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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Western Area Power Administration

CFR Citation: 42 CFR Parts 410 and 414

RIN ID: RIN 0938-AL96

CMS ID: [CMS-1476-FC]

NOTICE: Part II

DOCUMENT ACTION: Final rule with comment period.

SUBJECT CATEGORY: Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2004

DATES: Effective date: These regulations are effective on January 1, 2004.

Comment date: We will consider comments on the physician self referral designated health services additions and deletions identified in Tables 8 and 9, and the interim work RVUs for selected procedure codes identified in Addendum C if we receive them at the appropriate address, as provided in the addresses section, no later than 5 p.m. on January 6, 2004.

DOCUMENT SUMMARY: This final rule will refine the resource-based practice expense relative value units (RVUs) and make other changes to Medicare Part B payment policy. The policy changes concern: Medicare Economic Index, practice expense for professional component services, definition of diabetes for diabetes selfmanagement training, supplemental survey data for practice expense, geographic practice cost indices, and several coding issues. In addition, this rule updates the codes subject to the physician selfreferral prohibition. We also make revisions to the sustainable growth rate and the anesthesia conversion factor.

These changes will ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services.

We are also finalizing the calendar year (CY) 2003 interim RVUs and are issuing interim RVUs for new and revised procedure codes for CY 2004.

As required by the statute, we are announcing that the physician fee schedule update for CY 2004 is 4.5 percent, the initial estimate of the sustainable growth rate for CY 2004 is 7.4 percent, and the conversion factor for CY 2004 is $35.1339.

We published a proposed rule (68 FR 50428) in the Federal Register on Part B drug payment reform on August 20, 2003. This proposed rule would also make changes to Medicare payment for furnishing or administering certain drugs and biologicals. We have not finalized these proposals to take into account that the Congress is considering legislation that would address these issues. We will continue to monitor legislative activity that would reform the Medicare Part B drug payment system. If legislation is not enacted soon on this issue, we remain committed to completing the regulatory process.

SUMMARY: Health and Human Services Department, Centers for Medicare & Medicaid Services,

SUPPLEMENTAL INFORMATION

Copies: To order copies of the Federal Register containing this document, send your request to: New Orders, Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 152507954. Specify the date of the issue requested and enclose a check or money order payable to the Superintendent of Documents, or enclose your Visa or Master Card number and expiration date. Credit card orders can also be placed by calling the order desk at (202) 5121800 or by faxing to (202) 512 2250. The cost for each copy is $10. As an alternative, you can view and photocopy the Federal Register document at most libraries designated as Federal Depository Libraries and at many other public and academic libraries throughout the country that receive the Federal Register.

This Federal Register document is also available from the Federal Register online database through GPO access, a service of the U.S. Government Printing Office. The Web site address is http://www.access.gpo.gov/nara/index.html .
Accessing Physician Fee Schedule Web Site and Pricing Information

Information on the physician fee schedule and pricing files can be found on our homepage. You can access this data by typing the following: http://cms.hhs.gov/physicians/pfs or you can access this data by using the following directions:

1. Go to the CMS homepage (http://www.cms.hhs.gov).

2. Place your cursor over the word ``Professionals'' in the blue area near the top of the page. Select ``Physicians'' from the dropdown menu.

3. Scroll down and under ``Payment/Billing'' select ``Physician Fee Schedule'.

The Physician Fee Schedule pricing information is contained in two public use files.
(1) National Physician Fee Schedule Relative Value FileThis file contains all CPT/HCPCS (excluding codes beginning with B, E, L, K, and O), their short descriptions and a status indicator, which denotes whether or not the service is priced under the physician fee schedule. The file also contains the components used in the calculation of the annual pricing amount (that is., the RVUs, GPCIs, and
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conversion factor), anesthesia conversion factors, and the payment policy indicators used to price the claims with surgical modifiers. This file does not contain the calculated pricing amounts.
(2) Physician Fee Schedule Payment Amount File National/Carrier This file contains the CPT code and the Medicare price for all services priced under the Physician Fee Schedule. These data can be downloaded for (a) the entire country, or (b) for a selected carrier (in most cases carriers correlate with states). There is no option of requesting data for selected HCPCS codes. The zip file, which is downloaded, contains a file named PF04pc.doc, which explains the data contained in each column. This file also contains a description of pricing localities used in the Physician Fee Schedule. Due to the size of the national file (as well as many of the carrierspecific files), these data are provided in a commadelimited format, which can be used to populate database applications. Generally speaking, these data are too large for Excel, however if a carrier specific file has 3 or fewer localities, Excel can be used.

Another file that providers may find useful is the Zipcode to Carrier Locality File. This file will map ZIP Codes to CMS carriers and localities and map Zip Codes to their State and determine whether the ZIP Code has a rural designation as determined by CMS. You can access this file by typing the following: http://cms.hhs.gov/providers/pufdownload/default.asp#alphanu or you can access this data by using

the following directions:

1. Go to the CMS homepage (http://www.cms.hhs.gov).

2. Place your cursor over the word ``Professionals'' in the blue area near the top of the page. Select ``Physicians'' from the dropdown menu.

3. Scroll down and under ``Payment/Billing'' select ``Medicare Payment Systems.''

4. Scroll down and under Coding Files select ``Zipcode to Carrier Locality File.''
Table of Contents
I. Background

A. Legislative History

B. Published Changes to the Fee Schedule

II. Specific Provisions for Calendar Year 2004

A. ResourceBased Practice Expense Relative Value Units

1. ResourceBased Practice Expense Legislation

2. Current Methodology

3. Practice Expense Proposals for Calendar Year 2004

B. Geographic Practice Cost Indices (GPCIs)

C. Coding Issues

III. Other Issues

A. Definition of Diabetes for Diabetes SelfManagement Training (DSMT)

B. Outpatient Therapy Services Performed ``Incident To'' Physicians Services

C. Status of Anesthesia Work and 5Year Review

D. Payment Policies for Anesthesia Services

E. Technical Correction

F. Publication Issues
IV. Refinement of Relative Value Units for Calendar Year 2004 and Response to Public Comments on Interim Relative Value Units for 2003 V. Update to the Codes for Physician SelfReferral Prohibition VI. Physician Fee Schedule Update for Calendar Year 2004
VII. Allowed Expenditures for Physicians' Services and the Sustainable Growth Rate
VIII. Anesthesia and Physician Fee Schedule Conversion Factors for CY 2004
IX. Telehealth Originating Site Facility Fee Payment Amount Update X. Provisions of the Final Rule
XI. Collection of Information Requirements
XII. Response to Comments
XIII. Regulatory Impact Analysis
Addendum AExplanation and Use of Addendum B
Addendum B2004 Relative Value Units and Related Information Used in Determining Medicare Payments for 2004 Addendum CCodes with Interim RVUs
Addendum D2004 Geographic Practice Cost Indices by Medicare Carrier and Locality
Addendum E2005 Geographic Practice Cost Indices by Medicare Carrier and Locality
Addendum FUpdated List of CPT/HCPCS Codes Used to Describe Certain Designated Health Services Under the Physician SelfReferral Provision

