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Daily Rules, Proposed Rules, and Notices of the Federal Government

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare Medicaid Services

42 CFR Parts 409, 410, 411, 413, 414, 415, 418, 423, 424, 482, 484, 485, and 491

[CMS-1385-P]

RIN 0938-AO65

Medicare Program; Proposed Revisions to Payment Policies Under the Physician Fee Schedule, and Other Part B Payment Policies for CY 2008; Proposed Revisions to the Payment Policies of Ambulance Services Under the Ambulance Fee Schedule for CY 2008; and the Proposed Elimination of the E-Prescribing Exemption for Computer-Generated Facsimile Transmissions

AGENCY: Centers for Medicare Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
SUMMARY: This proposed rule would address certain provisions of the Tax Relief and Health Care Act of 2006, as well as make other proposed changes to Medicare Part B payment policy.

We are proposing these changes to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. This proposed rule also discusses refinements to resource-based practice expense (PE) relative value units (RVUs); geographic practice cost indices (GPCI) changes; malpractice RVUs; requests for additions to the list of telehealth services; several coding issues including additional codes from the 5-Year Review; payment for covered outpatient drugs and biologicals; the competitive acquisition program (CAP); clinical lab fee schedule issues; payment for renal dialysis services; performance standards for independent diagnostic testing facilities; expiration of the physician scarcity area (PSA) bonus payment authorized by section 413 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA); conforming and clarifying changes for comprehensive outpatient rehabilitation facilities (CORFs); a process for updating the drug compendia at section 1861(t)(2)(B) of the Social Security Act (the Act); physician self-referral issues; beneficiary signature for ambulance transport services; durable medical equipment (DME) update; the chiropractic services demonstration; a Medicare economic index (MEI) data change; technical corrections; issues related to therapy services; revisions to the ambulance fee schedule; the ambulance inflation factor for CY 2008; and the proposal to eliminate the exemption for computer-generated facsimile transmissions from the National Council for Prescription Drug Programs (NCPDP) SCRIPT standard for transmitting prescription and certain prescription-related information for Part D eligible individuals.

DATES: To be assured consideration, except for comments on section II.M.10 of the preamble, comments must be received at one of the adresses provided below, no later than 5 p.m. on Friday, August 31, 2007.

Comments on section II.M.10 "Alternative Criteria for Satisfying Certain Exceptions", of the preamble must be received by no later than 5 p.m. on Friday, September 7, 2007.

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

1.Electronically.You may submit electronic comments on specific issues in this regulation tohttp://www.cms.hhs.gov/eRulemaking.Click on the link "Submit electronic comments on CMS regulations with an open comment period." (Attachments should be in Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft Word.)

2.By regular mail.You may mail written comments (one original and two copies) to the following address ONLY: Centers for Medicare Medicaid Services, Department of Health and Human Services, Attention: CMS-1385-P, P.O. Box 8018,Baltimore, MD 21244-8018.

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

3.By express or overnight mail.You may send written comments (one original and two copies) to the following address ONLY: Centers for Medicare Medicaid Services, Department of Health and Human Services, Attention: CMS-1385-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

4.By hand or courier.If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) before the close of the comment period to one of the following addresses. If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members. Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 21244-1850.

(Because access to the interior of the HHH Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

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

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

For information on viewing public comments, see the beginning of theSUPPLEMENTARY INFORMATIONsection.

FOR FURTHER INFORMATION CONTACT: Rick Ensor (410) 786-5617 for issues related to practice expense methodology.

Stephanie Monroe (410) 786-6864 for issues related to the geographic practice cost index and malpractice RVUs.

Craig Dobyski (410) 786-4584 for issues related to list of telehealth services.

Ken Marsalek (410) 786-4502 for issues related to the DRA imaging cap.

Catherine Jansto (410) 786-7762 for issues related to payment for covered outpatient drugs and biologicals.

Edmund Kasaitis (410) 786-0477 for issues related to the Competitive Acquisition Program (CAP) for part B drugs.

