PE RVUs so that in the aggregate the direct portion of the PE RVUs do not exceed the proportion indicated by the survey data (See Step 4 in g.(ii) below).

Several of these commenters advocated the elimination of this direct scaling factor, while others indicated that the issue should be examined more closely.

A few commenters recommended that physician work not be used as an allocator in the development of the indirect portion of the PE RVUs as described earlier in this section. A few indicated that physician time, but not physician work, should be used in the allocation. Other commenters suggested that indirect costs should be allocated solely on the basis of direct costs.

We note that many of the issues raised by commenters on the CY 2010

PFS final rule with comment period are similar to issues raised in the development of the original resource-based PE methodology and in subsequent revisions to the methodology, including the adoption of the bottom-up methodology. While we did not propose a broad methodological change or broad data collection effort in the CY 2011 PFS proposed rule, we invited comments on our summary of the issues raised by the commenters on the CY 2010 PFS final rule with comment period, as discussed in the CY 2011 PFS proposed rule (75 FR 40050). The complete public comments on the CY 2010 PFS final rule with comment period are available for public review at http://www.regulations.gov by entering

``CMS-1413-FC'' in the search box on the main page.

Comment: A number of commenters believe the PPIS data are flawed and, therefore, should not be used to set the PE RVUs for all or certain categories of PFS services. Other commenters supported the adoption of the PPIS data and, whether ultimately favoring the adoption of the PPIS data or not, many commenters stated that the 4-year transition adopted by CMS is important to physicians and Medicare beneficiaries to ensure access to care. The commenters explained that the transition gives physician specialty societies the opportunity to collect new and more detailed data where appropriate for refinement and

CMS the opportunity to more carefully analyze the new data and its appropriateness. Although once again the commenters did not provide specific recommendations on alternatives to a comprehensive survey of practice expenses or options to decrease the PFS reliance on specialty- specific cost data, the commenters offered the following suggestions regarding future practice expense data collection.

Select a reputable company with experience in health care market research.

Base changes on a comprehensive data source with adequate participation rates.

Have data independently reviewed in order to ensure accuracy.

Make data publicly available in time to allow for review and comment by stakeholders.

Several commenters emphasized the administrative complexity and burden if CMS were to require all physicians to submit cost reports.

One commenter supported a limited study of practice costs estimated by cost reports to determine if the current PE RVUs were appropriately paying physicians for the physician's office costs of services. The commenter believes that cost reports would be more accurate than the

PPIS methodology. Finally, several commenters indicated a willingness to engage CMS in more detailed discussion about potential refinements to the current PE/HR data.

Response: We appreciate the commenters' recommendations regarding factors we should consider in developing future practice expense data collection efforts in order to improve the accuracy of the information.

While we are continuing the transition that was adopted in the CY 2010

PFS final rule with comment period (74 FR 61751) under the CY 2011 PFS to full implementation of the PPIS data for the CY 2013 PFS PE RVUs, we continue to remain interested in the thoughts of stakeholders regarding the MedPAC comment that ``CMS should consider alternatives to collecting specialty-specific cost data or options to decrease the reliance on such data.'' More specifically, we encourage stakeholders to contact us at any time if they encounter additional information to share, develop further ideas or analyses that could inform our ongoing consideration of physicians' practice expenses, or otherwise would like to discuss this topic further as part of an open dialogue with us.

While to date, no stakeholders have presented a comprehensive overall alternative methodology, we remain interested in potential novel or refined approaches. We also continue to welcome more limited suggestions for improvements to our current PE methodology or future practice expense information collection activities. g. PE RVU Methodology

For a more detailed description of the PE RVU methodology, we refer readers to the CY 2010 PFS final rule with comment period with comment period (74 FR 61745 through 61746).

(1) Setup File

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

(2) Calculate the Direct Cost PE RVUs

Sum the costs of each direct input.

Step 1: Sum the direct costs of the inputs for each service. Apply a scaling adjustment to the direct inputs.

Step 2: Calculate the current aggregate pool of direct PE costs.

This is the product of the current aggregate PE (aggregate direct and indirect) RVUs, the CF, and the average direct PE percentage from the survey data.

Step 3: Calculate the aggregate pool of direct costs. This is the sum of the product of the direct costs for each service from Step 1 and the utilization data for that service.

Step 4: Using the results of Step 2 and Step 3 calculate a direct

PE scaling adjustment so that the aggregate direct cost pool does not exceed the current aggregate direct cost pool and apply it

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to the direct costs from Step 1 for each service.

Step 5: Convert the results of Step 4 to an RVU scale for each service. To do this, divide the results of Step 4 by the CF. Note that the actual value of the CF used in this calculation does not influence the final direct cost PE RVUs, as long as the same CF is used in Step 2 and Step 5. Different CFs will result in different direct PE scaling factors, but this has no effect on the final direct cost PE RVUs since changes in the CFs and changes in the associated direct scaling factors offset one another.

(3) Create the Indirect Cost PE RVUs

Create indirect allocators.

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

Step 7: Calculate direct and indirect PE percentages at the service level by taking a weighted average of the results of Step 6 for the specialties that furnish the service. Note that for services with TCs and PCs, the direct and indirect percentages for a given service do not vary by the PC, TC, and global components.

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

For most services the indirect allocator is: Indirect percentage *

(direct PE RVUs/direct percentage) + work RVUs.

There are two situations where this formula is modified:

If the service is a global service (that is, a service with global, professional, and technical components), then the indirect allocator is: Indirect percentage (direct PE RVUs/direct percentage) + clinical PE RVUs + work RVUs.

If the clinical labor PE RVUs exceed the work RVUs (and the service is not a global service), then the indirect allocator is:

Indirect percentage (direct PE RVUs/direct percentage) + clinical PE

RVUs.

Note: For global services, the indirect allocator is based on both the work RVUs and the clinical labor PE RVUs. We do this to recognize that, for the PC service, indirect PEs will be allocated using the work RVUs, and for the TC service, indirect PEs will be allocated using the direct PE RVUs and the clinical labor PE RVUs.

This also allows the global component RVUs to equal the sum of the

PC and TC RVUs.)

For presentation purposes in the examples in Table 2, the formulas were divided into two parts for each service.

The first part does not vary by service and is the indirect percentage (direct PE RVUs/direct percentage).

The second part is either the work RVUs, clinical PE RVUs, or both depending on whether the service is a global service and whether the clinical PE RVUs exceed the work RVUs (as described earlier in this step).

Apply a scaling adjustment to the indirect allocators.

Step 9: Calculate the current aggregate pool of indirect PE RVUs by multiplying the current aggregate pool of PE RVUs by the average indirect PE percentage from the survey data.

Step 10: Calculate an aggregate pool of indirect PE RVUs for all

PFS services by adding the product of the indirect PE allocators for a service from Step 8 and the utilization data for that service.

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

Calculate the indirect practice cost index.

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

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

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

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

Step 16: Calculate the indirect practice cost index at the service level to ensure the capture of all indirect costs. Calculate a weighted average of the practice cost index values for the specialties that furnish the service. (Note: For services with TCs and PCs, we calculate the indirect practice cost index across the global components, PCs, and

TCs. Under this method, the indirect practice cost index for a given service (for example, echocardiogram) does not vary by the PC, TC, and global component.)

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

(4) Calculate the Final PE RVUs

Step 18: Add the direct PE RVUs from Step 6 to the indirect PE RVUs from Step 17 and apply the final PE budget neutrality (BN) adjustment,

MEI rebasing adjustment, and multiple procedure payment reduction

(MPPR) adjustment.

The final PE BN adjustment is calculated by comparing the results of Step 18 (prior to the MEI rebasing and MPPR adjustments) to the current pool of PE RVUs. This final BN adjustment is required primarily because certain specialties are excluded from the PE RVU calculation for ratesetting purposes, but all specialties are included for purposes of calculating the final BN adjustment. (See ``Specialties excluded from ratesetting calculation'' below in this section.)

As discussed in section II.E.5. of this final rule with comment period, we are rebasing and revising the Medicare Economic Index (MEI) for CY 2011. As discussed in section II.C.4. of this final rule with comment period, section 1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) specifies that the Secretary shall identify potentially misvalued codes by examining multiple codes that are frequently billed in conjunction with furnishing a single service.

There is inherent duplication in the PE associated with those services which are frequently furnished together, so reducing PFS payment for the second and subsequent services to account for the efficiencies in multiple service sessions may be appropriate. Consistent with this provision of the ACA, we are adopting a limited expansion of the current MPPR policy for imaging services for CY 2011 and a new MPPR policy for therapy services.

(5) Setup File Information

Specialties excluded from ratesetting calculation: For the purposes of calculating the PE RVUs, we exclude certain specialties, such as certain nonphysician practitioners paid at a percentage of the

PFS and low-volume specialties, from the calculation. These specialties are included for the purposes of calculating the BN adjustment. They are displayed in Table 1.

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Table 1--Specialties Excluded from Ratesetting Calculation

Specialty code

Specialty description

42........................... Certified nurse midwife. 49........................... Ambulatory surgical center. 50........................... Nurse practitioner. 51........................... Medical supply company with certified orthotist. 52........................... Medical supply company with certified prosthetist. 53........................... Medical supply company with certified prosthetist-orthotist. 54........................... Medical supply company not included in 51, 52, or 53. 55........................... Individual certified orthotist. 56........................... Individual certified prosthestist. 57........................... Individual certified prosthetist-orthotist. 58........................... Individuals not included in 55, 56, or 57. 59........................... Ambulance service supplier, e.g., private ambulance companies, funeral homes, etc. 60........................... Public health or welfare agencies. 61........................... Voluntary health or charitable agencies. 73........................... Mass immunization roster biller. 74........................... Radiation therapy centers. 87........................... All other suppliers (e.g., drug and department stores). 88........................... Unknown supplier/provider specialty. 89........................... Certified clinical nurse specialist. 95........................... Competitive Acquisition Program (CAP) Vendor. 96........................... Optician.

A0........................... Hospital.

A1........................... SNF.

A2........................... Intermediate care nursing facility.

A3........................... Nursing facility, other.

A4........................... HHA.

A5........................... Pharmacy.

A6........................... Medical supply company with respiratory therapist.

A7........................... Department store. 1............................ Supplier of oxygen and/or oxygen related equipment. 2............................ Pedorthic personnel. 3............................ Medical supply company with pedorthic personnel.

Crosswalk certain low volume physician specialties:

Crosswalk the utilization of certain specialties with relatively low

PFS utilization to the associated specialties.

Physical therapy utilization: Crosswalk the utilization associated with all physical therapy services to the specialty of physical therapy.

Identify professional and technical services not identified under the usual TC and 26 modifiers: Flag the services that are PC and TC services, but do not use TC and 26 modifiers (for example, electrocardiograms). This flag associates the PC and TC with the associated global code for use in creating the indirect PE RVUs.

For example, the professional service, CPT code 93010

(Electrocardiogram, routine ECG with at least 12 leads; interpretation and report only), is associated with the global service, CPT code 93000

(Electrocardiogram, routine ECG with at least 12 leads; with interpretation and report).

Payment modifiers: Payment modifiers are accounted for in the creation of the file. For example, services billed with the assistant at surgery modifier are paid 16 percent of the PFS amount for that service; therefore, the utilization file is modified to only account for 16 percent of any service that contains the assistant at surgery modifier.

Work RVUs: The setup file contains the work RVUs from this final rule with comment period.

(6) Equipment Cost Per Minute

The equipment cost per minute is calculated as:

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

Where: minutes per year = maximum minutes per year if usage were continuous

(that is, usage = 1); generally 150,000 minutes. usage = equipment utilization assumption; 0.75 for certain expensive diagnostic imaging equipment (see 74 FR 61753 through 61755 and section II.A.3. of this final rule with comment period) and 0.5 for others. price = price of the particular piece of equipment. interest rate = 0.11. life of equipment = useful life of the particular piece of equipment. maintenance = factor for maintenance; 0.05.

Note: The use of any particular conversion factor (CF) in Table 2 to illustrate the PE calculation has no effect on the resulting

RVUs.

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TABLE 2--Calculation of PE RVUs Under Methodology for Selected Codes

99213

33533 CABG,

Office

arterial, 71020 Chest 71020-TC

71020-26 93000 ECG, 93005 ECG, 93010 ECG,

Step

Source

Formula

visit, est

single

x-ray

Chest x-ray Chest x-ray complete

tracing

report

Nonfacility facility Nonfacility Nonfacility Nonfacility Nonfacility Nonfacility Nonfacility

(1) Labor cost (lab).......... Step 1......... AMA................... ...............

13.32

77.52

5.74

5.74

0.00

6.12

6.12

0.00

(2) Supply cost (sup)......... Step 1......... AMA................... ...............

2.98

7.34

3.39

3.39

0.00

1.19

1.19

0.00

(3) Equipment cost (eqp)...... Step 1......... AMA................... ...............

0.19

0.65

8.17

8.17

0.00

0.12

0.12

0.00

(4) Direct cost (dir)......... Step 1......... ...................... =(1) + (2) +

16.50

85.51

17.31

17.31

0.00

7.43

7.43

0.00

(3).

(5) Direct adjustment (dir

Steps 2-4...... See footnote*......... ...............

0.50

0.50

0.50

0.50

0.50

0.50

0.50

0.50 adj).

(6) Adjusted labor............ Steps 2-4...... =Lab * Dir adj........ =(1)*(5).......

6.68

38.87

2.88

2.88

0.00

3.07

3.07

0.00

(7) Adjusted supplies......... Steps 2-4...... =Sup * Dir adj........ =(2)*(5).......

1.50

3.68

1.70

1.70

0.00

0.60

0.60

0.00

(8) Adjusted equipment........ Steps 2-4...... =Eqp * Dir adj........ =(3)*(5).......

0.10

0.33

4.10

4.10

0.00

0.06

0.06

0.00

(9) Adjusted direct........... Steps 2-4...... ...................... =(6) + (7) +

8.27

42.87

8.68

8.68

0.00

3.73

3.73

0.00

(8).

(10) Conversion factor (CF)... Step 5......... PFS................... ...............

36.87

36.87

36.87

36.87

36.87

36.87

36.87

36.87

(11) Adj labor cost converted. Step 5......... =(Lab * Dir adj)/CF... =(6)/(10)......

0.18

1.05

0.08

0.08

0.00

0.08

0.08

0.00

(12) Adj supply cost converted Step 5......... =(Sup * Dir adj)/CF... =(7)/(10)......

0.04

0.10

0.05

0.05

0.00

0.02

0.02

0.00

(13) Adj equipment cost

Step 5......... =(Eqp * Dir adj)/CF... =(8)/(10)......

0.00

0.01

0.11

0.11

0.00

0.00

0.00

0.00 converted.

(14) Adj. direct cost

Step 5......... ...................... =(11) + (12) +

0.22

1.16

0.24

0.24

0.00

0.10

0.10

0.00 converted.

(13).

(15) Work RVUs................ Setup File..... PFS................... ...............

0.97

33.75

0.22

0.00

0.22

0.17

0.00

0.17

(16) Dir pct.................. Steps 6,7...... Surveys............... ...............

0.26

0.18

0.29

0.29

0.29

0.29

0.29

0.29

(17) Ind pct.................. Steps 6,7...... Surveys............... ...............

0.74

0.82

0.71

0.71

0.71

0.71

0.71

0.71

(18) Ind alloc formula (1st

Step 8......... See Step 8............ ...............

((14)/

((14)/

((14)/

((14)/

((14)/

((14)/

((14)/

((14)/ part).

(16))* (17) (16))* (17) (16))* (17) (16))* (17) (16))* (17) (16))* (17) (16))* (17) (16))* (17)

(19) Ind alloc (1st part)..... Step 8......... ...................... See (18).......

0.65

5.29

0.58

0.58

0.00

0.25

0.25

0.00

(20) Ind alloc formulas (2nd

Step 8......... See Step 8............ ...............

(15)

(15) (15) + (11)

(11)

(15) (15) + (11)

(11)

(15) part).

(21) Ind alloc (2nd part)..... Step 8......... ...................... See (20).......

0.97

33.75

0.30

0.08

0.22

0.25

0.08

0.17

(22) Indirect allocator (1st + Step 8......... ...................... =(19) + (21)...

1.62

39.04

0.88

0.66

0.22

0.50

0.33

0.17 2nd).

(23) Indirect adjustment (ind Steps 9-11..... See footnote**

0.37

0.37

0.37

0.37

0.37

0.37

0.37

0.37 adj).

(24) Adjusted indirect

Steps 9-11..... =Ind alloc * ind adj

0.60

14.47

0.33

0.24

0.08

0.19

0.12

0.06 allocator.

(25) Ind. practice cost index Steps 12-16.... See Steps 12-16

1.11

0.83

0.90

0.90

0.90

0.92

0.92

0.92

(IPCI).

(26) Adjusted indirect........ Step 17........ = Adj ind alloc * IPCI =(24) * (25)...

0.67

12.04

0.29

0.22

0.07

0.17

0.11

0.06

(27) MEI rebasing adjustment.. Step 18........ PFS................... ...............

1.18

1.18

1.18

1.18

1.18

1.18

1.18

1.18

(28) MPPR adjustments......... Step 18........ PFS................... ...............

1.01

1.01

1.01

1.01

1.01

1.01

1.01

1.01

(29) PE RVU................... Step 18........ =(Adj dir + Adj ind) * =((14) + (26))

1.06

15.68

0.63

0.54

0.09

0.32

0.25

0.07 budn * MEI adj * MPPR * budn * (27) adj.

* (28).

Note:

PE RVUs in Table 2, row 29, may not match the values in Addendum B due to rounding.

* The direct adj = [current pe rvus * CF * avg dir pct]/[sum direct inputs] = [Step 2]/[Step 3].

** The indirect adj = [current pe rvus * avg ind pct]/[sum of ind allocators] = [Step 9]/[Step 10].

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3. PE Revisions for CY 2011 a. Equipment Utilization Rate

As part of the PE methodology associated with the allocation of equipment costs for calculating PE RVUs, we currently use an equipment utilization rate assumption of 50 percent for most equipment, with the exception of expensive diagnostic imaging equipment (which is equipment priced at over $1 million, for example, computed tomography (CT) and magnetic resonance imaging (MRI) scanners), for which we adopted a 90 percent utilization rate assumption and provided for a 4-year transition beginning in CY 2010 (74 FR 61755). Therefore, CY 2010 is the first transitional payment year. Payment is made in CY 2010 for the diagnostic services listed in Table 3 (those that include expensive diagnostic imaging equipment in their PE inputs) of the CY 2011 PFS proposed rule (75 FR 40054) based on 25 percent of the new PE RVUs and 75 percent of the prior PE RVUs for those services.

Section 1848(b)(4)(C) of the Act (as added by section 3135(a) of the ACA) requires that with respect to fee schedules established for CY 2011 and subsequent years, in the methodology for determining PE RVUs for expensive diagnostic imaging equipment under the CY 2010 PFS final rule with comment period, the Secretary shall use a 75 percent assumption instead of the utilization rates otherwise established in that rule. The provision also requires that the reduced expenditures attributable to this change in the utilization rate for CY 2011 and subsequent years shall not be taken into account when applying the budget neutrality limitation on annual adjustments described in section 1848(c)(2)(B)(ii)(II) of the Act.

As a result, the 75 percent equipment utilization rate assumption will be applied to expensive diagnostic imaging equipment in a non- budget neutral manner for CY 2011, and the resulting changes to PE RVUs will not be transitioned over a period of years. We will apply the 75 percent utilization rate assumption in CY 2011 to all of the services to which we currently apply the transitional 90 percent equipment utilization rate assumption in CY 2010. These services are listed in a file on the CMS Web site that is posted under downloads for the CY 2010

PFS final rule with comment period at http://www.cms.gov/ physicianfeesched/downloads/CODES_SUBJECT_TO_90PCT_USAGE_RATE.zip.

These codes are also displayed in Table 3 at the end of this section.

Comment: Several commenters argued that the 75 percent utilization rate assumption should not be applied because of the imprecise data on which the policy was based. The commenters explained that based on an independent survey, actual equipment utilization rates are close to 50 percent. In addition, the commenters postulated that rural imaging centers would be adversely affected by the change due to lower equipment utilization rates than non-rural centers. The commenters requested that CMS base equipment utilization rate assumptions on actual utilization data rather than assumptions.

Several other commenters supported the implementation of the 75 percent utilization rate assumption, and MedPAC recommended that CMS explore increasing the equipment utilization rate assumption for diagnostic imaging equipment that costs less than $1 million. Finally, several commenters clarified that certain procedures were not subject to the provision, including nuclear cardiology services and therapeutic interventional radiology.

Response: Section 1848(b)(4)(C) of the Act (as added by section 3135(a) of the ACA) requires that with respect to fee schedules established for CY 2011 and subsequent years, in the methodology for determining PE RVUs for expensive diagnostic imaging equipment under the CY 2010 PFS final rule with comment period, the Secretary shall use a 75 percent assumption instead of the utilization rates otherwise established in that rule. We acknowledge that further data regarding actual equipment utilization in the physician's office setting may be informative, but our use of such data to set the equipment utilization rate assumption for expensive diagnostic imaging equipment at a value other than 75 percent would require a statutory change.

We did not propose to expand the 75 percent equipment utilization rate assumption for CY 2011 to other procedures beyond those that use

CT and MRI scanners as listed in Table 4 of the CY 2011 PFS proposed rule (75 FR 40055) and Table 3 at the end of this section. Any future changes in equipment utilization rate assumptions, including any expansion of the 75 percent equipment utilization rate assumption to additional expensive diagnostic imaging equipment, would be made through the annual PFS notice and comment rulemaking cycle.

Furthermore, any changes in equipment utilization rate assumptions for less costly diagnostic imaging equipment (less than $1 million) or for therapeutic imaging or other equipment would not be subject to the statutory provision that specifies a 75 percent assumption. We note that we are constantly reassessing our methodology for developing the

PE RVUs and would propose any changes to the equipment utilization rate assumptions for these types of equipment through the annual PFS rulemaking cycle if we determine such changes could be appropriate.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal without modification. The 75 percent equipment utilization rate assumption will be applied to expensive diagnostic imaging equipment in a non-budget neutral manner for CY 2011, and the changes to the PE RVUs will not be transitioned over a period of years. We will apply the 75 percent utilization rate assumption in CY 2011 to all of the services to which we currently apply the transitional 90 percent utilization rate assumption in CY 2010. The CY 2011 codes are displayed in Table 3 at the end of this section that lists all the codes to which the 75 percent equipment utilization rate assumption applies for CY 2011. In addition, the codes subject to this policy are posted under the downloads for the CY 2011

PFS final rule with comment period on the CMS Web site at http:// www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.

Additionally, for CY 2011, we proposed to expand the list of services to which the higher equipment utilization rate assumption applies to include all other diagnostic imaging services that utilize similar expensive CT and MRI scanners. The additional 24 CPT codes

(listed in Table 4 of the CY 2011 PFS proposed rule (75 FR 40055)) to which we proposed to apply the 75 percent equipment utilization rate assumption also have expensive diagnostic imaging equipment (priced at over $1 million) included in their PE inputs. These services are predominantly diagnostic computed tomographic angiography (CTA) and magnetic resonance angiography (MRA) procedures that include similar expensive CT and MRI scanners in their direct PE inputs. We indicated in the CY 2010 PFS final rule with comment period (74 FR 61754) that we were persuaded by PPIS data on angiography that the extrapolation of

MRI and CT data (and their higher equipment utilization rate) may be inappropriate. However, this reference was limited to those procedures that include an angiography room in the direct PE inputs, such as CPT code 93510 (Left heart catheterization, retrograde, from

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the brachial artery, axillary artery or femoral artery; percutaneous).

In contrast, CTA and MRA procedures include a CT room or MRI room, respectively, in the direct PE inputs, and the PPIS data confirm that a higher assumed utilization rate than 50 percent would be appropriate.

The PPIS angiography room data that reflected a 56 percent equipment utilization rate would not specifically apply to CTA and MRA procedures. Thus, on further review, we believe it is appropriate to include CTA and MRA procedures in the list of procedures for which we assume a 75 percent equipment utilization rate, and we proposed to do so beginning in CY 2011.

Consistent with section 1848(c)(2)(B)(v)(III) of the Act (as amended by section 3135 of the ACA), the reduced expenditures attributable to this change in the utilization rate assumption applicable to CY 2011 shall not be taken into account when applying the budget neutrality limitation on annual adjustments described in section 1848(c)(2)(B)(ii)(II) of the Act.

As provided in the CY 2010 PFS final rule with comment period (74

FR 61751), CY 2011 is the second year of the 4-year transition to the

PE RVUs calculated using the PPIS data. We note that the reductions in the PE RVUs for expensive diagnostic imaging equipment attributable to the change to an equipment utilization rate assumption of 75 percent for CY 2011 are not subject to the transition.

Comment: Several commenters urged CMS not to finalize the proposed expansion of the list of procedures to which the 75 percent equipment utilization rate assumption would apply, pending further evaluation of equipment utilization data. While noting the statutory requirement of section 1848(b)(4)(C) of the Act (as added by section 3135(a) of the

ACA), the commenters believe that CMS is not required to add additional services to the policy for CY 2011. Other commenters, including MedPAC, supported the proposed increase in the equipment utilization rate assumption from 50 percent to 75 percent for the 24 additional services that use diagnostic imaging equipment priced at over $1 million.

Response: No commenters presented a rationale for not including the proposed 24 additional services to the 75 percent equipment utilization rate assumption, when the proposed additions use the same diagnostic CT or MRI imaging equipment as the current codes to which the policy applies. We note that the 90 percent equipment utilization rate assumption that we finalized in the CY 2010 PFS final rule with comment period (74 FR 61755) applies to CT and MRI scanners when used as diagnostic imaging equipment, one of these two pieces of equipment is listed as a direct PE input for the proposed MRA and CTA services, and no commenters recommended that we remove the CT or MRI equipment inputs from the additional codes. Therefore, we continue to believe that it is appropriate to apply the 75 percent equipment utilization rate assumption beginning in CY 2011 to MRA and CTA procedures, as we proposed.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to include CTA and MRA procedures in the 75 percent equipment utilization rate assumption policy because they include expensive CT and MRI scanners that cost more than $1 million as direct PE inputs for these diagnostic imaging procedures. We are modifying our proposal, however, and will not include CPT code 77079 (Computed tomography, bone mineral density study, 1 or more sites; appendicular skeleton (peripheral) (e.g., radius, wrist, heel)) because, upon further analysis for this final rule with comment period, we noted that the procedure does not include a CT room in its direct PE inputs.

For CY 2011, we are also adding to the 75 percent equipment utilization rate assumption policy three new CY 2011 CPT codes for diagnostic imaging procedures that include a CT room in their direct PE inputs, specifically CPT codes 74176 (Computed tomography, abdomen and pelvis; without contrast material); 74177 (Computed tomography, abdomen and pelvis; with contrast material); and 74178 (Computed tomography, abdomen and pelvis; without contrast material in one or both body regions, followed by with contrast material(s) and further sections in one or both body regions). As new codes for CY 2011, the work, PE, and malpractice RVUs for these CPT codes that are displayed in Addendum C to this final rule with comment period are interim final values that are open to comment. Similarly, the assignment of the 75 percent equipment utilization rate assumption to these CPT codes, which contributes to the development of their PE RVUs, is being made on an interim final basis. We refer readers to section V.C. of this final rule with comment period for further discussion of the establishment of interim final RVUs for CY 2011 new and revised codes.

As a result of the CY 2011 changes, the 75 percent equipment utilization rate assumption will be applied to all diagnostic imaging procedures with nationally established rates under the PFS in CY 2011 and which include a CT or MRI scanner in their direct PE, consistent with the statutory requirement of section 1848(b)(4)(C) of the Act (as added by section 3135(a) of the ACA).

Consistent with section 1848(c)(2)(B)(v)(III) of the Act (as amended by section 3135 of the ACA), the reduced expenditures attributable to the change in the utilization rate assumption applicable to CY 2011 (from the CY 2011 transitional rate for the 90 percent equipment utilization rate assumption for expensive diagnostic imaging equipment costing over $1 million (CT and MRI scanners) that would have applied under the final policy established in the CY 2010

PFS final rule with comment period to the 75 percent rate required under section 1848(b)(4)(C) of the Act) shall not be taken into account when applying the budget neutrality limitation on annual adjustments described in section 1848(c)(2)(B)(ii)(II) of the Act.

Table 3 below lists the codes to which the 75 percent equipment utilization rate assumption applies for CY 2011. The codes subject to this policy are also posted under the downloads for the CY 2011 PFS final rule with comment period on the CMS Web site at http:// www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.

Table 3--Final CPT Codes Subject to 75 Percent Equipment Utilization Rate Assumption in CY 2011

CPT code

Short descriptor

70336........................................... Mri, temporomandibular joint(s). 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.

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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. 70496........................................... Ct angiography, head. 70498........................................... Ct angiography, 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........................................... Mri angiography head w/o dye. 70545........................................... Mri angiography head w/dye. 70546........................................... Mri angiography head w/o & w/dye. 70547........................................... Mri angiography neck w/o dye. 70548........................................... Mri angiography neck w/dye. 70549........................................... Mri angiography neck w/o & w/dye. 70551........................................... Mri brain w/o dye. 70552........................................... Mri brain w/dye. 70553........................................... Mri brain w/o & w/dye. 70554........................................... Fmri brain by tech. 71250........................................... Ct thorax w/o dye. 71260........................................... Ct thorax w/dye. 71270........................................... Ct thorax w/o & w/dye. 71275........................................... Ct angiography, chest. 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. 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. 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. 72159........................................... Mri angio spine w/o & w/dye. 72191........................................... Ct angiography, pelv w/o & w/dye. 72192........................................... Ct pelvis w/o dye. 72193........................................... Ct pelvis w/dye. 72194........................................... Ct pelvis w/o & w/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. 73200........................................... Ct upper extremity w/o dye. 73201........................................... Ct upper extremity w/dye. 73202........................................... Ct upper extremity w/o & w/dye. 73206........................................... Ct angio upper extr w/o & w/dye. 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. 73225........................................... Mri angio upr extr w/o & w/dye. 73700........................................... Ct lower extremity w/o dye. 73701........................................... Ct lower extremity w/dye.

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73702........................................... Ct lower extremity w/o & w/dye. 73706........................................... Ct angio lower extr w/o & w/dye. 73718........................................... Mri lower extremity w/o dye. 73719........................................... Mri lower extremity w/dye. 73720........................................... Mri lower extr 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........................................... Mri angio lower extr w or w/o dye. 74150........................................... Ct abdomen w/o dye. 74160........................................... Ct abdomen w/dye. 74170........................................... Ct abdomen w/o & w/dye. 74175........................................... Ct angio abdom w/o & w/dye. 74176........................................... Ct abd & pelvis w/o contrast. 74177........................................... Ct abdomen & pelvis w/contrast. 74178........................................... Ct abd & pelv 1+ section/regns. 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. 74261........................................... Ct colonography, w/o dye. 74262........................................... Ct colonography, w/dye. 75557........................................... Cardiac mri for morph. 75559........................................... Cardiac mri w/stress img. 75561........................................... Cardiac mri for morph w/dye. 75563........................................... Cardiac mri w/stress img & dye. 75565........................................... Card mri vel flw map add-on. 75571........................................... Ct hrt w/o dye w/ca test. 75572........................................... Ct hrt w/3d image. 75573........................................... Ct hrt w/3d image, congen. 75574........................................... Ct angio hrt w/3d image. 75635........................................... Ct angio abdominal arteries. 76380........................................... CAT scan follow up study. 77058........................................... Mri, one breast. 77059........................................... Mri, both breasts. 77078........................................... Ct bone density, axial. 77084........................................... Magnetic image, bone marrow.

b. HCPCS Code-Specific PE Issues

In this section, we discuss other specific CY 2011 proposals and changes related to direct PE inputs. The changes that follow were proposed in the CY 2011 PFS proposed rule and included in the proposed

CY 2011 direct PE database, which is available on the CMS Web site under the downloads for the CY 2011 PFS proposed rule at http:// www.cms.gov/PhysicianFeeSched/. The final direct PE database for CY 2011 is available under the downloads for the CY 2011 PFS final rule with comment period at the same location.

(1) Biohazard Bags

We identified 22 codes for which the supply item ``biohazard bag''

(SM004) is currently considered a direct PE input. The item is already properly accounted for in the indirect PE because it is not attributable to an individual patient service. Therefore, we proposed to remove the biohazard bag from the CY 2011 direct PE database and noted that the changes in direct PE inputs for the associated services were reflected in the proposed CY 2011 direct PE database.

We did not receive any public comments on our proposal to remove biohazard bags as a supply input. Therefore, we are finalizing our CY 2011 proposal to remove the supply item as a direct PE input for the associated services. This change is reflected in the final CY 2011 direct PE database.

(2) PE Inputs for Professional Component (PC) Only and Technical

Component (TC) Only Codes Summing to Global Only Codes

In the case of certain diagnostic tests, different but related CPT codes are used to describe global, professional, and technical components of a service. These codes are unlike the majority of other diagnostic test CPT codes where modifiers may be used in billing a single CPT code in order to differentiate professional and technical components. When different but related CPT codes are used to report the components of these services, the different CPT codes are referred to as ``global only,'' ``professional component (PC) only,'' and

``technical component (TC) only'' codes. Medicare payment systems are programmed to ensure that the PE RVUs for global only codes equal the sum of the PE RVUs for the PC and TC only codes. However, it came to our attention that the direct PE inputs for certain global only codes do not reflect the appropriate summation of their related TC only and

PC only component code PE inputs as they appear in the direct PE database. While the PFS payment calculations have been programmed to apply the correct PE RVUs for the global only code based on a summation of component code PE RVUs, the direct PE database has reflected incorrect inputs that are overridden by the payment system. Therefore, we proposed to correct the direct PE inputs for the global only codes so that the inputs reflect the appropriate summing of the PE inputs for the associated PC only and TC only codes. The proposed CY 2011 direct

PE database included PE

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corrections to the 14 CPT codes listed in Table 4.

Table 4--Groups of Related CPT Codes with Proposed Changes to PE Inputs so that Inputs for Professional

Component (PC) Only and Technical Component (TC) Only Codes Sum to Global Only Codes

CPT Code

Long descriptor

93224.................................. Wearable electrocardiographic rhythm derived monitoring for 24 hours by continuous original waveform recording and storage, with visual superimposition scanning; includes recording, scanning analysis with report, physician review and interpretation. 93225.................................. Wearable electrocardiographic rhythm derived monitoring for 24 hours by continuous original waveform recording and storage, with visual superimposition scanning; recording (includes connection, recording, disconnection). 93226.................................. Wearable electrocardiographic rhythm derived monitoring for 24 hours by continuous original waveform recording and storage, with visual superimposition scanning; scanning analysis with report. 93230.................................. Wearable electrocardiographic rhythm derived monitoring for 24 hours by continuous original waveform recording and storage without superimposition scanning utilizing a device capable of producing a full miniaturized printout; including recording, microprocessor-based analysis with report, physician review and interpretation. 93231.................................. Wearable electrocardiographic rhythm derived monitoring for 24 hours by continuous original waveform recording and storage without superimposition scanning utilizing a device capable of producing a full miniaturized printout; recording (includes connection, recording, and disconnection). 93232.................................. Wearable electrocardiographic rhythm derived monitoring for 24 hours by continuous original waveform recording and storage without superimposition scanning utilizing a device capable of producing a full miniaturized printout; microprocessor-based analysis with report. 93268.................................. Wearable patient activated electrocardiographic rhythm derived event recording with presymptom memory loop, 24-hour attended monitoring, per 30 day period of time; includes transmission, physician review and interpretation. 93270.................................. Wearable patient activated electrocardiographic rhythm derived event recording with presymptom memory loop, 24-hour attended monitoring, per 30 day period of time; recording (includes connection, recording, and disconnection). 93271.................................. Wearable patient activated electrocardiographic rhythm derived event recording with presymptom memory loop, 24-hour attended monitoring, per 30 day period of time; monitoring, receipt of transmissions, and analysis. 93720.................................. Plethysmography, total body; with interpretation and report. 93721.................................. Plethysmography, total body; tracing only, without interpretation and report. 93784.................................. Ambulatory blood pressure monitoring, utilizing a system such as magnetic tape and/or computer disk, for 24 hours or longer; including recording, scanning analysis, interpretation and report. 93786.................................. Ambulatory blood pressure monitoring, utilizing a system such as magnetic tape and/or computer disk, for 24 hours or longer; recording only. 93788.................................. Ambulatory blood pressure monitoring, utilizing a system such as magnetic tape and/or computer disk, for 24 hours or longer; scanning analysis with report.

Comment: A number of commenters expressed support for CMS' proposal to ensure that the direct PE inputs for certain global only codes reflect the appropriate summation of their related TC only and PC only component code PE inputs as they appear in the direct PE database. One commenter questioned why the prior clinical labor time for the global only codes in the PE database did not match the direct PE inputs that must have been used in CY 2010 to generate the PE RVUs, given that the

PE RVUs for the global only codes were the sum of the PE RVUs for the component codes.

Response: We appreciate the commenters' support for the proposal, and we are finalizing our correction of the direct PE inputs for the global only codes so that the inputs reflect the appropriate summing of the PE inputs for the associated PC only and TC only codes. In response to the commenter who questioned why prior clinical labor time for the global only codes in the PE database did not match the direct PE inputs that must have been used to generate the PE RVUs for payment, we note that Medicare payment systems are programmed to ensure that the PE RVUs for global only codes equal the sum of the PE RVUs for the PC and TC only codes. Therefore, rather than relying upon the direct PE inputs for the global only codes to determine the PE RVUs, which would have not resulted in values that equaled the summation of the component code

PE RUVs, our PFS system was programmed so that the PE RVUs for the global only codes were set as the sum of the PE RVUS for the component codes. We expect the corrections to the inputs as incorporated in the direct PE database to alleviate any confusion caused by the prior inclusion of inputs associated with the global only codes that were not actually used to generate the PE RVUs.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to correct the direct PE inputs for the global only codes so that the inputs reflect the appropriate summing of the PE inputs for the associated PC only and TC only codes. The final

CY 2011 direct PE database includes PE corrections to the 14 CPT codes listed in Table 4.

(3) Equipment Time Inputs for Certain Diagnostic Tests

In the CY 2011 PFS proposed rule (75 FR 40056), we stated that we had recently identified equipment time PE inputs that we believed were incorrect for four CPT codes associated with certain diagnostic tests

(each is displayed in Table 4):

CPT code 93225 is the TC only code that includes the connection, recording, and disconnection of the holter monitor (CMS

Equipment Code EQ127) used in 24-hour continuous electrocardiographic rhythm derived monitoring. The CY 2010 equipment time input for the holter monitor is 42 minutes, which parallels the intra-service clinical labor input time for the CPT code. However, we believed that the equipment time should reflect the 24 hours of continuous monitoring in which the device is used exclusively by the patient. Therefore, we proposed to change the monitor equipment time for CPT code 93225 to 1440 minutes, the number of minutes in 24 hours.

CPT code 93226 is the TC only code that includes the scanning analysis with report. We believed that the number of minutes the monitor (CMS Equipment

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Code EQ127) is used in this service should parallel the intra-service clinical labor input time of 52 minutes during which the monitor is in use, instead of the CY 2010 equipment time of 1440 minutes, because this code does not represent 24 hours of device use. Therefore, we proposed to change the monitor equipment time for CPT code 93226 to 52 minutes.

CPT 93224 is the global only code that includes the connection, recording, and disconnection of the monitor (CMS Equipment

Code EQ127) and the scanning analysis with report, as well as the physician review and interpretation. We proposed direct PE inputs for

CPT code 93224 to include 1492 total minutes of monitor time (which represents the total monitor time we proposed for CPT codes 93225 and 93226).

CPT code 93788 is the TC only code that describes the scanning analysis with report for ambulatory blood pressure monitoring.

We believed that the equipment time input for the blood pressure monitor should parallel the 10 minutes of clinical labor input for the

CPT code since that is the time during which the monitor is in use. In

CY 2010, the equipment time input for the monitor is 1440 minutes, which is appropriate only for CPT code 93786, the code that describes the 24 hours of ambulatory blood pressure monitoring recording.

Therefore, we proposed to correct the equipment time input for the ambulatory blood pressure monitor in CPT code 93788 to 10 minutes.

CPT code 93784 is the global only code that includes the recording, the scanning analysis with report, and the physician interpretation and report for ambulatory blood pressure monitoring. We proposed to establish the direct PE inputs for CPT code 93784 to include 1450 total minutes of time for the ambulatory blood pressure monitor (which represents the proposed total amount of monitor time included in CPT codes 93786 and 93788).

The proposed CY 2011 direct PE database reflected these changes.

Comment: Several commenters pointed out that the prior assignment of the 1440 minutes of holter monitor equipment time to CPT code 93226 stemmed from discussions between CMS and provider groups that resulted in PE policies initially implemented in CY 2007 (72 FR 18910). The commenters recommended that CMS retain the 1440 minutes of holter monitor equipment for CPT code 93326, consistent with current policy, rather than reassign the 1440 minutes of holter monitor equipment time as proposed to CPT code 93226.

Response: We agree with the commenters that it would be most appropriate to maintain our established policy for the equipment times associated with CPT codes 93225 and 93226, based upon further description of the direct practice expenses experienced by the current providers that typically furnish these services to Medicare beneficiaries. Therefore, we are not adopting the equipment time changes that we proposed for CPT codes 93225 and 93226. However, we are revising the direct PE inputs for CPT code 93224, a global only code, to include the total equipment time for the holter monitor that is incorporated in component codes CPT codes 93225 and 93226, as discussed in section II.A.3.b.(2). of this final rule with comment period. The PE inputs for CPT code 93224 did not previously correctly reflect the summation of the direct PE inputs for the component codes.

Comment: One commenter supported the proposed changes to the direct

PE inputs for CPT codes 93784 through 93788. However, the commenter was confused about why 1440 minutes of equipment time were assigned to CPT code 93786, which the commenter stated is used only for the technical component of scanning the data rather than recording the data.

Response: As we stated in our proposal, we believe that the direct

PE inputs for CPT code 93786 are currently correct because the code describes the recording of the data. We believe that the commenter may have inadvertently referred to CPT code 93786 instead of CPT code 93788, which is the technical component code that describes the scanning rather than the recording of the data. We proposed to remove the 1440 minutes associated with the scanning analysis from the inputs for CPT code 93788, not CPT code 93786.

After consideration of the public comments we received, we are finalizing our CY 2011 proposals to change the ambulatory blood pressure monitor equipment times included as direct PE inputs for CPT codes 938784 and 93788, while maintaining the current equipment time direct PE input for CPT code 93786. However, we are not finalizing our proposals to change the holter monitor equipment times included as direct PE inputs for CPT codes 93225 and 93226, but instead will maintain the inputs for CPT codes 93225 and 93226 as they were for CY 2010. We are also revising the direct PE inputs for CPT code 93224 to include the total equipment time for the holter monitor that is incorporated in CPT codes 93225 and 93226. The equipment times in the final CY 2011 direct PE database reflect these decisions.

(4) Cobalt-57 Flood Source

Stakeholders requested that CMS reevaluate the useful life of the

Cobalt-57 flood source (CMS Equipment Code ER001), given their estimate of approximately 271 days for the source's half-life. The CY 2010 useful life input in the CY 2010 direct PE database for the Cobalt-57 flood source is 5 years. Using publicly available catalogs, we found that the Cobalt-57 flood source is marketed with a useful life of 2 years. Therefore, we proposed to change the useful life input from the current 5 years to 2 years. The Cobalt-57 flood source was included with the revised useful life input for 96 HCPCS codes in the proposed

CY 2011 direct PE database.

Comment: One commenter supported the proposal to change the useful life input from 5 years to 2 years for the Cobalt-57 flood source.

Response: We appreciate the commenter's support for our proposal.

After consideration of the public comment we received, we are finalizing our CY 2011 proposal to change the useful life input in the direct PE database for the Cobalt-57 flood source from 5 years to 2 years. This change is included in the final CY 2011 direct PE database.

(5) Venom Immunotherapy

One stakeholder provided updated price information for the venoms used for the five venom immunology CPT codes, specifically 95145

(Professional services for the supervision of preparation and provision of antigens for allergen immunotherapy (specify number of doses); single stinging insect venom); 95146 (Professional services for the supervision of preparation and provision of antigens for allergen immunotherapy (specify number of doses); 2 single stinging insect venoms); 95147 (Professional services for the supervision of preparation and provision of antigens for allergen immunotherapy

(specify number of doses); 3 single stinging insect venoms); 95148

(Professional services for the supervision of preparation and provision of antigens for allergen immunotherapy (specify number of doses); 4 single stinging insect venoms); 95149 (Professional services for the supervision of preparation and provision of antigens for allergen immunotherapy (specify number of doses); 5 single stinging insect venoms).

In the CY 2004 PFS final rule with comment period (68 FR 63206), we adopted a pricing methodology that utilizes the average price of a 1 milliliter

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dose of venom and adds that price per dose as direct PE inputs for CPT codes 95145 and 95146. When a patient requires three stinging insect venoms, as for CPT code 95147, the price input for a 3-vespid mix is used. This 3-vespid mix price is also used to value CPT codes 95148

(four venoms) and 96149 (five venoms), with the single venom price added once to CPT code 97148 and twice to CPT code 97149.

As requested by the stakeholder, we updated the price inputs for the 1-milliliter dose of venom to $16.67 and for the 3-vespid mix to

$30.22 in the proposed CY 2011 direct PE database.

Comment: One commenter supported the proposal to update the price inputs for the venoms used for venom immunotherapy.

Response: We appreciate the information provided by stakeholders regarding the price inputs for venom immunotherapy supplies, consistent with our interest in utilizing accurate market prices as the direct PE inputs for these items.

After consideration of the public comment we received, we are finalizing our CY 2011 proposals to update the price inputs for the 1- milliliter dose of venom to $16.67 and for the 3-vespid mix to $30.22 in the CY 2011 direct PE database. These changes are included in the final CY 2011 direct PE database.

(6) Equipment Redundancy

Stakeholders recently brought to our attention that the ECG, 3- channel (with SpO2, NIBP, temp, resp) (CMS Equipment Code EQ011) incorporates all of the functionality of the pulse oximeter with printer (CMS Equipment Code EQ211). Therefore, in HCPCS codes where CMS

Equipment Code EQ011 is present, CMS Equipment Code EQ211 is redundant.

On this basis, we proposed to remove the pulse oximeter with printer

(CMS Equipment Code EQ211) as an input for the 118 codes that also contain the ECG, 3-channel (with SpO2, NIBP, temp, resp) (CMS Equipment

Code EQ011). We made these adjustments in the proposed CY 2011 direct

PE database.

We received no public comments regarding this proposal to address the pulse oximeter equipment redundancy. Therefore we are finalizing our CY 2011 proposal without modification. We have made these adjustments in the final CY 2011 direct PE database.

(7) Equipment Duplication

We recently identified a number of CPT codes with duplicate equipment inputs in the PE database. We proposed to remove the duplicate equipment items and modified the proposed CY 2011 direct PE database accordingly as detailed in Table 5.

TABLE 5--CPT Codes With Proposed Removal of Duplicate Equipment Items in the Direct PE Database

CMS equipment code

CPT Code

for duplicate

Description of equipment equipment

19302.............................. P-mastectomy w/1n removal. EF014

light, surgical.

ED005

camera, digital system, 12 megapixel (medical grade). 19361.............................. Breast reconstr w/lat flap EF031

table, power.

EQ168

light, exam. 44157.............................. Colectomy w/ileoanal anast EF031

table, power.

EQ168

light, exam. 44158.............................. Colectomy w/neo-rectum

EF031

table, power. pouch.

EQ168

light, exam. 56440.............................. Surgery for vulva lesion.. EF031

table, power.

EQ170

light, fiberoptic headlight w-source. 57296.............................. Revise vag graft, open abd EF031

table, power.

EQ170

light, fiberoptic headlight w-source. 58263.............................. Vag hyst w/t/o & vag

EF031

table, power. repair. 59610.............................. Vbac delivery............. EF031

table, power. 67228.............................. Treatment of retinal

EL005

lane, exam (oph). lesion.

EQ230

slit lamp (Haag-Streit), dedicated to laser use. 76813.............................. Ob us nuchal meas, 1 gest. ED024

film processor, dry, laser. 77371.............................. Srs, multisource.......... EQ211

pulse oximeter w-printer.

ED018

computer workstation, cardiac cath monitoring.

EL011

room, angiography. 93540.............................. Injection, cardiac cath... EQ011

ECG, 3-channel (with SpO2, NIBP, temp, resp).

EQ032

IV infusion pump.

EQ088

contrast media warmer.

EQ211

pulse oximeter w-printer. 93542.............................. Injection for heart x-rays ED018

computer workstation, cardiac cath monitoring.

EL011

room, angiography.

EQ011

ECG, 3-channel (with SpO2, NIBP, temp, resp).

EQ032

IV infusion pump.

EQ088

contrast media warmer.

EQ211

pulse oximeter w-printer.

Comment: One commenter pointed out that the equipment duplication issue for CPT codes 93540 and 93542 is irrelevant because these codes would no longer be reported for Medicare in CY 2011. The commenter stated that the codes are being replaced by a new set of diagnostic cardiac catheterization CPT codes.

Response: We agree with the commenter's assessment that our proposal for these codes is not relevant for CY 2011 because these codes are being deleted.

Comment: One commenter reviewed the duplicate inputs and offered a correction regarding CPT code 19302 (Mastectomy, partial (eg, lumpectomy,

Page 73196

tylectomy, quadrantectomy, segmentectomy); with axillary lymphadenectomy). The commenter pointed out that one of the line-items erroneously duplicated (light, surgical, EF014) for that code should have originally been applied to CPT code 19304 (Mastectomy, subcutaneous).

Response: We appreciate the commenter bringing this error to our attention and we agree with the commenter's assessment.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to remove the duplicate equipment items from the CY 2011 direct PE database as detailed in Table 5, with modification to transfer the duplicate surgical light input from CPT code 19302 to CPT code 19304. These changes are reflected in the final

CY 2011 direct PE database.

(8) Establishing Overall Direct PE Supply Price Inputs Based on Unit

Prices and Quantities

In the CY 2011 PFS proposed rule (75 FR 40057), we stated that we had identified minor errors in total price inputs for a number of supply items due to mathematical mistakes in multiplying the item unit price and the quantity used in particular CPT codes for the associated services. We proposed to modify the direct PE database to appropriately include the overall supply price input for a supply item as the product of the unit price and the quantity of the supply item used in the CPT code. Most of the overall supply price input changes were small, and we adjusted the proposed CY 2011 direct PE database accordingly. The CPT and Level II HCPCS codes and associated supplies for nonfacility and facility settings that were subject to these corrections are displayed in Tables 6 and 7, respectively.

BILLING CODE 4120-01-P

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GRAPHIC

TIFF OMITTED TR29NO10.233

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GRAPHIC

TIFF OMITTED TR29NO10.234

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GRAPHIC

TIFF OMITTED TR29NO10.235

Page 73200

GRAPHIC

TIFF OMITTED TR29NO10.236

Page 73201

GRAPHIC

TIFF OMITTED TR29NO10.237

Page 73202

GRAPHIC

TIFF OMITTED TR29NO10.238

Page 73203

GRAPHIC

TIFF OMITTED TR29NO10.239

BILLING CODE 4120-01-C

Comment: Several commenters agreed that the overall supply price inputs should be equal to the product of the supply price and the quantity associated with each code. Some commenters pointed out that for many of the supply items displayed in Tables 6 and 7, the overall supply prices remained incorrect in the proposed CY 2011 direct PE database. The commenters speculated that an underlying programming error may have led to incorrect calculations.

Response: In constructing the proposed CY 2011 direct PE database posted on the CMS web site, we inadvertently retained a display column of data that reflected our previous calculation error, despite our correct calculation of the values for PFS ratesetting purposes. We have corrected the underlying process error that led to the incorrect display. We have modified the direct PE database for the CY 2011 PFS final rule with comment period to appropriately display the overall supply price input for a supply item as the product of the unit price and the quantity of the supply item used in the CPT code.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to modify the direct PE database to include the overall supply price input for a supply item as the product of the unit price and the quantity of the supply item used in the CPT code. We have modified the display column within the publicly available database to reflect the proper calculation. These changes are reflected in the final CY 2011 direct PE database. c. AMA RUC Recommendations in CY 2010 for Changes to Direct PE Inputs

In a March 2010 letter, the AMA RUC made specific PE recommendations that we considered in the CY 2011 PFS proposed rule (75

FR 40062 through 40063). The proposed changes that follow were included in the proposed CY 2011 direct PE database, which is available on the

CMS Web site under the downloads for the CY 2011 PFS proposed rule at http://www.cms.gov/PhysicianFeeSched/. The final direct PE database for

CY 2011 is available under the downloads for the CY 2011 PFS final rule with comment period at the same location.

(1) Electrogastrography and Esophageal Function Test

We proposed to accept the AMA RUC recommendations for the CY 2011

PE inputs for the following CPT codes: 91132 (Electrogastrography, diagnostic, transcutaneous); 91133 (Electrogastrography, diagnostic, transcutaneous; with provocative testing); 91038 (Esophageal function test, gastroesophageal reflux test with nasal catheter intraluminal impedance electrode(s) placement, recording, analysis and interpretation; prolonged (greater than 1 hour, up to 24 hours)). For

CPT code 91038, we assumed a useful life of 5 years for the equipment item ``ZEPHR impedance/pH reflux monitoring system with data recorder, software, monitor, workstation and cart,'' based on its entry in the

AHA's publication, ``Estimated Useful Lives of Depreciable Hospital

Assets,'' which we use as a standard reference. The proposed CY 2011 direct PE database was changed accordingly.

(2) 64-Slice CT Scanner and Software

The AMA RUC submitted an updated recommendation regarding the correct pricing of the 64-slice CT scanner and its accompanying software. Based on the documentation accompanying the recommendation, we accepted this recommendation and proposed to update the price input for the 64-slice scanner and software. This affected the following four

CPT codes that use either the scanner, the software, or both: 75571

(computed tomography, heart, without contrast material, with quantitative evaluation of coronary calcium); 75572 (Computed tomography, heart, with contrast material, for evaluation of cardiac structure and morphology (including 3D image postprocessing, assessment of cardiac function, and evaluation of venous structures, if performed)); 75573 (Computed tomography, heart, with contrast material, for evaluation of cardiac structure and morphology in the setting of congenital heart disease (including 3D image postprocessing, assessment of LV cardiac function, RV structure and function and evaluation of venous structures, if performed)); and 75574 (Computed tomographic angiography, heart, coronary arteries and bypass grafts (when present), with contrast material, including 3D image post processing (including evaluation of cardiac structure and morphology, assessment of cardiac function, and evaluation of venous structure, if performed)). The proposed CY 2011 direct PE database was modified accordingly.

(3) Breath Hydrogen Test

The AMA RUC provided recommendations regarding the PE inputs for

CPT code 91065 (breath

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hydrogen test (e.g., for detection of lactase deficiency, fructose intolerance, bacterial overgrowth, or oro-cecal gastrointestinal transit). We accepted the recommendations with two modifications. We folded the two pieces of equipment listed as ``quinGas Table-Top

Support Stand, 3 Tank'' and ``Drying Tube, Patient Sample'' into the

``BreathTrackerDigital SC Instrument'' and summed their inputs into one equipment line-item, since these equipment items are used together specifically for the service in question. We increased the useful life input of the ``BreathTrackerDigital SC Instrument'' from 7 to 8 years based on our use of the American Hospital Association (AHA)'s publication entitled, ``Estimated Useful Lives of Depreciable Hospital

Assets'' as a standard reference. Additionally, because the AMA RUC did not include equipment times in their recommendations for this CPT code, we used 53 minutes as the total time for all equipment items based on the total intra-service period for the clinical labor, consistent with our general policy for establishing equipment times. These modifications were reflected in the proposed CY 2011 direct PE database.

(4) Radiographic Fluoroscopic Room

A recent AMA RUC review of services that include the radiographic fluoroscopic room (CMS Equipment Code EL014) as a direct PE input revealed that the use of the item is no longer typical for certain services in which it is specified within the current direct cost inputs. The AMA RUC recommended to CMS that the radiographic fluoroscopic room be deleted from CPT codes 64420 (Injection, anesthetic agent; intercostal nerve, single); 64421 (Injection, anesthetic agent; intercostal nerves, multiple, regional block); and 64620 (Destruction by neurolytic agent, intercostal nerve). We accepted these recommendations and, therefore, these changes were included in the proposed CY 2011 direct PE database.

Comment: Several commenters generally expressed support for our acceptance of these AMA RUC-recommended direct PE inputs with the stated refinements. The AMA RUC expressed appreciation for CMS' acceptance of the committee's recommendations.

Response: We appreciate the assistance of stakeholders in our efforts to utilize the most accurate direct PE inputs for PFS services.

We also appreciate the judicious work of the AMA RUC in providing these recommendations in time for us to respond to them and include our proposals in the CY 2011 proposed rule.

Comment: One commenter expressed concern about these recommendations on the basis of the flawed professional composition of the AMA RUC. The commenter stated that without fair representation by all specialties, including nonphysician practitioners who may bill Part

B directly under the PFS, CMS' reliance on the AMA RUC as representing the professional views and knowledge of all healthcare specialties for purposes of establishing the direct PE inputs for services paid under the PFS is deeply flawed.

Response: As we have stated previously (69 FR 66243), because the

AMA RUC is an independent committee, we are not in a position to set the requirements for AMA RUC membership. Concerned stakeholders should communicate directly with the AMA RUC regarding its professional composition. We note that we alone are responsible for all decisions about the direct PE inputs for purposes of PFS payment so, while the

AMA RUC provides us with recommendations for new and revised CPT codes in the context of what we believe is its broad expertise, we ultimately remain responsible for determining the direct PE inputs for all new or revised services.

After consideration of the public comments we received, we are finalizing our CY 2011 proposals to accept the AMA RUC recommendations, with certain changes described above, regarding the direct PE inputs for electrogastrography and esophageal function tests, the 64-slice CT scanner and software, the breath hydrogen test, and certain procedures that no longer require a radiographic fluoroscopic room. These decisions are reflected in the final CY 2011 direct PE database.

(5) Cystometrogram

The AMA RUC recently identified a rank order anomaly regarding CPT code 51726 (Complex cystometrogram (i.e., calibrated electronic equipment)). Currently, this procedure has higher PE RVUs, despite being less resource-intensive than the three CPT codes for which it serves as the base: 51727 (Complex cystometrogram (i.e., calibrated electronic equipment); with urethral pressure profile studies (i.e., urethral closure pressure profile), any technique); 51728 (Complex cystometrogram (i.e., calibrated electronic equipment); with voiding pressure studies (that is, bladder voiding pressure), any technique); and 51729 (Complex cystometrogram (i.e., calibrated electronic equipment); with voiding pressure studies (that is, bladder voiding pressure) and urethral pressure profile studies (that is, urethral closure pressure profile), any technique).

Since the AMA RUC's general view is that CPT codes with a 0-day global period do not have pre-service time associated with the code, the AMA RUC recommended removing the nonfacility pre-service clinical labor time from the PE inputs for 51726. Additionally, the AMA RUC recommended that the nonfacility clinical intra-service staff time for

CPT code 51276 be reduced from the 118 minutes of intra-service clinical labor time currently assigned to the code to 85 minutes of intra-service clinical labor time. These changes would resolve the rank order anomaly and bring the PE inputs for CPT code 51726 into alignment with the other three codes. Finally, and for the reasons stated above, the AMA RUC recommended that CMS remove the 23 minutes of pre-service nonfacility clinical labor time from CPT code 51725 (Simple cystometrogram (CMG) (for example, spinal manometer)). We agreed with the AMA RUC recommendations, proposed to accept these recommendations for CY 2011 and, therefore, changed the direct PE inputs for CPT codes 51725 and 51726 in the nonfacility setting in the proposed CY 2011 direct PE database.

Comment: Some commenters argued that the rank order anomaly resulted from clinical labor inputs that were too low in the more complex codes, rather than too high in the base codes. These commenters stated that the AMA RUC and CMS had addressed the wrong ``end'' of the rank order anomaly in making the changes to the clinical labor minutes assigned to CPT codes 51725 and 51726. Several commenters on the CY 2010 PFS final rule with comment period, where new CY 2011 CPT code 51727, 51728, and 51729 were assigned interim direct PE inputs, also argued that CPT codes 51727, 51728, and 51729 should have additional clinical labor inputs, including a greater number of minutes during the intra-service period and minutes during the pre-service period.

Response: We have reviewed the direct PE inputs for all five CPT codes in this series and continue to agree with the AMA RUC's recommendations regarding changes for CY 2011. Specifically, we believe the pre-service nonfacility clinical labor time for the 0-day global period CPT codes 51725 and 51726 should be removed and the intra- service clinical labor time for CPT code 51726 should also be reduced, consistent with the usual treatment of

Page 73205

other 0-day global codes. We believe the AMA RUC provided recommendations to us regarding the direct PE inputs for these four cystometrogram services that accurately reflect the costs of the resources (that is, the clinical labor, equipment, and supplies) typically required to furnish these services to Medicare beneficiaries.

Comment: Several commenters requested that CMS change the supply inputs included in the direct PE database for the complex cystometrogram services. For example, the commenters requested that single dual sensor catheters replace the single sensor catheters currently included as direct PE inputs for these codes. The commenters stated that both the catheters and their price inputs are outdated. In other cases, the commenters explained that certain supplies in the database were not those typically used by certain physician specialties in performing the services.

Response: We rely on our review of recommendations received from the AMA RUC in order to make changes to the clinical labor, supply, and equipment inputs for CPT codes within the direct PE database. We have no reason to believe that the supplies used in the complex cystometrogram procedures described by CPT codes 51727, 51728, and 51729 are outdated because these were new codes for CY 2010 and the AMA

RUC recently addressed their direct PE inputs when initially recommending values for the services. We believe the AMA RUC's extensive expertise and broad perspective generally allows it to accurately identify the direct PE inputs for new and revised CPT codes.

We encourage stakeholders who believe that enhancements in technology or changes in medical practice have resulted in changes in the supplies or equipment typically used in furnishing a particular service to address these concerns with the AMA RUC.

As we discuss further in section II.A.3.e. of this final rule with comment period with respect to our proposal regarding updating supply and equipment price inputs, we welcome public requests for updates to supply price and equipment price and useful life inputs associated with existing codes through the process we are adopting beginning in CY 2011.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to accept the recommendations of the

AMA RUC regarding the revised direct PE inputs for CPT codes 51725 and 52726. The final direct PE inputs are included in the final CY 2011 direct PE database. d. Referral of Existing CPT Codes for AMA RUC Review

As part of our review of high cost supplies, we conducted a clinical review of the procedures associated with high cost supplies to confirm that those supplies currently are used in the typical case described by the CPT codes. While we confirmed that most high cost supplies could be used in the procedures for which they are currently direct PE inputs, we noted that one of the high cost supplies, fiducial screws (CMS Supply Code SD073) with a current price of $558, is included as a direct PE input for two CPT codes, specifically 77301

(Intensity modulated radiotherapy plan, including dose-volume histograms for target and critical structure partial tolerance specifications) and 77011 (Computed tomography guidance for stereotactic localization). The documentation used in the current pricing of the supply item describes a kit that includes instructions, skull screws, a drill bit, and a collar for the TALON[reg] System manufactured by Best nomos. Best nomos' literature describes the insertion of the screws into the patient's skull to ensure accurate set-up. When CPT codes 77301 and 77011 were established in CY 2002 and

CY 2003, respectively, we accepted the AMA RUC recommendations to include fiducial screws in the PE for these services. Upon further review, while we understand why this supply may still be considered a typical PE input for CPT code 77011, we do not now believe that fiducial screws, as described in the Best nomos literature, would typically be used in CPT code 77301, where the most common clinical scenario would be treatment of prostate cancer.

Therefore, in order to ensure that CPT codes 77301 and 77011 are appropriately valued for CY 2011 through the inclusion or exclusion of fiducial screws in their PE, in the CY 2011 PFS proposed rule (75 FR 40063), we asked the AMA RUC to review these CPT codes with respect to the inclusion of fiducial screws in their PE. We requested that the AMA

RUC make recommendations to us regarding whether this supply should be included in the PE or removed from the PE for CPT codes 77301 and 77011 in a timeframe that would allow us to adopt interim values for these codes for CY 2011, should the AMA RUC recommend a change. Were the AMA

RUC to continue to recommend the inclusion of fiducial screws in the PE for CPT code 77301 and/or 77011 for CY 2011, we requested that the AMA

RUC provide us with a detailed rationale for the inclusion of this specialized supply in the PE for the typical case reported under the relevant CPT code. We also requested that the AMA RUC furnish updated pricing information for the screws if they were to continue to recommend the screws as a PE input for one or both of these CPT codes in CY 2011.

Comment: The AMA RUC recommended that CMS remove the fiducial screws as a direct PE input from both CPT codes 77011 and 77301.

Several commenters also agreed that the fiducial screws would not typically be used with CPT code 77301. Additionally, multiple commenters pointed out that the fiducial screws may now be reported using HCPCS supply code A4648 (Tissue marker, implantable, any type, each) when the markers are implanted.

Response: We appreciate the responsiveness of the AMA RUC to our request and the interest of the other commenters in this issue.

After consideration of the public comments we received and the AMA

RUC recommendation following publication of the CY 2011 PFS proposed rule, for CY 2011, we are accepting the AMA RUC's recommendation and removing fiducial screws from the direct PE database as inputs for CPT codes 77011 and 77301. Because the direct PE inputs for these codes are being revised on an interim final basis for CY 2011, the changes are subject to public comment on this final rule with comment period. e. Updating Equipment and Supply Price Inputs for Existing Codes

Historically, we have periodically received requests to change the

PE price inputs for supplies and equipment in the PE database. In the past, we have considered these requests on an ad hoc basis and updated the price inputs as part of quarterly or annual updates if we believed them to be appropriate. In the CY 2011 PFS proposed rule (75 FR 49963), we proposed to establish a regular and more transparent process for considering public requests for changes to PE database price inputs for supplies and equipment used in existing codes.

We proposed to act on public requests to update equipment and supply price inputs annually through rulemaking by following a regular and consistent process as discussed in the following paragraphs. We proposed to use the annual PFS proposed rule released in the summer and the final rule with comment period released on or about

Page 73206

November 1 each year as the vehicle for making these changes.

We would accept requests for updating the price inputs for supplies and equipment on an ongoing basis; requests must be received no later than December 31 of each calendar year to be considered for inclusion in the next proposed rule. In that next proposed rule, we would present our review of submitted requests to update price inputs for specific equipment or supplies and our proposals for the subsequent calendar year. We would then finalize changes in the final rule with comment period for the upcoming calendar year. Our review of the issues and consideration of public comments may result in the following outcomes that would be presented in the final rule with comment period:

Updating the equipment or supply price inputs, as requested.

Updating the equipment or supply price inputs, with modifications.

Rejecting the new price inputs.

Declining to act on the request pending a recommendation from the AMA RUC.

To facilitate our review and preparation of issues for the proposed rule, at a minimum, we would expect that requesters would provide the following information:

Name and contact information for the requestor.

The name of the item exactly as it appears in the direct

PE database under downloads for the most recent PFS final rule with comment period, available on the CMS Web site at http://www.cms.gov/

PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.

In order to best evaluate the requests in the context of our goal of utilizing accurate market prices for these items as direct PE inputs, we also would expect requestors to provide multiple invoices from different suppliers/manufacturers. In some cases, multiple sources may not be available, whereupon a detailed explanation should be provided to support the request. When furnishing invoices, requestors should take into consideration the following parameters:

++ May be either print or electronic but should be on supplier and/ or manufacturer stationery (for example, letterhead, billing statement, etc.)

++ Should be for the typical, common, and customary version of the supply or equipment that is used to furnish the services.

++ Price should be net of typical rebates and/or any discounts available, including information regarding the magnitude and rationale for such rebates or discounts.

++ If multiple items are presented on the same invoice, relevant item(s) should be clearly identified.

We solicited public comments on this process, including the information that requestors should furnish to facilitate our full analysis in preparation for the next calendar year's rulemaking cycle.

Comment: Several commenters supported establishing a regular and more transparent process for considering public requests for changes to the direct PE price inputs for supplies and equipment used in existing codes. However, other commenters were concerned that the process might prevent CMS from making timely corrections to the database that are brought to the attention of the agency by specialty societies or other stakeholders. These commenters suggested creating an expedited process whereby mistakes could be corrected.

Response: We appreciate the broad support for the proposal. We believe that this process, though regular, would not limit our ability to correct technical errors that are discovered by the agency or brought to our attention by stakeholders. On these occasions, we would continue to correct errors and issue correction notices to final rules when appropriate. The regular process for updating supply and equipment prices is intended to reflect significant changes in the market prices of supplies and equipment that are used in the direct PE database. It would not substitute for the timely correction of technical errors.

Comment: Some commenters were concerned that the proposed process would necessitate a 12- to 24-month delay between CMS' acknowledgement of a price update and the resulting change in PE RVU calculations. The commenters pointed out that the current ad hoc process has historically resulted in a fairly timely response from the agency in most circumstances and were concerned that the formalization of the process might result in unnecessary delays. One commenter suggested creating a process for quarterly updates to the supply and equipment price inputs.

Response: We understand that some commenters are concerned about the timelines for price updates. However, we believe that the value of the transparency of the proposed process outweighs its potential for slowing the previous ad hoc process. Additionally, it is important to acknowledge that in most previous cases, price input updates would not have been immediately effective since such updates have always required

CMS' review, concurrence, and processing through the rate setting methodology prior to any change in Medicare payment rates.

Additionally, many stakeholders already provide public comments to CMS regarding specific issues addressed in our annual rate setting for the

PFS through the notice and comment rulemaking process. Therefore, we believe that the annual process offers both an economic use of stakeholders' resources, as well as the best opportunity for broad public input into proposed price changes. These are qualities any accelerated alternative, such as quarterly updates, would lack.

We believe that an annual update process most effectively promotes both timeliness and transparency, while also allowing for public comment and input regarding our proposals before the adoption of pricing changes that could have a significant effect on payment for services under the PFS.

Comment: Some commenters asserted that it may be more difficult to obtain invoices for some supplies that are not frequently used and there should be acceptable alternative sources of information, including price lists or other information from the manufacturer. One commenter suggested that in the case of items that are not used in high volumes in physicians' office, volume or other discounts are unlikely for physicians' practices.

Response: Even though the direct PE inputs should reflect the resource costs required for typical cases, we understand that there may be circumstances in which updated invoices or invoices that reflect volume or other discounts may be difficult to obtain. As stated in our proposal, we will consider a detailed written explanation in support of requests submitted without the documentation usually required.

Comment: One commenter urged that the updating of supply and equipment prices be only for ``like'' items and not for ``newer technology'' items. The commenter requested that CMS refer the initial review of new supply and equipment inputs to the AMA RUC Practice

Expense Subcommittee for review and recommendation back to CMS. Other commenters made specific requests for additions, deletions, or substitutions of supply and equipment items associated with particular codes.

Response: We appreciate the opportunity to clarify that this regular and consistent process would only apply to the price inputs for supply and equipment items. As part of our review of equipment price inputs, we will also consider updates to the useful life of equipment insofar as that information is

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supported by similar documentation. However, we will continue to encourage stakeholders who believe that there should be additions, deletions, or substitutions of direct PE inputs associated with particular codes to address these concerns through the AMA RUC, including when a stakeholder believes that enhanced technology has replaced older technology in the typical case of a particular service.

We believe the AMA RUC recommendations are an efficient and effective mechanism to inform our review of changes to the clinical labor, supply, and equipment inputs within the direct PE database.

Comment: One commenter was concerned about the potential for CMS to reject the requested price input outright and suggested that CMS be required to explain its rejection of the request for an updated price input.

Response: We appreciate the concerns of the commenter and consider this perspective as providing additional support for instituting such a regular and transparent process. As we stated in the CY 2011 proposed rule (75 FR 40063), we would present our review of submitted requests to update price inputs for specific equipment or supplies and our proposals for the subsequent calendar year in the annual proposed rule.

This process would provide CMS an annual opportunity to explain our review and decisions regarding public requests for changes in direct PE price inputs.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to act on public requests to update equipment and supply price inputs annually through rulemaking by following a regular and consistent process as discussed in the preceding paragraphs. We will use the annual PFS proposed rule released in the summer and the final rule with comment period released on or about November 1 each year as the vehicle for making these changes. In order to make the most effective use of the rulemaking process and be responsive to the concerns of stakeholders that we consider the most recent evidence available, we ask that requests for updates to supply price inputs or equipment price or useful life inputs be submitted as comments to the PFS final rule with comment period each year, subject to the deadline for public comments applicable to that rule.

Alternatively, stakeholders may submit requests to CMS on an ongoing basis throughout a given calendar year to CMS PE_Price_Input_

Update@cms.hhs.gov. Requests received by the end of a calendar year will be considered in rulemaking during the following year. For example, requests received by December 31, 2010 will be considered in conjunction with the CY 2012 PFS rulemaking cycle. We refer readers to the description earlier in this section of the minimum information we are requesting that stakeholders provide in order to facilitate our review and preparation of issues for the proposed rule.

In the CY 2012 PFS proposed rule, scheduled to be released in the summer of CY 2011, we will present a review of any timely requests we receive to update supply price inputs or equipment price or useful life inputs. After reviewing the issues and responding to the public comments, we will finalize our decision as one of the outcomes listed below for each request in the final rule with comment period for CY 2012.

Updating the equipment or supply price inputs, as requested.

Updating the equipment or supply price inputs, with modifications.

Rejecting the new price inputs.

Declining to act on the request pending a recommendation from the AMA RUC. f. Other Issues

We received other public comments on matters related to direct PE inputs that were not the subject of proposals in the CY 2011 PFS proposed rule. We thank the commenters for sharing their views and suggestions. Because we did not make any proposals regarding these matters, we do not generally summarize or respond to such comments in this final rule with comment period. However, we are summarizing and responding to several of the public comments in order to reiterate or clarify certain information.

Comment: Several commenters stated that the clinical labor minutes for CPT code 37210 (Uterine fibroid embolization (UFE, embolization of the uterine arteries to treat uterine fibroids, leiomyomata), percutaneous approach inclusive of vascular access, vessel selection, embolization, and all radiological supervision and interpretation, intraprocedural roadmapping, and imaging guidance necessary to complete the procedure) are inconsistent with recommendations forwarded to CMS by the AMA RUC for CY 2007 and accepted by CMS in the CY 2007 PFS final rule with comment period (71 FR 69643). The commenters indicated that 10 minutes of clinical labor time were erroneously not attributed to this CPT code in the proposed CY 2011 direct PE database.

Response: We agree with the commenters' assessment and appreciate being informed of the error. The 10 minutes of clinical labor time missing from the direct PE inputs for CPT code 37210 have been incorporated and this change is reflected in the final CY 2011 direct

PE database.

Comment: Several commenters expressed concerns regarding the current direct PE inputs for various services. One commenter submitted extensive information regarding a perceived disparity between the equipment inputs for echocardiography services and those for other ultrasound services. Another commenter requested that CMS ask the AMA

RUC to establish nonfacility RVUs for the placement or insertion of high dose rate brachytherapy catheters/applicators because it is common practice, especially in gynecology, for physicians to perform such procedures in their offices or in freestanding clinics. One commenter stated that the proposed PE RVUs do not provide sufficient payment to cover the cost of prothrombin time (PT)/international normalized ratio

(INR) home monitoring services and recommended that CMS alter the direct PE inputs for those services. Another commenter requested that

CMS alter direct PE inputs for holter monitoring based on changes to the language in CPT code descriptors from the current ``24 hours'' to

``up to 48 hours,'' even when the AMA RUC did not recommend such changes.

Response: We did not propose CY 2011 changes to the direct PE inputs for any of those services referenced by the commenters and, therefore, their direct PE inputs have already been finalized in a prior year's PFS rulemaking. As we have previously stated in this section, we encourage stakeholders who believe a change is required in the direct PE inputs associated with a particular service in the typical case that is furnished in the facility or nonfacility setting to address these concerns with the AMA RUC with respect to codes that have been reviewed by the AMA RUC. The direct PE inputs for existing services paid under the PFS have all been adopted through rulemaking that has allowed for public notice and comment, so their current direct

PE inputs are final unless we would make a proposal to change them in a future year. In most cases, we like to receive and review recommendations from the AMA RUC for new and revised codes or other codes for which another review has been conducted in order to assist us in determining whether we should make changes to the clinical labor, supply, and equipment inputs within the direct

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PE database and, if so, what revisions should be made.

Additionally, throughout the year we meet with parties who want to share their views on topics of interest to them. These discussions may provide us with information regarding changes in medical practice and afford opportunities for the public to bring to our attention issues they believe we should consider for future rulemaking. Thus, we encourage stakeholders to contact us at any time if there are topics related to the direct PE inputs for physicians' services that they would like to discuss.

B. Malpractice Relative Value Units (RVUs) 1. Background

Section 1848(c) of the Act requires that each service paid under the PFS be comprised of three components: Work, PE, and malpractice.

From 1992 to 1999, malpractice RVUs were charge-based, using weighted specialty-specific malpractice expense percentages and 1991 average allowed charges. Malpractice RVUs for new codes after 1991 were extrapolated from similar existing codes or as a percentage of the corresponding work RVU. Section 4505(f) of the BBA required us to implement resource-based malpractice RVUs for services furnished beginning in 2000. Therefore, initial implementation of resource-based malpractice RVUs occurred in 2000.

The statute also requires that we review, and if necessary adjust,

RVUs no less often than every 5 years. The first review and update of resource-based malpractice RVUs was addressed in the CY 2005 PFS final rule with comment period (69 FR 66263). Minor modifications to the methodology were addressed in the CY 2006 PFS final rule with comment period (70 FR 70153). In the CY 2010 PFS final rule with comment period, we implemented the second review and update of malpractice

RVUs. For a discussion of the second review and update of malpractice

RVUs see the CY 2010 PFS proposed rule (74 FR 33537) and final rule with comment period (74 FR 61758). 2. Malpractice RVUs for New and Revised Services Effective Before the

Next 5-Year Review

Currently, malpractice RVUs for new and revised codes effective before the next 5-Year Review (for example, effective CY 2011 through

CY 2014) are determined by a direct crosswalk to a similar ``source'' code or a modified crosswalk to account for differences in work RVUs between the new/revised code and the source code. For the modified crosswalk approach, we adjust the malpractice RVUs for the new/revised code to reflect the difference in work RVUs between the source code and the AMA RUC's recommended work value (or the work value we are applying as an interim final value under the PFS) for the new code. For example, if the interim final work RVUs for the new/revised code are 10 percent higher than the work RVUs for the source code, the malpractice RVUs for the new/revised code would be increased by 10 percent over the source code RVUs. This approach presumes the same risk factor for the new/ revised code and source code but uses the work RVUs for the new/revised code to adjust for risk-of-service. The assigned malpractice RVUs for new/revised codes effective between updates remain in place until the next 5-Year Review.

For CY 2011, we explained that we will continue our current approach for determining malpractice RVUs for new/revised codes that become effective before the next 5-Year Review and update. Under this approach we crosswalk the new/revised code to the RVUs of a similar source code and adjust for differences in work (or, if greater, the clinical labor portion of the fully implemented PE RVUs) between the source code and the new/revised code. Additionally, we stated that we would publish a list of new/revised codes and the analytic crosswalk(s) used for determining their malpractice RVUs in the CY 2011 final rule with comment period, which we have not previously done. We also explained that the CY 2011 malpractice RVUs for new/revised codes would be implemented as interim final values in the CY 2011 PFS final rule with comment period, where they would be subject to public comment, and finalized in the CY 2012 PFS final rule with comment period.

Comment: Several commenters supported the continuation of our current approach to determining malpractice RVUs for new/revised codes that become effective before the next 5-Year Review and update. The commenters stated that publication of the new/revised codes and the analytic crosswalk(s) used for determining their malpractice RVUs in the final rule is a move toward greater transparency. A few commenters requested that CMS provide the rationale used for selecting crosswalks for new/revised codes and subject the rationale to public comment.

Response: For purposes of determining malpractice RVUs for the CY 2011 new/revised codes, we accepted all source code recommendations submitted by the AMA RUC. We understand that the AMA RUC-recommended source codes for new/revised codes were based on the expected similar specialty mix of practitioners furnishing the source code and the new/ revised code. In other words, the medical specialties furnishing a source code were expected to be similar to the specialty mix furnishing the new/revised code. In adopting all of the AMA RUC's source code recommendations for CY 2011, we agree with its assessment of these similarities in each new/revised code case. If we were to disagree with the AMA RUC's malpractice source code recommendations in a future year for any new/revised codes, we would provide the rationale for both our difference of opinion and the alternative source code we select for purposes of establishing the interim final malpractice RVUs.

After consideration of the public comments we received, we are continuing our current approach of assigning the interim final malpractice RVUs for new/revised codes based on the methodology described earlier in this section. We adjusted the malpractice RVUs of the CY 2011 new/revised codes for differences in work RVUs (or, if greater, the clinical labor portion of the fully implemented PE RVUs) between the source code and the new/revised code to reflect the specific risk-of-service for the new/revised code. The source code crosswalks for the CY 2011 new/revised codes are being adopted on an interim final basis and are subject to public comment on this CY 2011 final rule with comment period, as are the CY 2011 malpractice RVUs of the new/revised codes that are listed in Addendum C to this final rule with comment period. The malpractice RVUs for the CY 2011 new/revised codes will be finalized in the CY 2012 PFS final rule with comment period, where we will also respond to the public comments received on the values that are included in this CY 2011 final rule with comment period.

Table 8 lists the CY 2011 new/revised codes and their respective source codes for determining the interim final CY 2011 malpractice

RVUs. We are also posting this crosswalk on the CMS Web site under the downloads for the CY 2011 PFS final rule with comment period at: http:/

/www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.

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BILLING CODE 4120-01-C 3. Revised Malpractice RVUs for Selected Disc Arthroplasty Services

As discussed in the CY 2010 PFS proposed rule (74 FR 33539), we assign malpractice RVUs to each service based upon a weighted average of the risk factors of all specialties that furnish the service. For the CY 2010 review of malpractice RVUs, we used CY 2008 Medicare payment data on allowed services to establish the frequency of a service by specialty. CPT code 22856 (Total disc arthroplasty

(artificial disc), anterior approach, including discectomy with end plate preparation (includes osteophytectomy for nerve root or spinal cord decompression and microdissection), single interspace, cervical) had zero allowed services for CY 2008. Therefore, our contractor initially set the level of services to 1, and assigned a risk factor according to the average risk factor for all services that do not explicitly have a separate technical or professional component. We proposed to adopt our contractor's initial malpractice RVUs for CPT code 22856 in the CY 2010 proposed rule. Application of the average physician risk factor would have resulted in a significant decrease in malpractice RVUs for CPT code 22856 in CY 2010.

