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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Wage and Hour Division
CFR Citation: 42 CFR Parts 405, 410, 411, 414, 415, and 424
CMS ID: [CMS-1321-FC and CMS-1317-F]
NOTICE: Part II
DOCUMENT ACTION: Final rule with comment period.
SUBJECT CATEGORY: RINs 0938-AO24 and 0938-AO11
DATES: Effective Date: These regulations are effective on January 1, 2007.
Comment Date: Comments will be considered if we receive them at one of the addresses provided below, no later than 5 p.m. on January 2, 2007.
DOCUMENT SUMMARY: This final rule with comment period addresses certain provisions of the Deficit Reduction Act of 2005, as well as making other changes to Medicare Part B payment policy. These changes are intended 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 discusses geographic practice cost indices (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 optout; policies related to bone mass measurement (BMM) services, independent diagnostic testing facilities (IDTFs), the physician selfreferral 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; updates the list of certain services subject to the physician selfreferral prohibitions, finalizes ASP reporting requirements, and codifies Medicare's longstanding policy that payment of bad debts associated with services paid under a fee schedule/charge based system are not allowable.
We are also finalizing the calendar year (CY) 2006 interim RVUs and are issuing interim RVUs for new and revised procedure codes for CY 2007.
In addition, this rule includes revisions to payment policies under the fee schedule for ambulance services and the ambulance inflation factor update for CY 2007.
As required by the statute, we are announcing that the physician fee schedule update for CY 2007 is 5.0 percent, the initial estimate for the sustainable growth rate for CY 2007 is 2.0 percent and the CF for CY 2007 is $35.9848.
SUMMARY: Health and Human Services Department, Centers for Medicare & Medicaid Services,
DOCUMENT BODY 2:
Medicare Program; Revisions to Payment Policies, FiveYear Review
of Work Relative Value Units, Changes to the Practice Expense
Methodology Under the Physician Fee Schedule, and Other Changes to
Payment Under Part B; Revisions to the Payment Policies of Ambulance
Services Under the Fee Schedule for Ambulance Services; and Ambulance
Inflation Factor Update for CY 2007
SUPPLEMENTAL INFORMATION
Submitting Comments: We welcome comments from the public on the following issues: interim Relative Value Units (RVUs) for selected procedure codes identified in Addendum C and the physician selfreferral designated health services (DHS) listed in Tables 18 and 19. You can assist us by referencing the file code CMS 1321FC 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 18007433951.
This Federal Register document is also available from the Federal Register online database through Government Printing Office Access, a service of the U.S. Government Printing Office. The Web site address is: http://www.access.gpo.gov/nara/index.html.
Information on the physician fee schedule can also be found on the CMS homepage. You can access this data by using the following directions:
1. Go to the following Web site: http://www.cms.hhs.gov/PhysicianFeeSched/ .
2. Select ``PFS Federal Regulation Notices.''
To assist readers in referencing sections contained in this
preamble, we are providing the following table of contents. Some of the
issues discussed in this preamble affect the payment policies, but do
not require changes to the regulations in the Code of Federal
Regulations. Information on the regulation's impact appears throughout the preamble and is not exclusively in section VI.