Anita Greenberg (410) 786-4601 for issues related to the clinical laboratory fee schedule.

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

August Nemec (410) 786-0612 for issues related to independent diagnostic testing facilities.

Karen Rinker (410) 786-0189 for issues related to the drug compendia.

David Walczak (410) 786-4475 for issues related to reassignment andphysician self-referral rules for diagnostic tests and beneficiary signature for ambulance transport.

Lisa Ohrin (410) 786-4565 for issues related to physician self-referral rules.

Bob Kuhl (410) 786-4597 for issues related to the DME update.

Rachel Nelson (410) 786-1175 for issues related to the quality reporting system for physician payment for CY 2008.

Mary Ciccanti (410) 786-3107 for issues related to the reporting of anemia quality indicators.

James Menas (410) 786-4507 for issues related to payment for physician pathology services.

Dorothy Shannon (410) 786-3396 for issues related to the outpatient therapy cap.

Drew Morgan (410) 786-2543 for issues related to the E-Prescribing Exemption for Computer-Generated Facsimile Transmissions.

Roechel Kujawa (410) 786-9111 or Anne Tayloe (410) 786-4546 for issues related to the ambulance fee schedule.

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

Submitting Comments:We welcome comments from the public on all issues set forth in this rule to assist us in fully considering issues and developing policies. You can assist us by referencing the file code [CMS-1385-P] and the specific “issue identifier” that precedes the section on which you choose to comment.

Inspection of Public Comments:All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. 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.cms.hhs.gov/eRulemaking.Click on the link “Electronic Comments on CMS Regulations” 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.

To assist readers in referencing sections contained in this preamble, we are providing the following table of contents. Some of the issues discussed in this preamble affect the payment policies, but do not require changes to the regulations in theCode of Federal Regulations.Information on the regulation's impact appears throughout the preamble and is not exclusively in section VI.