Several commenters on the CY 2010 PFS proposed rule expressed concern regarding the proposed malpractice RVUs for CPT code 22856, which represented a proposed reduction of more than 77 percent. The commenters stated that this service is predominantly furnished by neurosurgeons and orthopedic surgeons. Given the high risk factors associated with these specialty types and the changes in malpractice

RVUs for comparable services, the commenters stated that a reduction in the malpractice RVUs of this magnitude for CPT code 22856 could not be correct.

After consideration of the public comments, for CY 2010, we set the risk factor for CPT code 22856 as the weighted average risk factor of six comparable procedures mentioned by the commenters: CPT code 22554

(Arthrodesis, anterior interbody technique, including minimal discectomy to prepare interspace (other than for decompression); cervical below C2); CPT code 22558 (Arthrodesis, anterior interbody technique, including minimal discectomy to prepare interspace (other than for decompression); lumbar); CPT code 22857 (Total disc arthroplasty (artificial disc), anterior approach, including discectomy to prepare interspace (other than for decompression), single interspace, lumbar); CPT code 22845 (Anterior instrumentation; 2 to 3 vertebral segments (list separately in addition to code for primary procedure)); CPT code 63075 (Discectomy, anterior, with decompression of spinal cord and/or nerve root(s), including osteophytectomy; cervical, single interspace); and CPT code 20931 (Allograft for spine surgery only; structural (list separately in addition to code for primary procedure)). The weighted average risk factor for these services is 8.4.

Since publication of the CY 2010 PFS final rule with comment period, stakeholders have mentioned that we made significant changes to the malpractice RVUs for CPT code 22856 in CY 2010. The commenters also brought to our attention that other services are clinically similar to

CPT code 22856 and have similar work RVUs and, therefore, some stakeholders believe these services should all have similar malpractice

RVUs. Services mentioned by the stakeholders that are clinically similar to CPT code 22856 include CPT code 22857; CPT code 22861

(Revision including replacement of total disc arthroplasty (artificial disc), anterior approach, single interspace;

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cervical); CPT code 22862 (Revision including replacement of total disc arthroplasty (artificial disc) anterior approach, lumbar); CPT code 22864 (Removal of total disc arthroplasty (artificial disc), anterior approach, single interspace; cervical); and CPT code 22865 (Removal of total disc arthroplasty (artificial disc), anterior approach, single interspace; lumbar).

After further review of this issue, for CY 2011 we proposed to apply the same risk factor used for CPT code 22856 to certain other services within this family of services (CPT codes 22857 through 22865) for which there were no allowed services in CY 2008. CPT codes 22861 and 22864 had zero allowed services in CY 2008 and our contractor initially set their malpractice RVUs in the same way as it did for CPT code 22856. Therefore, for CY 2011 we proposed to assign the weighted average risk factor used for CPT code 22856 (that is, the weighted average of the risk factors for CPT codes 20931, 22554, 22558, 22845, 22857, and 63075) to CPT codes 22861 and 22864. However, CPT codes 22857, 22862, and 22865 are low volume services (allowed services under 100). Our policy for low volume services is to apply the risk factor of the dominant specialty as indicated by our claims data. Thus, for CY 2011 we proposed to continue to apply our policy for low volume services to CPT codes 22857, 22862, and 22865.

Comment: A few commenters expressed support for the proposed changes in malpractice RVUs for disc arthroplasty services that are similar to CPT code 22856. One commenter urged CMS to finalize the proposal in the CY 2011 PFS final rule.

Response: We appreciate the commenters' support for our proposal.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to apply the same risk factor used for

CPT code 22856 to CPT codes 22861 and 22864 for purposes of setting the malpractice RVUs for these codes prior to the next 5-Year Review of malpractice RVUs.

C. Potentially Misvalued Services Under the Physician Fee Schedule 1. Valuing Services Under the PFS

As discussed in section I. of this final rule with comment period, in order to value services under the PFS, section 1848(c) of the Act requires the Secretary to determine relative values for physicians' services based on three components: The work, practice expense (PE), and malpractice components. Section 1848(c)(1)(A) of the Act defines the work component to include ``the portion of the resources used in furnishing the service that reflects physician time and intensity in furnishing the service.'' Additionally, the statute provides that the work component shall include activities that occur before and after direct patient contact. Furthermore, the statute specifies that with respect to surgical procedures, the valuation of the work component for the code would reflect a ``global'' concept in which pre-operative and post-operative physicians' services related to the procedure would also be included.

In addition, section 1848(c)(2)(C)(i) of the Act specifies that

``the Secretary shall determine a number of work relative value units

(RVUs) for the service based on the relative resources incorporating physician time and intensity required in furnishing the service.'' As discussed in detail in sections I.A.2. and I.A.3. of this final rule with comment period, the statute also defines the PE and malpractice components and provides specific guidance in the calculation of the

RVUs for each of these components. Section 1848(c)(1)(B) of the Act defines the PE component as ``the portion of the resources used in furnishing the service that reflects the general categories of expenses

(such as office rent and wages of personnel, but excluding malpractice expenses) comprising practice expenses.''

Section 1848(c)(2)(C)(ii) of the Act specifies that the ``Secretary shall determine a number of practice expense relative value units for the services for years beginning with 1999 based on the relative practice expense resources involved in furnishing the service.''

Furthermore, section 1848(c)(2)(B) of the Act directs the Secretary to conduct a periodic review, not less often than every 5 years, of the

RVUs established under the PFS. Finally, on March 23, 2010, the ACA was enacted, further requiring the Secretary to periodically review and identify potentially misvalued codes and make appropriate adjustments to the relative values of those services identified as being potentially misvalued. Section 3134(a) of the ACA added a new section 1848(c)(2)(K) of the Act which requires the Secretary to periodically identify potentially misvalued services using certain criteria, and to review and make appropriate adjustments to the relative values for those services. Section 3134(a) of the ACA also added a new section 1848(c)(2)(L) of the Act which requires the Secretary to develop a validation process to validate the RVUs of potentially misvalued codes under the PFS and make appropriate adjustments.

As discussed in section I.A.1. of this final rule with comment period, we establish physician work RVUs for new and revised codes based on our review of recommendations received from the AMA RUC. The

AMA RUC also provides recommendations to CMS on the values for codes that have been identified as potentially misvalued. To respond to concerns expressed by MedPAC, the Congress, and other stakeholders regarding accurate valuation of services under the PFS, the AMA RUC created the Five-Year Review Identification Workgroup in 2006. In addition to providing recommendations to CMS for work RVUs, the AMA

RUC's Practice Expense Subcommittee reviews direct PE (clinical labor, medical supplies, and medical equipment) for individual services and examines the many broad methodological issues relating to the development of PE RVUs.

In accordance with section 1848(c) of the Act, we determine appropriate adjustments to the RVUs, taking into account the recommendations provided by the AMA RUC and MedPAC, and publish the explanation for the basis of these adjustments in the PFS proposed and final rules. We note that section 1848(c)(2)(A)(ii) of the Act authorizes the use of extrapolation and other techniques to determine the RVUs for physicians' services for which specific data are not available, in addition to taking into account the results of consultations with organizations representing physicians. 2. Identifying, Reviewing, and Validating the RVUs of Potentially

Misvalued Services Under the PFS a. Background

In its March 2006 Report to Congress, MedPAC noted that ``misvalued services can distort the price signals for physicians' services as well as for other health care services that physicians order, such as hospital services.'' In that same report MedPAC postulated that physicians' services under the PFS can become misvalued over time for a number of reasons: ``For example, when a new service is added to the physician fee schedule, it may be assigned a relatively high value because of the time, technical skill, and psychological stress that are required to perform it. Over time, skill, and stress involved may decline as physicians become more familiar with the service and more efficient at providing it. The amount of physician work needed to furnish an existing service may decrease when new technologies are incorporated. Services

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can also become overvalued when practice expenses decline. This can happen when the costs of equipment and supplies fall, or when equipment is used more frequently, reducing its cost per use. Likewise, services can become undervalued when physician work increases or practice expenses rise.'' In the ensuing years since MedPAC's 2006 report, additional groups of potentially misvalued services have been identified by Congress, CMS, MedPAC, the AMA RUC, and other stakeholders.

In recent years CMS and the AMA RUC have taken increasingly significant steps to address potentially misvalued codes. As MedPAC noted in its March 2009 Report to Congress, in the intervening years since MedPAC made the initial recommendations, ``CMS and the AMA RUC have taken several steps to improve the review process.'' Most recently, section 1848(c)(2)(K)(ii) of the Act (as added by section 3134 of the ACA) directed the Secretary to specifically examine potentially misvalued services in seven categories as follows:

(1) Codes and families of codes for which there has been the fastest growth.

(2) Codes or families of codes that have experienced substantial changes in practice expenses.

(3) Codes that are recently established for new technologies or services.

(4) Multiple codes that are frequently billed in conjunction with furnishing a single service.

(5) Codes with low relative values, particularly those that are often billed multiple times for a single treatment.

(6) Codes which have not been subject to review since the implementation of the RBRVS (the so-called ``Harvard-valued codes'').

(7) Other codes determined to be appropriate by the Secretary.

Section 1848(c)(2)(K)(iii) of the Act (as added by section 3134 of the ACA) also specifies that the Secretary may use existing processes to receive recommendations on the review and appropriate adjustment of potentially misvalued services. In addition, the Secretary may conduct surveys, other data collection activities, studies, or other analyses as the Secretary determines to be appropriate to facilitate the review and appropriate adjustment of potentially misvalued services. This section authorizes the use of analytic contractors to identify and analyze potentially misvalued codes, conduct surveys or collect data, and make recommendations on the review and appropriate adjustment of potentially misvalued services. Finally, section 1848(c)(2)(K)(iii)(V) of the Act (as added by section 3134 of the ACA) specifies that the

Secretary may make appropriate coding revisions (including using existing processes for consideration of coding changes) which may include consolidation of individual services into bundled codes for payment under the physician fee schedule. b. Progress in Identifying and Reviewing Potentially Misvalued Codes

Over the last several years, CMS, in conjunction with the AMA RUC, has identified and reviewed numerous potentially misvalued codes in all seven of the categories specified in section 1848(c)(2)(K)(ii) (as added by section 3134 of the ACA), and we plan to continue our work examining potentially misvalued codes in these areas over the upcoming years, consistent with the new legislative mandate on this issue. In the current process, the AMA RUC reviews potentially misvalued codes that are identified either by CMS or through its own processes and recommends revised work RVUs and/or direct PE inputs for those codes to

CMS. CMS then assesses the recommended revised work RVUs and/or direct

PE inputs and, in accordance with section 1848(c) of the Act, we determine if the recommendations constitute appropriate adjustments to the RVUs under the PFS. Since CY 2009, CMS and the AMA RUC have identified over 700 potentially misvalued codes.

For example, in regard to the first category (codes and families of codes for which there has been the fastest growth), for CY 2009 CMS identified over 100 potentially misvalued codes for which an analysis of the utilization data showed an annual growth in allowed services of 10 percent (or more) for 3 consecutive years (73 FR 38586). Each of these codes had allowed charges of $1 million or more in CY 2007. We published this list in the CY 2009 PFS proposed rule (73 FR 38586 through 38589) and requested that the AMA RUC immediately begin a review of the codes on this list. Meanwhile, in parallel with CMS' efforts, the AMA RUC also initiated processes to identify and review potentially misvalued codes on an ongoing basis using certain screens, including screens for ``CMS fastest growing procedures'' and ``high volume growth.'' Both of these AMA RUC screens are applicable to the first category of potentially misvalued codes specified in the ACA. We plan to continue to analyze Medicare claims data over future years to identify additional services that exhibit rapid growth and high

Medicare expenditures for referral to the AMA RUC for review as potentially misvalued codes.

Pertaining to the second category specified in section 1848(c)(2)(K)(ii) of the Act (as added by section 3134 of the ACA)

(codes or families of codes that have experienced substantial changes in practice expenses), in CY 2009 we requested that the AMA RUC continue its review of direct PE inputs, focusing particularly on high- volume codes where the PE payments are increasing significantly under the transition to the new PE methodology (73 FR 38589). The AMA RUC has responded by sending CMS recommendations for revised direct PE inputs for codes identified for PE review on an ongoing basis.

Additionally in CY 2009, we began an initiative to review and update the prices for high-cost supplies in order to ensure the accuracy and completeness of the direct PE inputs. We discuss our most recent efforts in refining the process to update the prices of high- cost supplies in section II.C.5. of this final rule with comment period.

For the third category of potentially misvalued codes identified in section 1848(c)(2)(K)(ii) (as added by section 3134 of the ACA) (codes that are recently established for new technologies or services), the

AMA RUC routinely identifies such codes through a screen based on 3 years of Medicare claims data, and sends CMS recommendations for revised work RVUs and/or direct PE inputs for these codes on an ongoing basis. The AMA RUC may determine that a code for a new service requires reevaluation or does not require reevaluation, or it may conclude, on a case-by-case basis, that more than 3 years of claims data are necessary before the code can be reviewed. In that case, it would determine the appropriate future timeframe for review.

We also note that in its June 2008 Report to Congress entitled

``Reforming the Health Care System'' and in the context of a discussion about primary care, MedPAC acknowledges, ``* * * Efficiency can improve more easily for other types of services, such as procedures, with advances in technology, technique, and other factors. Ideally, when such efficiency gains are achieved, the fee schedule's relative value units (RVUs) for the affected services should decline accordingly, while budget neutrality would raise the RVUs for the fee schedule's primary care services.'' (page 27). Section II.C.5. of this final rule with comment period includes a discussion regarding periodic updates to the costs of high-cost supplies. This discussion is highly relevant to new technology services, where growth in volume of a

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service as it diffuses into clinical practice may lead to a decrease in the cost of expensive supplies. We also expect that other efficiencies in physician work and PE may be achieved after an initial period of relative inefficiency that reflects the ``learning curve.'' We plan to pay particular attention to the work values and direct PE inputs for these new services and the AMA RUC's periodic review process to ensure that any efficiencies are captured under the PFS over time, recognizing that the appropriate timing for revaluing these services needs to be considered on a case-by-case basis depending on the growth rate in service volume.

We have also addressed the fourth category (multiple codes that are frequently billed in conjunction with furnishing a single service) in rulemaking prior to the enactment of the ACA. As discussed in the CY 2009 PFS proposed rule (73 FR 38586), we have a longstanding policy of reducing payment for multiple surgical procedures performed on the same patient, by the same physician, on the same day. Over the ensuing years, the multiple procedure payment reduction (MPPR) policy has been extended to a number of nuclear diagnostic and diagnostic imaging procedures. We continue our work to recognize efficiencies in this area with a new CY 2011 policy to expand the MPPR policy to additional combinations of imaging services and to therapy services for CY 2011 as described in section II.C.4. of this final rule with comment period.

We note the AMA RUC has also established a screen to identify services performed by the same physician on the same date of service 95 percent of the time or more. Over the past 2 years, the CPT Editorial

Panel has established new bundled codes to describe a comprehensive service for certain combinations of these existing services that are commonly furnished together, and the AMA RUC has recommended work values and direct PE inputs to CMS for these comprehensive service codes that recognize the associated efficiencies. We look forward to working with the AMA RUC in this joint effort to examine codes commonly reported together and more appropriately value common combinations services.

We address the fifth category of potentially misvalued codes (codes with low relative values, particularly those that are often billed multiple times for a single treatment) in section II.C.3.b. of this final rule with comment period. That is, we have provided a list of services with low work RVUs that are commonly reported with multiple units in a single encounter and requested that the AMA RUC review these codes that we have identified as potentially misvalued.

The sixth category (codes which have not been subject to review since the implementation of the RBRVS (the so-called ``Harvard-valued codes'')) also continues to be addressed by CMS and the AMA RUC on an ongoing basis. As we noted in the CY 2009 PFS proposed rule (73 FR 38589), there were at that time approximately 2,900 codes, representing

$5 billion in annual spending, that were originally valued using

Harvard data and had not subsequently been evaluated by the AMA RUC.

Consequently, in CY 2009, we requested that the AMA RUC engage in an ongoing effort to review the remaining Harvard-valued codes, focusing first on the high-volume, low-intensity codes (73 FR 38589). In response to our request, the AMA RUC initially conducted an analysis of

Harvard-valued services with utilization above 10,000 services per year, which resulted in a list of 296 distinct services (73 FR 69883).

The AMA RUC, in its public comment on the CY 2009 proposed rule, stated that it believes it would be effective to limit any review to these 296 services and also noted that of the 296 services identified, 23 had already been identified by another screen and were in the process of being reviewed (73 FR 69883). To date, the AMA RUC has reviewed and submitted to CMS recommendations for revised work RVUs and/or direct PE inputs for a number of Harvard-valued codes, prioritizing those codes with utilization of over 1 million services. The AMA RUC and CMS intend to continue our ongoing assessment of Harvard-valued codes, next targeting codes with utilization of over 100,000 services.

Finally, the seventh category of potentially misvalued codes in section 1848(c)(2)(K)(ii) (as added by section 3134 of the ACA) is all other codes determined to be appropriate by the Secretary. In this category, CMS has previously proposed policies and requested that the

AMA RUC review codes for which there have been shifts in the site-of- service (site-of-service anomalies), as well as codes that qualify as

``23-hour stay'' outpatient services. The policies for valuation of both the site-of-service anomaly codes and the ``23-hour stay'' codes are developed further in sections II.C.3.d. and e., respectively, of this final rule with comment period. For CY 2011, we have also identified codes with low work RVUs but that are high volume based on claims data as another category of potentially misvalued codes and referred these codes to the AMA RUC for review, as discussed in section

II.C.3.b. of this final rule with comment period. In addition, for CY 2011 we have newly targeted key codes that the AMA RUC uses as reference services for valuing other services, termed ``multispecialty points of comparison'' services, and referred these to the AMA RUC for review as potentially misvalued codes as described in section II.C.3.a. of this final rule with comment period. Finally, we note the AMA RUC has also established screens to identify potentially misvalued codes in additional categories, including codes with a high intra-service work per unit of time (IWPUT) and codes representing services that had been surveyed by one specialty, but are now performed by a different specialty. We will continue to review AMA RUC recommendations for revised work RVUs and/or direct PE inputs for codes that fall into these categories.

As a result of the combined efforts of CMS and the AMA RUC to address potentially misvalued codes, for CY 2009 the AMA RUC recommended revised work values and/or PE inputs for 204 misvalued services (73 FR 69883). For CY 2010, an additional 113 codes were identified as misvalued and the AMA RUC provided new recommendations for revised work RVUs and/or PE inputs to CMS as discussed in the CY 2010 PFS final rule with comment period (74 FR 61778). Upon review of the AMA RUC-recommended work RVUs, CMS accepted the majority of the values as appropriate adjustments to the RVUs under the PFS, in accordance with section 1848(c) of the Act. However, for a number of codes, mainly the site-of-service anomaly codes, we indicated that although we would accept the AMA RUC valuations for these codes on an interim basis through CY 2010, we had ongoing concerns about the methodology used by the AMA RUC to review these services (73 FR 69883 and 74 FR 61776 through 61778, respectively). In the CY 2010 PFS final rule with comment period, we requested that the AMA RUC reexamine the site-of-service anomaly codes and use the building block methodology to revalue the services (74 FR 61777). In that same rule, we also stated that we would continue to examine these codes and consider whether it would be appropriate to propose additional changes in future rulemaking. We discuss our CY 2011 proposals with respect to these codes in section II.C.3.d. of this final rule with comment period.

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c. Validating RVUs of Potentially Misvalued Codes

In addition to identifying and reviewing potentially misvalued codes, section 1848(c)(2)(L) (as added by section 3134 of the ACA) specifies that the Secretary shall establish a formal process to validate relative value units under the PFS. The validation process may include validation of work elements (such as time, mental effort and professional judgment, technical skill and physical effort, and stress due to risk) involved with furnishing a service and may include validation of the pre-, post-, and intra-service components of work.

The Secretary is directed to validate a sampling of the work RVUs of codes identified through any of the seven categories of potentially misvalued codes specified by section 1848(c)(2)(K)(ii) of the Act (as added by section 3134 of the ACA). Furthermore, the Secretary may conduct the validation using methods similar to those used to review potentially misvalued codes, including conducting surveys, other data collection activities, studies, or other analyses as the Secretary determines to be appropriate to facilitate the validation of RVUs of services. Currently, while CMS does assess the AMA RUC-recommended work

RVUs to determine if the recommendations constitute appropriate adjustments to the RVUs under the PFS, we intend to establish a more extensive validation process of RVUs in the future in accordance with the requirements of section 1848(c)(2)(L) of the Act (as added by section 3134 of the ACA). Therefore, in the CY 2011 PFS proposed rule

(75 FR 40068), we solicited public comments on possible approaches and methodologies that we should consider for a validation process. We were interested in public comments regarding approaches, including the use of time and motion studies, to validate estimates of physician time and intensity that are factored into the work RVUs for services with rapid growth in Medicare expenditures, one of the categories that the statute specifically directs CMS to examine. We indicated that we plan to discuss the validation process in a future PFS rule once we have considered the matter further in conjunction with any public comments and other input from stakeholders that we receive.

Comment: Some commenters were skeptical that there could be viable alternative methods to the existing AMA RUC code review process for validating physician time and intensity that would preserve the appropriate relativity of specific physician's services under the current payment system. These commenters generally urged CMS to rely solely on the AMA RUC to provide valuations for services under the PFS.

A number of commenters expressed the belief that since CMS has reviewed the AMA RUC recommendations for codes and generally accepted these valuations in the past, these actions constitute a ``CMS validation process.'' The commenters asserted that this current ``CMS validation process'' more than meets the requirement of section 1848(c)(2)(L) of the Act (as added by section 3134 of the ACA).

In addition, a number of commenters opposed the approach of using time and motion studies to validate estimates of physician time and intensity, stating that properly conducted time and motion studies are extraordinarily expensive and, given the thousands of codes paid under the PFS, it would be unlikely that all codes could be studied. The commenters generally opposed applying different methodologies to valuing different services under the PFS and supported using a consistent methodology for all codes. Some commenters observed that it would be extremely difficult for CMS to establish a process by which to validate a sample of work RVUs under the PFS because of the relative nature of the system. Specifically, one commenter noted that the

``advantages of a relative system are considerable--they allow scaling based on available funds and make it far easier for a payer such as

Medicare to set rates for multiple services with a single adjustment to the conversion factor. However, one disadvantage of a relative system is that it cannot be externally validated unless all components are included in the validation. Services cannot be examined for absolute accuracy, only for relative precision. If we identify some component of the calculation used to generate the RVU that is incorrect, it is impossible to know whether this is a systemic error or an issue with an individual code. If it is a systemic error, then it does not invalidate the relative value system, which merely must operate on an even playing field.'' That is, many commenters believe that as long as appropriate relativity is maintained in the work RVUs for services valued under the

PFS, the specific methodology for valuing services is less important.

Accordingly, many commenters expressed support for the AMA RUC's use of

``magnitude estimation'' to develop the recommended value for a service and urged CMS to accept the AMA RUC's recommendations as the most informed and best estimation of the true value of physician work for a service.

In contrast, some commenters declared that ``the flaws inherent in the RUC system are the lack of accountability and transparency.'' These commenters believe that the AMA RUC's composition as a professional panel puts cognitive services at a disadvantage and suggested that

``the composition of the RUC needs to be modified to more accurately reflect the desired workforce composition. At present primary care specialties are under-represented which we [the commenters] believe contributes to the overvaluation of procedural codes and undervaluation of cognitive codes.'' Similarly, other commenters noted that while certified registered nurse anesthetists (CRNAs) furnished approximately 32 million anesthesia services in the United States annually and can bill Medicare directly for their services, ``the AMA RUC excludes CRNAs from directly participating in its deliberations because CRNAs are not physicians.'' These commenters noted that ``without fair representation by all specialties that bill Part B directly, CMS' reliance on the AMA-

RUC as representing the professional views and knowledge of all healthcare specialties is deeply flawed.'' The commenters also advised that ``while the RUC relies on persuasion and brokering deals, RVUs need to be validated empirically.'' In general, these commenters believe that since section 1848(c)(2)(L) of the Act (as added by section 3134 of the ACA) expressly specifies that CMS has the authority to conduct surveys and studies and collect data, CMS should develop a process that uses empirical evidence as the basis for validation of work RVUs.

Response: We agree with the commenters that the work before us to develop a formal validation process as specified by section 1848(c)(2)(L) of the Act (as added by section 3134 of the ACA) will be a challenging but worthwhile effort to ensure accurate valuation of physician work under the PFS. While we have reviewed AMA RUC recommendations for codes and frequently accepted these valuations in the past, we disagree with the commenters' assertion that these actions constitute a formal CMS validation process as envisioned by section 1848(c)(2)(L) of the Act (as added by section 3134 of the ACA). Section 1848(c)(2)(L) of the Act (as added by section 3134 of the ACA) clearly specifies a new requirement that ``the Secretary shall establish a process to validate relative value units under the fee schedule.''

While we solicited

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comments on the possibility of using time and motion studies to support a future validation process, we understand that these studies would require significant resources and we remain open to suggestions for other approaches to developing a validation process.

In response to the commenters who raised the issue of the AMA RUC's most commonly used approach for valuing codes, referred to as

``magnitude estimation,'' we note that the AMA RUC does not rely on a single consistent methodology to value codes. Based on our historical and current review of the AMA RUC recommendation summaries which accompany the work RVU recommendations for each code newly valued or revalued by the AMA RUC each year, we have noticed that the AMA RUC appears to use a variety of methodologies in its valuation process. For some codes, the AMA RUC uses magnitude estimation in conjunction with survey data from surveys conducted by the specialty societies to support the values. For other codes, the AMA RUC uses magnitude estimation to override the results of the survey data, recommending to

CMS a value that is not based on survey data, but rather, justified in terms of its appropriate relativity within the system to other similar services. The AMA RUC may also elect to use a crosswalk approach in valuing a code by applying a work value from a currently valued code to the code under review based on the clinical similarity of the procedures or explicit considerations of pre-, intra-, and post-service time. In some instances, we note that the AMA RUC has asserted that it uses the building block methodology to value the code, a methodology we have historically supported (74 FR 61777). Since the AMA RUC uses a variety of methodologies for valuing codes, not just magnitude estimation supported by survey data, or our recommended methodology of valuation based on building blocks, we foresee that validation of the work RVUs will be complex, perhaps requiring an initial study of the all the possible valuation methodologies currently being employed by the AMA RUC so that we can better understand how relativity between services under the PFS has developed and been maintained over the years.

As we have stated previously (69 FR 66243), because the AMA RUC is an independent committee, we are not in a position to set the requirements for AMA RUC membership regarding primary care specialties or other types of practitioners. Concerned stakeholders should communicate directly with the AMA RUC regarding its professional composition. We note that we alone are responsible for all decisions about establishing the RVUs for purposes of PFS payment so, while the

AMA RUC provides us with recommendations regarding the work and direct

PE inputs for new and revised CPT codes in the context of its broad expertise, we determine the interim final RVUs for all new or revised services. Additionally, the interim RVUs are subject to public comment and we respond to those comments in a final rule when we adopt the final RVUs for the new and revised CPT codes. We believe that the formal validation process will further complement the ongoing work of the AMA RUC to provide recommendations to us regarding the valuation of

PFS services.

Comment: While a number of commenters strongly opposed CMS' plans to develop a formal validation process, many other commenters expressed support for the development and establishment of a system-wide validation process of the work RVUs under the PFS. The commenters commended CMS for seeking new approaches to validation, as well as being open to suggestions from the public on this process. A number of commenters submitted technical advice and offered their time and expertise as resources for CMS to draw upon in any examination of possible approaches to developing a formal validation process.

Furthermore, MedPAC advised that a formal validation process should include validating the fee schedule's estimates of physician time.

MedPAC noted that ``Contract research for CMS and the Assistant

Secretary for Planning and Evaluation has shown that some of the time estimates are likely too high. In addition, the Government

Accountability Office has found that the fee schedule does not adequately account for efficiencies occurring when a physician furnishes multiple services for the same patient on the same day.''

Finally, MedPAC suggested that CMS should consider alternative approaches, ``such as collecting data on a recurring basis from a cohort of practices and other facilities where physicians and nonphysician clinical practitioners work.''

Some commenters noted that ``involving RUC experts, those who are most intimately acquainted with and possess the deepest level of expertise and experience makes the most sense'' and stated that these individuals ``are also those best equipped to provide insights and guidance to help shape an independent validation system.'' A number of commenters asked CMS to confirm that stakeholders would be given the opportunity to comment on any specific proposals for a validation process that CMS plans to implement.

Response: We thank the many commenters who generously offered to help and provided technical suggestions, including the use of statistical modeling and possible sources of data that we should consider in developing a validation process. We will review MedPAC's suggestions to examine physician time in the formal validation process.

We will also consider the commenters' recommendation that we include the AMA RUC and other professional groups who also have a stake in ensuring appropriate payment for practitioners' services. As we stated previously, we intend to establish a more extensive validation process of RVUs in the future in accordance with the requirements of section 1848(c)(2)(L) of the Act (as added by section 3134 of the ACA). We note that MedPAC, in providing comments to the CY 2011 PFS proposed rule,

``strongly supports efforts to improve the accuracy of the fee schedule's RVUs.'' We plan to discuss the validation process in more detail in a future PFS rule once we have considered the matter further in conjunction with the public comments that we have received in response to our solicitation in the CY 2011 proposed rule as well as other input from stakeholders. Moreover, we note that any proposals we would make on the formal validation process would be subject to public comment, and we would consider those comments before finalizing any policies. 3. CY 2011 Identification and Review of Potentially Misvalued Services

In this section, we discuss codes that may be potentially misvalued according to five different criteria:

Codes on the multi-specialty points of comparison list;

Codes with low work RVUs commonly billed in multiple units per single encounter;

Codes with high volume and low work RVUs;

Codes with site-of-service anomalies; and

Codes that qualify as ``23-hour stay'' outpatient services. a. Codes on the Multispecialty Points of Comparison List

The AMA RUC uses a scale referred to as the multispecialty points of comparison (MPC) to evaluate the reasonableness of a specialty society's recommended RVU value for a service.

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The MPC list contains reference codes of established comparison services that are used in the valuation of new codes. The current MPC list consists of 316 codes which the AMA RUC may use to compare and contrast the relativity of codes under review to existing relative values. Since the AMA RUC may use the values on the MPC list as a basis for relativity when determining the values for new, revised, and newly reviewed codes (including potentially misvalued codes), it is essential that the services on the MPC list be appropriately valued since any codes misvalued on the MPC list could contribute to the misvaluing of other codes under review. While we believe that the entire MPC list should be assessed to ensure that services are paid appropriately under the PFS, we prioritized the review of the MPC list, ranking the codes by allowed service units and charges based on CY 2009 claims data. We proposed to refer the codes in Table 9 to the AMA RUC for review in CY 2011.

Table 9--Codes on the MPC List Referred for AMA RUC Review

CPT code

Short descriptor

66984......................... Cataract surg w/iol, 1 stage. 97110......................... Therapeutic exercises. 43239......................... Upper GI endoscopy, biopsy. 20610......................... Drain/inject, joint/bursa. 78815......................... Pet image w/ct, skull-thigh. 45385......................... Lesion removal colonoscopy. 45380......................... Colonoscopy and biopsy. 11721......................... Debride nail, 6 or more. 17000......................... Destruct premalg lesion. 92980......................... Insert intracoronary stent. 74160......................... Ct abdomen w/dye. 71020......................... Chest x-ray. 11100......................... Biopsy, skin lesion. 66821......................... After cataract laser surgery. 52000......................... Cystoscopy. 92083......................... Visual field examination(s). 73721......................... Mri jnt of lwr extre w/o dye. 93010......................... Electrocardiogram report. 77334......................... Radiation treatment aid(s). 92250......................... Eye exam with photos. 95810......................... Polysomnography, 4 or more. 77003......................... Fluoroguide for spine inject. 11056......................... Trim skin lesions, 2 to 4. 76700......................... Us exam, abdom, complete. 77290......................... Set radiation therapy field. 77300......................... Radiation therapy dose plan. 43235......................... Uppr gi endoscopy, diagnosis. 71275......................... Ct angiography, chest. 95900......................... Motor nerve conduction test. 31231......................... Nasal endoscopy, dx. 95165......................... Antigen therapy services. 94060......................... Evaluation of wheezing. 31575......................... Diagnostic laryngoscopy.

Comment: While some commenters agreed with CMS that the entire MPC list should be assessed to ensure that services are paid appropriately under the PFS, and supported the proposal that the AMA RUC review the services listed in Table 9, a number of other commenters expressed surprise that CMS seemed to be suggesting that any code on the MPC list could be classified as potentially misvalued. Many commenters noted that the MPC list of codes is considered the ``gold standard'' within the PFS and it is used to help judge the appropriate relativity of procedures across specialties. A number of commenters assured CMS that the codes on the MPC list have been thoroughly vetted and, therefore, these commenters took issue with CMS for implying that the codes could somehow be considered potentially misvalued. Specifically, one commenter noted, ``[t]he assumption of the specialties, the RUC and CMS has been that these services are appropriately valued and well established.'' Another commenter expressed the concern as follows:

``[c]hallenging the rank order of the MPC list essentially negates 20 years of RUC work. Obtaining new data to validate the old data inevitably leads to the problem of what should be done if the data yield different results. Is there any reason to believe that a newer survey is a more accurate survey, or that the data analysis and subsequent opinion of the current or future RUCs will be more valid than that of previous RUCs? Admittedly data collection methods have become more refined in the past 20 years, but that neither means nor implies that relativity amongst physician services has changed.'' Some commenters reminded CMS that the AMA RUC is already planning to review some codes on the MPC list in the coming year, while other commenters noted that some of the codes on the MPC list have been reviewed by the

AMA RUC within the past 6 years. Some commenters did not believe that some of the well-established services on the MPC list would need another review and that the resources required to re-review such services could be better used elsewhere. Furthermore, some commenters believe that if a code has been surveyed as part of the potentially misvalued services initiative during the last 5 years and it is identified again using a different screen, that it need not be resurveyed again.

Finally, several commenters noted that while reviewing all the codes on the MPC list would ``be a substantial undertaking for the RUC, properly valuing these services will help restore equity in the physician payment system.'' The commenters further suggested that CMS should specify to the AMA RUC what it considers good survey methodology, including the use of peer review and time studies.

Response: We note that the vast majority of commenters, whether they supported or opposed our proposal, acknowledged the significant and central role that the MPC list plays in the valuation of services under the PFS. Because it is currently the ``gold standard'' to which other codes, across specialties, are compared, we agree with the commenters who suggested that codes on this list should be vetted, though we disagree that we should assume this has been done or occurs automatically and systematically. We also acknowledge that the AMA RUC recently has reviewed some of the codes and is planning to review more codes on the MPC list. Our proposal suggested prioritizing the review of the codes by ranking them according to utilization which, in our view, would potentially provide the most immediate benefit to the system.

If a code on the MPC list has not been reviewed recently--certainly more recently than 6 years ago--we believe that the code is vulnerable to being potentially misvalued and that the misvaluation of an MPC code could disproportionately affect the correct valuation of other related services under the PFS. Given the rapid changes in medical practice, we have no reason to believe that the relativity of the MPC codes would not have changed over the past 20 years and we would expect that more recent survey data would more accurately reflect the physician work in current medical practice. If the codes are resurveyed and newer more accurate data are available, we would support using the most recent available data to value physician work under the PFS, which is consistent with our general policy to use the most current data whenever possible and practicable to update the PFS.

Given the evolving review process of the AMA RUC over the past several years, CMS' strong interest in ensuring current and appropriate physician work values for PFS services, and the increased emphasis on revaluing established services that are potentially misvalued, we are requesting that the AMA RUC provide a current and comprehensive recommendation on the appropriate physician work value, including describing and affirming the methodology for the recommended work value, for all of the codes listed in Table 9. To the extent the AMA

RUC chooses to limit its work in reexamining MPC codes that have recently been evaluated, consistent with our usual practice, we will consider the context when we evaluate the AMA RUC's recommendation for the value of the code.

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Although valuation is ultimately our responsibility, the AMA RUC and CMS remain partners in ensuring the appropriate valuation of physician work for services under the PFS and we believe our proposal serves to enhance this process. Accordingly, after consideration of the public comments we received, we are finalizing our CY 2011 proposal and we look forward to receiving the AMA RUC's recommendations for the codes listed in Table 9. b. Codes With Low Work RVUs Commonly Billed in Multiple Units Per

Single Encounter

Consistent with section 1848(c)(2)(K)(ii) of the Act (as added by section 3134 of the ACA) which identifies categories of potentially misvalued codes for our review, we believe services with low work RVUs that are commonly billed with multiple units in a single encounter are an additional appropriate category for identifying potentially misvalued codes. An example of a high multiple/low work RVU service is

CPT code 95004 (Percutaneous tests (scratch, puncture, prick) with allergenic extracts, immediate type reaction, including test interpretation and report by a physician, specify number of tests). For purposes of compiling a list of the high multiple/low work RVU services, we defined a high multiple service as one that is commonly performed in multiples of 5 or more per day. Then, we selected from high multiple services with work RVUs of less than or equal to 0.5

RVUs. We note that in selecting 5 per day as the minimum threshold for the number of common services performed in a multiple service encounter, we intended to establish a meaningful threshold which, in conjunction with the threshold for work RVUs of 0.5 RVUs or less, would produce a reasonable number of services for the RUC to review that have substantial total work RVUs for the comprehensive service furnished during a single treatment. That is, as a general example, with a work

RVU threshold of 0.5 RVUs and a multiple threshold of 5 per day, the total work RVUs for a typical treatment would equate to 2.5 RVUs, which is approximately comparable to a high level office visit, an interpretation of a complex imaging procedure, or a minor surgical procedure.

In the CY 2011 PFS proposed rule (75 FR 40069), we requested that the AMA RUC review the codes in Table 10.

Table 10--Codes With Low Work RVUs That are Commonly Billed in Multiple

Units Referred for AMA RUC Review

CPT code

Short descriptor

95904......................... Sense nerve conduction test. 17003......................... Destruct premalg les, 2-14. 95004......................... Percut allergy skin tests. 11101......................... Biopsy, skin add-on. 95024......................... Id allergy test, drug/bug. 76000......................... Fluoroscope examination. 95144......................... Antigen therapy services. 95010......................... Percut allergy titrate test. 88300......................... Surgical path, gross. 95027......................... Id allergy titrate--airborne. 95015......................... Id allergy titrate--drug/bug. 95148......................... Antigen therapy services.

c. Codes With High Volume and Low Work RVUs

We believe that codes that have low work RVUs but are high volume based on claims data are another category of potentially misvalued codes. Although these codes have low work RVUs (less than or equal to 0.25 RVUs), the high utilization of these codes represents significant expenditures under the PFS such that their appropriate valuation is especially important. Table 11 contains a list of such codes and we requested that the AMA RUC review these codes in the CY 2011 PFS proposed rule (75 FR 40069).

Table 11: Codes With Low Work RVUs That Are High Volume Referred for AMA

RUC Review

CPT code

Short descriptor

71010.......................... Chest x-ray. 73510.......................... X-ray exam of hip. 97035.......................... Ultrasound therapy. 88313.......................... Special stains group 2. 73630.......................... X-ray exam of foot. 72100.......................... X-ray exam of lower spine. 73030.......................... X-ray exam of shoulder. 73562.......................... X-ray exam of knee, 3. 73560.......................... X-ray exam of knee, 1 or 2. 94010.......................... Breathing capacity test. 77052.......................... Comp screen mammogram add-on. 88304.......................... Tissue exam by pathologist. 73564.......................... X-ray exam, knee, 4 or more. 72170.......................... X-ray exam of pelvis. 74000.......................... X-ray exam of abdomen. 73610.......................... X-ray exam of ankle. 11719.......................... Trim nail(s). 73620.......................... X-ray exam of foot. 92567.......................... Tympanometry. 73110.......................... X-ray exam of wrist. 73130.......................... X-ray exam of hand. 93701.......................... Bioimpedance, cv analysis. 72040.......................... X-ray exam of neck spine. 92543.......................... Caloric vestibular test.

Comment: A number of commenters agreed with CMS' proposal for the

AMA RUC to review codes with low work RVUs that are commonly billed with multiple units, and codes with high volume and low work RVUs.

Other commenters did not support these proposals based on a belief that just because a code has low work RVUs, the conclusion should not necessarily be drawn that the code is potentially misvalued.

Response: While we do not believe that low work RVUs automatically indicate that the code is misvalued, we believe that some codes in this category may be vulnerable to being potentially misvalued because they have not been subject to review recently, there are particular challenges associated with establishing appropriate low work RVUs for services, and these services would not likely be subject to AMA RUC revaluation without CMS' recommendation. Accordingly, after consideration of the public comments we received, we are finalizing our

CY 2011 proposal and we look forward to receiving the AMA RUC's recommendation for the codes listed in Tables 10 and 11. d. Codes With Site-of-Service-Anomalies

In previous years, we requested that the AMA RUC review codes that, according to the Medicare claims database, have experienced a change in the typical site of service since the original valuation of the code.

For example, we have found services that originally were furnished in the inpatient setting but for which current claims data show the typical case has shifted to being furnished outside the inpatient setting. Since the procedures were typically performed in the inpatient setting when the codes were originally valued, the work RVUs for these codes would have been valued to include the inpatient physician work furnished, as well as to reflect the intensive care and follow-up normally associated with an inpatient procedure. If the typical case for the procedure has shifted from the inpatient setting to an outpatient or physician's office setting, it is reasonable to expect that there have been changes in medical practice, and that such changes would represent a decrease in physician time or intensity or both. The

AMA RUC reviewed and recommended to CMS revised work RVUs for 29 codes for CY 2009 and 11 codes for CY 2010 that were identified as having site-of-service anomalies.

In the CY 2010 PFS proposed and final rules with comment period (74

FR 33556 and 74 FR 61777, respectively), we encouraged the AMA RUC to utilize the building block methodology when revaluing services with site-of-service

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anomalies. Specifically, where the AMA RUC has determined in its review that changes in the inclusion of inpatient hospital days, office visits, and hospital discharge day management services (that is, the

``building blocks'' of the code) are warranted in the revaluation of the code, we asked the AMA RUC to adjust the site-of-service anomaly code for the work RVUs associated with those changes.

Additionally, we suggested that in cases where the AMA RUC has adjusted the pre-service, intra-service and post-service times of the code under review, the AMA RUC should also make associated work RVU adjustments to account for those changes. However, we remained concerned that in the AMA RUC's recommendations of the work RVUs for the CYs 2009 and 2010 site-of-service anomaly codes, the AMA RUC may have determined that eliminating or reallocating pre-service and post- service times, hospital days, office visits, and hospital discharge day management services was appropriate to reflect the typical case that is now occurring in a different setting, but the work RVUs associated with those changes may not have been systematically extracted or reallocated from the total work RVU value for the service.

In the CYs 2009 and 2010 PFS final rules with comment period (73 FR 69883 and 74 FR 61776 through 61778, respectively), we indicated that although we would accept the AMA RUC valuations for these site-of- service anomaly codes on an interim basis through CY 2010, we had ongoing concerns about the methodology used by the AMA RUC to review these services. We requested that the AMA RUC reexamine the site-of- service anomaly codes and use the building block methodology to revalue the services (74 FR 61777). We also stated that we would continue to examine these codes and consider whether it would be appropriate to propose additional changes in future rulemaking.

Accordingly, in preparation for CY 2011 rulemaking, we conducted a comprehensive analysis of the codes that the AMA RUC reviewed for CYs 2009 and 2010 due to site-of-service anomaly concerns. We systematically applied the reverse building block methodology to the 29 codes from CY 2009 and 11 codes from CY 2010 as follows:

First, we obtained the original work RVU value assigned to the code (this is the ``starting value'') and made a list of the building block services with RVUs that were originally associated with the code (that is, before the AMA RUC reviewed the code for site-of- service anomalies).

Next, we examined the AMA RUC-recommended changes to the building blocks of the code.

We then deducted the RVUs associated with the AMA RUC's recommended eliminations from the code's starting RVU value.

Generally, the AMA RUC eliminated inpatient hospital visit building blocks from the value of the code since the site-of-service for the code has shifted from the inpatient setting to another setting. We noted in some cases, the AMA RUC left an inpatient hospital visit in the valuation of the code. We believe this is inconsistent with the change in the site-of-service to non-inpatient settings. Accordingly, we adhered to the methodology and deducted the RVUs associated with all inpatient hospital visits from the starting value. In cases where the

AMA RUC recommended adding or substituting outpatient visits, we also added or substituted the RVUs associated with those changes to the starting value. If the AMA RUC recommended changes to the pre-, intra-, or post-service times, we calculated the incremental change in RVUs associated with that time and either added or deducted that RVU amount from the starting value. We noted that the RVU values associated with the incremental time change were calculated using the intensity associated with the particular pre-, intra-, or post-period. For the intensity of the intra-service period, we utilized the original IWPUT associated with the code. The AMA RUC generally recommended allowing only half of a hospital discharge day management service for the site- of-service anomaly codes. That is, CPT code 99238 (Hospital discharge day management; 30 minutes or less) has a work RVU value of 1.28; therefore, half the value associated with CPT code 99238 is 0.64.

Accordingly, if a code had one CPT code 99238 listed as part of the original valuation, we deducted 0.64 RVUs from the starting value.

We standardized the methodology so that each of the site-of-service anomaly codes had half of a hospital discharge day management service value accounted in the valuation. Finally, we noted that while we eliminated the RVUs associated with all inpatient hospital visits built into the code's starting value, because the typical case no longer occurs in the inpatient setting, we allowed for the possibility that in some cases, some part of the work which had been furnished in the inpatient setting may continue to be furnished even in the outpatient setting. Therefore, to be conservative in our deductions of work RVUs associated with the inpatient hospital codes from the starting values, we allowed the intra-time of any inpatient hospital visits included in the original valuation to migrate to the post-service period of the code. Accordingly, while we deducted the full RVUs of an inpatient hospital visit from the starting value, we added the intra-service time of the inpatient hospital visit to the post-service time of the code and accounted for the incremental change in RVUs. The following description provides an example of our methodology.

CPT code 21025 (Excision of bone (e.g., for osteomyelitis or bone abscess); mandible) has a starting value of 11.07 RVUs. Table 12 shows the building blocks that are included in the original valuation of the code.

Table 12

Median intra-

Immediate post-

Original

Pre-service time

service time

service time

99231

99232

99238

99211

99212

99213

IWPUT

75 min........................ 120 min......... 43 min.......... 1 visit.......... 1 visit.......... 1 visit.......... 2 visits......... 2 visits......... 2 visits.........

0.0145

(0.76 RVUs)...... (1.39 RVUs)...... (1.28 RVUs)...... (0.36 RVUs)...... (0.96 RVUs)...... (1.94 RVUs)......

The AMA RUC removed two inpatient hospital visits and reduced the outpatient visits from 6 to 4 visits. Table 13 shows the building blocks that were recommended for CY 2009 by the AMA RUC after its review of the code for site-of-service anomalies.

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Table 13

Median intra-

Immediate post-

Original

Pre-service time

service time

service time

99231

99232

99238

99211

99212

99213

IWPUT

85 min........................ 90 min.......... 30 min..........

2 visits......... 2 visits.........

0.0530

Next we calculated the RVUs associated with the changes to the building blocks recommended by the AMA RUC. We note that the immediate post-service value of 0.38 RVUs (Table 14) includes 30 minutes of intra-service time from inpatient hospital CPT code 99231 (Level 1 subsequent hospital care, per day). Also, the median intra-service value of 0.44 RVUs (Table 14) was determined using the starting IWPUT value of 0.0145. Additionally, our methodology accounted for a half of a hospital discharge day management service (CPT code 99238) for the site-of-service anomaly code. Table 14 shows the RVU changes to the building blocks that were calculated based on the methodology discussed above.

Table 14

Median intra-

Immediate post-

Pre-service time

service time

service time

99231

99232

99238

99211

99212

99213

0.22 RVUs...................... -0.44 RVUs........ 0.38 RVUs......... -0.76 RVUs......... -1.39 RVUs........ -0.64 RVUs........ -0.36 RVUs........ .................. ..................

In the final step, the RVUs associated with the changes to the building blocks recommended by the AMA RUC (Table 14) were deducted from or added to the starting value of 11.07 RVUs, which resulted in the CY 2011 reverse building block value of 8.08 RVUs (11.07 + 0.22- 0.44 + 0.38 - 0.76 - 1.39 - 0.64 - 0.36 = 8.08).

The methodology discussed above was applied to each of the site-of- service anomaly codes from CYs 2009 and 2010 and the results are summarized in Tables 15 and 16.

BILLING CODE 4120-01-P

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GRAPHIC

TIFF OMITTED TR29NO10.245

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GRAPHIC

TIFF OMITTED TR29NO10.246

BILLING CODE 4120-01-C

For most codes in Tables 15 and 16, the CY 2011 reverse building block methodology produced a value that was somewhat lower than the AMA

RUC-recommended value. While our results suggested that the majority of the codes with site-of-service anomalies continue to be overvalued under the AMA RUC's most recent recommendations, we also found that the methodology may produce a result that is considerably reduced or, in several cases, a negative value. We understand that in previous years, stakeholders have expressed confusion as to why the application of a building block methodology would produce negative values. We believe in some cases, the starting value, that is, the original work RVU, may have been misvalued using building block inputs that were not consistent with the service, although the overall work value of the code may have been consistent with the values for other similar services. Moreover, a number of these services are the Harvard-valued codes, for which the RVUs were established many years ago based on historical inputs that may no longer be appropriate for the code. An attempt to extract the RVUs associated with these inappropriate inputs through the reverse building block methodology could produce aberrant results. Furthermore, in some cases, we noticed that the original IWPUT of the code was negative even before the code was reviewed by the AMA

RUC for a site-of-service anomaly. A negative value for the IWPUT is counterintuitive to the IWPUT concept, indicating that the code was originally misvalued at the building block level. At a minimum, we believe that in cases where the reverse building block methodology produced aberrant results, and where clinical review indicated a need for further analysis, the codes should be referred back to the AMA RUC for review and new valuation should be performed based on the building block methodology.

We noted the application of the reverse building block methodology is an objective way to account for changes in the resources resulting from the change in the site-of-service in which the typical service is furnished. However, because relative values under the PFS are

``relative,'' that is, where work relative value units for a code are established relative to work relative value units for other codes, the recommended methodology of valuing services based on input building blocks is best applied within the context of the AMA RUC discussion.

For example, we recognize that the AMA RUC looks at families of codes and may assign RVUs based on a particular code ranking within the family. This method of valuing services preserves relativity within the relative value scale for that code family. However, we have stated that we believe the relative value scale requires each service to be valued based on the resources used in furnishing the service as specified in section 1848(c)(1)(A) of the Act, which defines the physician work component to include ``the portion of the resources used in furnishing the service that reflects physician time and intensity in furnishing the service.'' Furthermore, section 1848(c)(2)(C)(i) of the Act specifies that ``the Secretary shall determine a number of work relative value units (RVUs) for the service based on the relative resources incorporating physician time and intensity required in furnishing the service.'' Read together, these two sections of the statute support our intention to rely on the building block methodology to determine appropriate work RVUs for codes.

We noted that we continue to rely on the extensive expertise provided by the AMA RUC to recommend appropriate input building blocks for codes. Additionally, the AMA RUC's unique infrastructure and broad perspective permits the valuation of a code within the context of relativity to the entire relative value system. Therefore, we believe that the recommended methodology of valuing services based on input building blocks is best applied within the context of the AMA RUC discussion.

Accordingly, in the CY 2011 PFS proposed rule (75 FR 40072), we requested that the AMA RUC review the CPT codes displayed in Tables 15 and 16. In addition, where the application of the CY 2011 reverse building block methodology produced an aberrant result that is clearly not a reflection of physician work for the service, we requested that the AMA RUC review the

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input building blocks and recommend an appropriate RVU value that is both consistent with the building blocks of the code and appropriate relative to the values for other codes in the family. For other codes where the application of the CY 2011 reverse building block methodology produced a result that is consistent with the physician work for the service, we encouraged the AMA RUC to confirm the values and recommend these work values for CY 2011. In this way, we hoped to receive new AMA

RUC recommendations for all of the codes in Tables 15 and 16 for CY 2011. Furthermore, we indicated that if the recommendations that we received from the AMA RUC were not consistent with the building block methodology and not appropriate relative to the values of other services, and the application of the CY 2011 reverse building block methodology produced a result that CMS medical advisors believe is consistent with the work for the service, we proposed to adopt the CY 2011 reverse building block methodology values that are listed in

Tables 15 and 16 for CY 2011. In cases where the reverse building block methodology produced a negative work value, we suggested that the AMA

RUC review and revise the building blocks of the code so that a new valuation could be determined based on the building block methodology.

For such codes, if the revised recommendations that we hoped to receive from the AMA RUC were still not consistent with the building block methodology upon revision, because we could not pay for these services based on negative work RVUs, we proposed to modify the AMA RUC- recommended values for these codes as CMS determined to be clinically appropriate and adopt the CMS-modified RVUs on a interim final basis for CY 2011.

In their future work, we urged the AMA RUC to use the building block methodology when valuing services or provide CMS with extensive rationale for cases where the AMA RUC believes the building block methodology is inappropriate for a specific code. Since section 1848(c)(2)(L) of the Act (as added by section 3134 of the ACA) specifies that the Secretary shall establish a process to validate work

RVUs of potentially misvalued codes under the PFS, as we have discussed earlier in this section, we believe codes that are valued using the building block methodology would be more likely to meet the standards of a systematic RVU validation process that could be developed in accordance with the requirements of the statute.

Comment: While several commenters supported CMS' recommendation to use the reverse building block methodology to value physician work for codes identified as having site-of-service anomalies, the majority of commenters strongly opposed the reverse building block methodology, expressing concern that the methodology produced very low or negative work RVUs for a number of the codes listed in Tables 14 and 15. Several letter writing campaigns by groups of providers and beneficiaries affected by some of the codes listed in Tables 14 and 15 produced scores of comments expressing confusion and alarm that CMS appeared to be on the verge of finalizing negative work RVUs. Some commenters noted that the values calculated by the application of the reverse building block methodology would result in rank order anomalies across the PFS.

Many commenters reiterated CMS' observation that some of the codes were originally Harvard-valued, for which the RVUs were established many years ago based on historical inputs that may no longer be appropriate for the code, and an attempt to extract the RVUs associated with these inappropriate inputs through the reverse building block methodology would produce aberrant (that is, very low or negative) results. Some commenters disagreed with CMS' statement that if the typical case for the procedure has shifted from the inpatient setting to an outpatient or physician's office setting, it would be reasonable to expect that there have been changes in medical practice, and that such changes would represent a decrease in physician time, or intensity, or both. These commenters believe that that this assumption is fundamentally wrong and that the reverse actually may be true. One commenter noted, ``When a procedure migrates from the inpatient to the outpatient setting, the physician work and practice expense actually increase. The result is more office visits, more utilization of office staff, more consumption of office supplies, and no decrease in legal liability to the physician (and in some instances increased legal liability as functions formerly performed by hospital staff are now done by physician office staff).''

A number of commenters asserted that any mathematical or computational methodology used to value physician work is simply absurd. Many commenters stated their preference for the AMA RUC's established valuation process which the commenters believe is based on specialty society survey data. Other commenters asserted that the AMA

RUC's use of magnitude estimation is the only methodology that makes sense in assigning physician work values to individual services because the PFS is a relative system and maintaining appropriate relativity between the services is paramount in valuing physician work.

Response: We acknowledge that commenters overwhelmingly objected to the proposed reverse building block methodology because, in some cases, it produced very low or negative physician work values. While we explained in the proposed rule (75 FR 40071 through 40072) the possible reasons why negative values could be generated in the application of the reverse building block methodology, the commenters generally disregarded this explanation and summarily dismissed the methodology as invalid based on the reasoning that negative work values are absurd.

Responding to the commenters who were concerned that CMS was preparing to implement negative work RVUs imminently, we assure the commenters that at no time was this a possibility, as we made clear in the CY 2011

PFS proposed rule (75 FR 40072) where we acknowledge that we could not pay for services based on negative work RUVs. As we stated in the proposed rule, in cases where the reverse building block methodology produced a negative work value, we suggested that the AMA RUC review and revise the building blocks of the code so that a new valuation could be determined based on the building block methodology. We further proposed that if we did not believe the AMA RUC recommended values were consistent with the building block methodology, we would modify the recommended values as we determined to be clinically appropriate and adopt the modified RVUs on an interim final basis for CY 2011.

The AMA RUC has not provided revised work recommendations to us for these codes for CY 2011. Therefore, in light of the strong public opposition to the reverse building block methodology and since we remain convinced that the values for the codes with site-of-service anomalies listed in Tables 14 and 15 continue to be misvalued based on our clinical review of the building blocks for those services as recommended previously by the AMA RUC, we believe that the most appropriate action is to continue to await the further AMA RUC review of these codes that we requested in the CY 2011 PFS proposed rule (75

FR 40072). However, after consideration of the public comments we received, we are modifying our CY 2011 proposal and we will not apply the reverse building block methodology to value any of these codes for

CY 2011 as we proposed. We

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are requesting that the AMA RUC reconsider its previously recommended values that have been applied on an interim basis in CYs 2009 and 2010, as applicable, and revise the work RVUs to better reflect the intensity of the services and the revised physician times and post-procedure visits included in the valuation of these codes. As we stated in the CY 2011 PFS proposed rule (75 FR 40072), we suggest that the AMA RUC review and revise the building blocks of the codes so that a new valuation can be determined based on the building block methodology.

Until we receive the revised values from the AMA RUC for CY 2012 and can make a determination regarding them, we will continue to accept the existing AMA RUC-recommended work RVUs listed in Tables 14 and 15 on an interim basis for CY 2011. We would follow our usual method of reviewing the AMA RUC recommendations in the context of the associated valuation methodologies it used for CY 2012 and would either accept the recommendations for these codes or provide alternative work values that would be adopted on an interim final basis for CY 2012 and open to public comment on the CY 2012 PFS final rule with comment period. e. Codes With ``23-hour'' Stays

In the CY 2010 PFS proposed rule (74 FR 33557), we requested that the AMA RUC review services that are typically performed in the outpatient setting and require a hospital stay of less than 24 hours.

We stated in the proposed rule that we believed these to be primarily outpatient services and expressed concern that the value of evaluation and management (E/M) visits for inpatients was inappropriately included in the valuation of codes that qualify as ``23-hour stay'' outpatient services.

We received a number of comments in response to the discussion in the CY 2010 proposed rule. The AMA RUC stated that it already values stays of less than 23 hours appropriately by reducing the hospital discharge day management service (that is, CPT code 99238), from 1 day to a half day. The AMA RUC also explained that when the AMA RUC refers to 23-hour stay services in discussions at AMA RUC meetings, it is referring primarily to services that are reported in the Medicare claims database as typically outpatient services, but where the patient is kept overnight and, on occasion, even longer in the hospital.

Because the AMA RUC believes the patient stays overnight in the hospital, it believes the inclusion of inpatient E/M visits to be appropriate in the valuation of this category of codes.

We believe that the 23-hour stay issue encompasses several scenarios. The typical patient is commonly in the hospital for less than 24 hours, which often means the patient may indeed stay overnight in the hospital. On occasion, the patient may stay longer than a single night in the hospital; however, in both cases, the patient is considered for Medicare purposes to be a hospital outpatient, not an inpatient, and our claims data support that the typical 23-hour stay service is billed as an outpatient service. Accordingly, we believe that the valuation of the codes that fall into the 23-hour stay category should not reflect work that is typically associated with an inpatient service. For example, inpatient E/M visit codes such as CPT codes 99231 (Level 1 subsequent hospital care, per day); 99232 (Level 2 subsequent hospital care, per day); and 99233 (Level 3 subsequent hospital care, per day), should not be included at the full value in the valuation of 23-hour stay services.

Currently, the valuation of 23-hour stay services is conducted in a nonuniform manner by the AMA RUC. The AMA RUC has indicated that it currently includes a half hospital discharge day management service and no hospital inpatient visits for outpatient services with expected hospital stays of 23 hours or less. In contrast, for those outpatient services where the AMA RUC believes that the recovery period could be longer than 23 hours, the AMA RUC stated in its comment on the CY 2010

PFS proposed rule that it currently includes a full hospital discharge day management service and one or more inpatient E/M visits in the code's value. However, we note the typical 23-hour stay service is billed as an outpatient service and so long as the typical case continues to be billed as an outpatient service, we believe the code should not incorporate physician work values for services that are typically associated with an inpatient service. In the CY 2010 PFS proposed rule and final rule with comment period (74 FR 33556 and 74 FR 61777, respectively), we stated that we believed the use of inpatient

E/M visit codes for services rendered in the post-service period for outpatient 23-hour stay procedures would result in overpayment for pre- and post-service work that would not be furnished. Accordingly, we proposed in the CY 2010 proposed rule (74 FR 33556 through 33557) not to allow any additional inpatient E/M service to be billed for care furnished during the post-procedure period when care is furnished for an outpatient service requiring less than a 24-hour hospital stay.

However, we find it is plausible that while the patient receiving the 23-hour stay service remains a hospital outpatient, the patient would typically be cared for by the physician furnishing the procedure during that post-procedure period. While we do not believe that post- procedure hospital ``visits'' would be at the inpatient level since the typical case is an outpatient who would be ready to be discharged from the hospital in 23 hours or less, we agree that the intra-service time of the inpatient hospital visit may be included in the valuation for the 23-hour stay code.

Accordingly, for CY 2011 we modified our proposed CY 2010 approach and suggested that in the future, when the AMA RUC reviews new and potentially misvalued codes that are identified as 23-hour stay services, the AMA RUC would apply the following methodology:

Begin with the starting RVU value of the 23-hour stay code under review and decrease the hospital discharge day management service from one day to a half day.

Deduct the RVUs of inpatient hospital visits from the starting RVU value.

Reallocate the time associated with the intra-service portion of the inpatient hospital visits to the immediate post-service time of the 23-hour stay code under review.

Example: A 23-hour stay code is currently valued at 15 RVUs and has 1 hospital discharge day management service and 1 level 3 subsequent hospital care visit incorporated in this value.

Applying step (1): 15-0.64* = 14.36

Applying step (2): 14.36-2** = 12.36

Applying step (3): 12.36 + (30 minutes x 0.0224)*** = 13.032 RVUs

* Value associated with \1/2\ hospital discharge day management service.

** Value associated with an inpatient hospital visit, CPT code 99233.

*** Value associated with the reallocated intra-service time multiplied by the post-service intensity of the 23-hour stay code.

Finally, we note that since work relative value units are established by the Secretary in the context of relativity to other codes in the system, the recommended methodology for the evaluation of 23-hour stay codes is best applied within the context of relativity. We appreciate that the AMA RUC has the ability to assess the 23-hour stay code after application of the recommended methodology to ensure

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appropriate relativity of this code and other codes within the system.

We strongly encourage the AMA RUC to apply the recommended methodology to ensure the consistent and appropriate valuation of the physician work for these services.

Comment: A number of commenters asserted that if a service is performed in the hospital and the patient stays overnight, the work of the physician is typically the same regardless of whether the hospital designates the patient receiving the services as an inpatient or outpatient. Other commenters supported CMS' position in that it is appropriate for physicians' services related to the post-procedure care of the patient to be recognized and the intra-service time of the inpatient hospital visit should be included in the valuation for the 23-hour stay code. Some commenters noted that recent issues associated with hospital observation care may also be impacting CPT observation care codes, and these commenters ``request that any changes in the 23+ hour stay policy be deferred until after the RUC conducts its consideration of hospital observation services in February 2011.''

Response: While some commenters advocated for a deferral on the issue of valuing 23-hour stay services, we note that a number of commenters supported CMS' proposed approach. As we stated in the CY 2010 PFS proposed rule (74 FR 33557) and affirmed in the CY 2011 PFS proposed rule (75 FR 40072), we believe these services, for a typical patient, would be considered for Medicare purposes to be hospital outpatient services, not inpatient services, and our claims data support that the typical 23-hour stay service is billed as an outpatient service. Furthermore, since the typical patient commonly remains in the hospital for less than 24 hours, even if the stay extends overnight, and discharge from the hospital is therefore imminent, we believe the acuity of the typical patient is less than that of a typical inpatient who is admitted to the hospital, resulting in less intensity for the physician work to care for the hospital outpatient immediately following a 23-hour stay procedure. Accordingly, we believe that the valuation of the codes that fall into the 23-hour stay category should not reflect physician work that is typically associated with an inpatient service. Furthermore, we do not believe that it would be more beneficial to suspend valuing 23-hour services in the manner we discussed in the proposed rule until after the AMA RUC's review of hospital observation care services. Even if the AMA RUC were to provide future recommendations to us for valuing surgical procedures in which hospital observation care services were substituted for hospital inpatient care visits, we believe that we should treat the valuation of the physician time in the same manner as discussed previously, that is, by valuing the intra-service time of the hospital observation care service in the immediate post-service time of the 23- hour stay code being valued.

Accordingly, in light of the support from the commenters, we are finalizing our proposed approach to valuing 23-hour stay services by allowing the intra-service portion of the subsequent hospital care visits (or observation care visits in the future if the AMA RUC were to recommend them instead as building blocks for outpatient surgical services) furnished to outpatients in the hospital post-procedure to be allocated to the immediate post-service time of the procedure to account for the physician work in these cases. We encourage the AMA RUC to apply this methodology itself in the recommendations it provides to us for valuing 23-hour stay codes, in order to ensure the consistent and appropriate valuation of the physician work for these services. 4. Expanding the Multiple Procedure Payment Reduction (MPPR) Policy to

Additional Nonsurgical Services a. Background

Medicare has a longstanding policy to reduce payment by 50 percent for the second and subsequent surgical procedures furnished to the same patient by the same physician on the same day, largely based on the presence of efficiencies in the practice expense (PE) and pre- and post-surgical physician work. Effective January 1, 1995, the MPPR policy, with the same percentage reduction, was extended to nuclear medicine diagnostic procedures (CPT codes 78306, 78320, 78802, 78803, 78806, and 78807). In the CY 1995 PFS final rule with comment period

(59 FR 63410), we indicated that we would consider applying the policy to other diagnostic tests in the future.

Consistent with recommendations of MedPAC in its March 2005 Report to Congress on Medicare Payment Policy, under the CY 2006 PFS, the MPPR policy was extended to the technical component (TC) of certain diagnostic imaging procedures performed on contiguous areas of the body in a single session (70 FR 70261). The reduction recognizes that, for the second and subsequent imaging procedures, there are some efficiencies in clinical labor, supplies, and equipment time. In particular, certain clinical labor activities and supplies are not duplicated for subsequent procedures and, because equipment time and indirect costs are allocated based on clinical labor time; those would also be reduced accordingly.

The imaging MPPR policy currently applies to computed tomography

(CT) and computed tomographic angiography (CTA), magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA), and ultrasound services within 11 families of codes based on imaging modality and body region. When we adopted the policy in CY 2007, we stated that we believed efficiencies were most likely to occur 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 (70 FR 45850). Therefore, the MPPR policy currently applies only to procedures involving contiguous body areas within a family of codes, not across families, and to those procedures that are furnished in a single session. Additionally, while the MPPR policy applies to TC-only services and to the TC of global services, it does not apply to professional component (PC) services.

Under the current imaging MPPR policy, full payment is made for the

TC of the highest-paid procedure, and payment is reduced by 25 percent of the TC for each additional procedure when an MPPR scenario applies.

We had originally planned to phase in the MPPR policy over a 2-year period, with a 25 percent reduction in CY 2006 and a 50 percent reduction in CY 2007 (70 FR 70263). However, the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171) capped the PFS payment amount for most imaging procedures at the amount paid under the hospital outpatient prospective payment system (OPPS). In view of the DRA, we determined that it would be prudent to retain the MPPR at 25 percent while we continued to examine the appropriate payment levels (71 FR 69659). The

DRA also exempted reduced expenditures attributable to the MPPR policy from the PFS budget neutrality provision. Most recently, effective July 1, 2010, section 3135(b) of the ACA increased the MPPR on the TC of imaging services under the policy established in the CY 2006 PFS final rule with comment period from 25 to 50 percent and exempted the reduced expenditures attributable to this further change from the PFS budget neutrality provision.

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In the July 2009 GAO report entitled, ``Medicare Physician

Payments: Fees Could Better Reflect Efficiencies Achieved when Services are Provided Together,'' the GAO recommended that we take further steps to ensure that fees for services paid under the PFS reflect efficiencies that occur when services are furnished by the same physician on the same beneficiary on the same day. The GAO recommended the following: (1) Expanding the existing MPPR policy to the PC to reflect efficiencies in physician work for certain imaging services; and (2) expanding the MPPR to reflect PE efficiencies that occur when certain nonsurgical, nonimaging services are furnished together. The

GAO also encouraged us to focus on service pairs that have the most impact on Medicare spending.

In the March 2010 report, MedPAC noted its concerns about mispricing of services under the PFS. MedPAC indicated that it would explore whether expanding the unit of payment through packaging or bundling would improve payment accuracy and encourage more efficient use of services.

In the CYs 2009 and 2010 PFS proposed rules (73 FR 38586 and 74 FR 33554, respectively), we stated that we planned to analyze nonsurgical services commonly furnished together (for example, 60 to 75 percent of the time) to assess whether an expansion of the MPPR policy could be warranted. MedPAC encouraged us to consider duplicative physician work, as well as PE, in any expansion of the MPPR policy. b. CY 2011 Expansion of the Imaging Technical Component MPPR Policy to

Additional Combinations of Imaging Services

Over the past 2 years, the AMA RUC has examined several services billed 90 percent or more of the time together as part of the potentially misvalued service initiative and, in several cases, created one code to describe the complete service, with a value that reflects the expected efficiencies. Notwithstanding the bundling work of the

RUC, there may be additional imaging and other diagnostic services that are furnished together less than 90 percent of the time where we could still expect efficiencies in the TC, and in some cases in the PC, resulting in potential overpayment for these services under current policy when furnished together.

Section 1848(c)(2)(K) of the Act (as added by section 3134 of the

ACA) specifies that the Secretary shall identify potentially misvalued codes by examining multiple codes that are frequently billed in conjunction with furnishing a single service, and review and make appropriate adjustments to their relative values. As a first step in applying this provision, we proposed a limited expansion of the current imaging MPPR policy for CY 2011. We will continue to review other possible expansions of the MPPR policy to the TC and/or PC of imaging procedures or other diagnostic tests for the future. Any further changes will be addressed in future rulemaking.

In a related policy for hospital outpatient payment of imaging services, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68559 through 68569), the OPPS adopted a policy to pay for two or more

CT and CTA, MRI and MRA, or ultrasound procedures furnished in the same session through a single composite ambulatory payment classification

(APC) group. These composite APC payments were based on the 11 families of codes subject to the MPPR under the PFS that were collapsed into 3 imaging families for the OPPS according to their modality--1 for ultrasound, 1 for CT and CTA, and 1 for MRI and MRA services.

At that time, we stated our belief that the contiguous body area concept that was incorporated in the PFS imaging families was not necessary for potential efficiencies to be achieved in an imaging session. We provided examples to illustrate that we would not expect second and subsequent imaging services of the same modality involving noncontiguous body areas to require duplicate facility resources

(comparable to the TC under the PFS) for clinical labor activities such as greeting the patient, providing education and obtaining consent, retrieving prior exams, setting up an intravenous infusion, and preparing and cleaning the room, any more than second and subsequent imaging procedures of the same modality involving contiguous body areas. While we noted that multiple imaging claims under the OPPS are generally within the same imaging modality and involve contiguous body areas the vast majority of the time, we estimated that the collapsed 3 families, as opposed to the 11 PFS families, would add 12 percent additional claims to those eligible for a single composite APC payment under the OPPS based on the provision of 2 or more imaging services in a single session, allowing us to capture additional claims with efficiencies.

Taking into consideration the OPPS policy that was adopted in the

CY 2009 OPPS/ASC final rule with comment period, for CY 2011 under the

PFS, we proposed to apply the MPPR regardless of family, that is, the policy would apply to multiple imaging services furnished within the same family of codes or across families. This proposal would simplify the current imaging MPPR policy in a way that is consistent with the standard PFS MPPR policy for surgical procedures that does not group procedures by body region. Therefore, the MPPR would apply to CT and

CTA, MRI and MRA, and ultrasound procedures services furnished to the same patient in the same session, regardless of the imaging modality, and not limited to contiguous body areas.

Because of the different pieces of equipment used for CT/CTA, MRI/

MRA, and ultrasound procedures, it would be unlikely that a single practitioner would furnish more than one imaging procedure involving 2 different modalities to one patient in a single session where the proposed MPPR policy would apply. On the other hand, while most multiple procedures furnished with a single modality in one session would involve procedures currently assigned to one of the 11 imaging families, it would not be uncommon for more than one imaging procedure of the same modality to be furnished across families and, like the scenario for hospital outpatient imaging services, we would expect efficiencies to occur in these cases. Therefore, we believe that an expansion of the current imaging MPPR policy to account for efficiencies in such situations would allow us to pay more appropriately for these multiple imaging procedure sessions, consistent with our ongoing efforts to address misvalued services.

The expansion of the imaging MPPR policy to include all of the current codes in a single family to which the standard 50 percent reduction for second and subsequent procedures would apply would reduce payment for 20 percent more services than the current MPPR policy under the PFS. Thus, in CY 2011, we would capture additional efficiencies and pay more appropriately in these cases. We note that section 1848(c)(2)B)(v)(VI) (as added by section 3135(b) of the ACA)) specifies that reduced expenditures attributable to the increase in the imaging

MPPR from 25 to 50 percent in CY 2011 are excluded from the PFS budget neutrality adjustment. However, the reduced payment for code combinations that would newly be subject to the imaging MPPR policy under this proposal would be made in a budget neutral manner under the

PFS, as these new combinations are not included under section 1848(b)(4)(D) (as added by section 3135(b) of the ACA), which addresses

``single-session imaging to

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consecutive body parts'' under the established imaging MPPR policy.

We also proposed to add the CY 2010 codes displayed in Table 17 of the CY 2011 PFS proposed rule (75 FR 40075) to the list of imaging services subject to the MPPR policy in CY 2011. These four codes (CPT codes 75771 through 75774) were newly created for CY 2010 and are similar to codes currently in imaging family 2, titled CT and CTA

(Chest/Thorax/Abdomen/Pelvis).

We further note that new CY 2010 CPT codes 74261 (Computed tomography (CT) colonography, diagnostic, including image postprocessing; without contrast material) and 74262 (Computed tomography (CT) colonography, diagnostic, including image postprocessing; with contrast material(s) including non-contrast images, if performed) were added to the CY 2010 MPPR policy through the

July 2010 PFS quarterly update, with a retroactive effective date of

January 1, 2010. These codes replaced CPT code 0067T (Computed tomographic (CT) colonography (that is, virtual colonoscopy); diagnostic) in CY 2010, which was on the list of procedures subject to the imaging MPPR policy prior to CY 2010.

As discussed earlier in this section, reduced expenditures attributable to the increase in the MPPR for multiple imaging procedures to consecutive body parts (that is, those previously designated in the same family of codes) are exempt from the budget neutrality provision of the PFS. However, the reduced expenditures attributable to the MPPR for combinations of multiple imaging procedures that we proposed for CY 2011 (the MPPR for multiple imaging procedures not involving consecutive body parts) would be subject to budget neutrality adjustment under the PFS. We note that this formulation for whether reduced expenditures are exempt from budget neutrality applies both to procedures currently subject to the imaging

MPPR and to new codes that would be subject to the policy in CY 2011 and in future years. To the extent that imaging procedures described by the new codes are furnished in combination with other procedures that are subject to the imaging MPPR on consecutive body areas, the reduced expenditures attributable to the MPPR for these combinations would be exempt from the PFS budget neutrality adjustment.

Comment: With one exception, the commenters uniformly opposed the proposal to consolidate the imaging families for application of the imaging MPPR and urged CMS not to finalize the proposal. The exception was MedPAC, which supported the policy as reasonable and consistent with the hospital OPPS policy on multiple imaging and the PFS MPPR policy for multiple surgical procedures, neither of which are limited to procedures involving contiguous body areas.

Many commenters pointed out that the AMA RUC has worked to resolve any duplication in the direct PE inputs for services commonly furnished together over the past few years. The commenters stated that new bundled services were implemented in CY 2010 and speculated that additional ones would be implemented in the future and, therefore, concluded that a general MPPR to adjust PFS payment when imaging services are commonly furnished together is not necessary. The commenters argued that any duplication in the PE should be resolved at the code pair level. The AMA RUC urged CMS to continue to work within the established processes and offered for its Practice Expense

Subcommittee to review specific code pairs about which CMS was concerned regarding potential PE duplication and recommend a course of action that would be fair and consistent.

Response: The imaging MPPR is not intended to supersede the AMA RUC process that values services described by CPT codes. We encourage the

AMA RUC to continue examining code pairs for PE duplication based upon the typical case and appropriately valuing new comprehensive codes for bundled services that are established by the CPT Editorial Panel.

However, we believe that it is necessary to address the PE duplication immediately for imaging code pairs that have not been recently reviewed or bundled into single comprehensive codes. We note that as more code combinations are bundled into a single complete service reported by one

CPT code, they would no longer be subject to the MPPR. For example, there are new CY 2011 codes to describe abdominal and pelvic CT scans furnished together, specifically CPT codes 74176 (Computed tomography, abdomen and pelvis; without contrast material); 74177 (Computed tomography, abdomen and pelvis; with contrast material); and 74178

(Computed tomography, abdomen and pelvis; without contrast material in one or both body regions, followed by with contrast material(s) and further sections in one or both body regions). We are accepting the AMA

RUC recommendations for the direct PE inputs for these codes for CY 2011 and, therefore, their TCs are valued accordingly. Whereas prior to

CY 2011, the 50 percent imaging MPPR would have applied to the TC of the second service when an abdominal and pelvic CT were furnished in the same imaging session, this will no longer be the case in CY 2011.

Instead, the TC payment for the comprehensive code will reflect the valuing of the specific services furnished in combination with one another. Thus, we believe our current and proposed MPPR formulations are consistent with the AMA RUC's work to review code pairs for potential PE duplication and to appropriately value comprehensive codes for a bundle of component services.

Comment: Numerous commenters opposed applying the MPPR to noncontiguous body area imaging services using the same modality and to combinations of imaging services involving different modalities. Many commenters indicated that there is no major duplication in clinical labor activities when two studies of noncontiguous body areas using a single imaging modality are furnished in the same session and even less duplication when imaging services are furnished in a separate session on the same day using different modalities. The commenters argued that the duplication in clinical labor activities that occurs in the pre- and post-operative periods for multiple surgical procedures does not apply to imaging services.

More specifically, several commenters observed that the minimal duplicate costs of a few minutes of technician time do not justify a 50 percent payment reduction in the TC for the second service. Some commenters also believe that the imaging MPPR creates an incentive for physicians to order separate procedures on different days, thereby discouraging efficiencies. In addition, the commenters contended that the imaging MPPR is detrimental to patient care, access, and convenience.

One commenter asserted that it is not appropriate to compare the

OPPS composite ambulatory payment classification (APC) groups to office-based imaging as a justification for expanding the imaging MPPR under the PFS. The commenter cited an analysis of OPPS payment demonstrating that CMS pays hospitals for the second imaging study at nearly 100 percent of the amount paid for a single study, concluding that not until the third study would the payment be reduced from the sum of what would otherwise be paid under the OPPS if the studies were performed alone.

Another commenter agreed that the current PFS imaging families could be further collapsed to eliminate the contiguous body area concept but opposed applying the MPPR across

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modalities. The commenter suggested establishing three families to parallel the modality-based APC groups used under the OPPS, that is,

CT/CTA, MRI/MRA, and ultrasound. Another commenter noted that highly specialized clinics often treat complex conditions and perform multiple imaging services on noncontiguous body areas primarily for good patient care. As an example of a situation when complex imaging services are used to diagnose and treat significant medical conditions, the commenter indicated that a CT of the chest may be furnished, resulting in a diagnosis of lung cancer. In addition, the same commenter noted that appropriate treatment of the patient's neurological signs and symptoms also requires a CT of the head, because primary lung tumors account for 50 percent of all metastatic brain tumors. The commenter explained that these medically necessary combinations of imaging services are often performed in a single imaging session. Results of the initial imaging service, contended the commenter, could change the course of treatment for the patient and it would be prudent not to delay or complicate a patient's treatment plan. The commenter also pointed out that it is a convenience to the patient to have same day access for all imaging services.

Another commenter acknowledged that while some efficiencies are gained in certain situations and settings when multiple imaging services are furnished together, the expanded MPPR policy would not appropriately pay for the additional studies required for the majority of patients with significant medical conditions. The commenter explained that highly organized clinics treating these complex patients often structure patient encounters so that there are intervening consultations with multiple providers and additional tests in between imaging services.

Response: While most multiple procedures furnished with a single modality in 1 session would involve procedures currently assigned to 1 of the 11 imaging families, it would not be uncommon for more than 1 imaging procedure of the same modality to be furnished across families, and we would expect efficiencies to occur in these cases. As noted by

MedPAC, the proposed PFS MPPR expansion to eliminate the concept of contiguous body areas as the basis for a payment reduction due to efficiencies is consistent with the established hospital OPPS policy on multiple imaging and the PFS MPPR policy for multiple surgical procedures, neither of which is limited to procedures involving contiguous body areas. While we acknowledge that the OPPS composite imaging APCs utilize a different payment methodology than an MPPR to reflect the level of efficiencies when multiple imaging services are furnished together, consideration of the specific body areas imaged is not an aspect of the OPPS policy. The OPPS methodology continues to distinguish among services using different imaging modalities in part because of the statutory requirement that APCs be clinically homogenous. This same limitation would not apply to an MPPR. Despite the differences in their payment methodologies, both the OPPS and the

PFS strive to recognize the efficiencies in the TCs when multiple imaging services are furnished together. We continue to believe that there are significant efficiencies in the TCs when multiple imaging procedures of the same modality are furnished on noncontiguous body areas in the same imaging a session, and believe that an expanded imaging MPPR under the PFS is an important policy refinement to pay more appropriately for the comprehensive imaging service under such circumstances.