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: AMA American Medical Association
APC Ambulatory Payment Classification
BBA Balanced Budget Act of 1997
BBRA Balanced Budget Refinement Act of 1999
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
CF Conversion factor
CFR Code of Federal Regulations
CMS Centers for Medicare & Medicaid Services
CNS Clinical Nurse Specialist
CPT [Physicians'] Current Procedural Terminology [4th Edition, 2002, copyrighted by the American Medical Association]
CPEP Clinical Practice Expert Panel
CRNA Certified Registered Nurse Anesthetist
DHHS Department of Health and Human Services
E/M Evaluation and management
ESRD EndStage Renal Disease
GAF Geographic adjustment factor
GPCI Geographic practice cost index
HCPCS Healthcare Common Procedure Coding System
HHA Home health agency
IDTFs Independent Diagnostic Testing Facilities
MCM Medicare Carrier Manual
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MGMA Medical Group Management Association
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
OMB Office of Management and Budget
PC Professional component
PEAC Practice Expense Advisory Committee
PPO Preferred Provider Organization
PPS Prospective payment system
PRA Paperwork Reduction Act of 1995
RUC [AMA's Specialty Society] Relative [Value] Update Committee RVU Relative value unit
SGR Sustainable growth rate
SMS [AMA's] Socioeconomic Monitoring System
SNF Skilled Nursing Facility
TC Technical component
I. Background

A. Legislative History

Since January 1, 1992, Medicare has paid for physicians' services under section 1848 of the Social Security Act (the Act), ``Payment for Physicians'' Services.'' This section provides for three major elements: (1) A fee schedule for the payment of physicians' services; (2) limits on the amounts that nonparticipating physicians can charge beneficiaries; and (3) a sustainable growth rate (SGR) for the rates of increase in Medicare expenditures for physicians' services. The Act requires that payments under the fee schedule be based on national uniform relative value units (RVUs) that are 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, and malpractice expense. Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments in RVUs may not cause total physician fee schedule payments to differ by more than $20 million from what they would have been had the adjustments not been made. If adjustments to RVUs cause expenditures to change by more than
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$20 million, we must make adjustments to ensure that they do not increase or decrease by more than $20 million.

B. Published Changes to the Fee Schedule

In the July 2000 proposed rule, (65 FR 44177), we listed all of the final rules published through November 1999. In the August 2001 proposed rule (66 FR 40372) we discussed the November 2000 final rule relating to the updates to the RVUs and revisions to payment policies under the physician fee schedule.

In the November 2001 final rule with comment period (66 FR 55246), we made revisions to resourcebased practice expense RVUs; services and supplies incident to a physician's professional service; anesthesia base unit variations; recognition of Physicians' Current Procedural Terminology (CPT) tracking codes; and nurse practitioners, physician assistants, and clinical nurse specialists performing screening sigmoidoscopies. We also addressed comments received on the June 8, 2001 proposed notice (66 FR 31028) for the 5year review of work RVUs and finalized these work RVUs. In addition, we acknowledged comments received in response to a discussion of modifier62, which is used to report the work of cosurgeons. The November 2001 final rule also updated the list of services that are subject to the physician self referral prohibitions in order to reflect CPT and Healthcare Common Procedure Coding System (HCPCS) code changes that were effective January 1, 2002. All these revisions ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. This final rule also conformed our regulations to reflect statutory provisions of Medicare, Medicaid, and State Child Health Insurance Program (SCHIP) Benefits Improvement and Protection Act of 2000 (Pub. L. 106554) (BIPA) concerning: the mammography screening benefit; biennial screening pelvic examinations for certain beneficiaries; expanded coverage for screening colonoscopies to all beneficiaries; annual glaucoma screenings for highrisk beneficiaries; coverage for medical nutrition therapy services for certain beneficiaries; expanded payment for telehealth services; payment for certain Indian Health Service for some services under the physician fee schedule; and revision of the payment for certain physician pathology services.

In the December 31, 2002 final rule with comment period (67 FR 79966), we refined resourcebased practice expense RVUs and made other changes to Medicare Part B policy. These included: The pricing of the technical component for positron emission tomography (PET) scans, Medicare qualifications for clinical nurse specialists, a process to add or delete services to the definition of telehealth, the definition for ZZZ global periods, global period for surface radiation, and application of endoscopic reduction rules for certain codes. In addition, this rule: Updated the codes subject to physician self referral prohibitions, expanded the definition of a screening fecal occult blood test, and modified our regulations to expand coverage for additional colorectal cancer screening tests through our national coverage determination process. We also made revisions to the SGR, the anesthesia conversion factor (CF), and the work values for some gastroenterologic services. We finalized the calendar year (CY) 2002 interim RVUs and assigned interim RVUs for new and revised procedure codes for CY 2003, clarified the enrollment of therapists in private practice and the policy regarding services and supplies incident to a physician's professional services, and made technical changes to the definition of outpatient rehabilitation services.

This final rule also revised the regulations at Sec. 485.618 to allow registered nurses (RNs) to provide emergency care in certain critical access hospitals (CAHs) in frontier areas (an area with fewer than six residents per square mile) or remote locations (locations designated in a State's rural health plan that we have approved).

As required by statute this final rule also announced that the physician fee schedule update for CY 2003 was 4.4 percent, the initial estimate of the SGR for CY 2003 was 7.6 percent, and the CF for CY 2003 was $34.5920, effective March 1, 2003. However, on February 28, 2003 (68 FR 9567), after enactment of the Consolidated Appropriations Resolution of 2003 (Pub. L. 1087), we published a final rule that revised the estimates used to establish the SGRs for fiscal years 1998 and 1999 and announced a 1.6 percent increase in the CY 2003 physician fee schedule CF for March 1 to December 31, 2003. The CF from March 1 to December 31, 2003 is $36.7856 and the anesthesia CF for this period is $17.05. All other provisions of the December 31, 2002 final rule were unchanged by the rule published February 28, 2003.