Table of Contents I. Background A. Development of the Relative Value System 1. Work RVUs 2. Practice Expense Relative Value Units (PE RVUs) 3. Resource-Based Malpractice RVUs 4. Refinements to the RVUs 5. Adjustments to RVUs Are Budget Neutral B. Components of the Fee Schedule Payment Amounts C. Most Recent Changes to Fee Schedule II. Provisions of the Proposed Regulation Related to the Physician Fee Schedule A. Resource-Based Practice Expense (PE) Relative Value Units (RVUs) 1. Current Methodology 2. PE Proposals for CY 2008 B. Geographic Practice Cost Indices (GPCIs) 1. GPCI Update 2. Payment Localities C. Malpractice (MP) RVUs (TC/PC Issue) D. Medicare Telehealth Services 1. Requests for Adding Services to the List of Medicare Telehealth Services 2. Submitted Requests for Addition to the List of Telehealth Services E. Specific Coding Issues Related to PFS 1. Reduction in the Technical Component (TC) for Imaging Services Under the PFS to the Outpatient Department (OPD) Payment Amount 2. Application of Multiple Procedure Reduction for Mohs Micrographic Surgery (CPT Codes 17311 Through 17315) 3. Payment for Intravenous Immune Globulin (IVIG) Add-On Code for Preadmission-Related Services 4. Additional Codes From the 5-Year Review of Work RVUs 5. Anesthesia Coding (Part of 5-Year Review) 6. Reporting of Cardiac Rehabilitation Services F. Part B Drug Payment 1. Average Sales Price (ASP) Issues 2. Competitive Acquisition Program (CAP) Issues G. Issues Related to the Clinical Lab Fee Schedule 1. Date of Service for the TC of Physician Pathology Services (§ 414.510) 2. New Clinical Diagnostic Laboratory Test (§ 414.508) H. Proposed Revisions Related to Payment for Renal Dialysis Services Furnished by End-Stage Renal Disease (ESRD) Facilities 1. CY 2005 Revisions 2. CY 2006 Revisions 3. CY 2007 Updates 4. Provisions of This Proposed Rule I. Independent Diagnostic Testing Facility (IDTF) Issues 1. Proposed Revisions of Existing IDTF Performance Standards 2. Proposed New IDTF Standards J. Expiration of MMA Section 413 Provisions for Physician Scarcity Area (PSA) K. Comprehensive Outpatient Rehabilitation Facility (CORF) Issues 1. Requirements for Coverage of CORF Services—Plan of Treatment (§ 410.105(c)) 2. Included Services (§ 410.100) 3. Physician Services (§ 410.100(a)) 4. Clarifications of CORF Respiratory Therapy Services 5. Social and Psychological Services 6. Nursing Care Services 7. Drugs and Biologicals 8. Supplies and DME 9. Clarifications and Payment Updates for Other CORF Services 10. Cost-Based Payment (§ 413.1) 11. Payment for Comprehensive Outpatient Rehabilitation Facility (CORF) Services 12. Vaccines L. Compendia for Determination of Medically-Accepted Indications for Off-Label Uses of Drugs and Biologicals in an Anti-Cancer Chemotherapeutic Regimen (§ 414.930) 1. Background 2. Process for Determining Changes to the Compendia List M. Physician Self-Referral Issues 1. Changes to Reassignment and Physician Self-Referral Rules Relating to Diagnostic Tests (Anti-Markup Provision) 2. Burden of Proof 3. In-Office Ancillary Services Exception 4. Obstetrical Malpractice Insurance Subsidies 5. Unit-of-Service (per click) Payments