Because most of the combinations of imaging services furnished in one session that are not now subject to the imaging MPPR occur within one modality, we believe it would be unnecessarily complex to continue separate families (even if fewer than 11) for different imaging modalities to address the limited circumstances when imaging services furnished with more than one modality are performed in a single imaging session. Even in these unusual cases, we would expect certain efficiencies in the TCs, such as the establishment of venous access only one time. Finally, the more general proposed policy would provide a streamlined basis for our further consideration of other possible expansions of an MPPR policy to the TC and/or PC of imaging procedures or other diagnostic tests in the future.

Consistent with our current expectations for provider ordering practices under the established imaging MPPR policy for single modality, contiguous body area imaging studies, under an expanded MPPR we would not expect providers to order multiple imaging procedures of different modalities or for noncontiguous body areas on different days or order different imaging sessions on the same day simply to garner increased payment unless it were medically reasonable and necessary that the studies be furnished on different days or in different sessions on the same day. However, where it is medically necessary to have intervening consultations among multiple providers or other diagnostic tests furnished to a patient between imaging services on the same day to which the MPPR would otherwise apply, such cases would constitute separate imaging sessions and the MPPR would not apply.

Comment: Many commenters addressed CMS' assertion that because of the different pieces of equipment used for CT/CTA, MRI/MRA, and ultrasound procedures it would be unlikely that a single practitioner would furnish more than one imaging procedure involving two different modalities to one patient in a single session where the proposed MPPR policy would apply. While most commenters agreed with this statement, the commenters questioned why CMS would implement the proposal if this were the case. When procedures are furnished across modalities, the commenters believe them to be separate and distinct procedures with little or no overlap and argue that efficiencies cannot be achieved.

The commenters asserted that CMS offered no data to support its expectation that efficiencies would occur when different imaging modalities are furnished at the same time. Many commenters requested a more rigorous analysis, validated evidence to support the proposed expansion, and an opportunity for stakeholders to comment on the analysis.

A number of the commenters agreed that specialized staff with different expertise and certification is often needed to furnish services within the different imaging modalities. When multiple imaging is necessary, the commenters explained that two appointments are created, and the patient is checked in twice, prepared and instructed twice, educated on each study independently, transported from one room to another, and furnished separate supplies such as contrast and IV tubing, following which the two rooms are cleaned.

Response: We agree with the majority of commenters that in most cases a practitioner would not furnish more than one imaging procedure involving two different modalities to one patient in a single session.

While there may be some instances where the MPPR applies to two different modalities used in a single session, the MPPR would not apply in most cases because this clinical scenario is uncommon. In response to the commenters who questioned why we proposed to apply an MPPR across modalities, we believe that if, in the unusual case, more than one imaging service of different modalities were

Page 73231

furnished to a patient in a single session, there would be some efficiencies in the TC, such as greeting the patient only one time and setting up one intravenous line. We acknowledge that the application of a general MPPR policy to numerous imaging service combinations may result in an overestimate of the efficiencies in some cases and an underestimate in others, but this can be true for any service paid under the PFS, and we believe it is important to establish a general policy to pay appropriately for the TCs of combinations of imaging services upon which we may consider building in the future. We do not believe that it is administratively efficient or necessary for appropriate payment to maintain modality-specific imaging families given the uncommon occurrences of pairs of imaging services involving different modalities furnished by one practitioner on the same day to a single patient that we observe in our claims data.

Comment: Several commenters generally opposed the inclusion of nondiagnostic radiation oncology imaging procedures in any future expansion of the MPPR policy, given the clinical differences between radiation oncology and diagnostic imaging. In addition, one commenter noted that cardiologists commonly provide echocardiography services and peripheral vascular ultrasound tests. While both types of services use ultrasound technology that resembles the technology used in the ultrasound procedures currently subject to the imaging MPPR, the commenter reported that these services are furnished using a different machine and different staff who have different expertise so the imaging

MPPR policy.

Response: We did not propose to expand the existing contiguous body area MPPR policy, which currently includes only nonobstetrical chest, abdominal, and pelvic ultrasound services, to include peripheral vascular ultrasound services or echocardiography services in CY 2011.

While we explained in the CY 2011 PFS proposed rule (75 FR 40074) that we would continue to review other possible expansions of the MPPR policy to the TC and/or PC of imaging procedures or other diagnostic tests for the future, we have not proposed to do so at this time.

Further changes to include services such as nondiagnostic radiation oncology imaging services or echocardiography or peripheral vascular ultrasound services would be addressed in future rulemaking.

Comment: A few commenters reported that it is often difficult for imaging providers to understand when an encounter begins and ends and, therefore, urged CMS to better define a single session. They explained that it is not always easy to identify when the use of the -59 modifier

(Distinct procedural services), denoting a separate session under the current imaging MPPR policy, is appropriate. This ambiguity leaves the responsibility for determining whether imaging services are furnished in a separate session to the judgment of the imaging technologist, leading to inconsistent determinations and, therefore, variable payment for the same services furnished in similar clinical scenarios. One commenter specifically requested further parameters of a separate encounter be defined to include the same exam room, a specific timeframe, or a specific action. Another commenter noted that distinguishing separate sessions is a particular challenge for ultrasound imaging.

Response: In the CY 2006 PFS final rule with comment period (70 FR 70262), we indicated that a single imaging session is one encounter where a patient could receive one or more radiological studies. If a patient has a separate encounter on the same day for a medically necessary reason and receives a second imaging service, this would represent a separate session. Physicians would report the -59 modifier to indicate multiple sessions and the MPPR would not apply. This same policy would continue in CY 2011 under the consolidation of the imaging families to expand the imaging MPPR under the PFS. We believe that providers' 5 years of previous experience with this policy should allow them to continue to appropriately distinguish separate imaging sessions by reporting the -59 modifier, even under the expanded MPPR policy. We may provide further subregulatory guidance to providers on this issue in the future in view of our CY 2011 expanded imaging MPPR policy if specific issues arise that we believe warrant further clarification regarding the characteristics of separate imaging sessions.

After consideration of the public comments we received, we are finalizing our proposal, without modification, to apply the 50 percent imaging MPPR to all of the ultrasound, CT, CTA, MRI, and MRA services to which the current contiguous body area and modality-specific policy applies, regardless of the specific combinations of imaging services furnished to the patient in a single session. We believe this proposal is consistent with our overall strategy to pay more appropriately for services that are commonly furnished together, consistent with section 1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) that instructs the Secretary to identify multiple codes that are frequently billed in conjunction with furnishing a single service, and review and make appropriate adjustments to their relative values.

As stated earlier in this section, expenditures attributable to the increase in the MPPR for multiple imaging procedures to consecutive body parts (that is, those previously designated in the same family of codes) are exempt from the budget neutrality provision of the PFS.

However, the reduced expenditures attributable to the MPPR for new combinations of multiple imaging procedures that we are finalizing for

CY 2011 (the MPPR for multiple imaging procedures not involving consecutive body parts) would be subject to budget neutrality adjustment under the PFS. We note that this formulation for whether reduced expenditures are exempt from budget neutrality applies both to procedures currently subject to the imaging MPPR and to new codes that are subject to the policy in CY 2011 and in future years. To the extent that imaging procedures described by the new codes are furnished in combination with other procedures that are subject to the imaging MPPR on consecutive body areas, the reduced expenditures attributable to the

MPPR for these combinations would be exempt from the PFS budget neutrality adjustment.

The complete list of codes subject to the CY 2011 MPPR policy for diagnostic imaging services is included in Addendum F to this final rule with comment period and the CY 2011 code additions to the MPPR policy are listed in Table 17. The codes being added to the policy are those we proposed, as well as new CY 2011 codes or newly covered codes that are clinically similar to the imaging codes subject to the MPPR in

CY 2010. The new codes include CPT codes 74176 (Computed tomography, abdomen and pelvis; without contrast material); 74177 (Computed tomography, abdomen and pelvis; with contrast material(s)); and 74178

(Computed tomography, abdomen and pelvis; without contrast material in one or both body regions, followed by contrast material(s) and further sections in one or both body regions). The newly covered codes are CPT codes 72159 (Magnetic resonance angiography, spinal canal and contents, with or without contrast material) and 73225 (Magnetic resonance angiography, upper extremity, with or without contrast material). These codes are being added on an interim final

Page 73232

basis and are open to public comment on this final rule with comment period. The complete list of CPT codes newly added to the diagnostic imaging MPPR for CY 2011 is displayed in Table 17 below.

TABLE 17--CPT Code Additions to the Diagnostic Imaging MPPR Policy for

CY 2011

Subject to comment in CY

CPT code

Short descriptor

2011 PFS final rule

72159......................... Mr angio spine w/o & w/ Yes. dye. 73225......................... Mr angio upr extr w/o Yes.

& w/dye. 74176......................... Ct abd & pelvis w/o

Yes. contrast. 74177......................... Ct abdomen & pelvis w/ Yes. contrast. 74178......................... Ct abd & pelv 1+

Yes. section/regns. 75571......................... Ct hrt w/o dye w/ca

No. test. 75572......................... Ct hrt w/3d image..... No. 75573......................... Ct hrt w/3d image,

No. congen. 75574......................... Ct angio hrt w/3d

No. image.

c. CY 2011 Expansion of the MPPR Policy to Therapy Services

In the July 2009 GAO report entitled, ``Medicare Physician

Payments: Fees Could Better Reflect Efficiencies Achieved when Services are Provided Together,'' the GAO found efficiencies when multiple physical therapy services were furnished in one session and concluded that an MPPR policy could be appropriate for these services. In the report, the GAO noted that officials from the AMA RUC explained that time spent on pre-service and post-service therapy activities is spread across the number of services in a typical session in order to avoid duplication of the PE for the services. Nevertheless, the GAO found that there was duplication of certain activities in the intra-service period, and provided the example of time spent testing range of motion or muscle flexibility that was duplicated in commonly observed code pairs.

In the typical clinical scenario for therapy services, we believe that therapy services are misvalued for PFS payment when multiple services are furnished to a patient in a single session because duplicate clinical labor and supplies are included in the PE of the services furnished. We believe this duplication should be accounted for under the PFS, as we currently account for efficiencies in multiple surgical and multiple diagnostic imaging procedures furnished in a single session. Over the past 2 years, the AMA RUC has examined several services billed 90 percent or more of the time together as part of its potentially misvalued service initiative and, in several cases, created one code to describe the complete service, with a value that reflects the expected efficiencies. Notwithstanding the AMA RUC's analyses, in most cases it has not created one code to describe a complete therapy service, in part because many of the core therapy CPT codes are timed codes based on increments of treatment time.

Therefore, in the CY 2011 PFS proposed rule (75 FR 40075), we proposed a further step to implement section 1848(c)(2)(K) of the Act

(as added by section 3134 of the ACA) that specifies that the Secretary shall identify potentially misvalued codes by examining multiple codes that are frequently billed in conjunction with furnishing a single service. For CY 2011 we proposed an MPPR policy for the HCPCS codes listed in Table 18, specifically the separately payable ``always therapy'' services that are only paid by Medicare when furnished under a therapy plan of care. These services are designated ``always therapy'' services regardless of who furnishes them and always require therapy modifiers to be reported, specifically -GP (Services rendered under outpatient physical therapy plan of care); -GO (Services rendered under outpatient occupational therapy plan of care); or -GN (Services rendered under outpatient speech-language pathology plan of care). The therapy codes are available in a file on the CMS Web site at: http:// www.cms.gov/TherapyServices/. We excluded both contractor-priced and bundled codes from Table 18 because, under our proposal, an MPPR would not be applicable for ``always therapy'' services furnished in combination with these codes. In the case of bundled codes that are not separately paid, there are no explicit efficiencies in the direct PE to be reflected in payment for the second and subsequent therapy services furnished to the patient on the same day. In the case of contractor- priced codes, there is no nationally established pricing that could be uniformly adjusted to reflect the expected efficiencies when multiple therapy services are furnished.

Table 18--Separately Payable ``Always Therapy'' Services Proposed as

Subject to the CY 2011 MPPR Policy *

CPT/HCPCS code

Short descriptor

92506......................... Speech/hearing evaluation. 92507......................... Speech/hearing therapy. 92508......................... Speech/hearing therapy. 92526......................... Oral function therapy. 92597......................... Oral speech device eval. 92607......................... Ex for speech device rx, 1hr. 92608......................... Ex for speech device rx addl. 92609......................... Use of speech device service. 96125......................... Cognitive test by hc pro. 97001......................... Pt evaluation. 97002......................... Pt re-evaluation. 97003......................... Ot evaluation. 97004......................... Ot re-evaluation. 97010......................... Hot or cold packs therapy. 97012......................... Mechanical traction therapy. 97016......................... Vasopneumatic device therapy. 97018......................... Paraffin bath therapy. 97022......................... Whirlpool therapy. 97024......................... Diathermy eg, microwave. 97026......................... Infrared therapy. 97028......................... Ultraviolet therapy. 97032......................... Electrical stimulation. 97033......................... Electric current therapy. 97034......................... Contrast bath therapy. 97035......................... Ultrasound therapy. 97036......................... Hydrotherapy. 97110......................... Therapeutic exercises. 97112......................... Neuromuscular reeducation. 97113......................... Aquatic therapy/exercises. 97116......................... Gait training therapy. 97124......................... Massage therapy. 97140......................... Manual therapy. 97150......................... Group therapeutic procedures. 97530......................... Therapeutic activities. 97533......................... Sensory integration. 97535......................... Self care mngment training. 97537......................... Community/work reintegration. 97542......................... Wheelchair mngment training. 97750......................... Physical performance test. 97755......................... Assistive technology assess. 97760......................... Orthotic mgmt and training. 97761......................... Prosthetic training. 97762......................... C/o for orthotic/prosth use.

G0281......................... Elec stim unattend for press.

Page 73233

G0283......................... Elec stim other than wound.

G0329......................... Electromagnetic tx for ulcers.

*Excludes contractor-priced and bundled codes.

We did not propose an MPPR policy for ``sometimes therapy'' services, specifically those services that may be furnished under a therapy plan of care or otherwise by physicians or NPPs as medical services. We believe that the care patterns are different for the latter group of services that may sometimes be furnished as therapy services, and we noted that they are less commonly furnished with multiple services in a single session than the ``always therapy'' services. In the discussion that follows, our reference to therapy services means those HCPCS codes designated annually as ``always therapy'' services by CMS.

Based on CY 2009 PFS claims data, we identified over 500 therapy service code pairs billed for the same patient in a single session. We then reviewed a sample of the most common therapy code pairs, specifically those high volume code pairs with more than 250,000 combined services per year, to examine the potential for duplication in the PE. These code pairs represented more than half of the occurrences of therapy services billed together. While we acknowledged that the PE inputs per service for some therapy services were included in the direct PE database based on one-half of the total PE inputs required for two services furnished in a single session, which would account for some duplication, this was not the case for all combinations of therapy services. Of the high volume therapy services examined, approximately one-fourth of the code pairs were not valued based on two services. In addition, we noted that the CY 2009 PFS claims data for services paid under the PFS (excluding services furnished in facility settings that were paid at PFS rates) show that when multiple therapy services are billed on a claim for the same date of service, the median number is four services per day. Therefore, even for those clinical labor times that may reflect the allocation of total time across two units of therapy services, we believe that some elements of the current PE inputs are duplicated based on current patterns of therapy service delivery where most multiple service claims involve delivery of more than two services in a session.

In the CY 2011 proposed rule (75 FR 40076), we stated that duplicate labor activities currently included in the PE for the service period for these high volume pairs of therapy services are as follows: clean room/equipment; education/instruction/counseling/coordinating home care; greet patient/provide gowning; obtain measurements, for example, ROM/strength/edema; and post-treatment patient assistance. The most common duplicate supply item included in the PE was the multispecialty visit pack. Examples of duplicated and unduplicated labor activities and supplies for two sample therapy code pairs and our estimates of potential clinically appropriate time and quantity reductions for multiple service sessions (which were also included in our proposed rule) are displayed in Table 19. We note that CY 2009 PFS claims data for these sample code pairs include over 3.4 million pairs of CPT codes 97112 (Therapeutic procedure, 1 or more areas, each 15 minutes; neuromuscular reeducation of movement, balance, coordination, kinesthetic sense, posture, and/or proprioception for sitting and/or standing activities) and 97110 (Therapeutic procedure, 1 or more areas, each 15 minutes; therapeutic exercises to develop strength and endurance, range of motion and flexibility) furnished by the same practitioner on the same day and over 500,000 pairs of CPT codes 97001

(Physical therapy evaluation) and 97140 (Manual therapy techniques (eg, mobilization/manipulation, manual lymphatic drainage, manual traction), 1 or more regions, each 15 minutes).

BILLING CODE 4120-01-P

Page 73234

GRAPHIC

TIFF OMITTED TR29NO10.247

Page 73235

GRAPHIC

TIFF OMITTED TR29NO10.248

BILLING CODE 4120-01-C

In the CY 2011 PFS proposed rule (75 FR 40078), we did not remove minutes for clinical labor tasks that were not duplicated. For example, for CPT code pair 97001 and 97140 the following tasks were not duplicated: post treatment patient assistance; prep and position patient; and prepare room, equipment, and supplies. In addition, we did not remove any supply items that would be required for only one of the separate services because these would not be duplicated in the PE applicable to the combination of services. We estimated no reduction for equipment time, even though efficiencies would be expected for equipment that is used in both services when they are furnished together. Finally, a corresponding reduction to the indirect expenses would be appropriate since indirect costs are allocated partially based on direct costs. For five high volume therapy code pairs that each occur over 2 million times in PFS claims for multiple therapy services and account for almost half of such claims, we estimated that the resulting reduction in the PE for the lower paying code would range from 28 to 56 percent.

As we summarized in the CY 2011 PFS proposed rule (75 FR 40078), given the duplicative clinical labor activities and supplies as shown in the code combination examples, we believe it would be appropriate to extend the MPPR policy that is currently applied to surgical services and the TC of imaging services, to the PE component of certain therapy services. Specifically, we proposed to apply a 50 percent payment

Page 73236

reduction to the PE component of the second and subsequent therapy services for multiple ``always therapy'' services furnished to a single patient in a single day. Because we believed it would be difficult to determine the precise beginning and end of therapy sessions and we did not believe that beneficiaries would typically have more than one therapy session furnished in a single day, we proposed to apply the 50 percent MPPR policy to the PE component of subsequent therapy services furnished to the same patient on the same day, rather than limiting the proposed policy to services furnished in the same session.

We noted that many therapy services are time-based CPT codes, so multiple units of a single code may be billed for a single session that lasts for a longer period of time than one unit of the code. The proposed MPPR policy would apply to multiple units of the same therapy service, as well as to multiple different services, when furnished to the same patient on the same day. Therefore, we proposed that full payment would be made for the service or unit with the highest PE and payment would be made at 50 percent of the PE component for the second and subsequent procedures or units of the same service.

We proposed that the work and malpractice components of the therapy service payment would not be reduced. For therapy services furnished by an individual or group practice or ``incident to'' a physician's service, the MPPR would apply to all ``always therapy'' services furnished to a patient on the same day, regardless of whether the services are furnished in one therapy discipline or multiple disciplines, for example, physical therapy, occupational therapy, or speech-language pathology. The MPPR policy would apply to both those services paid under the PFS that are furnished in the office setting and those services paid at the PFS rates that are furnished by outpatient hospitals, home health agencies, comprehensive outpatient rehabilitation facilities (CORFs), and other entities that are paid by

Medicare for outpatient therapy services. Table 20 provides a sample calculation of the current and proposed CY 2011 payment for multiple therapy services furnished in on the same day. For those services paid under the PFS, the PFS budget neutrality provision would apply so that the estimated reduced expenditures for therapy services would be redistributed to increase payment for other PFS services.

TABLE 20--Sample Payment Calculation for Multiple Therapy Services Furnished to a Single Patient on the Same Day

Proposed CY

Procedure 1

Procedure 1

Procedure 2

Current total 2011 total

Proposed payment calculation

Unit 1

Unit 2

payment

payment

Work...........................

$7.00

$7.00

$11.00

$25.00

$25.00 no reduction

PE.............................

$10.00

$10.00

$8.00

$28.00

$19.00 $10 + (0.5 x $10) + (0.5 x $8)

Malpractice....................

$1.00

$1.00

$1.00

$3.00

$3.00 no reduction

Total..........................

$18.00

$18.00

$20.00

$56.00

$47.00 $18 + $7 + (0.5 x $10) + $1 + $11

+ (0.5 x $8) + $1

In the CY 2011 PFS proposed rule (75 FR 40078), we stated that we believe the proposed therapy MPPR policy would provide more appropriate payment for therapy services that are commonly furnished together by taking into account the duplicative clinical labor activities and supplies in the PE that are not furnished more than once in the single therapy session. This approach is consistent with the statutory requirement for the Secretary to identify, review and adjust the relative values of potentially misvalued services under the PFS as specified by section 1848(c)(2)(K) of the Act (as added by section 3134 of the ACA). We also believe this proposed policy is responsive to continued concerns about significant growth in therapy spending and to

MedPAC and GAO recommendations regarding the expansion of MPPR policies under the PFS to account for additional efficiencies. We observed that paying more appropriately for therapy services based on PE relative values that are adjusted for the clinical scenario under which the services are furnished would result in reduced therapy expenditures, and beneficiaries would be able to receive more medically necessary outpatient therapy services before reaching the therapy cap. For a further discussion of potential alternatives to the therapy caps, we refer readers to section III.A.2. of this final rule with comment period.

Comment: Many commenters opposed application of the proposed MPPR policy to therapy services. The commenters characterized the proposal as drastic, arbitrary, and unfair, resulting in across-the-board cuts based on flawed assumptions that would lead to therapy underpayments that would jeopardize access to necessary care and harm patients. The commenters requested that CMS withdraw the proposal, study the issue further, and share the analyses with the public.

In contrast, MedPAC supported the general direction of the proposed policy, but suggested that CMS better justify how a 50 percent reduction would capture the duplicate inputs related to multiple therapy services performed in a single session. MedPAC also recommended that CMS request that the AMA RUC review the values of all outpatient therapy codes to ensure that the practice expenses are not duplicated, regardless of whether or not the current values of those codes assume that two services are furnished during a single visit.

Numerous commenters requested a detailed justification for the proposed policy's 50 percent reduction, including an explanation of the methodology used to calculate the new payments that would result. These commenters asked CMS to work with stakeholders to finalize a policy that would not adversely impact access to care, particularly in rural and other underserved areas. The commenters further urged consideration of other payment methods and alternatives to the therapy caps that would preserve and improve access to therapy services. The commenters stated that between 80 to 90 percent of physical therapy services furnished in private practices would potentially be subject to the

MPPR, concluding that the policy would result in payment decreases of 19.2 percent and 17.8 percent for physical therapy services in facilities

Page 73237

and offices, respectively, notably more than the CMS' impact estimate of 11 percent for the proposed rule.

The commenters provided analyses to show that the duplication of supplies is very limited and argued that a more thorough analysis of duplication based on expert clinical review would result in considerably lower estimates of duplication. For example, the AMA RUC explained that for a typical single session combination of 2 units of

CPT code 97110 (Therapeutic procedure, 1 or more areas, each 15 minutes; therapeutic exercises to develop strength and endurance, range of motion and flexibility) and one unit of 97140 (Manual therapy techniques (e.g., mobilization/manipulation, manual lymphatic drainage, manual traction), 1 or more regions, each 15 minutes), a $12 PE payment reduction from the MPPR would be applied to adjust for $3.60 in potentially duplicated costs.

Before implementing an MPPR, the commenters urged CMS to take time to ensure that individual services were valued correctly based upon the resources needed to deliver them. The commenters advised CMS to conduct a more thorough analysis, taking into consideration the fact that the direct PE inputs for therapy services were already reduced to avoid duplication. The commenters alleged that CMS provided incorrect examples of duplication in the proposed rule examples by overestimating the duplication compared to the standard time allocated by the AMA RUC for certain activities. The commenters explained that PE for therapy services was valued by the AMA RUC based upon three units of service, not two units of service as stated by CMS in the proposed rule. Three units of service are typical, and the commenters contended that no duplication of PE exists when the typical three units of service are delivered using typical time allotments for clinical labor activities.

The commenters submitted multiple examples of combinations of therapy services, using the most frequently billed therapy codes and providing valuations for each of the components of PE, such as pre-service and post-service physical therapy assistant activities. The commenters pointed out that in the case of single unit therapy claims, or claims with one therapeutic procedure and one modality, there would currently be underpayment based on how therapy services are valued. The commenters further argued that it would not be fair to apply the MPPR to all subsequent services when some of the code combinations are already undervalued.

Many commenters observed that the AMA RUC has worked in good faith to resolve any duplication in the PE inputs over the past few years and pointed out that CMS has historically accepted over 90 percent of the

AMA RUC's recommendations. In April 2010, some commenters reported that the AMA RUC reviewed high volume therapy code pairs that included the most frequently billed therapy CPT code 97110, and the commenters conveyed the AMA RUC's conclusion that there is no duplication in the work or PE inputs for the most frequently reported therapy codes.

The commenters pointed out that single comprehensive codes for certain bundles of component services were implemented in CY 2010, and that additional ones would be created in the future. Therefore, the commenters disagreed with CMS' reasoning for proposing a general MPPR that is not code pair-specific in the context of these ongoing efforts of the CPT Editorial Panel and the AMA RUC to revise the coding and values for services that are commonly furnished together. Instead, the commenters urged CMS to continue to work within the established processes and resolve duplication, where it exists, at the code pair level rather than with payment.

Response: We appreciate the detailed information provided by the commenters regarding the historical AMA RUC process to value the therapy codes and the additional examples of the practice expenses as they apply to the many combinations of therapy services that may be reported. We understand that the AMA RUC valued many of the therapy services based on certain assumptions about the typical combinations of services furnished in a therapy session. However, as the commenters pointed out, there are numerous combinations of therapy services observed in the PFS claims data that we posted on the CMS Web site under supporting files for the CY 2011 PFS proposed rule that are commonly furnished in the physician's office setting. In the context of this large number of commonly observed combinations, we do not believe that our usual PFS methodology of valuing the typical service adequately accounts for the duplication in PE that occurs in the many possible therapy service combinations. Although they are frequent, they do not represent the typical case used by the AMA RUC in valuing the individual component services and, thus, do not fully account for duplications in PE. We proposed the therapy MPPR in order to pay more appropriately for therapy services in general by adjusting for the duplicate payment for the PE that may occur when combinations of therapy services are furnished together.

We agree with the commenters that, when considering all claims for therapy services paid under the PFS, the median number of services is three. Thus, that number may have been appropriate for the AMA RUC to use in valuing therapy services. However, the median number of four services that we presented in the CY 2011 PFS proposed rule was based upon all claims for multiple therapy services, and did not include claims for a single therapy service. It was the multiple service claims that we examined for purposes of the MPPR analysis, and it is these claims to which the MPPR would apply. Therefore, we continue to believe that the median number of four is the appropriate reference point when evaluating an MPPR. We note further that when the AMA RUC valued certain therapy services based on the assumption that a combination of three types of therapy services would be furnished to the patient, then in the case of multiple service claims where the median number of services is four, some PE duplication would clearly occur for the typical multiple service case with more than three services.

Although we continue to believe that 50 percent would generally be an appropriate level for an MPPR for the PE component of payment for therapy services, consistent with the current PFS MPPR policies for imaging and surgical services and our PE overlap analysis of certain therapy code combinations for the CY 2011 PFS proposed rule, we acknowledge there are particular challenges associated with establishing an MPPR for therapy services to account for the duplication in PE. For example, the current coding structure for therapy services relies upon timed units in many cases, and as a result, the number of commonly observed combinations is very large. The

PE overlaps vary depending upon the specific combinations of services furnished to the patient, which may include evaluation services, therapeutic procedures, and therapeutic modalities. The common occurrence of such a great variety of multiple therapy code combinations contrasts with the relatively lesser number of combinations and/or frequency of combinations of surgical procedures or diagnostic imaging procedures to which the established PFS MPPR policies apply.

As the commenters pointed out, the direct PE inputs for certain therapy services were systematically established

Page 73238

based upon a standard AMA RUC methodology of three therapy services furnished in a session that included two therapeutic procedures and one therapeutic modality and that assigned certain PE inputs solely to the two therapeutic procedures. However, the scenarios utilized by the AMA

RUC in this process are an incomplete representation of the usual combinations of services reported when therapy services are furnished in a practitioner's office. For example, the most common combination of

CPT codes for therapy services in CY 2009 PFS claims data consisted of an average of 3.5 services which were comprised of some combination of one or more units of a single therapeutic procedure CPT code and one or more units of a single modality CPT code, rather than 3 total units of the services. The second most common combination was a therapeutic procedure CPT code alone, with an average of 2.8 units, while the AMA

RUC relied upon 2 therapeutic procedures in a session for its assignment of certain PE inputs. Other commonly observed combinations of codes included 3.4 to 4.6 therapy services, with different numbers of therapeutic procedures and therapeutic modalities furnished to the patient than were assumed by the AMA RUC under the scenarios that were the basis for establishing the PE inputs for certain therapy CPT codes.

Therefore, despite the AMA RUC's consideration of multiple services for valuation, the therapy code combinations as actually reported by practitioners would typically have some additional duplication in their

PE. Thus, while the current PFS values for therapy services may reflect some efficiencies in the PE for certain code combinations based on the

AMA RUC approach to valuation (to the extent we accepted the AMA RUC recommendations), the actual efficiencies are not fully recognized in the PE inputs for the most commonly reported therapy code combinations, nor are they necessarily recognized in the many other common code combinations that were not considered by the AMA RUC as the typical case.

Based on our review of the scenarios submitted by the commenters, we continue to believe that there is significant overlap in the PE when many combinations of therapy services are furnished together and that this overlap has not been adequately accounted for in the direct PE inputs that the AMA RUC has recommended to us for the component services. We believe the overlaps remain substantial and they can be potentially higher than 50 percent for some combinations while lower for others. Our analysis of five high volume therapy code pairs as noted in the CY 2011 PFS proposed rule (75 FR 40078) suggested a reduction in the PE for the lower paying code of 28 to 56 percent to account for PE duplication.

In response to the commenters who projected that the impact on physician's office payment for physical therapy services would be greater than the 11 percent reduction we modeled for the proposed rule

(75 FR 40232), we note that an additional element of our analysis was the continued transition to setting the PE RVUs based on the PPIS data.

The PPIS transition is expected to significantly increase payment for the PE component of therapy services in CY 2011. While we acknowledge that the estimated change in PE RVUs due to the proposed therapy MPPR alone would result in a payment decrease for the specialty of physical and occupational therapy of somewhat more than 11 percent, it is the combined consideration of all factors affecting the CY 2011 PE RVUs that resulted in the 11 percent decrease for physical and occupational therapists in the proposed rule specialty impact table (75 FR 40232).

We note further that the estimated impact of all the PE RVU changes for physical and occupational therapy based upon our proposals for CY 2011 if there were no remaining transition to the new PE RVUs using the PPIS data would be -7 percent.

Any MPPR policy, such as the MPPR that currently applies to surgical services and imaging procedures, is a relatively blunt payment policy tool that improves the overall accuracy of payment when combinations of services are furnished together but is not, by its nature, a specific policy that precisely values each code combination.

A general MPPR is not unlike the well-established PFS pricing methodology that relies on the typical case, where we readily acknowledge that the clinician's resources used to furnish a specific service to a specific patient on a specific day may be more or less than those used in the typical case. Similarly, while we believe that an MPPR would generally improve the accuracy of PFS payment when multiple therapy services are furnished to a single patient in a single session, we understand that for a specific combination of services for a given patient, the resources required may be more or less than those recognized for payment under the MPPR policy. In view of the requirements of section 1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) which specify that the Secretary shall identify potentially misvalued codes by examining multiple codes that are frequently billed in conjunction with furnishing a single service and make RVU adjustments, we continue to believe it would be appropriate to expand the current PFS MPPR policies to address those scenarios where we conclude that combinations of services commonly furnished together are systematically overvalued.

We believe the more specific valuation of common code combinations is best conducted with input from the AMA RUC as it evaluates single new comprehensive codes for a bundle of component services when those new codes are established by the CPT Editorial Panel. In such cases where a single code is used to report a comprehensive service, an MPPR would no longer apply, which would be appropriate because the potential for PE duplication would have been explicitly considered in determining the PE inputs for the comprehensive service. As we stated earlier in this section concerning the MPPR for imaging services, the MPPR is not intended to supersede the AMA RUC process. We encourage the AMA RUC to reexamine the values and direct PE inputs for therapy services, including code pairs, for duplication in the PE, and to recommend therapy services to the CPT Editorial Panel for consideration of bundling into comprehensive codes. However, we believe it is appropriate to use an MPPR to address the PE duplication that is currently present within the PFS RVUs for the therapy codes when more than one service is furnished to a patient.

After consideration of the public comments we received, we are adopting, with modifications, our proposal to establish a MPPR policy for ``always therapy'' services for CY 2011. However, given the complexities involved in establishing an MPPR for the very large number of therapy codes and combinations, rather than the proposed 50 percent payment reduction to the PE component of the second and subsequent

``always therapy'' services billed by the same practitioner or facility on the same date of service for the same patient, we are adopting a 25 percent MPPR for ``always therapy'' services furnished in CY 2011. We continue to believe that a 50 percent MPPR for therapy services may be appropriate in light of our analysis of five high volume therapy code pairs that each occur over 2 million times in PFS claims for multiple therapy services and account for almost half of such claims, and for which we estimated that the resulting reduction in the PE for the lower paying code would range from 28 to 56 percent. However, we believe a 25

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percent MPPR represents an appropriate and conservative first step toward eliminating payment for duplicative PE when multiple ``always therapy'' services are furnished to the same patient by the same therapy provider on the same date of service. We note that a 25 percent

MPPR represents half the proposed reduction, and is slightly less than the lower range of the reduction suggested by our analysis of high volume code pairs. During CY 2011 and future years, we will continue to refine our analyses and consider whether further modifications to the policy would be appropriate, including the possible adoption of a 50 percent MPPR or a different payment percentage reduction. Any further changes to the MPPR for therapy services will be addressed in future rulemaking, including the possible adoption of any alternative percentage payment reduction to the 25 percent MPPR that will be in place for CY 2011. We will also closely follow the work of the CPT

Editorial Panel and the AMA RUC with respect to the coding and valuation for therapy services over the next few years as we assess the potential merits of further changes to the MPPR policy. We note that the typical reductions in total PFS payment for high utilization therapy code combinations due to the MPPR alone would fall within the range of 7 to 9 percent under our final policy, but this decrease will be mitigated by the continued transition to use of the PPIS data. As displayed in Table 101 of this final rule with comment period, we estimate that the CY 2011 impact on the PE RVUs of the new therapy MPPR and continued PPIS transition is a reduction in PFS payment to physical and occupational therapists of approximately -3 percent.

The final list of CY 2011 CPT codes for ``always therapy'' services that are subject to the therapy MPPR is displayed in Table 21 at the end of this section.

Comment: Some commenters pointed out that CMS' analysis was based only on data from physicians and private practice therapists, which the commenters opposed as unrepresentative of the typical therapy session because the data represent only 35 percent of outpatient therapy services paid under Medicare. The commenters objected that no data from skilled nursing facilities (SNFs), rehabilitation agencies, CORFs, and hospital outpatient departments were considered in the analysis. The commenters reported that application of the MPPR policy on a per-day basis would be inconsistent with the delivery of therapy services in provider settings where multiple sessions of the same or different disciplines of therapy on the same day are commonly furnished to

``captive'' patients and would unfairly reduce payment for the resources used to provide these services. The commenters believe there is no duplication in the PE in such circumstances. Some commenters suggested that reductions should not be applied when there is a break in services into more than one session in the same day.

Response: With respect to payment under the PFS, according to section 1848(c)(1)(B) of the Act, the term ``practice expense component'' means the portion of the resources used in furnishing the service that reflects the general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising practice expenses. Under section 1848(c)(2)(C)(ii) of the

Act, we are required to determine PE RVUs based on the relative practice expense resources involved in furnishing services. We develop these resource-based PE RVUs by looking at the direct and indirect physician practice resources involved in furnishing each service. To establish the direct PE inputs for services paid under the PFS, we consider the typical clinical scenario in which those services are delivered and paid by Medicare. In the case of therapy services that are paid under the PFS, the scenarios we consider are office-based (not institutional) because these therapy services are the only ones that are actually paid under the PFS (section 1848 of the Act) and subject to all of the provisions of the PFS, including budget neutrality under section 1848(c)(2)(B)(ii)(II) of the Act. Section 1834(k)(3) of the Act then requires that we pay for all outpatient therapy services at the applicable PFS amount. Therefore, our analyses and policy development regarding the therapy MPPR were based solely on claims for office-based therapy services and, given the applicable statutory payment provisions; we do not believe it would have been appropriate for us to consider institutional patterns of care in setting PFS rates for therapy services.

We are required to establish the values for services paid under the

PFS (office-based services) so that therapy services are valued appropriately in the context of all other services paid under the PFS, and that means ensuring that therapy services are appropriately valued for the office setting. In the case of other services paid under the

PFS that may be furnished in both facility and nonfacility settings, we generally establish separate but related facility and nonfacility values to differentially value the services when furnished in each of the two types of settings. However, therapy services are only paid under the PFS when furnished in the office setting, so we establish the

PFS values for therapy services based on patterns of care in the office setting. This approach ensures equitable and relative treatment of all services paid under the PFS with respect to the statutory provisions that apply to the PFS, including year-to-year budget neutrality. In contrast to other services paid under the PFS, the statute then specifies that we pay for therapy services furnished in facility settings at the applicable PFS amount (which, as discussed above, is established based upon our resource-based methodology for services furnished in nonfacility settings). Although the statutory payment scheme for therapy services differs from most other services, we note that this treatment ensures that Medicare payment is the same across all settings for outpatient Part B therapy services.

We acknowledge the commenters' point that multiple therapy sessions furnished to one patient by one provider (one National Provider

Identifier (NPI)) in a single day are more common in facility settings than in the office setting. However, we continue to believe that in these situations there would be some overlaps in the PE, including patient education and obtaining measurements, that would be appropriately accounted for through the therapy MPPR. Furthermore, given the nature of therapy services and the associated coding, we believe it would be very challenging to determine the medical necessity of multiple therapy sessions on one date of service or the precise beginning and ending of therapy sessions if we were to exclude from the

MPPR those therapy services furnished by the same provider to a single patient on the same day but in different sessions, although we acknowledge that this modification would be consistent with our established policy for the imaging MPPR.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to apply the therapy MPPR when multiple therapy services are billed on the same date of service for the same patient by the same practitioner or facility under the same NPI, regardless of whether those therapy services are furnished in separate sessions.

Comment: Many commenters objected to applying the MPPR across therapy disciplines because the commenters argued that physical therapy,

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occupational therapy, and speech-language pathology (SLP) are separate and distinct interventions furnished independently by individually licensed professionals, each of which is certified to provide unique and specialized services that do not cross discipline or service lines.

Several commenters explained that each discipline involves entirely different skills, equipment, supplies, and treatment goals, and separate disciplines are often located in different treatment settings.

Individual plans of care, explained the commenters, are separately maintained for each therapy discipline and contain specific goals and treatments. Some commenters compared the proposal to claiming that services furnished to a single patient on the same day by a cardiologist and internal medicine specialist contain duplicative PE inputs. The same commenters described administrative contact with the patient in this scenario as distinct and separate, observing that greeting and gowning the patient, cleaning, and assistant activities are furnished independently by the second or subsequent discipline, and cannot be shared.

The large majority of commenters argued that the proposal did not make logical distinctions between therapy treatments or specialties or even properly distinguish between the skills of rehabilitation practitioners. While physical therapists and occupational therapists report the same CPT codes, the commenters noted that the codes do not represent the same service and the plan and approach to treatments differ depending on the discipline.

Response: We recognize that the therapy disciplines are separately qualified professionals who address specific impairments using separate and unique skills. However, in the office setting which is the basis for our valuing therapy services for payment under the PFS as discussed previously, although we believe it would be uncommon for services to be furnished to a single patient by different therapy disciplines and billed by a single provider (one NPI) on the same date of service, we continue to believe that there would be some overlap in the PE in this circumstance. The PE overlaps that we would anticipate include greeting the patient, obtaining vital signs, and post-visit phone calls. We do not agree with the commenters that we should accept such multiple discipline cases from the therapy MPPR that would otherwise apply.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to apply the therapy MPPR to all therapy services across the disciplines billed on the same date of service for the same patient by the same practitioner or facility under the same NPI.

Comment: Several commenters pointed out that, unlike other therapy services, many SLP services contain therapist work in their PE because

SLPs have no assistants. These commenters requested that the therapy

MPPR not be implemented, or at least be delayed, until the AMA RUC completes its plan to recommend moving SLP work from PE to work. In addition to bundled codes, the commenters also requested that add-on codes, such as CPT code 92608 (Evaluation for prescription for speech- generating augmentative and alternative communication device, face-to- face with the patient; each additional 30 minutes (List separately in addition to code for primary procedure)), be exempted from the therapy

MPPR, since the PE inputs for add-on codes explicitly take into consideration the PE inputs for a base code that is always reported.

The commenters reported that the major SLP codes include a wide variety of service types and are essentially bundled already, meaning that SLP practitioners rarely bill two different services on the same day for the same patient. The commenters expressed concern because SLP services are furnished and valued differently than physical and occupational therapy, yet the proposed rule contained no SLP examples to justify including SLP codes in the MPPR or to estimate the impact on SLP services.

Response: We note that most of the SLP codes will have been valued with therapist work in the work component of the SLP service RVUs by CY 2011, although we do not see the continued valuation of therapist work in the PE as an impediment to application of the MPPR to SLP services.

Since many single SLP codes represent multiple component services that are reported using a single comprehensive code, the impact of the therapy MPPR on PFS payment for SLP services would be minimal. For those services that may occasionally be billed with more than one SLP code for a session, we see no basis for treating SLP services differently than other therapy services because we believe there would also be PE duplication in these cases.

However, we agree with the commenters that add-on codes should not be subject to the MPPR for therapy services because their PE inputs already consider that the add-on code is always furnished along with a primary service.

Therefore, after consideration of the public comments we received, we are removing add-on therapy CPT code 92608 from the list of ``always therapy'' services that we proposed for application of the therapy MPPR policy. In addition, we are removing CPT code 97010 (Application of a modality to 1 or more areas; hot or cold pack) which is a bundled code that was inadvertently included on the proposed list. These changes are reflected in the final list of codes subject to the therapy MPPR policy that is displayed in Table 21 at the end of this section. This policy parallels our treatment of the MPPR for surgical services, where surgical add-on codes are not subject to the surgical MPPR.

Comment: Some commenters characterized the proposed therapy MPPR as contrary to the objectives of the ACA, which the commenters believe was designed to shift care to the most effective and efficient delivery setting to ensure beneficiary access to cost-effective, high quality and coordinated care. Because therapy services do not involve expensive drugs or testing, yet they assist patients in avoiding or reducing other medical costs, many commenters believe that physical therapy is the most efficient and cost-effective treatment to return patients to independent function. The commenters contended that growing Medicare expenditures for the treatment of common musculoskeletal problems could easily be controlled by earlier access of patients to physical therapy services.

The commenters were concerned that lower therapy payments would exacerbate the shortage of therapists, lead to restricted access to therapy services, especially in rural areas, and result in patients who are more prone to injuries and functioning at a lower level.

Undertreated functional impairments, argued the commenters, would lead to increased spending for medication and medical costs associated with decreased mobility, pain and falls, increased emergency room services, longer inpatient stays, quicker returns to the hospital setting, and earlier placement in nursing homes.

In addition, some commenters were concerned that the MPPR would provide an incentive to schedule patients in a manner that would be inefficient, inappropriate, and inconvenient for patients. The commenters noted that research proves therapy is more effective for many elderly patients with several visits on the same day, separated by rest. The commenters indicated that patients in rural communities prefer multiple therapy service visits to minimize lengthy commutes.

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Response: Through the CY 2011 proposed rule and its associated public comment period, we have invited public involvement in the process of policy development regarding an MPPR for therapy services.

We believe the therapy MPPR policy is fully consistent with section 1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) which specifies that the Secretary shall identify potentially misvalued codes by examining multiple codes that are frequently billed in conjunction with furnishing a single service, and review and make appropriate adjustments to their relative values. Therefore, we do not agree with the commenters that the MPPR policy undermines the goals of the ACA but, instead, we believe the policy fulfills one of our statutory obligations by valuing more appropriately combinations of therapy services furnished to patients and paid under the PFS. We have no reason to believe that appropriately valuing services for payment under the PFS by reducing payment for duplication in the resource-based PE payment for the component services would contribute to therapist workforce shortages or limit patients' access to medically reasonable and necessary therapy services.

With respect to the ordering and scheduling of therapy services for

Medicare beneficiaries, we require that Medicare-covered services be appropriate to patient needs and that a physician certifies each patient's plan of care. We would not expect the adoption of an MPPR for therapy services to result in therapy services being furnished on separate days by one provider so that the provider may garner increased therapy payment unless this pattern of care is the most clinically appropriate for the patient. We agree with the commenters that this unprofessional behavioral response on the part of practitioners would be inefficient and inappropriate and could result in patient compliance problems with the plan of care. We will continue to monitor access to care and patterns of delivery for therapy services, with particular attention focused on identifying any changes in the delivery of same day therapy services that may be inappropriate.

Comment: Several commenters noted that CMS has contracted with

Computer Sciences Corporation (CSC) and RTI International to develop outpatient therapy payment alternatives and urged CMS to place a high priority on the development of an alternative payment approach for therapy services rather than applying the proposed MPPR. Many commenters supported bundled per-session codes that would vary based on the severity of the patient and the complexity of evaluation and treatment services, and some commenters believe this payment approach would be more equitable than the proposed MPPR. The commenters argued for a scientific approach to the development of alternatives to the current payment system, which the commenters believe contrasts with the analysis presented by CMS to support the MPPR. However, most commenters encouraged further study and development before implementation of any alternatives. Many commenters pledged to work with CMS in the future to further develop a bundled service approach based on episodes of care.

Response: We appreciate the effort and useful information contributed by stakeholders to the discussion and development of alternatives to the therapy caps and we refer readers to section

III.A.2. of this final rule with comment period for a further discussion of the public comments and our responses on this issue. We look forward to the continued cooperation of stakeholders as we continue our work in this area over the coming years. However, we do not believe short-term alternative payment options for therapy services are sufficiently developed to warrant immediate implementation, and the commenters on the CY 2011 PFS proposed rule generally shared that view.

In contrast, we believe that we can implement an appropriate MPPR for therapy services beginning in CY 2011 that would immediately provide more appropriate payment for the PE component of therapy services when multiple therapy services are furnished to one patient on one date of service by one provider. Paying more appropriately for therapy services in CY 2011 will allow patients to receive more medically necessary therapy services before reaching the therapy cap. To the extent that the therapy MPPR encourages the future bundling of therapy codes into a single comprehensive service that would be specifically valued, we support the exploration of that concept to capture the specific efficiencies associated with certain combinations of therapy services.

Comment: Several commenters asserted that the therapy MPPR proposal violated the Administrative Procedure Act (APA), alleging the proposal was arbitrary and capricious. In addition, some commenters argued that

CMS did not provide sufficient information regarding the data and analysis used to develop the policy to allow the informed public input from qualified providers of therapy services.

Response: Consistent with the requirements of the APA, a full description of our analysis and the rationale we used as the basis for the proposed therapy MPPR policy was presented in the proposed rule, the public comments on our proposal have been reviewed, and our responses are provided in this final rule with comment period. Although many commenters requested that we share more data to support the proposed policy, several commenters demonstrated that they have their own access to Medicare data by submitting reports to us along with their comments in order to support their views or to refute the examples we presented in the proposed rule. We note further that we posted therapy utilization data on the CMS web site after publication of the proposed rule to provide additional information regarding the specific combinations and utilization of therapy services on PFS claims. The information was posted under downloads for the CY 2011 PFS proposed rule at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/ list.asp#TopOfPage. Therefore, we believe the final MPPR for therapy services is being adopted in compliance with the notice and comment rulemaking process under the APA.

In summary, after consideration of the public comments we received, we are adopting our CY 2011 proposal to apply an MPPR to the PE component of Medicare payment for the second and subsequent outpatient

``always therapy'' services, with a modification to apply a 25 percent reduction for CY 2011 rather than the 50 percent reduction we had proposed. Specifically, beginning in CY 2011 we are adopting an MPPR for ``always therapy'' services under which a 25 percent reduction will be applied to the PE component of payment for the second and subsequent

``always therapy'' service(s) (those displayed in Table 21) that are furnished to a single patient by a single provider on one date of service in all settings where outpatient therapy services are paid under Part B. This policy applies to office-based therapy services paid under the PFS as well as to institutional therapy services paid under

Part B at the PFS rates. We note that the MPPR would apply only when multiple therapy services are billed on the same date of service for one patient by the same practitioner or facility under the same NPI.

This policy does not apply to add-on, bundled, or contractor-priced

``always therapy'' codes. It does, however, apply to all ``always therapy'' services furnished on a single date of service by the same provider to a single

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patient, including ``always therapy'' services furnished in different sessions or in different therapy disciplines.

For those therapy services paid under the PFS, we are required to make a budget neutrality adjustment under section 1848(c)(2)(B)(ii)(II) of the Act. As a result, the estimated reduced expenditures for therapy services due to the 25 percent MPPR will be redistributed to increased

CY 2011 payments for other PFS services. We refer readers to XI.A.2. of this final rule with comment period for further discussion of the impact of this policy. The final list of CY 2011 ``always therapy'' CPT codes subject to the MPPR policy for therapy services is displayed in

Table 21.

Table 21--``Always Therapy'' Services Subject To The CY 2011 MPPR

Policy*

CPT code

Short descriptor

92506......................... Speech/hearing evaluation. 92507......................... Speech/hearing therapy. 92508......................... Speech/hearing therapy. 92526......................... Oral function therapy. 92597......................... Oral speech device eval. 92607......................... Ex for speech device rx, 1 hr. 92609......................... Use of speech device service. 96125......................... Cognitive test by hc pro. 97001......................... Pt evaluation. 97002......................... Pt re-evaluation. 97003......................... Ot evaluation. 97004......................... Ot re-evaluation. 97012......................... Mechanical traction therapy. 97016......................... Vasopneumatic device therapy. 97018......................... Paraffin bath therapy. 97022......................... Whirlpool therapy. 97024......................... Diathermy eg, microwave. 97026......................... Infrared therapy. 97028......................... Ultraviolet therapy. 97032......................... Electrical stimulation. 97033......................... Electric current therapy. 97034......................... Contrast bath therapy. 97035......................... Ultrasound therapy. 97036......................... Hydrotherapy. 97110......................... Therapeutic exercises. 97112......................... Neuromuscular reeducation. 97113......................... Aquatic therapy/exercises. 97116......................... Gait training therapy. 97124......................... Massage therapy. 97140......................... Manual therapy. 97150......................... Group therapeutic procedures. 97530......................... Therapeutic activities. 97533......................... Sensory integration. 97535......................... Self care mngment training. 97537......................... Community/work reintegration. 97542......................... Wheelchair mngment training. 97750......................... Physical performance test. 97755......................... Assistive technology assess. 97760......................... Orthotic mgmt and training. 97761......................... Prosthetic training. 97762......................... C/o for orthotic/prosth use.

G0281......................... Elec stim unattend for press.

G0283......................... Elec stim other than wound.

G0329......................... Electromagntic tx for ulcers.

*Excludes contractor-priced, bundled, and add-on ``always therapy'' codes. 5. High Cost Supplies a. Background

MedPAC and the AMA RUC have long recommended that CMS establish a frequent price update process for high-cost supplies that are direct PE inputs in the PE database for services paid under the PFS because of their speculation that prices for these items may decrease over time as competition increases and new technologies disseminate into medical practice. MedPAC in particular has perennially noted that it is important for CMS to update the prices of high-priced supplies on a regular basis as inaccurate prices can distort PE RVUs over time, contributing to the misvaluation of established services under the PFS.

Most of the current prices for high-cost supplies included in the direct PE database are from 2004 or earlier. There are currently 62 unique supplies with prices of $150 or more in the proposed CY 2011 PE database, which is available on the CMS Web site under the supporting data files for the CY 2011 PFS proposed rule at http://www.cms.gov/

PhysicianFeeSched/. Finally, we note that we do not actually pay the supply prices included in the PE database but, instead, use them to develop the PE RVUs according to our standard PE methodology as described in section II.A.2. of this final rule with comment period.

Payment for a procedure that uses a supply is based upon the PE RVUs that result from the PE methodology, and supplies are among the direct

PE inputs for procedures. Therefore, it is the relativity of high-cost supply prices to prices for other PE items (equipment, low-cost supplies, and clinical labor) that is important.

Accordingly, in the CY 2009 PFS proposed rule (73 FR 38582), we proposed a process to update the prices for high-cost supplies priced at $150 or more that are included in the PE inputs for procedures paid under the PFS PE methodology. The CY 2009 proposed rule described a publicly transparent process in which CMS would publish a list of the high-cost supplies in the PFS proposed rule (65 supplies were included in the CY 2009 PFS proposed rule), and specialty societies or other relevant organizations would provide acceptable documentation supporting the pricing for the supplies during the 60-day public comment period. Furthermore, in that same proposed rule (73 FR 38582), we provided guidance on what constitutes valid, reliable documentation that reflects the typical price of the high-cost item in the marketplace. We outlined examples of acceptable documentation, such as a detailed description (including system components), sources, and current pricing information, confirmed by copies of catalog pages, invoices, and quotes from manufacturers, vendors, or distributors. We indicated that documentation that does not include specific pricing information such as phone numbers and addresses of manufacturers, vendors, or distributors or Web site links without pricing information would not be acceptable. We also noted that if acceptable documentation was not received within the proposed rule's 60-day public comment period, we would use prices from the Internet, retail vendors, and supply catalogs to determine the appropriate cost, and that we would use the lowest price identified by these sources (73 FR 38582).

Finally, we solicited public comments on alternatives that could be used to update pricing information in the absence of acceptable documentation provided by specialty societies or other interested organizations.

In the CY 2009 PFS final rule with comment period (73 FR 69882), we indicated that we received many comments on the proposed process and, while some commenters expressed support, others believed the proposed process was flawed and burdensome. Moreover, although we received some data in response to our request for information on the 65 high-cost supplies with prices of $150 or more, much of what we received was not complete or did not represent typical market prices. In particular, we expressed concern that the submitted data often represented manufacturer list prices for the premier models of many supplies, while we believed there were less expensive alternatives. Therefore, we were unable to determine the most appropriate, typical supply prices for our

PFS payment methodology that prices the typical service described by a

HCPCS code. Rather than finalizing the proposed process for updating high-cost supplies and revising the prices for the 65 supplies based on inadequate pricing information, we stated in the CY 2009 PFS final rule with comment period (73 FR 69882) that we would research the possibility of using an independent contractor to assist us in obtaining accurate pricing information. Furthermore, we informed the public that we planned to study the limitations of available pricing data and determine how to revise our proposed process to elicit better data.

In the CY 2010 PFS proposed rule and final rule with comment period

(74 FR 33554 and 61776, respectively), we

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stated that we were continuing to examine ways to obtain accurate pricing information for high-cost supplies. We noted again in the CY 2010 PFS proposed rule that we would depend upon the cooperation of the medical community to obtain typical prices in the marketplace, and we provided stakeholders with another opportunity to submit public comments on the process. In the CY 2010 PFS final rule with comment period, we acknowledged commenters' general support for an initiative to ensure accurate pricing of high-cost supplies. In general, the commenters strongly preferred a transparent and public process, and we stated that we would consider this perspective as we explore the best way to ensure that accurate supply pricing information is used in the

PFS payment methodology. b. Future Updates to the Prices of High-Cost Supplies

In working towards refining a process to update the prices of high- cost supplies and consistent with our intention expressed in the CY 2009 PFS final rule with comment period (73 FR 69882), we contracted with an independent contractor during CY 2009 to help us study the availability of accurate pricing information. We requested that the independent contractor, L&M Policy Research, research pricing information for the 65 high-cost supplies listed in the CY 2009 proposed rule (73 FR 38583 through 38585) and determine what, if any, pricing information reflecting typical market prices could be obtained for these high-cost supplies.

We first requested that the contractor explore publicly available sources to obtain typical market prices for these supplies. The contractor utilized supply vendor catalogs and web sites and directly contacted vendors, manufacturers, group purchasing organizations

(GPOs), and any other suppliers that the contractor identified in their research in order to identify prices for each of the supplies. Where more than one version of a supply item appeared to match a description of a high-cost supply and/or more than one possible vendor or manufacturer was identified, the contractor attempted to obtain prices from the multiple sources.

Upon review of the high-cost supply list, the contractor refined the list to 62 unique high-cost items with prices of $150 or more for the study. The original list only consisted of 64 items but included one item inadvertently listed twice (CMS Supply Code SD207 (suture device for vessel closure (Perclose A-T))) and one item (CMS Supply

Code SH079 (collagen implant)) that was deleted from the PE database after CY 2007 because it was no longer used as an input for any codes.

While the contractor was able to obtain prices for 37 of the 62 unique supplies, the contractor was unable to obtain pricing information for the remaining 25 supplies. Documentation of these prices, a requirement we discussed in the CY 2009 PFS proposed rule (73 FR 38582), was only obtained for 25 of the 36 supplies with new pricing information. For the remainder, while the contractor was given price quotes over the phone, the sales agents or customer service representatives declined to provide any form of written documentation, in some cases because company policies restricted providing pricing documentation to prospective customers without an account. Moreover, information on typical discounts was obtained for only seven products, and only one discount was documented. In the case of these products, companies disclosed the maximum available discounts, ranging from 18 percent to 45 percent. Relative to prices currently included in the PE database, the contractor found higher prices for the majority of the medical supplies that were researched, specifically 23 supplies with higher prices, 8 with lower prices, and 3 with the same price. The high-cost supplies studied by the contractor and their current database prices are displayed in Table 22.

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Next, we directed the contractor to access the United States

General Services Administration (GSA) medical supply schedule to augment the results obtained through review of vendor materials and direct contact with vendors, manufacturers, and GPOs. We note that the

GSA establishes long-term government-wide contracts with commercial firms for many products, negotiating contracts and determining prices to be fair and reasonable prior to placing them on schedule. Included on the schedule are thousands of medical supplies at prices that, in most cases, are established through competition. The GSA schedule is an open solicitation and a business of any size, if it is stable and financially sound, can request to be included on the schedule. GSA's vendors usually are nationwide

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vendors with substantial non-government sales, and products on the schedule must be manufactured in the U.S. or in a nation with a trade agreement with the United States. Submissions for the schedule are received 365 days per year, vendor contracts can be of varying lengths, and vendors can add or delete products from the schedule. Depending on the aggregate cost estimate associated with the vendor's supply items, the time to achieve inclusion on the schedule can vary from as short as several months to as long as 2 years. The GSA has delegated authority to the Department of Veterans Affairs (VA) to procure medical supplies under the VA Federal Supply Schedules Program.

Using the GSA general search engine under the category

``Laboratory, Scientific, & Medical'' available at https:// www.gsaadvantage.gov/advgsa/advantage/main/start_page.do, the contractor obtained nine prices for items similar to the high-cost supplies in the PE database and that are displayed in Table 20 from the publicly available information on the Internet, including pricing for one product for which its prior work did not yield an updated price. We believe that additional items that are similar to the high-cost supplies in the PE database and that may be used with the same procedures may be on the GSA schedule but we are still working through the crosswalk between our supplies and the way the supplies are presented on the GSA schedule. In the proposed rule (75 FR 40081), we stated that examples of high-cost supplies in the PE database that the contractor located on the GSA schedule include: (1) Kit, capsule, ESO, endoscopy w-application supplies (ESO), priced at $450 in the PE database and $444 on the GSA schedule; and (2) tube, jejunostomy, priced at $195 the PE database and $60 to $83 on the GSA schedule, depending on the characteristics of the tube. We note that the price of the ``jejunostomy'' tube that we included in the proposed rule was incorrect. The actual price of that supply item in the PE database is

$97.50, a lower value that is still substantially higher than the price range on the GSA schedule.

Since the GSA medical supply schedule is a source for pricing information that is public and transparent and reflects the best government contract price for a product, we believe it is a desirable resource for us to use in a refined process for updating the prices of high-cost supplies. For historical context, CMS has previously proposed to use VA prices that result from the competitive marketplace as comparison points to limit the Medicare prices for oxygen and certain items of durable medical equipment and prosthetic devices (62 FR 38100 through 38107, and 64 FR 44227 through 44231) in 1997 and 1999, respectively. These prior proposals were based on our determination that the Medicare payment amounts for these items as durable medical equipment or prosthetics (not as physicians' services) were not inherently reasonable. We noted, however, that our current interest in the GSA schedule for pricing high-cost supplies for payment of physicians' services is not based on considerations of inherent reasonableness, and we do not actually pay the prices in the PE database for supplies under the PFS.

We further noted that public commenters on pricing high-cost supplies have consistently requested that we ensure that the pricing information used to update the prices is provided publicly. The commenters have observed that this transparency would enable stakeholders to evaluate and provide feedback to the agency on pricing accuracy (74 FR 61776). We also acknowledged that our past attempts over several years to identify typical market prices for the high-cost supplies have been inhibited by the limited availability of public data that meet the documentation requirements we have previously established. Individual vendors do not always publish their product prices or provide typical discounts. Moreover, discounts may vary depending on suppliers and the volume of supplies purchased. In the CY 2011 PFS proposed rule (75 FR 40082), we explained that our understanding of the GSA medical supply schedule is that the publicly listed fair and reasonable prices on the schedule generally do not include volume and or certain other discounts that may be subsequently negotiated by the buyer. Consequently, we would consider the prices available on the GSA schedule to represent the ``individual item ceiling'' price for a single item purchase, which we believe would be appropriate to estimate the high-cost supply prices for physicians' office purchases. We solicited public comments regarding the high-cost supplies in the direct PE database for the CY 2011 PFS proposed rule, available on the CMS Web site as noted earlier in this section, and the corresponding supplies or alternative items that could be used for the same function that are currently on the GSA supply schedule. We encouraged commenters to provide a detailed analysis of the current relationships between the items in the PE database and those on the GSA schedule.

In the CY 2011 PFS proposed rule (75 FR 40082), we described a refined process for regularly updating prices for high-cost supplies under the PFS and solicit comments on how we could improve on this process. The process could occur every 2 years beginning as soon as CY 2013, although we noted that we would propose the refined process through rulemaking before revising the prices for any high-cost supply item based on the GSA schedule. We could also consider establishing a different price update period depending on whether a high-cost supply was a new supply in the PE database or had been in use for some time, in which case we might expect that the price would have stabilized and, therefore, could be updated less frequently. In general, we would expect that the periodicity of updating prices for high-cost supplies that we eventually adopted would balance the associated administrative burden with the rate of price changes, to ensure that the associated procedures remain appropriately valued, rather than increasingly misvalued, over time.

We envisioned that we would base high-cost supply price inputs on the publicly available price listed on the GSA medical supply schedule.

Since the medical community would have several years to examine the GSA medical supply schedule before the refined process would be adopted, and we had found no apparent limitations on vendors placing products on the GSA schedule, beyond the schedule's interest in competitive, best value procurements, stakeholders would have the opportunity to ensure that any high-cost direct PE input for a PFS service that may currently be missing from the GSA medical supply schedule would be included before CMS needs to access the publicly available price for the item.

If a supply price were not publicly available on the GSA medical supply schedule by the time CMS needs to access the price, we would propose to reduce the current price input for the supply by a percentage that would be based on the relationship between GSA prices at that time and the existing PE database prices for similar supplies (currently an average 23 percent reduction). We believe that this refined process would be desirable because it is consistent with commenters' repeated requests for the updating methodology to be transparent and predictable.

Moreover, the VA (with responsibility delegated by the GSA) determines whether prices are fair and reasonable by comparing the prices and discounts that a company offers the government

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with the prices and discounts that the company offers to commercial customers. Therefore, using the GSA medical supply schedule as a source for publicly available prices would also better account for product- specific market dynamics than the alternative of an across-the-board percentage reduction for supplies not on the GSA schedule based on general price trends for the high-cost supplies on the schedule. That is, if the market price of a particular supply were not to drop according to broad trends for other high-cost supplies, suppliers would have the opportunity to provide their price to the public on the GSA schedule in order to preclude any reduction in Medicare payment for procedures associated with that supply.

Finally, we reiterated our interest in receiving detailed public comments on the refined process discussed above, including all aspects of the price update methodology that we have presented. Moreover, we believe a similar approach could potentially be appropriate to update the prices for other supplies in the PE database that would not fall under our definition of high-cost supplies, and we welcomed further public comments on that possible extension. We also invited further suggestions for alternative approaches to updating high-cost supply prices, specifically those that would result in a predictable, public, and transparent methodology that would ensure that the prices in the PE database reflect typical market prices. These principles are particularly important in order to ensure that the services that utilize the high-cost supplies when provided in the physician's office are appropriately valued under the PFS and continue to be appropriately valued over time.

Comment: Many commenters agreed with the need for a frequent, transparent price update process for high-cost supplies based on publicly available sources of pricing information. MedPAC supported

CMS' description of the process update the prices of high-cost supplies presented in the CY 2011 PFS proposed rule: ``As an initial step, it is reasonable to use the GSA schedule as a source for the prices of high- cost supply items and to reduce the prices of items not on the GSA schedule by the average difference between the GSA prices and the prices in CMS' PE database for similar supplies.''

Response: We appreciate the general affirmation by many stakeholders of the significance of accurate pricing of high-cost supplies relative to other PE items (equipment, low-cost supplies, and clinical labor). We also value MedPAC's support for the update process that we described for the prices of high-cost supplies.

Comment: Many commenters asserted that because the medical supply prices on the GSA schedule reflect the best price for government entities, these prices are not representative of typical prices available to practitioners caring for Medicare beneficiaries. The commenters suggested that physicians in private practices do not have the requisite purchasing power to negotiate such large discounts on their own and that the sales environments for the government and private markets are vastly different. Therefore, the commenters argued, because the GSA schedule is a streamlined buying process that the government uses to buy products and services through registered vendors at pre-negotiated prices, the schedule does not provide an accurate reflection of prices faced by any physician practice. Some commenters also observed that the prices on this schedule have historically been used only by manufacturers and suppliers in the context of providing these high-cost supplies to the VA alone, and do not reflect prices to other non-governmental entities.

Response: We appreciate the differences in the purchasing power of the federal government and individual practitioners. However, we have reason to believe that prices on the GSA schedule do not reflect the full volume discounts available to large purchasers like the Federal government. In fact, while the GSA has delegated the authority to the

VA to procure medical supplies under the VA Federal Supply Schedules

Program, we understand that the prices that appear on the schedule do not reflect the prices the VA itself would usually pay for a medical supply. Instead, the VA determines the schedule prices to be fair and reasonable prior to placing them on the schedule, and uses that schedule price as a starting point for its own negotiations with supply vendors for specific purchases.

While several commenters explained how vendors provide the VA itself with discounts that are greater than those offered to other buyers, and a few additional commenters made uncorroborated claims that prices on the GSA supply schedule reflect discounts unavailable to other providers, we received no evidence that the prices contained on the schedule are atypical of medical supply prices in the private marketplace. We agree that the prices on the GSA schedule may reflect some discounting, but we do not believe that the prices reflect the full discounting available to the VA itself for many purchases.

Instead, we believe that the discounting on the GSA schedule reflects what the VA has deemed reasonable for other government buyers in the context of prices and discounts that a vendor offers to commercial customers.

We also believe that typical practitioners receive discounts from vendors' listed prices for supply items for a variety of reasons, although we acknowledge that the basis for the discounts reflected on the GSA schedule may differ from the basis for the discounts that are available to typical practitioners. Therefore, we do not necessarily agree with the premise underlying many commenters' concerns that the usefulness of the GSA schedule as a source for PFS high-cost supply prices is necessarily undermined solely because large government buyers benefit from some exclusive discounts.

We believe that in a relative payment system, maintaining the relativity of discounting among the prices for supply items may be more significant than any concern associated with the reasons different buyers receive particular discounts. At the moment, we have no reason to believe that the prices on the GSA schedule are atypical of the non- government market, despite broad assertions by the commenters that the government may receive discounts for different reasons than those available to private purchasers. As we consider this high-cost supply update process for the future, we would be interested in receiving further public comments that substantiate the claims that medical supply prices on the GSA schedule are not representative of actual prices paid by typical practitioners caring for Medicare patients.

Comment: Some commenters expressed concern that pricing high-cost supplies based on the GSA supply schedule could result in loss of appropriate relativity in PE RVUs because pricing for other supplies would be determined using other methodologies.

Response: As stated earlier in this section, we do not actually pay the supply prices included in the PE database but instead use them to develop the PE RVUs according to our standard PE methodology as described in section II.A.2. of this final rule with comment period.

However, we believe that inaccuracies in the prices for high-cost supplies that are specific to a very few PFS services may disproportionately distort physician payment by leading to inaccurate

PE RVUs for services using those high-cost supplies. We believe that neglecting to incorporate any discounts or typical reductions in the market price for a

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high-cost supply that is sold to a practitioner for use in a specific service would result in a greater likelihood that the service would be misvalued under a relative payment system than would similar imprecision in the prices for lower-cost supplies that are commonly used in many services and where price changes are typically less extreme. Finally, we note that we also remain interested in the possibility of using the GSA supply schedule for all PFS supply and equipment price inputs, as we stated in the CY 2011 PFS proposed rule

(75 FR 40082).

Comment: One commenter suggested that using the GSA schedule for supply price inputs might allow a single supplier furnishing a small volume of a product at a divergent price to distort the PE RVU calculations. On the other hand, MedPAC stated that the current CMS' process of ``using price information voluntarily submitted by specialty societies, individual practitioners, suppliers, and product developers might not result in objective and accurate prices because each group has a financial stake in the process.''

Another commenter recommended that if CMS were to use the GSA schedule prices as high-cost inputs, then CMS should guarantee that physicians may purchase supplies at the GSA schedule prices. The commenter claimed that failure to do so would result in inherently unfair, lower PE RVUs for certain procedures, which could ultimately create an access to care problem for Medicare beneficiaries.

Response: We believe that our current system of accepting voluntarily submitted invoices for supply and equipment price direct PE inputs may be problematic for high-cost supplies because the prices for such supplies may be particularly susceptible to distortions that significantly influence the PE RVUs that we use for payment of the associated services. We also believe that any attempt to account for these distortions and more appropriately value the services must be transparent to the stakeholders. Because the prices on the GSA supply schedule are developed based on the interaction between parties that have competing financial interests (the VA and supply vendors), we believe that these prices are more likely to be representative of competitive market prices than are prices that are voluntarily submitted by individuals with financial stakes in the PFS payment process. We agree that distortions--whether price overstatements or understatements--in the values of the direct PE inputs, resulting in misvalued services, have the potential to create financial incentives for practitioners that are detrimental to ensuring access to medically necessary and reasonable care for Medicare beneficiaries. Based in part on prior analysis by MedPAC, we believe that the greater risk of misvalued PE RVUs results from overvaluing high-cost supplies since we believe that prices for these items may generally decrease over time as competition increases.

As we discussed in our response to a previous comment, we do not actually use the prices in the PE database for supplies but instead those prices are the basis for the PE RVUs for the associated services developed under the budget neutral PFS. Therefore, we do not agree with the commenter that we should guarantee that physicians may purchase supplies at the GSA schedule prices. Where our goal is for the high- cost supply prices we use for PFS ratesetting to reflect typical market prices for these items, especially in a relative sense, for many reasons different supplies may not be available to individual practitioners purchasing them at the prices in the PE database. The PFS is not a payment system that reimburses health care practitioners based on their individual costs, and the price available to an individual practitioner for a supply item may be high or lower than the price in the PE database that is used for setting the PFS PE RVUs for the associated procedure.

Comment: One commenter claimed that no U.S. manufacturer sells cryoablation probes through the GSA supply schedule and, therefore, asserted that the pricing process for high-cost supplies described in the CY 2011 PFS proposed rule would be inappropriate for that particular supply. Other commenters reported difficulty locating particular medical supplies on the GSA supply schedule.

Response: While we recognize that not all high-cost supplies are currently on the GSA supply schedule, as we stated in the CY 2011 PFS proposed rule (75 FR 40082), we believe that since we have provided the medical community several years to examine the GSA medical supply schedule before its use could be adopted under the PFS, stakeholders would have the opportunity to ensure that any high-cost direct PE input for a PFS service that may currently be missing from the GSA medical supply schedule would be included before CMS needs to access the publicly available price for the item. Furthermore, we have found that the use of multiple clinically related search terms under the GSA schedule search engine improves our ability to locate supply items that are related to those that we currently include in the direct PE database for the PFS. We believe that the mistaken assumption that certain supplies are unavailable on the GSA supply schedule, resulting from some commenters' inconclusive searches, may have influenced many commenters' responses to the process we discussed in the CY 2011 PFS proposed rule.

Prior to adopting use of the GSA supply schedule to update the prices for high-cost supplies under the PFS, we believe it would be appropriate to work with interested stakeholders to consider developing a crosswalk between supply items included the direct PE database and the GSA supply schedule.

Comment: One commenter contended that implementation of a process to update high-cost supply prices based on the GSA schedule would disadvantage all medical device companies that have chosen to provide devices directly to the armed services or facilities for the treatment of veterans. A few commenters speculated that many supply vendors would resist placing their products on the GSA schedule for a variety of reasons, including avoiding any unnecessary regulatory burden or the scrutiny of GSA audits.

Response: We have no reason to believe that vendors who sell directly to the VA at discounts must incorporate negotiated discounted prices on the GSA schedule, so we do not believe that utilizing publicly available prices as direct PE inputs would have a disproportionately unfair impact on suppliers who sell directly to the

VA. At the same time, we also understand that not every medical supply vendor would choose to place their products on the GSA schedule. That is why we stated in the proposed rule (75 FR 40082) that if a supply price were not publicly available on the GSA medical supply schedule by the time CMS needs to access the price, we would consider proposing to reduce the current price input in the PE database for the supply by a percentage that would be based on the relationship between GSA prices at that time and the existing PE database prices for similar supplies.

Vendors would need to balance their concerns about placing their products on the GSA supply schedule with the alternative pricing policy that would apply.

Comment: Several commenters objected to a reduction of supply price inputs based on the relationship between GSA prices at the time the prices are being updated and the existing PE database prices for similar supplies. Many of the commenters stated that the 23 percent reduction presented as an example in the CY 2011 PFS proposed rule (75

FR 40082) was

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based on a very small sample of items and appeared arbitrary. One commenter contended that the percentage reduction would need to be validated for application to current pricing and argued that it would be inappropriate for use on an item-specific basis.

Additional commenters, including the AMA RUC, pointed out the discrepancy between the price of the ``jejunostomy tube'' supply item listed in the chart of high-cost supplies and in the direct PE database. These commenters were concerned that this discrepancy may have led CMS to incorrectly calculate the average difference between

GSA prices and current prices in the direct PE database. One commenter reasoned that it would be unfair for CMS to change the price inputs for innovative medical devices by relying on ``speculation that prices for these items may decrease over time as competition increases and new technologies disseminate into medical practice.''

Response: We appreciate the commenters' concerns regarding the example of the 23 percent reduction mentioned in the CY 2011 PFS proposed rule. We provided that sample percentage as an example based on a current analysis of a small sample of supplies. We appreciate commenters correctly pointing out that we displayed an outdated price input for the supply item ``jejunostomy tube'' in the CY 2011 PFS proposed rule (75 FR 40080 through 40081). As we explained in the proposed rule, we are still working through the crosswalk between our supplies and the way the supplies are presented on the GSA schedule. We included the 23 percent figure as a rough guide based on a comparison of current GSA schedule and PE database prices for a small sample of high-cost supply items.

Prior to implementing any price update based on GSA supply schedule prices, we would conduct a thorough analysis of the validity of the GSA pricing data in question. We believe that using such data for price comparisons, validated, and expanded to include all applicable supply items, may be more likely to approximate typical prices for these supplies than any available alternative--especially failing to update the high-cost supply price inputs with the necessary frequency. In cases where the prices for certain high-cost supplies do not follow the broad trends for other high-cost supplies, suppliers would have the opportunity to provide their price to the public on the GSA schedule in order to preclude any reduction in Medicare payment for procedures associated with that supply.

Comment: Some commenters asserted that CMS should conduct independent market research similar in kind to the research CMS claims that the VA conducts in placing supply items and their associated prices on the GSA schedule. Another commenter recommended that CMS use a particular market research contractor to price these supplies.

Response: As we stated in the CY 2011 PFS proposed rule (75 FR 40079), we contracted with an independent contractor during CY 2009 to help us study the availability of accurate pricing information for high-cost supplies. We believe such research needs to be conducted with transparency, including using publicly available sources and contacting supply vendors directly. The contractor reported tremendous difficulty in identifying typical market prices using these methods. We have no reason to believe that a different contractor using similar methods would have greater success in acquiring market pricing information without utilizing a methodology that would be burdensome to practitioners or supply vendors or other stakeholders. Because the supply vendors in contact with the VA generally have a financial incentive to cooperate with their market research directly, we believe that the VA's methodology in this case would yield more accurate information than information derived from market researchers who do not have such cooperation, like the contractor working previously on behalf of CMS.

Comment: Several commenters, including the AMA RUC, recommended that CMS consider creating HCPCS codes to be reported by rendering physicians for high-cost supplies when used for the care of a patient during procedure. The supplies could then be removed from the direct PE database and appropriate pricing for these supply HCPCS codes could be determined by CMS on an annual basis. One commenter requested that CMS explore whether such a methodology would be budget neutral under the

PFS, since the commenter did not support an approach that would reduce

PFS payments for cognitive services.

Response: We appreciate the commenters' suggestions, but we believe creating separately reportable HCPCS codes for high-cost supplies and paying separately for these items would merely shift the pricing challenge rather than resolve it, and could compound the problem of misvaluing services by explicitly paying for high-cost supplies at the expense of other low-cost supplies, equipment, and clinical labor included in the PE component of PFS payment. We do not understand how this suggestion would help CMS price the supply items accurately, nor how it would lead to more appropriate payment for high-cost supplies under the relativity of the budget neutral PFS. This approach would be required to be budget neutral under the PFS and, to the extent that our current PE methodology pays less than the direct PE database cost for a supply item, payment for individual high-cost supplies at prices we establish could redistribute dollars from other PFS services to payment for these supply items if we were to pay more for them separately.

Finally, unbundling payment for high-cost supplies from the associated procedures would be contrary to the current public policy interest in increasing the size of the payment bundles used for Medicare payment to encourage efficiencies in the delivery of services.

Comment: Several commenters expressed a readiness to provide any additional information that may help CMS in pricing high-cost supplies, in lieu of using the GSA schedule prices for that purpose.

Response: We appreciate commenters' offers of assistance regarding the pricing of direct PE inputs. However, based on the public comments from stakeholders that we received on the process we proposed in the CY 2009 PFS proposed rule and the experience of the CMS' contractor who attempted to acquire market pricing for supply items directly from supply vendors, we believe that use of the GSA schedule would have greater potential to provide us systematically and transparently with typical market prices for high-cost supply items that could be updated with an appropriate periodicity.

Comment: Some commenters expressed concern that CMS had not presented any information about how prices for Medicare PE purposes would actually be developed from the GSA supply schedule and had not specified how the Agency would do so nor whether (or when) CMS intended to make the approach available for public comment.

Response: We appreciate the commenters' concerns regarding the practical implementation of a high-cost supply price update process based on prices on the GSA supply schedule. In the CY 2011 PFS proposed rule (75 FR 40082), our discussion was intended to encourage broad stakeholder comment, including consideration of potential alternatives to the process presented. Prior to implementing a high-cost supply update methodology, such as the use of prices on the GSA schedule that was the focus of our proposed rule

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discussion, we would expect to use annual rulemaking in order to propose a more detailed process that would be subject to modification based upon our consideration of the public comments.

In summary, we appreciate the many public comments we received on our discussion of a process that would use GSA schedule prices to update the prices for high-cost supplies utilized for developing PE

RVUs under the PFS. In the context of our explicit responsibility to review and adjust the PFS values for potentially misvalued services under section 1848(c)(2)(K) of the Act (as added by section 3134 of the

ACA), we believe it is especially important to soon establish a periodic and transparent process to update the cost of high-cost supplies to reflect typical market prices so that these supply items are appropriately considered in our ratesetting methodology. While public commenters expressed some concerns regarding our discussion of use of the GSA supply schedule prices in such a process, at this point we remain optimistic that this approach has significant potential to be used under the PFS and, based on our several year history of work in this area, we do not see other viable alternatives at this point. We will continue to study the issue of how to update the prices for high- cost supplies over the upcoming months, and we encourage stakeholders to also further consider the process we discussed in CY 2011 rulemaking and provide their additional thoughts and perspectives to us on an ongoing basis.

D. Geographic Practice Cost Indices (GPCIs) 1. Background

Section 1848(e)(1)(A) of the Act requires us to develop separate

Geographic Practice Cost Indices (GPCIs) to measure resource cost differences among localities compared to the national average for each of the three fee schedule components (that is, work, PE, and malpractice). While requiring that the PE and malpractice GPCIs reflect the full relative cost differences, section 1848(e)(1)(A)(iii) of the

Act requires that the physician work GPCIs reflect only one-quarter of the relative cost differences compared to the national average. In addition, section 1848(e)(1)(G) of the Act sets a permanent 1.5 work

GPCI floor in Alaska for services furnished beginning January 1, 2009.

Section 1848(e)(1)(C) of the Act requires us to review and, if necessary, adjust the GPCIs not less often than every 3 years. This section also specifies that if more than 1 year has elapsed since the last GPCI revision, we must phase in the adjustment over 2 years, applying only one-half of any adjustment in each year. As discussed in the CY 2009 PFS final rule with comment period (73 FR 69740), the CY 2009 adjustment to the GPCIs reflected the fully implemented fifth comprehensive GPCI update. CY 2010 would have typically included no adjustments to the GPCIs. However, section 3102(a) of the ACA amended section 1848(e)(1)(E) of the Act to extend the 1.0 work GPCI floor for services furnished through December 31, 2010. Additionally, section 3102(b) of the ACA added a new subparagraph (H) to section 1848(e)(1) of the Act, which specifies that for CY 2010 and CY 2011, the employee compensation and rent portions of the PE GPCI must reflect only one- half of the relative cost differences for each locality compared to the national average. The new subparagraph also includes a ``hold harmless'' provision for CY 2010 and CY 2011 for any PFS locality that would otherwise receive a reduction to its PE GPCI resulting from the limited recognition of cost differences. Additionally, section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the ACA) established a 1.0 PE GPCI floor for services furnished in frontier

States effective January 1, 2011. In May 2010, we provided our Medicare contractors with an updated CY 2010 payment file that included the 1.0 work GPCI floor and the PE GPCIs calculated according to the methodology required by section 1848(e)(1)(H) of the Act (as added by section 3102(b) of the ACA) for CY 2010, to be used for payment of services furnished on or after January 1, 2010.