C. Components of the Fee Schedule Payment Amounts

Under the formula set forth in section 1848(b)(1) of the Act, the payment amount for each service paid under the physician fee schedule is the product of three factors(1) a nationally uniform relative value for the service; (2) a geographic adjustment factor (GAF) for each physician fee schedule area; and (3) a nationally uniform conversion factor (CF) for the service. The CF converts the relative values into payment amounts.

For each physician fee schedule service, there are three relative values(1) an RVU for physician work; (2) an RVU for practice expense; and (3) an RVU for malpractice expense. For each of these components of the fee schedule, there is a geographic practice cost index (GPCI) for each fee schedule area. The GPCIs reflect the relative costs of practice expenses, malpractice insurance, and physician work in an area compared to the national average for each component.

The general formula for calculating the Medicare fee schedule amount for a given service in a given fee schedule area can be expressed as:
Payment = [(RVU work x GPCI work) + (RVU practice expense x GPCI practice expense) + (RVU malpractice x GPCI malpractice)] x CF

The CF for CY 2004 appears in section IX. The RVUs for CY 2004 are in Addendum B. The GPCIs for CY 2004 can be found in Addendum D.

Section 1848(e) of the Act requires us to develop GAFs for all physician fee schedule areas. The total GAF for a fee schedule area is equal to a weighted average of the individual GPCIs for each of the three components of the service. In accordance with the statute, however, the GAF for the physician's work reflects onequarter of the relative cost of physician's work compared to the national average. D. Development of the Relative Value System

1. Work Relative Value Units (RVUs)

Approximately 7,500 codes represent services included in the physician fee schedule. The 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 work RVUs for most codes in a cooperative agreement with us. In constructing the vignettes for the original RVUs, Harvard worked with expert panels of physicians and obtained input from physicians from numerous specialties.

The RVUs for radiology services were based on the American College of Radiology (ACR) relative value scale,
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which we integrated into the overall physician fee schedule. The RVUs for anesthesia services were based on RVUs from a uniform relative value guide. We established a separate CF for anesthesia services, and we continue to recognize time as a factor in determining payment for these services. As a result, there is a separate payment system for anesthesia services.
2. Practice Expense and Malpractice Expense Relative Value Units

Section 1848(c)(2)(C) of the Act required that the practice expense and malpractice expense RVUS equal the product of the base allowed charges and the practice expense and malpractice percentages for the service. Base allowed charges are defined as the national average allowed charges for the service furnished during 1991, as estimated using the most recent data available. For most services, we used 1989 charge data aged to reflect the 1991 payment rules, since those were the most recent data available for the 1992 fee schedule.

Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 103432), enacted on October 31, 1994, required us to develop a methodology for a resourcebased system for determining practice expense RVUs for each physician service. As amended by the BBA, section 1848(c) required the new payment methodology to be phased in over 4 years, effective for services furnished in 1999, with resourcebased practice expense RVUs becoming fully effective in 2002. The BBA also required us to implement resourcebased malpractice RVUs for services furnished beginning in 2000.

II. Specific Provisions for Calendar Year 2004

In response to the publication of the August 15, 2003 proposed rule, (68 FR 49030), and the December 2002 interim final rule, (67 FR 79966), we received approximately 2,433 comments. We received comments from individual physicians, health care workers, and professional associations and societies. The majority of comments addressed the physician fee schedule proposals related to the dialysis G codes, ``incident to'' therapy services, and the geographic practice cost indices locality payment discussion issue.

The proposed rule discussed policies that affected the RVUs on which payment for certain services would be based. Certain changes implemented through this final rule are subject to the $20 million limitation on annual adjustments contained in section

1848(c)(2)(B)(ii)(II) of the Act.

After reviewing the comments and determining the policies we would implement, we have estimated the costs and savings of these policies and added those costs and savings to the estimated costs associated with any other changes in RVUs for 2004. We discuss in detail the effects of these changes in the Regulatory Impact Analysis in section XIII.

For the convenience of the reader, the headings for the policy issues correspond to the headings used in the August 15, 2003 proposed rule. More detailed background information for each issue can be found in the December 2002 interim final rule with comment period and the August 2003 proposed rule.
A. ResourceBased Practice Expense Relative Value Units

1. ResourceBased Practice Expense Legislation

Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 103432), enacted on October 31, 1994, required us to develop a methodology for a resourcebased system for determining practice expense RVUs for each physician's service beginning in 1998. In developing the methodology, we were to consider the staff, equipment, and supplies used in providing medical and surgical services in various settings. The legislation specifically required that, in implementing the new system of practice expense RVUs, we apply the same budget neutrality provisions that we apply to other adjustments under the physician fee schedule.

Section 4505(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 10533), enacted on August 5, 1997, amended section 1848(c)(2)(B)(ii) of the Act and delayed the effective date of the resourcebased practice expense RVU system until January 1, 1999. In addition, section 4505(b) of the BBA provided for a 4year transition period from charge based practice expense RVUs to resourcebased RVUs.

Further legislation affecting resourcebased practice expense RVUs was included in the Medicare, Medicaid and State Child Health Insurance Program (SCHIP) Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106113) enacted on November 29, 1999. Section 212 of the BBRA amended section 1848(c)(2)(B)(ii) of the Act by directing us 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. These data would supplement the data we normally collect in determining the practice expense component of the physician fee schedule for payments in CY 2001 and CY 2002. (In the 1999 final rule (64 FR 59380), we extended, for an additional 2 years, the period during which we would accept supplementary data.)
2. Current Methodology for Computing the Practice Expense Relative Value Unit System

Effective with services furnished on or after January 1, 1999, we established a new methodology for computing resourcebased practice expense RVUs that used the two significant sources of actual practice expense data we have availablethe Clinical Practice Expert Panel (CPEP) data and the American Medical Association's (AMA) Socioeconomic Monitoring System (SMS) data. The methodology was based on an assumption that current aggregate specialty practice costs are a reasonable way to establish initial estimates of relative resource costs for physicians' services across specialties. The methodology allocated these aggregate specialty practice costs to specific procedures and, thus, can be seen as a ``topdown'' approach. a. Major Steps