in Space and Equipment Leases 6. Period of Disallowance for Noncompliant Financial Relationships 7. Ownership or Investment Interest in Retirement Plans 8. “Set in Advance” and Percentage-Based Compensation Arrangements 9. Stand in the Shoes 10. Alternative Criteria for Satisfying Certain Exceptions 11. Services Furnished “Under Arrangements” N. Beneficiary Signature for Ambulance Transport Services O. Update to Fee Schedules for Class III DME for CYs 2007 and 2008 1. Background 2. Proposed Update to Fee Schedule P. Discussion of Chiropractic Services Demonstration Q. Technical Corrections 1. Particular Services Excluded From Coverage (§ 411.15(a)) 2. Medical Nutrition Therapy (§ 410.132(a)) 3. Payment Exception: Pediatric Patient Mix (§ 413.84) 4. Diagnostic X-Ray Tests, Diagnostic Laboratory Tests, and OtherDiagnostic Tests: Conditions (§ 410.32(a)(1)) R. Percentage Change in the Medicare Economic Index (MEI) S. Other Issues 1. Recalls and Replacement Devices

2. Therapy Standards and Requirements

3. Proposed Elimination of the Exemption for Computer-Generated Facsimile Transmission From the National Council for Prescription Drug Programs (NCPDP) SCRIPT Standard for Transmitting Prescription and Certain Prescription Related Information for Part D Eligible Individuals T. Division B of the Tax Relief and Health Care Act of 2006—Medicare Improvements and Extension Act of 2006 (Pub. L. 109-432) (MIEA-TRHCA) 1. Section 101(b)—Physician Quality Reporting Initiative (PQRI) 2. Section 110—Reporting of Anemia Quality Indicators (§ 414.707(b)) 3. Section 104—Extension of Treatment of Certain Physician Pathology Services Under Medicare 4. Section 201—Extension of Therapy Cap Exception Process 5. Section 101(d)—Physician Assistance and Quality Initiative (PAQI) Fund 6. Section 108—Payment Process Under the Competitive Acquisition Program (CAP) III. Fee Schedule for Payment of Ambulance Services Update for CY 2007; Ambulance Inflation Factor Update for CY 2008; and Proposed Revisions to the Publication of the Ambulance Fee Schedule (§ 414.620) A. History of Medicare Ambulance Services 1. Statutory Coverage of Ambulance Services 2. Medicare Regulations for Ambulance Services 3. Transition to National Fee Schedule B. Ambulance Inflation Factor (AIF) During the Transition Period C. Ambulance Inflation Factor (AIF) for CY 2008 D. Proposed Revisions to the Publication of the Ambulance Fee Schedule (§ 414.620) IV. Collection of Information Requirements V. Response to Comments VI. Regulatory Impact Analysis Regulation Text Addendum A—Explanation and Use of Addendum B Addendum B—2008 Relative Value Units and Related Information Used in Determining Medicare Payments for 2008 Addendum C—Codes for Which We Received PERC Recommendations on PE Direct Inputs Addendum D—Proposed 2008 Geographic Adjustment Factors (GAFs) Addendum E—Proposed 2008* Geographic Practice Cost Indices (GPCIs) by State and Medicare Locality Addendum F—CPT/HCPCS Imaging Codes Defined by Section 5102(b) of the DRA Addendum G—FY 2008 Wage Index for Urban Areas Based On CBSA Labor Market Areas Addendum H—FY 2008 Wage Index based on CBSA Labor Market Areas for Rural Areas Acronyms