For the CY 2011 PFS proposed rule, we completed the sixth review of the GPCIs and proposed new GPCIs. We noted that section 1848(e)(1)(E) of the Act (as amended by section 3102(a) of the ACA) extends the 1.0 work GPCI floor only through December 31, 2010. Under current statute, the 1.0 work GPCI floor will expire on January 1, 2011. Therefore, the

CY 2011 physician work GPCIs, and summarized geographic adjustment factors (GAFs), do not reflect the 1.0 work floor. However, section 1848(e)(1)(G) of the Act (as amended by section 134(b) of the MIPPA) set a permanent 1.5 work GPCI floor in Alaska for services furnished beginning January 1, 2009 and, as noted above, section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the ACA) provides for a permanent 1.0 PE GPCI floor for frontier States effective January 1, 2011. Therefore, as required by the statute, the 1.5 work GPCI floor for Alaska and the 1.0 PE GPCI floor for frontier States will be in effect for CY 2011. In addition to the limited recognition of certain cost differences for the PE GPCIs, section 1848(e)(1)(H) of the Act (as added by section 3102 (b) of the ACA) also requires us to complete an analysis of the data sources used and cost share weights assigned to the PE GPCIs. Implementation of the ACA provisions related to the CY 2011 PE GPCIs is discussed in more detail in the GPCI update section below. 2. GPCI Update

As discussed in the CY 2011 PFS proposed rule (75 FR 40083), the updated GPCI values were developed by Acumen, LLC (Acumen) under contract to CMS. As mentioned above, there are three GPCI components

(physician work, PE, and malpractice), and all GPCIs are developed through comparison to a national average for each component.

Additionally, each of the three GPCIs relies on its own data source(s) and methodology for calculating its value as described below. a. Physician Work GPCIs

The physician work GPCIs are designed to capture the relative cost of physician labor by Medicare PFS locality. Previously, the physician work GPCIs were developed using the median hourly earnings from the 2000 Census of workers in seven professional specialty occupation categories which we used as a proxy for physicians' wages and calculated to reflect one-quarter of the relative cost differences for each locality compared to the national average. Physicians' wages are not included in the occupation categories because Medicare payments are a key determinant of physicians' earnings. Including physicians' wages in the physician work GPCIs would, in effect, have made the indices dependent upon Medicare payments.

The physician work GPCIs were updated in CYs 2001, 2003, 2005, and 2008 using professional earnings data from the 2000 Census. However, wage and earnings data are no longer available from the Census long form and the 2000 data are outdated. Therefore, for the proposed sixth

GPCI update, we used the 2006 through 2008 Bureau of Labor Statistics

(BLS) Occupational Employment Statistics (OES) data as a replacement for the 2000 Census data. The use of BLS OES data as a replacement for the 2000 Census data is discussed in more detail in the update of the

PE GPCIs section. As noted above, the 1.0 work GPCI floor is set to expire under current statute on December 31, 2010. Therefore, the CY 2011 proposed

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physician work GPCIs reflected the removal of this floor. b. Practice Expense GPCIs

(1) The Affordable Care Act Requirements for PE GPCIs

(A) General Methodology for the CY 2011 GPCIs

The ACA added a new subparagraph (H) to section 1848(e)(1) of the

Act which revised the methodology for calculating the PE GPCIs for CY 2010 and CY 2011 so that the employee compensation and rent portions of the PE GPCIs reflect only one-half of the relative cost differences for each locality compared to the national average. Additionally, under section 1848(e)(1)(H)(iii) of the Act (as added by section 3102(b) of the ACA), each PFS locality is held harmless so that the PE GPCI will not be reduced as a result of the change in methodology for PE GPCIs.

In accordance with section 1848(e)(1)(H)(ii) of the Act (as added by section 3102(b) of the ACA), the employee compensation and rent components of the proposed CY 2011 PE GPCIs were calculated to reflect one-half of the cost differences for each PFS locality relative to the national average cost. Additionally, as required by the statute, physicians' services furnished in each PFS locality would be adjusted by the higher of the locality's PE GPCI calculated with the limited recognition of employee compensation and rent cost differences or the

PE GPCI calculated without the limited recognition of cost differences.

(B) Phase-In of PE GPCIs

Section 1848(e)(1)(C) of the Act requires us to phase in GPCI adjustments over 2 years if there was more than 1 year between GPCI adjustments. In accordance with the statute, we proposed to phase in the updated PE GPCIs using one-half of the CY 2010 values and one-half of the fully implemented values (as described in this section). To apply the phase-in and hold harmless provisions of the Act, we calculated transitional PE GPCIs based on two scenarios. Under the first scenario, we calculated transitional CY 2011 PE GPCIs using the full recognition of employee compensation and rent cost differences for each locality as compared to the national average. As discussed below, the first scenario reflects the ``hold harmless'' transitional PE GPCI value that would apply to any PFS locality receiving a reduction to its

PE GPCI resulting from the application of the limited recognition of PE cost differences. The CY 2011 transitional PE GPCI values with full recognition of cost differences were calculated using one-half of the

CY 2010 PE GPCI values with full recognition of cost differences and one-half of the updated PE GPCIs with full recognition of cost differences. The first scenario represents the transitional PE GPCI values prior to the limited recognition of cost differences (the pre-

ACA CY 2011 transitional values). In other words, this scenario does not include the effects of sections 1848(e)(1)(H)(i) and (ii) of the

Act (as added by section 3102(b) of the ACA).

For the second scenario, we calculated transitional CY 2011 PE

GPCIs with the limited recognition of cost differences for the employee compensation and rent components (as required by sections 1848(e)(1)(H)(i) and (ii) of the Act (as added by section 3102(b) of the ACA)). The CY 2011 transitional PE GPCI values with the limited recognition of cost differences were calculated using one-half of the

CY 2010 PE GPCIs with the limited cost differences and one-half of the updated PE GPCIs with the limited cost differences. The hold harmless provision under section 1848(e)(1)(H)(iii) of the Act (as added by section 3102(b) of the ACA) was applied by selecting the greater of the

CY 2011 transitional PE GPCI value calculated with the limited recognition of cost differences or the CY 2011 transitional PE GCPI value calculated with full recognition of cost differences (the pre-ACA

CY 2011 transitional values). The phase-in of the CY 2011 PE GPCIs and application of the hold harmless provision are illustrated in Table 23 below.

Table 23--Phase-In of the CY 2011 PE GPCIs

CY 2011 (transitional

CY 2010

Updated GPCIs

year)

Hold harmless

File 1:

PE GPCI Without 3102(b) of ACA... Without ACA.......... Without ACA (Updated (\1/2\ of 2010) + (\1/2\ Greater of File 1 Transitional Value or File

Data).

Updated GPCI).

2 Transitional Value.

File 2:

PE GPCI With 3102(b) of ACA...... With ACA............. With ACA (Updated

(\1/2\ of 2010 w/ACA) +

Data).

(\1/2\ Updated GPCI w/

ACA).

(C) Data Analysis

Section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA) also requires the Secretary to ``analyze current methods of establishing practice expense adjustments under subparagraph (A)(i) and evaluate data that fairly and reliably establishes distinctions in the cost of operating a medical practice in different fee schedule areas.''

Section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA) requires that such analysis shall include an evaluation of the following:

The feasibility of using actual data or reliable survey data developed by medical organizations on the costs of operating a medical practice, including office rents and non-physician staff wages, in different fee schedule areas.

The office expense portion of the practice expense geographic adjustment, including the extent to which types of office expenses are determined in local markets instead of national markets.

The weights assigned to each area of the categories within the practice expense geographic adjustment.

This section also requires the Secretary to make appropriate adjustments to the PE GPCIs no later than by January 1, 2012. To begin to implement this statutory requirement based on our initial analysis, we proposed to implement changes in PE data sources and cost share weights discussed herein effective beginning in CY 2011.

In accordance with section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA), we initially analyzed the current methods and data sources used in the establishment of the PE GPCIs.

With respect to the method used, we began with a review of the GAO's

March 2005 Report entitled, ``MEDICARE PHYSICIAN FEES: Geographic

Adjustment Indices Are Valid in Design, but Data and Methods Need

Refinement'' (GAO-05-119). While we have raised concerns in the past about some of the GAO's GPCI

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recommendations, we noted that with respect to the PE GPCIs, the GAO did not indicate any significant issues with the methods underlying the

PE GPCIs. Rather, the report focused on some of the data sources used in the method. For example, the GAO stated that the wage data used for the PE GPCIs are not current. Similarly, upon our reexamination of public comments we had received on the PE GPCIs for previous updates, we noted that the commenters predominately focused on either the data sources used in the method or raised issues such as incentivizing the provision of care in different geographic areas. However, the latter issue (incentivizing the provision of care) is outside the scope of the statutory requirement that the PE GPCIs reflect the relative costs of the mix of goods and services comprising practice expenses in the different fee schedule areas relative to the national average.

One key component of the PE GPCI method that our analysis identified involved the office expense portion of the PE GPCIs and the cost share weight assigned to this component. Most significantly, we proposed that the weight for the office rent component be revised from 12.209 percent to 8.410 percent to reflect our more detailed breakout of the types of office expenses that are determined in local markets instead of national markets. For example, for previous GPCI updates, we used the office expenses cost category as the cost share weight for office rent and, therefore, all individual components previously included in the office expenses category were adjusted for local area cost differences by the GPCIs. As discussed in section II.E. of this final rule with comment period, we proposed to disaggregate the broader office expenses component into 9 new cost categories as part of the proposed CY 2011 MEI rebasing. The disaggregation of the office expenses category indicates that the fixed capital cost category, for which the consumer price index (CPI) for owner's equivalent rent is the price proxy, is the office expense category applicable to the office rent component of the PE GPCI. Therefore, the fixed cost capital cost category is the only component of office expenses that we proposed to adjust for local area cost differences beginning in CY 2011. We proposed to assign other newly defined components of the office expenses category (for example, utilities, chemicals, paper, rubber and plastics, telephone, postage, and moveable capital) to the medical equipment, supplies, and other miscellaneous expenses cost component of the PE GPCIs. As discussed later in this section, the medical equipment, supplies, and other miscellaneous expenses component of the

PE GPCIs is assumed to have a national market and, therefore, this component is not adjusted for local area cost differences.

The proposed expense categories for the PE GPCIs, along with their respective cost share weights, are primarily derived from the 2006

American Medical Association (AMA) Physician Practice Information

Survey (PPIS) for self-employed physicians and selected self-employed non-medical doctor specialties. The PPIS is the most comprehensive, multispecialty, contemporaneous, and consistently collected PE data source available. It was developed by medical organizations and captures the costs of operating a medical practice, including office rents and nonphysician staff wages. Moreover, we also examined the feasibility of using the American Community Survey (ACS) and the Bureau of Labor and Statistics (BLS) Occupational Employment Statistics (OES) data for the employee compensation component of the PE GPCI. For previous updates, the employee compensation component was based on the 2000 Decennial Census long form data. Since the Census data are significantly outdated and the 2010 Census no longer includes occupational wage data, we believe the ACS or BLS OES data might be viable alternatives. While the ACS 3-year public use microsample (PUMS) is currently available, it reflects only about 3 percent of households and the data exhibit significant variation due to the small sample. In particular, the ACS PUMS has fewer than 10 observations of pharmacists in the Manhattan; Beaumont, Texas; and Southern Maine localities.

Therefore, we believe it would be premature to use the ACS data for determining GPCI values. The 2006, 2007, and 2008 panels from the BLS

OES represent a larger sample than the ACS PUMS and more recent data than the 2000 Census. As such, we proposed to use the BLS OES data for updating the GPCIs. We look forward to exploring the use of the full

ACS data when they become available. Additionally, we explored other sources of rent data (including commercial rental data and survey data) for use in calculating the PE GPCIs. We could not identify a reliable alternative rental data source available on a national basis with coverage of nonmetropolitan areas.

We do not believe there is a national data source better than the

Housing and Urban Development (HUD) data for determining the relative cost differences in office rents. Therefore, based on our review of the available data sources, we proposed to use the 2010 apartment rental data produced by HUD at the 50th percentile as a proxy for the relative cost difference in physician office rents.

In the proposed rule (75 FR 40085), we indicated that we believe our analysis of the current methods of establishing PE GPCIs and our evaluation of data that fairly and reliably establish distinctions in the cost of operating a medical practice in the different fee schedule areas meet the statutory requirements of section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA). A more detailed discussion of our analysis of current methods of establishing PE GPCIs and evaluation of data sources is included in Acumen's draft report.

Acumen's draft report and associated analysis of the sixth GPCI update, including the PE GPCIs, was posted on the CMS Web site after display of the CY 2011 PFS proposed rule. The draft report may be accessed from the PFS Web site at: http://www.cms.gov/PhysicianFeeSched/ under the

``Downloads'' section of the CY 2011 PFS proposed rule Web page.

Acumen's final report and associated analysis of the sixth GPCI update will be posted on the CMS Web site after publication of the CY 2011 PFS final rule with comment.

(D) Determining the PE GPCI Cost Share Weights

To determine the cost share weights for the CY 2011 GPCIs, we proposed to use the proposed 2006-based Medicare Economic Index (MEI) as discussed in section II.E. of this final rule with comment period.

The proposed MEI was rebased and revised to reflect the weighted- average annual price change for various inputs needed to provide physicians' services. As discussed in detail in that section, the proposed expense categories in the MEI, along with their respective weights, were primarily derived from data collected in the 2006 AMA

PPIS for self-employed physicians and selected self-employed non- medical doctor specialties.

For the cost share weight for the PE GPCIs, we used the 2006-based

MEI weight for the PE category of 51.734 percent minus the professional liability insurance category weight of 4.295 percent. Therefore, we proposed a cost share weight for the PE GPCIs of 47.439 percent. For the employee compensation portion of the PE GPCIs, we used the nonphysician employee compensation category weight of 19.153 percent.

The fixed capital category weight of 8.410, for which the CPI for

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owner's equivalent rent is the price proxy, was used for the office rent component. To determine the medical equipment, supplies, and other miscellaneous expenses component, we removed professional liability

(4.295 percent), nonphysician employee compensation (19.153 percent), and fixed capital (8.410 percent) from the PE category weight (51.734 percent). Therefore, we proposed a cost share weight for the medical equipment, supplies, and other miscellaneous expenses component of 19.876 percent.

Furthermore, the physician compensation cost category and its weight of 48.266 percent reflected the proposed work GPCI cost share weight and the professional liability insurance weight of 4.295 percent was used for the malpractice GPCI cost share weight. In the proposed rule (75 FR 40085), we stated that we believe our analysis and evaluation of the weights assigned to each of the categories within the

PE GPCIs meets the statutory requirements of section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA).

The proposed cost share weights for the CY 2011 GPCIs are displayed in Table 24 below.

Table 24--Cost Share Weights for CY 2011 GPCI Update

Current

Proposed

Expense category

cost share cost share weight (%) weight (%)

Physician Work................................

52.466

48.266

Practice Expense..............................

43.669

47.439

--Employee Compensation...................

18.654

19.153

--Office Rent.............................

12.209

8.410

--Equipment, Supplies, Other..............

12.806

19.876

Malpractice Insurance.........................

3.865

4.295

Total.........................................

100

100

(E) PE GPCI Floor for Frontier States

Section 10324(c) of the ACA added a new subparagraph (I) under section 1848(e)(1) of the Act to establish a 1.0 PE GPCI floor for physicians' services furnished in frontier States. In accordance with section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the

ACA), beginning in CY 2011, we applied a 1.0 PE GPCI floor for physicians' services furnished in States determined to be frontier

States. The statute requires us to define any State as a frontier State if at least 50 percent of the State's counties are determined to be frontier counties, which the statute defines as counties that have a population density less than 6 persons per square mile. However, section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the

ACA) also specifies that this provision shall not apply to States receiving a non-labor related share adjustment under section 1886(d)(5)(H) of the Act (which excludes Alaska and Hawaii from qualifying as a frontier State).

Consistent with the proposed FY 2011 hospital inpatient prospective payment system (IPPS) 1.0 wage index floor for frontier States (as required by section 10324(a) of the ACA) (75 FR 30920 through 30921), we proposed to identify frontier counties by analyzing population data and county definitions based upon the most recent annual population estimates published by the U.S. Census Bureau. We divided each county's population total by each county's reported land area (according to the decennial census) in square miles to establish population density. We also proposed to update this analysis from time to time, such as upon publication of a subsequent decennial census, and if necessary, add or remove qualifying States from the list of frontier States based on the updated analysis.

For a State that qualifies as a frontier State, in accordance with section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the

ACA), we proposed that physicians' services furnished within that State would receive the higher of the applicable PE GPCI value calculated according to the standard CY 2011 methodology or a minimum value of 1.00. Furthermore, in accordance with section 1848(e)(1)(I) of the Act

(as added by section 10324(c) of the ACA), the frontier State PE GPCI floor is not subject to budget neutrality and would only be extended to physicians' services furnished within a frontier State.

For determining the proposed CY 2011 PFS PE GPCI values, the frontier States are the following: Montana; Wyoming; North Dakota;

Nevada; and South Dakota (as reflected in Table 25).

Table 25--Frontier States Under Section 1848(e)(1)(I) of the Act

as Added by Section 10324(c) of the ACA

Percent

State

Total

Frontier

frontier counties

counties

counties

Montana..........................

56

45

80

Wyoming..........................

23

17

74

North Dakota.....................

53

36

68

Nevada...........................

17

11

65

South Dakota.....................

66

34

52

(2) Summary of the CY 2011 PE GPCIs

The PE GPCIs include three components: employee compensation, office rent, and medical equipment, supplies and miscellaneous expenses as discussed below:

Employee Compensation: We used the 2006 through 2008 BLS

OES data to determine the proposed employee

Page 73256

compensation component of the PE GPCIs. The proposed employee compensation component accounted for 40.4 percent of the total PE

GPCIs.

Office Rents: Consistent with the previous GPCI update, we used the most recent residential apartment rental data produced by HUD

(2010) at the 50th percentile as a proxy for the relative cost differences in physician office rents. The proposed office rent component accounted for 17.7 percent of the PE GPCIs.

Medical Equipment, Supplies, and other Miscellaneous

Expenses: We assumed that items such as medical equipment and supplies have a national market and that input prices do not vary among geographic areas. As discussed in previous GPCI updates in the CY 2005 and CY 2008 PFS proposed rules, specifically the fourth GPCI update (69

FR 47503) and fifth GPCI update (72 FR 38138), respectively, some price differences may exist, but we believe these differences are more likely to be based on volume discounts rather than on geographic market differences. For example, large physicians' practices may utilize more medical equipment and supplies and therefore may or may not receive volume discounts on some of these items. To the extent that such discounting may exist, it is a function of purchasing volume and not geographic location. The proposed medical equipment, supplies, and miscellaneous expenses component was factored into the PE GPCIs with a component index of 1.000. The proposed medical equipment, supplies, and other miscellaneous expense component accounted for 41.9 percent of the

PE GPCIs. c. Malpractice GPCIs

The malpractice GPCIs are calculated based on insurer rate filings of premium data for $1 million to $3 million mature claims-made policies (policies for claims made rather than services furnished during the policy term). The CY 2011 malpractice GPCI update reflects 2006 and 2007 premium data. d. Public Comments and CMS Responses on the Proposed 6th GPCI Update

We received many public comments regarding the CY 2011 proposed

GPCIs. Summaries of the comments and our responses follow.

Comment: Many commenters requested that CMS delay implementation of the changes in underlying PE GPCI data and cost share weights until complete findings and recommendations from the Institute of Medicine's study of geographic adjustment factors for physician payment, the

Secretary's Medicare Geographic Payment Summit, and the MEI technical advisory panel have been developed and considered. A few commenters acknowledged that the BLS OES data is the best data source for updating the GPCIs for CY 2011 but expressed concern that it provides data for

MSAs and rest of state areas and not counties. The commenters believe that collecting data at the MSA level distorts the accuracy of the input costs and requested that CMS delay the update until the full ACS data can be evaluated and compared with the BLS OES data. A few commenters requested that CMS delay the GPCI update for CY 2011 as was done in the CY 2004 PFS final rule with comment period for the 4th GPCI update.

Additionally, several commenters stated that a more comprehensive analysis and evaluation of the PE GPCI is required by the ACA, further noting that section 1848(e)(1)(H)(v) of the Act (as added by section 3102(b) of the ACA) allows CMS until January 1, 2012 to implement the findings from the analysis of PE data. To that end, several commenters requested a more comprehensive analysis of the occupational groups used to determine the employee wage component of the PE GPCI to reflect the

``true costs'' incurred by physician groups in the delivery of health care to Medicare beneficiaries. The commenters cited pharmaceutical, accounting, legal, computer science, and management professionals as examples of the types of nonphysician labor costs that should be included in the determination of the employee compensation index.

Several commenters also stated that HUD rental data does not reflect the ``actual costs'' of physician office rent and therefore should be replaced by another data source.

Response: Section 1848(e)(1)(C) of the Act requires us to review and update the GPCIs at least every 3 years. When updating the GPCIs we believe we should use the best data that are currently available. As mentioned by the commenters, the BLS OES data are more timely data than the 2000 census data (which has been used for previous GPCI updates).

We believe that the BLS OES data, which are currently available, are an appropriate and relevant data source for updating the work GPCIs and employee compensation component of the PE GPCIs. Also because of the timeliness of the data, we believe that using the BLS OES data would result in a more accurate reflection of the geographic practice cost differences among PFS localities than not updating the GPCIs for CY 2011.

While we believe it is appropriate to finalize updated GPCIs for CY 2011 using the most current data, we also acknowledge that there is much ongoing analysis that may inform future GPCI changes. Therefore, as discussed below, we are not using the revised cost share weights for the CY 2011 GPCIs that would apply under the revised and rebased MEI for CY 2011. We will address the GPCI cost share weights once again in the CY 2012 PFS proposed rule, and we may make additional proposals that would further modify the GPCI data and/or methods for CY 2012.

Additionally, we will review the complete findings and recommendations from the Institute of Medicine's study of geographic adjustment factors for physician payment, the Secretary's Medicare

Geographic Payment Summit, and the MEI technical advisory panel, and we will continue to study the issues as required by section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA).

We will once again consider the GPCIs for CY 2012 in the context of our annual PFS rulemaking beginning in CY 2011 based on the information available at that time. The CY 2011 GPCIs arising from the 6th GPCI update reflect our initial review and response to the currently available GPCI data, methods, and cost share weights. Once the full ACS data are available, we will reassess the occupational groups used to determine the employee compensation component of the PE GPCI and continue to explore the use of commercial rent data as part of our ongoing analysis of the GPCIs. We anticipate that further information, including our review of the full ACS data, may lead to proposed additional refinements to the GPCIs for future years. We have addressed the CY 2011 GPCI cost share weights in response to other public comments received on the CY 2011 PFS proposed rule that are summarized later in this section.

With regard to the commenters who expressed concern that the BLS

OES data are not collected at the county level, we note that the 2000

Decennial Census data are only available at the county level for approximately 10 percent of counties. For previous updates, the GAFs for more than 90 percent of counties were developed based on MSAs or larger geographic areas (for example, data for all rural areas in a

State were combined and used to proxy values for each rural county in a

State). Therefore, using BLS OES data and disaggregating data to the county

Page 73257

level is not a significant departure from previous GPCI updates.

Moreover, we acknowledge that in the CY 2004 PFS proposed and final rules (68 FR 49042 and 68 FR 63213 respectively), we updated only the malpractice GPCI because the special tabulation of census data used for the physician work GPCI and employee compensation portion of the PE

GPCI was not yet available. We explained that no acceptable data sources could be found to update the work GPCIs and the employee compensation portion of the practice expense GPCIs. Therefore, we made no changes to the work GPCIs and PE GPCIs for CY 2004. However, in view of the statutory requirement to update the GPCIs at least every 3 years, we do not believe it would be appropriate to finalize an update only for malpractice GPCIs for CY 2011, while delaying the update of the work GPCI and PE GPCI, when we currently have appropriate updated data available to us for this purpose. As discussed previously, we will review the GPCIs as part of the CY 2012 PFS rulemaking cycle (beginning in CY 2011) based on the information available at that time, and we may propose changes to the GPCIs prior to the next 3-year GPCI update.

Comment: Several commenters stated that the use of HUD rental data is not an appropriate proxy for determining the office rent index and suggested that CMS use data on actual physician office rents instead.

Additionally, one commenter questioned CMS' analysis of the Medical

Group Management Association's (MGMA's) survey data on rent. The commenter raised questions as to why CMS rejected the use of MGMA rental data due to insufficiency in sample size and representation, despite admitting that the physician response rate on the MGMA survey was typical for surveys of business.

Response: As we have previously explained in the CY 2005 and CY 2008 final rules with comment period (69 FR 66262 and 72 FR 66245 respectively), we recognize that apartment rents may not be a perfect proxy for measuring the relative cost differences in physician office rents. However, we believe the HUD rental data are the most comprehensive and valid indicator that is available of the real estate rental market in all areas of the country. We continue to believe that

HUD rental data remain the best data source for determining the relative cost differences in physicians' office rent among all areas of the country. The data are regularly updated and available nationally, and retain consistency area-to-area and year-to-year. We would welcome any alternative rental data source that is available nationally with sufficient representation among PFS localities.

With regard to our review of MGMA survey data, we have concerns with both the sample size and representativeness of the MGMA data. For example, the responses represent only about 2,250 physician practices nationwide and have disproportionate sample sizes by State, suggesting very uneven response rates geographically. In addition, we also have concerns that the MGMA data have the potential for response bias. The

MGMA's substantial reliance on its membership base suggests a nonrandom selection into the respondent group. Some evidence for such issues in the MGMA data arises from the very different sample sizes by State. For example, in the MGMA data, 10 States have fewer than 10 observations each, and California, New York, and New Jersey have fewer than 10 observations per locality. Therefore, we continue to believe the MGMA survey data would not be a sufficient rental data source for all PFS localities.

Comment: One commenter expressed concern that the BLS OES wage data may result in the undervaluation of physician earnings because the data exclude incomes of self-employed professionals.

Response: The GPCIs are not an absolute measure of physician earnings; rather, they are a measure of the relative cost differences for each of the three PFS components. We have no evidence to suggest that self-employment income would have different geographic variation than non-self-employed income. Absent such evidence, we would expect that including wage data from self-employed professionals would result in a geographic distribution of professional wages similar to the BLS

OES data source.

Comment: Many commenters stated that implementing PE GPCI changes in CY 2011 would reduce payment to urban areas and, therefore, would violate the ``hold harmless'' provision as required by the ACA.

Response: Section 1848(e)(1)(H) of the Act (as added by section 3102 (b) of the ACA) requires that we apply a limited recognition of cost differences for the rent component and employee compensation component of the PE GPCI as compared to the national average. This section also includes a ``hold harmless'' provision for CY 2010 and CY 2011 for any PFS locality that would receive a reduction to its PE GPCI resulting from the limited recognition of PE cost differences. For CY 2010 and CY 2011, we applied the limited recognition of PE cost differences and ``hold harmless provision'' in accordance with the statutory requirement, which is specific only to the limited recognition of rent and employee wage cost differences. In other words, the ``hold harmless'' (non-budget neutral) provision under section 1848(e)(1)(H)(iii) of the Act (as added by section 3102 (b) of the ACA) does not apply to the effects of updated data incorporated into the

GPCIs as a result of our normal GPCI update process. As discussed earlier in this section, the proposed GPCI update reflected our preliminary review based on the best information currently available.

We anticipate that further information may lead to proposed additional refinements to the GPCIs in future years.

Comment: One commenter recommended that CMS track the ``hold harmless'' transitional GPCIs to determine whether certain regions of the country are underpaid as a result of the application of the limited recognition of PE cost differences.

Response: The ``hold harmless'' provision under section 1848(e)(1)(H)(iii) of the Act (as added by section 3102(b) of ACA) was applied by selecting the greater of the CY 2011 transitional PE GPCI value calculated with the limited recognition of cost differences or the CY 2011 transitional PE GCPI value calculated with full recognition of cost differences. Therefore, no locality is ``underpaid'' by the application of the limited recognition of PE cost differences.

Comment: One commenter requested that CMS consider applying a 1.0

GPCI floor to non-frontier States that serve significant rural populations. The commenter was not specific as to which GPCI (work, PE, or malpractice) the floor should be applied.

Response: As discussed previously in this section, section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the ACA) established a permanent 1.0 PE GPCI floor only for frontier States, and section 3102(a) of the ACA amended section 1848(e)(1)(E) of the Act to extend the 1.0 work GPCI floor for services furnished only through

December 31, 2010. We do not otherwise have the authority to establish

GPCI floors that do not consider the differences in physicians' resource costs among localities.

Comment: A few commenters requested that CMS release underlying data sources, including county level GPCI values and budget neutrality estimates, which would allow interested parties to replicate GPCI calculations.

Response: We strive to be as transparent as possible in all of our proposals. To that end, we have made

Page 73258

numerous files available on the CMS Web site under the downloads for the CY 2011 PFS proposed rule to assist in the public's review of the

CY 2011 proposal. These files include: The preliminary contractor's report on data for the 6th GPCI update; the CY 2010 through CY 2012

GPCIs, both as proposed (including the ACA provisions) and without the

ACA provisions to permit isolation of the impacts of the updated data; and web links to the publicly available source data and copies of data files that are not otherwise publicly available, for example county and locality-specific RVUs from Medicare claims data and malpractice insurance premium data. In combination, this information allows the public to apply our methodology to replicate our calculations for the proposed GPCIs.

Comment: Many commenters expressed concern about the proposed cost share weights for the rent component and medical equipment, supplies, and other miscellaneous component of the PE GPCI. The commenters stated that the proposed cost share weights would unjustifiably shift Medicare payment away from urban localities to rural localities. Several commenters suggested that portions of the ``all other services'' component of the office expenses cost category, (which includes maintenance services, storage, security and janitorial services, office equipment, information technology systems, and medical record systems) and the stand-alone ``other professional services'' cost category

(which includes accounting services, legal services, office management services, continuing education, professional association memberships, journals, and professional care expenses) are wage-related and, therefore, should be adjusted for locality cost differences.

Additionally, a few commenters stated that the cost share weight attributed to the rent component of the PE GPCI should vary by region because one national cost share weight for rent penalizes areas where office rent is a higher portion of practice expenses.

Response: Although we typically update the GPCI cost share weights concurrently with the most recent MEI revision and rebasing, the commenters raised many points regarding the reallocation of labor- related costs from the medical equipment and supplies and miscellaneous component to the employee compensation component of the PE GPCI. After consideration of the public comments we received on this issue, we will continue to use the current GPCI cost share weights for CY 2011. We have asked the Institute of Medicine to evaluate the accuracy of the geographic adjustment factors used for Medicare physician payment. The

Institute of Medicine will prepare two reports for Congress and the

Secretary of the Department of Health and Human Services. The first report, expected in spring 2011, will include an evaluation of the accuracy of geographic adjustment factors, and the methodology and data used to calculate them. The second report, expected in spring 2012, will evaluate the effects of the adjustment factors on the distribution of the health care workforce, quality of care, population health, and the ability to provide efficient, high-value care. For more information on the Institute of Medicine's study on Medicare geographic adjustment factors, we refer readers to the Institute of Medicine Web site: http:/

/iom.edu/Activities/HealthServices/GeographicAdjustments.aspx.

We will explore further the options that were raised to us by the commenters and the recommendations in the forthcoming Institute of

Medicine report(s). We will also continue our analysis of the cost share weights attributed to the PE GPCI as required by section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA), including the possibility of assigning cost share weights to the rent component of the PE GPCI that vary among fee schedule areas. We will address the GPCI cost share weights again in the CY 2012 PFS proposed rule.

Comment: MedPAC suggested an alternative method for calculating the

PE GPCI. This alternative PE GPCI method would account for variations in the cost share of equipment and supplies across services.

Response: We appreciate MedPAC's suggestion of an alternative method that would vary the portion of PE that is geographically adjusted for locality differences based on the characteristics of individual services, rather than applying a uniform percentage across all PFS services. We recommend that MedPAC continue to analyze this or other alternative geographic adjustment methods, including their administrative feasibility.

Comment: A few commenters stated that the ``range of disparity'' between the highest and lowest paid PFS localities is too large and contradicts data studies showing little to no distinction in physician practice expenses throughout the nation. For example, the commenters stated that the AMA's analysis of its own PPIS data concluded that

``expenses did not differ significantly by either metro location or

Census region.'' One commenter requested an explanation of the discrepancy between the AMA's findings of no measurable practice expense distinctions and CMS' findings that continue to show substantial distinctions in physician practice expenses among the

Medicare payment localities. Another commenter stated that a 2007 survey conducted by the journal, Medical Economics, indicated that the average practice expenses are highest in the Midwestern States (which is contrary to the proposed CY 2011 GPCIs).

Response: We have reviewed the studies referenced by the commenters and compared their findings with the GPCI values calculated for the CY 2011 PFS proposed rule. As mentioned by the commenters, both the AMA and Medical Economics studies aggregated per-physician expenses at the

Census region level. The AMA PPIS analysis showed the Northeast as having the lowest per-physician expenses, followed by the Midwest then the West, with the South identified as having the highest expenses.

Although there is about a 20 percent difference in total expenses between the Northeast and South, the study noted that the difference was not significant after controlling for practice setting and physician specialty. The Medical Economics survey findings showed about a 30 percent difference in costs, with the East showing the lowest expenses and the Midwest with the highest. Both studies demonstrated that rural areas have the highest per-physician expenses and highly populated areas the lowest.

To compare the variation of PE GPCI values calculated for the CY 2011 PFS proposed rule to the AMA and Medical Economics studies, we used PE RVUs to create weighted averages of the PE GPCIs by Census region. Additionally, because the AMA and Medical Economics data reported total per-physician practice expenses, whereas the GPCI is a cost index, we produced indices for each source to create comparable measures of variation. We then normalized each index to the lowest cost area from each data source. Consequently, the index values show the percent difference in costs relative to the lowest cost area. For example, the AMA study shows the Northeast as having the lowest per- physician expenses, thus establishing an index value of 1.00 for that area. For the AMA study, the Midwest index value is 1.07 which signifies that costs in the Midwest are 7 percent above the Northeast

AMA values. The PE GPCI data indicate that the Midwest has the lowest costs; and the South, with an

Page 73259

index value of 1.01, has costs that are 1 percent above the Midwest

GPCI values. When aggregated to the Census region, the PE GPCIs showed less variation in costs than the comparison data sources (AMA PPIS and

Medical Economics). Using the PE GPCI data to calculate Census region indices produced only a 16 percent difference in costs between the most costly and least costly areas, equating to roughly half the variation found in the Medical Economics survey and about 75 percent of the variation found in the PPIS study. Table 26 compares the results on the disparity in costs by Census region.

Table 26--Census Region Cost Indices by Data Source

PE GPCI components

Medical

PE GPCI --------------------------------------

AMA

economics

data

Office

Rent

Wages

supplies

Midwest...........................

1.07

1.29

1.00

1.00

1.04

1.00

South.............................

1.21

1.20

1.01

1.12

1.00

1.00

West..............................

1.11

1.06

1.14

1.47

1.17

1.00

Northeast.........................

1.00

1.00

1.16

1.55

1.18

1.00

Additionally, the conceptual approaches to the GPCIs and the data sources noted by the commenters are sufficiently different to make comparisons extremely difficult. The different rank ordering in the costs by regions, as shown in Table E4, may also reflect the different strategies used to measure costs. Specifically, the AMA and Medical

Economics studies ordered areas based on total physicians' expenses, whereas the GPCIs are intended to provide a local cost index that is then applied to each PFS component; work, practice expense, and malpractice expense. Based on our review of the AMA PPIS and Medical

Economics studies, a key factor in explaining differences with the proposed GPCI values is differences in practice patterns across the different areas. Specifically, rural practitioners tend to see more patients, incurring higher expenses. However, as noted in the Medical

Economics study, higher patient loads result in higher payment. To place this in the context of Medicare PFS payment, seeing more patients produces more billed services, allowed charges, and payments.

Therefore, the greater number of patients seen by rural physicians is accounted for in total RVUs to the physician, rather than through the

GPCI values.

Moreover, the very low cost ranking of the Northeast in both the

AMA PPIS and Medical Economics datasets suggests a possible influence of economies of scale. The GPCIs are designed to capture differences in the prices of inputs facing physicians in each region. The input prices are used to create GPCI values as a measure of the relative cost differences in operating a medical practice in one locality versus another. It is likely that the AMA and Medical Economics studies are capturing differences in the production of services, distinct from the input prices. In particular, the geographic differences may reflect differences in economies of scale in more and less urbanized areas.

More rural practitioners are less likely to work in large practices, leading to higher per-physician costs, all else being equal. For example, a two-physician practice may need the same number of front office staff as a one-physician practice. When this expense is measured on a per-physician basis, the single physician pays twice as much for front office support. This type of variation can occur within localities and may reflect the practitioner's choice to work in a small or large physician practice. Nevertheless, there is no mechanism within the existing GPCI approach to account for the influence of economies of scale, despite its potentially significant impact on the effective per- unit costs of providing care.

Comment: Several commenters recommended that CMS use data from a reliable survey of physicians' practices, such as the AMA PPIS or the

MGMA survey, to develop the office rent index and employee compensation index.

Response: Because of the limited sample sizes of the AMA PPIS (n = 2,137) and MGMA studies (n = 2,246), we do not believe that it would be possible to calculate reliable indices for all Medicare PFS localities based upon these data. As mentioned previously, in the MGMA data, 10

States have fewer than 10 observations each, and California, New York, and New Jersey have fewer than 10 observations per locality.

In light of the comments received suggesting the use of survey data to determine GPCI values and the typical response rates for existing physician surveys, we are continuing to consider the possibility of establishing a physician cost report and requiring a sufficiently large sample of physicians in each locality to report data on actual costs incurred. However, we believe that a physician cost report could take years to develop and implement, and could be prohibitively expensive.

We also have some concerns about the administrative burden this approach would place on physician's office staff. Therefore, we are requesting specific public comments regarding the potential benefits to be gained from establishing a physician cost report and whether this approach is appropriate to achieve potentially greater precision in measuring the relative cost differences in physicians' practices among

PFS localities. We are also requesting public comments on the potential administrative burden of requiring physicians to routinely complete and submit a cost report and whether this requirement should be mandatory for all physician practices. Additionally, we have asked the Institute of Medicine to look at the use of survey data in the context of their geographic adjustment analysis. It is also our understanding that

MedPAC is considering the issue of data sources used to determine geographic payment adjustments under the PFS.

Comment: One commenter stated that all geographic adjustment factors should be eliminated from the Medicare PFS ``except for those designed to achieve a specific public policy goal, for example, to encourage physicians to practice in underserved areas.'' The commenter requested that CMS utilize the most broadly applicable methodology allowed by law to reduce geographic payment disparity.

Response: We are required by section 1848(b)(1)(C) and (e)(1)(A) of the Act to develop and apply separate GPCIs to adjust for resource cost differences among localities compared to the national average for each of the three PFS components: work, practice expense, and malpractice expense. The purpose of the GPCIs is not to reduce

Page 73260

geographic payment disparity; rather, the GPCIs distribute PFS payments among areas in order to adjust for area cost differences. In general the data show that urban areas usually are higher cost, while rural areas are lower cost. However, there are several provisions currently in place that have the effect of reducing geographic payment disparities. For example, the statute requires that only one-quarter of area cost differences in physician work be recognized, and we assign a 1.0 index to the medical equipment, supplies, and miscellaneous component of the PE GPCI because we believe there is a national market for these items. In addition, 34 States and 2 territories are

``Statewide'' payment localities wherein all physicians, whether urban or rural, are paid the same. Moreover, many geographic areas are designated as Health Professional Shortage Areas (HPSAs). Physicians in these areas may be eligible for a 10 percent HPSA bonus payment in addition to the amount paid under the Medicare PFS for services they furnish. Beginning in CY 2011, general surgeons furnishing major surgical procedures in these areas may be eligible for the HPSA surgical incentive payment program (HSIP) that also pays 10 percent in addition to the amount paid under the PFS as discussed in section

VI.S.2. of this final rule with comment period. For complete information on the HPSA bonus payment program and a list of eligible areas for both programs by zip code, we refer readers to the CMS Web site at: http://www.cms.hhs.gov/hpsapsaphysicianbonuses/01_ overview.asp. All of these factors mentioned above have the effect of reducing geographic payment disparities under the Medicare PFS.

Comment: One commenter encouraged CMS to follow the GAO's recommendations, as outlined in the GAO's March 2005 Report (GAO-05- 119), for improving underlying GPCI data and methods by taking the following actions:

Transition from Census Bureau's Decennial Census data to the annual ACS for earning and wage data.

Include physician assistant wage data to improve the measurement of the PE GPCI.

Consider the feasibility of using a commercial rent index or a residential rent index directly based on ACS data for determining the rent component of the PE GPCI.

Collect malpractice premium data from all States, accounting for at least half of the malpractice business in a State.

Standardize collection of malpractice premium data, for example by using data from Physician Insurer's Association of America.

Response: As previously discussed, the full ACS data were not available in time for the 6th GPCI update. We intend to explore the use of ACS data for determining the work GPCI and the employee compensation component of the PE GPCI, as well as evaluate its possible use as an office rent index once the data are fully available. We also intend to continue exploring the potential use of commercial rent data as part of our ongoing review and refinement of the GPCIs.

Additionally, we have considered the use of physician assistant wages in calculating the employee compensation index. However, since physician assistants can furnish medical services and bill the Medicare program directly, their wages are influenced by Medicare PFS payment.

Therefore, we have some concern that a circular effect could occur if we included physician assistants among the occupational groups comprising the employee compensation component, similar to our concern with including physicians' salaries in the determination of the work

GPCI.

With regard to the collection of malpractice premium data, the CY 2011 malpractice GPCI update reflects 2006 and 2007 premium data which were also used for the CY 2010 update to the malpractice RVUs. As compared to previous malpractice RVU updates, we substantially increased the number of States from which we were able to collect rate filings. We were able to collect malpractice premium data from every

State except for Mississippi and Puerto Rico. Premium data were selected from at least two companies in each State, with more selected if necessary to reach 50 percent of the market share in that State. To ensure consistency across States we collected premium data from State

Departments of Insurance. For States where we were not able to collect rate fillings, we used premium information from the Medical Liability

Monitor Survey data from 2005 through 2008. e. Summary of Final CY 2011 GPCIs

After consideration of the public comments received on the GPCIs, we are finalizing the 6th GPCI update using the most current data, with modifications; we are not finalizing the proposal to change the GPCI cost share weights for CY 2011. Instead, we are continuing to use the current GPCI cost share weights for determining the PE GPCI values and locality GAFs in CY 2011, and we will address the cost share weights again in the CY 2012 PFS proposed rule. As a result, the cost share weight for the physician work GPCI (as a percentage of the total) will be 52.5 percent (current and for CY 2011) rather than 48.3 percent (as proposed), and the cost share weight for the PE GPCI will be 43.7 percent (current and for CY 2011) rather than 47.4 percent (as proposed) with only a slight difference in the employee compensation component (18.7 percent rather than 19.2 percent as proposed). However, the cost share weight for the office rent component of the PE GPCI will be 12.2 percent (current and for CY 2011) rather than 8.4 percent (as proposed), and the medical equipment, supplies, and other miscellaneous expenses component will be 12.8 percent (current and for CY 2011) rather than 19.9 percent (as proposed). Moreover, the cost share weight for the malpractice GPCI will be 3.9 percent (current and for CY 2011) rather than 4.3 percent (as proposed).

Additionally, we will review the complete findings and recommendations from the Institute of Medicine's study of geographic adjustment factors for physician payment, the Secretary's Medicare

Geographic Payment Summit, and the MEI technical advisory panel, and continue to study the issues as required by section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA). We will once again consider the GPCIs for CY 2012 in the context of our annual PFS rulemaking beginning in CY 2011 based on the information available at that time.

We are using the 2006 through 2008 panels from the BLS OES data for updating the work GPCIs and the employee compensation component of the

PE GPCIs. We are also using the 2010 apartment rental data produced by

HUD at the 50th percentile as a proxy for the relative cost difference in physicians' office rents and 2006 and 2007 malpractice premium data for determining the malpractice GPCIs.

As required by section 1848(e)(1)(H)(ii) and (iii) of the Act (as added by section 3102(b) of the ACA), the CY 2011 GPCIs reflect only one-half of the relative cost differences for the employee compensation and rent portions of the PE GPCI, and the ``hold harmless'' provision ensures that no locality receives a payment reduction resulting from the limited recognition of PE cost differences. For CY 2011, the ``hold harmless'' provision was applied by selecting the greater of the CY 2011 transitional PE GPCI value calculated with the limited recognition of cost differences or the CY 2011 transitional

Page 73261

PE GPCI value calculated with full recognition of cost differences.

In accordance with section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the ACA), and consistent with the final FY 2011 hospital IPPS (75 FR 5160 through 5161), we applied a 1.0 PE GPCI floor for services furnished in frontier States. The frontier States are the following: Montana; Wyoming; North Dakota; Nevada; and South Dakota. As we indicated above in this section, section 1848(e)(1)(E) of the Act

(as amended by section 3102(a) of the ACA) extended the 1.0 work GPCI floor only through December 31, 2010. Therefore, the CY 2011 physician work GPCIs and summarized GAFs do not reflect the 1.0 work floor.

However, the permanent 1.5 work GPCI floor for Alaska (as established by section 134(b) of the MIPPA) will remain in effect for CY 2011.

We are finalizing the CY 2011 GPCIs shown in Addendum E. The GPCIs have been budget neutralized to ensure that nationwide, total RVUs are not impacted by changes in locality GPCIs. The 1.0 PE GPCI floor for frontier States and the PE GPCI ``hold harmless'' provision were applied to the budget neutralized GPCIs.

Typically when we complete a review and update of the GPCIs, the values shown represent the first year of the 2-year GPCI update transition. Although the CY 2011 GPCIs have been set on that basis, we note that we will be assessing the results of the various studies regarding the GPCIs and cost share weights (once they are completed), and exploring the use of the full ACS data. Based on these assessments, we may make additional proposals that would further modify the GPCIs for CY 2012, which would result in changes to the CY 2012 GPCIs shown in Addendum E to this final rule with comment period. Therefore, the final CY 2011 GPCIs may not reflect a true mid-point ``phase-in'' to the updated GPCIs, although, as noted above, they have been set for CY 2011 on that basis. The CY 2011 updated GAFs and GPCIs may be found in

Addenda D and E of this final rule with comment period. 3. Payment Localities

The current PFS locality structure was developed and implemented in 1997. There are currently 89 localities; 34 localities are Statewide areas. There are 52 localities in the other 18 States, with 10 States having 2 localities, 2 States having 3 localities, 1 State having 4 localities, and 3 States having 5 or more localities. The District of

Columbia, Maryland, and Virginia suburbs, Puerto Rico, and the Virgin

Islands are additional localities that make up the remainder of the total of 89 localities. The development of the current locality structure is described in detail in the CY 1997 PFS proposed rule (61

FR 34615) and the subsequent final rule with comment period (61 FR 59494).

As we have previously noted in the CYs 2008 and 2009 proposed rules

(72 FR 38139 and 73 FR 38513), any changes to the locality configuration must be made in a budget neutral manner within a State and can lead to significant redistributions in payments. For many years, we have not considered making changes to localities without the support of a State medical association in order to demonstrate consensus for the change among the professionals whose payments would be affected (with some increasing and some decreasing). However, we have recognized that, over time, changes in demographics or local economic conditions may lead us to conduct a more comprehensive examination of existing payment localities.

For the past several years, we have been involved in discussions with physician groups and their representatives about recent shifts in relative demographics and economic conditions, most notably within the current California payment locality structure. We explained in the CY 2008 PFS final rule with comment period that we intended to conduct a thorough analysis of potential approaches to reconfiguring localities and would address this issue again in future rulemaking. For more information, we refer readers to the CY 2008 PFS proposed rule (72 FR 38139) and subsequent final rule with comment period (72 FR 66245).

As a follow-up to the CY 2008 PFS final rule with comment period, we contracted with Acumen to conduct a preliminary study of several options for revising the payment localities on a nationwide basis. The contractor's interim report was posted on the CMS Web site on August 21, 2008, and we requested comments from the public. The report entitled, ``Review of Alternative GPCI Payment Locality Structures,'' remains accessible from the CMS PFS Web page under the heading

``Interim Study of Alternative Payment Localities under the PFS.'' The report may also be accessed directly from the following link: http:// www.cms.hhs.gov/PhysicianFeeSched/10_Interim_Study.asp#TopOfPage.

We accepted public comments on the interim report through November 3, 2008. The alternative locality configurations discussed in the report are described briefly below in this section.

Option 1: CMS Core-Based Statistical Area (CBSA) Payment Locality

Configuration

This option uses the Office of Management and Budget (OMB's)

Metropolitan Statistical Area (MSA) designations for the payment locality configuration. MSAs would be considered as urban CBSAs.

Micropolitan Areas (as defined by OMB) and rural areas would be considered as non-urban (rest of State) CBSAs. This approach would be consistent with the IPPS pre-reclassification CBSA assignments and with the geographic payment adjustments used in other Medicare payment systems. This option would increase the number of PFS localities from 89 to 439.

Option 2: Separate High-Cost Counties from Existing Localities

(Separate Counties)

Under this approach, higher cost counties are removed from their existing locality structure and they would each be placed into their own locality. This option would increase the number of PFS localities from 89 to 214, using a 5 percent GAF differential to separate high- cost counties.

Option 3: Separate MSAs from Statewide Localities (Separate MSAs)

This option begins with statewide localities and creates separate localities for higher cost MSAs (rather than removing higher cost counties from their existing locality as described in Option 2). This option would increase the number of PFS localities from 89 to 130, using a 5 percent GAF differential to separate high-cost MSAs.

Option 4: Group Counties Within a State Into Locality Tiers Based on

Costs (Statewide Tiers)

This option creates tiers of counties (within each State) that may or may not be contiguous but share similar practice costs. This option would increase the number of PFS localities from 89 to 140, using a 5 percent GAF differential to group similar counties into statewide tiers.

As discussed in Acumen's interim report, all four studied alternative locality configurations would increase the number of localities and separate higher cost areas from rural ``rest of state'' areas. As a result, payments to urban areas would increase, while rural areas would see a decrease in payment because they would no longer be grouped with higher cost ``urbanized'' areas. A number of public commenters

Page 73262

on the draft report expressed support for Option 3 (separate MSAs from

Statewide localities) because the commenters believed this alternative would improve payment accuracy over the current locality configuration and could mitigate possible payment reductions to rural areas as compared to Option 1 (CMS CBSAs). Therefore, Acumen is conducting a more in-depth analysis of the dollar impacts that would result from the application of Option 3. For a detailed discussion of the public comments on the contractor's interim locality study report, we refer readers to the CY 2010 PFS proposed rule (74 FR 33534) and subsequent final rule with comment period (74 FR 61757).

We note that the discussion of PFS payment localities and our preliminary study of alternative payment locality configurations in the

CY 2011 PFS proposed rule was intended for informational purposes only.

We did not make any proposals regarding the PFS locality configurations for CY 2011 and, therefore, public comments on the PFS locality configurations are not within scope of the CY 2011 PFS proposed rule.

We thank the commenters for sharing their views and suggestions; however, we are not summarizing or responding to `out of scope' comments in this final rule with comment period.

E. PFS Update for CY 2010: Rebasing and Revising of the Medicare

Economic Index (MEI) 1. Background

The Medicare Economic Index (MEI) was originally required by section 1842(b)(3) of the Act, which states that prevailing charge levels beginning after June 30, 1973 may not exceed the level from the previous year except to the extent that the Secretary finds, on the basis of appropriate economic index data, that such higher level is justified by year-to-year economic changes. We continued to use the MEI as part of the statutory update formula (specified under section 1848 of the Act) when the physician fee schedule was implemented in 1992 (56

FR 59511).

Beginning July 1, 1975, and continuing through today, the MEI has served these purposes by reflecting the weighted-average annual price change for various inputs needed to furnish physicians' services. As such, the index is necessarily a fixed-weight input price index, with an adjustment for the change in economy-wide, private nonfarm business multifactor productivity. The MEI is comprised of two broad categories:

(1) Physician's own time; and (2) physician's practice expense (PE).

The MEI was first published on June 16, 1975 (40 FR 25446), and became effective for services furnished beginning July 1, 1975. The original MEI had a base period of 1971. The structure of the original

MEI remained essentially unchanged from its original until the CY 1993 final rule (57 FR 55896) in which we finalized a comprehensive rebasing and revision process with a 1989 base year. The new index was based in part on the recommendations of a Congressionally-mandated meeting of experts held in March 1987. The MEI was again rebased in the CY 1999 final rule (63 FR 58845), which moved the cost structure of the index from a 1989 base to a 1996 base. The methodology for the productivity adjustment was revised in the CY 2003 final rule (67 FR 80019) to reflect the percentage change in the 10-year moving average of economy- wide private nonfarm business multifactor productivity (previously the index was adjusted by a measure of labor productivity). The current form of the MEI was detailed in the CY 2004 PFS final rule (68 FR 63239) which updated the cost structure of the index from a base year of 1996 to 2000.

We proposed to rebase and revise the MEI and incorporate it into the CY 2011 PFS update. The terms ``rebasing'' and ``revising'', while often used interchangeably, actually denote different activities.

Rebasing refers to moving the base year for the structure of costs of an input price index, while revising relates to other types of changes such as changing data sources, cost categories, or price proxies used in the price index. As is always the case with a rebasing and revising exercise, we have used the most recently available, relevant, and appropriate information to develop the proposed MEI cost category weights and price proxies. In the following sections of this final rule with comment period, we detail our proposals and respond to comments regarding the updated cost weights for the MEI expense categories, our rationale for selecting the price proxies in the MEI, and the results of the rebasing and revising of the MEI. 2. Use of More Current Data

The MEI was last rebased and revised in 2003 in the CY 2004 PFS final rule with comment period (68 FR 63239). The current base year for the MEI is 2000, which means that the cost weights in the index reflect physicians' expenses in 2000. However, we believe it is desirable to periodically rebase and revise the index so that the expense shares and their associated price proxies reflect more current conditions. For the

CY 2011 PFS update, we are finalizing the proposal to rebase and revise the MEI to reflect appropriate physicians' expenses in 2006.

Compared to the 2000-based MEI, we proposed to make several changes to the MEI cost structure. First, we proposed to exclude the

Pharmaceutical cost category as pharmaceuticals are neither paid for under the PFS nor are they included in the definition of ``physicians' services'' for purposes of calculating the physician update via the SGR system (for more details see the CY 2010 PFS final rule with comment period (74 FR 61961 through 61962)). We also proposed to exclude the expenses associated with separately billable supplies since these items are not paid for under the PFS. Our primary data source, the 2006

Physician Practice Information Survey (PPIS), collected data on these costs enabling us to accurately remove them from the index. In addition, we proposed to include nine new cost categories that disaggregate the costs under the broader Office Expenses cost category.

The 2000-based MEI did not break these expenses into individual cost categories. As a result of comments received, which are described more fully below in this section, we are modifying this proposal to instead include ten detailed cost categories. As indicated in the CY 2011 PFS proposed rule, we proposed to continue to adjust the MEI for economy- wide multifactor productivity based on changes in the 10-year moving average of private nonfarm business multifactor productivity. After considering the comments received, we are finalizing our proposal to continue to adjust the MEI for economy-wide multifactor productivity based on changes in the 10-year moving average of private nonfarm business multifactor productivity. 3. Rebasing and Revising Expense Categories in the MEI

The MEI is used in conjunction with the SGR system to update the

PFS and represents the price component of that update. The proposed expense categories in the index, along with their respective weights, are primarily derived from data collected in the 2006 AMA PPIS for self-employed physicians and selected self-employed non-medical doctor specialties. As noted, in addition to data on medical doctors, we included data from several non-medical doctor specialties in the MEI cost weight calculations (including optometrists, oral surgeons, podiatrists, and chiropractors) consistent with the definition of the term ``physician'' in section 1861(r) of the Act. In summary,

Page 73263

the term ``physician'' when used in connection with the performance of functions or actions an individual is legally authorized to perform means the following: (1) A doctor of medicine or osteopathy; (2) a doctor of dental surgery or of dental medicine; (3) a doctor of podiatric medicine; (4) a doctor of optometry; or (5) a chiropractor.

For a complete definition, please see section 1861(r) of the Act. We weighted the expense data from the above-referenced specialties with the self-employed physician expense data using physician counts by specialty, the same methodology used in the AMA PPIS.

The AMA PPIS data were used to determine the expenditure weights in the MEI for all of the major cost categories including total expenses, physicians' earnings, physicians' benefits, employed physician payroll, nonphysician compensation, office expenses, professional liability insurance (PLI), medical equipment, medical supplies, and other professional expenses. We are finalizing our proposal to further disaggregate both non-physician compensation and office expenses into subcategories reflecting more detailed expenses. We used several data sources for further disaggregation of expenses including: data from the 2002 Bureau of Economic Analysis (BEA) Benchmark Input-Output table (I/

O), the 2006 Bureau of the Census Current Population Survey (CPS), the 2006 Bureau of Labor Statistics (BLS) Occupational Employment Survey

(OES), the 2006 Employment Cost for Employee Compensation Survey

(ECEC), and the 2006 Internal Revenue Service (IRS) Statistics of

Income (SOI) data. The development of each of the cost categories using these sources is described in detail below. a. Developing the Weights for Use in the MEI

Developing a rebased and revised MEI requires selecting a base year and determining the appropriate expense categories. We proposed to rebase the MEI to CY 2006. We choose CY 2006 as the base year as: 1) this is the most recent year for which comprehensive physician expense data are available; and (2) we believe these data represent an accurate proxy for the physician expense distribution in CY 2011.

Table 27 lists the set of mutually exclusive and exhaustive cost categories that make up the final rebased and revised MEI, including the addition of the All Other Products category we are adopting in response to public comments.

Table 27--Final 2006 MEI Cost Categories, Weights, and Price Proxies Compared to the 2000 MEI Cost Categories and Weights

Final 2006-

Cost category

cost weights 2000 Cost

2006 Price proxies

(1,2)

weights

Total.............................

100.00

100.000

Physician's Compensation (Own

48.266

52.466

Time) \(3)\.

Wages and Salaries............

43.880

42.730 AHE Total Nonfarm Private for Production &

Nonsupervisory Employees.\(5)\

Benefits (3),(4)..............

4.386

9.735 ECI-Benefits Total Nonfarm Private.\(6)\

Physician's Practice Expense......

51.734

47.534

Nonphysician Employee

19.153

18.654

Compensation.

Nonphysician Employee Wages

13.752

13.809 and Salaries.

Prof/Tech Wages...........

6.006

5.887 ECI-Wages/Salaries: Private Professional

&Technical.

Managerial Wages..........

1.446

3.333 ECI-Wages/Salaries: Private Managerial.

Clerical Wages............

4.466

3.892 ECI-Wages/Salaries: Private Clerical.

Services Wages............

1.834

0.696 ECI-Wages/Salaries: Private Service.

Nonphysician Employee Benefits

5.401

4.845 ECI-Ben: Private Blend.

\(4)\.

Office Expenses...............

20.035

12.209

Utilities.................

1.266 ............. CPI Fuel & Utilities.\(7)\

Chemicals.................

0.723 ............. PPI for Other Basic Organic Chemical

Manufacturing.\(8)\

Paper.....................

0.657 ............. PPI for Converted Paper.

Rubber & Plastics.........

0.598 ............. PPI for Rubber and Plastics.

Telephone.................

1.501 ............. CPI for Telephone Services.

Postage...................

0.898 ............. CPI for Postage.

All Other Services........

3.582 ............. ECI Compensation Services Occupations.

All Other Products........

0.500 ............. CPI-U All Items Less Food and Energy.

Fixed Capital.............

8.957 ............. CPI for Owner's Equivalent Rent.

Moveable Capital..........

1.353 ............. PPI for Machinery and Equipment.

PLI...........................

4.295

3.865 CMS-Prof. Liab. Phys. Premiums.

Medical Equipment.............

1.978

2.055 PPI-Medical Instruments & Equip.

Pharmaceuticals and Medical

1.760

4.320

Materials and Supplies.

Pharmaceuticals........... .............

2.309

Medical Materials and

1.760

2.011 PPI Surg. Appliances and Supplies/CPI(U) Med

Supplies.

Supplies.

Page 73264

Other Professional Expenses...

4.513 ............. CPI-U All Items Less Food and Energy.

Other Expenses................ .............

6.433

(1) Due to rounding, weights may not sum to 100.000 percent.

(2) Sources: 2006 Physician Practice Information Survey (PPIS), Center for Health Policy Research, American

Medical Association; 2006 Employment Cost for Employee Compensation, U.S. Department of Labor, Bureau of Labor

Statistics; 2006 Occupational Employment Statistics (OES), BLS; U.S. Department of Commerce, Bureau of

Economic Analysis 2002 Benchmark Input Output Tables, and U.S. Department of Commerce, Bureau of the Census, 2006 Current Population Survey.

(3) Includes employed physician payroll.

(4) Includes paid leave.

(5) Average Hourly Earnings (AHE)

(6) Employment Cost Index (ECI)

(7) Consumer Price Index (CPI)

(8) Producer Price Index (PPI)

The development of each of the cost categories in the final 2006

MEI is described, in detail, as follows. b. Physician's Own Time

The component of the MEI that reflects the physician's own time is represented by the net income portion of business receipts. The proposed 2006 cost weight associated with the physician's own time

(otherwise referred to as the Physician Compensation cost weight) is based on 2006 AMA PPIS data for mean physician net income (physician compensation) for self-employed physicians and for the selected self- employed specialties referenced previously in this rule.

We proposed to continue to add employed physician compensation to self-employed physician compensation in order to calculate an aggregate

Physician Compensation cost weight. By including the compensation of employed physicians in the Physician Compensation expense category, these expenses will be adjusted by the appropriate price proxies for a physician's own time. The proposed 2006 Physician Compensation cost weight is 48.266 percent as compared to a 52.466 percent share in the 2000-based MEI. We split the Physician Compensation component into two subcategories: Wages & Salaries; and Benefits. For self-employed physician's compensation, the ratios for Wages & Salaries and Benefits were calculated using data from the PPIS. Self-employed physician wages

& salaries accounted for 92.2 percent of physician compensation while physician benefits accounted for the remaining 7.8 percent. For employed physician payroll, the distribution for wages & salaries and benefits for 2006 was 85.8 percent and 14.2 percent, respectively. This ratio was determined by calculating a weighted average of available SOI data for partnerships, corporations, and S-corporations specific to physicians and outpatient care centers. Based on these methods, the proposed 2006 Physician Wages & Salaries cost weight was 43.880 percent and the proposed 2006 Physician Benefits cost weight was 4.386 percent. c. Physician's Practice Expenses

To determine the remaining individual Practice Expenses cost weights, we used mean expense data from the 2006 PPIS survey expressed as a percentage of total expenses. The detailed explanations for the derivation of the individual weights under Practice Expenses are listed below.

(1) Nonphysician Employee Compensation

The cost weight for Nonphysician Employee Compensation was developed using the 2006 AMA PPIS mean expenses for these costs. We further divided this cost share into Wages & Salaries and Benefits using 2006 BLS Employer Costs for Employee Compensation (ECEC) data for the Health Care and Social Assistance (private industry) category.

Although this survey does not contain data only for offices of physicians, data are available to help determine the shares associated with wages & salaries and benefits for private industry health care and social assistance services (which include offices of physicians, hospitals, nursing homes, and offices of dentists). We believe these data provide a reasonable estimate of the split between wages and benefits for employees in physicians' offices. Data for 2006 in the

ECEC for Health Care and Social Assistance indicate that wages and benefits are 71.8 percent and 28.2 percent of compensation, respectively. The 2000-based MEI included a wage and benefit split of 74.0 percent and 26.0 percent of compensation.

We proposed to use 2006 Current Population Survey (CPS) data and 2006 BLS Occupational Employment Statistics (OES) data to develop cost weights for wages for nonphysician occupational groups. These are the same data sources that were used in the 2000-based MEI. We determined total annual earnings for offices of physicians using employment data from the CPS and mean annual earnings from the OES. To arrive at a distribution for these separate categories, we determined annual earnings for each of the four categories (which are Professional &

Technical workers, Managers, Clerical workers, and Service workers), using the Standard Occupational Classification (SOC) system. We then determined the overall share of the total for each. The resulting proposed distribution, as well as the distribution from the 2000-based

MEI, are presented in Table 28.

TABLE 28--Percent Distribution of Nonphysician Payroll Expense by

Occupational Group: 2006 and 2000

2006 Expenditure 2000 Expenditure

BLS Occupational Group

shares

shares

Total...........................

100.000

100.000

Page 73265

Professional & Technical

43.671

42.635

Workers....................

Managers....................

10.517

24.138

Clerical Workers............

32.477

28.187

Service Workers.............

13.336

5.040

Values may not sum to 100 due to rounding.

The decrease in the Managers expenditure share is directly related to a decrease in the total number of employees in Management occupations in physicians' offices, in particular, ``Medical and health service managers.'' The decrease in expenditure share may also be due, in part, to the methods used in this rebasing. That is, for the 2006- based MEI, we are using data limited to ``Offices of physicians.'' In the 2000-based version of the index, the only data that were available to inform these estimates were inclusive of physician offices and clinics (``Offices of physicians and clinics''). An examination of 2006

CPS and OES data comparing ``Outpatient care centers'' to ``Offices of physicians'' indicates that there is a higher share of management occupations in the ``Outpatient care centers'' than in ``Offices of physicians''.

The increase in the Service Workers expenditures share is attributable to a substantive increase in the number of employees in service occupations, particularly, ``Medical assistants and other health care support occupations''.

(2) Office Expenses

The aggregate Office Expenses cost weight was derived using the 2006 AMA PPIS and was calculated as the mean office expenses expressed as a percentage of mean total expenses. This calculation resulted in a 20.035 percent share of total costs in 2006 compared to a 12.209 percent share in the 2000-based index. The Office Expenses cost weight used in the 2000-based MEI was based on the AMA 1997 Socioeconomic

Monitoring System (SMS) survey, which defined office expenses as rent, mortgage interest, depreciation on medical buildings, utilities, and telephones. The AMA expanded the office expense question in the 2006

PPIS survey to include additional expenses, described in more detail below in this section.

As a result, and in order to provide for a higher level of precision in assigning appropriate price proxies to underlying costs, we proposed to further disaggregate the Office Expenses cost category into 9 detailed cost categories using the BEA 2002-Benchmark I/O data for Offices of Physicians, Dentists, and Other Health Practitioners

(North American Industrial Classification System (NAICS) 621A00). In response to comments, and as described more fully below, we are finalizing those nine categories, as well as adding a tenth detailed cost category.

The proposed Office Expenses cost categories and associated cost weights were developed by matching the BEA I/O data as closely as possible to the 2006 AMA PPIS survey, which defined office expenses as

``office (non-medical) equipment and office (nonmedical) supplies, as well as rent, mortgage, interest, maintenance, refrigeration, storage, security, janitorial, depreciation on medical buildings used in your practice, utilities, or other office computer systems (including information management systems/electronic medical record systems) and telephone.'' In most instances, the proposed underlying detailed cost categories and associated cost weights were chosen to be consistent with the NAICS 3-digit classification. BEA I/O expense data is published on a NAICS-basis. Some of the proposed underlying detailed cost categories such as All Other Services include various 3-digit

NAICS codes for service related industries. Similar methods are used in the other legislatively-required market baskets developed by CMS. After we categorized the BEA I/O data, we calculated the relative share for each category as a percentage of the total office expenses categories within the I/O data. We then aged the 2002 weights forward to 2006 to derive the 2006 detailed Office Expense cost weights as a percent of total Office Expenses. The methodology we used to age the data forward was to apply the annual price changes from each respective price proxy to the appropriate cost categories. We repeated this practice for each year of the interval from 2002 to 2006. We then applied the resulting 2006 distributions to the aggregate 2006 AMA Office Expenses weight of 20.035 percent to yield the detailed 2006 Office Expenses' weights as a percent of total expenses.

In response to public comments that are detailed in the subsequent sections of this rule, we conducted an additional review of the BEA I/O data used to disaggregate the Office Expense cost category, comparing the I/O's detailed categories with the questions on the AMA PPIS survey. This review led to small revisions to the underlying Office

Expense cost weights and resulted in the inclusion of one additional cost weight in that category: All Other Products. These products, which were previously assumed to be captured in the Other Professional

Expenses category (as measured by the AMA PPIS survey), include a variety of miscellaneous products, such as miscellaneous wood and building products, that we believe respondents included in Office

Expenses as maintenance expense. Table 27 provides the revised MEI weights.

We believe the introduction of these new, more detailed categories for the 2006-based index allow for an increased level of precision while maintaining appropriate levels of aggregation in the index. The individual price proxies are described in more detail in section

II.E.4.of this final rule.

The following is a description of the types of expenses included in each of the detailed Office Expense cost categories.

Utilities: The Utilities cost weight includes expenses classified in the fuel, oil and gas, water and sewage, and electricity industries. These types of industries are classified in NAICS and include NAICS 2211 (Electric power generation, transmission, and distribution), 2212 (Natural gas distribution), and 2213 (Water, sewage, and other systems). The cost weight for utilities is 1.266 percent.

Chemicals: The Chemicals cost weight includes expenses classified in the NAICS 325 (Chemical manufacturing), excluding pharmaceuticals and biologicals. This would include, but is not limited to, expenses such as soap and cleaning compounds, as well as photocopier

Page 73266

toners and laser printer toners. The cost weight for chemicals is 0.723 percent.

Paper: The Paper cost weight includes expenses classified in NAICS 322 (paper manufacturing) and NAICS 323 (printing and related support activities). This would include expenses associated with items such as paper, paperboard, sanitary paper products, and printing. The cost weight for paper is 0.657 percent.

Rubber and Plastics: The Rubber and Plastics cost weight includes expenses classified in NAICS 326 (Plastics and Rubber Products

Manufacturing). This would include, but is not limited to expenses associated with plastic bags, plastic trash cans, and plastic plumbing fixtures. The cost weight for Rubber and Plastics is 0.598 percent.

Telephone: The Telephone cost weight includes expenses classified in NAICS 517 (Telecommunications) and NAICS 518 (Internet service providers), and NAICS 515 (Cable and other subscription programming). Telephone service, which is one component of the

Telecommunications expenses, accounts for the majority of the expenditures in this cost category. The cost weight for Telephone services is 1.501 percent.

Postage: The Postage cost weight includes expenses classified in NAICS 491 (Postal services) and NAICS 492 (Courier services). The cost weight for Postage is 0.898 percent.

All Other Services: The All Other Services cost weight includes other service expenses including, but not limited to, nonresidential maintenance and repair, machinery repair, janitorial, and security services. This cost weight does not include expenses associated with professional services such as accounting, billing, legal, and marketing which are included in the Other Professional

Expenses cost weight derived using the AMA PPIS survey. The cost weight for All Other Services is 3.582 percent.

All Other Products: The All Other Products cost weight, which we are adding based upon our further review in response to public comments, includes other miscellaneous expenses, including but not limited to, a variety of miscellaneous building products (such as wood and concrete). The cost weight for All Other Products is 0.500 percent.

Fixed Capital: The Fixed Capital cost weight includes expenses for building leases, mortgage interest, and depreciation on medical buildings. The cost weight for Fixed Capital is 8.957 percent.

Moveable Capital: The Moveable Capital cost weight includes expenses and depreciation costs for non-medical equipment including but not limited to, computer equipment and software and the rental and leasing of industrial machinery equipment. The cost weight for Moveable Capital is 1.353 percent.

(3) Professional Liability Insurance (PLI) Expense

The proposed weight for PLI expense was derived from the 2006 AMA survey and was calculated as the mean PLI expense expressed as a percentage of mean total expenses. This calculation resulted in a 4.295-percent share of total costs in 2006 compared to a 3.865-percent share in the 2000-based index. The increase in the weight for PLI reflects the current prices of premiums, as well as an update to the level of coverage purchased by physicians in 2006 compared to 2000.

(4) Medical Equipment Expenses

The proposed weight for Medical Equipment was calculated using the 2006 AMA PPIS mean expense data expressed as a percentage of mean total expenses. This calculation resulted in a 1.978-percent share of total costs in 2006 compared to a 2.055-percent share in the 2000-based index. By definition, this category includes the expenses related to depreciation, maintenance contracts, and the leases or rental of medical equipment used in diagnosis or treatment of patients. The category would also include the tax-deductible portion of the purchase price or replacement value of medical equipment, if not leased.

(5) Medical Supplies Expenses

The proposed weight for Medical Supplies was calculated using the 2006 AMA PPIS mean expense data expressed as a percentage of mean total expenses. This calculation resulted in a 1.760-percent share of total costs in 2006 compared to a 2.011-percent share in the 2000-based index. By definition, this category includes the expenses related to medical supplies such as sterile gloves, needles, bandages, specimen containers, and catheters. Additionally, we proposed to exclude the expenses related to separately billable supplies as these expenses are not paid for under the PFS. The Medical Supply cost category does not include expenses related to drugs.

(6) Other Professional Expenses

The proposed weight for Other Professional expenses was calculated using the 2006 AMA PPIS mean expense data expressed as a percentage of mean total expenses. This calculation resulted in a 4.513-percent share of total costs in 2006. By definition, this category includes the expenses related to tax-deductible expenses for any other professional expenses not reported in another category from the PPIS. These expenses would include fees related to legal, marketing, accounting, billing, office management services, professional association memberships, maintenance of certification or licensure, journals and continuing education, professional car upkeep and depreciation, and any other general expenses or other professional expenses not reported elsewhere on the PPIS.

In summary, we are finalizing the proposed 2006-based MEI cost categories and respective cost weights for all categories except for the underlying detailed Office Expense cost categories and cost weights. In response to public comments, we reexamined the BEA I/O data and compared it again with the specific types of costs sought by the

AMA PPIS survey question on Office Expenses. Although we are finalizing the proposed Office Expense cost weight of 20.035 percent, our re- evaluation resulted in slight changes to the underlying detail of the

Office Expense cost categories and cost weights. Specifically, we are finalizing the nine proposed detailed cost categories and adding one additional detailed cost category, All Other Products. The final detailed cost categories and cost weights for the underlying Office

Expense cost categories are shown in Table 27.

Table 29 shows a comparison of the proposed MEI Office Expense cost categories and weights to the final MEI Office Expense cost categories and weights. In addition to adding the subcategory All Other Products, the final Office Expenses' category weights were updated in response to public comments to reflect the removal of automobile-related expenses, which were in effect being double-counted, from the Movable Capital category. Further examination of the AMA's PPIS questions showed that automobile costs, such as those associated with leasing and depreciation, were captured in the question related to other professional expenses and are, thus accounted for in Other Professional

Expenses (with a final cost weight of 4.513 percent). Notably, that cost weight is not impacted as, again, those costs were captured there in the survey.

Page 73267

Table 29--Comparison of Proposed Office Expense Cost Categories and Cost

Weights to the Final Office Expense Cost Categories and Cost Weights

2006

2006

Final

Proposed

Cost categories

weight

weight

(%)

(%)

Office Expenses...................................

20.035

20.035

Utilities.....................................

1.266

1.139

Chemicals.....................................

0.723

0.679

Paper.........................................

0.657

0.616

Rubber & Plastics.............................

0.598

0.563

Telephone.....................................

1.501

1.415

Postage.......................................

0.898

0.661

All Other Services............................

3.582

4.718

All Other Products............................

0.500 .........

Fixed Capital.................................

8.957

8.410

Moveable Capital..............................

1.353

1.834

4. Selection of Price Proxies for Use in the MEI

After the 2006 cost weights for the rebased and revised MEI were developed, we reviewed all of the price proxies to evaluate their appropriateness. As was the case in the development of the 2000-based

MEI (68 FR 63239), most of the proxy measures we considered are based on BLS data and are grouped into one of the following five categories:

Producer Price Indices (PPIs): PPIs measure price changes for goods sold in markets other than retail markets. These fixed-weight indexes are a measure of price change at the intermediate or final stage of production. They are the preferred proxies for physician purchases as these prices appropriately reflect the product's first commercial transaction.

Consumer Price Indices (CPIs): CPIs measure changes in the prices of final goods and services bought by consumers. Like the PPIs, they are fixed-weight indexes. Since they may not represent the price changes faced by producers, CPIs are used if there are no appropriate

PPIs or if the particular expenditure category is likely to contain purchases made at the final point of sale.

Average Hourly Earnings (AHEs): AHEs are available for production and nonsupervisory workers for specific industries, as well as for the nonfarm business economy. They are calculated by dividing gross payrolls for wages & salaries by total hours. The series reflects shifts in employment mix and, thus, is representative of actual changes in hourly earnings for industries or for the nonfarm business economy.

ECIs for Wages & Salaries: These ECIs measure the rate of change in employee wage rates per hour worked. These fixed-weight indexes are not affected by employment shifts among industries or occupations and thus, measure only the pure rate of change in wages.

ECIs for Employee Benefits: These ECIs measure the rate of change in employer costs of employee benefits, such as the employer's share of Social Security taxes, pension and other retirement plans, insurance benefits (life, health, disability, and accident), and paid leave. Like ECIs for wages & salaries, the ECIs for employee benefits are not affected by employment shifts among industries or occupations.

When choosing wage and price proxies for each expense category, we evaluate the strengths and weaknesses of each proxy variable using the following four criteria:

Relevance: The price proxy should appropriately represent price changes for specific goods or services within the expense category. Relevance may encompass judgments about relative efficiency of the market generating the price and wage increases.

Reliability: If the potential proxy demonstrates a high sampling variability, or inexplicable erratic patterns over time, its viability as an appropriate price proxy is greatly diminished. Notably, low sampling variability can conflict with relevance--since the more specifically a price variable is defined (in terms of service, commodity, or geographic area), the higher the possibility of high sampling variability. A well-established time series is also preferred.

Timeliness of actual published data: For greater granularity and the need to be as timely as possible, we prefer monthly and quarterly data to annual data.

Public availability: For transparency, we prefer to use data sources that are publicly available.

The BLS price proxy categories previously described meet the criteria of relevance, reliability, timeliness, and public availability. Below we discuss the price and wage proxies for the rebased and revised MEI (as shown in Table E4), along with a summary of the public comments we received on our proposals and our responses to those comments. a. Cost (Expense) Categories in the MEI

(1) Physician's Own Time (Physician Compensation)

For the revised and rebased MEI, we proposed to continue to use the

AHE for production and non-supervisory employees for the private nonfarm economy as the proxy for the Physician Wages & Salaries component (BLS series code: CEU0500000008).

The AHE for the private nonfarm economy reflects general earnings including the impacts of supply, demand, and economy-wide productivity for the average worker in the economy. As such, use of this proxy is consistent with the original intent of the Congress for the change in the MEI to follow reflect changes in expenses of practice and general earnings levels.\1\ The current 2000-based MEI uses the ECI for Total

Benefits (BLS series code: CIU2030000000000I) for total private industry as the price proxy for Physician Benefits. We proposed to continue using the same proxy for the 2006-based MEI and received no public comment on this particular aspect of the index. This means that both the wage and benefit proxies for physician earnings are derived from the private nonfarm business sector and are computed on a per-hour basis.

\1\ U.S. Senate, Committee on Finance, Social Security

Amendments of 1972. ``Report of the Committee on Finance United

States Senate to Accompany H.R. 1,'' September 26, 1972, p. 191.

(2) Nonphysician Employee Compensation

For the 2006-based MEI, we proposed to use the same ECI private series for each occupational group as in the 2000-based MEI. In particular, we proposed to use the ECI for Professional and Technical

Workers, the ECI for Managerial Services, the ECI for Administrative

Support Services, and the ECI for Service Occupations.

As described in the CY 2008 PFS proposed rule (72 FR 38190), as a result of the discontinuation of the White Collar Benefit ECI for private workers, we proposed to continue to use a composite ECI benefit index. We are continuing to use the composite ECI for non-physician employees in the proposed rebased and revised MEI; however, we proposed to rebase the weights within that blend in order to reflect the more recent 2006 data. Table 30 lists the four ECI series and corresponding weights used to construct the 2006 composite benefit index.

Page 73268

Table 30--CMS Composite Price Index for Nonphysician Employee Benefits

2006

ECI series

weight

(%)

Benefits, Private, Professional & Related......................

44

Benefits, Private, Management, Business, Financial.............

11

Benefits, Private, Office & Administrative Support.............

32

Benefits, Private, Service Occupations.........................

13

(3) Utilities

For the 2006-based MEI, we proposed to use the CPI for Fuel and

Utilities (BLS series code CUUR0000SAH2) to measure the price growth of this cost category. This cost category was not broken out separately in the 2000-based MEI.

(4) Chemicals

For the 2006-based MEI, we proposed to use the PPI for Other Basic

Organic Chemical Manufacturing (BLS series code PCU32519- 32519) to measure the price changes of this cost category. We are using this industry-based PPI because BEA's 2002 benchmark I/O data show that the majority of the office of physicians' chemical expenses are attributable to Other Basic Organic Chemical Manufacturing (NAICS 32519). This cost category was not broken out separately in the 2000- based MEI.

(5) Paper

For the 2006-based MEI, we proposed to use the PPI for Converted

Paper and Paperboard (BLS series code WPU0915) to measure the price growth of this cost category. This cost category was not broken out separately in the 2000-based MEI.

(6) Rubber and Plastics

For the 2006-based MEI, we proposed to use the PPI for Rubber and

Plastic Products (BLS series code WPU07) to measure the price growth of this cost category. This cost category was not broken out separately in the 2000-based MEI.

(7) Telephone

For the 2006-based MEI, we proposed to use the CPI for Telephone

Services (BLS series code CUUR0000SEED) to measure the price growth of this cost category. This cost category was not broken out separately in the 2000-based MEI.

(8) Postage

For the 2006-based MEI, we proposed to use the CPI for Postage (BLS series code CUUR0000SEEC01) to measure the price growth of this cost category. This cost category was not broken out separately in the 2000-based MEI.