A brief discussion of the major steps involved in the determination of the practice expense RVUs follows. (Please see the November 1, 2001 final rule (66 FR 55249) for a more detailed explanation of the top down methodology.)
[sbull] Step 1Determine the specialty specific practice expense per hour of physician direct patient care. We used the AMA's SMS survey of actual aggregate cost data by specialty to determine the practice expenses per hour for each specialty. We calculated the practice expenses per hour for the specialty by dividing the aggregate practice expenses for the specialty by the total number of hours spent in patient care activities.
[sbull] Step 2Create a specialty specific practice expense pool of practice expense costs for treating Medicare patients. To calculate the total number of hours spent treating Medicare patients for each specialty, we used the physician time assigned to each procedure code and the Medicare utilization data. We then calculated the specialty specific practice expense pools by multiplying the specialty practice expenses per hour by the total physician hours.
[sbull] Step 3Allocate the specialty specific practice expense pool to the specific services performed by each specialty. For each specialty, we
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divided the practice expense pool into two groups based on whether direct or indirect costs were involved and used a different allocation basis for each group.
(i) Direct costsFor direct costs (which include clinical labor, medical supplies, and medical equipment), we used the procedure specific CPEP data on the staff time, supplies, and equipment as the allocation basis.
(ii) Indirect costsTo allocate the cost pools for indirect costs, including administrative labor, office expenses, and all other expenses, we used the total direct costs combined with the physician fee schedule work RVUs. We converted the work RVUs to dollars using the Medicare CF (expressed in 1995 dollars for consistency with the SMS survey years).
[sbull] Step 4For procedures performed by more than one specialty, the final procedure code allocation was a weighted average of allocations for the specialties that perform the procedure, with the weights being the frequency with which each specialty performs the procedure on Medicare patients.
b. Other Methodological Issues

(i) Nonphysician Work Pool

For services with physician work RVUs equal to zero (including the technical components of radiology services and other diagnostic tests), we created a separate practice expense pool using the average clinical staff time from the CPEP data and the ``all physicians'' practice expense per hour.

We then used the adjusted 1998 practice expense RVUs to allocate this pool to each service. We have removed services from the nonphysician work pool if the requesting specialty predominates utilization of the service. Also, for all radiology services that are assigned physician work RVUs, we used the adjusted 1998 practice expense RVUs for radiology services as an interim measure to allocate the direct practice expense cost pool for radiology specialties to the most appropriate SMS specialty.
(ii) Crosswalks for Specialties Without Practice Expense Survey Data

Since many specialties identified in our claims data did not correspond exactly to the specialties included in the SMS survey data, it was necessary to crosswalk these specialties to the most appropriate SMS specialty.

(iii) Physical Therapy Services

Because we believe that most physical therapy services furnished in physicians' offices are performed by physical therapists, we crosswalked all utilization for therapy services in the CPT 97000 series to the physical and occupational therapy practice expense pool. 3. Practice Expense Proposals for Calendar Year 2004

a. Nonphysician Workpool

The nonphysician work pool is a special methodology that we used to determine practice expense RVUs for many services that do not have physician work RVUs. While the nonphysician work pool is of benefit to many of the services that were originally included, we have allowed specialties to request that their services be removed from the pool. Because the nonphysician work pool includes a variety of services performed by many different specialties, we use the ``all physician'' average practice expense per hour in place of a specialtyspecific practice expense per hour.

As discussed in the August 15, 2003 proposed rule, we are continuing to study the alternatives that are available and any modifications to the nonphysician workpool would be published in proposed rulemaking.

Comment: Several specialty societies expressed support for the ongoing study of this complex issue and appreciate that any modifications to the nonphysician workpool would be published as proposed rulemaking for review and comment prior to implementation. A biopharmaceutical company commented that we should move forward to develop a new methodology that better recognizes actual resource consumption so that we can develop a preferable alternative.

Response: We are appreciative of the support and will continue to study this issue.
b. Supplemental Practice Expense Survey Data

i. Survey Criteria and Submission Dates

As required by the BBRA, we established criteria to evaluate data collected by organizations to supplement the data normally used in determining the practice expense component of the physician fee schedule. We have required supplementary survey data to be submitted by August 1 to be considered for computing practice expense RVUs for the following year. We proposed to change the required submission date to March 1, which would allow us to publish our decisions regarding survey data in the proposed rule and provide an opportunity for public comment on survey results. We also proposed to extend for an additional 2 years the period for accepting survey data that meets the criteria set forth in the November 2000 final rule (as modified in the December 31, 2002 final rule). The deadline for submission of the supplemental data to be considered in CY 2005 and CY 2006 would be March 1, 2004 and March 1, 2005, respectively.

Comment: Specialty societies expressed appreciation for our proposal to extend the deadline for submission of surveys. Commenters also approved of our proposal to change the due date for submission of supplemental practice expense survey data to March 1, so that the implications of the use of the survey data could be discussed in the proposed rule.

Response: We will implement the change in the submission dates for supplementary surveys as proposed. The deadline for submission of the supplemental data to be considered in CY 2005 and CY 2006 would be March 1, 2004 and March 1, 2005, respectively. We will revise Sec. 414.22(b)(6)(ii) to reflect this change.

ii. Submission of Supplemental Surveys

The College of American Pathologists (CAP) submitted supplemental survey data for independent laboratories for consideration for CY 2004. Our contractor, The Lewin Group, evaluated the data and has recommended acceptance.

Comment: Based on our proposal to revise the date for submission of supplemental survey data, CAP requested that we delay incorporation of this survey data until next year's proposed rule. CAP also expressed an interest in being able to evaluate the combined effects of the use of the new survey data along with the technical change for pathology services before the changes are implemented. Therefore, CAP requested that we also extend the moratorium on calculating the technical component as the difference between the global and professional component practice expense RVUs by one additional year, as discussed in the August 15, 2003 proposed rule. This request for a delay in incorporating the new survey data, as well as extending the moratorium was supported by the AMA and several specialty societies.

Response: We agree with the comments that suggest extending by one year the moratorium on calculating the technical component practice expense RVU as the difference between the global and professional component RVUs for pathology services. We also agree with comments suggesting that we not incorporate the CAP survey into the practice expense methodology until next year. We will evaluate the CAP [[Page 63201]]
survey in next year's proposed rule at the same time we show the effect of the above described change for pathology services.

c. Practice Expense for a professional component service

While we typically assign all staff, equipment and supply costs for services with professional and technical components (PC and TC) to the technical portion of the service, in the proposed rule we discussed limited instances where it is appropriate to assign direct inputs to a PC service. We proposed to modify the practice expense methodology to allow direct inputs to be added to PC services when these inputs are clearly associated with the professional service, including when the PEAC makes such recommendations. Specifically we proposed to add the PEAC recommended staff times to the PC of the following cardiac services: CPT codes 93508, 93510, 93511, 93514, 93524, 93526, 93527, 93528, 93529, 93530, 93531, 93532, 93533 and 93624.