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

AAAAbdominal aortic aneurysm AAPAverage acquisition price ACOTEAccreditation Council for Occupational Therapy Education ACRAmerican College of Radiology AFROCAssociation of Freestanding Radiation Oncology Centers AHFS-DIAmerican Hospital Formulary Service-Drug Information AHRQAgency for Healthcare Research and Quality (HHS) AIFAmbulance inflation factor AMAAmerican Medical Association AMA-DEAmerican Medical Association Drug Evaluations AMPAverage manufacturer price AOTAAmerican Occupational Therapy Association APCAmbulatory payment classification APTAAmerican Physical Therapy Association ASAAmerican Society of Anesthesiologists ASCAmbulatory surgical center ASPAverage sales price ASTROAmerican Society for Therapeutic Radiology and Oncology ATAAmerican Telemedicine Association AWPAverage wholesale price BBABalanced Budget Act of 1997 (Pub. L. 105-33) BBRA[Medicare, Medicaid and State Child Health Insurance Program] Balanced Budget Refinement Act of 1999 (Pub. L. 106-113) BIPAMedicare, Medicaid, and SCHIP Benefits Improvement Protection Act of 2000 BLSBureau of Labor Statistics BMDBone mineral density BMIBody mass index BMMBone mass measurement BNBudget neutrality BSABody surface area CADComputer-aided detection CAHCritical access hospital CAPCompetitive acquisition program CBSACore-Based Statistical Area CEMCardiac event monitoring CFConversion factor CFRCode of Federal Regulations CMACalifornia Medical Association CMSCenters for Medicare Medicaid Services CNSClinical nurse specialist CORFComprehensive Outpatient Rehabilitation Facility COTACertified Occupational Therapy Assistant CPEPClinical Practice Expert Panel CPIConsumer Price Index CPI-UConsumer price index for urban customers CPT(Physicians') Current Procedural Terminology (4th Edition, 2002, copyrighted by the American Medical Association) CRT-DCardiac resynchronization therapy defibrillator CTComputed tomography CTAComputed tomographic angiography CYCalendar year DEXADual energy x-ray absorptiometry DHSDesignated health services DMEDurable medical equipment DMEPOSDurable medical equipment, prosthetics, orthotics, and supplies DODoctor of Osteopathy DRADeficit Reduction Act of 2005 (Pub. L. 109-432) E/MEvaluation and management ECIEmployment cost index EHRElectronic health record EPC[Duke] Evidence-based Practice Centers EPOErythopoeitin ESRDEnd stage renal disease FCFacts and Comparisons FAWFurnish as written FAXFacsimile FDAFood and Drug Administration (HHS) FMRFair market rents FQHCFederally qualified health center FRFederal Register GAFGeographic adjustment factor GAOGeneral Accounting Office GIIGlobal Insight, Inc. GPOGroup purchasing organization GPCIGeographic practice cost index HCPACHealth Care Professional Advisory Committee HCPCSHealthcare Common Procedure Coding System HCRISHealthcare Cost Report Information System HIPAAHealth Insurance Portability and Accountability Act of 1996 (Pub. L. 104-191) HHAHome health agency HHS[Department of] Health and Human Services HITHealth information technology HMOHealth maintenance organization HPSAHealth Professional Shortage Area HRSAHealth Resources Services Administration (HHS) HUD[Department of] Housing and Urban Development ICDImplantable cardioverter-defibrillator ICFIntermediate care facilities IDTFIndependent diagnostic testing facility IFCInterim final rule with comment period IOTEDInternational Occupational Therapy Eligibility Determination IPPEInitial preventive physical examination IPPSInpatient prospective payment system IVIntravenous IVIGIntravenous immune globulin IWPUTIntra-service work per unit of time JCAAIJoint Council of Allergy, Asthma, and Immunology LPNLicensed practical nurse MAMedicare Advantage MA-PDMedicare Advantage-Prescription Drug Plans MDMedical doctor MedCACMedicare Evidence Development and Coverage Advisory Committee (formerly the Medicare Coverage Advisory Committee (MCAC)) MedPACMedicare Payment Advisory Commission MEIMedicare Economic Index MIEA-TRHCAMedicare Improvements and Extension Act of 2006 (That is, Division B of the Tax Relief and Health Care Act of 2006 (TRHCA)) MMAMedicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173) MNTMedical nutrition therapy MPMalpractice MRAMagnetic resonance angiography MRIMagnetic resonance imaging MSAMetropolitan statistical area MSPMedicare Secondary Payer MSVPMulti-specialty visit package NBCOTNational Board for Certification in Occupational Therapy, Inc. NCCNNational Comprehensive Cancer Network NCPDPNational Council for Prescription Drug Programs NCQDISNational Coalition of Quality Diagnostic Imaging Services NDCNational drug code NEMCNew England Medical Center NISTANational Institute of Standards and Technology Act NLANational limitation amount NPNurse practitioner NPPNonphysician practitioners NQFNational Quality Forum NTTAANational Technology Transfer and Advancement Act of 1995 (Pub. L. 104-113) OACT[CMS'] Office of the Actuary OBRAOmnibus Budget Reconciliation Act OIGOffice of Inspector General OMBOffice of Management and Budget OPD Outpatient Department OPPSOutpatient prospective payment system OPTOutpatient physical therapy OSCAROnline Survey and Certification and Reporting PAPhysician assistant PCProfessional component PCFPatient compensation fund PDPPrescription Drug Plan PEPractice Expense PE/HRPractice expense per hour PEACPractice Expense Advisory Committee PECOSProvider Enrollment, Chain, and Ownership System PERCPractice Expense Review Committee PETPositron emission tomography PFSPhysician Fee Schedule PLIProfessional liability insurance PPIProducer price index PPSProspective payment system PQRIPhysician Quality Reporting Initiative PRAPaperwork Reduction Act PSAPhysician scarcity areas PT Physical therapy PT/INRProthrombin time, international normalized ratio RFA Regulatory Flexibility Act RHCRural health clinic RIA Regulatory impact analysis RNRegistered nurse RTRespiratory therapist RUC[AMA's Specialty Society] Relative (Value) Update Committee RVURelative value unit SBASmall Business Administration SGRSustainable growth rate SLPSpeech-language pathology SMS[AMA's] Socioeconomic Monitoring System SNFSkilled nursing facility STSSociety of Thoracic Surgeons TATechnology Assessment TC Technical Component TENSTranscutaneous electric nerve stimulator TRHCATax Relief and Health Care Act of 2006 (Pub. L. 109-432) USP-DIUnited States Pharmacopoeia-Drug Information WACWholesale acquisition cost WAMPWidely available market price Wet AMDExudative age-related macular degeneration WFOTWorld Federation of Occupational Therapists
I. Background

[If you choose to comment on issues in this section, please include the caption “BACKGROUND” at the beginning of your comments.]