Table of Contents
I. Background
A. Development of the Relative Value System
B. Components of the Fee Schedule Payment Amounts
C. Most Recent Changes to the Fee Schedule
II. Provisions of the Final Rule
A. ResourceBased Practice Expense Relative Value Units
1. Current Methodology
2. Proposals for Revising the PE Methodology
3. Specific Changes to the Indirect PE Methodology for Calendar Year 2007
4. Additional PE Issues for CY 2007
a. RUC Recommendations for Direct PE Inputs and Other PE Input Issues
b. Payment for Splint and Cast Supplies
c. Medical Nutrition Therapy Services
d. Surgical Pathology Codes
e. PE Issues from Rulemaking for CY 2006
f. Other PE Issues for CY 2007
g. Specific PE Concerns Raised by Commenters
h. Concerns About Decreases in PE RVUs
i. Equipment Utilization and Interest Rate Assumptions
j. Further Review of PE Direct Inputs
k. Supply and Equipment Items Needing Specialty Input
B. Geographic Practice Cost Indices (GPCIs)
C. Medicare Telehealth Services
D. Miscellaneous Coding Issues
1. Global Period for Remote Afterloading High Intensity Brachytherapy Procedures
2. Assignment of RVUS for Proton Beam Treatment Delivery Services
E. Deficit Reduction Act (DRA)
1. Section 5102Adjustments for Payments to Imaging Services
a. Payment for Multiple Imaging Procedures for 2007
b. Reduction in TC for Imaging Services Under the PFS to OPD Payment Amount
c. Interaction of the Multiple Imaging Payment Reduction and the OPPS Cap
2. Section 5107Revisions to Payments for Therapy Services
3. Section 5112Addition of Ultrasound Screening for Abdominal Aortic Aneurysm (AAA)
a. Coverage
b. Payment
4. Section 5113NonApplication of the Part B Deductible for Colorectal Cancer Screening Tests
5. Section 5114Addition of Diabetes Outpatient SelfManagement Training Services (DSMT) and Medical Nutrition Therapy (MNT) for the FQHC Program
F. Payment for Covered Outpatient Drugs and Biologicals (ASP Issues)
1. ASP Issues
2. Intravenous Immune Globulin (IVIG)
3. Clotting Factor Furnishing Fee
4. Widely Available Market Prices (WAMP) and Average Manufacturer Price (AMP) Threshold
5. Payment for Drugs Furnished During CY 2006 and Subsequent
Years in Connection With the Furnishing of Renal Dialysis Services if Separately Billed by Renal Dialysis Facilities
6. Other Issues
G. Revisions Related to Payment for Renal Dialysis Services Furnished by End Stage Renal Disease (ESRD) Facilities
1. Growth Update to the Drug Addon Adjustment to the Composite Rate
2. Update to the Geographic Adjustments to the Composite Rates
H. Private Contracts and OptOut ProvisionPractitioner Definition
I. Changes to Reassignment and Physician SelfReferral Rules Relating to Diagnostic Tests
J. Supplier Access to Claims Billed on Reassignment
K. Coverage of Bone Mass Measurement
1. Provisions of the June 24, 1998 IFC
2. Additional Scientific Evidence
3. Changes to the June 24, 1998 IFC
4. Analysis of and Response to Comments on the June 24, 1998 IFC and the CY 2007 PFS Proposed Rule
L. Independent Diagnostic Testing Facility (IDTF) Issues
1. IDTF Changes
2. Performance Standards for IDTFs
3. Supervision
4. Place of Service
5. Analysis of and Response to Public Comments
6. Provisions of the Final Rule
M. Independent Laboratory Billing for the TC of Physician Pathology Services to Hospital Patients
N. Public Consultation for Medicare Payment for New Outpatient Clinical Diagnostic Laboratory Tests
1. Medicare, Medicaid, and SCHIP Benefits Improvement Protection Act of 2000 (BIPA)
2. Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)
3. Other Laboratory Issues
a. Quality
b. Blood Glucose Monitoring in SNFs
c. Other Lab IssuesClinical Diagnostic Laboratory Date of Service (DOS) for Stored Specimens
O. Criteria for National Certifying Bodies that Certify Advanced Practice Nurses
P. Chiropractic Services Demonstration
Q. Promoting Effective Use of Health Information Technology (HIT)
R. Health Care Information Transparency Initiative
S. Bad Debt Payment for Services Associated with Reasonable Charge/Fee Schedules
III. Revisions to the Payment Policies of Ambulance Services Under
the Fee Schedule for Ambulance Services and the Ambulance Inflation Factor Update for CY 2007
A. History of Medicare Ambulance Services
B. Provisions of the Final Regulation
C. Analysis of and Responses to Public Comments
D. Ambulance Inflation Factor (AIF) for 2007
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IV. FiveYear Refinement of Relative Value Units Under the Physician
Fee Schedule: Responses to Public Comments on the FiveYear Review of Work Relative Value Units
A. Scope of FiveYear Review