Comment: The RUC, the AMA, the American College of Physicians and societies representing cardiologists, cardiac rhythm specialists, interventional radiologists, nuclear medicine, chest physicians, radiation oncologists, radiologists, endocrinologists and
dermatologists expressed support for this change in methodology. Commenters were also in agreement with the specific CPT codes mentioned in the proposed rule, but requested that direct inputs also be added to the PC of CPT codes 93619, 93620 and 93642, which were reviewed at the January PEAC meeting. The RUC comment indicated that additional codes might be identified at future PEAC/RUC meetings.

Response: We will finalize the proposed assignment of direct practice expense to the proposed 14 cardiac services and will add the PEAC recommended inputs to the PC of CPT codes 93619, 93620 and 93642, as requested by the commenters.

d. Utilization Data

We use Medicare utilization data in the development of specialty specific practice expense RVUs that are then weight averaged to determine a single practice expense RVU per code. Prior to 2003, we used the most recent complete year of utilization data to determine the practice expense RVUs. In the December 31, 2002 final rule (67 FR 79982), we adopted a policy of using the 1997 through 2000 Medicare utilization in the practice expense methodology. For new codes created since 2000, there are no Medicare utilization data. In the August 15, 2003 rule we proposed to follow a similar practice to the one described above and use specialtyspecific Medicare utilization data for codes created after 2000 at the first opportunity they become available to us. Since we will not have any utilization data at the time we first establish practice expense RVUs for a new code, we proposed that we continue, whenever possible, to make an assumption about the specialty that will likely provide the service or to use the ``all physician'' average when we do not have sufficient information to assign any given specialty.

Comment: The specialty societies representing internal medicine, rheumatology and pulmonary medicine supported our proposal to use 1997 through 2000 Medicare utilization data for all codes that were in existence at that time and to use specialtyspecific Medicare utilization data for codes created after 2000 when utilization data first become available, using the ``all physician'' average when we do not have sufficient information to assign a given specialty. These commenters, as well as several others, suggested that the RUC and the specialty societies could provide information on the specialties that will likely perform a new service to minimize the potential changes to the practice expense RVUs that will occur when we substitute actual for estimated utilization. However, a specialty society representing gastroenterology expressed concern that we are moving forward with plans to shift the basis of our methodology for compiling data to a fiveyear basis. The commenter urged us to not make changes until extensive impact comparisons are conducted that can be evaluated by physician community.

Response: We will implement our proposal to use specialtyspecific Medicare utilization data for codes created after 2000 at the first opportunity they become available to us. We will also continue, whenever possible, to make an assumption about the specialty that will likely provide the service or to use the ``all physician'' average when we do not have sufficient information to assign any given specialty. Information about the specialty we assign to a code that has no utilization data can be found in the utilization data files we make available on the CMS web site following final rule publication. With respect to the comment about shifting to a 5year basis of utilization data for the practice expense methodology, we are making no change in policy for codes that existed in the 1997 to 2000 period. We are using only the later year utilization data for codes that have been created since that time. Any information from the RUC that could assist us in this process would be welcomed.

Comment: A specialty society representing colon and rectal surgeons agreed with our general utilization methodology, but disagreed that averaged 19972000 utilization data should be used for all codes that were not in existence for the entire period. The commenter argued that the frequency for these codes might be artificially low because the coding was new and that this may impact the relativity between new and old codes in the same family with similar inputs. The society suggested that any code that did not exist during the entire 19972000 period default to 2002 or most recent data.

Response: As we have explained, the Medicare utilization is important to the practice expense methodology because it determines which specialty scaling factors will be applied to the estimated practice expense input values in determining the practice expense RVUs for each service. The proportion of the volume billed by each specialty is more important to determining the practice expense RVU for a given service than the total volume. If the code is low in volume but the proportion of the code's volume billed by each specialty is generally consistent over time, there will be little or no difference in a code's practice expense RVUs, whether we use its initial year of utilization or a later year to determine its value.

Comment: Commenters representing dermatology as well as a pharmaceutical company expressed concern regarding the decrease in payment for photodynamic therapy, CPT code 95657. The commenters noted our discussion in the proposed rule indicating that this reduction in the practice expense RVUs is occurring because of updates to the Medicare utilization data used in the practice expense methodology. As a result of the updated utilization data, the practice expense methodology now uses the dermatology scaling factor (0.54) for supplies instead of the all physician average (1.29), and this change leads to the reduction in payment for the code. The commenters urged us to reconsider the proposal and at least to reinstate physicians' ability to bill separately in 2004 for the lightactivating agent under the appropriate J code and also to remove the drug from the practice expense portion of the procedure.

Response: One of the functions of the utilization data in our practice expense methodology is to assign all procedures to the specialtyspecific cost pools of the
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specialty or specialties performing them. Each cost pool has its own scaling factor. This scaling factor is used to scale the aggregate CPEP procedurelevel costs for a specialty to the aggregate costs for the same specialty as determined by the SMS practice expense data. As we indicated in the proposed rule, we do not have utilization data upon which to determine the practice expense RVUs for a new code at the time it is created. As a default, we have assigned many new codes the ``all physician'' scaling factor until we have the data to move these codes into the appropriate specialty cost pools. Because it allows us to apply the appropriate specialty scaling factor, the use of the updated utilization data in the practice expense methodology can lead to increases or decreases in the value of a code, even though its practice expenses remain unchanged. In this case, the supplies scaling factor for dermatology is lower than that for ``all physicians,'' leading to a decrease in practice expense RVUs when the dermatology scaling factor was applied to the CPEP data of the photodynamic therapy service.

We believe the initial practice RVUs for photodynamic therapy were too high, because the later information on Medicare utilization indicates that we should have used the dermatology scaling factor which would have produced a lower practice expense value. As we indicate above, we are working to minimize changes that will occur in the practice expense RVUs for a service by making an initial assumption about which specialty will likely bill us for a service. However, we believe our policy for new codes should be consistent with how we determine the practice expense RVUs for existing codes, even if updates to the Medicare utilization data lead to increases or decreases in the practice expense RVUs.

Though we believe that it is appropriate to use the updated utilization that results in a reduction in payment for CPT code 96567, we will pay separately for the light activating agent beginning January 1, 2004. However, we are also further considering whether Medicare should pay separately for certain topical drugs in certain circumstances. Any change in policy would be discussed in future rulemaking.