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

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

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

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

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

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

2. Practice Expense Relative Value Units (PE RVUs)

Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 103-432), enacted on October 31, 1994, amended section 1848(c)(2)(C)(ii) of the Act and required us to develop resource-based PE RVUs for each physician's service beginning in 1998. We were to consider general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising PEs.

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

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

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

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

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

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

3. Resource-Based Malpractice (MP) RVUs

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

4. Refinements to the RVUs

Section 1848(c)(2)(B)(i) of the Act requires that we review all RVUs no less often than every 5 years. The first 5-Year Review of the physician work RVUs was effective in 1997, published on November 22, 1996 (61 FR 59489). The second 5-Year Review went into effect in 2002, published in the CY 2002 PFS final rule (66 FR 55246). The third 5-Year Review of physician work RVUs went into effect on January 1, 2007 and was published in the CY 2007 PFS final rule with comment period (71 FR 69624) (although we note that this proposed rule contains certain additional proposals relating to the third 5-Year Review).

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

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

5. Adjustments to RVUs Are Budget Neutral

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

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

B. Components of the Fee Schedule Payment Amounts

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

Payments are converted to dollar amounts through the application of a CF, which is calculated by the Office of the Actuary (OACT) and is updated annually for inflation.

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

Payment = [(RVU work × budget neutrality adjuster × work GPCI) + (RVU PE × PE GPCI) + (MP RVU × MP GPCI)] × CF.

C. Most Recent Changes to the Fee Schedule

The CY 2007 PFS final rule with comment period (71 FR 69624) addressed certain provisions of the Deficit Reduction Act of 2005 (Pub. L. 109-432) (DRA) and made other changes to Medicare Part B payment policy to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. This final rule with comment period also discussed GPCI changes; requests for additions to the list of telehealth services; payment for covered outpatient drugs and biologicals; payment for renal dialysis services; policies related to private contracts and opt-out; policies related to bone mass measurement (BMM) services, independent diagnostic testing facilities (IDTFs), the physician self-referral prohibition; laboratory billing for the technical component (TC) of physician pathology services; the clinical laboratory fee schedule; certification of advanced practice nurses; health information technology, the health care information transparency initiative; updated the list of certain services subject to the physician self-referral prohibitions, finalized ASP reporting requirements, and codified Medicare's longstanding policy that payment of bad debts associated with services paid under a fee schedule/charge-based system is not allowable.

We also finalized the CY 2006 interim RVUs and issued interim RVUs for new and revised procedure codes for CY 2007.

In addition, the CY 2007 PFS final rule with comment period included revisions to payment policies under the fee schedule for ambulance services and announced the ambulance inflation factor (AIF) update for CY 2007.

In accordance with section 1848(d)(1)(E)(i) of the Act, we also announced that the PFS update for CY 2007 is −5.0 percent, the initial estimate for the sustainable growth rate (SGR) for CY 2007 is 1.8 percent and the CF for CY 2007 is $35.9848. However, subsequent to publication of the CY 2007 PFS final rule with comment period, section 101(a) of Division B, Title I of the Tax Relief and Health Care Act of 2006 (Pub. L. 109-432) (MIEA-TRHCA), which was enacted on December 22, 2006, amended section 1848(d) of the Act. [Division B of the Tax Relief and Health Care Act of 2006 is entitled Medicare and Other Health Provisions and its short title is the Medicare Improvements and Extension Act of 2006. Therefore, it is hereinafter referred to as “MIEA-TRHCA”.] As a result of this statutory change the CF of $37.8975 was maintained for CY 2007.

II. Provisions of the Proposed Regulation Related to the Physician Fee Schedule A. Resource-Based Practice Expense (PE) Relative Value Units (RVUs)

[If you choose to comment on issues in this section, please include the caption “RESOURCE-BASED PE RVUs” at the beginning of your comments.]