B. Review of Comments (Includes Table entitled ``Work RVU Revisions in Response to the June 29, 2006 proposed notice'')
C. Discussion of Comments by Clinical Area
1. Dermatology and Plastic Surgery
2. Orthopedic Surgery
3. Gynecology, Urology, Pain Medicine, and Neurosurgery
4. Radiology, Pathology, and Other Miscellaneous Services
5. Evaluation and Management Services
6. Cardiothoracic Surgery
7. General, Colorectal and Vascular Surgery
8. Otolaryngology and Ophthalmology
9. HCPAC codes
D. Other Issues Under the 5Year Review
1. Anesthesia Services
2. Discussion of PostOperative Visits included in the Global Surgical Packages
3. Budget Neutrality
4. Review Process
V. Refinement of Relative Value Units for Calendar Year 2007 and
Response to Public Comments on Interim Relative Value Units for 2006
A. Summary of Issues Discussed Related to the Adjustment of Relative Value Units
B. Process for Establishing Work Relative Value Units for the 2006 Physician Fee Schedule
C. Work Relative Value Unit Refinements of Interim Relative Value Units
1. Methodology (Includes table entitled ``2006 Interim Work
Relative Value Units for Codes Reviewed Under the Refinement Panel Process'')
2. Interim 2006 Codes
D. Establishment of Interim Work Relative Value Units for New and Revised Physician's Current Procedural Terminology (CPT) Codes and New Healthcare Common Procedure Coding System Codes (HCPCS) for 2007 (Includes Table titled ``American Medical Association Specialty Relative Value Update Committee and Health Care Professionals Advisory Committee Recommendations and CMS' Decisions for New and Revised 2007 CPT Codes'')
E. Discussion of Codes for Which There Were No RUC
Recommendations or for Which the RUC Recommendations Were Not Accepted
F. Additional Pricing Issue
G. Establishment of Interim PE RVUs for New and Revised
Physician's Current Procedural Terminology (CPT) Codes and New
Healthcare Common Procedure Coding System (HCPCS) Codes for 2007
VI. Physician SelfReferral Prohibition: Annual Update to the List of CPT/HCPCS Codes
A. General
B. Nuclear Medicine
C. Annual Update to the Code List
VII. Physician Fee Schedule Update for CY 2007
A. Physician Fee Schedule Update
B. The Percentage Change in the Medicare Economic Index (MEI)
C. The Update Adjustment Factor (UAF)
VIII. Allowed Expenditures for Physicians' Services and the Sustainable Growth Rate
A. Medicare Sustainable Growth Rate
B. Physicians' Services
C. Preliminary Estimate of the SGR for 2007
D. Revised Sustainable Growth Rate for 2006
E. Final Sustainable Growth Rate for 2005
F. Calculation of 2007, 2006, and 2005 Sustainable Growth Rates
IX. Anesthesia and Physician Fee Schedule Conversion Factors for CY 2007
A. Physician Fee Schedule Conversion Factor
B. Anesthesia Fee Schedule Conversion Factor
X. Telehealth Originating Site Facility Fee Payment Amount Update
XI. Provisions of the Final Rule
XII. Waiver of Proposed Rulemaking and Delay in Effective Date
XIII. Collection of Information Requirements
XIV. Response to Comments
XV. Regulatory Impact Analysis
A. RVU Impacts
1. ResourceBased Work and PE RVUs
2. Section 5102 of the DRA Adjustments for Payments for Imaging Services
3. Combined Impacts
B. Geographic Practice Cost Indices (GPCI) Payment Localities
C. Global Period for Remote Afterloading High Intensity Brachytherapy Procedures
D. DRA 5112: Addition of Ultrasound Screening for Abdominal Aortic Aneurysm to ``Welcome to Medicare'' Benefit
E. DRA 5113: Colorectal Screening Exemption from Part B Deductible
F. Section 5114: Addition of Diabetes Outpatient Selfmanagement Training Services (DSMT) and Medical Nutrition Therapy (MNT) for the FQHC Program
G. Payment for Covered Outpatient Drugs and Biologicals (ASP Issues)
H. Provisions Related to Payment for Renal Dialysis Services Furnished by End State Renal Disease (ESRD) Facilities
I. Private Contracts and Optout Provision
J. Supplier Access to Claims Billed on Reassignment
K. Coverage of Bone Mass Measurement
L. IDTF Changes
M. Independent Lab Billing for TC Component of Physician Pathology Services for Hospital Patients
N. Public Consultation for Medicare Payment for New Outpatient Clinical Diagnostic Laboratory Tests
O. Bad Debt Payment for Services Associated with Reasonable Charge/Fee Schedules
P. Revisions to Payment Policies under the Ambulance Fee Schedule and the Ambulance Inflation Factor Update for CY 2007
Q. Alternatives Considered
R. Impact on Beneficiaries
S. Accounting Statement
Addendum AExplanation and Use of Addendum B.
Addendum B2007 Relative Value Units and Related Information Used in Determining Medicare Payments for 2006.