Comment: Specialty societies representing radiation oncology, as well as individual commenters, expressed concern about the decrease in payment for the intensity modulated radiation therapy (IMRT) treatment service, CPT code 77418. The commenters stated that this was due to a ``quirk'' in the utilization data relating to new codes and requested that this code be priced by the nonphysician work pool methodology.

Response: We will calculate the practice expense RVUs for the IMRT treatment service, CPT code 77418, using the nonphysician workpool methodology. This will be consistent with the way we currently calculate the practice expense for all other radiation therapy services with no physician work RVUs.

Comment: The specialty society representing radiation oncology also noted that there was a reduction in the practice expense RVUs for the intensity modulated radiation therapy planning procedure, CPT code 77301. A remote cardiac monitoring service questioned why the use of new utilization data could decrease the value of a code such as HCPCS code G0249 for the provision of test material and equipment for home INR monitoring.

Response: Both CPT code 77301 and HCPCS code G0249 were new codes for which we did not have utilization data and which were initially assigned the ``all physician'' scaling factor. As described above, now that we have the utilization data, the services have been placed in the specialtyspecific cost pools based on how the service is billed to Medicare, which have lower scaling factors than the ``all physician.'' This shift has led to the reduced practice expense RVUs for CPT code 77301. If we had placed this code in the radiation oncology cost pool to begin with, it would have had the reduced practice expense payments for the past two years as well. HCPCS code G0249 will actually have increased practice expense RVUs in 2004 due to the effect of the repricing of supplies.

Comment: We received one comment that questioned how updated utilization data could have such a huge and direct effect on specific codes. The commenter requested clarification from us on the workings of the utilization data within the practice expense methodology so that the public will understand how utilization data will affect new technologies in the future.

Response: As explained above, one of the functions of the utilization data in our practice expense methodology is to assign all procedures to the specialtyspecific cost pools of the specialty or specialties performing them. If we do not know the specialty, we have used ``all physician'' scaling factors. The ``all physician'' scaling factors could be higher or lower than the specialtyspecific scaling factor and produce different RVUs for the code. For instance, CPT code 7730126 is a PC service that has no direct cost inputs. Thus, its practice expense RVUs are affected only by the indirect cost scaling factor. To develop the 2003 practice expense RVUs for this code, we adjusted indirect costs allocated to this code by the ``all physician'' indirect cost scaling factor of 0.57. However, for 2004, we have Medicare utilization data from 2002 for this procedure code. Radiation oncologists and radiologists respectively billed Medicare for 67 percent and 30 percent of the total volume of services provided to Medicare patients in 2002. The weighted average scaling factor for all the specialties that bill Medicare for this procedure code is 0.48. Since we are adjusting indirect costs by 0.48 instead of 0.57, the final practice expense value is lower.

e. Practice Expense Advisory Committee (PEAC)

The PEAC, a subcommittee of the RUC, has, since 1999, been providing us with recommendations for refining the direct practice expense inputs (clinical staff, supplies, and equipment) for existing CPT codes.

1. Recommendations on CPEP Inputs for 2003

In the December 31, 2002 proposed rule, we responded to the PEAC recommendations for the refinement to the CPEP direct practice expense inputs for over 1200 codes, including refinements to codes from almost every major specialty. In addition, the recommendations included standardized times for officebased clinical staff for services provided during a patient's hospitalization and for discharge day management services, as well as preservice clinical staff times for 323 neurosurgery procedures. We reviewed and accepted all of the recommendations. We received the following comments on these revisions.

Comment: We received comments from specialty societies representing dermatology, dermatolgic surgery and Mohs surgery expressing concern regarding the decrease in practice expense RVUs for skin biopsy procedures, CPT codes 11100 and 11101 and the destruction of benign or premalignant lesion services, CPT codes 17000 and 17003. The commenters questioned whether the reductions reflect errors in the validated practice expense inputs used in the practice expense calculations.

Response: We have checked the practice expense inputs and found that these match the clinical staff, supply and equipment inputs as recommended by the RUC. The reduction in practice expense RVUs was caused by the
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refinement of these inputs, which, in turn, was based on the presentation made to the PEAC by the dermatology specialty society. We will, therefore, not make any further revisions to the practice expense inputs for these services in this final rule.

2. Recommendations on CPEP Inputs for 2004

In the August 15, 2003 proposed rule we included the PEAC recommendations from meetings held in September of 2002 and January 2003 as well as recommendations on the refinements to the clinical staff time for all 90day global services. In addition, the PEAC convened a workgroup to make recommendations on the refinement of all the 116 remaining evaluation and management codes. We reviewed the submitted PEAC recommendations and proposed to accept them.

Comment: The American Osteopathic Association expressed appreciation that we supported the recommended changes for the osteopathic manipulative treatment codes and commended us for accepting the PEAC recommendations for the clinical staff times for 90day global codes. The American College of Obstetricians and Gynecologists stated that our acceptance of the PEAC recommendations is an example of exceptional cooperation and collaboration in meeting the healthcare needs of Americans served by the Medicare program. The American Academy of Dermatology applauded our acceptance of the year's PEAC recommendations. The AMA and the American College of Radiology stated that they appreciate our recognition of the significant resources specialty societies have devoted to the practice expense refinement process and is thankful that our practice expense staff avail themselves of specialty society input. The American College of Surgeons also supported our acceptance of the PEAC recommendations, including the decision to permit exceptions to the standard preservice times for some surgical procedures. The College other specialty societies also expressed appreciation for our commitment to the refinement process.

Response: We, in turn, are appreciative of these positive comments. We believe that it is only because of the cooperative working relationship between the specialty societies, the AMA and CMS that there has been such a high level of success in tackling practice expense refinement.

Comment: The American College of Physicians as well as other specialty societies representing surgeons, otolaryngologists, podiatrists, geriatric psychiatrists, obstetricians and gynecologists, cataract and refractive surgeons, neurosurgeons, dermatologists, rheumatologists, radiologists and radiation oncologists supported our inclusion of the PEAC recommendations in the proposed rule because this would better enable specialty societies to address their impact and make comments prior to publication of the final rule.

However, specialty societies representing chest physicians and thoracic physicians disagreed with our decision to change our previous practice of including the PEAC recommendations in the final, rather than the proposed rule, because this meant that the recommendations from the March PEAC meeting were not included for this year. The society argued that changing this longstanding policy without announcing it in the Federal Register is inappropriate. The comment also contended that the specialty societies agreed to the inputs at the PEAC meeting; therefore, negative comments would not be forthcoming.