(9) All Other Services

For the 2006-based MEI, we proposed to use the ECI for Compensation for Service Occupations (private industry) (BLS series code

CIU2010000300000I) to measure the price growth of this cost category. This cost category was not broken out separately in the 2000- based MEI.

(10) All Other Products

As noted previously, we are adding this category in this final rule with comment period in response to public comments. This category includes a variety of miscellaneous expenses such as miscellaneous building products; thus, we will use the CPI-U for All Items Less Food and Energy as a proxy for price changes. This cost category was not broken out separately in the 2000-based MEI.

(11) Fixed Capital

For the 2006-based MEI, we proposed to use the CPI for Owner's

Equivalent Rent (BLS series code CUUS0000SEHC) to measure the price growth of this cost category. This price index represents about 50 percent of the CPI for Housing, which was used in the 2000-based MEI to proxy total Office Expenses.

(12) Moveable Capital

For the 2006-based MEI, we proposed to use the PPI for Machinery and Equipment (series code WPU11) to measure the price growth of this cost category. This cost category was not broken out separately in the 2000-based MEI.

(13) Professional Liability Insurance (PLI)

Each year, we solicit PLI premium data for physicians from a sample of commercial carriers. This information is not collected through a survey form, but instead is requested directly from, and provided by

(on a voluntary basis), several national commercial carriers. As we require for our other price proxies, the professional liability price proxy is intended to reflect the pure price change associated with this particular cost category. Thus, it does not include changes in the mix or level of liability coverage. To accomplish this result, we obtain premium information from a sample of commercial carriers for a fixed level of coverage, currently $1 million per occurrence and a $3 million annual limit. This information is collected for every State by physician specialty and risk class. Finally, the State-level, physician-specialty data are aggregated by effective premium date to compute a national total, using counts of physicians by State and specialty as provided in the AMA publication, Physician Characteristics and Distribution in the U.S.

The resulting data provide a quarterly time series, indexed to a base year consistent with the MEI, and reflect the national trend in the average professional liability premium for a given level of coverage, generally $1 million/$3 million of claims-made mature policies. From this series, quarterly and annual percent changes in PLI are estimated for inclusion in the MEI.

The most comprehensive data on professional liability costs are held by the State insurance commissioners, but these data are available only with a substantial time lag and hence, the data currently incorporated into the MEI are much timelier. We believe that, given the limited data available on professional liability premiums, the information and methodology described above produces an adequate proxy of the PLI price trends facing physicians.

(14) Medical Equipment

The Medical Equipment cost category includes depreciation, leases, and rent on medical equipment. We proposed to use the PPI for Medical

Instruments and Equipment (BLS series code: WPU156201) as the price proxy for this category, consistent with the price proxy used in the 2000-based MEI and other CMS input price indexes.

(15) Medical Materials and Supplies

As was used in the 2000-based MEI, we proposed to use a blended index comprised of a 50/50 blend of the PPI Surgical Appliances (BLS series code: WPU156301) and the CPI-U for Medical Equipment and

Supplies (BLS series code: CUUR0000SEMG). We believe physicians purchase the types of supplies contained within these proxies, including such items as bandages, dressings, catheters, intravenous

(I.V.) equipment, syringes, and other general disposable medical supplies, via wholesale purchase, as well as at the retail level.

Consequently, we proposed to combine the two aforementioned indexes to reflect those modes of purchase.

Page 73269

(16) Other Professional Expenses

This category includes the residual subcategory of other professional expenses such as accounting services, legal services, office management services, continuing education, professional association memberships, journals, professional car expenses, and other general expenses and other professional expenses not captured elsewhere. Given this heterogeneous mix of goods and services, we are finalizing our proposal to use the CPI-U for All Items Less Food and

Energy. In summary, we are finalizing the proposed 2006-based MEI price proxies with one modification. Since an additional cost category, All

Other Products, was added to the office expense disaggregation, we are also finalizing the decision to use the CPI for All Items Less Food and

Energy as the price proxy for that category.

(b) Productivity Adjustment to the MEI

The MEI has been adjusted for changes in productivity since its inception. In the CY 2003 PFS final rule (67 FR 80019), we implemented a change in the way the MEI was adjusted to account for those changes in productivity. The MEI used for the 2003 physician payment update incorporated changes in the 10-year moving average of private nonfarm business multifactor productivity that were applied to the entire index. Previously, the index incorporated changes in productivity by adjusting the labor portions of the index by changes in the 10-year moving average of economy-wide private nonfarm business labor productivity.

We proposed to continue to use the current method for adjusting the full MEI for multifactor productivity in the rebased and revised MEI, and are finalizing that proposal.

As described in the CY 2003 PFS final rule, we believe this adjustment is appropriate because it explicitly reflects the productivity gains associated with all inputs (both labor and non- labor). We believe that using the 10-year moving average percent change in private nonfarm business multifactor productivity is appropriate for deriving a stable measure that helps alleviate the influence that a peak (or a trough) of a business cycle may have on the measure. The adjustment will be based on the latest available historical e private nonfarm business multifactor productivity data as measured and published by BLS. 5. Results of Rebasing

Table 31 illustrates the results of updating the MEI cost weights for Physician Compensation, Practice Expenses (excluding PLI), and PLI from a 2000-based cost distribution to a 2006-based cost distribution, including all the proposed and finalized revisions as specified in this final rule.

Table 31--Percent Distribution of Selected Physician Expenses Used To

Calibrate RVUs: CYs 2006 and 2000

CY 2006

CY 2000 weight

weight

(%)

(%)

Physician Compensation (Own Time).................

48.266

52.466

Practice Expenses (less PLI)......................

47.439

43.669

PLI...............................................

4.295

3.865

The rebased and revised MEI has several differences as compared to the 2000-based MEI; these changes have been discussed in detail in prior sections of this rule. Table E8 shows the average calendar year percent change for CY 2004 to CY 2011 for both the 2000- and 2006-based

MEIs. The 2006-based MEI annual percent changes differ from the 2000- based MEI annual percent changes by 0.0 to 0.8 percentage point. For

CYs 2007 through 2011, the annual percent change in the rebased and revised MEI was within 0.3 percentage point of the percent change in the 2000-based MEI. In the earlier years, there were larger differences between the annual percent change in the rebased and revised MEI and the 2000-based MEI. The majority of these differences can be attributed to the lower benefit cost weight, as measured by the 2006 AMA data, and the exclusion of the Pharmaceuticals cost category. The remaining differences are attributable to the higher cost weight for PLI, as measured by the 2006 AMA data.

Table 32--Annual Percent Changes in the 2000-based and Revised 2006- based MEI

Current

Update year \(A)\

Final 2006- 2000-based based MEI

MEI

CY 2004.......................................

2.3

2.6

CY 2005.......................................

1.8

2.6

CY 2006.......................................

1.8

2.4

CY 2007.......................................

1.6

1.9

CY 2008.......................................

1.9

1.8

CY 2009.......................................

1.6

1.6

CY 2010.......................................

1.5

1.2

CY 2011\(B)\..................................

0.4

0.3

Average Change for CYs 2004- 2011.............

1.6

1.8

\(A)\ Update year based on historical data through the second quarter of the prior calendar year. For example, the 2010 update is based on historical data through the second quarter 2009.

\(B)\ Based on historical data through the 2nd quarter 2010.

As shown in Table 33, the percent change of the rebased and revised

MEI for the CY 2011 PFS final rule is an increase of 0.4 percent, one tenth of a percentage point higher than the 2000-based MEI for the same period. The proposed rule included an estimated increase of 0.3 percent for 2011 based on projected data from IHS Global Insight, Inc. The 0.4 percent increase was calculated based on historical data through the second quarter of 2010, including revised data from the BLS on the 10- year moving average of BLS private nonfarm business multifactor productivity published on October 6, 2010 (http://www.bls.gov/ news.release/pdf/prod3.pdf). The 0.1 percentage point difference in the

MEI update factor from the 0.3-percent estimate indicated in the proposed rule to our current figure of 0.4 percent is primarily related to the incorporation of more recent historical data for private nonfarm business multifactor productivity.

Table 33--Annual Percent Change in the 2000-based and Revised 2006-based

MEI for CY 2011

2006-based 2000-based

MEI

MEI

CY 2011.......................................

0.4

0.3

Page 73270

Table 34--Annual Percent Change in the Revised and Rebased MEI CY 2011,

All Categories \1\

CY 2011

Cost categories

2006 weight percent

\2\ (%)

change

MEI Total, productivity adjusted..............

100.000

0.4

Productivity: 10[dash]year moving average of

N/A

1.2

MFP..........................................

MEI Total, without productivity adjustment....

100.000

1.6

Physician Compensation (Own Time) \3\.....

48.266

2.4

Wages and Salaries....................

43.880

2.5

Benefits..............................

4.386

1.7

Physician's Practice Expenses.............

51.734

0.7

Nonphysician Employee Compensation....

19.153

1.5

Nonphysician Employee Wages.......

13.752

1.4

Prof/Tech Wages...............

6.006

1.2

Managerial Wages..............

1.446

1.2

Clerical Wages................

4.466

1.7

Services Wages................

1.834

1.7

Nonphysician Employee Benefits....

5.401

1.6

Other Practice Expenses...............

26.308

0.1

Office Expenses...................

20.035

0.6

Utilities.....................

1.266

-3.1

Chemicals.....................

0.723

-2.5

Paper.........................

0.657

-0.3

Rubber & Plastics.............

0.598

-0.3

Telephone.....................

1.501

0.8

Postage.......................

0.898

4.7

All Other Services............

3.582

1.8

All Other Products............

0.500

1.4

Fixed Capital.................

8.957

0.6

Moveable Capital..............

1.353

0.1

PLI \4\...............................

4.295

-2.9

Medical Equipment.....................

1.978

0.5

Medical Materials and Supplies........

1.760

0.4

Other Professional Expenses...........

4.513

1.4

\1\ The estimates are based upon the latest available Bureau of Labor

Statistics data on the 10-year moving average of BLS private nonfarm business multifactor productivity published on October 6, 2010 (http:// www.bls.gov/news.release/pdf/prod3.pdf).

\2\ The weights shown for the MEI components are the 2006 base-year weights, which may not sum to subtotals or totals because of rounding.

The MEI is a fixed-weight, Laspeyres input price index whose category weights indicate the distribution of expenditures among the inputs to physicians' services for CY 2006. To determine the MEI level for a given year, the price proxy level for each component is multiplied by its 2006 weight. The sum of these products (weights multiplied by the price index levels) yields the composite MEI level for a given year.

The annual percent change in the MEI levels is an estimate of price change over time for a fixed market basket of inputs to physicians' services.

\3\ The measures of Productivity, Average Hourly Earnings, Employment

Cost Indexes, as well as the various Producer and Consumer Price

Indexes can be found on the Bureau of Labor Statistics (BLS) Web site at http://stats.bls.gov.

\4\ Derived from a CMS survey of several major commercial insurers.

\N/A\ Productivity is factored into the MEI as a subtraction from the total index growth rate; therefore, no explicit weight exists for productivity in the MEI. 6. Medicare Economic Index Technical Advisory Panel

In the CY 2011 PFS proposed rule, we notified the public of our intent to convene a Medicare Economic Index Technical Advisory Panel

(MEI TAP) to study all aspects of the MEI including its cost categories, their associated cost weights and price proxies, and the adjustment of the index by an economy-wide measure of multi-factor productivity. We will be convening the MEI TAP. More details regarding this issue can be found in the next section of this rule. 7. Summary of Comments and the Associated Responses a. Timing of Rebasing and Revising the MEI

Comment: Many commenters support the rebasing and revising of the

MEI using CY 2006 as a base year and the incorporation of practice cost changes reflected in the 2006 AMA PPIS. Many of these commenters also indicated their support for the upcoming MEI technical advisory panel, but stressed that CMS should not delay moving forward with rebasing and revising the MEI for CY 2011. Several people wrote that they believe that the rebasing, along with the addition of new product categories, will result in a more accurate distribution of expenses among physician compensation, practice expense, and professional liability. The commenters believe that the proposal to rebase to 2006 will make the

MEI more representative of current conditions in the health care marketplace and, in particular, more reflective of the higher burden of practice expenses in relation to physician compensation in modern physician practices. The commenters agree that the use of more current data and the expansion of the categories used in determining the MEI update are a technical improvement over the 2000-based MEI and urge CMS to proceed accordingly.

Response: We agree with the commenters that the 2006-based MEI reflects a more current estimate of the cost distribution associated with furnishing physicians' services. Therefore we are finalizing our proposals (with minor modifications described above) to rebase and revise the MEI, and are proceeding with implementation of the 2006- based MEI for CY 2011.

Comment: Many commenters indicated CMS should postpone implementation of the rebased and revised MEI until the MEI technical advisory panel can conduct a comprehensive review of all aspects of the index. These commenters believe that it is premature to finalize proposals

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that will significantly change the MEI prior to receiving recommendations from the technical advisory panel and therefore strongly support convening the technical advisory panel first and rebasing and revising the MEI afterwards.

Response: We agree with the commenters that the MEI technical advisory panel should move forward (discussed in more detail below).

However, we do not find any compelling technical reason to postpone finalizing the proposed changes to the index. We believe rebasing and revising the index for CY 2011 to reapportion the work, practice expense, and malpractice weights will allow the MEI to appropriately reflect more recent data. For these reasons we disagree with the commenters that support delaying the rebasing of the MEI until the technical panel has had a chance to convene and make further recommendations. Should we concur with recommendations from the technical advisory panel that would result in technical improvements to the MEI, we would propose any changes in a future rulemaking exercise.

Comment: One commenter questioned the need for changes in the MEI in 2011, particularly since there is no statutory timeframe for these changes and the most recent changes in practice expenses from the PPIS survey are in the first year of a 4-year phase-in.

Response: The current MEI reflects the physician practice cost structure for 2000. Based on both our own analysis and supporting public comments, it is evident that this cost structure has changed from 2000 to 2006. Accordingly, we believe it is technically appropriate to update to a more recent base year for use in CY 2011.

Comment: A commenter suggested that when rebasing is done in the future, CMS should propose phasing in the changes, perhaps over 2 years, in order to mitigate negative consequences.

Response: We do not believe it would be appropriate to phase in changes to the MEI associated with rebasing and revising the index.

These periodic efforts are done to ensure that the MEI is reflecting the latest available information and echoes current cost distributions associated with furnishing physicians' services. Our approach is consistent across all of the Medicare market baskets in this regard and is likewise consistent with how technical improvements are incorporated into other published price indexes, such as the CPI or PPI.

Comment: Some commenters asked CMS to delay rebasing the MEI until the summit on geographic practice costs and the IOM studies have been completed.

Response: We believe that it is technically appropriate to update the MEI to reflect the more current cost structure as determined by using the 2006 AMA PPIS data. We note that the MEI is constructed independent of the GPCIs. While the GPCI weights have historically been linked to the MEI cost weights, we do not believe it would be appropriate to postpone rebasing the MEI in anticipation of the summit's or the IOM's findings. b. PPIS Data

Comment: Many commenters stated they, like CMS, are unaware of another more robust or more current source of available data on physician practice costs than the PPIS. Other commenters noted that CMS and the AMA have supported using PPIS data to update the practice expense per hour (PE/HR) calculations beginning in CY 2010. The commenters believe that if the data were sufficient to adjust PE/HR, then they are sufficient to update the MEI. Other commenters indicate they support periodic updates to the index, recognizing the difficulties associated with updating the MEI's cost categories and weights on an annual basis.

Response: We agree with the commenters that the PPIS is the most up-to-date and comprehensive data source available on physician practice costs. We also believe that the estimates derived from the

PPIS are current, valid, and appropriate for use in rebasing and revising the MEI. Likewise, we concur that a variety of data-related issues would make updating the MEI on an annual basis difficult and believe that periodic revisions such as the one we are adopting in this final rule with comment period are more appropriate.

Comment: A few commenters expressed general concerns over using data from the PPIS. One commenter specifically notes that the MEI changes are allegedly being proposed to reflect changes in medical practice based on research using PE data. The commenter has reviewed some of the research, including the research process and questioned the research data itself. Their concerns over the raw data source include issues related to sample design, sample geographic distribution, and sample size sufficiency. They questioned the choice of the data collection firm used by AMA.

Response: We conducted an extensive review of the PPIS data and continue to believe it appropriately reflects the cost distributions of physicians. We note that we rely upon the physician community to complete the AMA surveys as accurately as possible since unlike other provider types (such as hospitals and skilled nursing facilities) physicians are not required to submit annual Medicare cost report data.

Comment: Some commenters indicated that CMS did not make clear why the rebased MEI would be based on PPIS data from 2006. Several expressed concerns that the use of 4-year old data is questionable as data this old would not reflect physician expenses in 2011 (and that more up-to-date data on physician costs is surely available).

Response: As stated in the CY 2011 PFS proposed rule (75 FR 40088), we chose to rebase the MEI to 2006 in order to incorporate the 2006 AMA

PPIS data. We believe the 2006 AMA PPIS data is the most up-to-date, complete, statistically valid data source available. We welcome any recommendations for more up-to-date data sources available on physician expenses. We would also note that the 2006 data from the PPIS are used to provide the cost structure that is used in the MEI. The increase in the CY 2011 MEI ultimately reflects the input price inflation, adjusted for productivity, that physicians face based on a 2006 distribution of costs. It does not, nor is it intended to, reflect physician input cost levels for 2011.

Comment: Some commenters noted that in the interest of transparency, CMS should publish on its Web site all data from the PPIS that were used in rebasing the MEI.

Response: We understand the commenter's request for transparency.

Unfortunately, we are unable to publish the detailed micro level data from the AMA PPIS survey as it is proprietary information. We would suggest the commenter contact the AMA with their request. c. Office Expenses

Comment: Several commenters appreciated the intent of the new subcategories found in Office Expenses to include more medical office- specific data and believe it will improve the index.

Response: We agree with the commenters and believe that having greater detail under the Office Expense cost category in the MEI provides a technical improvement.

Comment: Several commenters questioned the CMS proposal to create detailed categories under the broader Office Expense cost category.

Some of the commenters had specific concerns about the particular subcategories. Examples included the following:

The Chemicals and Rubber & Plastics categories (all derived from the BEA) might not be relevant (or

Page 73272

meaningful) to today's physicians' practice.

Computers, computer expenses, billing, and scheduling technology and electronic medical records are high-cost, non-optional office expenses for medical practices that are not adequately captured and would represent more appropriate categories.

CMS references data on the Office Expenses' components derived from the BEA, but the agency provided no rationale to justify the changes in Office Expenses, nor did it provide a detailed accounting methodology or solicit advice on new inputs to the index.

Response: We proposed to disaggregate the Office Expense cost category into more detailed cost categories as a result of a change to the question in the 2006 AMA PPIS survey that captured these types of costs. In addition, in rulemaking for the CY 2008 Physician Fee

Schedule, we received a comment from the industry about our use of the

CPI for Housing to proxy Office Expenses (72 FR 66376). At that time, we notified the public of our intent to explore the feasibility of breaking the Office Expenses category into more descriptive cost categories during the next rebasing.

In order to appropriately represent the information collected by the PPIS and to increase the level of precision of our price proxies, we proposed to disaggregate the Office Expense cost category and its associated weight into more detailed components and to proxy those costs with the most technically appropriate price proxies. Moreover, we believe it would be technically inappropriate to proxy the Office

Expense cost category, which now includes a much broader range of expenses, by one price proxy, namely the CPI for Housing. For these reasons, we developed our proposals and solicited public comments.

We disagree with the commenters' assertion that the Chemicals and

Rubber & Plastics categories are not relevant to today's physician practice (and note that the commenters did not provide additional information or data to support the claim that the proposed categories are not relevant). The information we relied on came directly from the

BEAs' Benchmark I/O files for Offices of Physicians, Dentists, and

Other Health Practitioners. The Chemicals cost category includes expenses for items such as soaps and cleaning compounds, as well as photocopier toners and laser printer toners. The Rubber and Plastics category includes expenses for items such as plastic plumbing fixtures, plastic bags, and plastic trash cans. Although we will continue to explore further additional disaggregation of expenses, we believe that the aforementioned costs are associated with, and relevant to, furnishing physicians' services.

As indicated previously, and in response to the comment, we conducted an additional review of the BEA I/O data used to disaggregate the Office Expense cost category, comparing the detailed underlying expenses with the questions on the AMA PPIS survey. This review led us to make small revisions to the underlying Office Expense cost weights, including the addition of another cost weight for the new subcategory,

All Other Products. These products were initially assumed to be captured in Other Professional Expenses as measured by the AMA PPIS survey, but were determined to have been reported as Office Expenses.

All Other Products would include a variety of miscellaneous products such as miscellaneous wood and apparel products. Table E4 provides the revised MEI weights. Also, as part of this additional analysis on the

Office Expense categories, we determined that automobile-related expenses were captured in the PPIS question associated with Other

Professional Expenses (and that its associated weight reflected respondents including those costs when answering that question). As a result, we removed automobile-related NAICS-based industry spending from the BEA I/O data that was being used to distribute expenses across the various Office Expense subcategories. As this spending was included in the Movable Capital subcategory for the proposed rule, the weight associated with that subcategory will be 1.353 rather than the 1.834 we proposed.

We disagree with the commenters' statements that the MEI does not adequately capture high-level or high-cost technology expenses (and briefly note that Movable Capital includes only non-medical movable equipment). The Office Expense cost weight (20.035 percent) was calculated using the 2006 PPIS data, which specifically requested health information technology equipment and other nonmedical office equipment to be included in the Office Expense category as follows:

Provide [your] share (dollar amount) of the specialty or department level's share (dollar amount) of the practice's total

(dollar amount) for] 2006 office expenses, including office (non- medical) equipment and office (non-medical) supplies, as well as rent, mortgage interest, maintenance, refrigeration, storage, security, janitorial, depreciation on medical buildings used in your practice, utilities, or other office computer systems (including information management systems/electronic medical record systems) and telephone.

Given that the expenses related to information management systems and electronic medical record systems were included as ``office expenses'' in the 2006 PPIS, the 20.035 percent weight would include these costs. Unfortunately, given the data limitations, it remains difficult to determine a percentage associated specifically with computer equipment, computer-related depreciation, and computer-related leasing. For this rebasing, the costs we classified as Moveable Capital are comprised of the expenses paid by Office of Physicians industry to the following industries based on NAICS classification:

33329A............................ Other industrial machinery manufacturing. 33331A............................ Vending, commercial, industrial, and office machinery manufacturing. 333414............................ Heating equipment, except warm air furnaces. 333415............................ Air conditioning, refrigeration, and warm air heating equipment manufacturing. 33399A............................ Other general purpose machinery manufacturing. 33411A............................ Computer terminals and other computer peripheral equipment manufacturing. 334210............................ Telephone apparatus manufacturing. 334220............................ Broadcast and wireless communications equipment. 334290............................ Other communications equipment manufacturing. 334300............................ Audio and video equipment manufacturing. 334418............................ Printed circuit assembly (electronic assembly) manufacturing. 334613............................ Magnetic and optical recording media manufacturing. 335120............................ Lighting fixture manufacturing. 337110............................ Wood kitchen cabinet and countertop manufacturing. 337215............................ Showcase, partition, shelving, and locker manufacturing. 532400............................ Commercial and industrial machinery and equipment rental and leasing.

Page 73273

We believe technology-related expense are captured in the MEI and that the PPI for Machinery and Equipment is an appropriate price proxy to estimate price changes. However, we will actively monitor the data moving forward to ensure these types of expenses are adequately reflected in the MEI.

Finally, we would note that the descriptions of the methodologies used to construct the subcategories under Office Expenses were both detailed and consistent with those provided in the recent proposed rules relating to the rebasing of other CMS market baskets. However, in response to the comment we hope the additional information provided here is helpful.

Comment: One commenter found it most problematic that the CMS proposal related to Office Expenses would reduce the weight of rent within physician practice expenses. Currently, rent comprises 12.2 percent of the practice expense GPCI. Under the proposed rule, rent would be reduced to 8.4 percent. The commenter also noted that their attempt to validate the proposal, using BEA 2002 Benchmark I/O use files for NAICS 621A00 as described in the proposed rule were not successful.

Response: We proposed to disaggregate the Office Expense cost weight in the 2006-based MEI in order to recognize and take advantage of the expansion of the AMA PPIS survey question to include additional expenses not included in the 2000-based survey. Consistent with the methodology used for other CMS market baskets, we relied upon the BEA

I/O data to disaggregate the Office Expense cost category, which we described in the proposed rule. This methodology required a series of calculations including classifying costs as office expenses consistent with AMA PPIS survey. As noted elsewhere, and based on public comment, we have refined our methodology, as well as added additional detail in this final rule which we believe will be helpful in validating our estimates. The new methodology has resulted in a cost weight of 8.957 percent for Fixed Capital. Comments related to weights specifically associated with the PE GPCIs are found in section II.D. of this final rule with comment period.

Comment: A commenter stated that it appeared that utility costs have been included twice in the MEI calculation. The HUD data used by

CMS as a source for the rent data includes utilities. However, utilities have been included a second time as a new component of the

``Office Expense'' category of ``Other Practice Expenses'' and it does not appear that the ``Fixed Capital'' (rent) component has been scaled down as a result. This error should be corrected, a new proposed rule published, and a new comment period opened.

Response: We disagree with the commenter's assertions that utilities expenses in the MEI are double counted. The Utilities cost weight in the MEI was derived using the BEA I/O data for NAICS 621A

(Offices of Physicians, Offices of Dentist, and Offices of Other

Practitioners). The BEA I/O data provide information regarding physicians' purchases from other industries. Expenses classified in the

Utilities cost weight, such as NAICS 22110 (Electric power generation, transmission, and distribution), were not included in the Fixed Capital cost weight; therefore, we did not include utility costs twice in the

MEI calculation. The HUD data referenced by the commenter is used in conjunction with the GPCI rent update and is independent of the development of the cost weight for Utilities in the MEI. d. Purpose of the MEI

Comment: Several commenters requested that CMS address the problem that the ``market basket'' of inputs, whose prices are measured in the

MEI, is outdated and, despite periodic rebasing, has not been comprehensively revised since it was originally developed in 1973. They indicated that the MEI does not reflect the inputs involved in 21st century medical practice and claim that the costs associated with complying with an array of government-imposed regulatory requirements, including increasing staffing levels, costs related to Medicare prescription drug plans and formulary compliance, compliance with rules governing referrals and interactions with other providers, and others, are not accounted for in the index. They also indicate that the MEI has not been adjusted for modern practice costs such as computers, copiers, and new medical technology.

Response: We disagree with the commenters' statement that the MEI only measures changes in specific types of practice costs that existed in 1973. Since 1973, the MEI has been rebased four times. For each of those updates, the MEI methodology and data sources were thoroughly reviewed and evaluated to ensure that the index accurately reflected the cost distributions encountered by physicians. The revisions have included changes to the structure of the index, the price proxies used, the data sources used to develop the weights, the productivity adjustment, and, as proposed in the CY 2011 PFS proposed rule, disaggregating categories within the Office Expenses category into more detail.

We also note that the MEI is a price index, not a cost index.

Changes in physician costs are a function of changes in prices and changes in quantities. Examples of changes in quantities include purchasing more moveable equipment (such as health information technology), hiring additional office staff, or changing the mix of staff. The MEI was established in accordance with section 1842(b)(3) of the Act, which states the growth of prevailing charge levels is to be limited to growth in an ``appropriate economic index''. The relevant

Senate Finance Committee report \2\ provides slightly more detail on such an index, stating that:

\2\ U.S. Senate, Committee on Finance, Social Security

Amendments of 1972. ''Report of the Committee on Finance United

States Senate to Accompany H.R. 1,'' September 26, 1972, p. 190.

I t is necessary to move in the direction of an approach to reasonable charge reimbursement that ties recognition of fee increases to appropriate economic indexes so that the program will not merely recognize whatever increases in charges are established in a locality but would limit recognition of charge increases to rates that economic data indicate would be fair to all concerned and

follow rather than lead any inflationary trends.

Thus, in accordance with Congressional intent that the index reflect and follow inflationary trends, and since its inception in 1973, the MEI has been constructed as a fixed-weight price index that measures the inflationary trends of goods and services associated with furnishing physicians' services. The data sources that are used to construct the weights have been updated regularly to include the modern inputs required by physicians in running their respective practices.

The MEI then appropriately apportions the various costs into their respective categories and calculates the associated weights. It is this distribution of costs, and not the level of costs, that the MEI appropriately incorporates. Based on this distribution, the MEI measures the weighted input price inflation, adjusted by productivity, faced by physicians. The MEI is then incorporated into the SGR formula to derive the final PFS update. Having an accurate and contemporary distribution of input costs is critical to producing an accurate measure of price inflation and is the major reason we are moving forward to rebase and revise the MEI for CY 2011.

Finally, to date, we have not received any proposals from the public on how the MEI should be revised and still meet

Page 73274

its statutory requirements. We will continue to evaluate the validity and relevance of the index to ensure that it meets statutory requirements while adequately reflecting the evolution of the expense distribution associated with furnishing physicians' services.

Comment: A commenter asserted that the time gap between the two surveys, the PPIS and the SMS, may not be directly comparable, but a comparison of the two indicates that medical practice costs increased 79 percent from 2000 to 2006. However, the MEI only increased 18 percent from 2000 to 2006. The commenter notes that every other available measure of physician expense growth shows faster growth than the MEI.

Response: The MEI is strictly a fixed-weight price index expressly designed to measure the change in price of a fixed basket of goods.

Changes in physician costs are a function of changes in prices and changes in quantities. As other commenters have noted to CMS, and CMS agrees, cost increases are only reflected in the MEI's weights to the extent the relative cost of an input changes over time. Comparing the

MEI (reflecting price changes) to other cost metrics (that reflect both price changes, as well as changes in volume and mix) is inappropriate given the MEI's definition and purpose.

Comment: A commenter noted that the proposed revisions to the MEI do not do anything to improve the adequacy of the MEI. The commenter also noted that in the proposed rule, CMS estimated the 2011 MEI at just 0.3 percent, and the addition of the new components that CMS has proposed based on BEA data does nothing to increase it.

Response: The rebased and revised MEI is intended to more accurately reflect the cost structure of furnishing physicians' services, as well as measure the input price inflation encountered by physicians. Accordingly, we disagree with the commenter and believe that the 2006-based MEI offers numerous technical improvements. These improvements include updating the base year to reflect more current cost distributions, updating price proxies, and adding more detailed cost categories.

Comment: A commenter stated that the MEI is used to annually update medical practice costs in the SGR calculation. Virtually all physician groups signed on to a January 2009 letter arguing that the MEI's price inputs as currently structured do not accurately reflect current medical practice costs. No action has been taken to remedy the situation.

Response: We disagree with the commenter's claim the MEI annually updates the medical practice cost in the SGR. The purpose of the MEI in the SGR is to measure price increases related to the furnishing of physician services. It is not intended to measure cost increases, but rather to reflect the cost structure associated with furnishing physicians' services, and then subsequently measure the weighted price increases associated with that cost structure. We would also like to note that the MEI is currently part of the statutorily prescribed formula for physician payment updates and that revisions to the MEI are adopted through the notice and comment rulemaking process. e. Technical Panel

Comment: Many commenters expressed their support for the convening of a Medicare Economic Index Technical Advisory Panel (MEI TAP).

Response: We agree that the MEI TAP should be convened and will be moving forward accordingly. This process includes announcing the panel's creation through an official CMS communication such as a

Federal Register announcement. This announcement will provide details on the expected number of panel members, provide an opportunity for the public to nominate members, and inform the public of the objectives and scope of the panel's activities.

We will be asking this group of independent experts to evaluate only technical aspects of the MEI, including the index's inputs, input weights, price-measurement proxies, and the productivity adjustment.

Any formal recommendations made by the MEI TAP will be carefully considered by CMS. Suggested modifications that we believe would result in technical improvements to the MEI would appear in subsequent PFS proposed rules and be subject to public comment and the overall rulemaking process.

Comment: Several commenters provided many suggestions on technical issues that they believe should be considered by the technical advisory panel. The commenters generally requested that the panel perform a thorough review of all aspects and elements of the MEI.

Response: We appreciate the constructive comments on potential topics for the MEI technical advisory panel, which will be asked to fully evaluate the index. As noted above, the panel will be evaluating all technical aspects of the MEI including the cost categories, their associated weights and price proxies, and the productivity adjustment.

Comment: A commenter stated that any recommendations that are made by the panel should be published with an opportunity for comment before they are finalized.

Response: Any substantive recommendations from the technical advisory panel that CMS believes will result in technical improvements to the MEI will be subject to the rulemaking process, including giving the opportunity to the public to review and comment.

Comment: Some commenters request that CMS reach out to the medical community to ensure that the panel's work is accurate and complete.

Others indicated that pending the recommendations of the technical advisory panel, CMS should: (1) Include physicians and other stakeholders in the MEI revision process, so that the impact of any recommended changes can be studied prior to implementation; and (2) clearly state their rationale for proposed changes.

Response: As mentioned previously, we will be reaching out to the public for suggestions as to the composition of an independent expert panel that will assist us in ensuring that the MEI is constructed accurately and completely, and fulfills its purpose to appropriately reflect the inflationary pressures faced by physicians in furnishing services. CMS will also present to the public any future proposed revisions to the MEI through notice and comment rulemaking, during which we will clearly state the rationale for any proposed changes and consider public comment before finalizing changes to the index.

Comment: One commenter believes that one of the possible options for resolving the SGR problem involves replacing the SGR update formula with the MEI. The commenter noted that input from the MEI technical panel should better position the MEI as a viable alternative to the SGR update formula.

Response: We welcome any technical comments the public has on the composition of the MEI, including the inputs, input weights, price- measurement proxies, and productivity adjustment. Any recommendations from the MEI TAP will be evaluated and considered for possible future rulemaking. However, we note that replacement of, or adjustments to, the SGR is outside the scope of the MEI TAP.

Page 73275

f. Other

Comment: Several commenters agreed with CMS' proposal to remove pharmaceuticals and separately billable medical supplies, since these are not paid under the PFS. Even though this change lessens the weight given to the practice expense component of the index, it made sense to the commenters given the separate line-item payments for these goods.

Further, incident-to drugs are now paid based on average sales price

(ASP) and, since last-year's changes, are no longer a factor in the SGR formula and the determination of the PFS conversion factor.

Response: We agree with the commenters on the appropriateness of removing drugs and separately billable supplies from the MEI since they are not paid under the PFS and are no longer included as costs in the

SGR formula.

Comment: A commenter disagreed with the continued use of the AHE wage data for the total nonfarm business economy as a price proxy for physician income rather than using BLS data specific to all professional and technical workers.

Response: We disagree with the commenter's suggestion. We believe that the use of the average hourly earnings data for the total nonfarm business economy, which captures skill mix shifts in the labor force, is the most appropriate index for use as the price proxy for physician income in the MEI. The AHE for the nonfarm business economy reflects general earnings including the impacts of supply, demand, and economy- wide productivity for the average worker in the economy. Its use is consistent with the Congress's original intent that the index be based on changes in expenses of practice and general earnings levels.\3\ It is also consistent with our use of the BLS private nonfarm business multifactor productivity measure to adjust the index as economy-wide wage increases reflect economy-wide productivity increases. Therefore, we are finalizing our proposal to continue to use average hourly earnings for the total private nonfarm economy as a price proxy for physician income in the 2006-based MEI.

\3\ U.S. Senate, Committee on Finance, Social Security

Amendments of 1972, ``Report of the Committee on Finance United

States Senate to Accompany H.R. 1,'' September 26, 1972, p. 191.

Comment: A commenter stated that although CMS has expanded the designation of the data underlying some of the GPCI and MEI constructs over the designations of previous years, the descriptions used are sometimes either inconsistent or contradictory. For example, CMS noted that ``for the proposed sixth GPCI update, we used the 2006 through 2008 Bureau of Labor Statistics (BLS) Occupational Employment

Statistics (OES) data as a replacement for the 2000 Census data.'' (75

FR 40083). In contrast, CMS used ``2006 Occupational Employment

Statistics (OES), BLS'' for the proposed 2006 MEI expense weights. (75

FR 40089, note (2)). The commenter believes it is impossible to discern from the proposed rule whether inconsistent data sets were used or whether there is simply a misprint.

Response: Because the MEI and GPCIs serve different purposes and are not interdependent, we may use data from different years and, in some instances, different sources. Both the MEI and the GPCI use the

OES. However, because the MEI is based to 2006 it is appropriate to use the 2006 BLS Occupational Employment Statistics data to disaggregate the nonphysician wages cost weight into more detailed occupational cost weights.

For the proposed sixth GPCI update, CMS proposed to use OES data for 2006 through 2008. The rationale for choosing this data for the proposed GPCI update was provided in the CY 2011 PFS proposed rule (75

FR 40084). 8. Adjustments to the RVU Shares To Match the Proposed Rebased MEI

Weights

As described in the previous section, CMS proposed to rebase the

MEI for CY 2011 based on the most current data and establish new weights for physician work, PE, and malpractice under the MEI. As stated in the previous section, the MEI was rebased to a CY 1996 base year beginning with the CY 1999 MEI (63 FR 58845), and to a CY 2000 base year beginning with the CY 2004 MEI (68 FR 63239). For both the CY 1999 and CY 2004 rebasing, we made adjustments to ensure that estimates of aggregate PFS payments for work, PE, and malpractice were in proportion to the weights for these categories in the rebased MEI (63

FR 58829 and 69 FR 1095).

Consistent with past practice when the MEI has been rebased, we proposed to make adjustments to ensure that estimates of aggregate CY 2011 PFS payments for work, PE, and malpractice are in proportion to the weights for these categories in the rebased CY 2011 MEI.

As explained in the CY 2011 PFS proposed rule (75 FR 40095), to match the proportions for work, PE, and malpractice in the rebased CY 2011 MEI would necessitate increasing the proportion of aggregate CY 2011 PFS payments for PE and malpractice and decreasing the proportion for work. This could be accomplished by applying adjustments directly to the work, PE, and malpractice RVUs. However, as stated in the proposed rule (75 FR 40095), we are cognizant of the public comments made during prior rulemaking on issues related to scaling the work

RVUs. Many commenters have indicated a preference for the work RVUs to remain stable over time and for any necessary adjustments that would otherwise be made broadly to the work RVUs to be accomplished in an alternative manner. For example, in past 5-Year Reviews of the work

RVUs, many commenters cited stability in the work RVUs, among other reasons, in their requests that any required budget neutrality adjustments not be made directly to the work RVUs. Given these prior comments, for CY 2011, we proposed to make the necessary MEI rebasing adjustments without adjusting the work RVUs. Instead, we proposed to increase the PE RVUs and the malpractice RVUs. Furthermore, as noted in the proposed rule (75 FR 40096), section 1848(c)(2)(B)(ii)(II) of the

Act requires that changes to RVUs cannot cause the amount of expenditures for a year to differ by more than $20 million from what expenditures would have been in the absence of the changes. Therefore, as required by section 1848(c)(2)(B)(ii) of the Act, we proposed to make an adjustment to the CY 2011 conversion factor to ensure that the adjustments to the PE RVUs and the malpractice RVUs would not cause an increase in CY 2011 PFS expenditures.

Comment: A number of commenters expressed support for the use of the most current and accurate data as inputs to ``formulas used by the

Agency, whether the formula for the SGR, for practice expense inputs, malpractice expense inputs, or in this case to calculating the Medicare

Economic Index.'' These commenters supported the proposal to rebase and revise the MEI using the AMA PPIS data and the corresponding adjustments to the work, PE, and MP RVUs. Some commenters noted particularly that since the AMA PPIS has been deemed appropriate for the purpose of the PE RVU update process begun in CY 2010, using this same data source to inform the MEI costs and weights in CY 2011 is also appropriate because it will ensure that all of the major cost-based components of the fee schedule methodology will now be tied to cost data collected in the same year (2006). Furthermore, a number of commenters supported the

Page 73276

proposed policy to adjust the RVU shares on the basis that the changes appear to have a modest positive impact on many of the services that were negatively affected by the implementation of the AMA PPIS data in

CY 2010. These services were typically ones that are more heavily weighted to PE than work. In contrast, numerous commenters expressed dissatisfaction with the proposed policy on the premise that it

``penalizes health care work that is not technology-intensive,'' that is, services that are typically more heavily weighted to physician work than PE, ``when in fact it is the technology-intensive health expenses that are actually driving up costs.'' A few of these commenters suggested that CMS insulate certain services that are work-intensive from the effects of the MEI rebasing.

Response: We believe that using the most current and accurate data whenever practicable to update the PFS is a key principle for the payment system. We agree with the commenters that using the AMA PPIS data to rebase and revise the MEI in CY 2011 promotes consistency within the PFS. In using the AMA PPIS information to rebase and revise the MEI, the result is that the most current data drive the work RVU share down compared to the PE RVU and malpractice RVU shares. Since the

PFS is both resource-based, relative, and budget neutral, if the data show that physicians' resources (that is, costs) have shifted proportionately more to PE and malpractice, the proportion for work must come down. We have tried to accommodate the preferences of previous commenters to preserve the stability of work RVUs by proposing to make the necessary MEI rebasing adjustments without adjusting the work RVUs. However, given the PFS budget neutrality requirement, we cannot implement some commenters' suggestion to insulate certain services that are work-intensive from the effects of the MEI rebasing without violating the inherent relativity of the system. That is, in order to insulate certain services from the effects of the MEI rebasing while adjusting the RVU shares to match the proportions for work, PE, and malpractice in the rebased MEI in a budget neutral manner as discussed previously, the individual work RVUs for those certain services would need to be increased. However, if we were to increase the work RVUs for those certain services, the services would no longer be appropriately valued relative to the other services under the PFS.

Comment: Of the many commenters who supported CMS' proposal to adjust the RVU shares to match the proportions for work, PE, and malpractice in the rebased CY 2011 MEI, the vast majority also favored adjusting the RVU shares upward for PE and malpractice while making a corresponding adjustment to the conversion factor for budget neutrality without modifying the RVUs for work. These commenters stated that stability in the work RVUs was desirable. However, some commenters also expressed concern that CMS proposed an additional downward adjustment to the conversion factor when, under current law, the effect of the SGR update formula in December of 2010 and CY 2011 would reduce PFS payments significantly. These commenters generally opposed the MEI rebasing and the adjustment to the RVUs to match the MEI weights; however, if CMS were to proceed with the policy, the commenters suggested that, at the very least the adjustments be phased in over 2 or 4 years. A few commenters suggested replacing the SGR update formula entirely with the MEI.

Response: We are sympathetic to the commenters' concern that an additional downward adjustment to the conversion factor on top of the negative effect of the statutory SGR-based update is inopportune.

However, as we explained in the proposed rule (75 FR 40095) and discussed previously in this section, rather than applying adjustments directly to the work, PE, and malpractice RVUs in order to match the rebased MEI weights for those categories, we believe that it is appropriate for the work RVUs to remain stable over time. The only way we can make the adjustments without affecting the work RVUs is to also make an adjustment to the conversion factor. We note that we did not receive a public comment suggesting that we make the downward adjustment to the work RVUs instead of the conversion factor in order to meet the requirements of section 1848(c)(2)(B)(ii) of the Act for budget neutrality. In response to the commenters that suggested replacing the SGR update with the MEI, we assume the commenters are making a general suggestion for a change in the current law, which is outside the purview of CMS.

Comment: Many commenters addressed CMS' proposal to convene a technical advisory panel to review all aspects of the MEI. In light of this proposal, the majority of commenters urged CMS to delay implementation of the MEI rebasing and any other MEI changes, including the proposed adjustment to the RVU shares, until the advice of the technical advisory panel is reviewed by CMS and recommendations for change, if any, are considered. Additionally, while the commenters generally supported convening an MEI technical advisory panel, some commenters, including MedPAC, advised that CMS should go ahead and implement the rebased and revised MEI and the proposed adjustment to the RVU shares in CY 2011. These commenters noted that if the recommendations of the advisory panel indicated that the MEI should be adjusted, CMS could propose future changes accordingly.

Response: We acknowledge the overwhelming support from commenters for the MEI technical advisory panel and refer readers to section

II.E.6 of this final rule with comment period for a more detailed discussion of our plans to convene the panel. We note that a more detailed summary of the public comments and our responses is included in that section.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to make MEI rebasing adjustments to the

PFS work and PE RVUs and to adjust the conversion factor to maintain budget neutrality. In light of the substantial support in general for us to make adjustments to match the proportions of the work, PE, and malpractice RVU shares to the categories in the revised and rebased CY 2011 MEI and our decision, as described in section II.E.5 of this final rule, to proceed with rebasing the MEI for CY 2011, we are finalizing our proposal to adjust the RVU shares for CY 2011 to align the RVU shares with the rebased MEI weights. Specifically, we will not be making an adjustment directly to the work RVUs. Instead, we are increasing the PE RVUs by an adjustment factor of 1.181 and the malpractice RVUs by an adjustment factor of 1.358. The RVUs in Addendum

B to this final rule with comment period reflect the application of these adjustment factors. We note that an application of the 1.358 adjustment factor to the malpractice RVUs for services with malpractice

RVUs of 0.01 will, due to rounding, result in malpractice RVUs of 0.01.

Furthermore, section 1848(c)(2)(B)(ii)(II) of the Act requires that changes to RVUs cannot cause the amount of expenditures for a year to differ by more than $20 million from what expenditures would have been in the absence of the changes. Therefore, as required by section 1848(c)(2)(B)(ii) of the Act, we are making an adjustment of 0.9181 to the CY 2011 conversion factor to ensure that the 1.181 adjustment to the PE RVUs and the 1.358 adjustment

Page 73277

to the malpractice RVUs do not cause an increase in CY 2011 PFS expenditures.

F. Allowed Expenditures for Physicians' Services and the Sustainable

Growth Rate 1. Medicare Sustainable Growth Rate (SGR)

The SGR is an annual growth rate that applies to physicians' services paid by Medicare. The use of the SGR is intended to control growth in aggregate Medicare expenditures for physicians' services.

Payments for services are not withheld if the percentage increase in actual expenditures exceeds the SGR. Rather, the PFS update, as specified in section 1848(d)(4) of the Act, is adjusted based on a comparison of allowed expenditures (determined using the SGR) and actual expenditures. If actual expenditures exceed allowed expenditures, the update is reduced. If actual expenditures are less than allowed expenditures, the update is increased.

Section 1848(f)(2) of the Act specifies that the SGR for a year

(beginning with CY 2001) is equal to the product of the following four factors:

(1) The estimated change in fees for physicians' services;

(2) The estimated change in the average number of Medicare fee-for- service beneficiaries;

(3) The estimated projected growth in real GDP per capita; and

(4) The estimated change in expenditures due to changes in statute or regulations.

In general, section 1848(f)(3) of the Act requires us to publish

SGRs for 3 different time periods, no later than November 1 of each year, using the best data available as of September 1 of each year.

Under section 1848(f)(3)(C)(i) of the Act, the SGR is estimated and subsequently revised twice (beginning with the FY and CY 2000 SGRs) based on later data. (The Act also provides for adjustments to be made to the SGRs for FY 1998 and FY 1999. See the February 28, 2003 Federal

Register (68 FR 9567) for a discussion of these SGRs.) Under section 1848(f)(3)(C)(ii) of the Act, there are no further revisions to the SGR once it has been estimated and subsequently revised in each of the 2 years following the preliminary estimate. In this final rule with comment, we are making our preliminary estimate of the CY 2011 SGR, a revision to the CY 2010 SGR, and our final revision to the CY 2009 SGR. 2. Physicians' Services

Section 1848(f)(4)(A) of the Act defines the scope of physicians' services covered by the SGR. The statute indicates that ``the term physicians' services includes other items and services (such as clinical diagnostic laboratory tests and radiology services), specified by the Secretary, that are commonly performed or furnished by a physician or in a physician's office, but does not include services furnished to a Medicare+Choice plan enrollee.''

We published a definition of physicians' services for use in the

SGR in the November 1, 2001 Federal Register (66 FR 55316). We defined physicians' services to include many of the medical and other health services listed in section 1861(s) of the Act. As discussed in the CY 2010 PFS final rule with comment period (74 FR 61961), the statute provides the Secretary with clear discretion to decide whether physician-administered drugs should be included or excluded from the definition of ``physicians' services.'' Accordingly, we removed physician-administered drugs from the definition of ``physicians' services'' in section 1848(f)(4)(A) of the Act for purposes of computing the SGR and the levels of allowed expenditures and actual expenditures beginning with CY 2010, and for all subsequent years.

Furthermore, in order to effectuate fully the Secretary's policy decision to remove drugs from the definition of ``physicians' services,'' we removed physician-administered drugs from the calculation of allowed and actual expenditures for all prior years.

Additionally, payment was made under the PFS for several new benefit categories in CY 2010 including pulmonary rehabilitation (PR), cardiac rehabilitation (CR), intensive cardiac rehabilitation (ICR), and kidney disease education (KDE) services. We note further that section 101 of the MIPPA added a new benefit category for ``additional preventive services'' effective January 1, 2009. Although we neglected to identify and add these additional benefit categories when describing the scope of physicians' services for purposes of the SGR in course of rulemaking for CY 2010 and CY 2009, respectively, we did include payments for these services in calculating target and actual PFS expenditures beginning in CY 2009 for additional preventive services and beginning in CY 2010 for PR, CR, ICR, and KDE services.

Section 4103 of the ACA added a new benefit category for

``personalized prevention plan services'' (which include the annual wellness visit). Payment for these services will be made under the PFS, and payments for these services will be included in calculating target and actual PFS expenditures, beginning January 1, 2011.

Thus, for purposes of determining allowed expenditures, actual expenditures for all years, and SGRs beginning with CY 2010 and for all subsequent years, we are specifying that physicians' services include the following medical and other health services if bills for the items and services are processed and paid by Medicare carriers (and those paid through intermediaries where specified) or the equivalent services processed by the Medicare Administrative Contractors (MACs):

Physicians' services.

Services and supplies furnished incident to physicians' services, except for the expenditures for drugs and biologicals which are not usually self-administered by the patient.

Outpatient physical therapy services and outpatient occupational therapy services.

Services of PAs, certified registered nurse anesthetists, certified nurse midwives, clinical psychologists, clinical social workers, NPs, and certified nurse specialists.

Screening tests for prostate cancer, colorectal cancer, and glaucoma.

Screening mammography, screening pap smears, and screening pelvic exams.

Diabetes outpatient self-management training (DSMT) services.

MNT services.

Diagnostic x-ray tests, diagnostic laboratory tests, and other diagnostic tests (including outpatient diagnostic laboratory tests paid through intermediaries).

X-ray, radium, and radioactive isotope therapy.

Surgical dressings, splints, casts, and other devices used for the reduction of fractures and dislocations.

Bone mass measurements.

An initial preventive physical exam.

Cardiovascular screening blood tests.

Diabetes screening tests.

Telehealth services.

Physician work and resources to establish and document the need for a power mobility device.

Additional preventive services.

Pulmonary rehabilitation.

Cardiac rehabilitation.

Intensive cardiac rehabilitation.

Kidney disease education services.

Personalized prevention plan services. 3. Preliminary Estimate of the SGR for 2011

Our preliminary estimate of the CY 2011 SGR is -13.4 percent. We first estimated the CY 2011 SGR in March

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2010, and we made the estimate available to the MedPAC and on our Web site. Table 35 shows the March 2010 estimate and our current estimates of the factors included in the CY 2011 SGR. The majority of the difference between the March estimate and our current estimate of the

CY 2011 SGR is explained by adjustments to reflect several intervening legislative changes that occurred after our March estimate was prepared.

Table 35--CY 2011 SGR Calculation

Statutory factors

March estimate

Current estimate

Fees.................................... 0.2 percent (1.002)........ 0.2 percent (1.002)

Enrollment.............................. 3.1 percent (1.031)........ 2.4 percent (1.024)

Real Per Capita GDP..................... 0.8 percent (1.008)........ 0.7 percent (1.007)

Law and Regulation...................... -4.4 percent (0.956)....... -16.2 percent (0.838)

Total............................... -0.4 percent (0.996)....... -13.4 percent (0.866)

Note: Consistent with section 1848(f)(2) of the Act, the statutory factors are multiplied, not added, to produce the total (that is, 1.002 x 1.024 x 1.007 x 0.838 = 0.866). A more detailed explanation of each figure is provided in section II.F.6.a. of this final rule with comment period. 4. Revised Sustainable Growth Rate for CY 2010

Our current estimate of the CY 2010 SGR is 8.3 percent. Table 36 shows our preliminary estimate of the CY 2010 SGR that was published in the CY 2010 PFS final rule with comment period (74 FR 61965) and our current estimate. The majority of the difference between the preliminary estimate and our current estimate of the CY 2010 SGR is explained by adjustments to reflect several intervening legislative changes that have occurred since publication of the CY 2010 final rule with comment period.

Table 36--CY 2010 SGR Calculation

Estimate from CY 2010 final

Statutory factors

rule

Current estimate

Fees.................................... 0.9 percent (1.009)........ 0.9 percent (1.009)

Enrollment.............................. 1.2 percent (1.012)........ 1.6 percent (1.016)

Real Per Capita GDP..................... 0.7 percent (1.007)........ 0.7 percent (1.007)

Law and Regulation...................... -11.3 percent (0.887)...... 4.9 percent (1.049)

Total............................... -8.8 percent (0.912)....... 8.3 percent (1.083)

Note: A more detailed explanation of each figure is provided in section II.F.6.b. of this final rule with comment period. 5. Final Sustainable Growth Rate for CY 2009

The SGR for CY 2009 is 6.4 percent. Table 37 shows our preliminary estimate of the CY 2009 SGR from the CY 2009 PFS final rule with comment period (73 FR 69904), our revised estimate from the CY 2010 PFS final rule with comment period (74 FR 61966), and the final figures determined using the best available data as of September 1, 2010.

Table 37--CY 2009 SGR Calculation

Estimate from CY

Estimate from CY

Statutory factors

2009 final rule

2010 final rule

Final

Fees.............................. 2.1 percent (1.021). 1.8 percent (1.018). 1.8 percent (1.018)

Enrollment........................ -0.2 percent (0.998) -0.8 percent (0.992) -0.6 percent (0.994)

Real Per Capita GDP............... 1.2 percent (1.012). 0.9 percent (1.009). 1.0 percent (1.010)

Law and Regulation................ 4.2 percent (1.042). 4.1 percent (1.041). 4.1 percent (1.041)

Total......................... 7.4 percent (1.074). 6.1 percent (1.061). 6.4 percent (1.064)

Note: A more detailed explanation of each figure is provided in section II.F.6.b. of this final rule with comment period. 6. Calculation of CYs 2011, 2010, and 2009 Sustainable Growth Rates a. Detail on the CY 2011 SGR

All of the figures used to determine the CY 2011 SGR are estimates that will be revised based on subsequent data. Any differences between these estimates and the actual measurement of these figures will be included in future revisions of the SGR and allowed expenditures and incorporated into subsequent PFS updates.

(1) Factor 1--Changes in Fees for Physicians' Services (Before Applying

Legislative Adjustments) for CY 2011

This factor is calculated as a weighted-average of the CY 2011 changes in fees for the different types of services included in the definition of physicians' services for the SGR. Medical and other health services paid using the PFS are estimated to account for approximately 89.4 percent of total allowed charges included in the SGR in CY 2011 and are updated using the MEI. The MEI for CY 2011 is 0.4 percent. Diagnostic laboratory tests are estimated to represent approximately 10.6 percent of Medicare allowed charges included in the

SGR for CY 2011. Medicare payments for these tests are updated by the

Consumer Price Index for Urban Areas (CPI-U), which is 1.1 percent for

CY 2011. However, section 3401 of the ACA reduces the CPI-U update applied to clinical laboratory tests by a productivity adjustment, but does not allow this adjustment to cause the

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update to be negative. The applicable productivity adjustment for CY 2011 is 1.2 percent. Adjusting the CPI-U update by the productivity adjustment results in a -0.1 percent (1.1 percent-1.2 percent) update for CY 2011. However, since section 3401 of the ACA does not allow the productivity adjustment to result in a negative CLFS update, the result is that the CLFS update for CY 2011 is 0.0 percent. Additionally, section 3401 of the ACA reduces the update applied to clinical laboratory tests by 1.75 percent for CYs 2011 through 2015. Therefore, for CY 2011, diagnostic laboratory tests will receive an update of - 1.75 percent. Additionally, as discussed in the CY 2010 PFS final rule with comment period (74 FR 61961), we removed physician-administered drugs from the definition of ``physicians' services'' in section 1848(f)(4)(A) of the Act for purposes of computing the SGR and the levels of allowed expenditures and actual expenditures beginning with

CY 2010, and for all subsequent years. Therefore, drugs represent 0.0 percent of Medicare allowed charges included in the SGR in CY 2011.

Table 38 shows the weighted-average of the MEI and laboratory price changes for CY 2010.

Table 38--Weighted-Average of the MEI and Laboratory Price Changes for

CY 2011

Weight

Update

Physician...............................

0.894

0.4

Laboratory..............................

0.106

-1.8

Weighted-average........................

1.000

0.2

We estimate that the weighted-average increase in fees for physicians' services in CY 2011 under the SGR (before applying any legislative adjustments) will be 0.2 percent.

(2) Factor 2--The Percentage Change in the Average Number of Part B

Enrollees From CY 2010 to CY 2011

This factor is our estimate of the percent change in the average number of fee-for-service enrollees from CY 2010 to CY 2011. Services provided to Medicare Advantage (MA) plan enrollees are outside the scope of the SGR and are excluded from this estimate. We estimate that the average number of Medicare Part B fee-for-service enrollees will increase by 2.4 percent from CY 2010 to CY 2011. Table 39 illustrates how this figure was determined.

Table 39--Average Number of Medicare Part B Fee-for-Service Enrollees

From CY 2010 to CY 2011

Excluding beneficiaries enrolled in MA plans

2010

2011

Overall....................... 43.932 million... 45.010 million

Medicare Advantage (MA)....... 11.683 million... 11.998 million

Net........................... 32.249 million... 33.012 million

Percent Increase.............. ................. 2.4 percent

An important factor affecting fee-for-service enrollment is beneficiary enrollment in MA plans. Because it is difficult to estimate the size of the MA enrollee population before the start of a CY, at this time we do not know how actual enrollment in MA plans will compare to current estimates. For this reason, the estimate may change substantially as actual Medicare fee-for-service enrollment for CY 2011 becomes known.

(3) Factor 3--Estimated Real Gross Domestic Product Per Capita Growth in 2011

We estimate that the growth in real GDP per capita from CY 2010 to

CY 2011 will be 0.7 percent (based on the 10-year average GDP over the 10 years of 2002 through 2011). Our past experience indicates that there have also been changes in estimates of real per capita GDP growth made before the year begins and the actual change in GDP computed after the year is complete. Thus, it is possible that this figure will change as actual information on economic performance becomes available to us in CY 2011.

(4) Factor 4--Percentage Change in Expenditures for Physicians'

Services Resulting From Changes in Statute or Regulations in CY 2011

Compared With CY 2010

The statutory and regulatory provisions that will affect expenditures in CY 2011 relative to CY 2010 are estimated to have an impact on expenditures of -16.2 percent. These include the Department of Defense Appropriations Act (DODAA), the Temporary Extension Act

(TEA), and the Preservation of Access to Care for Medicare

Beneficiaries and Pension Relief Act (PACMBPRA) which provided for physician updates.

Furthermore, the ACA contained provisions regarding the policy on equipment utilization for imaging services, the multiple procedure payment reduction policy for imaging services, and the annual wellness visit providing personalized prevention plan services. b. Detail on the CY 2010 SGR

A more detailed discussion of our revised estimates of the four elements of the CY 2010 SGR follows.

(1) Factor 1--Changes in Fees for Physicians' Services (Before Applying

Legislative Adjustments) for CY 2010

This factor was calculated as a weighted-average of the CY 2010 changes in fees that apply for the different types of services included in the definition of physicians' services for the SGR in CY 2010.

We estimate that services paid using the PFS account for approximately 91.1 percent of total allowed charges included in the SGR in CY 2010. These services were updated using the CY 2010 MEI of 1.2 percent. We estimate that diagnostic laboratory tests represent approximately 8.9 percent of total allowed charges included in the SGR in CY 2010. Medicare payments for these tests are updated by the CPI-U, which is -1.4 percent for CY 2010. However, section 145 of the MIPPA, as modified

Page 73280

by section 3401 of the ACA, reduced the update applied to clinical laboratory tests by 0.5 percent for CY 2009 and CY 2010. Therefore, for

CY 2010, diagnostic laboratory tests received an update of -1.9 percent. Since we removed physician-administered drugs from the definition of ``physicians' services'' for purposes of computing the

SGR and the levels of allowed expenditures and actual expenditures beginning with CY 2010, and for all subsequent years, drugs represent 0.0 percent of Medicare allowed charges included in the SGR in CY 2010.

Table 40 shows the weighted-average of the MEI, laboratory, and drug price changes for CY 2010.

Table 40--Weighted-Average of the MEI, Laboratory, and Drug Price

Changes for CY 2010

Weight

Update

Physician...............................

0.911

1.2

Laboratory..............................

0.089

-1.9

Drugs...................................

0.000

0.0

Weighted-average........................

1.000

0.9

After considering the elements described in Table 40, we estimate that the weighted-average increase in fees for physicians' services in

CY 2010 under the SGR (before applying any legislative adjustments) will be 0.9 percent. Our estimate of this factor in the CY 2010 PFS final rule with comment period was 0.9 percent (74 FR 61966).

(2) Factor 2--The Percentage Change in the Average Number of Part B

Enrollees From CY 2009 to CY 2010

We estimate that the average number of Medicare Part B fee-for- service enrollees (excluding beneficiaries enrolled in Medicare

Advantage plans) increased by 1.6 percent in CY 2010. Table 41 illustrates how we determined this figure.

Table 41--Average Number of Medicare Part B Fee-for-Service Enrollees

From CY 2009 to CY 2010

Excluding beneficiaries enrolled in MA plans

2009

2010

Overall....................... 42.846 million... 43.932 million

Medicare Advantage (MA)....... 11.098 million... 11.683 million

Net........................... 31.748 million... 32.249 million

Percent Increase.............. ................. 1.6 percent

Our estimate of the 1.6 percent change in the number of fee-for- service enrollees, net of Medicare Advantage enrollment for CY 2010 compared to CY 2009, is a larger change than our original estimate of 1.2 percent in the CY 2010 PFS final rule with comment period (74 FR 61967). While our current projection based on data from 8 months of CY 2010 differs from our original estimate of 1.2 percent when we had no actual data, it is still possible that our final estimate of this figure will be different once we have complete information on CY 2010 fee-for-service enrollment.

(3) Factor 3--Estimated Real Gross Domestic Product Per Capita Growth in CY 2010

We estimate that the growth in real GDP per capita will be 0.7 percent for CY 2010 (based on the 10-year average GDP over the 10 years of CY 2001 through CY 2010). Our past experience indicates that there have also been differences between our estimates of real per capita GDP growth made prior to the year's end and the actual change in this factor. Thus, it is possible that this figure will change further as complete actual information on CY 2010 economic performance becomes available to us in CY 2011.

(4) Factor 4--Percentage Change in Expenditures for Physicians'

Services Resulting From Changes in Statute or Regulations in CY 2010

Compared With CY 2009

The statutory and regulatory provisions that will affect expenditures in CY 2010 relative to CY 2009 are estimated to have an impact on expenditures of 4.9 percent. These include the DODAA, TEA, and PACMBPRA which provided for physician updates. Also included are the MIPPA provisions regarding the physician update, Physician Quality

Reporting Initiative (PQRI) and e-prescribing bonuses, the work GPCIs, and payment provisions related to certain pathology services.

Additionally, the ACA contained provisions regarding the work GPCIs, the policy on equipment utilization for imaging services, coverage of preventive services, and a physician enrollment requirement. c. Detail on the CY 2009 SGR

A more detailed discussion of our final revised estimates of the four elements of the CY 2009 SGR follows.

(1) Factor 1--Changes in Fees for Physicians' Services (Before Applying

Legislative Adjustments) for CY 2009

This factor was calculated as a weighted-average of the CY 2009 changes in fees that apply for the different types of services included in the definition of physicians' services for the SGR in CY 2009. As we stated in the CY 2010 PFS final rule with comment period (74 FR 61965), although we removed drugs from the calculation of allowed and actual expenditures under sections 1848(d)(3)(C) and 1848(d)(4) of the Act retrospectively to the 1996/1997 base year, we determined that we were only authorized to remove drugs from the calculation of the SGR beginning with CY 2010. Therefore, we did not remove drugs from the SGR calculations for previous years, including CY 2009. Consistent with this determination, the revisions to our estimate of the CY 2009 SGR will be limited to revisions to reflect later data available as of

September 1, 2010, that were not available when we published our previous estimates.

Services paid using the PFS accounted for approximately 82.3 percent of total Medicare-allowed charges included in the SGR for CY

Page 73281

2009 and are updated using the MEI. The MEI for CY 2009 was 1.6 percent. Diagnostic laboratory tests represented approximately 8.0 percent of total CY 2009 Medicare allowed charges included in the SGR and were updated by the CPI-U, which was 5.0 percent for CY 2009.

However, section 145 of the MIPPA, as modified by section 3401 of the

ACA, reduced the update applied to clinical laboratory tests by 0.5 percent for CYs 2009 and 2010. Therefore, for CY 2009, diagnostic laboratory tests received an update of 4.5 percent. Drugs represented approximately 9.7 percent of total Medicare-allowed charges included in the SGR for CY 2009. We estimate a weighted-average change in fees for drugs included in the SGR of 1.6 percent for CY 2009. Table 42 shows the weighted-average of the MEI, laboratory, and drug price changes for

CY 2009.

Table 42--Weighted-Average of the MEI, Laboratory, and Drug Price

Changes for CY 2009

Weight

Update

Physician...............................

0.823

1.6

Laboratory..............................

0.080

4.5

Drugs...................................

0.097

1.6

Weighted-average........................

1.000

1.8

After considering the elements described in Table 42, we estimate that the weighted-average increase in fees for physicians' services in

CY 2009 under the SGR (before applying any legislative adjustments) was 1.8 percent. This figure is a final one based on complete data for CY 2009.

(2) Factor 2--The Percentage Change in the Average Number of Part B

Enrollees From CY 2008 to CY 2009

We estimate the change in the number of fee-for-service enrollees

(excluding beneficiaries enrolled in MA plans) from CY 2009 to CY 2010 was -0.6 percent. Our calculation of this factor is based on complete data from CY 2009. Table 43 illustrates the calculation of this factor.

Table 43--Average Number of Medicare Part B From CY 2008 to CY 2009

Excluding beneficiaries enrolled in MA plans

2008

2009

Overall....................... 41.958 million.. 42.846 million

Medicare Advantage (MA)....... 10.008 million.. 11.098 million

Net........................... 31.950 million.. 31.748 million

Percent Change................ ................ -0.6 percent

(3) Factor 3--Estimated Real Gross Domestic Product Per Capita Growth in CY 2009

We estimate that the growth in real per capita GDP was 1.0 percent in CY 2009 (based on the 10-year average GDP over the 10 years of CY 2000 through CY 2009). This figure is a final one based on complete data for CY 2009.

(4) Factor 4--Percentage Change in Expenditures for Physicians'

Services Resulting From Changes in Statute or Regulations in CY 2009

Compared With CY 2008

Our final estimate for the net impact on expenditures from the statutory and regulatory provisions that affect expenditures in CY 2009 relative to CY 2008 is 4.1 percent. These include the DRA provision regarding payments for imaging services, the Medicare, Medicaid, and

SCHIP Extension Act of 2007 (Pub. L. 110-173) (MMSEA) provision regarding the PQRI bonuses payable in CY 2009, and the MIPPA provisions regarding the physician update, mental health services, and the change in application of budget neutrality to the CF.

G. The Update Adjustment Factor (UAF)

Section 1848(d) of the Act provides that the PFS update is equal to the product of the MEI and the UAF. The UAF is applied to make actual and target expenditures (referred to in the statute as ``allowed expenditures'') equal. As discussed previously, allowed expenditures are equal to actual expenditures in a base period updated each year by the SGR. The SGR sets the annual rate of growth in allowed expenditures and is determined by a formula specified in section 1848(f) of the Act. 1. Calculation Under Current Law

Under section 1848(d)(4)(B) of the Act, the UAF for a year beginning with CY 2001 is equal to the sum of the following--

Prior Year Adjustment Component. An amount determined by--

+ Computing the difference (which may be positive or negative) between the amount of the allowed expenditures for physicians' services for the prior year (the year prior to the year for which the update is being determined) and the amount of the actual expenditures for those services for that year;

+ Dividing that difference by the amount of the actual expenditures for those services for that year; and

+ Multiplying that quotient by 0.75.

Cumulative Adjustment Component. An amount determined by--

+ Computing the difference (which may be positive or negative) between the amount of the allowed expenditures for physicians' services from April 1, 1996, through the end of the prior year and the amount of the actual expenditures for those services during that period;

+ Dividing that difference by actual expenditures for those services for the prior year as increased by the SGR for the year for which the UAF is to be determined; and

+ Multiplying that quotient by 0.33.

Section 1848(d)(4)(E) of the Act requires the Secretary to recalculate allowed expenditures consistent with section 1848(f)(3) of the Act. As discussed previously, section 1848(f)(3) specifies that the

SGR (and, in turn, allowed expenditures) for the upcoming CY (CY 2011 in this case), the current

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CY (that is, CY 2010) and the preceding CY (that is, CY 2009) are to be determined on the basis of the best data available as of September 1 of the current year. Allowed expenditures for a year generally are estimated initially and subsequently revised twice. The second revision occurs after the CY has ended (that is, we are making the second revision to CY 2009 allowed expenditures in this final rule with comment).

Table 44 shows the historical SGRs corresponding to each period through CY 2011.

Table 44--Annual and Cumulative Allowed and Actual Expenditures for Physicians' Services From April 1, 1996 through the End of the Current Calendar Year

Cumulative

Cumulative

Annual allowed

Annual actual

allowed

actual

Period

expenditures ($ expenditures ($ expenditures ($ expenditures ($

FY/CY SGR (%) in billions)

in billions)

in billions)

in billions)

4/1/96-3/31/97.........................................

\1\ $46.8

$46.8

$46.8

$46.8

N/A 4/1/97-3/31/98.........................................

48.3

47.0

95.2

93.9

FY 1998=3.2 4/1/98-3/31/99.........................................

50.4

47.8

145.6

141.7

FY 1999=4.2 1/1/99-3/31/99.........................................

12.7

12.4

\(2)\

141.7

FY 1999=4.2 4/1/99-12/31/99........................................

40.3

37.0

\(3)\

178.8

FY 2000=6.9 1/1/99-12/31/99........................................

53.0

49.5

185.8

178.8

FY 1999/2000 1/1/00-12/31/00........................................

56.8

54.1

242.7

232.9

CY 2000=7.3 1/1/01-12/31/01........................................

59.4

61.2

302.1

294.2

CY 2001=4.5 1/1/02-12/31/02........................................

64.3

64.6

366.4

358.7

CY 2002=8.3 1/1/03-12/31/03........................................

69.0

70.2

435.4

429.0

CY 2003=7.3 1/1/04-12/31/04........................................

73.6

78.3

509.0

507.2

CY 2004=6.6 1/1/05-12/31/05........................................

76.7

83.5

585.7

590.7

CY 2005=4.2 1/1/06-12/31/06........................................

77.8

84.6

663.5

675.3

CY 2006=1.5 1/1/07-12/31/07........................................

80.5

84.5

744.0

759.8

CY 2007=3.5 1/1/08-12/31/08........................................

84.2

86.7

828.2

846.4

CY 2008=4.5 1/1/09-12/31/09........................................

89.6

90.6

917.8

937.0

CY 2009=6.4 1/1/10-12/31/10........................................

97.0

92.9

1,014.7

1,029.9

CY 2010=8.3 1/1/11-12/31/11........................................

84.0

NA

1,098.7

NA

CY 2011=-13.4

\(1)\ Allowed expenditures in the first year (April 1, 1996-March 31, 1997) are equal to actual expenditures. All subsequent figures are equal to quarterly allowed expenditure figures increased by the applicable SGR. Cumulative allowed expenditures are equal to the sum of annual allowed expenditures. We provide more detailed quarterly allowed and actual expenditure data on our Web site at the following address: http://www.cms.hhs.gov/

SustainableGRatesConFact/. We expect to update the web site with the most current information later this month.

\(2)\ Allowed expenditures for the first quarter of 1999 are based on the FY 1999 SGR.

\(3)\ Allowed expenditures for the last three quarters of 1999 are based on the FY 2000 SGR.

Consistent with section 1848(d)(4)(E) of the Act, Table 44 includes our second revision of allowed expenditures for CY 2009, a recalculation of allowed expenditures for CY 2010, and our initial estimate of allowed expenditures for CY 2011. To determine the UAF for

CY 2011, the statute requires that we use allowed and actual expenditures from April 1, 1996 through December 31, 2010 and the CY 2011 SGR. Consistent with section 1848(d)(4)(E) of the Act, we will be making revisions to the CY 2010 and CY 2011 SGRs and CY 2010 and CY 2011 allowed expenditures. Because we have incomplete actual expenditure data for CY 2010, we are using an estimate for this period.

Any difference between current estimates and final figures will be taken into account in determining the UAF for future years.

We are using figures from Table 44 in the following statutory formula:

GRAPHIC

TIFF OMITTED TR29NO10.231

UAF11= Update Adjustment Factor for CY 2011 = -2.9 percent

Target10= Allowed Expenditures for CY 2010 = $97.0 billion

Actual10= Estimated Actual Expenditures for CY 2010 = $92.9 billion

Target 4/96-12/10= Allowed Expenditures from 4/1/1996-12/ 31/2010 = $1,014.7 billion

Actual 4/96-12/10= Estimated Actual Expenditures from 4/1/ 1996-12/31/2010 = $1,029.9 billion

SGR11= -13.4 percent (0.866)

GRAPHIC

TIFF OMITTED TR29NO10.232

Section 1848(d)(4)(D) of the Act indicates that the UAF determined under section 1848(d)(4)(B) of the Act for a year may not be less than

-0.07 or greater than 0.03. Since -0.029 is between -0.07 and 0.03, the

UAF for CY 2010 will be -0.029.

Section 1848(d)(4)(A)(ii) of the Act indicates that 1.0 should be added to the UAF determined under section 1848(d)(4)(B) of the Act.

Thus, adding

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1.0 to -0.029 makes the UAF equal to 0.971.

H. Physician and Anesthesia Fee Schedule Conversion Factors for CY 2011

The CY 2011 PFS CF is $25.5217. The CY 2011 national average anesthesia CF is $15.8085. 1. Physician Fee Schedule Update and Conversion Factor a. CY 2011 PFS Update

The formula for calculating the PFS update is set forth in section 1848(d)(4)(A) of the Act. In general, the PFS update is determined by multiplying the CF for the previous year by the percentage increase in the MEI times the UAF, which is calculated as specified under section 1848(d)(4)(B) of the Act. b. CY 2011 PFS Conversion Factor

Generally, the PFS CF for a year is calculated in accordance with section 1848(d)(1)(A) of the Act by multiplying the previous year's CF by the PFS update.

We note section 101 of the MIEA-TRHCA provided a 1-year increase in the CY 2008 CF and specified that the CF for CY 2009 must be computed as if the 1-year increase had never applied. Section 101 of the MMSEA provided a 6-month increase in the CY 2009 CF, from January 1, 2009, through June 30, 2009, and specified that the CF for the remaining portion of CY 2009 and the CFs for CY 2010 and subsequent years must be computed as if the 6-month increase had never applied. Section 131 of the MIPPA extended the increase in the CY 2009 CF that applied during the first half of the year to the entire year, provided for a 1.1 percent increase to the CY 2010 CF, and specified that the CFs for CY 2011 and subsequent years must be computed as if the increases for CYs 2008, 2009, and 2010 had never applied. Section 1011(a) of the DODAA and section 5 of the TEA specified a zero percent update for CY 2010, effective January 1, 2010 through May 31, 2010. Subsequently, section 101(a)(2) of the PACMBPRA provided for a 2.2 percent update to the CF, effective from June 1, 2010 to November 30, 2010. Therefore, under current law, the CF in effect in December 2010 is $28.3868.

In addition, when calculating the PFS CF for a year, section 1848(c)(2)(B)(ii)(II) of the Act requires that increases or decreases in RVUs may not cause the amount of expenditures for the year to differ more than $20 million from what it would have been in the absence of these changes. If this threshold is exceeded, we must make adjustments to preserve budget neutrality. We estimate that CY 2011 RVU changes would result in a decrease in Medicare physician expenditures of more than $20 million. Accordingly, we are increasing the CF by 1.0045 to offset this estimated decrease in Medicare physician expenditures due to the CY 2011 RVU changes. Furthermore, as discussed in section II.E.6 of this final rule with comment period, we are decreasing the CF by 0.9181 in order to offset the increase in Medicare physician payments due to the CY 2011 rescaling of the RVUs so that the proportions of total payments for the work, PE, and malpractice RVUs match the proportions in the final revised and rebased MEI for CY 2011.

Accordingly, we calculate the CY 2011 PFS CF to be $25.5217. This final rule with comment period announces a reduction to payment rates for physicians' services in CY 2011 under the SGR formula. These payment rates are currently scheduled to be reduced under the SGR system on

December 1, 2010, and then again on January 1, 2011. The total reduction in MPFS rates between November 2010 and January 2011 under the SGR system will be 24.9 percent. By law, we are required to make these reductions in accordance with section 1848(d) and (f) of the Act, and these reductions can only be averted by an Act of Congress. While

Congress has provided temporary relief from these reductions every year since 2003, a long-term solution is critical. We are committed to permanently reforming the Medicare payment formula.

We illustrate the calculation of the CY 2011 PFS CF in Table 45.

Table 45--Calculation of the CY 2011 PFS CF

December 2010 Conversion Factor.... ......................

$28.3868

CY 2011 Medicare Economic Index.... 0.4 percent (1.0040)

...........

CY 2011 Update Adjustment Factor... -2.9 percent (0.9710) ...........

CY 2011 RVU Budget Neutrality

0.5 percent (1.0045)

...........

Adjustment.

CY 2011 Rescaling to Match MEI

-8.2 percent (0.9181) ...........

Weights Budget Neutrality

Adjustment.

CY 2011 Conversion Factor.......... ......................

$25.5217

We note payment for services under the PFS will be calculated as follows:

Payment = [(RVU work x GPCI work) + (RVU PE x GPCI PE) + (RVU malpractice x GPCI malpractice)] x CF. 2. Anesthesia Conversion Factor

We calculate the anesthesia CF as indicated in Table 45. Anesthesia services do not have RVUs like other PFS services. Therefore, we account for any necessary RVU adjustments through an adjustment to the anesthesia CF to simulate changes to RVUs. More specifically, if there is an adjustment to the work, PE, or malpractice RVUs, these adjustments are applied to the respective shares of the anesthesia CF as these shares are proxies for the work, PE, and malpractice RVUs for anesthesia services. Furthermore, as discussed in section II.E.6 of this final rule with comment period, we are rescaling the RVUs so that the proportions of total payments for the work, PE, and malpractice

RVUs match the proportions in the final revised and rebased MEI for CY 2011. Accordingly, we are adjusting the anesthesia CF to reflect the

RVUs adjustments being made to all other physician fee schedule services to match the revised and rebased MEI weights.

As explained previously, in order to calculate the CY 2011 PFS CF, the statute requires us to calculate the CFs for CYs 2009, 2010, and 2011 as if the various legislative changes to the CFs for those years had not occurred. Accordingly, under current law, the anesthesia CF in effect in December 2010 is $16.6058. We illustrate the calculation of the CY 2011 anesthesia CF in Table 46.

Table 46--Calculation of the CY 2011 Anesthesia Conversion Factor

December 2010 Anesthesia Conversion ......................

$16.6058

Factor.

CY 2011 Medicare Economic Index.... 0.4 percent (1.0040)

...........

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CY 2011 Update Adjustment Factor... -2.9 percent (0.9710) ...........

CY 2011 Anesthesia Adjustment...... -2.3 percent (0.97651) ...........

CY 2011 Anesthesia Conversion

......................

$15.8085

Factor.

III. Code-Specific Issues for the PFS

A. Therapy Services 1. Outpatient Therapy Caps for CY 2011

Section 1833(g) of the Act applies an annual, per beneficiary combined cap on expenses incurred for outpatient physical therapy and speech-language pathology services under Medicare Part B. A similar separate cap for outpatient occupational therapy services under

Medicare Part B also applies. The caps apply to expenses incurred for therapy services furnished in outpatient settings, other than in an outpatient hospital setting which is described under section 1833(a)(8)(B) of the Act. The caps were in effect during 1999, from

September 1, 2003 through December 7, 2003, and continuously beginning

January 1, 2006. The caps are a permanent provision, that is, there is no end date specified in the statute for therapy caps. Beginning

January 1, 2006, the DRA provided for exceptions to the therapy caps until December 31, 2006. The exceptions process for therapy caps has been extended through December 31, 2009 pursuant to three subsequent amendments (in MEIA-TRHCA, MMSEA, and MIPPA).

Section 1833(g)(5) of the Act (as amended by section 3103 of the

ACA) extended the exceptions process for therapy caps through December 31, 2010. The annual change in the therapy cap is computed by multiplying the cap amount for CY 2010, which is $1,860, by the MEI for

CY 2011, and rounding to the nearest $10. This amount is added to the

CY 2010 cap to obtain the CY 2011 cap. Since the MEI for CY 2011 is 0.4 percent, the therapy cap amount for CY 2011 is $1870.

The agency's authority to provide for exceptions to therapy caps

(independent of the outpatient hospital exception) will expire on

December 31, 2010, unless the Congress acts to extend it. If the current exceptions process expires, the caps will be applicable in accordance with the statute, except for services furnished and billed by outpatient hospital departments.

Comment: The commenters unanimously requested repeal of the therapy caps, while characterizing caps as arbitrary and medically unfounded and the combination of cap amounts for PT and SLP services as groundless. A number of commenters argued that therapy caps restrict provision of medically necessary services to beneficiaries. Several commenters reported that patients are discharged for care prior to recovery due to payment restrictions and this leads to increased medical costs for Medicare.