Addendum CCodes with Interim RVUs
Addendum D2007 Geographic Practice Cost Indices by Medicare Carrier and Locality
Addendum EGAF Addenda
Addendum FAddendum F: CPT/HCPCS Imaging Codes Defined by DRA 5102(b)
Addendum GCY 2007 Wage Index For Urban Areas Based On CBSA Labor Market Areas
Addendum HCY 2007 ESRD Wage Index for Rural Areas Based on CBSA Labor Market Areas
Addendum IRUCA Rurality Level by State and Zip Code
Addendum JUpdated 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 final rule with comment period, we
are listing these acronyms and their corresponding terms in alphabetical order below:
AAA Abdominal aortic aneurysm
AAD American Academy of Dermatology
AAFP American Academy of Family Physicians
AANS American Association of Neurological Surgeons
AAO American Academy of Ophthalmology
AAOS American Academy of Orthopaedic Surgeons
AATS American Association for Thoracic Surgery
ACC American College of Cardiology
ACG American College of Gastroenterology
ACHPN Advanced Certified Hospice and Palliative Nurse
ACOG American College of Obstetrics and Gynecology
ACR American College of Radiology
ACS American College of Surgeons
ADA American Dietetic Association
AFROC Association of Freestanding Radiation Oncology Centers AGA American Gastroenterological Association
AMA American Medical Association
AMP Average manufacturer price
APC Ambulatory payment classification
ASA American Society of Anesthesiologists
ASC Ambulatory surgical center
ASCRS American Society of Colon and Rectal Surgeons
ASGE American Society of Gastrointestinal Endoscopy
ASP Average sales price
ASSH American Society for Surgery of the Hand
ASTRO American Society for Therapeutic Radiology and Oncology AUA American Urological Association
BBA Balanced Budget Act of 1997 (Pub. L. 10533)
BBRA [Medicare, Medicaid and State Child Health Insurance Program] Balanced Budget Refinement Act of 1999 (Pub. L. 106113)
[[Page 69627]]
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection Act of 2000
BLS Bureau of Labor Statistics
BMD Bone mineral density
BMM Bone mass measurement
BN Budget neutrality
BNF Budget neutrality factor
BP Best price
CAD Computeraided detection
CAH Critical access hospital
CAP Competitive acquisition program
CBSA CoreBased Statistical Area
CCI Correct Coding Initiative
CEO Chief executive officer
CF Conversion factor
CFO Chief financial officer
CFR Code of Federal Regulations
CMP Competitive medical plan
CMS Centers for Medicare & Medicaid Services
CNS Clinical nurse specialist
CPI Consumer Price Index
CPT (Physicians') Current Procedural Terminology (4th Edition, 2002, copyrighted by the American Medical Association)
CT Computed tomography
CTA Computed tomographic angiography
CY Calendar year
DHS Designated health services
DME Durable medical equipment
DMEPOS Durable medical equipment, prosthetics, orthotics, and supplies
DRA Deficit Reduction Act
DSMT Diabetes outpatient selfmanagement training services
DXA Dual energy xray absorptiometry
E/M Evaluation and management
EPO Erythopoeitin
ESRD End stage renal disease
FAX Facsimile
FDA Food and Drug Administration (HHS)
FQHC Federally qualified health center
FR Federal Register
GAF Geographic adjustment factor
GAO Government Accountability Office
GDP Gross domestic product
GPO Group purchasing organization
GPCI Geographic practice cost index
HCPAC Health Care Professional Advisory Committee
HCPCS Healthcare Common Procedure Coding System
HCRIS Healthcare Cost Report Information System
HSA Health Savings Account
HHA Home health agency
HHS [Department of] Health and Human Services
HIT Health information technology
HMO Health maintenance organization
HOCM High osmolar contrast media
HPSA Health Professional Shortage Area
HRSA Health Resources Services Administration (HHS)
HUD [Department of] Housing and Urban Development
ICF Intermediate care facilities
IDTF Independent diagnostic testing facility
IFC Interim final rule with comment period
IPPE Initial preventive physical examination
IPPS Inpatient prospective payment system
IVIG Intravenous immune globulin
IWPUT Intraservice work per unit of time
JCAAI Joint Council of Allergy, Asthma, and Immunology
LCD Local coverage determination
LOCM Low osmolar contrast media
LOINC Logical Observation Identifiers Names and Codes
MA Medicare Advantage
MCP Monthly capitation payment
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MLN Medicare Learning Network
MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108173)
MNT Medical nutrition therapy
MRA Magnetic resonance angiography
MRI Magnetic resonance imaging
MSA Metropolitan statistical area
MSVP Multispecialty visit package
NCD National coverage determination
NCQDIS National Coalition of Quality Diagnostic Imaging Services NDC National drug code
NEMA National Electrical Manufacturers Association