Response: We discussed this issue at the January PEAC meeting and indicated that we were considering including the PEAC recommendations in the proposed rule and that the March recommendations would most likely not be included. We made this decision because, now that the PEAC is refining such a large number of codes, the revisions to the inputs were not only changing the practice expense RVUs of the refined codes, but also the values of services that were not refined. Therefore, we believed it was prudent that revisions be subject to comment before the revisions were implemented.

Comment: The specialty society representing podiatry identified some discrepancies between the PEAC recommendations and the inputs in the CPEP database for CPT codes 10060, 11000, 11055, 11056, 11057 and 11752 and requested that these be corrected.

Response: We have made the corrections as requested.

Comment: The American Society of Transplant Surgeons (ASTS) commented that it is not appropriate to apply either the PEACapproved standard clinical staff times or RN/LPN/MTA staff blend for 90day global procedures to the transplant recipient or living donor services. ASTS stated that it had been unaware that the PEAC was applying the standard to all 90day services unless a case was made to the PEAC that the times should be increased. ASTS argued that there are substantial atypical staff times required for transplant recipients due, in large part, to the intensive education required for the transplant patient. The commenter noted that the three new CPT codes for living donor hepatectomies, CPT codes 4714047142, were given increased preservice clinical staff time by the RUC and have an RN as the staff type. ASTS requested that the current clinical staff times be retained and that an RN be assigned rather than the blended staff type to the following transplant services: CPT codes 32851, 32852, 32853, 32854, 33935, 33945, 47135, 47136, 48554, 48556, 50320, 50360, 50365, 50380, 50547.

Response: It does seem reasonable that at least some of these services would have increased pretimes as do the living donor hepatectomies recently reviewed by the RUC. Therefore, we will restore the original CPEP clinical staff pretimes and use the RN staff type for the above services on an interim basis for the coming year. We anticipate that the society will bring all of these codes to the PEAC for review for either the January or March meeting to ensure that the times for the codes receive the same scrutiny as did the new transplant codes. It should be noted that a few of the codes have lower original CPEP pretime than the PEAC standard of 60 minutes; for those codes we did not change the PEAC standard time. We also are not revising the postprocedure clinical staff times for these codes, because the current times are in line with the postservice times assigned to the new living donor hepatectomy codes recently reviewed by the RUC.

Comment: A commenter noted that high dose rate (HDR) brachytherapy CPT codes 77781, 77782, 77783 and 77784 were not listed in Addendum C of the proposed rule. Since these codes were approved by the PEAC and forwarded to CMS, ACR questioned why these codes were not listed.

Response: The CPEP data base files had been revised to reflect the PEAC recommendations for these codes. It was an oversight that they were not included in Addendum C.

Comment: The American College of Surgeons listed several possible errors in the CPEP database:

CPT code 11450missing 1 minute of staff time

CPT codes 10080, 10081, 11770, 12032, 12035, 12046, 12047, 21550, 21920, 37609, 38300, 4530045327, and 4660046615missing correct number of gloves.

CPT codes 45900, 45905, 45910, 47382, 49320, 49321, 49322, 49422, 49429supplies listed incorrectlyhave nonfacility inputs when PEAC recommended none in office setting.

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Response: We thank the College for checking the database so carefully. We have made the suggested corrections, with the following notes: For CPT codes 10080, 10081 and 11770, the PEAC recommendation listed 5 gloves, not 6. For CPT codes 4530045327 and 4660046615, we adjusted the quantity of unsterile gloves to reflect that there are 2 pair in the minimum visit supply package; in addition, CPT codes 45321 and 45327 were not priced in the nonfacility setting.

Comment: The American Society of Colon and Rectal Surgeons noted a few errors in the CPEP supply database. The supply inputs had not been changed to match the accepted new recommendations for CPT codes 45900, 45905, 45910, 47382, 49320, 49321, 49322, 49422 and 49429.

Response: We have made the corrections to the supply database and thank the specialty for bringing this to our attention.

Comment: The American SpeechLanguageHearing Association (ASHA) questioned the proposed 28 percent reduction in the practice expense for CPT code 92507, Treatment of speech, language, voice,
communication, auditory processing and/or aural rehabilitation status. The reduction is attributable to a decrease in clinical staff time. ASHA contended that the PEAC recommendation was based on a vignette for a child receiving such therapy, but that the time involved with a typical adult patient receiving this treatment is much longer. ASHA stated that a more reasonable time for clinical staff for this service is 69 minutes compared to the proposed 46 minutes.

Response: We understand that the scenario for performing this service for a child might be very different than for an adult because an adult can participate in a more protracted therapy session. Because it is not clear to us at this time what would be the typical scenario, we will, on an interim basis, average the clinical staff time needed during a speech therapy session for a child with that suggested by ASHA for an adult. We will, therefore, assign 58 minutes of clinical staff time to this service, with the expectation that ASHA will present CPT code 92507 for further discussion and review at the PEAC.

Comment: We received several comments in response to our acceptance of PEAC recommendations for evaluation and management (E/M) codes that reduced payment rates for six nursing home services (CPT codes 99301 99303 and 9931199313) and two home visit codes (CPT codes 99348 and 99350). This payment reduction is primarily due to a decrease in the clinical staff time assigned to these services.

The American Academy of Family Physicians (AAFP) supported our acceptance of the PEAC recommendations for the E/M nursing facility services. The commenter noted that current practice expenses are higher for services provided in the nonSNF nursing facility than those provided in the SNF facility. The commenter contended that the direct practice expense inputs should not vary based on the type of nursing facility setting and supported the elimination of the current differential in the practice expense RVUs between the SNF and nonSNF facility setting.

However, the American Medical Directors Association (AMDA) representing long term care physicians, the American Geriatrics Society (AGS) and a health care management company, Health Essentials, all disagreed with our decision to accept the E/M nursing facility PEAC recommendations and asked us to reconsider our decision to implement them in 2004. The request to delay implementation was echoed by the American Academy of Home Care Physicians and AGS relating to the two E/ M home visit codes.

The home care physicians argued that the PEAC recommendations for the two home visit codes are flawed because these codes have not yet been surveyed by the specialty performing this service. The commenters also contended that their views were not represented when the PEAC considered the refinements of the E/M home visit codes. Similarly, the AMDA noted that the PEAC workgroup responsible for formulating the recommendations for the nursing facility codes did not include long term care physicians. The AMA also commented on this issue and expressed concern that the PEAC recommendations did not include the views of all the relevant medical specialties and requested that we delay implementation of these E/M code recommendations to allow impacted medical specialties an opportunity to present new information to the PEAC.