Response: Therapy caps are mandated by statute. We have no authority to repeal the caps, or to restructure the grouping of therapy disciplines to which the caps apply. However, we understand the concerns of the commenters, and we are actively exploring alternatives to therapy caps to inform the discussions about approaches to identify and pay for those therapy services that are necessary for patients to attain the best outcomes with the most efficient use of resources. 2. Alternatives to Therapy Caps a. Background

In section 4541 of the Balanced Budget Act of 1997 (Pub. L. 105-33)

(BBA), the Congress enacted the financial limitations on outpatient therapy services (the ``therapy caps'' discussed above for physical therapy, occupational therapy, and speech-language pathology). At the same time, the Congress requested that the Secretary submit a Report to

Congress that included recommendations on the establishment of a revised coverage policy for outpatient physical therapy services and outpatient occupational therapy services under the statute. The

Balanced Budget Refinement Act of 1999 (Pub. L. 106-113) (BBRA) placed the first of a series of moratoria on implementation of the limits. In addition, it required focused medical review of claims and revised the report requirements in section 4541(d)(2) of the BBA to request a report that included recommendations on the following: (A) The establishment of a mechanism for assuring appropriate utilization of outpatient physical therapy services, outpatient occupational therapy services, and speech-language pathology services; and (B) the establishment of an alternative payment policy for such services based on classification of individuals by diagnostic category, functional status, prior use of services (in both inpatient and outpatient settings), and such other criteria as the Secretary determines appropriate, in place of the limits. In 1999, therapy services were not defined, but services documented as therapy were billed and reported when furnished by a variety of individuals in many different settings.

These services were not identified in a way that would allow analysis of utilization or development of alternative payment policies. Since that time, we have clarified the definition of therapy services and applied the qualifications of therapists consistently to outpatient settings, which have facilitated analysis of therapy services.

We have studied therapy services with the assistance of a number of contractors over the past 11 years. Reports of these projects are available on the CMS Web site at http://www.cms.gov/TherapyServices/.

On November 9, 2004, we delivered the Report to Congress, Number 137953, ``Medicare Financial Limitations on Outpatient Therapy

Services'' that referenced two utilization analyses. We periodically updated the utilization analyses and posted other contracted reports on the CMS web site in order to further respond to the requirements of the

BBRA. Subsequent reports highlighted the expected effects of limiting services in various ways and presented plans to collect data about patient condition using available tools. The general belief was that if patient condition could be reliably described, that approach would ensure appropriate payment for appropriately utilized services.

Over the past decade, significant progress has been made in identifying the outpatient therapy services that are billed to

Medicare, the demographics of the beneficiaries who utilize those services, the types of services, the HCPCS codes used to bill the services, the allowed and paid amounts of the services, and the settings, geographic locations, and provider or supplier types where services are furnished.

Some of the information that is necessary to ensure appropriate utilization and develop objective and equitable payment alternatives to therapy caps based on patient condition has proven difficult to develop. The influence of prior use of inpatient services on outpatient use of therapy services was not accessible due to systems issues and differences in the policies, billing, and reporting practices for inpatient and outpatient therapy

Page 73285

services. The weakness of the ICD-9-CM diagnostic codes in describing the condition of the rehabilitation patient obscured analyses of claims to assess the need for therapy services. The primary diagnosis on the claim is a poor predictor for the type and duration of therapy services required, which complicates assignment of patient cohorts for analysis.

Although changes to the guidance in the Medicare Benefit Policy Manual

(Pub. 100-02) on documentation of therapy services in 2005 improved the consistency of records and facilitated chart review, it became increasingly obvious that neither claims analysis nor chart review could serve as a reliable and valid method to determine a patient's need for services or to form the basis for equitable payment. We concluded that in order to develop alternative payment approaches to the therapy caps, we needed a method to identify patients with similar risk-adjusted conditions (cohorts) and then we would identify the therapy services that are necessary for the patients to attain the best outcomes with the most efficient use of resources.

While we studied therapy utilization, a number of proprietary tools were developed by researchers in the professional community to assess the outcomes of therapy. Some tool sponsors collected sufficient information to predict with good reliability the amount or length of treatment that would result in the best expected outcomes. We encouraged the use of these proprietary tools in manual instructions, but proprietary tools do not serve our purposes because modification of proprietary tools may only be done by the tool sponsor. There now are some versions of the tools in the public domain and they are being utilized widely to identify patient conditions and, by some insurers, to pay for efficient and effective treatment. Examples of such tools include the National Outcomes Measurement System (NOMS) by the American

Speech-Language Hearing Association and Patient Inquiry by Focus On

Therapeutic Outcomes, Inc. (FOTO).

In 2006, Focus on Therapeutic Outcomes, Inc. delivered to CMS a report titled, ``Pay for Performance for Physical Therapy and

Occupational Therapy,'' which is also available on the CMS Web site at http://www.cms.gov/TherapyServices. The purpose of this project was to simulate a pay-for-performance implementation, designed to align financial incentives with the achievement of better clinical outcomes from services that were delivered efficiently. The project, funded by

HHS/CMS Grant 18-P-93066/9-01, demonstrated the predictive validity of the risk-adjusted pay-for-performance model and the feasibility of reducing payments without affecting services to beneficiaries who need them. b. Current Activities

The Tax Relief and Health Care Act of 2006 (TRHCA) extended the therapy cap exceptions process through December 31, 2007 and provided funds used for two CMS projects related to developing alternative payment approaches for therapy services that are based on beneficiary needs. A 5-year project titled ``Development of Outpatient Therapy

Alternatives'' (DOTPA), awarded to RTI International, was initiated in order to develop a comprehensive and uniform therapy-related data collection instrument, assess its feasibility, and determine the subset of the measures that we could routinely and reliably collect in support of payment alternatives. While DOTPA will identify measurement items relevant to payment, the project will not deliver a standardized measurement tool. We may either develop a tool or allow other tools to be used for payment purposes when they include those items that identify the following: (1) Beneficiary need; and (2) outcomes (that is effectiveness of therapy services). In addition to therapy caps, the

DOTPA project considers our interest in value-based purchasing by identifying components of value, including beneficiary need and the effectiveness of therapy services. The DOTPA project reports are available on the contractor's Web site at http://optherapy.rti.org/.

The data collection design and instrument development have been completed, and a Paperwork Reduction Act (PRA) package was submitted for approval of the data collection forms by the Office of Management and Budget (OMB). The Federal Register notice for the second round of public comment on this package was published on April 23, 2010 (75 FR 21296). The PRA package has been approved; the contractor is recruiting potential participants in the data collection, developing training materials for participants, and updating the project web site. We did not seek public comments on the DOTPA project in the proposed rule.

The TRCHA also funded the 2-year project contracted to Computer

Sciences Corporation (CSC) entitled ``Short Term Alternatives for

Therapy Services'' (STATS). STATS has provided recommendations regarding alternative payment approaches to therapy caps that could be considered before completion of the DOTPA project. The STATS project draws upon the analytical and clinical expertise of contractors and stakeholders to consider policies, measurement tools, and claims data that are currently available to provide further information about patient condition and the outcomes of therapy services. The final report, received September 13, 2010, included recommended actions we could take within 2 or 3 calendar years to replace the current cap limits on therapy services with a policy that pays appropriately for necessary therapy services. c. Potential Short-Term Approaches to Therapy Caps

On June 30, 2009, we received a draft of the CSC report titled

``STATS Outpatient Therapy Practice Guidelines,'' a summary of expert workgroup discussions, and several short-term payment alternatives for consideration. CSC discussed options based on the assumption that short-term policy changes should facilitate the development of adequate function and/or outcomes reporting tools. In the longterm, CSC recommended that payment be based on function or quality measurements that adequately perform risk adjustment for episode-based payment purposes.

Based on the draft report, additional stakeholder input, and subsequent communications with the contractor, in the CY 2011 PFS proposed rule (75 FR 40097 through 40099) we discussed several potential alternatives to the therapy caps that could lead to more appropriate payment for medically necessary and effective therapy services that are furnished efficiently. We solicited public comments on the proposed rule regarding all aspects of these alternatives, including the potential associated benefits or problems, clinical concerns, practitioner administrative burden, consistency with other

Medicare and private payer payment policies, and claims processing considerations. We did not propose either short-term or long-term payment alternatives to the therapy caps. However, we referred readers to section II.C.4.(c) of the proposed rule for our CY 2011 proposal to expand the MPPR policy to ``always therapy'' services furnished in a single session in order to pay more appropriately for therapy services, taking into consideration the expected efficiencies when services are furnished together. While we did not propose the adoption of an MPPR policy for therapy services specifically as an alternative to the therapy caps, we acknowledged that by paying more appropriately for combinations of

Page 73286

therapy services that are commonly furnished in a single session, practitioners would be able to furnish more medically necessary therapy services to a given beneficiary before surpassing the caps. We noted that the proposed MPPR policy would have the potential to reduce the number of beneficiaries impacted by the therapy caps in a given year.

Comment: Many commenters stated that use of the financial cap on therapy services as a rationale for the proposed MPPR was unacceptable and not a sound basis for such a significant policy proposal. Quite a few commenters contrasted the cap alternatives research with the MPPR which, in the commenters' opinion, did not reflect a similar level of analysis. Instead of implementing the proposed MPPR, a large majority of the commenters urged CMS to place a high priority in resources and funding for research to identify alternatives to the cap that would ensure patients receive medically necessary therapy services.

While the commenters agreed that more therapy could be furnished to a beneficiary before surpassing the caps if the payments were reduced, the commenters believe that other, more serious access problems would result from arbitrary payment reductions under an MPPR. Many commenters were concerned that the proposed MPPR policy might restrict access to therapy services for patients with more severe problems, especially neurological problems and complex medical conditions. Less payment, explained the commenters, would force therapists to spend less time with patients, incentivize cutting corners, and encourage greater fraud and abuse. The commenters argued that the shortage of therapists, particularly physical therapists, would be exacerbated and access to therapy services would be severely jeopardized.

Response: We appreciate the effort and resources contributed by stakeholders to the discussion and development of alternatives to therapy caps. We look forward to the continued cooperation of stakeholders as we continue our work in this area over the coming years. We refer readers to section II.C.4.(c) of this final rule with comment period for a detailed discussion of the public comments and our responses regarding the proposed therapy MPPR.

The three specific short-term options that we discussed in the CY 2011 PFS proposed rule would not have required statutory changes when

CSC originally delivered them. In CY 2011, some would require extension of the therapy cap exceptions process. Some would require moderate reporting changes that would yield more detailed information about patient function and progress to inform future payment approaches and facilitate the medical review of services above the therapy caps at the present time. Others require new coding and bundled per-session payment that would be a first step toward episode-based payment. They are not necessarily independent of each other.

Under each of these alternatives, administrative simplification with respect to current policies, such as HCPCS code edits and ``ICD-9-

CM to HCPCS code'' crosswalk edits that serve to limit utilization without regard to the patient's clinical presentation, could be pursued in the context of these options.

The first option would modify the current therapy caps exceptions process to capture additional clinical information regarding therapy patient severity and complexity in order to facilitate medical review.

This approach would complement the DOTPA project, which is identifying items to measure patient condition and outcomes. We believe the first option may have the greatest potential for rapid implementation that could yield useful information in the short-term. In the CY 2011 PFS proposed rule (75 FR 40097), we indicated that we were especially interested in detailed public comments on this option that could inform a potential proposal to adopt such an alternative through future rulemaking. The second option would involve introducing additional claims edits regarding medical necessity, in order to reduce overutilization. The third option would be to adopt a per-session bundled payment that would vary based on patient characteristics and the complexity of evaluation and treatment services furnished in the session. Each option would require significant provider and contractor education, and all would necessitate major claims processing systems changes. Moreover, some of the options may affect beneficiaries by changing the type or amount of services covered by Medicare or the beneficiary's cost sharing obligations.

Comment: Many commenters agreed that a long term solution to the therapy caps is desirable. Generally, the commenters supported an evidence-based payment system grounded in accurate, comprehensive analysis of the clinical characteristics of the wide range of therapy patients in diverse settings and the concept of bundled payment for episodes of care based on clinical characteristics of patients. Many commenters urged CMS to place a high priority in resources and funding for research to identify alternatives to the cap that would ensure patients receive medically necessary therapy services. The commenters asserted that such research would be a key factor in identifying clinically appropriate ways to control spending. Those who commented on this issue commended CMS for proposing alternatives that reflect in- depth analytical work, expressing appreciation to CMS and its contractor for the opportunity to participate on task forces and pledging continued assistance in trials of alternatives. The commenters also commend CMS for recommending better clinical information be included in payment decisions.

MedPAC and some other commenters supported all three alternatives as reasonable steps consistent with the end goals of value for purchases based on the care needs of beneficiaries. Many commenters supported the first option or the third option, and very few supported the second option. Regardless of the alternative chosen, commenters consistently recommended further study and analysis, with a national demonstration or pilot project to test any alternative prior to implementation.

Response: We continue to believe that the advice and assistance of stakeholders, including clinicians and practice administrators, are essential to the development of policies that are appropriate, realistic, and effective in allowing necessary therapy care while limiting overutilization. We appreciate the time and effort provided by the dedicated professionals involved in the STATS workgroups and DOTPA technical advisory panels.

Comment: A commenter suggested that diagnoses cannot be used to predict medical necessity. The same commenter argued that if the patient were assessed using self-reported functional status measures that are risk-adjusted using many variables, it would be possible to predict outcomes, identify ineffective treatment, and reduce gaming without relying on clinician-generated estimates known to be biased and fraught with poor reliability and validity.

Several other commenters stated that clinicians' judgment is essential to accurate outcomes assessment, and these commenters provided examples of clinical judgments believed essential to appropriate care planning.

Response: None of the alternatives discussed in the proposed rule would require a measurement tool scored by either a clinician or the patient. We note the disagreement among the commenters on this point.

Page 73287

Comment: While generally supportive of the development of alternatives to therapy caps, many commenters expressed concern that there were insufficient data and details of the options discussed in the proposed rule to develop a rational payment system based on the options at this time. Several commenters suggested that sophisticated multivariate statistical methods with a long list of clinically appropriate risk-adjustment variables would be required. Another commenter recommended using risk-adjustment models built on large aggregate datasets to develop efficiency and effectiveness projections on which payments could be based.

Response: We agree that the alternatives presented were not fully developed and that statistically sound methods of evaluation of the fully developed alternatives would be appropriate. We made no specific proposal to adopt an alternative beginning in CY 2011, but instead presented three potential options in order to gather additional public input on the overall concepts and the details to inform our future developmental work in this area. We will continue to review and consider all the information provided to us and acknowledge that, in the context of any future proposal, we would need to provide further detail as part of notice and comment rulemaking in order for the public to provide meaningful comment prior to the adoption of changes to therapy payment.

Comment: Many commenters complained that therapy payments have decreased relative to inflation over the past 10 years. The commenters described the practitioner's struggle to provide appropriate care and noted their fear of alternatives that could result in fewer resources with which to treat beneficiaries. Some commenters stated that Medicaid payments also decreased, leaving them with less flexibility to provide covered services to Medicare beneficiaries. Several commenters warned that those who bill therapy services will find ``creative'' ways to manage patients in the future, leading to reduced quality of care, or that therapists will be laid off, leading to access problems for beneficiaries.

Some commenters recommended that CMS take time to consider the potential alternatives to therapy caps from all angles related to cost, including the costs of different health outcomes. Several commenters reported that outpatient physical therapy saves Medicare spending by preventing more expensive procedures and surgeries.

Response: Achieving appropriate payment for quality services that quickly lead to good health outcomes is among the major goals of our payment policy. It is also our goal to limit overutilization of services, and to discourage the provision of services that are not medically reasonable and necessary or represent an abuse of Medicare funds. To that end, we will continue to develop policies aimed at paying for those therapy services that meet patients' needs. The clear challenge is to identify those needs and the services required.

Comment: One commenter was concerned that underlying therapy utilization data are flawed due to inconsistent coverage and payment policies that also negatively affect good clinical practice by restricting the therapist's clinical judgment. The commenter provided detailed examples to illustrate inconsistencies in forms and billing rules between Part A and B providers and suppliers which in the aggregate, the commenter argued, impede CMS' ability to analyze claims data for comparison purposes. Differences due to National Correct

Coding Initiative (NCCI) and Medically Unlikely Edit (MUE) policies and most particularly local coverage determinations (LCDs) were also identified by the commenter as creating significant variations among contractors. The commenter was particularly concerned about requirements for specific ICD-9-CM and CPT code combinations, which limit therapy diagnoses or require specific diagnoses as primary.

Response: We develop national and local policies and guidelines as needed to interpret statutory requirements and to limit, whenever possible, abusive behaviors while encouraging high quality care and good outcomes for beneficiaries. Since no one method is entirely effective in curbing incorrect or fraudulent billing practices, a number of approaches have been adopted. We attempt to coordinate these policies and we recognize that it is sometimes difficult for providers and suppliers to stay informed about changes, especially when they treat beneficiaries whose services are impacted by different payment policies. We will continue to work cooperatively with interested stakeholders, as we did with the STATS project, to identify and resolve concerns or conflicts regarding our policies. We intend that any claims data collected in a pilot study would be unencumbered by conflicts that have been identified.

Comment: Many commenters stated that the options are identified as alternatives to the cap exceptions process, which expires December 31, 2010.

Response: The short-term alternatives discussed are potential alternatives to the therapy caps, and while it may be possible to implement some as modifications to the exceptions process, we recognize that Congress would have to act to extend the authority for a therapy cap exceptions process or to otherwise provide for certain alternatives to therapy caps.

Option (1): Revise therapy caps exceptions process by requiring the reporting of new patient function-related Level II HCPCS codes and severity modifiers.

This option would require that clinicians submit beneficiary function-related nonpayable HCPCS codes to replace the -KX modifier

(Specific required documentation on file). Codes would not be submitted on every claim, but at episode onset and at periodic intervals (for example, progress report intervals of 12 sessions or 30 days--whichever is less). Codes would be submitted for all patients in order for the claims to be paid and not only those claims approaching or surpassing the therapy caps. The current -KX modifier is not useful to identify claims exceeding therapy caps, because it is used for services both before and after the caps are exceeded, and it must be used on the entire claim for facilities. New codes also would not identify claims above the cap, but they would perform the same function as the current

-KX modifier to signal that documentation in the medical record supported medical necessity that should lead to an exception to the therapy caps. The codes would also provide more information for medical review.

Six Level II HCPCS G-codes representing functions addressed in the plan of care and 5 (or 7) modifiers representing severity/complexity would be utilized to report information on the claim. Examples of six new function-related G-codes:

GXXXU--Impairments to body functions and/or structures-- current.

GXXXV--Impairments to body functions and/or structures-- goal.

GXXXW--Activity limitations and/or participation restrictions--current.

GXXXX--Activity limitations and/or participation restrictions--goal.

GXXXY--Environmental barriers--current.

GXXXZ--Environmental barriers--goal.

Two potential severity/complexity scales have been suggested that would require the adoption of 5 or 7 new severity modifiers, respectively. Under one scenario, modifiers based on the

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International Classification of Function would identify severity as follows:

None (0 to 4 percent).

MILD (5 to 24 percent).

MODERATE (25 to 49 percent).

SEVERE (50 to 95 percent).

COMPLETE (96 to 100 percent).

Alternatively, a proportional severity/complexity scale would use 7 modifiers to describe impairments, limitations, or barriers-- 0 percent; 1 to 19 percent; 20 to 39 percent; 40 to 59 percent; 50 to 79 percent; 80 to 99 percent; or 100 percent.

Implementation of this general approach might require 6 months to 2 years to modify claims processing for the current therapy caps and exceptions processing of claims, and to develop, pilot test, and refine coding before applying the approach nationally. While therapists initially would need to learn the new codes and update their billing systems, ultimately their reporting burden might be reduced because the

-KX modifier would not be required on each claim line for patients with expenditures approaching or exceeding the therapy caps. This option could potentially result in a small reduction in outpatient therapy expenditures due to increased Medicare contractor scrutiny of episodes where functional severity scores did not change over time, or to other atypical reporting patterns associated with the new codes.

In the longterm, these codes and modifiers could be mapped to reliable and validated measurement tools (either currently available tools in the public domain or newly developed tools from items on the

DOTPA instrument or the Continuity Assessment Record and Evaluation

(CARE) tool). If statistically robust patient condition information were collected from claims data, it may be possible to develop Medicare payment approaches for outpatient therapy services that could pay appropriately and similarly for efficient and effective services furnished to beneficiaries with similar conditions who have good potential to benefit from the services furnished. At a minimum, the new codes could allow contractors to more easily identify and limit the claims for beneficiaries who show no improvement over reasonable periods of time.

Comment: Most commenters supported the concept of Option (1) although often not without concerns about the details of implementation. The commenters generally endorsed the concept of describing patients' goals in terms of activity participation and environmental barriers, in addition to impairments based on the World

Health Organization's (WHO's) International Classification of

Functioning, Disability and Health (ICF). Some supported Option (1) as the best of the three options as it could begin providing a national overview of functional status and severity of patients which would be essential if CMS were to pursue future episode-based payment. The majority of commenters agreed with the concept of developing an infrastructure to work toward payment reform based on episodes of care, patient characteristics, functional status, rehabilitation complexity, severity, and outcomes. Many commenters supported Option (1) as the first step in a plan to move toward Option (3) that would introduce per-session codes to bundle payment, as described in detail below, and ultimately episode-based payments, although a few suggested the severity codes could be used, after adequate testing and definition, to inform appropriate payment. Some commenters recommended developing

Option (1) and suggested that further development should include: definition of terms (including the ICD-10 diagnosis codes in 2013), input from therapists, field testing, and data analysis to ensure that payment appropriately reflects patient complexity and risk before application of the codes to individual therapy disciplines.

The commenters in favor of this option supported the use of ICF language in descriptions, but consistently preferred a 7-point rating scale for severity over the 5-point scale based on the ICF. Several commenters also noted that sufficient training would be required for contractors and providers of service under this option.

Response: We appreciate the perspectives of the commenters who see

Option (1) as a first step in the process of exploring alternatives to the therapy caps that could move toward payment based on the needs of beneficiaries.

Comment: Many commenters opposed this option as burdensome, easy to

``game,'' and lacking the potential for saving money. The commenters in opposition to the option claimed it could require a great deal of research to establish, validate and value codes, and then pilot test, refine, establish inter-tester reliability, and modify the claims processing process, which could take 2 years. Instead, the same commenters recommended the use of valid and reliable measurement tools currently in the public domain and in use by clinicians. One commenter requested that CMS not use clinician-graded single item assessment scales of patient severity or complexity, unless such methodology possessed published reliability and validity on the selection and grading processes because there are more psychometrically sound published scales available that include a risk adjustment process to predict treatment success and number of visits and are less vulnerable to gaming. If scales were used, several commenters recommended that they must be sensitive and cardinal so each change would represent an equal increment.

Response: We recognize that Option (1) is not yet fully developed and would require further study. As we consider this option further, we will also assess the feasibility of using currently available validated measurement scales in the public domain. The issues of ``gaming'' and savings remain of interest in relationship to this and the other options.

Comment: Several commenters voiced serious concerns about the concept of using function-related codes and severity modifiers on the claim to monitor patient improvement. The commenters were alarmed that contractors would deny services when improvement was insufficiently demonstrated, or when the beneficiary's goal was to prevent deterioration of function. Several commenters were concerned that a contractor's attention to function and severity modifiers might cause the contractor to unduly limit the therapy sessions a patient needed to maintain or increase functionality.

A few commenters interpreted the statute to require only that a service be medically necessary to treat the underlying illness or condition, and not to require that the service lead to improvement.

According to the commenters, a service required to maintain current function is medically necessary but the focus on identifying improvement would prevent those patients with progressive diseases from receiving therapy to prevent further decline in function when there is little probability of meeting an undefined improvement standard. A few commenters provided citations of court cases that rejected Medicare policies and practices that denied therapy services based on arbitrary rules of thumb without consideration of the patient's individual condition. Therefore, the same commenters recommended that CMS omit reference to improvement standards in any proposal related to Option

(1).

Response: The policies for Medicare Part B outpatient therapy services require payment for therapy services that require the skills of a therapist. In

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contrast, ``Unskilled services are palliative procedures that are repetitive or reinforce previously learned skills, or maintain function after a maintenance program has been developed * * *. services related to activities for the general good and welfare of patients, for example, general exercises to promote overall fitness and flexibility and activities to provide diversion or general motivation, do not constitute therapy services for Medicare purposes'' (Medicare Benefit

Policy Manual, Pub. 100-02, chapter 15, section 220.2.A.). We note that when the goal of therapy is to halt degeneration of function due to disease, therapy is not palliative or related to general welfare, but may be an active treatment with measurable outcomes. For that reason, we do not anticipate that function-related codes and severity modifiers would be used exclusively as a proxy for the determination of medical necessity.

The Medicare policy goes on to state, `` * * * services must be necessary for the establishment of a safe and effective maintenance program required in connection with a specific disease state. In the case of a progressive degenerative disease, service may be intermittently necessary to determine the need for assistive equipment and/or establish a program to maximize function * * *.'' (Pub. L. 100- 02, chapter 15, section 220.2.A.). Further details concerning maintenance therapy and examples of covered services to patients with degenerative neurological diseases are found in Pub. 100-02, chapter 15, section 220.2.D.

Option (2): Enhance existing therapy caps exceptions process by applying medical necessity edits when per-beneficiary expenditures reach a predetermined value.

The existing automatic process for exceptions, and the revised exceptions process described in Option (1) above, pay practitioners indefinitely for services if they attest on the claim by appending a specific modifier to therapy HCPCS codes that the services being furnished are medically necessary and that supporting documentation is included in the medical record. Unless the local contractor uses claims edits or does post-payment review, these processes do not identify or limit unusually high annual per-beneficiary utilization. High utilization is not limited to beneficiaries with multiple or complex conditions. We would use existing therapy utilization data to develop annual per-beneficiary medical necessity payment edits, such as limits to the number of services per-session, per-episode, or per-diagnostic grouping, for exceptions to the therapy caps which would be set at benchmark payment levels that only a small percentage of beneficiaries would surpass in a single year. Once these levels were reached, additional claims would be denied and practitioners would need to appeal those denials if they wished to challenge Medicare's nonpayment.

This alternative would require 1 to 2 years to implement as an expansion of existing policy, and its effects would be anticipated by analysis of the current utilization of therapy services. Additional practitioner burden would be incurred in the small number of cases exceeding the per beneficiary expenditure edits if the practitioner chose to appeal the medical necessity denial.

Comment: Few commenters preferred Option (2) over the other two. In addition, the commenters stated that they were familiar with this approach because other insurers use a similar system of edits, so the adoption of Option (2) for Medicare patients would not represent an additional administrative burden. The commenters who favored this option reported that it would be the easiest for CMS to implement and would be the only option likely to save money in the very short-term.

Some commenters who favored this option would still prefer the use of existing measurement tools to gather data about therapy services. One commenter pointed out that limits per-diagnosis should be based on reasonable data that reflect good patient outcomes.

Most of the commenters who supported Option (2) also noted that this option could influence therapy utilization and possibly outcomes, creating flawed data that were not representative of needed services.

The commenters were concerned that future payment policy decisions might later be based on those flawed data.

Response: We agree that Option (2) has the benefit of being relatively easy to implement and we appreciate the perspective of some commenters on the low anticipated burden. We also recognize that a database of limited services would not be appropriate to use for estimating the full cost of medically necessary services.

Comment: Some commenters took a neutral position on this option, finding that it could be part of a viable alternative to therapy caps but only after considerable study and development. MedPAC noted that

Option (2) would implement more meaningful therapy caps in the interim, while longer-term solutions were being developed and tested. At the same time, MedPAC supported CMS' efforts to identify medically unnecessary care and to implement payment systems that ensure that the program obtains value for its purchases. Other commenters were concerned that the benchmark levels for edits be realistic and not arbitrary. The commenters requested that CMS consider a method to deal with outliers without forcing denials and appeals.

Response: Option (2) could be used in combination with other options. We recognize the description we provided was not specific about the edit levels and that further deliberation would be appropriate before edits could be implemented.

Comment: The majority of commenters opposed Option (2). Although some commenters agreed that edits for medically unlikely services are useful and appropriate, they expressed concerns about this approach because edits can often be arbitrary, are not based on patient needs, and may improperly limit necessary services. Some commenters asserted that individuals with degenerative conditions may require shorter sessions over longer periods of time to address functional loss and slow deterioration and to maximize health outcomes. The commenters also opposed edits that would fail to address the affects of cognitive impairment on treatment. Several commenters cited the existing ICD-9-

CPT code crosswalks, LCDs, NCCI edits, and MUEs as examples of similar edits that commenters often found to be clinically inappropriate. The commenters argued that current edits and policies based on unsupported information led to denials and appeals that were costly to therapists and CMS. The commenters urged CMS to avoid edits that lack clinical relevance or a scientific basis and create anomalies in claims data.

Response: Option (2) was developed with input from therapy professionals based on their review of therapy utilization data. If this option were to be implemented, we would, at a minimum, review the advice and recommendations of stakeholders, along with any available utilization data to inform our decisions regarding the edit levels.

Comment: A few commenters criticized Option (2) as scientifically flawed. One commenter reported that use of a combined effectiveness

(that is, functional status change) and efficiency (that is, number of treatment visits) algorithm in a value-based payment process is one of the few methods where one could determine if the patient needs more or less treatment to reach optimal risk-adjusted gains in functional status. The same commenter referenced numerous research efforts that have analyzed functional status outcomes in

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rehabilitation using sophisticated risk-adjustment methods and requested that CMS use these as a basis for a new payment policy.

Other commenters asserted that currently available utilization data are inadequate to develop predetermined edit values, citing studies of therapy utilization under contract to CMS and studies performed by industry that demonstrate why ICD-9 coding, lack of function/severity data, and lack of a definition for ``episode'' are problematic.

Response: Current therapy utilization data reveal that one percent of beneficiaries who receive services incur costs that proportionately far exceed those of the other 99 percent of beneficiaries. However, we are also aware that without some knowledge of the condition of the beneficiary, it is impossible to determine which, if any, of those services were medically necessary. While it would be desirable to analyze more detailed utilization data that include patient function/ severity outcomes for setting edit values, those data are not available to us in the short-term. We believe that the existing limited utilization data, albeit not fully descriptive of patients, could inform potential future edit values for therapy services.

Comment: If CMS plans to move forward with edits, many commenters strongly requested that professional organizations be consulted to determine whether such edits are clinically appropriate and realistic.

Some commenters specifically urged CMS to await the results of the

DOTPA pilot in the hope of capturing meaningful clinical differences between patients before applying edits. Before such edits could reliably be applied to payment, other commenters recommended that CMS design, test, and evaluate additional data on functional status and barriers to participation. Many commenters indicated that more data are needed; especially thresholds based on episodes, condition groupings, and similar criteria that could trigger medical review, but not support denial. To that end, some commenters stated that it might be possible to support this approach under Option (2), but after Option (1) was implemented.

Response: We understand the commitment of stakeholders to the development of alternatives to the therapy caps based on clinically appropriate policies. We will consider the potential benefit of Option

(1) to develop data on which to base the edits required under Option

(2) as we further contemplate alternatives to the therapy caps.

Comment: A few commenters opposed Option (2) edits because the edits would virtually eliminate the exceptions process mandated by law and replace it with denial of claims at a predetermined value, which may be inconsistent with the statutory requirement for an exceptions process. The same commenters stated that there would be no basis for edits until Option (1) was implemented to provide more detailed claims- based information. Several commenters reported research showing 10 percent of Part B patients in nursing facilities have highly complex problems, with multidisciplinary needs and inconsistent patterns of therapy service use. The commenters were concerned that denials would interfere with treatment of these complex patients with special needs.

Response: Option (2) would require an existing exception to the therapy caps, which would be enhanced to allow limited billing and payment for medically necessary services that exceed the caps. The option could not be used if the exceptions process were not extended.

However, the Deficit Reduction Act of 2005 that established exceptions to the caps for medically necessary therapy services also required implementation of clinically appropriate code edits in order to identify and eliminate improper payments for therapy services. CMS currently applies NCCI and MUE edits to therapy services that fail to meet a reasonable assumption of medical necessity. We view implementation of Option (2) as consistent with our current authority to create edits to control inappropriate billings.

Benchmark levels for Option (2) would be based on existing therapy utilization data and limits would be set at levels that a high percentage of beneficiaries would not exceed. While it may be helpful to have more data related to patient condition as described in Option

(1) before implementing Option (2), we do not consider such information vital to the development of limits that affect a very small percentage of beneficiaries whose service payments would so far exceed average payments that they would be likely to include inappropriate billings and would be unlikely to interfere with the delivery of medically necessary services.

Comment: If the option of implementing edits were pursued, several commenters indicated that the edits should be variable based on clinical criteria, result in medical review instead of denials, and reflect issues of multidisciplinary care, care coordination, and clinical issues.

Response: If Option (2) were to be further developed, we would consider the commenters' suggestions prior to finalizing a plan for implementation, along with any new information available from additional research studies, OIG reports, or other sources.

Option (3): Introduce per-session ``Evaluation/Assessment and

Intervention'' (E&I) codes to bundle payment for groups of current therapy HCPCS codes into a single per-session payment.

As discussed in section II.C.4.(c) of this final rule with comment period, multiple therapy services are often furnished in a single session, and we proposed to expand the MPPR policy to ``always therapy'' services in CY 2011 in order to take into consideration the efficiencies that occur when multiple services (the typical therapy scenario) are furnished in one session to a beneficiary. Furthermore, we note that section 1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) regarding potentially misvalued codes under the PFS specifies that the Secretary may make appropriate coding changes, which may include consolidation of individual services into bundled codes for payment under the PFS, as part of her review and adjustment of the relative values for services identified as potentially misvalued.

This option would require that practitioners submit a single new

Level II HCPCS code to represent all the therapy services currently reported and paid separately for an outpatient therapy session. Payment for the HCPCS code would be based on patient characteristics (as identified through prior CMS contractor analyses) and the complexity of the evaluation/assessment and intervention services furnished during the session. The new coding requirements would not necessarily disrupt the current exceptions process or the revised exceptions process described in Option (1) above. Approximately 12 E&I codes would be needed for each discipline, taking into consideration the basic algorithm shown in Table 47.

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Table 47--Evaluation/Assessment & Intervention Level II HCPCS Codes

Evaluation/assessment complexity

Minimal

Moderate

Significant

Intervention level.................. None....................... E&I Code 1........ E&I Code 2........ E&I Code 3.

Minimal.................... E&I Code 4........ E&I Code 5........ E&I Code 6.

Moderate................... E&I Code 7........ E&I Code 8........ E&I Code 9.

Significant................ E&I Code 10....... E&I Code 11....... E&I Code 12.

We would need to develop and test operational definitions for each

E&I code so that practitioners would be able to properly report services and appropriate relative values could be established for each per-session code. We believe that a pilot study might reveal that the different practice patterns for the three therapy professions (physical therapy, occupational therapy, and speech-language pathology) could necessitate separate relative value determinations for each E&I code by type of therapy service furnished. As a result, up to 36 total new

Level II HCPCS codes could be needed (12 per discipline).

We anticipate that the definitions of E&I codes 1 through 3 and 7 through 12 would describe services that may only be furnished by a

``clinician'' (therapist, physician, or non-physician practitioner).

E&I codes 1 through 3 would be reported for sessions that consisted only of evaluations. In addition, the definitions of E&I codes 4 through 6 would describe services that could be furnished by or under the permissible supervision of all qualified outpatient therapy professionals. Based upon historical therapy utilization patterns, the vast majority of E&I codes submitted would likely fall in the 4 through 9 code range. We would expect the RVUs under the PFS for all E&I codes to take into consideration the efficiencies when multiple services

(those that would be currently reported under multiple CPT codes) are furnished.

This option would require 2 to 4 years to add new codes and conduct a short-term pilot study to refine coding and value the 12 new HCPCS codes (or 36 if they are specific to each therapy discipline). There would be significant initial practitioner administrative burden to learn new codes and update billing systems. However, ultimately, with elimination of the practitioner's reporting of 76 different codes and many of the associated claims processing edits, the administrative burden of reporting therapy services to Medicare would be minimized.

This bundled approach to reporting and payment could result in more appropriate valuation of therapy services that reflects efficiencies when individually reported services are furnished in the same session.

As a result, it could lead to reduced therapy expenditures, as well as a reduction in the number of beneficiaries affected by the therapy caps in a given year.

Comment: The vast majority of commenters concurred that provider payments should be influenced by underlying beneficiary characteristics. Most commenters agreed that following research and development, an episode-based payment alternative would be the most feasible payment model for outpatient therapy services in the longterm, and some recommended it be developed in a performance-based model. The commenters generally supported this option as a foundation to those goals, but recommended expert therapist input into the process and further study to determine how such an approach might affect different therapy types and settings. Several commenters noted that it would be critical to ensure clear nomenclature, the availability of an appropriate reporting methodology, and adequate payment for these codes that reflects the resources used to provide these services.

To assure appropriate payment for needed services, the commenters agreed that the outcomes resulting from provider interventions must be incorporated in payment models. The commenters believe that experience gained in a transparent development process could be carried over into future payment system reform. Therefore, the majority of commenters who supported Option (3) also requested that there be a transparent process of development and testing in which expert therapists from various settings were included. Many also argued that Option (3) should be developed only after Option (1) had been implemented and function and severity data had been collected to inform the development of Option

(3).

Response: We appreciate the support of commenters for Option (3) and their interest in moving toward long-term goals by implementing short-term approaches as an incremental step. We agree that the information presented in the proposed rule was limited regarding Option

(3) and that further study would be necessary before a bundled per- session payment approach could be implemented. We will consider the commenters' recommendations to develop an episode-based payment alternative in the future.

Comment: The concept of moving toward per-session codes that would be based on the severity of the patient and intensity of therapist clinical judgment and work involved in the provision of the therapy service was welcomed by many commenters. Those commenters who encouraged CMS to use this option to reduce the administrative burden of counting minutes and eliminate NCCI edits and MUEs anticipated corresponding improvement in the effective and efficient delivery of clinical interventions. The commenters urged CMS to ensure compliance of policies related to Option (3) with other payment policies, such as the delivery of medically necessary care driven by the development of an appropriate functional goal-based plan of care.

Response: While a per-session payment methodology could result in modification of current policies regarding counting treatment time, it would not necessarily result in deleting claims edits. If we were to adopt such a methodology, we would assess the current claims processing edits and determine whether they continued to be appropriate and/or implement new edits to address potential issues under the revised payment approach.

Comment: Some commenters suggested a modified definition of severity. The commenters recommended two separate severity tables of

``severity or complexity,'' one for evaluation and the other for intervention. For each table separately, severity/complexity of clinical presentation would be rated as low, moderate, or high. In all cases, the commenters believe CMS should identify the factors to be used to determine severity for both evaluations and interventions. The commenters urged that CMS defer to professional standards of practice and state law with respect to the provision of services in each category. Other commenters

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recommended modifiers for complex patients and comprehensive multidisciplinary rehabilitation settings to facilitate application of special policies for those circumstances.

Response: The tables presented in the proposed rule were illustrative of the potential Level II per-session HCPCS codes, and these codes would require further development prior to implementation.

We appreciate the commenters' suggestions and will consider them as we weigh this option.

Comment: Some commenters who supported the general premise of

Option (3) and some commenters who opposed it were not optimistic that per-session payment could be developed in a reliable and valid manner in the shortterm.

Response: This alternative was developed as a short-term action that would start the process toward bundled payments for therapy episodes. The work completed by expert therapist advisors to the STATS workgroups laid a foundation that could facilitate development of the initial per-session HCPCS codes, which could reasonably be based on utilization data that demonstrated which services were historically billed together most of the time. We have analyzed data regarding common therapy code combinations. While a per-session payment approach could have a significant impact on payment for therapy services, we would not expect that developing and valuing per-session E&I codes would be a particularly lengthy or complex process. We note that over the past several years, the CPT Editorial Panel has bundled multiple services into a single code numerous times in different medical specialty areas and the AMA RUC has then valued the new comprehensive service by taking into account the expected efficiencies in the physician work and/or practice expense.

Comment: Rather than consign the code definition and valuation processes integral to Option (3) to the CPT Editorial Panel and AMC RUC processes, which have little transparency, several commenters recommended that CMS develop Level II HCPCS codes for this purpose and allow for continued stakeholder input as to their valuation. Some commenters expressed appreciation for being included in the STATS process and suggested it as a model for future transparency in developing payment policies.

Response: We appreciate the confidence stakeholders expressed regarding our capacity to develop HCPCS codes and values using a transparent process that includes input from stakeholders. If we were to move toward per-session payment in the future, we would need to consider the most appropriate approach to the development and valuation of new codes to describe those services. In the meantime, we note that if the CPT Editorial Panel were to develop new codes for comprehensive therapy services, as they have developed new CY 2011 comprehensive codes for cardiac catheterization and lower extremity endovascular revascularization services that bundle services that are commonly furnished together, we would consider those therapy codes for adoption under the PFS and would value them if we recognized them for PFS payment.

Comment: Due to the nature of certain services when assessment and intervention are inseparable, some commenters asserted that interventions should not be included in this model but should be separately identified. The commenters provided the examples of active wound care management and prosthetic/orthotic management.

Response: The details of therapy E&I codes have not been proposed or finalized. We appreciate the perspective of the commenters and will keep it in mind if we were to pursue the creation of per-session therapy codes in the future.

Comment: While some commenters stated that Option (3) has the potential to simplify and increase consistency in coding for therapy services, several commenters who opposed this option and Option (1) mentioned that providers would learn to ``game the system'' and that all patients would be documented as severe on initial intake.

Response: We too are concerned about approaches where providers could learn to game the system. The commenters who criticized this option generally preferred the edits in Option (2).

Restriction on utilization of certain codes sometimes increases the risk of billing different codes, billing more of the same codes, or increasing patient visits, resulting in the same or greater cost to the

Medicare program. The edits described in Option (2) would prevent high payments for individual beneficiaries, but might have little or no effect on the payments to providers or suppliers who increase the number of beneficiaries treated. Generally, we apply a number of different methods concurrently to reduce risk.

At times, it may be difficult to know whether the clinical judgment and objective measurements have been accurately reported or documented in the record and whether the service furnished is appropriately represented by the billed HCPCS code. Providers focused on billing inappropriately may also document inappropriately. In the long term, we hope to incentivize honest and ethical providers and suppliers of services to furnish effective and efficient, high quality services.

Possible fraudulent activity may be identified by aberrant billing patterns, and the new codes could facilitate the identification of such patterns.

Several commenters expanded on the options presented as alternatives to the therapy caps or recommended options of their own. A few presented their own analyses of utilization to support their recommendations.

Comment: Several commenters recommended incorporation of currently and publicly available validated tools to inform the collection of patient-specific information and move toward performance-based payment.

A few commenters suggested that the study ``Pay-for-Performance for

Outpatient Physical Therapy and Occupational Therapy'' that Focus On

Therapeutic Outcomes (FOTO) completed in 2006 under Grant 18-

P-93066-/0-01 might be a good template from which to start a process to replace caps and ultimately develop a value-based purchasing process.

The commenters suggested the FOTO predictive model could be used, after pilot testing, to develop a reimbursement process where care is based on need and payment is based on results.

Response: We recognize the importance of demonstrating the application of a value-based purchasing approach to physical and occupational therapy services. We posted the FOTO study on the CMS Web site at: http://www.cms.gov/TherapyServices/downloads/P4PFinalReport06- 01-06.pdf.

We are aware that research continues on the functional status indicator and that other measurement tools are also available in the public domain. The STATS discussions resulted in some improvements in the feasibility of matching outcomes data to claims. However, there are a number of problems that would have to be resolved before any of the currently available versions of therapy outcomes tools could be incorporated into payment policy. The FOTO study did not address value- based purchasing for speech-language pathology services and there remain questions about applying the FOTO functional status indicator, or any self-reported measure, to certain cognitively impaired patients or to the Medicare population without further refinement.

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As we continue to explore various options, we would be interested in the feasibility of using historical research, existing electronic input systems, and registry information to provide a conceptual framework for alternative payment systems.

Comment: Although CMS did not discuss the option of establishing therapy payments based on episodes in the discussion of short-term options, many commenters encouraged CMS to pursue that goal. Using data obtained from the severity/complexity codes described in Option (1),

DOTPA, and other data initiatives, several commenters urged CMS to undertake research to develop a new episodic prospective payment system for Part B therapy services. Some commenters described the details of a plan to base therapy episode payment on groups based on patient clinical characteristics, considering mean episode costs, adjusting for high and low outliers or interrupted episodes, setting a default payment for unmapped episode groups, and also adjusting for local wage indices and providing an annual market basket payment rate update.

The opportunity for CMS to define sessions and episodes more clearly and the potential to support the overall goal of payment reform was eagerly anticipated by several commenters. The commenters applauded

CMS for recognizing the potential opportunity to gather these data on episodes for payment of therapy services furnished in the institutional setting.

Episode-based payment was recommended as an alternative to the proposed therapy MPPR by numerous commenters. The commenters explained that the fundamental problem with fee-for-service payment is the incentive to over utilize therapy services in the outpatient setting and limit institutional providers from using resources flexibly. The commenters described analysis of a large database of Medicare beneficiaries as the basis for a methodology for grouping diagnosis codes to create episodes of care on which therapy payment would be based. The commenters noted that adjustment would be needed to payments for complex patients and readmissions. The same commenters supported episode payments for separate therapy disciplines based on a patient's medical diagnosis and goals. A critical goal for these commenters was to identify and account for differences in the conditions and needs of patients in skilled nursing facilities as opposed to other outpatient therapy settings.

Response: We did not discuss development of episode-based payments as an option in the CY 2011 PFS proposed rule because we recognize that substantially more research would be necessary to define the episodes and determine what resources would be needed for different groups or categories of patients before the episodes could be incorporated into a payment system, particularly one that also addressed quality, efficiency, and good health outcomes. However, the absence of discussion in our proposed rule of an episode-based payment methodology as a short-term therapy cap alternatives option should not be interpreted as our reluctance to pursue the definition of episodes or the refinement of the concept of episode-based payments.

Comment: A number of commenters supported testing variables they believe to be important in making a clinical judgment concerning a patient's severity, including: general type of patient (orthopedic, neurological, medical, etc.); impairment (body part treated); intake functional status; patient age; symptom acuity; surgical history; payer; gender; level of fear-avoidance of physical activities; and number of co-morbid conditions. Other commenters urged inclusion of clinical judgment of severity based on medical condition, physical impairments resulting from these conditions, patient function, and ability to participate in activities of daily living.

Response: As we progress in the analysis of payment alternatives to the therapy caps, we appreciate the information on variables believed to be critical by stakeholders who have conducted related research and/ or furnished therapy services to a wide array of patients in different clinical settings. We welcome their expert contributions and collaboration with us on this important issue.

In conclusion, we emphasize that we continue to be committed to developing alternatives to the therapy caps that would provide appropriate payment for medically necessary and effective therapy services furnished to Medicare beneficiaries based on patient needs, rather than the current therapy caps which establish financial limitations on Medicare payment for therapy services in some outpatient settings regardless of medical necessity. The Congress has repeatedly intervened to allow exceptions to these caps for certain time periods, and the current exceptions are automatically processed based on a practitioner's attestation that medical necessity is documented in the chart for an individual patient. We believe that, ultimately, payment for therapy services should incentivize the most effective and efficient care, consistent with Medicare's focus on value in its purchasing.

The STATS contractor has worked closely with a broad variety of clinicians, administrators, scientists, researchers, and other contractors to develop the three alternatives presented in this discussion in CY 2011 rulemaking for the PFS. We are grateful for all public comments on the proposed rule from interested stakeholders, including individual therapists from both facility and nonfacility outpatient settings paid under Medicare Part B.

We are committed to finding alternatives to the current therapy cap limitations on expenditures for outpatient therapy services that will ensure that beneficiaries continue to receive those medically necessary therapy services that maximize their health outcomes. We continue to dedicate our resources to identifying alternatives that would encourage the most efficient and cost-effective treatments. We believe motivated therapists, with attention to the most cost-effective practices, can incorporate practice efficiencies that benefit patients by achieving the best possible results at the lowest cost. Our STATS and DOTPA projects, which are currently engaged in data collection and analysis to inform short-term and long-term alternatives to the therapy caps, respectively, lay the foundation for future payment alternatives for outpatient therapy services. We are optimistic that the STATS project has identified short-term, feasible alternatives that may be tested in the future. The DOTPA project will create a tool and test its use to collect patient condition information that could then be applied to identify patient need for therapy services. Together, these projects may provide the basis for a long-term plan to reshape Medicare's payment policy for outpatient therapy services to align with the value- based purchasing principles that are now guiding principles of the

Medicare program.

B. Diabetes Self-Management Training (DSMT) Services (HCPCS Codes G0108 and G0109) 1. Background

Section 1861(s)(2)(S) of the Act provides for coverage of DSMT in outpatient settings without limiting this coverage to hospital outpatient departments. DSMT services consist of educational and training services furnished to an individual with diabetes by a certified provider in an outpatient setting.

Section 1861(qq)(2)(A) of the Act stipulates that training must be

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furnished by a ``certified provider'' which is a physician or other individual or entity that also provides other items or services for which payment may be made under Medicare. This program is intended to educate beneficiaries in the successful self-management of diabetes.

The program includes instructions in self-monitoring of blood glucose; education about diet and exercise; an insulin treatment plan developed specifically for the patient who is insulin-dependent; and motivation for patients to use the skills for self-management. DSMT services are reported under HCPCS codes G0108 (Diabetes outpatient self-management training services, individual, per 30 minutes) and G0109 (Diabetes outpatient self-management training services, group session (2 or more), per 30 minutes). 2. Payment for DSMT Services

In accordance with section 1848(j)(3), Medicare payment for outpatient DSMT services is made under the PFS as specified in Sec. 414.1 through Sec. 414.48. When we created HCPCS codes G0108 and

G0109, the only direct costs included in the PE were registered nurse labor. Section 410.144(a)(4)(a) states that the DSMT team includes at least a registered dietitian and a certified diabetes educator. We initially did not establish work RVUs for DSMT services because we believed training would typically be performed by individuals other than a physician, such as a registered nurse (65 FR 83130). However, since that time, we have received requests from a number of stakeholders, including the American Association of Clinical

Endocrinologists (AACE), the American Association of Diabetes Educators

(AADE), and the Juvenile Diabetes Research Foundation, to include physician work in valuing DSMT services that is similar to the physician work that has been included in medical nutrition therapy

(MNT) services since CY 2007 and kidney disease education (KDE) services since CY 2010. The stakeholders argued that because physicians coordinate DSMT programs, provide patient instruction, and communicate with referring physicians, physician work should be included in the

RVUs for DSMT services. The stakeholders also requested that we reconsider the direct PE inputs for DMST services and include clinical labor for diabetes educators at a higher hourly rate instead of registered nurse labor. In addition, they stated that the supplies and equipment in the PE for DSMT services should be the same as for KDE services, with additional direct PE inputs for a diabetes educator curriculum, data tracking software, and DSMT program accreditation.

For CY 2011, we proposed the following:

To assign physician work RVUs to DSMT services that are comparable, as adjusted for the service times of the HCPCS codes, to the work RVUs for MNT services. The rationale for the proposed work

RVUs for the DSMT HCPCS G-codes was based on the similarity of DSMT services to MNT services in the individual (CPT code 97803) and group

(CPT code 97804) setting.

That HCPCS G0108 for 30 minutes of individual DSMT services would be crosswalked to CPT code 97803 (Medical nutrition therapy; re-assessment and intervention, individual, face-to-face with the patient, each 15 minutes) for purposes of assigning work RVUs, with the physician work RVUs for CPT code 97803 multiplied by two to account for the greater time associated with HCPCS code G0108 (that is, 30 minutes).

That HCPCS G0109 for 30 minutes of group DSMT services would be crosswalked to CPT code 97804 (Medical nutrition therapy; group (2 or more individuals(s)), each 30 minutes) for purposes of assigning work RVUs.

To modify the PE inputs for DSMT services to reflect the current equipment and supplies for the KDE HCPCS G-codes implemented in the CY 2010 PFS final rule with comment period (74 FR 61901) (that is,

HCPCS codes G0420 (Face-to-face educational services related to the care of chronic kidney disease; individual, per session, per one hour) and G0421 (Face-to-face educational services related to the care of chronic kidney disease; group, per session, per one hour)), based on the similarity in the equipment and supplies necessary for DSMT and KDE services. We made adjustments to some of the equipment times for the 30 minute DSMT individual and group services as compared to the one hour individual and group KDE services.

To include a diabetes educator curriculum and data tracking software in the PE inputs for DSMT services, while noting that we did not include the DSMT program accreditation costs because it is our general practice not to include these costs in the PE inputs.

To utilize the same approach for clinical labor as we adopted for MNT services when we provided physician work RVUs for those services in CY 2007 (71 FR 69645), rather than changing the current labor type for DSMT services. Specifically, we removed all of the clinical labor from the group DSMT code and most of the clinical labor from the individual DSMT code, given that we proposed work RVUs for both DSMT HCPCS codes for CY 2011.

In the CY 2011 PFS proposed rule (75 FR 40100), we stated our belief that these proposals would value DSMT services more consistently with other similar services that are paid under the PFS. As a result of our proposed CY 2011 changes, the proposed work RVUs for HCPCS codes

G0108 and G0109 were 0.90 and 0.25, respectively. As described above, we also proposed to modify the direct PE inputs for these codes for CY 2011.

Comment: Numerous commenters specifically supported the establishment of work RVUs for the DSMT services based on the work RVUs of the similar MNT services, CPT codes 97803 for 15 minutes of individual MNT services and 97804 for 30 minutes of group MNT services.

Some commenters explained that addition of work RVUs would lead to higher payment rates for DSMT services, resulting in a significant positive impact on diabetes education practices and increased patient access to care for DSMT services. Several commenters suggested that this change would appropriately recognize the active role many physicians contribute to ensuring that their patients have access to

DSMT services and providing care coordination and communication with the multidisciplinary DSMT team members. One commenter concurred with the proposal to update the direct PE inputs for the DSMT HCPCS codes based on those assigned to the HCPCS codes for KDE services.

Response: We appreciate the commenters' support for our proposal to establish work RVUs and to update the direct PE inputs for the DSMT services.

In conducting our review of the public comments on this issue for this final rule with comment period, we examined newly available PFS claims data for same day billings from one provider for a single

Medicare beneficiary. In response to that analysis and in accordance with our PFS methodology which values services as delivered to the typical patient, we note that we have made minor adjustments to some of the direct PE inputs for supplies and equipment times for both HCPCS G- codes for DSMT services, G0108 and G0109, under our final CY 2011 policy. We made these refinements after a review of our PFS utilization data indicated that 2 units of HCPCS code G0108 (a total of 60 minutes) were typically billed together on the same day for the same patient, instead of the one unit of HCPCS code G0108 (30

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minutes) which was used as the assumption for the typical session at the time of our CY 2011 proposal. As a result, we have assigned half of the amount of the direct inputs for supplies and equipment time in

HCPCS code G0420 (60 minutes individual KDE services) to HCPCS code

G0108 (30 minutes individual DSMT services). Regarding the direct PE inputs for HCPCS code G0109, we continue to believe that there is a similarity among the group and individual DSMT and KDE services and the education practices when these services are delivered, as reflected in their PFS utilization patterns. For this reason, we have made minor modifications to the PE inputs for HCPCS code G0109 (30 minutes of group DSMT services) to reflect half of each input for HCPCS code G0421

(60 minutes of group KDE services) that parallel the modifications we made for the individual DSMT HCPCS code described previously. We further note that these refinements to the direct PE inputs for DSMT services are based on the final adjustments that were made to the direct PE inputs for HCPCS codes G0420 and G0421 for KDE services, discussed in section V. B.2.e. of this final rule with comment period, because our approach to establishing the direct PE inputs for the DMST

HCPCS G-codes is based on the inputs for KDE services.

As a result, the modifications we made to the supplies and equipment inputs for the DSMT HCPCS G-codes, G0108 and G0109, equal half of the same supply and equipment times in the one hour HCPCS G- codes for KDE services, G0420 and G0421.

In addition, because the $200 price of the diabetes educator curriculum does not meet the $500 floor we established for inclusion in the equipment database, we have bundled the diabetes educator curriculum price with the $500 data tracking software one because the patient's curriculum information is typically recorded in the tracking software. The equipment descriptor for the data tracking software was modified to read: Diabetes education data tracking software, includes curriculum. Accordingly, we changed the price input from $500 to $700 and assigned the bundled equipment a total of 4 minutes. In this way, we are including the cost of the curriculum in the direct PE inputs for

DSMT services as we proposed for CY 2011, while remaining consistent with the established $500 floor on inclusion of equipment in the PE database.

After consideration of the public comments we received, we are finalizing the proposed work RVUs and direct PE input for DSMT services, with modification to make the PE adjustments described previously. The final CY 2011 direct PE database that lists the direct

PE inputs is available on the CMS Web site under the downloads for the

CY 2011 PFS final rule with comment period at: http://www.cms.gov/

PhysicianFeeSched/PFSFRN/list.asp#TopOfPage. The final CY 2011 RVUs for

HCPCS codes G0108 and G0109 are displayed in Addendum B to this final rule with comment period.

C. End-Stage Renal Disease Related Services for Home Dialysis (CPT codes 90963, 90964, 90965, and 90966) 1. End-Stage Renal Disease Home Dialysis Monthly Capitation Payment

Services (CPT codes 90963, 90964, 90965, and 90966)

In the CY 2004 PFS final rule with comment period (68 FR 63216), we established new Level II HCPCS G-codes for end-stage renal disease

(ESRD) monthly capitation payment (MCP) services. For center-based patients, payment for the G-codes varied based on the age of the beneficiary and the number of face-to-face visits furnished each month

(for example, 1 visit, 2-3 visits and 4 or more visits). Under the MCP methodology, the lowest payment applied when a physician provided one visit per month; a higher payment was provided for two to three visits per month. To receive the highest payment, a physician would have to provide at least four ESRD-related visits per month. However, payment for home dialysis MCP services only varied by the age of beneficiary.

Although we did not initially specify a frequency of required visits for home dialysis MCP services, we stated that we ``expect physicians to provide clinically appropriate care to manage the home dialysis patient'' (68 FR 63219).

Effective January 1, 2009, the CPT Editorial Panel created new CPT codes to replace the G-codes for monthly ESRD-related services, and we accepted the new codes for use under the PFS in CY 2009. The CPT codes for monthly ESRD-related services for home dialysis patients include the following, as displayed in Table 32 of the CY 2011 PFS proposed rule (75 FR 40101) and reprinted as Table 48 below: 90963, 90964, 90965, and 90966. In addition, the clinical vignettes used for the valuation of CPT codes 90963, 90964, 90965, and 90966 include scheduled

(and unscheduled) examinations of the ESRD patient.

Given that we pay for a physician (or nonphysician practitioner

(NPP)) to evaluate the ESRD patient over the course of an entire month under the MCP, we believe that it is clinically appropriate for the physician (or NPP) to have at least one in-person, face-to-face encounter with the patient per month. As such, for CY 2011 we proposed to require the MCP physician (or NPP) to furnish at least one in-person patient visit per month for home dialysis MCP services (as described by

CPT codes 90963 through 90966). The proposed requirement would be effective for home dialysis MCP services beginning January 1, 2011. As stated in the CY 2011 PFS proposed rule (75 FR 40100), we believe this requirement reflects appropriate, high quality medical care for ESRD patients being dialyzed at home and generally would be consistent with the current standards of medical practice.

Comment: Many commenters stated that a monthly visit embodies the standard of care for home dialysis patients. However, many of the same commenters also stated that it may not always be feasible to furnish a face-to-face visit every month for home dialysis patients due to extenuating circumstances. A number of commenters explained that, in contrast to patients who dialyze in a dialysis center, home dialysis patients would need to travel to the doctor's office (or the physician would need to visit the patient's home) which would be an undue burden on both the physician and the patient. To that end, several commenters urged CMS to provide flexibility in cases where a patient does not show up for their scheduled appointment and for those that cannot travel due to significant geographic distance between the patient and the nephrologist. For example, some specialty societies stated that pediatric home dialysis patients may experience exceptional circumstances due to the scarcity of pediatric nephrologists and remote geographic locations, making the monthly face-to-face visit requirement harder to fulfill. In these circumstances, one commenter requested that

CMS consider allowing the MCP physician to furnish at least 1 visit every 3 months and allowing the other monthly visits to be furnished as a telehealth service. Additionally, several commenters explained that the monthly management of a home dialysis patient involves many tasks

(in addition to face-to-face visits) including: Reviewing lab tests, treatment data and the dialysis prescription; monitoring the patient's vascular access; and overseeing quality improvement activities (as well as incurring the practice expense

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associated with managing the patient's care). The commenters stated that the MCP physician should not be ``penalized'' if the patient chooses not to attend the monthly visit. Moreover, many of the commenters who agreed that monthly visits are optimal care did not support a monthly visit requirement for the home dialysis MCP service.

The commenters stated that the frequency of face-to-face visits should remain at the discretion of the nephrologist and patient. Several of the commenters who did not support a policy change also stated that requiring a monthly visit could create disincentives for providing beneficiaries with home dialysis therapy in circumstances where it may be difficult for the MCP physician to furnish a visit every month. The commenters explained that nephrologists may not want to encourage home dialysis therapy if they will not get paid as a result of a patient

``opting out'' of a scheduled visit.

Response: We continue to believe that furnishing monthly face-to- face visits is an important component of high quality medical care for

ESRD patients being dialyzed at home and generally would be consistent with the current standards of medical practice. However, we also acknowledge that extenuating circumstances may arise that make it difficult for the MCP physician (or NPP) to furnish a visit to a home dialysis patient every month. Therefore, we will allow Medicare contractors the discretion to waive the requirement for a monthly face- to- face visit for the home dialysis MCP service on a case-by-case basis, for example, when the MCP physician's (or NPP's) notes indicate that the MCP physician (or NPP) actively and adequately managed the care of the home dialysis patient throughout the month. Additionally, as we explained in the CY 2004 PFS final rule with comment period (68

FR 63219 through 63220), we also believe that the use of other practitioners working with the MCP physician (or NPP) to furnish the required monthly visit for the home dialysis MCP service could help alleviate scheduling issues and problems related to geographic distance.

With regard to the comment on furnishing the proposed required visit for the home dialysis MCP as a telehealth service, we note that any interested parties may submit requests to add services to the list of Medicare telehealth services. Requests submitted before the end of

CY 2010 will be considered for the CY 2012 PFS proposed rule.

Requestors should be advised that each request to add a service to the list of Medicare telehealth services must include any supporting documentation the requestor wishes us to consider as we review the request. For more information on submitting a request for an addition to the list of Medicare telehealth services, including where to directly mail these requests, we refer readers to section IV.B. of this final rule with comment period and the CMS Web site at: http:// www.cms.hhs.gov/telehealth.

Comment: Several commenters stated that the conditions for coverage for dialysis facilities require a monthly interaction between a clinician representing the facility and the home dialysis patient. The commenters believe that the conditions for coverage for dialysis facilities permit flexibility in the monthly visit requirement if the patient chooses to opt out of the monthly visit and requested that CMS align the proposed visit requirement for the home dialysis MCP service with the ``flexibility'' permitted under the conditions for coverage for dialysis facilities.

Response: With regard to conditions for coverage for dialysis facilities, Sec. 494.90(b)(4) of the regulations specifies that the dialysis facility must ensure that all dialysis patients are seen by a physician, nurse practitioner, clinical nurse specialist, or physician's assistant providing ESRD care at least monthly. Section 494.100 requires ``a dialysis facility that is certified to provide service to home patients to ensure that home dialysis services are at least equivalent to those provided to in-facility patients and meet all applicable conditions of this part.'' In addition, the interpretive guidance for part 494 entitled ``Conditions for Coverage for ESRD

Facilities'' specifies that a monthly visit is required for each home patient by a physician, an advanced practice registered nurse, or a physician assistant. The visit may be conducted in the dialysis facility, at the physician's office, or in the patient's home. The guidelines state that ``any patient may choose not to be seen by a physician every month'' but also specify that if there is a pattern of a patient consistently missing physician and or practitioner visits, the lack of medical oversight should be addressed with the patient in the plan of care.

The requirement for at least one monthly visit with a clinician associated with the dialysis facility is a condition for coverage for the dialysis facility for purposes of participating in the Medicare program and not a direct factor in determining the payment amount for the dialysis facility. In other words, the clinician visit is not a component of the facility's composite rate. However, as mentioned in the background section, the clinical vignettes used for the valuation of the home dialysis MCP service under the PFS include scheduled (and unscheduled) examinations of the ESRD patient. Given that physician or

NPP visits are a factor in determining the PFS payment amount for the home MCP service that is furnished to the typical Medicare beneficiary, we do not believe that the monthly visit requirement for the home dialysis MCP service is analogous to the visit requirement under the conditions for coverage for dialysis facilities that has no implications for setting payment rates under the PFS. Therefore, we do not agree that the visit requirement for the home dialysis MCP service necessarily should be ``aligned'' with the conditions for coverage for dialysis facilities.

Comment: One commenter suggested that CMS consider structuring the home dialysis MCP similar to the center-based MCP. Under this approach, the commenter suggested that a higher payment amount could be made for home dialysis MCP services with at least one in person, face-to-face visit per month.

Response: We will consider the commenter's suggestion as we continue to develop and refine Medicare payment policy for physicians and practitioners managing patients on dialysis. In the event we decide to make changes in the payment amount(s) for the home dialysis MCP services, we would do so in a future proposed rule where the public would have the opportunity to provide comments as afforded by the rulemaking process.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal, with modification. We will require the

MCP physician (or NPP) to furnish at least one in-person patient visit per month for home dialysis MCP services (as described by CPT codes 90963 through 90966). However, Medicare contractors will have the discretion to waive the monthly visit requirement for the home dialysis

MCP service on a case-by-case basis. 2. Daily and Monthly ESRD-Related Services (CPT Codes 90951 Through 90970)

In CY 2008, the AMA RUC submitted recommendations for valuing the new CY 2009 CPT codes displayed in Table 48 that replaced the MCP HCPCS

G-codes for monthly ESRD-related services. We accepted these codes for use under the PFS.

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Table 48--MCP Codes Recognized Under the PFS

MCP Code

Long descriptor

90951.................................. End-stage renal disease (ESRD) related services monthly, for patients younger than 2 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents; with 4 or more face-to-face physician visits per month. 90952.................................. End-stage renal disease (ESRD) related services monthly, for patients younger than 2 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents; with 2-3 face-to-face physician visits per month. 90953.................................. End-stage renal disease (ESRD) related services monthly, for patients younger than 2 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents; with 1 face-to-face physician visit per month. 90954.................................. End-stage renal disease (ESRD) related services monthly, for patients 2- 11 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents; with 4 or more face-to-face physician visits per month. 90955.................................. End-stage renal disease (ESRD) related services monthly, for patients 2- 11 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents; with 2-3 face-to-face physician visits per month. 90956.................................. End-stage renal disease (ESRD) related services monthly, for patients 2- 11 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents; with 1 face-to-face physician visit per month. 90957.................................. End-stage renal disease (ESRD) related services monthly, for patients 12-19 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents; with 4 or more face-to-face physician visits per month. 90958.................................. End-stage renal disease (ESRD) related services monthly, for patients 12-19 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents; with 2-3 face-to-face physician visits per month. 90959.................................. End-stage renal disease (ESRD) related services monthly, for patients 12-19 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents; with 1 face-to-face physician visit per month. 90960.................................. End-stage renal disease (ESRD) related services monthly, for patients 20 years of age and older; with 4 or more face-to-face physician visits per month. 90961.................................. End-stage renal disease (ESRD) related services monthly, for patients 20 years of age and older; with 2-3 face-to-face physician visits per month. 90962.................................. End-stage renal disease (ESRD) related services monthly, for patients 20 years of age and older; with 1 face-to-face physician visit per month. 90963.................................. End-stage renal disease (ESRD) related services for home dialysis per full month, for patients younger than 2 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents. 90964.................................. End-stage renal disease (ESRD) related services for home dialysis per full month, for patients 2-11 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents. 90965.................................. End-stage renal disease (ESRD) related services for home dialysis per full month, for patients 12-19 years of age to include monitoring for the adequacy of nutrition, assessment of growth and development, and counseling of parents. 90966.................................. End-stage renal disease (ESRD) related services for home dialysis per full month, for patients 20 years of age and older.

There are four additional CPT codes for ESRD-related services that are reported on a per-day basis. These daily CPT codes are: 90967 (End- stage renal disease (ESRD) related services for dialysis less than a full month of service, per day; for patients younger than 2 years of age); 90968 (End-stage renal disease (ESRD) related services for dialysis less than a full month of service, per day; for patients 2-11 years of age); 90969 (End-stage renal disease (ESRD) related services for dialysis less than a full month of service, per day; for patients 12-19 years of age); and 90970 (End-stage renal disease (ESRD) related services for dialysis less than a full month of service, per day; for patients 20 years of age and older).

For the MCP codes displayed in Table 32 of the CY 2011 PFS proposed rule, the AMA RUC initially recommended 36 minutes of clinical labor time for the pre-service period. They also recommended an additional 6 minutes in the post-period for CPT codes 90960, 90961, 90962, and 90966. For the four codes describing daily services (CPT codes 90967 through 90970), the AMA RUC recommended including 1.2 minutes of clinical labor per day, which is the prorated amount of pre-service clinical labor included in the monthly codes. The AMA RUC also recommended that CPT codes 90952 and 90953 be contractor-priced.

In the CY 2009 PFS final rule with comment period (73 FR 69898), we asked the AMA RUC to reconsider their recommended PE inputs in the interest of making certain that they accurately reflected the typical direct PE resources required for these services. In addition, we asked the AMA RUC to review the physician times for CPT codes 90960 and 90961 that are used in the calculation of the PE RVUs. We accepted the work values for the new CPT codes for ESRD-related services that were recommended by the AMA RUC.

Since CY 2009, we have continued to calculate the PE RVUs for the entire series of MCP codes displayed in Table 32 of the CY 2011 PFS proposed rule (75 FR 40101) by using the direct PE inputs from the predecessor HCPCS G-codes, except for CPT codes 90952 and 90953 which are contractor-priced. We have also continued to use the physician time associated with the predecessor HCPCS G-codes for CPT codes 90960 and 90961 for purposes of calculating the PE RVUs.

In CY 2009, the AMA RUC submitted new recommendations for CPT codes 90951 and 90954 through 90970. For each of the MCP codes (CPT code 90951 and CPT codes 90954 through 90966), the AMA RUC recommended an increased pre-service clinical staff time of 60 minutes. For each of the daily dialysis service codes (CPT codes 90967 through 90970), the

AMA RUC

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recommended an increased clinical labor time of two minutes, which is the prorated amount of clinical labor included in the monthly codes.

The AMA RUC also recommended an additional 38 minutes of physician time for CPT codes 90960 and 90961. This resulted in a total physician time of 128 minutes and 113 minutes, respectively, for these codes. The AMA

RUC continued to recommend that CPT codes 90952 and 90953 be contractor-priced.

For CY 2011, we proposed to accept these AMA RUC recommendations as more accurate reflections of the typical direct PE resources required for these services. Therefore, we proposed to develop the PE RVUs for

CPT code 90951 and CPT codes 90954 through 90970 using the direct PE inputs as recommended by the AMA RUC and reflected in the proposed CY 2011 PE database, which is available on the CMS Web site under the supporting data files for the CY 2011 PFS proposed rule at: http:// www.cms.gov/PhysicianFeeSched/. We also proposed to use the AMA RUC- recommended physician times for CPT codes 90960 and 90961. Consistent with the AMA RUC's recommendations, we proposed to continue to contractor-price CPT codes 90952 and 90953.

We did not receive public comment on our proposal to accept these

AMA RUC recommendations as more accurate reflections of the typical direct PE resources required for these services. Therefore, we are finalizing our CY 2011 proposal to develop the PE RVUs for CPT code 90951 and CPT codes 90954 through 90970 using the direct PE inputs as recommended by the AMA RUC and reflected in the CY 2011 direct PE database, which is available on the CMS Web site under the supporting data files for the CY 2011 PFS final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/. We will also use the AMA RUC- recommended physician times for CPT codes 90960 and 90961. Consistent with the AMA RUC's recommendations, we will continue to contractor- price CPT codes 90952 and 90953.

D. Portable X-Ray Set-Up (HCPCS Code Q0092)

When a portable x-ray is furnished to a single patient, as many as four component HCPCS codes may be billed and paid for the service, including the portable x-ray transportation (HCPCS code R0070

(Transportation of portable x-ray equipment and personnel to home or nursing home, per trip to facility or location, one patient seen)); the portable x-ray set-up (HCPCS code Q0092 (Set-up of portable x-ray equipment)); and the professional and technical components of the x-ray service itself (CPT 70000 series). Currently, the direct PE database contains x-ray equipment in both the radiology codes in the 70000 series of CPT and HCPCS code Q0092, the code for the set-up of a portable x-ray. In the technical component of the x-ray service is the direct PE input of a radiology room which contains x-ray equipment for the various radiology codes in the 70000 series of CPT. In addition, portable x-ray equipment is included as a direct PE input for HCPCS code Q0092. Thus, x-ray equipment currently is recognized within the direct PE values for two of the HCPCS codes that would be reported for the portable x-ray service, resulting in an overvaluation of the comprehensive portable x-ray service.

Therefore, for CY 2011 we proposed to remove portable x-ray equipment as a direct PE input for HCPCS code Q0092, in order to pay more appropriately for the x-ray equipment used to furnish a portable x-ray service. We believe the resulting payment for the comprehensive portable x-ray service would more appropriately reflect the resources used to furnish portable x-ray services by providing payment for the x- ray equipment solely through payment for the technical component of the x-ray service that is furnished.

Comment: Several commenters opposed the removal of portable x-ray equipment as a direct PE input for HCPCS code Q0092. The commenters believe the elimination of the equipment from HCPCS code Q0092 is inconsistent with longstanding CMS payment policy recognizing the unique and additional costs incurred by portable x-ray suppliers in furnishing services that involve special equipment requiring extra assembly and disassembly time. In addition, the commenters believe that the proposed equipment elimination conflicts with the statutory mandate of section 1848(c) of the Act that CMS calculate the PFS RVUs based on the actual resources used in furnishing a service because equipment is a legitimate direct PE component of the set-up component service (HCPCS code Q0092).

Response: We agree that x-ray equipment is used to furnish a portable x-ray service and the equipment set-up is reported with HCPCS code Q0092. However, because the portable x-ray set-up service would always be reported along with the technical component of the x-ray service (CPT 70000 series) that already includes x-ray equipment as a direct PE input, to include x-ray equipment again in the PE of the set- up code would clearly be duplicative. Only one item of equipment, that is, a single x-ray machine, is used in furnishing the portable x-ray service. We are, therefore, eliminating the portable x-ray equipment from HCPCS code Q0092 and, instead, recognizing the cost of such equipment in the direct PE for the technical component of the x-ray service.

Comment: According to several commenters, because CMS has not undertaken a review of all combinations of services paid under the PFS that together might comprise a ``comprehensive service'' to identify potentially duplicative direct PE inputs when the services are furnished together, CMS should refrain from applying the proposed policy to suppliers of portable x-ray services.

Response: While it would require an extensive analysis to review all combinations of PFS services that may be furnished together and identify potentially duplicative PE inputs, the PFS has several longstanding policies that were adopted to provide appropriate payment when certain services are furnished together. For example, existing multiple procedure payment reduction policies reduce payment for the second and subsequent surgical procedures or technical components of imaging services when furnished to the same patient by the same physician on the same day, based partly on the presence of efficiencies in the PE under such circumstances. Furthermore, as discussed in section II.C.4. of this final rule with comment period, we are adopting a new multiple procedure payment reduction policy for CY 2011 for therapy services because of the duplication in the PE when therapy services are furnished together. Finally, we note that for those CPT codes that are designated as add-on codes to primary services, we ensure that the direct PE inputs do not duplicate inputs in the primary services. Given our ongoing efforts to more appropriately value services furnished together, we believe that HCPCS code Q0092 essentially functions as an ``add-on'' code to the primary service that it generally accompanies, which is the technical component of an x-ray service. Therefore, we believe it is fully consistent with our ongoing efforts to recognize efficiencies through payment policy when multiple services are furnished together to remove the duplicative x-ray equipment from the direct PE inputs for HCPCS code Q0092.

Comment: A few commenters believe that elimination of x-ray equipment in HCPCS code Q0092 would have a negative impact on the financial status

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of portable x-ray suppliers who are typically small business owners.

According to the commenters, CMS should heed the statutory mandates of the Regulatory Flexibility Act (RFA) which require mitigation of such adverse effects.

Response: We note that the RFA requires only that we analyze regulatory options for small businesses that include a justification for 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. The CY 2011 PFS proposed rule included a regulatory impact analysis (75 FR 40230 through 40245), as does section

XI.A. of this final rule with comment period. As a specialty, the aggregate impact on portable x-ray suppliers from the PFS changes proposed for CY 2011 was an increase of 8 percent in the proposed rule

(75 FR 40232), and it is an increase of 6 percent for CY 2011 as displayed in Table 101 of this final rule with comment period.

Therefore, the combined effect of all final PFS policies for CY 2011 will not adversely impact portable x-ray suppliers.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to remove portable x-ray equipment as a direct PE input for HCPCS code Q0092.

E. Pulmonary Rehabilitation Services (HCPCS Code G0424)

In the CY 2010 PFS proposed rule (74 FR 33614), we proposed to create new HCPCS G-code G0424 (Pulmonary rehabilitation, including aerobic exercise (includes monitoring), per session, per day) to describe the services of a pulmonary rehabilitation (PR) program as specified in section 144(a) of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). Using CPT code 93797 (Cardiac rehab without telemetry) as a reference code, we proposed to assign 0.18 work

RVUs and 0.01 malpractice RVUs to G0424. To establish PE RVUs, we reviewed the PE inputs of similar services, particularly those of the respiratory therapy HCPCS codes G0237 (Therapeutic procedures to increase strength or endurance or respiratory muscles, face to face, one on one, each 15 minutes (includes monitoring)) and G0238

(Therapeutic procedures to improve respiratory function, other than described by G0237, one on one, face to face, per 15 minutes (includes monitoring)), as well as the cardiac rehabilitation codes, CPT codes 93797 and 93798 (Physician services for outpatient cardiac rehabilitation; with continuous ECG monitoring (per session)). In the

CY 2010 PFS final rule with comment period (74 FR 61886), we finalized our proposal with modifications to the code descriptor and PE inputs, as recommended by some commenters.

Based on commenters' recommendations from the CY 2010 PFS final rule with comment period and further information furnished by stakeholders, for CY 2011 we proposed to increase the work RVUs for

HCPCS code G0424 to 0.28 for CY 2011 to be comparable to the work RVUs for cardiac rehabilitation with monitoring (CPT code 93798) in view of the monitoring required for HCPCS code G0424.

We also proposed to increase the clinical labor time for the respiratory therapist from 15 minutes to 30 minutes and to crosswalk the PE equipment inputs for HCPCS code G0424 to those for respiratory treatment services (HCPCS code G0238), which include a 1-channel ECG and a pulse oximeter. We retained the treadmill currently assigned to

HCPCS code G0424 and adjusted the equipment time to 45 minutes. While several public commenters recommended this equipment, these commenters also requested a full 60 minutes of respiratory therapist time be included in the PE for HCPCS code G0424, comparable to the 15 minutes of respiratory therapist time included in the one-on-one codes for 15 minutes of respiratory treatment services (HCPCS codes G0237 and

G0238). However, because pulmonary rehabilitation services reported under HCPCS code G0424 can be furnished either individually or in groups, we believe that 30 minutes of respiratory therapist time would be more appropriate for valuing the typical pulmonary rehabilitation service.

Comment: Many commenters applauded CMS for its proposal to increase the work RVUs for HCPCS code G0424 to 0.28. While the commenters supported the increase in work RVUs in the short term, they believe that an accurate, independent assessment of the work value associated with physician's office-based pulmonary rehabilitation is the only reasonable way to determine actual physician work. The commenters stated that continuing to rely on work values related to cardiac rehabilitation is flawed, noting that the clinical characteristics of the cardiac rehabilitation patient are different from the pulmonary rehabilitation patient. Due to the expected frequency and duration of acute events, the commenters explained that the pulmonary rehabilitation patient would require greater physician involvement.

Response: Until we gain more data and experience on the use of this code to report pulmonary rehabilitation services furnished to Medicare beneficiaries under the new comprehensive benefit, we believe using the work RVUs for cardiac rehabilitation with monitoring (CPT code 93798) as a crosswalk is appropriate for this service. We further note that the crosswalk methodology is commonly used by the AMA RUC in recommending work RVUs to us for new or revised codes.

Comment: A number of commenters generally supported the increase in the clinical labor time for a respiratory therapist from 15 minutes to 30 minutes. While the commenters generally agreed with CMS' reasoning for not increasing the respiratory therapist time to 60 minutes, the commenters noted that in the physician's office setting, pulmonary therapy items and services are routinely provided one-on-one, face-to- face, requiring 60 minutes of individualized therapy services by a respiratory therapist. Some commenters believe that the proposal to increase the respiratory therapist time to only 30 minutes would place physicians at an economic disadvantage in the provision of pulmonary rehabilitation items and services when furnished in an office setting due to the limited amount of office space available to treat more than one patient in the same time period. One commenter suggested that the respiratory therapist time be increased to 45 minutes or that CMS consider the development of a HCPCS code for the provision of pulmonary rehabilitation items and services to patients on a one-on-one, face-to- face per 15 minute basis to ensure that physicians can provide this service in the office setting. Another commenter believed that HCPCS code G0424 is undervalued at 0.46 PE RVUs in comparison to the PE RVUs for other PFS services that are conceptually similar but do not include a treadmill, arm ergometer, monitoring devices, or emergency carts.

Response: Payment for services under the PFS is resource-based, and individual services are valued based upon the resources needed to provide the typical service. As we noted in the CY 2011 PFS proposed rule (75 FR 40103), pulmonary rehabilitation services reported under

HCPCS code G0424 can be furnished either individually or in groups and we continue to believe that 30 minutes of respiratory therapist time is appropriate for valuing the typical pulmonary rehabilitation service.

We believe that

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pulmonary rehabilitation in the physician's office is most commonly furnished to a group of patients, rather than one-on-one for 60 minutes of respiratory therapist time. Regarding the commenter who was concerned that the PE for HCPCS code G0424 was undervalued in comparison to similar services that do not use the equipment necessary for HCPCS code G0424, we note that we have utilized the standard PFS PE methodology to develop the PE RVUs for HCPCS code G0424 based on the direct PE inputs we consider to be appropriate.