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. Until that time, PE RVUs were based on historical allowed charges. This legislation stated that the revised PE methodology must consider the staff, equipment, and supplies used in the provision of various medical and surgical services in various settings beginning in 1998. The Secretary has interpreted this to mean that Medicare payments for each service would be based on the relative PE resources typically involved with furnishing the service.

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

• Use, to the maximum extent possible, generally-accepted cost accounting principles that recognize all staff, equipment, supplies, and expenses, not solely those that can be linked to specific procedures and actual data on equipment utilization.

• Develop a refinement method to be used during the transition.

• Consider, in the course of notice and comment rulemaking, impact projections that compare new proposed payment amounts to data on actual physician PE.

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

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

1. Current Methodology a. Data Sources for Calculating Practice Expense

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

The AMA developed the SMS survey in 1981 and discontinued it in 1999. Beginning in 2002, we incorporated the 1999 SMS survey data into our calculation of the PE RVUs, using a 5-year average of SMS survey data. (See the November 1, 2002 Revisions to Payment Policies and Five-Year Review of and Adjustments to the Relative Value Units Under the Physician Fee Schedule for CY 2002 final rule (66 FR 55246) (hereinafter referred to as CY 2002 PFS final rule).) The SMS PE survey data are adjusted to a common year, 2005. The SMS data provide the following six categories of PE costs:

• Clinical payroll expenses, which are payroll expenses (including fringe benefits) for nonphysician clinical personnel.

• Administrative payroll expenses, which are payroll expenses (including fringe benefits) for nonphysician personnel involved in administrative, secretarial or clerical activities.

• Office expenses, which include expenses for rent, mortgage interest, depreciation on medical buildings, utilities and telephones.

• Medical material and supply expenses, which include expenses for drugs, x-ray films, and disposable medical products.

• Medical equipment expenses, which include expenses depreciation, leases, and rent of medical equipment used in the diagnosis or treatment of patients.

• All other expenses, which include expenses for legal services, accounting, office management, professional association memberships, and anyprofessional expenses not previously mentioned in this section.

In accordance with section 212 of the BBRA, we established a process to supplement the SMS data for a specialty with data collected by entities and organizations other than the AMA (that is, the specialty itself). (See the Criteria for Submitting Supplemental Practice Expense Survey Data interim final rule with comment period (65 FR 25664, May 3, 2000).) Originally, the deadline to submit supplementary survey data was through August 1, 2001. In the CY 2002 PFS final rule (66 FR 55246), the deadline was extended through August 1, 2003. To ensure maximum opportunity for specialties to submit supplementary survey data, we extended the deadline to submit surveys until March 1, 2005 in the Revisions to Payment Policies Under the Physician Fee Schedule for CY 2004 final rule (November 7, 2003; 68 FR 63196) (hereinafter referred to as CY 2004 PFS final rule).

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

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

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

b. Allocation of PE to Services

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

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

(ii)Indirect costs.The SMS and supplementary survey data are the source for the specialty-specific aggregate indirect costs used in our PE calculations. We then allocate the indirect costs to the code level on the basis of the direct costs specifically associated with a code and the maximum of either the clinical labor costs or the physician work RVUs. For calculation of the 2008 PE RVUs, we are proposing to use the 2006 procedure-specific utilization data crosswalked to 2007 services. To arrive at the indirect PE costs:

• We apply a specialty-specific indirect percentage factor to the direct expenses to recognize the varying proportion that indirect costs represent of total costs by specialty. For a given service, the specific indirect percentage factor to apply to the direct costs for the purpose of the indirect allocation is calculated as the weighted average of the ratio of the indirect to direct costs (based on the survey data) for the specialties that furnish the service. For example, if a service is furnished by a single specialty with indirect PEs that were 75 percent of total PEs, the indirect percentage factor to apply to the direct costs for the purposes of the indirect allocation would be (0.75/0.25) = 3.0. The indirect percentage factor is then applied to the service level adjusted indirect practice expense allocators.