In addition, the AMDA expressed concern regarding the current work RVUs for nursing home visit services.

Response: At the time the PEAC recommendations were forwarded to CMS, we agreed with the views expressed by the AFPP as to the reasonableness of the practice expense recommendations for the E/M codes for the nursing facility and home visits. However, we are also of the opinion that the relevant medical specialties should be given the opportunity to have their views considered by the PEAC. Consequently, we will not go forward with these E/M recommendations in 2004. This will allow time for the PEAC to reconsider the eight E/M codes with input from representatives from the nursing home and home visit specialties. We will use current CPEP practice expense inputs to price these codes for 2004.

With regard to the concern expressed about the work RVUs for the nursing home visits, in the 2004 final rule we will solicit recommendations on codes to be reviewed during the next 5year review of work and we suggest that the society recommend review of these codes.

Comment: A specialty society representing gastroenterologists commented that the increased clinical staff pretime added to certain colorectal procedures needs to be applied equally to

gastroenterologists who provide those services.

Response: We have a single payment for each procedure regardless of the specialty performing the service. Therefore, gastroenterologists will be paid the same as colorectal surgeons when performing those services for which we allowed increased preservice clinical staff time.

Comment: The American College of Radiology submitted several corrections to the CPEP database for those instances where the database differed from the PEAC recommendations that we accepted. The College stated its appreciation for the opportunity to review the practice expense data file for completeness and accuracy and applauded our efforts to ensure that the database captures correct and complete practice expense data.

Response: We thank the College for the time and effort expended in checking this detailed data. We have made revisions to 19 codes: We changed the quantity of sodium chloride injection for CPT codes 78306, 78315, 78460, 78461, 78464, and 78465; adjusted the quantity of films for CPT code 76812; added missing supplies to CPT codes 77408, 77409, 77411, 77412, 77414, 77416, 76830 and 77290; removed equipment that had been deleted from CPT codes 78478 and 78480; and corrected a typographical error in the preservice clinical staff time for CPT codes 73218 and 75555.

g. Repricing of Clinical Practice Expense InputsSupplies

We use the practice expense inputs (the clinical staff, supplies, and equipment assigned to each procedure) to allocate the specialty specific practice expense cost pools to the procedures
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performed by each specialty. The costs of the original inputs assigned by the Clinical Practice Expert Panels (CPEP) were determined by our contractor, Abt Associates, based primarily on 1994 and 1995 pricing data from supply catalogs. In addition, for many items on the equipment and supply list, the associated costs were based on the recommendations of a CPEP panel member, rather than on actual catalog prices. Subsequent to the CPEP panels, equipment and supply items have also been added to the CPEP data, with the costs of the inputs provided by the relevant specialty society.

We contracted with a consultant to assist in obtaining current pricing information and also to recommend revisions to improve the uniformity and consistency of the CPEP supply database. On the basis of these recommendations, in the August 15, 2003 proposed rule, we proposed updates to the cost information for supplies in the database. In addition, we proposed the following database revisions:

Assignment of supply categories.

We proposed that supplies be assigned to one of 14 categories. Consolidation/standardization of item descriptions.

We proposed combining items which appeared to be duplicative and modifiying descriptions using a key first word when possible for easier identification of items. For example, ``mayo stand cover'' and ``drape, sterile Mayo'' have both been changed to ``drape, sterile, for Mayo stand.''

Standardization of unit descriptions.

The current CPEP database contains over 72 unit descriptions associated with supplies (for example, item, gram, and cup). To provide consistency and ensure that inputs in the database accurately reflect the quantity of an item used, we proposed to standardize the unit description of items. We also proposed to specifically identify items intended for single use through the use of ``uou'' (unit of use) following the unit. These changes were reflected in Addendum D of the proposed rule.

There were also items that had not been identified or for which pricing information was not found that were included in Table 1 in the August 15 proposed rule. Items that we proposed to delete from the database were also identified in this table. We requested that commenters, particularly the relevant specialty groups, provide us with the needed pricing information with appropriate documentation. We also stated if we did not obtain verified pricing information for an item, it would be eliminated from the database.

Comment: The RUC expressed appreciation for the enormity of the repricing project and stated that the proposed approach was well organized and comprehensive. The American Association of Orthopedic Surgeons also agreed that the assignment of supply categories would be helpful in future refinement activities. The American College of Physicians, the American College of Surgeons, and the American Urological Association expressed support for our proposal to create a numbering system and to standardize the descriptions of supply items to increase accuracy of use. The American Academy of Dermatology also supported this standardization of proposed ``unit of use'' as long as its application does not assume that ``one size fits all'' as some supplies may go from milliliter to liter in usage. The American Society of Cataract and Refractive Surgery and the Outpatient Ophthalmic Surgery Society thanked us for the repricing proposal because this will ensure that we are using the more accurate and uptodate supply costs, thus reimbursing physicians more fairly. The American College of Radiology recognized the need to update supply and pricing information in the practice expense database and commended us for committing to this extensive project. The American College of Surgeons also agreed that the update of prices for supplies will improve the accuracy of the direct practice expense data. The Society of Nuclear Medicine commended us for committing to this extensive project. The American Urological Association also appreciated this effort and acknowledged it as a huge undertaking.

Response: We appreciate the positive feedback and would like to thank all the staff of the specialty societies who worked with our contractor to obtain the most representative prices for all of the supplies in the CPEP input database.

Comment: A specialty society representing podiatrists agreed with removal of hallux implant and the broach kit from the list of supplies

FOR FURTHER INFORMATION CONTACT

Pam West (410) 7862302 (for issues related to practice expense.)

Jim Menas (410) 7864507 (for issues related to anesthesia.)

Rick Ensor (410) 7865617 (for issues related to Geographic Cost Price Index (GPCI).)

Mary Stojak (410) 7866939 (for issues related to the definition of diabetes for diabetes selfmanagement training (DSMT).)

Shannon Martin (410) 7867939 (for issues related to rebasing of the Medicare Economic Index (MEI).)

Craig Dobyski, (410) 7864584 (for issues related to telehealth).

Joanne Sinsheimer, (410) 7864620 (for issues related to updates to the list of certain services subject to the physician selfreferral prohibitions).

Diane Milstead (410) 7863355, Latesha Walker (410) 7861101, or Gaysha Brooks (410) 7863355 (for all other issues.)