Comment: One commenter suggested that the valuing of HCPCS code

G0424 is flawed and does not fully account for the inclusion of all professionals who are involved in the pulmonary rehabilitation program, specifically physical therapists. In addition, the commenter referenced the CY 2010 PFS final rule with comment (74 FR 61884) where CMS stated and recognized that physical therapists provide pulmonary rehabilitation services. The commenter believes that by only basing the value on services performed by respiratory therapists, CMS has miscalculated the payment for the comprehensive, multidisciplinary pulmonary rehabilitation program and recommended that CMS create a separate HCPCS code with a higher value that could be used to delineate those patients who require individualized physical therapy within the pulmonary rehabilitation program.

Response: Like all services paid under the PFS, pulmonary rehabilitation is valued based on the staff type who would typically perform this service, a respiratory therapist. Because the items and services furnished by a pulmonary rehabilitation program are individualized, we expect that evaluations and individualized treatments would be conducted by one or more members of the multidisciplinary team of the pulmonary rehabilitation program with the appropriate expertise. Therefore, individualized treatment by a physical therapist would be furnished when required by the patient as part of the pulmonary rehabilitation plan of care. However, we do not believe individualized treatment would be typical and, therefore, we do not believe the creation of a separate HCPCS code with a higher value is necessary to recognize those cases that require individualized physical therapy as part of a pulmonary rehabilitation program.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to increase the work RVUs for HCPCS code G0424 to 0.28 for CY 2011 to be comparable to the work RVUs for cardiac rehabilitation with monitoring (CPT code 93798). In addition, we are finalizing our CY 2011 proposal to increase the clinical labor time for the respiratory therapist from 15 minutes to 30 minutes and to crosswalk the PE equipment inputs for HCPCS code G0424 to those for respiratory treatment services (HCPCS code G0238), which include a 1- channel ECG and a pulse oximeter.

F. Application of Tissue Cultured Skin Substitutes to Lower Extremities

(HCPCS Codes G0440 and G0441)

There are currently two biological products, Apligraf and

Dermagraft, which are FDA-approved for the treatment of diabetic foot ulcers. While commonly used by podiatrists for this purpose, these products are also used by other specialists in the treatment of other clinical conditions, such as burns.

Many Medicare contractors have established local coverage determinations specifying the circumstances under which these services are covered. In the case of diabetic foot ulcers, clinical studies of

Apligraf application were based on up to 5 treatments over a 12-week period. In contrast, Dermagraft was applied weekly, up to 8 treatments over a 12-week period.

The skin substitute CPT codes were reviewed and new codes were last created by the CPT Editorial Panel for CY 2006. There are currently 2 skin repair CPT codes that describe Apligraf application, one primary code, CPT code 15340 (Tissue cultured allogeneic skin substitute; first 25 sq cm or less) and one add-on code, CPT code 15341 (Tissue cultured allogeneic skin substitute; each additional 25 sq cm, or part thereof

(List separately in addition to code for primary procedure)) and 4 codes that describe Dermagraft application, two initial codes based on body area, CPT codes 15360 (Tissue cultured allogeneic dermal substitute, trunk, arms, legs; first 100 sq cm or less, or 1% of body area of infants and children) and 15365 (Tissue cultured allogeneic dermal substitute, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple digits; first 100 sq cm or less, or 1% of body area of infants and children) and two add-on codes,

CPT codes 15361 (Tissue cultured allogeneic dermal substitute, trunk, arms, legs; each additional 100 sq cm, or each additional 1% of body area of infants and children, or part thereof (List separately in addition to code for primary procedure)) and 15366 (Tissue cultured allogeneic dermal substitute, face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple digits; each additional 100 sq cm, or each additional 1% of body area of infants and children, or part thereof (List separately in addition to code for primary procedure)).

In the CY 2011 PFS proposed rule (75 FR 40103), we noted that several stakeholders had expressed concern about the appropriateness and equity of the coding and payment for these services, given their similar uses and the office resources required when the products are applied repeatedly over a number of weeks for treatment of lower extremity ulcers. They were concerned that current coding, with the associated payment policies and relative values, does not provide for appropriate payment for the services based on how they are furnished.

In addition, some stakeholders believe that the current coding and payment provides a financial incentive for the selection of one tissue cultured product over another, rather than facilitating clinical decision-making based solely on the most clinically appropriate product for the patient's case. For example, the Dermagraft and Apligraf application codes have 90-day and 10-day global periods, respectively, and their current values include several follow-up office visits. When patients are treated periodically with repeated applications of the products over several weeks, the patients may be seen in follow-up by the physician. However, those encounters would not be evaluation and management visits but, instead, would be procedural encounters that would typically be valued differently under the PFS than the follow-up office visits currently included in the values for the Dermagraft and

Apligraf application codes. Furthermore, while different stakeholders indicated that debridement and site preparation are variably performed when these products are applied, the CPT codes for Dermagraft application allow separate reporting of these preparation services when they are performed, while the Apligraf application codes bundle these services. Since CY 2006, the PFS has accepted the AMA RUC work and PE recommendations for the Dermagraft and Apligraf application codes and has paid accordingly.

With respect to Medicare payment policy, some Medicare contractors allow the use of modifier -58 (Staged or related procedure or service by the same physician during the postoperative period) to be reported with the skin substitute application codes and provide full payment for the service

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each time it is performed, even if the subsequent application(s) is within the global period of the service. Other contractors do not allow the use of modifier -58 and, therefore, provide a single payment for a series of applications over 90 days or 10 days, as applicable to the particular code reported for the product's initial application.

Because of the current inconsistencies in valuing similar skin substitute application services and the common clinical scenarios for their use for Medicare beneficiaries, in the CY 2011 PFS proposed rule

(75 FR 40103), we stated that we believe it would be appropriate to temporarily create Level II HCPCS G-codes to report application of tissue cultured skin substitutes applied to the lower extremities in order to provide appropriate and consistent payment for the services as they are commonly furnished. Therefore, we proposed to create two new

HCPCS G-codes for CY 2011, GXXX1 (Application of tissue cultured allogeneic skin substitute or dermal substitute; for use on lower limb, includes the site preparation and debridement if performed; first 25 sq cm or less) and GXXX2 (Application of tissue cultured allogeneic skin or dermal substitute; for use on lower limb, includes the site preparation and debridement if performed; each additional 25 sq cm), that would be recognized for payment under the PFS for the application of Apligraf or Dermagraft to the lower limb. These codes would not allow separate reporting of CPT codes for site preparation or debridement. We emphasized that we would expect that the use of these

HCPCS G-codes for payment under Medicare would be temporary, while stakeholders work through the usual channels to establish appropriate coding for these services that reflects the current common clinical scenarios in which the skin substitutes are applied. Furthermore, we stated that we would expect to receive recommendations from the AMA RUC for appropriate work values and direct practice expense inputs for the applicable codes, according to the usual process for new or revised codes.

Under the PFS, as a temporary measure, the HCPCS G-codes would be assigned a 0-day global period so payment would be made each a time a covered service was furnished. We proposed to base payment on the physician work relative values and the direct PE inputs for the existing CPT codes for Apligraf application, with adjustments for the global period differences because the HCPCS G-codes and the Apligraf application CPT codes. These CPT codes resemble the new HCPCS G-codes in terms of wound size description and the inclusion of site preparation and debridement in their current values so we believe they appropriately represent the physician work involved in the proposed

HPCPCS G-codes. However, we proposed to adjust the work RVUs of the

Apligraf application codes to derive the HCPCS G-code proposed CY 2011 work values by extracting the values for any office visits and discharge day management services because the HCPCS G-codes have a 0- day global period. In addition, we proposed to adjust the direct PE inputs of the Apligraf application codes to develop the proposed CY 2011 direct PE inputs of the HPCPS G-codes that have a 0-day global period.

Our crosswalks and adjustments resulted in proposed CY 2011 work

RVUs of 2.22 for HPCPCS code GXXX1 and 0.50 for HCPCPS GXXX2. The proposed direct PE inputs for HCPCS codes GXXX1 and GXXX2 are included in the direct PE database for the CY 2011 proposed rule that is posted on the CMS Web site at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/ list.asp.

We noted that many Medicare contractors currently have local coverage policies that specify the circumstances under which Medicare covers the application of skin substitutes. The local coverage policies may include diagnostic or prior treatment requirements, as well as frequency limitations on the number and periodicity of treatments. We stated our expectation that these policies would be updated in the context of the temporary new HCPCS G-codes that we proposed for use in

CY 2011 to report the application of tissue cultured allogeneic skin or dermal substitutes. We proposed to establish the HCPCS G-codes for temporary use in CY 2011 in order to improve the consistency and resource-based nature of PFS payments for skin substitute application services that require similar resources. However, we noted our continued interest in ensuring that skin substitutes are properly utilized for Medicare beneficiaries who will benefit from that treatment. We indicated that we would continue to monitor the utilization of these services and plan to identify any concerning trends in utilization that contractors may want to examine further through medical review or other approaches.

Comment: While acknowledging concerns with the existing CPT codes for the application of skin substitutes, several commenters opposed the proposed HCPCS G-codes because the commenters believe that CMS should wait for new codes to be created by the CPT Editorial Panel and the associated recommendations to be developed by the AMA RUC for physician work and direct PE inputs for any new codes. The commenters argued that

CMS' proposal to create new temporary codes would circumvent or otherwise influence the well-established processes already underway to address issues identified by the stakeholders. Several commenters pointed out that CMS' proposal would not treat the application of skin substitutes that are not tissue cultured similarly to the procedures for the application of Apligraf and Dermagraft. Because these commenters argued that inconsistencies in coding and payment for the other products would continue, several commenters recommended that CMS await a more comprehensive solution from the CPT Editorial Panel.

On the other hand, a number of commenters supported the proposal to establish the two new HCPCS G-codes, and a few of these commenters recommended no changes to the proposed HCPCS code descriptors. However, one commenter who generally supported the proposal recommended that CMS expand the proposed HCPCS code descriptors to incorporate the application of a broader range of skin substitutes that were not tissue cultured, specifically to include the application of biologically active skin substitutes.

Another commenter requested that CMS clarify the meaning of

``dermal substitute.'' This commenter also requested that CMS delete the words ``for use on lower limb'' and allow the new codes to be used for application of tissue cultured skin or dermal substitutes on locations other than the lower limb. Consistent with this perspective, the commenter further recommended that CMS not recognize the existing

CPT codes for application of Apligraf and Dermagraft on other areas of the body. The commenter argued that, as proposed, the HCPCS G-codes would lead to confusion and the potential for fraudulent billing because both a HCPCS G-code and a CPT code could describe the application of the same product to the lower extremities. The commenter believes that CMS should only recognize the proposed G-codes under the

PFS for the application of tissue cultured skin or dermal substitutes to any body site, to allow for consistency in reporting and payment of these services.

Several commenters requested that CMS provide guidance on the proper use of the current CPT codes and new HCPCS G-codes for reporting the application of skin substitutes. Other

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commenters were concerned that the temporary HCPCS G-codes could create confusion, disrupt physician's office billing policies, and otherwise burden coding staff and advised CMS to not finalize the proposal.

Response: We appreciate the perspectives of stakeholders and we share the commenters' desire for appropriate and consistent payment that is resource-based for the application of skin substitutes as these services are commonly furnished for appropriate clinical indications.

We appreciate and value the work of the CPT Editorial Panel in evaluating the complexities and nuances in this area and look forward to reviewing any new codes created for CY 2012 or later years and the

AMA RUC recommendations for the physician work and direct PE inputs for those new codes. We note that there are no new codes for CY 2011 that describe the application of skin substitutes and, therefore, new codes would not be available before CY 2012 at the earliest.

In proposing to create two temporary HCPCS G-codes for CY 2011, we sought a fair and balanced temporary alternative to provide appropriate and equitable payment for the application of tissue cultured skin or dermal substitutes to the lower extremities. While we understand from stakeholders that the work of the CPT Editorial Panel is ongoing in this area, our proposal was specifically to establish temporary HCPCS

G-codes that would allow for more appropriate reporting and payment under certain scenarios in the short term while a more comprehensive solution is being developed and refined by expert advisors. Because our proposal was so limited in scope and temporary, clearly it was not our intention to circumvent or unduly influence the CPT Editorial Panel or the AMA RUC as these groups proceed in their comprehensive work to establish new codes and values for the application of skin substitutes.

We would also not expect that the characteristics of the temporary

HCPCS G-codes, in terms of terminology in the code descriptors, global periods, work values, or direct PE inputs, should shape or otherwise affect the ongoing work of stakeholders who are developing a complete approach to coding for the application of skin substitutes. We acknowledge that new CPT codes and their AMA RUC-recommended values and direct PE inputs arising from these processes may appropriately differ in one or multiple characteristics from the temporary HCPCS G-codes.

With regard to the commenters who were concerned about the limited scope of our proposal and suggested that we not proceed or that we broaden the scope of the proposed code descriptors to address inequities and inconsistencies that the commenters believe would persist under our proposal, we believe that the limited proposal continues to be the most appropriate temporary approach for CY 2011.

First, it was not our intention to comprehensively address the issue of coding revisions for the application of skin substitutes because we are aware of the ongoing work of the CPT Editorial Panel in this area and would not want to undermine its deliberative process. Moreover, based on the public comments we received, we have reason to believe that a revised coding structure for the application of skin substitutes will be available soon. Second, the HCPCS G-codes that we proposed had a 0- day global period based on the FDA-approved indications and regimens for the application of the tissue cultured products to which the codes would apply, and we are not certain to what extent a 0-day global period would be appropriate for the application of other skin substitutes. Third, while several commenters provided suggestions regarding alternative language that could be used in the HCPCS G-code descriptors, it is unclear which skin substitutes products would be incorporated under the revised terms. Some of the suggested alternatives would use phrases such as ``biologically active'' that, as far as we know, are not fully defined in the medical community and are not currently used in the CPT code descriptors that describe the application of skin substitutes. Because of our uncertainty in this regard, we would be hesitant to make such significant revisions to the

HCPCS G-code descriptors without the opportunity for public notice and comment, which would allow stakeholders the opportunity to provide input about revised code descriptors and the appropriateness of the values for the HCPCS G-codes. In contrast, our proposal relied upon the use of terms in the HCPCS G-code descriptors that are already included in the descriptors for established CPT codes and, therefore, we do not believe we would be setting a precedent that would affect the current work of the CPT Editorial Panel on this issue. Finally, we do not see a need to further clarify terms, such as ``dermal substitute,'' in the

HCPCS G-code descriptors because these are currently used in the CPT code descriptors and the same definitions would apply to the G-codes.

Furthermore, we believe it would continue to be appropriate to recognize the existing CPT codes for the application of tissue cultured skin or dermal substitutes to areas of the body other than the lower extremities. We established the 0-day global period, the physician work values, and the direct PE inputs for the proposed HCPCS G-codes based on the specific clinical scenarios where Apligraf or Dermagraft would be applied to treat lower extremity ulcers. We do not necessarily believe that the same global periods and values would be appropriate for the application of these products to other body areas under different clinical scenarios. The usual coding guidance that providers should report the most specific HCPCS code that describes the service furnished would apply in the case of the application of Apligraf or

Dermagraft. If one of these products were applied to the lower extremities, we would expect the HCPCS G-codes to be reported, rather than the CPT codes, as the HCPCS G-codes are more specific to application in that body area.

Finally, because it is our common practice to create one or more new HCPCS G-codes for payment under the PFS each year, we believe that physicians' offices are experienced in integrating new codes into the reporting of services furnished and paid under the PFS. Not only are local coverage determinations commonly applicable to the application of skin substitutes, we also understand that there are a subset of physicians who regularly apply tissue cultured skin or dermal substitutes to lower extremities to treat ulcers. In this context, we believe that our national educational efforts, in addition to education by local contractors, will quickly disseminate information to the relevant practitioners about these new HCPCS G-codes and their appropriate use in CY 2011.

After consideration of the public comments we received, we are finalizing our proposal, with editorial modification, to create two new

HCPCS G-codes for reporting the application of tissue cultured skin substitutes and dermal substitutes to the lower extremities in CY 2011.

For internal consistency, we are changing the descriptors of HCPCS codes GXXX1 and GXXX2 from the proposed language to both refer to

``skin substitute or dermal substitute.'' HCPCS code GXXX2 as proposed read ``Application of tissue cultured allogeneic skin or dermal substitute; for use on lower limb, includes the site preparation and debridement if performed; each additional 25 sq cm.'' The final codes are HCPCS code G0440 (Application of

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tissue cultured allogeneic skin substitute or dermal substitute; for use on lower limb, includes the site preparation and debridement if performed; first 25 sq cm or less) and HCPCS code G0441 (Application of tissue cultured allogeneic skin substitute or dermal substitute; for use on lower limb, includes the site preparation and debridement if performed; each additional 25 sq cm) that will be recognized for payment under the PFS in CY 2011.

Comment: A number of commenters supported the assignment of a 0-day global period to the application of tissue cultured skin or dermal substitutes. Many expressed the view that assigning a 0-day global period to the codes would allow the products to be prescribed and administered based on their clinical value, without concern for payment differences between products. The commenters who did not support the 0- day global period were those who believe that the proposal would further payment inequities between products used similarly. For example, one commenter reasoned that, insofar as a patient is likely to require multiple administrations of a skin substitute product during a 90-day period, providers would have a significant incentive to use the products whose application would be reported under the proposed codes rather than a product whose application procedure continues to have a 90-day global period.

Another commenter addressed the bundling of site preparation and debridement into the proposed HCPCS codes GXXX1 and GXXX2. The commenter argued that the proposed values for the new codes HCPCS G- codes would not be sufficient to account for this work. The commenter recommended that the proposed values should be adjusted upward or separate payment should be allowed for site preparation and/or debridement.

In reviewing CMS' proposed methodology for setting the physician work values for the HCPCS G-codes, one commenter contended that CMS should finalize a total of 2.86 works RVUs for GXXX1 instead of the proposed 2.22 work RVUs. The commenter claimed that the work RVUs for

GXXX1 should be crosswalked from CPT code 15340 less only the physician work for the two post-procedure visits in CPT code 15340 which are not included in HCPCS code GXXX1.

Another commenter recommended that CMS review the proposed PE inputs for the new HCPCS G-codes. Specifically, the commenter explained that the only difference in clinical labor time between CPT code 15340 and HCPCS code GXXX1 should be an adjustment to account for the difference in the global period (10 days for CPT code 15340 and 0 days for HCPCS code GXXX1). The commenter also stated that HCPCS code GXXX1 should include all the pre-service clinical staff time in CPT code 15340, yet did not for the proposed rule. The commenter was unclear on whether the post-service clinical labor time was properly adjusted to account for the change in global period from CPT code 15340 to HCPCS code GXXX1.

Response: We agree with the commenters that a 0-day global period is the most appropriate for the application of tissue cultured skin substitutes or dermal substitutes to the lower limb for purposes of the temporary HCPCS G-codes, pending a comprehensive change in coding established by the CPT Editorial Panel. As discussed in the previous response, we sought a fair and balanced temporary solution to provide appropriate and consistent payment for the application of tissue cultured skin substitutes or dermal substitutes to the lower limb. The commenters who did not support the 0-day global period were those who were more broadly against the creation of the new HCPCS G-codes codes because of potential payment imbalances between products that would be included in the new codes and those that would not be. No commenters asserted that the 0-day global period would be inappropriate for the codes to which we proposed to apply that period.

The proposed physician work values for HCPSC G-codes G0440 and

G0441 (proposed as HCPCS codes GXXX1 and GXXX2, respectively) were crosswalked, with adjustment for the different global periods, from CPT codes 15340 and 15341. CPT codes 15340 and 15341 currently include site preparation and debridement and, as such, the additional reporting of a separate CPT code for these activities, if performed on the same site as the skin substitute application procedure, is not permitted. We believe that the values for both the current CPT codes and the HCPCS G- codes are clinically appropriate for the services they describe, with payment for site preparation and debridement bundled if furnished.

In response to a commenter's concern, we reviewed the proposed valuation of the physician work for HCPCS codes G0440 and G0441 to ensure consistency with our proposed methodology, and we continue to believe that the appropriate work value for HCPCS code G0440 is 2.22

RVUs as we proposed. HCPCS code G0440 was crosswalked to CPT code 15340, with adjustments to account for the 0-day global period of the

HCPCS G-code. CPT code 15340, with a 10-day global period, is currently valued to include two CPT code 99212 (level 2 established patient office or other outpatient visit) post-operative visits (0.48 RVUs each, 0.96 RVUs total) and half of one CPT code 99238 (Hospital discharge day management; 30 minutes or less) visit (1.28 RVUs each, 0.64 RVUs total). CPT code 15340 has a current total physician work value of 3.82 RVUs. To adjust for the 0-day global period for the minor procedure described by HCPCS code G0440, we believe it would be appropriate to deduct the value of both the two post-operative office visits and the discharge day visit. In the case of post-operative office visits, these may be separately reported and paid if medically reasonable and necessary. In addition, we also do not believe that a half discharge day visit should be a building block based on the clinical characteristics of the procedure described by HCPCS code

G0440. When we make these adjustments to the work value of 3.82 RVUs for CPT code 15340, 2.22 work RVUs, the value we proposed for HCPCS code G0440, remain.

We also reviewed the proposed PE inputs included in the direct PE database for the CY 2011 PFS proposed rule. Like the physician work values, to determine the PE inputs we crosswalked HCPCS code G0440 from

CPT code 15340 and HCPCS code G0441 from CPT code 15341. As one commenter observed, the difference in the values should reflect the shift from a 10-day global period to a 0-day global period. However, for PE inputs, the change in global period typically affects both the pre- and post-service PE inputs. To establish the post-operative clinical labor time for HCPCS code G0440, we subtracted out the time associated with the two CPT code 99212 visits that were removed (32 minutes total) and the half discharge day visit (19 minutes total) that was eliminated, bringing the post-operative clinical labor time down from 54 minutes to three minutes. For the pre-service activities, while 0-day global period procedures generally have 0 minutes of pre-service clinical labor time allocated to them, we believe that 5 minutes in the nonfacility setting and 10 minutes in the facility setting reflect more appropriate pre-service clinical labor times in the instance of HCPCS code G0440. These revised pre- and post-service clinical labor times were reflected in the proposed CY 2011 direct PE database for HCPCS code G0440.

While we valued the physician work and clinical labor time PE inputs

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according to the crosswalk methodology as described in the CY 2011 PFS proposed rule (75 FR 40103 through 40104), upon review of the new CY 2011 HCPCS G-codes for this final rule with comment period, we noticed that we had not applied the proposed methodology to the PE inputs for equipment and supplies. Therefore, consistent with our proposal, we have adjusted the supply and equipment PE inputs for HCPCS codes G0440 and G0441 in the final CY 2011 PE database to reflect the shift to a 0- day global period from a 10-day global period for these HCPCS codes. As the equipment and supply PE inputs for the 10-day global period CPT codes reflect those necessary for multiple visits to the provider, the equipment and supply inputs for the new HCPCS G-codes codes should reflect more appropriate values for codes with a 0-day global period.

After consideration of the public comments we received, we are finalizing our proposal to value HCPCS codes G0440 and G0441 as 0-day global procedures into which site preparation and debridement are bundled. As we proposed, under our final policy we have crosswalked the physician work RVUs and direct PE inputs from CPT codes 15340 and 15341 to HCPCS codes G0440 and G0441, respectively, with adjustments. We have adjusted the work RVUs and the direct PE inputs (clinical labor, equipment, and supplies) to reflect the shift from a 10-day global period to a 0-day global period for the new HCPCS G-codes.

Comment: Several commenters were concerned about the use of the -58 modifier for 10-day and 90-day global surgical procedures for the application of skin substitutes when repeated application of a product within the global period is the typical case. The commenters were largely supportive of eliminating the use of the -58 modifier for the two new HCPCS codes which, the commenters remarked, has been the source of some confusion and has been interpreted inconsistently by Medicare contractors. The commenters explained that the change to a 0-day global period would result in no need for the -58 modifier to be reported with the HCPCS G-codes. Several commenters recommended that CMS provide guidance on use of the -58 modifier with the existing CPT codes for the application of skin substitutes, most of which have 90-day global period and all of which would continue to be recognized for payment under the PFS.

Response: Assignment of a 0-day global period for the two HCPCS G- codes eliminates the need for use of the -58 modifier with these two new codes. We recognize that the -58 modifier may continue to be used in conjunction with the other CPT codes with 10-day or 90-day global periods for the application of skin substitutes. Specific determinations of the appropriate use of the -58 modifier will continue to be the responsibility of individual Medicare contractors.

In summary, after consideration of the public comments we received, we are finalizing our CY 2011 proposal, with modification to adjust the supply and equipment direct PE inputs, as well as editorial modification to the code descriptors for consistency, to create two new

HCPCS G-codes for CY 2011, G0440 (Application of tissue cultured allogeneic skin substitute or dermal substitute; for use on lower limb, includes the site preparation and debridement if performed; first 25 sq cm or less) and G0441 (Application of tissue cultured allogeneic skin substitute or dermal substitute; for use on lower limb, includes the site preparation and debridement if performed; each additional 25 sq cm), that will be recognized for payment under the PFS for the application of products described by the codes to the lower limb. These codes do not allow separate reporting of CPT codes for site preparation or debridement. Providers reporting the application of tissue cultured allogeneic skin substitute or dermal substitutes to the lower limb for payment under the PFS in CY 2011 should report HCPCS code G0440, along with HCPCS code G0441 if applicable based on wound size, and not CPT code 15340, 15341, 15360, 16361, 15365, or 15366.

Under the PFS, as a temporary measure, the HCPCS G-codes are assigned a 0-day global period so payment is made each a time a covered service is furnished. As proposed, we are basing payment on the physician work relative values and the direct PE inputs for the existing CPT codes 15340 and 15341 for Apligraf application, with adjustments for the global period differences between the HCPCS G-codes and the Apligraf application CPT codes. However, as we proposed, we have adjusted the work RVUs of the Apligraf application codes to derive the final CY 2011 HCPCS G-code work values by extracting the values for any office visits and discharge day management services because the

HCPCS G-codes have a 0-day global period. In addition, with modifications of our proposed PE equipment and supply inputs to be fully consistent with our crosswalk proposal, we have adjusted the direct PE inputs of the Apligraf application codes to develop the final

CY 2011 direct PE inputs for the HPCPS G-codes that have a 0-day global period.

Our crosswalks and adjustments result in CY 2011 final work RVUs of 2.22 for HCPCS code G0440 and 0.50 for HCPCS G0441. The final direct PE inputs for HCPCS codes G0440 and G0442 are included in the direct PE database for the CY 2011 PFS final rule with comment period rule.

G. Canalith Repositioning (CPT code 95992)

For CY 2009, CPT created a new code for canalith repositioning, specifically CPT code 95992 (Canalith repositioning procedure(s) (eg,

Epley maneuver, Semont maneuver), per day). This service may be furnished by both physicians and therapists. Although we accepted the

AMA RUC-recommended work RVUs and PE inputs, we initially bundled this procedure on an interim basis in the CY 2009 PFS final rule with comment period (73 FR 69896), indicating that we believed it would be paid through the E/M service that it would accompany. Subsequently, in view of concerns from therapists who cannot furnish E/M services, we clarified that therapists could report one of the generally defined therapy CPT codes when canalith repositioning was furnished. In the CY 2010 PFS final rule with comment period (74 FR 61766), we changed the code's status under the PFS to ``not recognized for payment under

Medicare,'' consistent with our expectation that another payable code would be reported when the service was furnished.

Based on further information from stakeholders regarding the distinct and separate nature of this procedure from an E/M service and their request that we recognize this CPT code for payment, similar to our separate payment for most other procedures commonly furnished in association with an E/M service, we proposed to recognize CPT code 95992 for payment under the CY 2011 PFS, consistent with our typical treatment of most other codes for minor procedures. In doing so, we proposed to change the code's status to ``A'' and utilize the CY 2009

RUC recommendations for work RVUs (0.75) and PE inputs for establishing its payment in CY 2011. (That is, status ``A'' means Active code. These codes are separately payable under the PFS if covered.) Because canalith repositioning (CPT code 95992) can be furnished by physicians or therapists as a therapy service under a therapy plan of care or by physicians as physicians' services outside of a therapy plan of care, we would add CPT code

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95992 to the ``sometimes therapy'' list on the therapy code abstract file.

Comment: Many commenters supported CMS' proposal to acknowledge the distinct and separate nature of CPT code 95992 from an E/M service by recognizing CPT code 95992 for separate payment and agreed with the proposed use of the AMA RUC- recommended values for work RVUs (0.75) and PE inputs for establishing payment in CY 2011.

Response: We appreciate the commenters' support for our proposal.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to recognize CPT code 95992 for payment under the PFS. As a result, the code's status has been changed to ``A'' in Addendum B to this final rule with comment period and the CY 2009

AMA RUC recommendations for work RVUs (0.75) and PE inputs will be used for establishing its payment in CY 2011. (That is, status ``A'' means

Active code. These codes are separately payable under the PFS if covered.) CPT code 95992 has also been added to the ``sometimes therapy'' list on the therapy code abstract file.

H. Intranasal/Oral Immunization Codes (CPT codes 90467, 90468, 90473, and 90474)

To ensure that the PE RVUs are consistent between the intranasal/ oral and injectable immunization administration CPT codes that describe services that utilize similar PE resources, we proposed to crosswalk the PE values for CPT code 90471 (Immunization administration (includes percutaneous, intradermal, subcutaneous, or intramuscular injections); one vaccine (single or combination vaccine/toxoid)) to CPT codes 90467

(Immunization administration younger than age 8 years (includes intranasal or oral routes of administration) when the physician counsels the patient/family; first administration (single or combination vaccine/toxoid), per day) and 90473 (Immunization administration by intranasal or oral route; one vaccine (single or combination vaccine/toxoid)).

Similarly, we also proposed to crosswalk the PE values for CPT code 90472 (Immunization administration (includes percutaneous, intradermal, subcutaneous, or intramuscular injections); each additional vaccine

(single or combination vaccine/toxoid) (List separately in addition to code for primary procedure)) to CPT codes 90468 (Immunization administration younger than age 8 years (includes intranasal or oral routes of administration) when the physician counsels the patient/ family; each additional administration (single or combination vaccine/ toxoid), per day (List separately in addition to code for primary procedure)) and 90474 (Immunization administration by intranasal or oral route; each additional vaccine (single or combination vaccine/ toxoid) (List separately in addition to code for primary procedure)).

Comment: Many commenters expressed support for the proposal. One commenter questioned why the PE values are currently different and several other commenters urged CMS to utilize the AMA RUC recommendations and the resource-based methodology to develop PE RVUs for these services in CY 2011, rather than crosswalk the PE RVUs.

Response: We appreciate the support from the commenters for our proposal. We would note that, even with the same direct PE inputs, somewhat different PE RVUs for the various CPT codes may result from our PE methodology that relies upon the historical specialty mix, as reflected in the most recent PFS utilization data, of providers who furnished the services to allocate the indirect PE. Therefore, because we believe it is especially important to have consistent PE values for payment of these similar services under the PFS, we are unable to utilize the AMA RUC direct PE input recommendations and the resource- based methodology to develop PE RVUs for these services. While in general we value services under the PFS with reference to the direct PE inputs recommended by the AMA RUC and our standard resource-based approach to establishing PE RVUs, we note that we also commonly use crosswalks to other similar codes to establish the values for services in certain circumstances. In this instance, we believe a crosswalk is particularly appropriate in order to maintain appropriate relativity between similar services and avoid the potential for non-clinically- based bias in favor of one vaccine administration technique over another.

Comment: A few commenters questioned why the CY 2011 proposed rule referenced ``physician'' counseling when identifying CPT codes 90467 and 90468 and requested clarification that nurse practitioners (NPs) and physician assistants (PAs) also be included within the scope of this proposal.

Response: We would like to clarify that the reference to

``physician'' counseling noted by the commenters is part of the official CPT code descriptors for CPT codes 90467 and 90468. Consistent with our usual interpretation of CPT codes that include the term physician in the code descriptor, for Medicare payment purposes this specificity does not exclude NPs or PAs from providing counseling to the patient/family that is within the NP's or PA's scope of practice.

Comment: Several commenters recommended modifying the proposal by crosswalking the PE RVUs for CPT code 90466 (Immunization administration younger than age 8 years of age (includes percutaneous, intradermal, subcutaneous, or intramuscular injections) when the physician counsels the patient/family; each addition injection (single or combination vaccine/toxoid) per day (List separately in addition to code for primary procedure)) to CPT code 90468 to achieve parity and reflect the additional clinical time and other practice expenses expended to provide immunizations to young children.

Response: For CY 2011, the CPT Editorial Panel revised the reporting of immunization administration services for the pediatric population. As a result, CPT codes 90466 and 90468 have been deleted and replaced with CPT code 90461 (Immunization administration through 18 years of age via any route of administration, with counseling by physician or other qualified health professional; each additional vaccine/toxoid component (List separately in addition to code for primary procedure)). In addition, CPT codes 90465 (Immunization administration younger than 8 years of age (includes percutaneous, intradermal, subcutaneous, or intramuscular injections) when the physician counsels the patient/family; first injection (single or combination vaccine/toxoid), per day) and 90467 were deleted and replaced with CPT code 90460 (Immunization administration through 18 years of age via any route of administration, with counseling by physician or other qualified health care professional; first vaccine/ toxoid component).

We agree with the commenters who believe that consistency in the PE

RVUs across CPT codes with different code descriptors reflecting immunization services to different populations or using different routes of administration is desirable. As a matter of longstanding policy (69 FR 66307), we have crosswalked the nonfacility PE value from

CPT code 96372 (Therapeutic, prophylactic, or diagnostic injection

(specify substance or drug); subcutaneous or intramuscular)

predecessor CPT codes 90782 and 90772

to the PE values for CPT code 90471 and to the HCPCS G-codes for administration of specific vaccines.

We

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will continue this crosswalk for CY 2011 and, as we proposed, also crosswalk the nonfacility PE value of CPT code 90471 to CPT code 90473.

The PE value for CPT code 90472 is based on the direct PE inputs for that code, according to the usual PFS methodology. We will crosswalk the nonfacility PE value of CPT code 90472 to CPT code 90474 for CY 2011 as we proposed. Finally, we are modifying our CY 2011 proposal and crosswalking the nonfacility PE RVUs for CPT codes 90472 and 90474 to new CPT code 90461 (replacement code for CPT codes 90466 and 90468) for

CY 2011. In addition, we will crosswalk the nonfacility PE RVUs for CPT codes 90471 and 90473 to new CPT code 90460 (replacement code for CPT codes 90465 and 90467).

After consideration of the public comments we received and the CY 2011 changes in codes for pediatric immunization services by the CPT

Editorial Panel, we are finalizing our CY 2011 proposals, with the following modifications. In summary, for CY 2011 we will--

Crosswalk the nonfacility PE RVUs for CPT codes 90472 and 90474 to new CPT code 90461; and

Crosswalk the nonfacility PE RVUs for CPT codes 90471 to 90473 to new CPT code 90460.

I. Refinement Panel Process

As discussed in the 1993 PFS final rule with comment period (57 FR 55938), we adopted a refinement panel process to assist us in reviewing the public comments on interim physician work RVUs for CPT codes with an interim final status in each year and developing final work values for the subsequent year. We decided that the panel would be comprised of a multispecialty group of physicians who would review and discuss the work involved in each procedure under review, and then each individual would individually rate the work of the procedure. We believed that establishing the panel with a multispecialty group would balance the interests of those who commented on the work RVUs against the budgetary and redistributive effects that could occur if we accepted extensive increases in work RVUs across a broad range of services. Historically, the refinement panel has based its recommendation to change a work value or to retain the interim value has hinged solely on the outcome of a statistical test on the ratings

(an F-test).

Depending on the number and range of codes that public commenters, typically specialty societies, request be subject to refinement, we establish refinement panels with representatives from 4 groups of physicians: Clinicians representing the specialty most identified with the procedures in question; physicians with practices in related specialties; primary care physicians; and contractor medical directors

(CMDs). Typically the refinement panels meet in the summer prior to the promulgation of the final rule finalizing the RVUs for the codes.

Typical panels have included 8 to 10 physicians across the 4 groups.

Over time, the statistical test used to evaluate the RVU ratings of individual panel members have become less reliable as the physicians in each group have tended to select a previously discussed value, rather than independently evaluating the work. In addition, the resulting RVUs have occasionally exhibited rank order anomalies (that is, a more complex procedure is assigned lower RVUs than a less complex procedure).

Recently, section 1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) authorized the Secretary to review potentially misvalued codes and make appropriate adjustments to the relative values. In addition, MedPAC has encouraged CMS to critically review the values assigned to the services under the PFS. MedPAC has stated its belief that CMS has historically relied too heavily on specialty societies to identify services that are misvalued by accepting a high proportion of the recommendations of the AMA RUC.

We believe the refinement panel process continues to provide stakeholders with a meaningful opportunity to review and discuss the interim work RVUs with a clinically diverse group of experts which then provides informed recommendations to CMS. Therefore, in the CY 2011 proposed rule (75 FR 40105), we indicated that we would like to continue the refinement process, including the established composition that includes representatives from the 4 groups of physicians, but with administrative modification and clarification. Specifically, for refinement panels beginning in CY 2011 (that is, for those codes with

CY 2011 interim values that would be subject to refinement during CY 2011), we proposed to eliminate the use of the F-test and instead base revised RVUs on the median work value of the panel members' ratings. We believe this approach will simplify the refinement process administratively, while resulting in a final panel recommendation that reflects the summary opinion of the panel members based on a commonly used measure of central tendency that is not significantly affected by outlier values. In addition, we clarified that we have the final authority to set the RVUs and, therefore, may make adjustments to the work RVUs resulting from refinement if policy concerns warrant their modification.

Comment: Most commenters expressed support for the proposal to eliminate the F-test, including the increased transparency of the refinement panel process that the commenters believe would result from this change. Many commenters, including the AMA RUC, agreed with the use of the median work value of the panel members' ratings and believe the median would provide a clearer view of the central tendency of the estimates provided by the survey respondents. On the other hand, several commenters believe the current process is effective and eliminates the effects of agreement between the panel members' ratings.

The AMA RUC recommended that CMS be mindful when assigning individuals to the refinement panel to ensure that all members, including CMDs, are not from the same specialties that were involved in the public comment originating the issue under review. Another commenter cautioned CMS that the refinement panels need to be balanced and should ensure that there is at least one representative on the panel who has direct experience with the procedure or service under review.

Response: We appreciate the support of the commenters regarding our proposal to use the median work value of the panel members' ratings and will move forward to finalize our proposal for refinement panels beginning in CY 2011 (refinement of CY 2011 new/revised codes with interim values).

When identifying individuals for the refinement panel, including

CMDs, we attempt to select individuals from each of the different specialties with an interest in the codes being refined, not just the specialty or specialties responsible for the public comment originating the request for refinement. We also take steps to ensure that the panel members have direct experience and knowledge of the procedure or service under review. We will certainly continue our efforts in this regard. However, we note that in recent years the number of physicians who are available to participate in the refinement panel has been limited at times, and some specialty societies have had difficulty obtaining representation for the panel.

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Comment: Several commenters urged CMS to use a methodology that would allow the AMA RUC-recommended value to prevail when appropriately supported by the pertinent specialty societies and when the value is strongly supported by the rank order and resources of the procedure, since the PFS final rule with comment period is the first opportunity for the public to see the RVUs for the coming calendar year. These commenters also believe a full and fair review process is warranted prior to the publication of these values in the final rule with comment period.

Response: We note that PFS payments for services are resource- based. When reviewing the AMA RUC recommendations, our decisions to value services are based on the resources needed to perform the typical service and, therefore, these decisions are based upon a thorough review of the AMA RUC recommendations in the context of the specific new or revised codes. In those cases where we reject the AMA RUC recommendations, we publish our rationale in the PFS final rule with comment period where we first make the values public. These values are published as interim final values that are subject to public comment.

The public comment period serves as the opportunity for public review and we see no other alternative to this timing, given the timeframes in which the new or revised CPT codes and the AMA RUC recommendations regarding their values are available to us and in which the new or revised CPT codes must be incorporated into the PFS for payment.

Comment: Several commenters expressed concerns about the proposal to allow CMS to have the final authority to set the work RVUs if policy concerns warrant modifications to the values derived from the refinement process. These commenters opposed this proposal and recommended that the decisions of the refinement panels remain unchanged by CMS. The commenters believe a major strength of the current process is that is gives stakeholders a strong incentive to participate, knowing that the outcomes of the process will not be overturned by CMS.

Response: Although we appreciate the concerns raised by the commenters, by law, we retain the final responsibility and authority to set the RVUs and, therefore, may make adjustments to the work RVUs resulting from refinement if policy concerns (such as a rank order anomaly) warrant their modifications.

Comment: One commenter urged CMS to make the refinement process transparent and open to the public.

Response: We believe our proposal would make the refinement process more transparent, as noted by some commenters. We further believe that representation from specialty societies as part of the AMA RUC process for valuing the codes allows the input of physicians who have direct experience with the procedure or service under review.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to eliminate the use of the F-test for the refinement panels and, instead, we will base the revised RVUs on the median work value of the panel members' ratings. In addition, we note that CMS retains the final authority to set the RVUs and, therefore, make adjustments to the work RVUs resulting from refinement if policy concerns warrant their modification.

J. Remote Cardiac Monitoring Services (CPT codes 93012, 93229, 93268, and 93271)

In the CY 2011 PFS proposed rule (75 FR 40105), we reiterated our concerns about the issue of developing PE RVUs for services that are utilized 24 hours a day, 7 days a week (24/7), such as those that require certain centralized monitoring system equipment and which have been discussed in earlier PFS rulemaking cycles, most recently in the

CY 2010 PFS final rule with comment period (74 FR 61755). We stated that the PE equipment methodology was developed for equipment that is in use during standard physician's office business hours and not equipment that is used in furnishing such continuous services, and that we would conduct further analysis of this issue. We indicated that services that were contractor-priced in CY 2009 remained contractor- priced in CY 2010 and that any proposed changes would be communicated through future rulemaking.

In the CY 2011 PFS proposed rule (75 FR 40105), we explained that since publication of the CY 2010 PFS final rule with comment period, we focused our additional analysis on 4 of the CPT codes that commenters have brought to our attention because they involve concurrent, remote, 24/7 attended monitoring of multiple patients from a central location:

CPT code 93012 (Telephonic transmission of post-symptom electrocardiogram rhythm strip(s); 24-hour attended monitoring, per 30 day period of time; tracing only); CPT code 93229 (Wearable mobile cardiovascular telemetry with electrocardiographic recording, concurrent computerized real time data analysis and greater than 24 hours of accessible ECG data storage (retrievable with query) with ECG triggered and patient selected events transmitted to a remote attended surveillance center for up to 30 days; technical support for connection and patient instructions for use, attended surveillance, analysis and physician prescribed transmission of daily and emergent data reports);

CPT code 93268 (Wearable patient activated electrocardiographic rhythm derived event recording with presymptom memory loop, 24-hour attended monitoring, per 30 day period of time; includes transmission, physician review and interpretation); and CPT 93271 code (Wearable patient activated electrocardiographic rhythm derived event recording with presymptom memory loop, 24-hour attended monitoring, per 30 day period of time; monitoring, receipt of transmissions, and analysis).

We pointed out that of these four codes, CPT code 93229 is currently contractor-priced in CY 2010, meaning that the local Medicare contractors determine payment rates for the service within the PFS geographic areas in their jurisdiction. The three services that are currently nationally-priced on the PFS are in the first year of a 4- year transition to lower payment rates based on the use of the PPIS data adopted in the CY 2010 PFS final rule with comment period. We refer readers to section II.A.2. of this final rule with comment period for a description of the general PFS PE methodology that is the basis for the following discussion of approaches to establishing PE RVUs for these four CPT codes.

In the CY 2011 PFS proposed rule, we explained that we examined several alternative methods for developing PE RVUS upon which PFS payment rates for these four CPT codes could be based. Each of these services involves transmission of information from multiple patients who wear individual monitoring devices that transmit patient-specific information to centralized equipment that is simultaneously in use for multiple patients. We stated that we believed it would be most consistent with the principles underlying the PFS PE methodology to classify the centralized monitoring equipment as an indirect cost since it is servicing multiple patients at the same time. We explained that after classifying this equipment as an indirect cost, we used our standard methodology to calculate an indirect practice cost index value for each code based on the PE/HR survey data of the historical mix of specialties providing these services. We went on to state that

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establishing payment rates for these codes based on this approach would result in decreases in the payment rates for these services, including the typical contractor's price for CPT code 93229. For the three services that are nationally priced, these decreases would be relative to the lower payment rates based on the use of the PPIS data after the 4-year transition.

In the CY 2011 PFS proposed rule, we acknowledged that we had also received PE/HR data from the Remote Cardiac Services Provider Group

(RCSPG), a group of Independent Diagnostic Testing Facility (IDTF) suppliers of these types of services. We explained that for sensitivity analysis purposes, we substituted these data for the PE/HR data of the specialties performing these services, while continuing to treat the centralized monitoring equipment as an indirect cost. We stated that we found that establishing payment rates for these codes based on the approach of using the submitted RCSPG PE/HR data would again result in decreases in the payment rates for these services, including the typical contractor's price for CPT code 93229. As in the prior alternative, the decreases for the nationally priced codes would be relative to the payment rates reflecting the 4-year transition to the

PPIS data.

We indicated that although we believed that it would be most consistent with the principles underlying the PE methodology to classify the centralized monitoring equipment as an indirect cost, we also performed a sensitivity analysis of the payment rates if the centralized monitoring equipment were classified as a direct cost. In this simulation, we assumed that the centralized monitoring equipment was in year-round use, 7 days per week for 24 hours per day. We found that establishing payment rates for these codes based on the approach of classifying the centralized monitoring equipment as a direct cost would again result in decreases in the payment rates for the nationally priced services relative to their payment rates after the 4-year transition to the use of the PPIS data, as well as to the typical current contractor's price for CPT code 93229.

Finally, we explained that we considered proposing contractor- pricing for all four of these services for CY 2011 but were cognizant of past public comments on this issue that had requested that all of these services be priced nationally on the PFS, including the one service (CPT code 93229) that is currently contractor-priced.

In the CY 2011 PFS proposed rule, we also considered that the services currently priced nationally on the PFS were scheduled to receive lower payment rates under the 4-year transition to the PPIS data and that the contractor's price for CPT 93229 was recently reduced in the area where the majority of the billings for this service currently occur.

We concluded that after taking all these factors into consideration, we were not proposing CY 2011 methodological or direct cost input changes for CPT codes 93012, 93268, or 93271--the services that are nationally priced under the PFS. We proposed to continue contractor-pricing for CPT 93229 for CY 2011. We solicited public comments on this issue, including responses to our analysis of alternative approaches to establishing PE RVUs for 24/7 services, and further discussion of the issues we identified in our alternative pricing methodologies. In addition, while we had focused the 24/7 services analysis up until that point in time on developing the PE RVUS for remote cardiac monitoring services, we observed that there may be 24/7 services in other areas of medicine, either currently paid under the PFS or in development for the future. Therefore, we also solicited public comments on these current or emerging 24/7 services, including descriptions of the similarities or differences between these other services and remote cardiac monitoring services, particularly with respect to the issues we identified in our analysis of alternative approaches to establishing PE RVUs for remote cardiac monitoring services under the PFS.

Comment: Several commenters expressed concerns regarding CMS' discussion of PFS payment for remote cardiac monitoring, which included no proposal of changes for CY 2011. The commenters pointed out the benefits of 24/7 remote monitoring services for cardiac and other specialty services and argued that these types of services can differ in complexity and frequency from one another and from traditional medical services. In general, the commenters expressed interest in CMS accurately capturing the cost components for all of these services, primarily arguing for the consideration of these costs as direct costs.

One commenter explained that the current methodology for assigning

PE RVUs does not work for remote cardiac providers whose businesses are structured differently from physicians' practices and, as a result, the

RVUs assigned to the services do not reflect their proper relative cost. Although CMS focused its analysis on services characterized by concurrent, remote, 24/7 attended monitoring of multiple patients from a single location, the commenter addressed cardiac event monitoring, pacemaker monitoring, Holter monitoring, International Normalized Ratio

(INR) monitoring, and a number of new monitoring technologies such as cardiac telemetry under the umbrella term of remote cardiac monitoring.

The commenter asserted that the IDTF providers of remote cardiac monitoring services operate on a 24/7 basis because the services that they furnish require round-the-clock service and are, therefore, structured very differently from physicians' offices and other IDTFs.

The commenter argued that CMS should utilize PE/HR data submitted by

RCSPG, a group of IDTF suppliers of these types of services, to the entire ranging of cardiac monitoring services furnished by these providers. Alternatively, the commenter indicated that CMS could use the all physician indirect percentage, use an indirect practice cost index (IPCI) of one, and add equipment costs to the PE formula for allocating indirect costs in setting the PE RVUs for cardiac monitoring services. Finally, the commenter requested that if CMS did not adopt one of the previous two suggestions, then CMS should temporarily suspend the phase-in of the use of PPIS data for cardiac monitoring services. Several other commenters also requested that CMS suspend the

PPIS transition for remote cardiac monitoring services.

Several commenters disagreed with CMS regarding the appropriateness of treating the centralized monitoring equipment as an indirect cost, arguing that the equipment is used specifically for patients that are receiving a specific service and, therefore, represents a direct cost like other medical equipment. The commenters contended that the centralized equipment is inherently different from other indirect practice expenses that are used to run a practice and are not tied directly to any one particular service. One commenter speculated that considering the cardiac monitoring equipment as an indirect expense would dilute the payment for this cardiac telemetry by distributing it to many people who are not providing it. Another commenter expressed concern that an indirect cost approach does not appropriately account for the significant differences in remote monitoring services and thus cannot accurately capture the cost components of each.

With respect to the remote cardiac monitoring service described by

CPT code 93229 which is contractor-priced, one commenter made several specific requests, namely that CMS: (1) Nationally price CPT code 93229 rather

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than contractor-price the service; (2) consider the centralized monitoring equipment associated with CPT code 93229 as a direct cost;

(3) adjust the equipment utilization assumption for the centralized monitoring equipment from 100 percent to 50 percent; (4) use new direct cost inputs (for example, the cost of the monitoring device worn by patient) supplied by the commenter; (5) incorporate a new PE/HR, based on the cardiac monitoring industry-wide RCSPG PE/HR data applied to all cardiac monitoring services, based on data from two telemetry providers for CPT code 93229 that yields a PE/HR of $243.22 that would be applied to CPT code 93229, or based on data for telemetry and cardiac event monitoring (CEM) which results in a PE/HR of $214.79 that would be applied to telemetry and CEM services; and (6) apply an additional indirect allocation in the CMS PE methodology based on the equipment direct costs as previously recommended by one telemetry provider. The commenter provided equipment inputs and the associated prices and further recommended that CMS should continue to apply the clinical labor and supply input items associated with this services as recommended by the AMA RUC.

Response: We appreciate the continuing interest of the commenters in the pricing of cardiac monitoring services under the PFS. After further review of this issue, while we continue to recognize there are some unique aspects to the services, we do not agree with the commenters that the PE for cardiac monitoring services cannot be appropriately valued using the PFS PE methodology. After our review, we believe that we can appropriately identify and price the direct cost inputs for these services. Furthermore, we note that the PPIS data for allocating indirect costs is from a multispecialty, nationally representative PE survey of both physicians and NPPS and, as the most comprehensive source of PE information available to date, appropriate for use for cardiac monitoring services. Therefore, we disagree that we should suspend the PE transition to the PPIS data or otherwise change our established methodology for setting the PE RVUs furnished by a subset of providers in a certain specialty area.

We continue to believe that it is more appropriate to classify the costs associated with the centralized monitoring equipment, including the hardware and software, workstation, webserver, and call recording system, as indirect costs since it is difficult to allocate those costs to services furnished to individual patients in a manner that adequately reflects the number of patients being tested. This would be true for CPT code 93229 which has not previously been nationally priced. We believe that the ability to appropriately allocate costs to individual services is a key concept that should guide our adoption of the direct PE inputs for services paid under the PFS. Having drawn this conclusion, we plan to review the direct PE inputs for other nationally priced services that include centralized monitoring equipment under the

PFS and, if we find that we have not consistently treated that equipment as an indirect cost, we may propose changes to the direct PE inputs for existing codes in a future PFS rulemaking cycle.

We agree with several commenters that it would be appropriate at this time to nationally price CPT code 93229, especially in light of our conclusion regarding how the centralized monitoring system should be treated under the PFS PE methodology and the fact that the commenters have provided current prices and associated documentation for the direct PE inputs used in the typical case. Therefore, we are accepting the AMA RUC recommendations originally made for CY 2009 (73

FR 69896) for clinical labor and supplies for CPT code 93229 and are utilizing these direct PE inputs for CY 2011. With respect to the equipment inputs provided to us by one commenter who currently furnishes the majority of services described by CPT code 93229, under our final CY 2011 policy the only piece of equipment that would be appropriately treated as a direct PE input is the cardiac telemetry monitoring device worn by the patient. The other equipment items, including the monitoring system software and hardware, workstation, webserver, and call recording system are indirect practice costs.

Therefore, we are accepting the commenter's submission of $21,575 as the price for this device in the typical case, and applying a 50 percent utilization rate and useful life of 3 years as recommended by the commenter.

We do not believe it would be appropriate to deviate from our standard PFS PE methodology to adopt a PE/HR that is specific to CPT code 93229 or any other set of cardiac monitoring codes based on data from two telemetry providers, from a subset of services provided by certain specialty cardiac monitoring providers, or from a certain group of specialty providers that overall furnish only a portion of cardiac monitoring services, nor to change our established indirect PE allocation methodology. We believe the current PE methodology appropriately captures the relative costs of these services in setting their PE RVUs, based on the conclusion we have drawn following our assessment of the centralized monitoring system that is especially characteristic of services such as CPT code 93229. We note that these direct PE inputs are included in the final CY 2011 direct PE database that is posted on the CMS Web site under downloads for this CY 2011 PFS final rule with comment period at: http://www.cms.gov/

PhysicianFeeSched/PFSFRN/list.asp#TopOfPage. We further note that the

CY 2011 payment for CPT code 93229 (without considering the negative

PFS update that will apply for CY 2011 under current law) is close to the current typical contractor's price for the service in CY 2010.

After consideration of the public comments we received, we are establishing a national price for CPT code 93229 based on nationally set RVUs, instead of maintaining the code as contractor-priced as we proposed. We are adopting the AMA RUC's recommendations for the clinical labor and supply inputs, and utilizing price, utilization, and useful life information provided by the commenters as equipment inputs for the cardiac telemetry monitoring device worn by the patient. The final CY 2011 RVUs for CPT code 93229 are displayed in Addendum B to this final rule with comment period. While we are making no changes to the direct PE inputs for other remote cardiac monitoring CPT codes for

CY 2011, we will consider in the future whether changes could be appropriate if we conclude that these services utilize a centralized monitoring system that would most appropriately be treated an indirect cost.

Comment: While most of the commenters addressed remote cardiac monitoring services specifically discussed in the CY 2011 PFS proposed rule, several commenters addressed other types of emerging 24/7 services. One commenter described a pilot program that utilizes telehealth to monitor certain health status indicators for cardiac patients. This monitoring occurs during the day and night and includes an assessment by a nurse. The commenter stated that the initial results of the pilot show a lower rate of hospital readmissions for participants. The commenter asserted that there is currently no payment for this service, and urged CMS to consider funding for these types of programs.

Outside of cardiac monitoring, another commenter noted that there are many types of remote monitoring

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services that provide important benefits, especially for chronically ill patients. The commenter explained that these may include health status monitoring services, activity and sensor monitoring services, and medication dispensing and monitoring services. The commenter asserted that the resource requirements for these types of services can differ in complexity and frequency and may involve varied resources, including equipment and other fees; training and coaching; data collection, monitoring and documentation; and personal emergency response. As such, the commenter recommended that CMS' PE methodology for remote monitoring services be as transparent and flexible as possible to allow for these differences, and to accurately capture the cost components for each. Therefore, the commenter, concluded that a direct cost approach would be the most appropriate approach in most cases.

Response: We thank the commenters for providing information on other current and emerging 24/7 services. We will consider appropriate payment for other 24/7 services under the PFS as specific codes for such services are created by the CPT Editorial Panel. Regarding direct

PE inputs for other remote monitoring services, we acknowledge diversity in the direct and indirect costs to providers for furnishing various monitoring services--and all services--and believe that our current PE methodology, as discussed earlier in this section, is able to yield appropriate values across this wide range. As stated earlier in the context of remote cardiac monitoring, we believe that the ability to appropriately allocate costs to the services furnished to individual patients is a key concept that should guide our adoption of the direct PE inputs for services paid under the PFS, including remote monitoring and other 24/7 services.

We look forward to continuing a dialogue with stakeholders involved in developing and furnishing 24/7 services as medical practice evolves in order to ensure that the PFS pays appropriately for those 24/7 services that are covered by Medicare and paid as physicians' services.

IV. Medicare Telehealth Services for the Physician Fee Schedule

A. Billing and Payment for Telehealth Services 1. History

Prior to January 1, 1999, Medicare coverage for services delivered via a telecommunications system was limited to services that did not require a face-to-face encounter under the traditional model of medical care. Examples of these services included interpretation of an x-ray or electrocardiogram or electroencephalogram tracing, and cardiac pacemaker analysis.

Section 4206 of the BBA provided for coverage of, and payment for, consultation services delivered via a telecommunications system to

Medicare beneficiaries residing in rural health professional shortage areas (HPSAs) as defined by the Public Health Service Act.

Additionally, the BBA required that a Medicare practitioner

(telepresenter) be with the patient at the time of a teleconsultation.

Further, the BBA specified that payment for a teleconsultation had to be shared between the consulting practitioner and the referring practitioner and could not exceed the fee schedule payment which would have been made to the consultant for the service provided. The BBA prohibited payment for any telephone line charges or facility fees associated with the teleconsultation. We implemented this provision in the CY 1999 PFS final rule with comment period (63 FR 58814).

Effective October 1, 2001, section 223 of the Medicare, Medicaid and SCHIP Benefits Improvement Protection Act of 2000 (Pub. L. 106-554)

(BIPA) added a new section 1834(m) to the Act which significantly expanded Medicare telehealth services. Section 1834(m)(4)(F)(i) of the

Act defines Medicare telehealth services to include consultations, office visits, office psychiatry services, and any additional service specified by the Secretary, when delivered via a telecommunications system. We first implemented this provision in the CY 2002 PFS final rule with comment period (66 FR 55246). Section 1834(m)(4)(F)(ii) of the Act required the Secretary to establish a process that provides for annual updates to the list of Medicare telehealth services. We established this process in the CY 2003 PFS final rule with comment period (67 FR 79988).

As specified in regulations at Sec. 410.78(b), we generally require that a telehealth service be furnished via an interactive telecommunications system. Under Sec. 410.78(a)(3), an interactive telecommunications system is defined as multimedia communications equipment that includes, at a minimum, audio and video equipment permitting two-way, real-time interactive communication between the patient and the practitioner at the distant site. Telephones, facsimile machines, and electronic mail systems do not meet the definition of an interactive telecommunications system. An interactive telecommunications system is generally required as a condition of payment; however, section 1834(m)(1) of the statute does allow the use of asynchronous ``store-and-forward'' technology in delivering these services when the originating site is a Federal telemedicine demonstration program in Alaska or Hawaii. As specified in regulations at Sec. 410.78(a)(1), store and forward means the asynchronous transmission of medical information from an originating site to be reviewed at a later time by the practitioner at the distant site.

Medicare telehealth services may be provided to an eligible telehealth individual notwithstanding the fact that the individual practitioner providing the telehealth service is not at the same location as the beneficiary. An eligible telehealth individual means an individual enrolled under Part B who receives a telehealth service furnished at an originating site. As specified in BIPA, originating sites are limited under section 1834(m)(3)(C) of the statute to specified medical facilities located in specific geographic areas. The initial list of telehealth originating sites included the office of a practitioner, a critical access hospital (CAH), a rural health clinic

(RHC), a federally qualified health center (FQHC) and a hospital. More recently, section 149 of the Medicare Improvements for Patients and

Providers Act of 2008 (Pub. L. 110-275) (MIPPA) expanded the list of telehealth originating sites to include hospital-based renal dialysis centers, skilled nursing facilities (SNFs), and community mental health centers (CMHCs). In order to serve as a telehealth originating site, these sites must be located in an area designated as a rural HPSA, in a county that is not in a metropolitan statistical area (MSA), or must be an entity that participate in a Federal telemedicine demonstration project that has been approved by (or receives funding from) the

Secretary as of December 31, 2000. Finally, section 1834(m) of the statute does not require the eligible telehealth individual to be presented by a practitioner at the originating site. 2. Current Telehealth Billing and Payment Policies

As noted above, Medicare telehealth services can only be furnished to an eligible telehealth beneficiary in an originating site. An originating site is defined as one of the specified sites where an eligible telehealth individual is located at the time the service is being furnished via a telecommunications system. In general, originating sites must be located in a rural HPSA or in a county outside of an MSA. The

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originating sites authorized by the statute are as follows:

Offices of a physician or practitioner

Hospitals

CAHs

RHCs

FQHCs

Hospital-Based or Critical Access Hospital-Based Renal

Dialysis Centers (including Satellites)

SNFs

CMHCs

Currently approved Medicare telehealth services include the following:

Initial inpatient consultations

Follow-up inpatient consultations

Office or other outpatient visits

Individual psychotherapy

Pharmacologic management

Psychiatric diagnostic interview examination

End Stage Renal Disease (ESRD) related services

Individual medical nutrition therapy (MNT)

Neurobehavioral status exam

Individual health and behavior assessment and intervention

(HBAI).

In general, the practitioner at the distant site may be any of the following, provided that the practitioner is licensed under State law to furnish the service being furnished via a telecommunications system:

Physician

Physician assistant (PA)

Nurse practitioner (NP)

Clinical nurse specialist (CNS)

Nurse midwife

Clinical psychologist

Clinical social worker

Registered dietitian or nutrition professional.

Practitioners furnishing Medicare telehealth services are located at a distant site, and they submit claims for telehealth services to the Medicare contractors that process claims for the service area where their distant site is located. Section 1834(m)(2)(A) of the Act requires that a practitioner who furnishes a telehealth service to an eligible telehealth individual be paid an amount equal to the amount that the practitioner would have been paid if the service had been furnished without the use of a telecommunications system. Distant site practitioners must submit the appropriate HCPCS procedure code for a covered professional telehealth service, appended with the -GT (Via interactive audio and video telecommunications system) or -GQ (Via asynchronous telecommunications system) modifier. By reporting the -GT or -GQ modifier with a covered telehealth procedure code, the distant site practitioner certifies that the beneficiary was present at a telehealth originating site when the telehealth service was furnished.

The usual Medicare deductible and coinsurance policies apply to the telehealth services reported by distant site practitioners.

Section 1834(m)(2)(B) of the Act provides for payment of a facility fee to the originating site. To be paid the originating site facility fee, the provider or supplier where the eligible telehealth individual is located must submit a claim with HCPCS code Q3014 (Telehealth originating site facility fee), and the provider or supplier is paid according to the applicable payment methodology for that facility or location. The usual Medicare deductible and coinsurance policies apply to HCPCS code Q3014. By submitting HCPCS code Q3014, the originating site authenticates that it is located in either a rural HPSA or non-MSA county or is an entity that participates in a Federal telemedicine demonstration project that has been approved by (or receives funding from) the Secretary as of December 31, 2000 as specified in section 1834(m)(4)(C)(i)(III) of the Act.

As described above, certain professional services that are commonly furnished remotely using telecommunications technology, but that do not require the patient to be present in-person with the practitioner when they are furnished, are covered and paid in the same way as services delivered without the use of telecommunications technology when the practitioner is in-person at the medical facility furnishing care to the patient. Such services typically involve circumstances where a practitioner is able to visualize some aspect of the patient's condition without the patient being present and without the interposition of a third person's judgment. Visualization by the practitioner can be possible by means of x-rays, electrocardiogram or electroencephalogram tracings, tissue samples, etc. For example, the interpretation by a physician of an actual electrocardiogram or electroencephalogram tracing that has been transmitted via telephone

(that is, electronically, rather than by means of a verbal description) is a covered physician's service. These remote services are not

Medicare telehealth services as defined under section 1834(m) of the

Act. Rather, these remote services that utilize telecommunications technology are considered physicians' services in the same way as services that are furnished in-person without the use of telecommunications technology; they are paid under the same conditions as in-person physicians' services (with no requirements regarding permissible originating sites), and should be reported in the same way

(that is, without the -GT or -GQ modifier appended).

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

Services

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

Medicare telehealth services to one of the following categories:

Category 1: Services that are similar to professional consultations, office visits, and office psychiatry services. In reviewing these requests, we look for similarities between the requested 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 in-person 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 in-person delivery of the requested service.

Since establishing the process to add or remove services from the list of approved telehealth services, we have added the following to the list of Medicare telehealth services: individual HBAI services; psychiatric diagnostic interview examination; ESRD services with 2 to 3 visits per month and 4 or more visits per month (although we require at least 1 visit a month to be furnished in-person by a physician, CNS,

NP, or PA in order to examine the vascular access site); individual

MNT; neurobehavioral status exam; and initial and follow-up inpatient telehealth consultations for beneficiaries in hospitals and skilled nursing facilities (SNFs).

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Requests to add services to the list of Medicare telehealth services must be submitted and received no later than December 31 of each calendar year to be considered for the next rulemaking cycle. For example, requests submitted before the end of CY 2010 are considered for the CY 2012 proposed rule. Each request for adding a service to the list of Medicare telehealth services must include any supporting documentation the requester wishes us to consider as we review the request. Because we use the annual PFS rulemaking process as a vehicle for making changes to the list of Medicare telehealth services, requestors should be advised that any information submitted is subject to public disclosure for this purpose. For more information on submitting a request for an addition to the list of Medicare telehealth services, including where to mail these requests, we refer readers to the CMS Web site at http://www.cms.gov/telehealth/.

C. Submitted Requests for Addition to the List of Telehealth Services for CY 2011

We received requests in CY 2009 to add the following services as

Medicare telehealth services effective for CY 2011: (1) Individual kidney disease education (KDE) services; (2) individual diabetes self- management training (DSMT) services; (3) group KDE, DSMT, MNT, and HBAI services; (4) initial, subsequent, and discharge day management hospital care services; (5) initial, subsequent, discharge day management, and other nursing facility care services; (6) neuropsychological testing services; (7) speech-language pathology services; and (8) home wound care services. The following presents a discussion of these requests, including our proposed additions to the

CY 2011 telehealth list. 1. Individual KDE Services

The American Society of Nephrology, Dialysis Patient Citizens,

AMGEN, and Kidney Care Partners submitted requests to add individual

KDE services, reported by HCPCS code G0420 (Face-to-face educational services related to the care of chronic kidney disease; individual, per session, per one hour), to the list of approved telehealth services for

CY 2011 on a category 1 basis.

Individual KDE services, covered under the new Medicare KDE benefit effective for services furnished beginning in CY 2010, are defined as face-to-face educational services provided to a patient with stage IV chronic kidney disease (CKD). We believe the interaction between a practitioner and a beneficiary receiving individual KDE services is similar to the education, assessment, and counseling elements of individual MNT services, reported by HCPCS code G0270 (Medical nutrition therapy; reassessment and subsequent intervention(s) following second referral in same year for change in diagnosis, medical condition or treatment regimen (including additional hours needed for renal disease), individual, face to face with the patient, each 15 minutes); CPT code 97802 (Medical nutrition therapy; initial assessment and intervention, individual, face-to-face with the patient, each 15 minutes); and CPT code 97803 (Medical nutrition therapy; re-assessment and intervention, individual, face-to-face with the patient, each 15 minutes), all services that are currently on the telehealth list.

Therefore, we proposed to add HCPCS code G0420 to the list of telehealth services for CY 2011 on a category 1 basis and to revise our regulations at Sec. 410.78(b) and Sec. 414.65(a)(1) to include individual KDE as a Medicare telehealth service.

Comment: Several commenters expressed support for CMS' proposal to add KDE services to the list of Medicare telehealth services for CY 2011. One commenter stated that the proposal would provide patients at risk for developing chronic kidney disease and ESRD with access to educational services that may help in controlling the progression of disease. Another commenter suggested that delivery of KDE services through telehealth would provide beneficiaries with the flexibility to interact with practitioners in a manner tailored to their needs, thus facilitating a more patient-centered approach. Another commenter noted that greater flexibility in the provision of KDE services is particularly important in rural areas where individuals do not have as much access to dialysis centers.

Response: We agree with the commenters that adding KDE services to the list of Medicare telehealth services may be valuable to Medicare beneficiaries, especially insofar as it helps provide greater access to the services for beneficiaries in rural or other isolated areas.

Comment: One commenter who supported the proposal also encouraged the CMS to maintain its existing policy regarding the qualified providers for KDE services in order to appropriately ensure the quality and content conveyed to patients in educational sessions and remain concordant with the intent of MIPPA.

Response: We note that the addition of KDE to the list of Medicare telehealth services does not alter the qualifications for providers of

KDE services as specified in Sec. 410.48 of the regulations.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to add HCPCS code G0420 to the list of telehealth services for CY 2011 on a category 1 basis and to revise our regulations at Sec. 410.78(b) and Sec. 414.65(a)(1) to include individual KDE as a Medicare telehealth service. 2. Individual DSMT Services

The Tahoe Forest Health System and the Marshfield Clinic submitted requests to add individual DSMT services, reported by HCPCS code G0108

(Diabetes outpatient self-management training services, individual, per 30 minutes), to the list of telehealth services for CY 2011 on a category 1 basis. In the CY 2009 PFS final rule with comment period (73

FR 69743), we stated that we believe individual DSMT services are not analogous to individual MNT services because of the element of skill- based training that is encompassed within individual DSMT services that is not an aspect of individual MNT services (or any other services currently approved for telehealth). Due to the statutory requirement that DSMT services include teaching beneficiaries the skills necessary for the self-administration of injectable drugs, we have stated our belief that DSMT, whether provided to an individual or a group, must be evaluated as a category 2 service as specified in the CY 2009 PFS proposed rule (73 FR 38516). Prior to CY 2011 rulemaking, we had considered several previous requests to add DSMT to the list of

Medicare telehealth services. We had not added individual DSMT to the list of telehealth services because we believe that skill-based training, such as teaching patients how to inject insulin, would be difficult to accomplish effectively without the physical presence of the teaching practitioner (70 FR 45787 and 70157, and 73 FR 38516 and 69743).

In considering the new request to add individual DSMT services to the list of telehealth services in CY 2011, we took into account requestors' argument that individual DSMT services are highly similar to individual MNT services and that injection training constitutes just a small proportion of DSMT services. Except for the component of individual DSMT services that involves instruction in self- administration of injectable drugs for eligible beneficiaries, we agreed with the requestors that individual DSMT

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services are similar to individual MNT services, which are currently on the list of Medicare telehealth services. We note that Medicare coverage of DSMT services was initially authorized in the BBA. After more than a decade of Medicare coverage, the most recent information shows that DSMT continues to be significantly underutilized in the context of the eligible population of Medicare beneficiaries. While we are uncertain to what extent geographic barriers to care contribute to this underutilization, given the morbidity associated with poorly managed diabetes and the growing evidence-base regarding effective DSMT services, we believe it is very important to facilitate Medicare beneficiary access to these underutilized services. While we were previously concerned about treating the components of DSMT services differently in the context of considering DSMT services for the telehealth list, in the CY 2011 PFS proposed rule (75 FR 40108), we stated our belief that our concern regarding the skill-based injection training component of DSMT services could be addressed by imposing a requirement that a minimum portion of the training be furnished in- person. We noted that for beneficiaries who meet the coverage criteria,

Medicare covers 10 hours of DSMT services in the year following the initial training, as described in the Medicare Benefit Policy Manual

(Pub. 100-02, Chapter 15, Section 300.3). Taking into consideration the initial year coverage of DSMT services, for CY 2011 we proposed that a minimum of 1 hour of instruction in injection training must be furnished in-person during the year following the initial DSMT service.

Imposing this condition would allow us to expand access to DSMT services by adding individual DSMT services to the list of telehealth services, while ensuring effective injection training for beneficiaries.

Therefore, we proposed to add HCPCS code G0108 to the list of telehealth services beginning in CY 2011. We also proposed that, as a condition of payment for individual DSMT services furnished as telehealth services to an eligible telehealth individual, a minimum of 1 hour of in-person instruction in the self-administration of injectable drugs must be furnished to the individual during the year following the initial DSMT service. The injection training may be furnished through either individual or group DSMT services. By reporting the -GT or -GQ modifier with HCPCS code G0108 as a telehealth service, the distant site practitioner would certify that the beneficiary has received or will receive 1 hour of in-person DSMT services for purposes of injection training during the year following the initial DSMT service. Consistent with this proposal, we proposed to revise our regulations at Sec. 410.78(b) and Sec. 414.65(a)(1) to include individual DSMT services as a Medicare telehealth service, with the exception of 1 hour of in-person instruction in self-administration of injectable drugs which must be furnished to the eligible telehealth individual as individual or group DSMT services during the year following the initial DSMT service.

Comment: A number of commenters expressed support for CMS' proposal to add DSMT services to the list of Medicare telehealth services. One commenter requested that CMS clarify that this proposal would permit

NPs and PAs in all patient care settings to provide and bill for DSMT services furnished through telehealth technologies.

Response: As we stated in the CY 2011 PFS proposed rule (75 FR 40109), our proposal is consistent with the statutory requirements of section 1834(m)(1) of the Act and as provided in Sec. 410.141(e) that individual DSMT services may be furnished by a physician, individual, or entity that furnishes other services for which direct Medicare payment may be made and that submits necessary documentation to, and is accredited by, an accreditation organization approved by us as described in the Benefit Policy Manual (Pub. 100-04, chapter 15, section 300.2). However, consistent with the statutory requirements of section 1834(m)(1) of the Act and as provided in Sec. 410.78(b)(1) and

(b)(2) of our regulations, Medicare telehealth services, including individual DSMT furnished as a telehealth service, can only be furnished by a licensed physician, PA, NP, CNS, certified nurse- midwife, clinical psychologist, clinical social worker, or registered dietitian or nutrition professional. Additionally, the site of the beneficiary must conform with the statutory requirements of telehealth originating sites from section 1834(m)(3)(C) of the Act and described in section IV.A. 2. of this final rule with comment period.

Comment: One commenter requested that pharmacists be added to the list of eligible Medicare telehealth distant site practitioners. The commenter stated that since pharmacists are already providing valuable

DSMT services to patients in-person, these practitioners should not be excluded from providing those same valuable services via telehealth.

Response: Under section 1834(m) of the Act, payment is made for a

Medicare telehealth service furnished by a physician or practitioner in a distant site. For purposes of Medicare telehealth services, the physician or practitioner must either be a physician as defined in section 1861(r) of the Act or another practitioner as defined in section 1842(b)(18)(C) of the Act. Because pharmacists do not fall within these statutory definitions, we do not have the authority to make payment to pharmacists as eligible distant site practitioners for

Medicare telehealth services.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to add HCPCS code G0108 to the list of telehealth services beginning in CY 2011. As a condition of payment for individual DSMT services furnished as telehealth services to an eligible telehealth individual, a minimum of 1 hour of in-person instruction in the self-administration of injectable drugs must be furnished to the individual during the year following the initial DSMT service. The injection training may be furnished through either individual or group DSMT services. By reporting the -GT or -GQ modifier with HCPCS code G0108 as a telehealth service, the distant site practitioner certifies that the beneficiary has received or will receive 1 hour of in-person DSMT services for purposes of injection training during the year following the initial DSMT service. Consistent with this final policy, we are revising our regulations at Sec. 410.78(b) and Sec. 414.65(a)(1) to include individual DSMT services as a Medicare telehealth service, with the exception of 1 hour of in- person instruction in self-administration of injectable drugs which must be furnished to the eligible telehealth individual as individual or group DSMT services during the year following the initial DSMT service.

We note that, as specified in Sec. 410.141(e), individual DSMT services may be furnished by a physician, individual, or entity that furnishes other services for which direct Medicare payment may be made and that submits necessary documentation to, and is accredited by, an accreditation organization approved by CMS. However, consistent with the statutory requirements of section 1834(m)(1) of the Act and as provided in Sec. 410.78(b)(1) and (b)(2) of our regulations, Medicare telehealth services, including individual DSMT furnished as a telehealth service, can only be furnished by a licensed physician, PA,

NP, CNS, certified nurse-midwife, clinical psychologist, clinical social worker, or registered dietitian or nutrition professional.

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3. Group KDE, MNT, DSMT, and HBAI Services

The American Society of Nephrology, Dialysis Patient Citizens,

AMGEN, Tahoe Forest Health Systems, Kidney Care Partners, the American

Telemedicine Association, and the Marshfield Clinic submitted requests to add one or more of the following group services to the telehealth list for CY 2011:

Group KDE services, reported by HCPCS code G0421 (Face-to- face educational services related to the care of chronic kidney disease; group, per session, per one hour);

Group MNT services, reported by CPT code 97804 (Medical nutrition therapy; group (2 or more individual(s)), each 30 minutes);

Group DSMT services, reported by HCPCS code G0109

(Diabetes outpatient self-management training services, group session

(2 or more), per 30 minutes); and/or

Group HBAI services, reported by CPT code 96153 (Health and behavior intervention, each 15 minutes, face-to-face; group (2 or more patients)) and 96154 (Health and behavior intervention, each 15 minutes, face-to-face; family (with the patient present)).

When furnished as individual services, HBAI and MNT services are currently on the list of Medicare telehealth services. Furthermore, we proposed to add individual KDE and DSMT services to the list of

Medicare telehealth services beginning in CY 2011 as described above.

In the CY 2007 and CY 2010 PFS rulemaking cycles (70 FR 45787 and 70157, and 74 FR 33543 and 61764), we stated that we did not believe that group services could be appropriately delivered through telehealth. In the CY 2011 PFS proposed rule (75 FR 40109), we observed that currently there are no group services approved as Medicare telehealth services and that there is a different interactive dynamic between the practitioner and his or her patients in group services as compared to individual services. We previously had considered requests to add various group services to the list of Medicare telehealth services on a category 2 basis because we had believed that, especially given the interactive dynamic between practitioners and their patients, group services were not similar to other services on the list of

Medicare telehealth services. Therefore, we had maintained that it was necessary to evaluate the addition of group services by comparing diagnostic findings or therapeutic interventions when services are furnished via telehealth versus when services are furnished in-person.

In the CY 2011 proposed rule (75 FR 40109), we stated that we continue to believe that the group dynamic may be a critical and defining element for certain services, and that this characteristic precludes many group services from being considered on a category 1 basis for addition to the list of Medicare telehealth services. For example, we believe that due to the therapeutic nature of the group dynamic that is integral to group psychotherapy, group psychotherapy is fundamentally different from other Medicare telehealth services and, therefore, could not be considered on a category 1 basis for addition to the telehealth services list. For the same reason, in the absence of evidence to the contrary, we do not believe group psychotherapy services could be appropriately delivered through telehealth.

However, upon further consideration, with regard to the particular group education and training services for which we received requests for addition to the Medicare telehealth services list, for CY 2011 we concluded that we believe the group dynamic is not central to the core education and training components of these particular services, specifically DSMT, MNT, KDE, and HBAI services. We believe that these group services are sufficiently similar to the individual, related services that are already on the telehealth services list or were proposed for addition beginning in CY 2011. Specifically, we believe that for these group services, which consist principally of an information exchange for the purpose of education and training, the roles of, and interactions between, the patients and the practitioner are sufficiently similar to the related individual education and training services that the services can be furnished appropriately as a telehealth service.

Therefore, we proposed to add HCPCS code G0421 for group KDE services, CPT code 97804 for group MNT services, HCPCS code G0109 for group DSMT services, and CPT codes 96153 and 96154 for group HBAI services to the Medicare telehealth services list on a category 1 basis for CY 2011. Furthermore, because the concerns we raised above regarding adequate injection training with the addition of individual

DSMT are also present for group DSMT, we proposed to require the same minimum of 1 hour of in-person instruction for injection training within the year following the initial DSMT service for any beneficiary that receives DSMT services via telehealth. By reporting the -GT or -GQ modifier with HCPCS code G0109, the distant site practitioner would certify that the beneficiary has received or will receive 1 hour of in- person instruction in self-administration of injectable drugs which must be furnished to the eligible telehealth individual as individual or group DSMT services during the year following the initial DSMT service. Consistent with this proposal to add these group education and training services, we also proposed to revise our regulations at Sec. 410.78(b) and Sec. 414.65(a)(1) to include group KDE, MNT, DSMT, and

HBAI services as Medicare telehealth services, with the exception of 1 hour of in-person instruction in self-administration of injectable drugs which must be furnished to the eligible telehealth individual as individual or group DSMT services in the year following the initial

DSMT service.

Comment: Many commenters agreed with CMS' proposal to add group

KDE, MNT, DSMT, and HBAI to the list of Medicare telehealth services for CY 2011. Some commenters commended CMS' willingness to expand the list of Medicare telehealth services and explained that the additions would facilitate beneficiary access to care.

Many commenters also urged CMS to make further additions to the list of Medicare telehealth services beyond those proposed for CY 2011.

Response: We believe adding these group services to the list of

Medicare telehealth services will facilitate beneficiary access to care, and we appreciate the commenters' shared interest in that goal.

The process for requesting additional services to be added to the list of Medicare telehealth services is described in section IV.B. of this final rule with comment period. Requests for additions for CY 2012 must be received by the end of CY 2010. Further information is available about the process on the CMS web site at: http://www.cms.gov/ telehealth/.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to add HCPCS code G0421 for group KDE services, CPT code 97804 for group MNT services, HCPCS code G0109 for group DSMT services, and CPT codes 96153 and 96154 for group HBAI services to the Medicare telehealth services list on a category 1 basis. Furthermore, because we have the same concerns for group DSMT services that we raised above regarding adequate injection training for individual DSMT services, we are requiring the same minimum of 1 hour of in-person instruction for injection training within

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the year following the initial DSMT service for any beneficiary that receives DSMT services via telehealth. By reporting the -GT or -GQ modifier with HCPCS code G0109, the distant site practitioner would certify that the beneficiary has received or will receive 1 hour of in- person DSMT services for purposes of injection training during the year following the initial DSMT service. Consistent with the addition of these group education and training services, we are also revising our regulations at Sec. 410.78(b) and Sec. 414.65(a)(1) to include group

KDE, MNT, DSMT, and HBAI services as Medicare telehealth services, with the exception of 1 hour of in-person instruction for injection training within the year following the initial DSMT service.