• We use the specialty-specific PE/HR from the SMS survey data, as well as the supplemental surveys for cardio-thoracic surgery, vascular surgery, physical and occupational therapy, independent laboratories, allergy/immunology, cardiology, dermatology, radiology, gastroenterology, IDTFs, radiation oncology and urology.

Note:For radiation oncology, the data represent the combined survey data from the American Society for Therapeutic Radiology and Oncology (ASTRO) and the Association of Freestanding Radiation Oncology Centers (AFROC).) We incorporate this PE/HR into the calculation of indirect costs using an index which reflects the relationship between each specialty's indirect scaling factor and the overall indirect scaling factor for the entire PFS. For example, if a specialty had an indirect practice cost index of 2.00, this specialty would have an indirect scaling factor that was twice the overall average indirect scaling factor. If a specialty had an indirect practice cost index of 0.50, this specialty would have an indirect scaling factor that was half the overall average indirect scaling factor.

• When the clinical labor portion of the direct PE RVU is greater than the physician work RVU for a particular service, the indirect costs are allocated based upon the direct costs and the clinical labor costs. For example, if a service has no physician work and 1.10 direct PE RVUs, and the clinical labor portion of the direct PE RVUs is 0.65 RVUs, we would use the 1.10 direct PE RVUs and the 0.65 clinical labor portions of the direct PE RVUs to allocate the indirect PE for that service.

c. Facility/Nonfacility Costs

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

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

Diagnostic services are generally comprised of two components; a professional component (PC) and a technical component (TC), which may be performed independently or by different providers. When services have TC, PC, and global components that can be billed separately, the payment for theglobal component equals the sum of the payment for the TC and PCs. 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, PC, and TCs for a service. (The direct PE RVUs for the TC and PCs sum to the global under the bottom-up methodology.)

e. Transition Period

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

f. PE RVU Methodology

The following is a description of the PE RVU methodology.

(i) Setup File

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

(ii) Calculate the Direct Cost PE RVUs

Sum the costs of each direct input.

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

Apply a BN adjustment to the direct inputs.

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

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

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

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

(iii) Create the Indirect PE RVUs

Create indirect allocators.

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

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

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

For most services the indirect allocator is:

indirect percentage * (direct PE RVU/direct percentage) + work RVU.

There are two situations where this formula is modified:

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

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

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

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

Apply a BN adjustment to the indirect allocators.

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

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

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

Calculate the Indirect Practice Cost Index.

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

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

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

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

Step 16:Calculate the indirect practice cost index at the service level to ensure the capture of all indirect costs. Calculate a weighted average of the practice cost index values for the specialties that furnish the service.

Note:

For services with TC 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 components.

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

(iv) Calculate the Final PE RVUs

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

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

(v) Setup File Information

Specialties excluded from rate-setting calculation:For the purposes of calculating the PE RVUs, we exclude certain specialties such as midlevel practitioners paid at a percentage of the PFS, audiology, and low volume specialties from the calculation. These specialtiesareincluded for the purposes of calculating the BN adjustment.

Crosswalk certain low volume physician specialties:Crosswalk the utilization of certain specialties with relatively low PFS utilization to the associated specialties.

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

Identify professional and technical services not identified under the usual TC and 26 modifier:Flag the services that are PC and TC services, but do not use TC and 26 modifiers (for example, electrocardiograms). This flag associates the PC and TC with the associated global code for use in creating the indirect PE RVU. For example, the professional service code 93010 is associated with the global code 93000.

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

Work RVUs:The setup file contains the work RVUs from this proposed rule.

(vi) Equipment Cost Per Minute =

The equipment cost per minute is calculated as:

(1/(minutes per year * usage)) * price * ((interest rate/(1-(1/((1 + interest rate) * life of equipment)))) + maintenance) Where: minutes per year= maximum minutes per year if usage were continuous (that is, usage = 1); 150,000 minutes. usage= equipment utilization assumption; 0.5. price= price of the particular piece of equipment. interest rate= 0.11