As described above for individual DSMT services, we note that group

DSMT services may be furnished by a physician, individual, or entity that furnishes other services for which direct Medicare payment may be made and that submits necessary documentation to, and is accredited by, an accreditation organization approved by CMS, as specified in Sec. 410.141(e) for DSMT services. However, consistent with the statutory requirements of section 1834(m)(1) of the Act and as provided in Sec. 410.78(b)(1) and (b)(2) of our regulations, Medicare telehealth services, including group DSMT furnished as a telehealth service, can only be furnished by a licensed physician, PA, NP, CNS, certified nurse-midwife, clinical psychologist, clinical social worker, or registered dietitian or nutrition professional. 4. Initial, Subsequent, and Discharge Day Management Hospital Care

Services

The University of Louisville School of Medicine, the American

Telemedicine Association, and Mille Lacs Health System submitted various requests to add initial hospital care services (reported by CPT codes 99221 (Level 1 initial hospital care), 99222 (Level 2 initial hospital care), and 99223 (Level 3 initial hospital care)); subsequent hospital care services (reported by CPT codes 99231 (Level 1 subsequent hospital care), 99232 (Level 2 subsequent hospital care), and 99233

(Level 3 subsequent hospital care)); and/or hospital discharge day management services (reported by CPT codes 99238 (Hospital discharge day management; 30 minutes or less) and 99239 (Hospital discharge day management; more than 30 minutes) to the Medicare telehealth services list beginning in CY 2011, generally on a category 1 basis. Some of the requestors also recommended that we limit the delivery of these services through telehealth to the provision of services to patients with a psychiatric diagnosis or to those treated in a psychiatric hospital or licensed psychiatric bed.

We appreciate the recommendations of the requestors to substantially expand the list of Medicare telehealth services. The requestors submitted a number of studies regarding the outcomes of telehealth services in caring for patients with psychiatric diagnoses.

However, we note that the CPT codes for hospital care services are used to report care for hospitalized patients with a variety of diagnoses, including psychiatric diagnoses. In the CY 2011 PFS proposed rule (75

FR 40110), we stated our belief that it would not be appropriate to add services to the telehealth list only for certain diagnoses because the service described by a HCPCS code is essentially the same service, regardless of the patient's diagnosis. When evaluating the addition of services for telehealth on a category 1 basis, our focus is on the roles of, and interactions among, the beneficiary, the physician or practitioner, and the telepresenter (if applicable), which generally are similar across diagnoses for services that may be reported with the same HCPCS codes. Even in the unique case of certain ESRD services, we limited additions to the list of Medicare telehealth services based on the appropriateness of certain specific codes, taking into consideration the full service descriptions (69 FR 47511). Therefore, we continue to believe that it is most appropriate to consider additions to the list of telehealth services based on the overall suitability of the services described by the relevant HCPCS codes to delivery through telehealth.

In the CY 2005, CY 2008, and CY 2009 PFS rulemakings (69 FR 47510 and 66276, 72 FR 38144 and 66250, and 73 FR 38517 and 69745, respectively), we did not add initial, subsequent, or discharge day management hospital care services to the list of approved telehealth services because of our concern regarding the use of telehealth for the ongoing evaluation and management (E/M) for the generally high acuity of hospital inpatients. While we continue to have some concern in this area, we also share the requestors' interest in improving access for hospitalized patients to care furnished by treating practitioners.

Therefore, we reevaluated these services in the context of the CY 2011 requests, including considering the possibility that these services could be added on a category 1 basis based on their resemblance to services currently on the telehealth list, such as initial and follow- up inpatient telehealth consultations. The following presents a discussion of our review for the CY 2011 proposed rule of the subcategories of hospital care services included in these requests.

Currently, one of the three codes for an initial hospital care service (specifically CPT codes 99221, 99222, or 99223) is reported for the first hospital inpatient E/M visit to the patient by the admitting or a consulting practitioner when that visit is furnished in person. In addition, we note that currently there are several HCPCS G-codes on the

Medicare telehealth services list that may be reported for initial and follow-up inpatient consultations through telehealth, specifically

HCPCS codes G0406 (Follow-up inpatient telehealth consultation, limited, physicians typically spend 15 minutes communicating with the patient via telehealth); G0407 (Follow-up inpatient telehealth consultation, intermediate, physicians typically spend 25 minutes communicating with the patient via telehealth); G0408 (Follow-up inpatient telehealth consultation, complex, physicians typically spend 35 minutes or more communicating with the patient via telehealth);

G0425 (Initial inpatient telehealth consultation, typically 30 minutes communicating with the patient via telehealth); G0426 (Initial inpatient telehealth consultation, typically 50 minutes communicating with the patient via telehealth); and G0427 (Initial inpatient telehealth consultation, typically 70 minutes or more communicating with the patient via telehealth).

While initial inpatient consultation services are currently on the list of approved telehealth services, there are no services on the current list of telehealth services that resemble initial hospital care for an acutely ill patient by the admitting practitioner who has ongoing responsibility for the patient's treatment during the hospital course. Therefore, we were unable to consider initial hospital care services on a category 1 basis for the telehealth list for CY 2011.

We reviewed the documentation submitted in support of adding the initial hospital care codes to the Medicare telehealth services list as category 2 requests. Most of the studies provided by the requestors were specific to the treatment of patients with particular diagnoses.

Additionally, the studies were not specific to initial hospital care visits by admitting practitioners. Finally, most of the studies concluded that more research was required in order to establish medical equivalence between telehealth

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and in-person services. Therefore, we received no information that provides robust support for the addition of initial hospital care services to the approved telehealth list on a category 2 basis. The initial hospital care codes describe the first visit to the hospitalized patient by the admitting practitioner who may or may not have seen the patient in the decision-making phase regarding hospitalization. We believe it is critical that the initial hospital visit by the admitting practitioner be conducted in-person to ensure that the practitioner with ongoing treatment responsibility comprehensively assesses the patient's condition upon admission to the hospital through a thorough in-person examination. Therefore, we did not propose to add initial hospital care services to the Medicare telehealth services list for CY 2011.

We again considered adding subsequent hospital care services reported by CPT codes 99231 through 99233 to the telehealth list for CY 2011 on a category 1 basis. In the CY 2005 and CY 2008 PFS proposed rules (69 FR 47511 and 72 FR 38155), we stated that the potential acuity of patients in the hospital setting precludes consideration of subsequent hospital visits as similar to existing telehealth services.

However, as stated earlier, we also note that HCPCS codes for initial and follow-up inpatient consultation services are on the list of telehealth services. These E/M services are furnished to high acuity hospitalized patients, although not by the admitting practitioner himself or herself. However, in light of the increasingly prevalent care model that entails multidisciplinary team care for patients with complex medical illnesses that involve multiple body systems, consulting practitioners may often play a key, intensive, and ongoing role in caring for hospitalized patients. Therefore, we believe that subsequent hospital care visits by a patient's admitting practitioner may sufficiently resemble follow-up inpatient consultation services to consider these subsequent hospital care services on a category 1 basis for the telehealth list. While we still believe the potential acuity of hospital inpatients is greater than those patients likely to receive currently approved Medicare telehealth services, we also believe that it would be appropriate to permit some subsequent hospital care services to be furnished through telehealth in order to ensure that hospitalized patients have frequent encounters with their admitting practitioner. However, we also continue to believe that the majority of these visits should be in-person to facilitate the comprehensive, coordinated, and personal care that medically volatile, acutely ill patients require on an ongoing basis.

Therefore, for CY 2011 we proposed that subsequent hospital care services, specifically CPT codes 99231, 99232, and 99233, be added to the list of telehealth services on a category 1 basis for CY 2011, but with some limitations on the frequency with which these services may be furnished through telehealth. Because of our concerns regarding the potential acuity of hospital inpatients, we proposed to limit the provision of subsequent hospital care services through telehealth to once every 3 days. We were confident that admitting practitioners would continue to make appropriate in-person visits to all patients who need such care during their hospitalization. Consulting practitioners should continue to use the inpatient telehealth consultation HCPCS G-codes, specifically G0406, G0407, G0408, G0425, G0426, or G0427 when reporting consultations furnished to inpatients via telehealth.

Consistent with this proposal, we proposed to revise Sec. 410.78(b) and Sec. 414.65(a)(1) to include subsequent hospital care services as Medicare telehealth services, with the limitation of one telehealth subsequent hospital care service every 3 days.

We also considered adding hospital discharge day management services to the list of telehealth services. These services, reported by CPT codes 99238 and 99239, include the final examination of the patient, discussion of the hospital stay, instructions for continuing care to all relevant caregivers, and preparation of discharge records, prescriptions, and referral forms. These services are furnished when a practitioner deems it medically reasonable and necessary to assess a patient's readiness for discharge and to prepare a patient for discharge from an acute care environment to a less intensive setting.

There are no services on the current list of telehealth services that resemble such preparation of a patient for discharge. We believe it is especially important that, if a practitioner furnishes a discharge day management service, the service be furnished in-person in order to allow the practitioner to comprehensively assess the patient's status in preparation for discharge so that the patient will have a higher likelihood of making a successful transition to the less intensive setting. Therefore, we did not consider hospital discharge day management services for addition to the Medicare telehealth services list on a category 1 basis.

We reviewed the documentation submitted by requestors in support of adding these codes to the Medicare telehealth services list on a category 2 basis. Most of the submitted studies were specific to the treatment of patients with specific diagnoses and were not specific to discharge services. Additionally, most of the studies concluded that more research was required in order to establish medical equivalence between telehealth and in-person services. The submitted documentation did not provide the necessary evidence to alter our previous conclusion that hospital discharge day management services should be provided in- person in light of the acuity of hospitalized patients, their typically complex post-hospitalization care needs, and the importance of patient education by the admitting practitioner who had ongoing responsibility for the patient's treatment during the hospital stay. Therefore, we did not propose to add hospital discharge day management services to the list of telehealth services for CY 2011.

Comment: Many commenters expressed support for all of CMS' proposed additions to the list of Medicare telehealth services, including subsequent hospital care services. One commenter urged CMS to focus on adding services where research demonstrates that technology can facilitate medically equivalent services and improve beneficiary access to providers, and to carefully monitor implementation of any new telehealth services to ensure that patients' experience of the care is positive and that patient outcomes are not compromised. The commenter encouraged CMS' continued attention to the evidence and the role of patient needs as CMS evaluates telehealth requests. The commenter cited

CMS' decision not to propose the addition of hospital discharge day management services as a Medicare telehealth service as an example of the agency applying appropriate rigor to best reflect patient needs and preferences.

Response: We appreciate the support for our proposed additions, as well as our consideration and decisions regarding requested additions to telehealth services that we did not propose to add to the list of telehealth services for CY 2011.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to add subsequent hospital care services, specifically CPT codes 99231, 99232, and 99233, to the list of telehealth services on a category 1 basis for CY 2011, but with the limitation of one

Page 73317

subsequent hospital care service furnished through telehealth every 3 days. We are revising Sec. 410.78(b) and Sec. 414.65(a)(1) accordingly to include subsequent hospital care services as Medicare telehealth services, with the limitation of one telehealth subsequent hospital care service every 3 days. We are also finalizing our decision not to add initial or discharge day management hospital care services to the list of Medicare telehealth services. 5. Initial, Subsequent, Discharge Day Management, and Other Nursing

Facility Care Services

The American Telemedicine Association and the Marshfield Clinic submitted requests to add nursing facility care codes, covering the spectrum of initial (reported by CPT codes 99304 (Level 1 initial nursing facility care), 99305 (Level 2 initial nursing facility care) and 99306 (Level 3 initial nursing facility care)); subsequent

(reported by CPT codes 99307 (Level 1 subsequent nursing facility care), 99308 (Level 2 subsequent nursing facility care), 99309 (Level 3 subsequent nursing facility care), and 99310 (Level 4 subsequent nursing facility care)); discharge day management (reported by CPT codes 99315 (Nursing facility discharge day management; 30 minutes or less) and 99316 (Nursing facility discharge day management; more than 30 minutes)); and other (reported by CPT code 99318 (Evaluation and management of a patient involving an annual nursing facility assessment)) services, to the Medicare telehealth services list beginning in CY 2011. The commenters requesting the addition of these services expressed concerns regarding limited access to care if we did not allow these services to be furnished through telehealth, and requested that CMS acknowledge the recent Congressional inclusion of nursing facilities as telehealth originating sites by adding these codes to the list of Medicare telehealth services.

In the CY 2010 PFS proposed and final rules (74 FR 33544 and 74 FR 61762), we discussed concerns about potential disparities in patient acuity between nursing facility services and the current list of

Medicare telehealth services. We also declined to add HCPCS codes to the Medicare telehealth services list that are used exclusively to describe Federally-mandated nursing facility visits. As discussed in the CY 2010 PFS proposed rule (74 FR 33543), the long-term care regulations at Sec. 483.40(c) require that residents of SNFs receive initial and periodic personal visits. These regulations ensure that at least a minimal degree of personal contact between a practitioner and a

SNF resident is maintained, both at the point of admission to the facility and periodically during the course of the resident's stay. We continue to believe that these Federally-mandated visits should be conducted in-person, and not as Medicare telehealth services.

Therefore, in the CY 2010 PFS final rule with comment period, we revised Sec. 410.78 to preclude physicians and other practitioners from furnishing the physician visits required under Sec. 483.40(c) through telehealth.

We reviewed the use of telehealth for each of the subcategories of nursing facility services included in the requests for CY 2011. We identified the E/M services that fulfill Federal requirements for personal visits under Sec. 483.40(c), and we did not propose for CY 2011 to add any HCPCS codes to the Medicare telehealth services list that are used exclusively to describe these Federally-mandated visits.

These codes include the CPT codes for initial nursing facility care

(CPT codes 99304 through 99306) that are used to report the initial E/M visit that fulfills Federally-mandated requirements under Sec. 483.40(c) and other nursing facility service (CPT code 99318) that is only payable by Medicare if the visit is substituted for a Federally- mandated visit under Sec. 483.40(c).

The nursing facility discharge day management services reported under CPT code 99315 and 99316 are E/M visits that prepare a nursing facility resident for discharge from the facility. There are no

Medicare requirements that such a service be furnished. If a practitioner chooses to furnish this service, we continue to believe that an in-person visit is most appropriate in order to ensure the resident is prepared for discharge from the nursing facility. These services are furnished when a practitioner deems it medically reasonable and necessary to assess a patient's readiness for and to prepare a patient being discharged from the monitored nursing facility environment to another typically less intensive setting. There are no services on the current list of telehealth services that resemble such preparation of a patient for discharge. As in the case of hospital discharge day management services, we believe it is especially important that, if a practitioner furnishes a nursing facility discharge day management service, the service be furnished in-person.

The practitioner must be able to comprehensively assess the patient's status in preparation for discharge so that the patient will have a higher likelihood of making a successful transition from the nursing facility to another setting. Therefore, we did not consider nursing facility discharge day management services for addition to the Medicare telehealth services list on a category 1 basis for CY 2011. When we considered the addition of these services under category 2, we had no evidence that nursing facility discharge services furnished through telehealth are equivalent to in-person discharge services. Therefore, we did not propose to add nursing facility discharge day management services to the CY 2011 telehealth list.

Subsequent nursing facility services, reported by CPT codes 99307 through 99310, may be used to report either a Federally-mandated periodic visit under Sec. 483.40(c) or another E/M visit, prior to or after the initial nursing facility care visit, as long as the subsequent nursing facility care visit is medically reasonable and necessary for the resident's care. While we continue to believe that many SNF residents have complex medical care needs, we believe that it is appropriate to consider the addition of these codes to the telehealth list on a category 1 basis. As we state above in the context of our discussion of subsequent hospital care services, the HCPCS codes for initial and follow-up inpatient consultation services for nursing facility patients are on the list of Medicare telehealth services, and subsequent nursing facility services are similar to those services.

These E/M services are furnished to high acuity, complex SNF patients, although not by the admitting practitioner himself or herself.

Therefore, we believe that subsequent nursing facility visits by a patient's admitting practitioner sufficiently resemble follow-up inpatient consultation services to consider them on a category 1 basis for the telehealth list. We concluded for CY 2011 that it would be appropriate to permit some subsequent nursing facility care services to be furnished through telehealth to ensure that complex nursing facility patients have frequent encounters with their admitting practitioner, although we continue to believe that the Federally-mandated visits should be in-person to facilitate the comprehensive, coordinated, and personal care that these complex patients require on an ongoing basis.

Therefore, we proposed that subsequent nursing facility care services, specifically CPT codes 99307, 99308, 99309 and 99310, be added to the list of Medicare telehealth services on a category 1 basis beginning in CY 2011, with some limitations on furnishing these services through telehealth. Because of our concerns regarding the potential acuity and

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complexity of SNF inpatients, we proposed to limit the provision of subsequent nursing facility care services furnished through telehealth to once every 30 days. We were especially interested in public comments, including any evidence regarding patterns of high quality care and clinical outcomes, regarding this proposal to limit the provision of subsequent nursing facility care services furnished through telehealth to once every 30 days. We remain committed to ensuring that SNF inpatients receive appropriate in-person visits and that Medicare pays only for medically reasonable and necessary care.

Currently and continuing in CY 2011, an unlimited number of initial and follow-up consultation services may be furnished through telehealth to these patients, so we believe that only a limited number of subsequent nursing facility care services by the admitting practitioner would be appropriate for SNF inpatients. Finally, we specified that subsequent nursing facility care services reported for a Federally-mandated periodic visit under Sec. 483.40(c) may not be furnished through telehealth. In light of this CY 2011 proposal, we were confident that admitting practitioners would continue to make appropriate in-person visits to all patients who need such care during their SNF stay.

Consistent with our proposal, we proposed to revise Sec. 410.78(b) and Sec. 414.65(a)(1) to include subsequent nursing facility care services as Medicare telehealth services, with the limitation of one telehealth subsequent nursing facility care service every 30 days.

Federally-mandated periodic visits may not be furnished through telehealth, as specified currently in Sec. 410.78(e)(2).

Comment: One commenter recommended that CMS limit the use of telehealth for subsequent nursing facility care services to CPT codes 99307 and 99308, the lower two levels of care. The commenter stated that the subsequent nursing facility care services described by CPT codes 99309 and 99310, the higher two levels of care, require a detailed to comprehensive history and examination, along with moderate to complex decisionmaking that warrant an in-person visit with the physician. The same commenter disagreed with the limitation of one telehealth subsequent nursing facility care service every 30 days and suggested that unless and until evidence of overutilization is obtained, the limit could hinder access to appropriate care under the telehealth benefit. The commenter agreed with the CMS policy that all

Federally-mandated visits as defined by the long-term care regulations

Sec. 483.40(c) should be conducted in-person and not as Medicare telehealth services.

Response: We appreciate the response to our specific request for public comment regarding the addition of subsequent nursing facility care services to the list of Medicare telehealth services with the limitation of one telehealth subsequent nursing facility care service every 30 days. As we stated in the proposed rule (75 FR 40112), we remain committed to ensuring that SNF inpatients receive appropriate in-person visits and that Medicare pays only for medically reasonable and necessary care. We received no new evidence from the commenter regarding patterns of high quality care and clinical outcomes in terms of our proposal to limit the provision of subsequent nursing facility care services furnished through telehealth to once every 30 days.

Because we want to ensure that nursing facility patients with complex medical conditions have appropriately frequent medically reasonable and necessary encounters with their admitting practitioner, we continue to believe that it would be appropriate to permit the full range of subsequent nursing facility care services to be furnished through telehealth. At the same time, because of our concerns regarding the potential acuity and complexity of SNF inpatients, we want to ensure that these patients continue to receive in-person visits as appropriate to manage their care. We are adding these services as Medicare telehealth services with the limitation as we proposed, and we remain confident that admitting practitioners will continue to make appropriate in-person visits to all patients who need such care during their SNF stay.

After consideration of the public comments we received, we are finalizing our CY 2011 proposal to add subsequent nursing facility care services, specifically CPT codes 99307, 99308, 99309 and 99310, to the list of Medicare telehealth services on a category 1 basis beginning in

CY 2011, with limits to the provision of subsequent nursing facility care services furnished through telehealth to once every 30 days. We are revising Sec. 410.78(b) and Sec. 414.65(a)(1) to include subsequent nursing facility care services as Medicare telehealth services, with the limitation of one telehealth subsequent nursing facility care service every 30 days. Federally-mandated periodic visits may not be furnished through telehealth, as specified currently in

Sec. 410.78(e)(2). 6. Neuropsychological Testing Services

The American Telemedicine Association submitted a request to add neuropsychological testing services, described by CPT codes 96119

(Neuropsychological testing (for example, Halstead-Reitan

Neuropsychological Battery, Wechsler Memory Scales and Wisconsin Card

Sorting Test), per hour of the psychologist's or physician's time, both face-to-face time administering tests to the patient and time interpreting these test results and preparing the report); and 96119

(Neuropsychological testing (for example, Halstead-Reitan

Neuropsychological Battery, Wechsler Memory scales and Wisconsin Card

Sorting Test), with qualified health care professional interpretation and report, administered by technician, per hour of technician time, face-to-face), to the list of telehealth services for CY 2011 based on their similarity to other telehealth services.

In the CY 2008 PFS final rule with comment period (72 FR 66251), we stated that we have received conflicting comments and data regarding the appropriateness of furnishing neuropsychological testing via telehealth. While we appreciate the recent request for addition of these same services to the Medicare telehealth services list, we did not believe that these services are similar to services currently on the Medicare telehealth services list and, therefore, we concluded that they would not be appropriate for consideration or addition under category 1 for CY 2011. In the CY 2011 request for the addition of the these services, we received no information to indicate that the diagnostic findings of neuropsychological testing through telehealth are similar to those based upon in-person testing, and therefore that testing through telehealth does not affect the patient's diagnosis.

Consequently, we did not propose to add neuropsychological testing services to the list of approved Medicare telehealth services for CY 2011.

We received no public comments regarding our discussion of the request to add neuropsychological testing to the list of Medicare telehealth services. Therefore, we are finalizing our decision not to add neuropsychological testing to the list of Medicare telehealth services for CY2011. 7. Speech-Language Pathology Services

The Marshfield Clinic submitted a request to add various speech- language pathology services to the list of approved telehealth services for CY

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2011. Speech-language pathologists are not permitted under section 1842(b)(18)(C) of the Act to furnish and receive payment for Medicare telehealth services. Therefore, we did not propose to add any speech- language pathology services to the list of Medicare telehealth services for CY 2011. For further discussion of these services in the context of telehealth, we refer readers to the CY 2005 and CY 2007 PFS proposed and final rules with comment period (69 FR 47512 and 66276, and 71 FR 48995 and 69657).

Comment: One commenter stated that research has proven that audiology procedures offered via telehealth services have great potential. The commenter also stated that CMS should use its broad discretion in implementing programs to expand the list of available telehealth services to include audiology.

Response: It is not within our administrative authority to pay speech language pathologists and audiologists for services furnished via telehealth. The statute authorizes the Secretary to pay for telehealth services only when furnished by a physician or a practitioner as those terms are defined in section 1834(m)(4)(D) and

(E) of the Act.

After consideration of the public comment we received, we are finalizing our decision not to add various speech-language pathology services to the list of approved telehealth services for CY 2011. 8. Home Wound Care Services

Wound Care Associates, LLC, submitted a request to add wound care in the home setting to the list of Medicare telehealth services. A patient's home is not permitted under current statute to serve as an originating site for Medicare telehealth services. Therefore, we did not propose to add home wound care services to the list of Medicare telehealth services for CY 2011.

We received no public comments regarding our discussion of the request to add wound care in the home setting to the list of Medicare telehealth services. Therefore, we are finalizing our decision not to add wound care in the home setting to the list of Medicare telehealth services for CY2011. 9. Other Issues

We received other public comments on matters related to Medicare telehealth services that were not the subject of proposals in the CY 2011 PFS proposed rule. We thank the commenters for sharing their views and suggestions. Because we did not make any proposals regarding these matters, we do not generally summarize or respond to such comments in this final rule with comment period. However, we are summarizing and responding to the following comments in order to reiterate certain information.

Comment: One commenter requested an explanation of the acceptable time and format to request or recommend changes to the criteria set in 2003 by which CMS considers specific services for Medicare coverage when furnished through telehealth.

Response: As we discussed in the CY 2010 PFS final rule with comment period (74 FR 61766), our established criteria and process for reviewing requests to add to the list of approved Medicare telehealth services were subject to full notice and comment procedures in the CY 2003 PFS proposed and final rules. Since we did not make any proposals relating to the criteria or process for CY 2011, any potential revisions to the process for adding or deleting services from the list of approved Medicare telehealth services are outside the scope of this

CY 2011 final rule with comment period.

Throughout the year, we regularly meet with parties who want to share their views on topics of interest to them. These discussions may provide us with information regarding changes in medical practice and afford opportunities for the public to bring to our attention issues they believe we should consider for future rulemaking. Thus, we encourage stakeholders to contact us at any time if there are topics related to physician payment policy that they would like to discuss.

Comment: One commenter requested an explanation regarding how the payment rates for telehealth consultations are set in a manner that is consistent with section 1834(m)(2)(A) of the Act that requires Medicare to pay a practitioner who furnishes a telehealth service an amount equal to the amount that the practitioner would have been paid if the service had been furnished without the use of a telecommunications system.

Response: As we stated in the CY 2009 PFS final rule with comment period (73 FR 69745), we established the RVUs for follow-up inpatient telehealth consultations at the same level as the RVUs established for subsequent hospital care (as described by CPT codes 99231 through 99233). For CY 2010, we established the RVUs for initial inpatient telehealth consultations at the same level as the RVUs for initial hospital care (as described by CPT codes 99221 through 99223) (75 FR 61775). We believe this is appropriate because a physician or practitioner furnishing a telehealth service is paid an amount equal to the amount that would have been paid if the service had been furnished without the use of a telecommunication system. Since physicians and practitioners furnishing follow-up inpatient consultations in an in- person encounter must continue to utilize subsequent hospital care codes (as described by CPT codes 99231 through 99233) and those furnishing initial inpatient consultations in an in-person encounter must generally utilize initial hospital care codes (as described by CPT codes 99221 through 99223), we believe it is appropriate that the RVUs for the subsequent and initial telehealth HCPCS G-codes are set at the same level as the subsequent and initial hospital care codes, respectively.

D. Summary of CY 2011 Telehealth Policies

In summary, we are finalizing our proposals to add the following requested services to the list of Medicare telehealth services for CY 2011:

Individual and group KDE services (HCPCS codes G0420 and

G0421, respectively);

Individual and group DSMT services, with a minimum of 1 hour of in-person instruction to be furnished in the year following the initial DSMT service to ensure effective injection training (HCPCS codes G0108 and G0109, respectively);

Group MNT and HBAI services (CPT codes 97804, and 96153 and 96154, respectively);

Subsequent hospital care services, with the limitation for the patient's admitting practitioner of one telehealth visit every 3 days (CPT codes 99231, 99232, and 99233); and

Subsequent nursing facility care services, with the limitation for the patient's admitting practitioner of one telehealth visit every 30 days (CPT codes 99307, 99308, 99309, and 99310).

Furthermore, we are revising Sec. 410.78(b) and Sec. 414.65(a)(1) accordingly. Specifically, we are adding individual and group KDE services, individual and group DSMT services, group MNT services, group

HBAI services, and subsequent hospital care and nursing facility care services to the list of telehealth services for which payment will be made at the applicable PFS payment amount for the service of the practitioner. In addition, we have reordered the listing of services in these two sections and removed ``initial and follow-up inpatient telehealth consultations furnished to beneficiaries in hospitals and

SNFs'' in Sec. 410.78(b) because these are described by the more general term ``professional

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consultations'' that is in the same section. Finally, we are continuing to specify that the physician visits required under Sec. 483.40(c) may not be furnished as telehealth services.

E. Telehealth Originating Site Facility Fee Payment Amount Update

Section 1834(m) of the Act establishes the payment amount for the

Medicare telehealth originating site facility fee for telehealth services provided from October 1, 2001, through December 31 2002, at

$20. For telehealth services provided on or after January 1 of each subsequent calendar year, the telehealth originating site facility fee is increased by the percentage increase in the MEI as defined in section 1842(i)(3) of the Act. The MEI increase for 2011 is 0.4 percent. Therefore, for CY 2011, the payment amount for HCPCS code

Q3014 (Telehealth originating site facility fee) is 80 percent of the lesser of the actual charge or $24.10. The Medicare telehealth originating site facility fee and MEI increase by the applicable time period is shown in Table 49.

Table 49--The Medicare Telehealth Originating Site Facility Fee and MEI

Increase by the Applicable Time Period

MEI

Facility increase

Period fee

(%)

$20.00

N/A 10/01/2001-12/31/2002

$20.60

3.0 01/01/2003-12/31/2003

$21.20

2.9 01/01/2004-12/31/2004

$21.86

3.1 01/01/2005-12/31/2005

$22.47

2.8 01/01/2006-12/31/2006

$22.94

2.1 01/01/2007-12/31/2007

$23.35

1.8 01/01/2008-12/31/2008

$23.72

1.6 01/01/2009-12/31/2009

$24.00

1.2 01/01/2010-12/31/2010

$24.10

0.4 01/01/2011-12/31/2011

V. Addressing Interim Final Relative Value Units From CY 2010 and

Establishing Interim Relative Value Units for CY 2011

A. Background

In accordance with section 1848(c) of the Act, CMS determines work,

PE, and malpractice RVUs for each service paid under the PFS. On an annual basis, the AMA RUC provides CMS with recommendations regarding physician work values for new, revised, and potentially misvalued codes. Over the last several years, CMS, in conjunction with the AMA

RUC, has identified and reviewed numerous potentially misvalued CPT codes. In 2006, the AMA RUC established the Five-Year Review

Identification Workgroup to identify potentially misvalued services using the following screens: ``New Technology;'' ``Site-of-Service

Anomalies;'' `` High Volume Growth;'' ``CMS Fastest Growing;'' ``High

Intra-Service Work per Unit Time (IWPUT);'' ``Services Surveyed by One

Specialty--Now Performed by a Different Specialty;'' ``Harvard-Valued,

Utilization over 1 Million;'' ``Harvard Valued, Utilization over 100,000;'' and ``Codes Reported Together/Bundled CPT Services.'' In addition to providing recommendations to CMS for work RVUs, the AMA

RUC's Practice Expense Subcommittee reviews and then the AMA RUC recommends direct PE inputs (clinical labor, medical supplies, and medical equipment) for individual services. To guide the establishment of malpractice RVUs for new and revised codes before the next 5-Year

Review of Malpractice, the AMA RUC also provides crosswalk recommendations, that is, ``source'' codes with a similar specialty mix of practitioners furnishing the source code and the new/revised code.

CMS reviews the AMA RUC recommendations on a code-by-code basis. For

AMA RUC recommendations regarding physician work RVUs, we determine whether we agree with the recommended work RVUs for a service (that is, we agree the valuation is accurate), or, if we disagree, we determine an alternative value that better reflects our estimate of the physician work for the service. Because of the timing of the CPT Editorial Panel decisions, AMA RUC recommendations, and our rulemaking cycle, we publish these work RVUs in the PFS final rule with comment period as interim final values, subject to public comment. Similarly, we assess the AMA RUC's recommendations for direct PE inputs and malpractice crosswalks, and establish PE and malpractice interim final values, which are also subject to comment. We note that, with respect to interim final PE RVUs, the main aspect of our valuation that is open for public comment for a new, revised, or potentially misvalued code is the direct PE inputs and not the other elements of the PE valuation methodology, such as the indirect cost allocation methodology, that also contribute to establishing the PE RVUs for a code. The public comment period on the PFS final rule with comment period remains open for 60 days after the rule is issued.

If we receive public comments on the interim final work RVUs for a specific code indicating that refinement of the interim final work value is warranted based on sufficient information from the commenters concerning the clinical aspects of the physician work associated with the service (57 FR 55917), we refer the service to a refinement panel, as discussed in further detail in sections III.I. and V.B.1. of this final rule with comment period.

In the interval between closure of the comment period and the subsequent year's PFS final rule with comment period, we consider all of the public comments on the interim final work, PE, and malpractice

RVUs for the new, revised, and potentially misvalued codes and the results of the refinement panel, if applicable. Finally, we address the interim final RVUs (including the interim final direct PE inputs) by providing a summary of the public comments and our responses to those comments, including a discussion of any changes to the interim final work or malpractice RVUs or direct PE inputs, in the following year's

PFS final rule with comment period. We then typically finalize the direct PE inputs and the work, PE, and malpractice RVUs for the service in that year's PFS final rule with comment period, unless we determine it would be more appropriate to continue their interim final status for another year and solicit further public comment.

B. Addressing Interim Final RVUs From CY 2010

In this section, we address the interim final values published in

Appendix C of the CY 2010 PFS final rule with comment period (74 FR 62144 through 62146), as subsequently corrected in the December 10, 2009 (74 FR 65449) and May 11, 2010 correction notices (75 FR 26350).

We discuss the results of the CY 2010 refinement panel, respond to public comments received on specific interim final values (including direct PE inputs) from CY 2010, address the status of the interim final values of a number of potentially misvalued codes from CY 2009 and CY 2010, and address the other new, revised, or potentially misvalued codes with interim final values for CY 2010 that are not specifically discussed elsewhere in this final rule with comment period.

We note that the final CY 2011 direct PE database that lists the direct PE inputs is available on the CMS Web site under the downloads for the CY 2011 PFS final rule with comment period at: http:// www.cms.gov/PhysicianFeeSched/PFSFRN/

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list.aspTopOfPage. The final CY 2011 work, PE, and malpractice

RVUs are displayed in Addendum B to this final rule with comment period. 1. CY 2010 Interim Final Work RVUs Referred to the Refinement Panel

We received public comments on 4 CPT codes with CY 2010 interim final work values. We referred these services to the CY 2010 refinement panel for further review. For ease of discussion, we will be referring to these services as ``refinement codes.'' Consistent with past practice (62 FR 59084), we convened a multispecialty panel of physicians to assist us in the review of the comments. The panel was moderated by our physician advisors, and consisted of the following voting members:

One or two clinicians representing the commenting organization.

Two primary care clinicians nominated by the American

Academy of Family Physicians and the American College of Physicians.

Three contractor medical directors (CMDs).

Clinicians with practices in related specialties who were expected to have knowledge of the services under review.

We assembled a set of 300 reference services and asked the panel members to compare the clinical aspects of physician work for the refinement code to one or more of the reference services. In compiling the set of reference services, we attempted to include: (1) Services that are commonly performed for which the work RVUs are not controversial; (2) services that span the spectrum of work intensity; and (3) at least three services performed by each of the major specialties that furnish the refinement codes so that the perspective of relevant specialties would be represented. The panel process was designed to capture each participant's independent judgment and his or her clinical experience which informed and drove the discussion of the refinement code during the refinement panel proceedings. Following the discussion, each voting participant rated the physician work of the refinement code. Ratings were obtained individually and confidentially, with no attempt to achieve consensus among the panel members.

We then analyzed the ratings for each refinement code based on a presumption that the interim final work RVUs were correct unless the ratings clearly indicated a different result. Ratings of work were analyzed for consistency among the four different groups (commenting organization, primary care physicians, CMDs, and related clinicians) represented on the panel. In addition, we used statistical tests to determine whether there was sufficient agreement among the groups of the panel and whether the agreed-upon RVUs differed significantly from the interim final RVUs published in Addendum C of the CY 2010 final rule with comment period. We did not modify the interim final RVUs unless there was clear agreement for a change. If there was agreement across groups for change, but the groups did not agree on what the new

RVUs should be, we eliminated the outlier group and looked for agreement among the remaining groups as the basis for new RVUs for the refinement code. This methodology is consistent with the historical refinement process as established in the November 25, 1992 PFS final rule with comment period (57 FR 55938).

Our decision to convene multispecialty panels of physicians and to apply the statistical tests described above has historically been based on our need to balance the interests of those who commented on the interim final work values with the redistributive effects that would occur in other specialties if the work values were changed. We refer readers to section III.I. of this final rule with comment period for a full discussion of the changes to the refinement process that we are adopting for refinement panels beginning in CY 2011.

Table 50 lists those refinement codes reviewed under the CY 2010 refinement panel process described in this section. The table includes the following information:

CPT Code. This is the CPT code for a service.

Short Descriptor. This is an abbreviated version of the narrative description of the code.

CY 2010 Interim Final Work RVUs. The interim final work

RVUs that appeared in the CY 2010 PFS final rule with comment period

(74 FR 61949 through 61953), as subsequently corrected in the December 10, 2009 (74 FR 65449) and May 11, 2010 correction notices (75 FR 26350), are shown for each reviewed code.

Requested Work RVUs. This column identifies the work RVUs requested by the commenters.

CY 2011 Final Work RVUs. This column contains the final work RVUs after consideration by the refinement panel.

We note that we are accepting the results of the CY 2010 refinement panel for all of these codes as the final work RVUs for CY 2011. These final values are also displayed in Addendum B to this final rule with comment period.

Table 50--CPT Codes Reviewed Under the CY 2010 Refinement Panel Process

CY 2010 interim Requested work CY 2011 final

CPT Code

Mod

Short descriptor final work RVUs

RVUs

work RVUs

74261............................

26 Ct colonography, w/

2.28

2.40

2.40 o dye. 78451............................

26 Ht muscle image

1.38

1.40

1.38 spect, sing. 78452............................

26 Ht muscle image

1.62

1.75

1.62 spect, mult. 95905............................

26 Motor/sens nrve

0.05

0.15

0.05 conduct test.

2. CY 2010 Interim Final RVUs for Which Public Comments Were Received a. Insertion of Breast Prosthesis (CPT Code 19340)

CPT code 19340 (Immediate insertion of breast prosthesis following mastopexy, mastectomy or in reconstruction) was identified by CMS for

AMA RUC review as requested by the specialty society. The AMA RUC recommended 13.78 work RVUs for CY 2010, which CMS accepted. However, as noted by a public comment on the CY 2010 PFS final rule with comment period, the interim final CY 2010 work RVUs published in the CY 2010

PFS final rule with comment period (74 FR 61779, 62023 and 62144) for this service did not reflect the increases in the evaluation and management services for the post-operative visits associated with this service that resulted from the CY 2010 changes to the consultation code policy. The work RVUs for CPT code 19340 with these increases included are 13.99 RVUs. This correction was included in the May 11, 2010 correction notice to the CY 2010 final rule with comment period (75 FR 26356). We are finalizing the interim work RVUs for CPT code 19340 of 13.99 for CY 2011.

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b. Computed Tomographic Colonography (CPT Code 74261)

For CPT code 74261, (Computed tomographic (CT) colonography, diagnostic, including image postprocessing; without contrast material), the AMA RUC recommended 2.40 work RVUs. During the AMA RUC meeting, this code was compared to two CPT codes: 75635 (Computed tomographic angiography, abdominal aorta and bilateral iliofemoral lower extremity runoff, with contrast material(s), including noncontrast images, if performed, and image postprocessing (work RVUs = 2.40)) and 78815

(Positron emission tomography (PET) with concurrently acquired computed tomography (CT) for attenuation correction and anatomical localization imaging; skull base to mid-thigh (work RVUs = 2.44)). Based on the comparisons of similar physician work, physician time, and intensity/ complexity measures, the AMA RUC determined that work RVUs of 2.40 were appropriate for CPT code 74261. We disagreed with the AMA RUC- recommended work RVUs and believe CPT code 74263 (Computed tomographic

(CT) colonography, screening, including image postprocessing) represents a more comparable service because it has virtually the same description of work, pre-, intra-, and post-service time for which the

AMA RUC recommended work RVUs of 2.28. Therefore, we assigned interim final work RVUs of 2.28 to CPT code 74261 for CY 2010.

Comment: Several commenters disagreed with the interim final work

RVUs assigned by CMS and believe that equalizing the work RVUs for diagnostic and screening computed tomographic colonography ignores the reality that patients referred for diagnostic study, by definition, have greater complexity. These commenters believed that for this reason and the increased time involved with a diagnostic study, higher work

RVUs are necessary to maintain the proper relativity with the corresponding screening CPT code 74263. The commenters recommended that

CMS accept the AMA RUC-recommended work RVUs of 2.40 for CPT code 74261 and refer this code to the CY 2010 refinement panel for review.

Response: Based on the concerns expressed by the commenters, we referred this code to the CY 2010 refinement panel for review. As a result of the statistical analysis of the CY 2010 refinement panel ratings, we are assigning 2.40 work RVUs to CPT code 74261 as the final value for CY 2011. c. Myocardial Perfusion Imaging (CPT Codes 78451, 78452, 78453, and 78454)

For CPT code 78451 (Myocardial perfusion imaging, tomographic

(SPECT) (including attenuation correction, qualitative or quantitative wall motion, ejection fraction by first pass or gated technique, additional quantification, when performed); single study, at rest or stress (exercise or pharmacologic)), the AMA RUC recommended 1.40 work

RVUs, while the AMA RUC recommended 1.75 work RVUs for CPT code 78452

(Myocardial perfusion imaging, tomographic (SPECT) (including attenuation correction, qualitative or quantitative wall motion, ejection fraction by first pass or gated technique, additional quantification, when performed); multiple studies, at rest and/or stress (exercise or pharmacologic) and/or redistribution and/or rest reinjection).

Upon review of the AMA RUC recommendations for these codes, it was unclear what methodology the AMA RUC used to calculate the recommended work RVUs for CPT code 78451. Therefore, we disagreed with the AMA RUC- recommended work RVUs of 1.40 for CPT code 78451 and believe the work

RVUs for the survey 25th percentile were more appropriate. Therefore, we assigned interim final work RVUs of 1.38 to CPT code 78451 for CY 2010.

For CPT code 78452, we disagreed with the reference code used, CPT code 70496 (Computed tomographic angiography, head, with contrast material(s), including noncontrast images, if performed, and image postprocessing (work RVUs = 1.75)). We believe CPT code 78452 is comparable to CPT code 73219 (Magnetic resonance (eg, proton) imaging, upper extremity, other than joint; with contrast material(s) (work RVUs

= 1.62)), which has the same pre-, intra-, and post-service time.

Therefore, we assigned interim final work RVUs of 1.62 to CPT code 78452 for CY 2010.

We accepted the CY 2010 recommendations of the AMA RUC for the direct PE inputs for CPT codes 78451, 78452, 78453, and 78454 (75 FR 61955).

Comment: Several commenters disagreed with the interim final work

RVUs assigned by CMS for these two services. The commenters pointed out that the specialty and AMA RUC recommendations for both of these services already reflected a tremendous reduction from the work RVUs for the services as reported by multiple component codes in previous years and expressed disappointment that additional reductions were made by CMS. The commenters explained that in an effort to maintain relativity between CPT codes 78451 and 78452, the recommended RVUs for 78451 were derived by calculating the relationship between the median survey RVUs for CPT codes 78451 and 78452 and maintaining this relationship between the recommended RVUs for CPT codes 78451 and 78452. That is, the survey work RVU relationship between CPT code 78451: 78452 is [1.50: 1.87], leading to the same relationship between the AMA RUC-recommended RVUs for 78451: 78452 of [1.40: 1.75]. The AMA

RUC agreed that the computed work RVUs, 1.40 for CPT code 78451, maintain the relativity of the original survey data and provide an appropriate measure of the work for CPT code 78451.

The commenters believe that CMS does not have the special expertise necessary to choose a different reference code than the code selected by the multispecialty AMA RUC panel and disagreed with the reference code used by CMS for establishing work RVUs for CPT code 78452. The AMA

RUC pointed out that the reference code has no associated computer post-processing analysis, requires the interpretation of fewer images, and has no additional cine-motion images to analyze and interpret, all of which are included in the myocardial perfusion imaging procedures.

The commenters requested that CMS accept the AMA RUC recommendations of 1.40 work RVUs for CPT code 78451 and 1.75 work RVUs for CPT code 78452 and refer these codes to the CY 2010 refinement panel for review.

Response: Based on the concerns expressed by the commenters, these codes were referred to the CY 2010 refinement panel for review. As a result of the statistical analysis of CY 2010 refinement panel ratings, the work RVUs for these codes were unchanged. Therefore, we are adopting the interim final values for these codes as final, with 1.38 work RVUs for CPT code 78451 and 1.62 work RVUs for CPT code 78452 for

CY 2011.

Comment: Several commenters asserted that CMS had incorrectly crosswalked equipment time inputs for several myocardial perfusion imaging codes (CPT codes 78451, 78452, 78453, and 78454), rather than accepting the AMA RUC recommendations for these codes as CMS had stated in the CY 2010 PFS final rule with comment period (74 FR 61955). One commenter further suggested that the useful life of 5 years for the

Cobalt-57 flood source was incorrect.

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Response: We appreciate the commenters' assistance, and we corrected the equipment times in the May 11, 2010 correction notice to the CY 2010 PFS final rule with comment period (75 FR 26356 and 26570).

We are finalizing these direct PE inputs for CY 2011. We also proposed to change the useful life of the Cobalt-57 flood source from 5 to 2 years for CY 2011 (75 FR 40056). We address our final policies regarding this proposal in section II.A.3.b.(4) of this final rule with comment period.

Comment: Several commenters expressed concern that CMS applied fully transitioned PE RVUs to the new and revised CY 2010 CPT codes, specifically CPT codes 78451, 78452, 78453, and 78554. The commenters argued that the result of the lack of a transition to use of the PPIS data was an immediate 26 percent reduction for myocardial perfusion imaging services, simply because the CPT code descriptors had been revised to capture multiple procedure components. The commenters requested that the new CPT codes follow the same blend of new and previous PE RVUs that was applied to the existing CPT codes in CY 2010 and later years.

Response: Our longstanding policy is that if the CPT Editorial

Panel creates a new code for a given year, the new code would be paid at its fully implemented PFS amount and not at a transition rate for that year. Consistent with this policy, the new CY 2010 myocardial perfusion imaging codes, and all other new CY 2010 CPT codes, are not being paid based on transitional PE RVUs in CY 2010. We will continue to pay these services based on the fully implemented PE RVUs in CY 2011, the same approach we are applying to other CPT codes that were new for CY 2010 or CY 2011. d. Nerve Conduction Test (CPT Code 95905)

For CPT code 95905 (Motor and/or sensory nerve conduction, using preconfigured electrode array(s), amplitude and latency/velocity study, each limb, includes F-wave study when performed, with interpretation and report), the AMA RUC recommended 0.05 work RVUs, which we accepted in the CY 2010 PFS final rule with comment (74 FR 61953).

Comment: One commenter requested that CMS refer CPT code 95905 to the CY 2010 refinement panel for review. The commenter believes the AMA

RUC erred in its recommendation to CMS in regard to the physician work involved. The commenter noted that when this code was discussed at the

AMA RUC meeting, the commenter and other specialty societies that presented this code to the AMA RUC recommended assignment of 0.15 work

RVUs. The commenter also believes that the undervaluation of the physician work for this service may undermine the ability of physicians to provide the service.

Response: Based on the concerns expressed by the commenter, this code was referred to the CY 2010 refinement panel for review. As a result of the statistical analysis of the CY 2010 refinement panel ratings, the work RVUs for this code were unchanged. Therefore, we are finalizing the interim final values for CPT code 95905 as 0.05 work

RVUs for CY 2011. e. Kidney Disease Education Services (HCPCS Codes G0420 and G0421)

During rulemaking for CY 2010, we adopted policies to provide for the implementation of section 152(b) of the MIPPA which created a new benefit category for kidney disease education (KDE) services for

Medicare beneficiaries diagnosed with Stage IV chronic kidney disease

(CKD). The MIPPA also amended section 1848(j)(3) of the Act which allows for payment of KDE services under the PFS. For CY 2010, we proposed and finalized the RVUs for the two HCPCS G-codes established for the payment of KDE services (74 FR 61901), G0420 (Face-to-face educational services related to the care of chronic kidney disease; individual, per session, per one hour) and G0421 (Face-to-face educational services related to the care of chronic kidney disease; group, per session, per one hour). For purposes of valuing the HCPCS codes for KDE services, we based the work RVUs and the PE inputs, with minor modifications, on CPT codes for medical nutrition therapy (MNT) services, specifically CPT code 97802 (Medical nutrition therapy; initial assessment and intervention, individual, face-to-face with the patient, each 15 minutes) and CPT code 97804 (Medical nutrition therapy; group (2 or more individual(s)), each 30 minutes), because we believed these services to be similar. We crosswalked the work RVUs for

HCPCS code G0420 from CPT code 97802 and for HCPCS code G0421 from CPT code 97804. We multiplied the work RVUs for HCPCS code G0420 by four and the work RVUs for HCPCS code G0421 by two to account for the fact that we crosswalked a 15 minute code to a 60 minute code (CPT code 97802 to HCPCS code G0420) and a 30 minute code to a 60 minute code

(CPT code 97804 to HCPCS code G0421). In order to determine the direct

PE inputs for the KDE services, we indicated that we did not perform straight multiplication of the actual MNT inputs because we did not believe that the required equipment and supplies for the KDE services would increase in direct proportion to the increased time for the codes. For both HCPCS codes G0420 and G0421, we noted that we did not increase the equipment time-in-use for the body analysis machine, printer, or scale, and that we did increase the inputs for the table, computer, paper, and other printed materials.

Comment: Several commenters expressed support for the CY 2010 work

RVUs for the KDE HCPCS codes G0420 and G0421. However, one commenter requested that CMS include the supplies for the KDE services as directly proportional multiple units of the MNT services in order to appropriately pay for the costs of care, noting that HCPCS code G0420

(60 minutes) should have 4 times as many supplies as those in CPT code 97802 (15 minutes) and HCPCS code G0421 (60 minutes) should have 2 times as many as those in CPT code 97804 (30 minutes).

Response: We appreciate the commenters' support for the interim final work

Response: We appreciate the commenters' support for the interim final work RVUs we established for HCPCS codes G0420 and G0421 for KDE services and we are finalizing those work RVUs for CY 2011. After reviewing the direct PE inputs for supplies in both the KDE HCPCS G- codes (G0420 and G0421) and the MNT CPT codes (CPT codes 97802 and 97804), we agree with the commenter that we had not increased the number of sheets of paper for either HCPCS code G0420 or G0421 as we indicated we would (74 FR 61901). Therefore, we have increased the number of paper sheets from 2 in CPT code 97802 (15 minutes) to 8 in

HCPCS code G0420 (60 minutes) and from 2 in CPT code 97804 (30 minutes) to 4 in HCPCS code G0421 (60 minutes). We have also made conforming changes to the printer times for both KDE HCPCS G-codes in the equipment file because we base the printer time on the number of sheets of paper. We are adopting these modified direct PE inputs for HCPCS codes G0420 and G0421 as final for CY 2011.

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f. Excision of Soft Tissue and Bone Tumors (CPT codes 21011 through 21016, 21552, 21554 through 21558, 21930 through 21933, 21395, 21936, 22900 through 22905, 23071, 23073, 23075 through 23078, 23200, 23210, 23220, 24071, 24073, 24075 through 24077, 24079, 24150 through 24153, 25071, 25073, 25075 through 25078, 25170, 26111, 26113, 26115 through 26118, 26250, 26255, 26260, 26262, 27043, 27045, 27047 through 27049, 27059, 27075 through 27078, 27327 through 27329, 27337, 27339, 27364, 27365, 27615, 27616, 27618, 27619, 27632, 27634, 27619, 27645 through 27647, 28039, 28041, 28043, 28045 through 28047, 28171, 28173, and 28175)

For CY 2010, the CPT Editorial Panel split 31 excision codes into 62 codes differentiated by the size of the excised lesion, 18 codes were revised, and 12 additional codes were created. Although we had significant concerns with the pre-service times and the AMA RUC- recommended work RVUs for these codes for CY 2010, in the context of public comments on the CY 2010 proposed rule regarding the site-of- service anomaly codes, we agreed to accept the AMA RUC-recommended work values for these codes on an interim final basis for CY 2010 (74 FR 61954). We also requested that the AMA RUC reexamine the minutes allocated for positioning of the patient for these codes. We noted that we would work with the AMA RUC to address our concerns about the valuation of these codes and would consider whether it would be appropriate to propose further changes in future rulemaking. We indicated that we did not agree with the AMA RUC's recommendations for the inclusion of inpatient hospital care services in these codes, particularly in the cases of codes that would be reported for the smaller-sized tumors. As a result, we stated that we would monitor the frequency data for these codes and may propose further changes to the work RVUs in the future based on these data. We emphasized that the AMA

RUC itself recommended that these services be re-reviewed to determine the accuracy of the utilization assumptions once 2 years of utilization data were available.

In addition, we noted that the CPT 2010 instructions regarding the use of the excision and resection of soft tissue and bone tumor codes advised that a complex repair may be separately reported. However, longstanding Medicare policy generally includes payment for all simple, intermediate, and complex repairs of procedural incisions and, therefore, Medicare would not separately pay for complex repairs associated with procedures reported by these codes.

Comment: Several commenters were pleased that CMS agreed to accept the AMA RUC-recommended values for these new and revised codes. One commenter endorsed CMS' decision to closely monitor the utilization rates for these codes and believes this would be important to ensure accurate payment. The commenters did not see a need for CMS or the AMA

RUC to review the pre-service times assigned to the codes and stated that all of these times were derived from the AMA RUC's pre-service time package methodology, a methodology that CMS has historically supported. The commenters asserted that the times assigned are reflective of the actual patient positioning times. Therefore, the commenters urged CMS to withdraw the request that the AMA RUC revisit the pre-service times for these codes. The commenters asserted that further review would add extra time and work to the already significant workload of the AMA RUC and would not result in any changes.

Response: We appreciate the commenters' support for our acceptance of the AMA RUC-recommended values for these new and revised codes and we are finalizing the interim final work RVUs for these codes for CY 2011. As we stated in the CY 2010 PFS final rule with comment period, we will continue to monitor the frequency data for these codes and work with the AMA RUC to address our concerns and, if appropriate, propose further changes in future rulemaking. In addition, we are reiterating our request originally made in the CY 2010 PFS final rule with comment period (74 FR 61954) that the AMA RUC review the pre-service times for these codes and provide their recommendations to us. g. Cryoablation of Prostate (CPT code 55873)

In June 2008, CMS requested that the AMA RUC review the nonfacility direct PE inputs for CPT code 55873 (Cryosurgical ablation of the prostate (includes ultrasonic guidance for interstitial cryosurgical probe placement). During this review, the AMA RUC recognized that this service was initially reviewed as a new code by the AMA RUC in February 2001. The AMA RUC believed that the intra-service physician time since the initial review had declined (from 200 minutes) as the service is now more commonly performed. The AMA RUC agreed with the specialty society that the service should be surveyed for physician work and also recommended revisions in the direct PE inputs. As a result of the AMA

RUC review and input from the specialty society, the AMA RUC recommended 13.45 work RVUs and revisions to the direct PE inputs for this service for CY 2010. We reviewed these recommendations and accepted the AMA RUC-recommended work RVUs for this code and the direct

PE inputs in the CY 2010 PFS final rule with comment (74 FR 61954 and 61955).

Comment: One commenter expressed concern about the reduction in the work RVUs for CPT code 55873 and the lack of public notice given prior to the reduction. The commenter believes that the intra-service time was underestimated and could vary based on the skill set of the physician. The commenter requested that CMS reinstate the work RVUs as included in the CY 2010 PFS proposed rule for CY 2010 (74 FR 33740).

Response: While we originally requested that the AMA RUC review the nonfacility direct PE inputs for CPT code 55873, we believe that it is appropriate for the AMA RUC to respond to its findings during a limited review by taking other actions that it believes to be appropriate for the particular circumstances, such as requesting that procedures be resurveyed. We followed our usual methodology for revised codes whereby we respond to the AMA RUC work recommendations and adopt interim final values in the final rule with comment period for the upcoming year. In this way, we facilitate appropriate payment for the services on an interim final basis while providing public notice and the opportunity for public comment prior to finalizing the values in the following year.

We note that the RVUs for services paid under the PFS are resource- based, and individual services are valued based upon the typical resources used to provide the service. Because clinical utilization of this service has increased over the last several years and information from the current AMA RUC survey suggests there has been a decrease in intra-service time from 200 to 100 minutes, we continue to believe the reduction in intra-service time and the revised work RVUs as recommended to us by the AMA RUC are clinically appropriate for this service. We commonly expect greater work efficiency as clinical experience with a new service increases over time, and this service fits that profile. Therefore, we are finalizing the interim final work

RVUs of 13.60 for CPT code 55873 for CY 2011.

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Comment: One commenter stated that the 162 minutes of clinical labor time for CPT code 55873 in the final CY 2010 PFS direct PE database should be 168 minutes. The commenter also indicated that supply code SD074 be included as an input for CPT code 55873 based on the AMA RUC's CY 2010 recommendations.

Response: We appreciate the commenter bringing this information to our attention and agree with the commenter's assessment. The 6 minutes of clinical labor time missing from the direct PE inputs for CPT code 55873 have now been included, as has the filiform, and these changes are reflected in the final CY 2011 PFS direct PE database. We are finalizing these direct PE inputs for CPT code 55873 for CY 2011. h. Urodynamics Studies (CPT Codes 51728 and 51729)

In February 2008, the AMA RUC identified CPT codes 51726 (Complex cystometrogram (ie, calibrated electronic equipment)); 51772 (Urethral pressure profile studies (UPP) (urethral closure pressure profile), any technique); 51795 (Voiding pressure studies (VP); bladder voiding pressure, any technique); and 51797 (Voiding pressure studies, intra- abdominal (ie, rectal, gastric, intraperitoneal) (List separately in addition to code for primary procedure)) through the ``Codes Reported

Together'' potentially misvalued codes screen as combinations of codes that were reported together more than 95 percent of the time. The AMA

RUC referred all four codes to the CPT Editorial Panel for creation of

CPT codes for new comprehensive services and for reorganization of the coding structure to reflect the typical procedures performed. As a result, CPT codes 51772 and 51795 were deleted, CPT code 51797 was revised, and CPT codes 51727 (Complex cystometrogram (ie, calibrated electronic equipment); with urethral pressure profile studies (ie, urethral closure pressure profile), any technique); 51728 (Complex cystometrogram (ie, calibrated electronic equipment); with voiding pressure studies (i.e., bladder voiding pressure), any technique); and 51729 (Complex cystometrogram (i.e., calibrated electronic equipment); with voiding pressure studies (ie, bladder voiding pressure) and urethral pressure profile studies (i.e., urethral closure pressure profile), any technique) were created for CY 2010. Accordingly, the AMA

RUC reviewed the clinical labor inputs for the typical patient and made minor edits regarding the intra-service time for these services. In addition, the AMA RUC made adjustments to the medical supplies and equipment. As noted in the CY 2010 PFS final rule with comment period

(74 FR 61955), we accepted these recommendations for the direct PE inputs on an interim final basis.

Comment: Several commenters asserted that CPT codes 51728 and 51729 should have additional clinical labor inputs, including a greater number of minutes during the intra-service period and minutes during the pre-service period. These commenters also requested revisions to the PE supply inputs for the codes.

Response: We discuss our CY 2011 proposal and the final CY 2011 policy with respect to the direct PE inputs for CPT codes 51728 and 51729 in section II.A.3.c.(5) of this final rule with comment period.

As we state there, we reviewed the direct PE inputs for these two CPT codes and three related CPT codes following revised AMA RUC recommendations for CY 2011. We agreed with the AMA RUC recommendations regarding changes for CY 2011. Specifically, we believe the pre-service nonfacility clinical labor time for the 0-day global period CPT codes 51725 (simple cystometrogram (CMG) (eg, spinal manometer)) and 51726 should be removed and the intra-service clinical labor time for CPT code 51726 should also be reduced, consistent with the usual treatment of other 0-day global codes. We believe the AMA RUC provided recommendations to us regarding the direct PE inputs for these cystometrogram services that accurately reflect the costs of the resources (that is, the clinical labor, equipment, and supplies) typically required to furnish these services to Medicare beneficiaries.

Comment: Several additional commenters alerted CMS to incorrect supply inputs for CPT codes 51728 and 51729. The commenters noted that the AMA RUC direct PE recommendations for CPT code 51728 included an additional beaker. In the case of CPT code 51729, the commenters stated that CMS did not include the recommended beaker and tubing in the direct PE database for the CY 2010 final rule with comment period.

Response: We appreciate the commenters' assistance, and we made these corrections in the May 11, 2010 correction notice to the CY 2010

PFS final rule with comment period (75 FR 26356 and 26478). We are finalizing these direct PE inputs, as corrected, for CPT codes 51728 and 51239 for CY 2011. i. Coronary Computed Tomographic Angiography (CPT Codes 75571, 75572, 75573, and 75574)

In October 2008, the CPT Editorial Panel deleted eight Category III

CPT codes (0144T through 0151T) and created four new codes for CY 2010, specifically CPT codes 75571 (Computed tomography, heart, without contrast material, with quantitative evaluation of coronary calcium); 75572 (Computed tomography, heart, with contrast material, for evaluation of cardiac structure and morphology (including 3D image postprocessing, assessment of cardiac function, and evaluation of venous structures, if performed)); 75573 (Computed tomography, heart, with contrast material, for evaluation of cardiac structure and morphology in the setting of congenital heart disease (including 3D image postprocessing, assessment of LV cardiac function, RV structure and function and evaluation of venous structures, if performed)); and 75574 (Computed tomographic angiography, heart, coronary arteries and bypass grafts (when present), with contrast material, including 3D image postprocessing (including evaluation of cardiac structure and morphology, assessment of cardiac function, and evaluation of venous structures, if performed)) to describe the evolution of the performance of cardiac and coronary computed tomography for specific clinical scenarios. We accepted the AMA RUC recommendations for direct PE inputs for these codes on an interim final basis for CY 2010 (74 FR 61955).

Comment: Several commenters stated that the final CY 2010 PFS direct PE database included incomplete direct PE inputs for CPT codes 75572 and 75573. The commenters also submitted updated pricing information for the 64-slice CT scanner.

Response: We appreciate the commenters' assistance, and we corrected these errors in the May 11, 2010 correction notice to the CY 2010 PFS final rule with comment period (75 FR 26356 and 26543). We are finalizing the direct PE inputs for CPT codes 75571, 75572, 75573, and 75574, as corrected, for CY 2011. Additionally, we proposed an updated price for the 64-slice CT scanner and its accompanying software in the

CY 2011 PFS proposed rule (75 FR 40062). We address that proposal and our final CY 2011 policy in section II.A.3.c.(2) of this final rule with comment period.

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j. Adjacent Tissue Transfer or Rearrangement (CPT Codes 14301 and 14302)

CPT code 14300 (Adjacent tissue transfer or rearrangement, more than 30 sq cm, unusual or complicated, any area) was identified by the

Five-Year Review Identification Workgroup through its ``Site-of-Service

Anomalies'' screen for potentially misvalued codes and subsequently identified through the ``CMS Fastest Growing'' screen. The service was referred to the CPT Editorial Panel to clarify the coding for tissue transfers involving different size areas. As a result, CPT code 14300 was deleted and two new codes, CPT codes 14301 (Adjacent tissue transfer or rearrangement, any area; defect 30.1 sq cm to 60.0 sq cm) and 14302 (Adjacent tissue transfer or rearrangement, any area; each additional 30.0 sq cm, or part thereof (List separately in addition to code for primary procedure)) were created. We accepted the AMA RUC recommendations for direct PE inputs on an interim final basis for CY 2010 (74 FR 61955).

Comment: One commenter stated that there were discrepancies between the AMA RUC recommendations and the direct PE inputs for CPT codes 14301 and 14302.

Response: We appreciate the commenters' assistance, and we corrected these errors in the May 11, 2010 correction notice to the CY 2010 PFS final rule with comment period (75 FR 26356 and 26368). Upon additional review of the direct PE inputs for consistency with the CY 2010 AMA RUC recommendations for this CY 2011 final rule with comment period, we also found that the instrument pack for CPT code 14301 should be EQ138 (instrument pack, medium ($1500 and up)) instead of

EQ137 (instrument pack, basic ($500-$1499)). Furthermore, CPT code 14301 should have one SA054 (pack, post-op incision care (suture)) as a supply input in both the nonfacility and facility settings. The final

CY 2011 PFS direct PE database reflects these additional corrections.

We are finalizing the direct PE inputs for CPT codes 14301 and 14302 for CY 2011. k. Insertion of a Temporary Prostatic Urethral Stent (CPT code 53855)

CPT code 53855 (Insertion of a temporary prostatic urethral stent, including urethral measurement) was created for CY 2010 to describe the service previously reported under the Category III CPT code 0084T. We accepted the AMA RUC recommendations for direct PE inputs on an interim final basis for CY 2010 (74 FR 61955).

Comment: One commenter stated that CPT code 53855 was incorrectly missing supply codes SD074 and SH050 as inputs in the final CY 2010 PFS direct PE database. The commenter also noted that SJ038 was incorrectly substituted for SJ032.

Response: We appreciate the commenter bringing these items to our attention and agree with the commenter's assessment. The supply items for CPT code 53588 (filiform and one unit of lidocaine) have been included in the direct PE inputs and we have replaced petroleum jelly with lubricating jelly. These changes are reflected in the final CY 2011 PFS direct PE database. We are finalizing the revised direct PE inputs for CPT code 53855 for CY 2011. l. High Dose Rate Brachytherapy (CPT codes 77785, 77786, and 77787)

CPT codes 77785 (Remote afterloading high dose rate radionuclide brachytherapy; 1 channel); 77786 (Remote afterloading high dose rate radionuclide brachytherapy; 2-12 channels); and 77787 (Remote afterloading high dose rate radionuclide brachytherapy; over 12 channels) were identified by the Five-Year Review Identification

Workgroup through the ``CMS Fastest Growing'' and ``High Volume

Growth'' potentially misvalued codes screens and later revised by the

CPT Editorial Panel for CY 2009. As a result, the AMA RUC made recommendations for physician work and direct PE inputs for these revised services for CY 2009, which we accepted in the CY 2009 PFS final rule with comment period (73 FR 69892). Upon acceptance of the

AMA RUC recommendations, we received several comments concerning the direct PE direct inputs (for example, supply costs and the useful life of the renewable sources) related to several high dose radiation therapy and placement CPT codes. In the CY 2010 PFS proposed rule (74

FR 33532), we requested that the AMA RUC revisit the direct PE inputs for these services. In response to our request, the AMA RUC reviewed the direct PE inputs for these services and made adjustments to the clinical labor staff type, changed the time for some activities, and edited the medical supplies and equipment for the typical patient scenario. In addition, the AMA RUC also recommended further discussion between the specialty and CMS regarding appropriate resolution of the

PE input price for the Iridium-192 brachytherapy source typically used in CPT codes 77785, 77786, and 77787. We accepted these direct PE recommendations for CY 2010 on an interim final basis (74 FR 61782).

Comment: One commenter informed CMS of two concerns regarding CPT codes 77785, 77786, and 77787. The commenter stated that the AMA RUC summary direct PE output table included incorrectly doubled PE inputs for each of the codes. The commenter also pointed out that the medical physicist clinical labor time for CPT code 77786 should be 54 minutes instead of 29 minutes.

Response: We appreciate the commenters' assistance, and we corrected these errors in the May 11, 2010 correction notice to the CY 2010 PFS final rule with comment period (75 FR 26356 and 26564). We are finalizing the direct PE inputs for CPT codes 77785, 77786, and 77787, as corrected, for CY 2011. m. Injection of Facet Joint (CPT Codes 64490, 64491, 64492, 64493, 64494, and 64495)

Facet joint injection services were identified by the Five-Year

Review Identification Workgroup ``High Volume Growth'' potentially misvalued codes screen and referred to the CPT Editorial Panel to create an appropriate coding structure to report primary and additional injections. As a result, the four existing codes describing these services were deleted and CPT codes 66490 (Injection(s), diagnostic or therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves innervating that joint) with image guidance (fluoroscopy or CT), cervical or thoracic; single level); 64491 (Injection(s), diagnostic or therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves innervating that joint) with image guidance (fluoroscopy or CT), cervical or thoracic; second level (List separately in addition to code for primary procedure)); 64492 (Injection(s), diagnostic or therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves innervating that joint) with image guidance (fluoroscopy or CT), cervical or thoracic; third and any additional level(s) (List separately in addition to code for primary procedure)); 64493 (Injection(s), diagnostic or therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves innervating that joint) with image guidance

(fluoroscopy or CT), lumbar or sacral; single level); 64494

(Injection(s), diagnostic or therapeutic agent, paravertebral facet

(zygapophyseal) joint (or nerves innervating that joint) with image guidance (fluoroscopy or CT), lumbar or

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sacral; second level (List separately in addition to code for primary procedure)); and 64495 (Injection(s), diagnostic or therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves innervating that joint) with image guidance (fluoroscopy or CT), lumbar or sacral; third and any additional level(s) (List separately in addition to code for primary procedure)) were created for CY 2010. Accordingly, the AMA RUC reviewed the direct PE inputs as recommended by the specialty and made some minor edits to the clinical labor and medical supplies to reflect the typical patient service, which we accepted in the CY 2010 PFS final rule with comment on an interim final basis (74 FR 61955).

Comment: Several commenters stated that the equipment and supplies listed in the final CY 2010 PFS direct PE database for CPT codes 64490, 64491, 64492, 64493, 64494, and 64495 were incorrect and not consistent with the AMA RUC's recommendations.

Response: We verified that the equipment and supplies listed as direct inputs for these codes in the final CY 2011 direct PE database match the CY 2010 recommendations provided to us by the AMA RUC. We encourage stakeholders who believe a change is required in the direct

PE inputs associated with a particular service in the typical case that is furnished in the facility or nonfacility setting to address these concerns with the AMA RUC. We are finalizing these direct PE inputs for

CPT codes 64490, 64491, 64492, 64493, 64494, and 64495 for CY 2011. n. Knee Arthroscopy (CPT Code 29870)

In the CY 2008 PFS final rule (72 FR 66238), we deferred the establishment of nonfacility direct PE inputs for CPT code 29870

(Arthroscopy, knee, diagnostic, with or without synovial biopsy

(separate procedure)) and stated that the physicians performing arthroscopic services in the nonfacility setting should be given the opportunity to have a multispecialty review by the AMA RUC. We accepted the AMA RUC recommendations for nonfacility direct PE inputs in the CY 2010 PFS final rule with comment period on an interim final basis (74

FR 61955).

Comment: One commenter indicated that the wrong arthroscopic system was approved by the AMA RUC for CPT code 29870.

Response: We verified that the equipment input for this code in the final CY 2011 PFS direct PE database matches the recommendation provided to us by the AMA RUC. We encourage stakeholders who believe a change is required in the direct PE inputs associated with a particular service in the typical case that is furnished in the facility or nonfacility setting to address these concerns with the AMA RUC. We are finalizing the direct PE inputs for CPT code 298770 for CY 2011. 3. Status of Interim Final Work RVUs for Potentially Misvalued Site-of-

Service Anomaly Codes From CY 2009 and CY 2010

In previous years, we have requested that the AMA RUC review codes that, according to Medicare claims data, have experienced a change in the typical site-of-service since the original valuation of the code.

The AMA RUC reviewed and recommended to CMS revised work RVUs for 29 codes for CY 2009 and 11 codes for CY 2010 that were identified as having site-of-service anomalies. In the CYs 2009 and 2010 PFS final rules with comment period (73 FR 69883 and 74 FR 61776 through 61778, respectively), we indicated that although we would accept the AMA RUC valuations for these site-of-service anomaly codes on an interim final basis through CY 2010, we had ongoing concerns about the methodologies used by the AMA RUC to review these services. We requested that the AMA

RUC reexamine the site-of-service anomaly codes and use the building block methodology to revalue the services (74 FR 61777).

For CY 2011, as discussed in more detail in section II.C.3.d. of this final rule with comment period, we are requesting that the AMA RUC reconsider its previously recommended values, which have been applied on an interim final basis in CYs 2009 and 2010, and revise the work

RVUs to better reflect the intensity of the services and the revised physician times and post-procedure visits included in the valuation of these codes. Until we receive the revised values from the AMA RUC for

CY 2012 and can make a determination regarding them, we are continuing to accept the existing AMA RUC-recommended work RVUs listed in Tables 14 and 15 in section II.C.3.d. of this final rule with comment period on an interim final basis for CY 2011. 4. Other New, Revised, or Potentially Misvalued Codes With CY 2010

Interim Final RVUs Not Specifically Discussed in the CY 2011 Final Rule

With Comment Period

For all other CY 2010 new, revised, or potentially misvalued codes with CY 2010 interim final RVUs that are not specifically discussed in this final rule with comment period, we are finalizing, without modification, the interim final work and malpractice RVUs and direct PE inputs that we initially adopted for CY 2010.

C. Establishment of Interim Final RVUs for CY 2011

In this section, we discuss the establishment of work, PE, and malpractice interim final RVUs for CY 2011 and issues related to the processes for establishing these values. These CY 2011 work, PE, and malpractice interim final RVUs, and the associated direct PE inputs, are open to comment on this CY 2011 final rule with comment period. In general, the work, PE, and malpractice RVUs and the associated direct

PE inputs for the CY 2011 new and revised codes will be finalized in the CY 2012 PFS final rule with comment period, where we will also respond to the public comments received on the values and direct PE inputs that are adopted on an interim final basis in this CY 2011 final rule with comment period. The final CY 2011 PFS direct PE database and the crosswalks for the malpractice RVUs for new and revised codes are posted on the CMS Web site under the downloads for the CY 2011 PFS final rule with comment period at: http://www.cms.gov/

PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.

For CY 2011, we received AMA RUC recommendations for 325 new, revised, and potentially misvalued CPT codes and 93 recommended deletions. Of the 325 codes, 84 were identified as potentially misvalued, 125 as new, and 116 as revised. After subtracting out CPT codes for which no work RVU recommendation were given--including codes listed on the Clinical Lab Fee Schedule (CLFS), vaccine codes, and technical component only codes--there were 291 codes for which the AMA

RUC provided work RVU recommendations for CY 2011: 82 CPT codes classified by the AMA RUC as potentially misvalued, 108 as new, and 101 as revised. Of note, as displayed in Table 53, we consider 204 of the

AMA RUC work recommendations for CY 2011 new and established CPT codes to be for codes identified through, created as a result of, or valued in association with service(s) identified through a potentially misvalued code screen. Additionally, we received direct PE input recommendations from the AMA RUC for 325 CPT codes for CY 2011.

For CY 2011, we note that the CPT Editorial Panel deleted CPT codes 0160T (Therapeutic repetitive transcranial magnetic stimulation treatment planning) and 0161T (Therapeutic repetitive transcranial magnetic stimulation treatment delivery and management, per session) and created two new CPT codes, 90867

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(Therapeutic repetitive transcranial magnetic stimulation treatment; planning) and 90868 (Therapeutic repetitive transcranial magnetic stimulation treatment; delivery and management, per session). Due to the timing of the creation of these codes, the AMA RUC was unable to provide work and PE recommendations for CY 2011. As a result, these codes will be contractor-priced for CY 2011. 1. Establishment of Interim Final Work RVUs for CY 2011 a. Background

As we previously explained in section V.A. of this final rule with comment period, on an annual basis, the AMA RUC provides CMS with recommendations regarding physician work values for new, revised, and potentially misvalued codes. We review the AMA RUC-recommended work

RVUs on a code-by-code basis. We determine whether we agree with the

AMA RUC's recommended work RVUs for a service (that is, we agree the valuation is accurate), or, if we disagree, we determine an alternative value that better reflects our estimate of the physician work for the service.

As stated earlier, the AMA RUC provided work RVU recommendations for 291 CPT codes. Of the 291, we are accepting 207 (71 percent) of the

AMA RUC-recommended values and providing alternative values for the remaining 84 (29 percent). Over the last several years our rate of acceptance of the AMA RUC recommendations has been higher, at 90 percent or greater. However, in response to concerns expressed by

MedPAC, the Congress, and other stakeholders regarding the accurate valuation of services under the PFS, we have intensified our scrutiny of the work valuations of new, revised, and potentially misvalued codes. We note that most recently, the law was amended (section 1848(c)(2)(L) of the Act (as added by section 3134 of the ACA)) to add a new requirement which specifies that the Secretary shall establish a formal process to validate RVUs under the PFS. The validation process may include validation of work elements (such as time, mental effort and professional judgment, technical skill and physical effort, and stress due to risk) involved with furnishing a service and may include validation of the pre-, post-, and intra-service components of work.

Furthermore, the Secretary is directed to validate a sampling of the work RVUs of codes identified through any of the seven categories of potentially misvalued codes specified by section 1848(c)(2)(K)(ii) of the Act (as added by section 3134 of the ACA). While we are currently in the planning stage of developing a formal validation process, we believe we should be incorporating, where appropriate, the validation principles specified in the law. That is, in reviewing the CY 2011 AMA

RUC recommendations for valuing the work of new, revised, and potentially misvalued services, we have expended significant effort in evaluating whether the recommended values reflect the work elements, such as time, mental effort, and professional judgment, technical skill and physical effort, and stress due to risk, involved with furnishing the service. We subjected each of the CY 2011 codes to a rigorous clinical review, examining the pre-, post-, and intra-service components of the work. If we concluded that the AMA RUC's recommended value for a code was not accurate, we looked for comparisons with other established reference codes with clinical similarity or analogous pre-, post-, and intra-service times, and, where applicable, employed the building block approach to inform our interim final decision to establish an alternative value that we believe is more appropriate.

The AMA RUC has emphasized the need to value services ``relative'' to other services, explaining in its public comment on the CY 2011 PFS proposed rule that it will ``continue to employ magnitude estimation in developing relative value recommendations as it is the cornerstone of the RBRVS (resource-based relative value scale).'' We agree that services paid under the PFS should be reviewed and valued in manner consistent with Medicare payment policy to maintain appropriate relativity between services and promote accurate pricing. In our review of the 291 CY 2011 AMA RUC recommendations for work values, we noted that the AMA RUC used a variety of approaches and methodologies to arrive at the recommended work values. For some codes, the AMA RUC used magnitude estimation in conjunction with survey data from physician surveys conducted by the specialty societies to support the values. For other codes, the AMA RUC used magnitude estimation to override the results of the survey data, recommending to CMS a value that was not based on survey data but rather, justified in terms of its appropriate relativity within the system to other similar services. The AMA RUC may also elect to use a crosswalk approach in valuing a code by applying a work value from a currently valued code to the code under review based on the clinical similarity of the procedures or explicit considerations of pre-, intra-, and post-service times. In some instances, the AMA RUC asserted that it used the building block methodology to value the code, a methodology CMS has historically supported (74 FR 61776).

We understand that the AMA RUC believes that it must approach valuation on a code-by-code basis, and depending on the context of the particular code, some methodologies may be better suited than others for valuation purposes. However, we remain concerned over the variations and some applications of the AMA RUC's methodologies which, if we continue to accept them, could contribute to inaccuracy in the relativity of physician work valued under the PFS for different services. Our concerns at this time include the following methodological issues which we observed during our review of the CY 2011 AMA RUC work recommendations:

AMA RUC-recommended values without benefit of a survey:

For a number of codes, the AMA RUC justified the work RVUs by crosswalking the codes to existing codes deemed comparable by the AMA

RUC. Since the specialty society did not conduct a survey for these codes, there are no survey data to back up the recommended work RVUs.

Surveys conducted on existing codes produced predictable results: In providing recommendations for existing potentially misvalued codes, the AMA RUC often recommended maintaining the current work RVUs and supported this valuation by citing the survey results.

Upon clinical review of a number of these cases, we are concerned over the validity of the survey results since the survey values often are very close to the current code values. Increasingly, rather than recommending the median survey value that has historically been most commonly used, the AMA RUC is choosing to recommend the 25th percentile value, potentially responding to the same concern we have identified.

AMA RUC deviated significantly or disregarded survey results completely: For the majority of codes, the AMA RUC cited the survey results in support of the work RVU recommendations and in many instances adopted either the survey median or 25th percentile value as the AMA RUC-recommended value. However, in some instances, the AMA RUC recommended work RVUs which deviated significantly from the survey results. Rather than using the survey data, the AMA RUC appears to have relied on another methodology to value the code, such as ``magnitude

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estimation'' or crosswalk to a comparable code.

In reviewing the 291 work RVU recommendations from the AMA RUC for

CY 2011, we concluded that the strongest support for the valuation of a code occurred when the AMA RUC cited multiple germane methodologies that all yielded a similar value that was also supported by the survey.

We tended to accept the AMA RUC-recommended values in these instances.

However, we found the weakest and least convincing valuations occurred in cases where the AMA RUC either deviated significantly or disregarded the survey results in favor of tweaking various components of the code in order to justify a value which the AMA RUC believed was correct due to perceived ``magnitude estimation'' for that code. We are concerned that such actions by the AMA RUC may create problems for any systematic validation processes that could be implemented in the future as required by section 1848(c)(2)(L) of the Act (as added by section 3134 of the ACA).

Accordingly, for those CY 2011 codes for which we did not accept the AMA RUC recommendations and are instead establishing alternative interim final values, we discuss our decisions based on groupings of codes in the following sections. Table GG4 at the end of this section displays the AMA RUC recommendations and interim final work RVUs for CY 2011 new, revised, and potentially misvalued codes. b. CY 2011 Interim

Final Work RVUs for New and Revised Codes (1) CY 2011 New and Revised

Codes that Do Not Represent Major New Comprehensive Services

We provide an explanation in the following sections of our rationale for not accepting particular AMA RUC-recommended or Health

Care Professional Advisory Committee (HCPAC)-recommended work RVUs for

CY 2011 new and revised CPT codes that do not represent major new comprehensive services that are listed in Table 51 and discussed in the subsequent section. The issues are arranged by type of service in CPT code order and address only work RVUs. These codes are listed in Table 53, which includes a complete list of all new, revised, and potentially misvalued CPT codes with CY 2011 AMA RUC work RVU recommendations and

CMS' interim final decisions for CY 2011.

(A) Excision and Debridement (CPT Codes 11010, 11011, 11012, 11042, 11043, 10144, 11045, 11046, 11047, and 97598)

CPT codes 11043 (Debridement; skin, subcutaneous tissue, and muscle) and 11044 (Debridement; skin, subcutaneous tissue, muscle, and bone) were identified by the AMA RUC's Five-Year Review Identification

Workgroup through the ``Site-of-Service Anomalies'' potentially misvalued codes screen in September 2007. The AMA RUC recommended that the entire family of services described by CPT codes 11040 through 11044 and 97597 and 97598 be referred to the CPT Editorial Panel because the current descriptors allowed reporting of the codes for a bimodal distribution of