NHE National health expenditures
NOP National Osteoporosis Foundation
NP Nurse practitioner
NPP Nonphysician practitioners
NPWP Nonphysician Work Pool
NSQIP National Surgical Quality Improvement Program
OBRA Omnibus Budget Reconciliation Act
OIG Office of Inspector General
OMB Office of Management and Budget
OPD Outpatient Department
OPPS Outpatient prospective payment system
OSCAR Online Survey and Certification and Reporting
PA Physician assistant
PBM Pharmacy benefit managers
PC Professional component
PE Practice Expense
PE/HR Practice expense per hour
PEAC Practice Expense Advisory Committee
PERC Practice Expense Review Committee
PET Positron emission tomography
PFS Physician Fee Schedule
PLI Professional liability insurance
PPI Producer price index
PPO Preferred provider organization
PPS Prospective payment system
PRA Paperwork Reduction Act
PRM Provider Reimbursement Manual
PT Physical therapy
QCT Quantitative computerized tomography
RFA Regulatory Flexibility Act
RHC Rural health clinic
RIA Regulatory impact analysis
RN Registered nurse
RUC [AMA's Specialty Society] Relative (Value) Update Committee RVU Relative value unit
SGR Sustainable growth rate
SMS [AMA's] Socioeconomic Monitoring System
SNF Skilled nursing facility
SNM Society for Nuclear Medicine
SPA Single photon absorptiometry
STS Society of Thoracic Surgeons
SVS Society for Vascular Surgery
SXA Single energy xray absorptiometry
TA Technology Assessment
TC Technical Component
UAF Update adjustment factor
UPIN Unique Physician Identification Number
USPSTF United States Preventive Services Task Force
VA [Department of] Veteran Affairs
WAC Wholesale acquisition cost
WAMP Widely available market price
WHO World Health Organization
I. Background
Since January 1, 1992, Medicare has paid for physicians' services
under section 1848 of the Social Security Act (the Act), ``Payment for
Physicians' Services.'' The Act requires that payments under the
physician fee schedule (PFS) 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 resourcebased 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. 101239), and OBRA 1990 (Pub. L. 101508). 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 resourcebased, 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 codespecific 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)(A) of the Act specifies that the RVUs for
radiology services are based on relative value scale we adopted under section
[[Page 69628]]
1834(b)(1)(A) of the Act, (the American College of Radiology (ACR)
relative value scale), which we integrated into the overall PFS.
Section 1848(b)(2)(B) of the Act specifies that the RVUs for anesthesia
services are based on RVUs from a uniform relative value guide. We
established a separate conversion factor (CF) for anesthesia services,
and we continue to utilize time units as a factor in determining
payment for these services. As a result, there is a separate payment methodology for anesthesia services.
We establish physician work RVUs for new and revised codes based on recommendations received from the American Medical Association's (AMA) Specialty Society Relative Value Update Committee (RUC).
2. Practice Expense Relative Value Units (PE RVUs)
Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 103432), enacted on October 31, 1994, amended section
1848(c)(2)(C)(ii) of the Act and required us to develop resourcebased
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. 10533), amended section 1848(c)(2)(C)(ii) of the Act to delay implementation of the resourcebased PE RVU system until January 1, 1999. In addition, section 4505(b) of the BBA provided for a 4year transition period from chargebased PE RVUs to resourcebased RVUs.
We established the resourcebased 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 resourcebased system for PE over a 4year period, resourcebased PE RVUs did not become fully effective until 2002.
This resourcebased system was based on two significant sources of actual PE data: The Clinical Practice Expert Panel (CPEP) data and the AMA's Socioeconomic Monitoring System (SMS) data. The CPEP data were collected from panels of physicians, practice administrators, and nonphysicians (for example, registered nurses) nominated by physician specialty societies and other groups. The CPEP panels identified the direct inputs required for each physician's service in both the office setting and outofoffice setting. The AMA's SMS data provided aggregate specialtyspecific 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 (OPD). The difference between the facility and nonfacility RVUs reflects the fact that a facility receives separate payment from Medicare for its costs of providing the service, apart from payment under the PFS. The nonfacility RVUs reflect all of the direct and indirect PEs of providing a particular service.
Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106113) directed the Secretary of Health and Human Services (the Secretary) to establish a process under which we accept and use, to the maximum extent practicable and consistent with sound data practices, data collected or developed by entities and organizations to supplement the data we normally collect in determining the PE component. On May 3, 2000, we published the interim final rule (65 FR 25664) that set forth the criteria for the submission of these supplemental PE survey data. The criteria were modified in response to comments received, and published in the Federal Register (65 FR 65376) as part of a November 1, 2000 final rule. The PFS final rules published in 2001 and 2003, respectively, (66 FR 55246 and 68 FR 63196) extended the period during which we would accept these supplemental data. 3. ResourceBased Malpractice RVUs
Section 4505(f) of the BBA amended section 1848(c) of the Act to require us to implement resourcebased malpractice RVUs for services furnished on or after 2000. The resourcebased malpractice RVUs were implemented in the PFS final rule published November 2, 1999 (64 FR 59380) (hereinafter referred to as the CY 2000 PFS final rule). The malpractice RVUs were based on malpractice insurance premium data collected from commercial and physicianowned 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 5year review of the physician work RVUs went into effect in 1997, published on November 22, 1996 (61 FR 59489). The second 5year review of work RVUs went into effect in 2002, published on November 1, 2001 (66 FR 55246). The third 5year review is being finalized in this rule for CY 2007.
In 1999, the AMA's RUC established the Practice Expense Advisory Committee (PEAC) for the purpose of refining the direct PE inputs. Through March 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).
In the November 15, 2004, PFS final rule (69 FR 66236) (hereinafter referred to as the CY 2005 PFS final rule), 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.
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 malpractice RVUs) are adjusted by a geographic practice cost index (GPCI). The GPCIs reflect the relative costs of physician work, PEs, and malpractice insurance in an area compared to the national average costs for each component.
Payments are converted to dollar amounts through the application of a CF, which is calculated by the Office of the Actuary and is updated annually for inflation.
The general formula for calculating the Medicare fee schedule amount for a given service and fee schedule area can be expressed as: Payment = [(RVU work x GPCI work) + (RVU PE x GPCI PE) + (RVU malpractice x GPCI malpractice)] x CF.
However, as discussed in section IV.D of this final rule with
comment period, due to the need to meet the budget neutrality (BN)
provisions of 1848(c)(2)(B)(ii), we are applying a BN adjustor to the
work RVUs in order to calculate payment for a service. Therefore, payment for services will now be calculated as follows:
[[Page 69629]]
Payment = [(RVU work x BN adjustor x GPCI work) + (RVU PE x GPCI PE) + (RVU malpractice x GPCI malpractice)] x CF.)
C. Most Recent Changes to the Fee Schedule
The final rule with comment period that appeared in the Federal Register on November 21, 2005 (70 FR 70116) (hereinafter referred to as the CY 2006 PFS final rule with comment period) addressed Medicare Part B payment policy including the PFS that is applicable for CY 2006; and finalized certain provisions of the interim final rule to implement the Competitive Acquisition Program (CAP) for Part B Drugs.
It also revised Medicare Part B payment and related policies regarding: physician work, PE and malpractice RVUs; Medicare telehealth services; multiple diagnostic imaging procedures; covered outpatient drugs and biologicals; supplemental payments to Federally Qualified Health Centers (FQHCs); renal dialysis services; coverage for glaucoma screening services; National Coverage Determination (NCD) timeframes; and physician referrals for nuclear medicine services and supplies to health care entities with which physicians have financial
relationships.
In addition, the rule finalized the interim RVUs for CY 2005 and issued interim RVUs for new and revised procedure codes for CY 2006. The rule also updated the codes subject to the physician selfreferral prohibition and discussed payment policies relating to teaching anesthesia services, therapy caps, private contracts and optout, and chiropractic and oncology demonstrations.
In accordance with section 1848(d)(1)(E)(i) of the Act, we also announced that the PFS update for CY 2006 would be 4.4 percent; the initial estimate for the sustainable growth rate for CY 2006 would be 1.7 percent; and the CF for CY 2006 would be $36.1770. However, subsequent to publication of the CY 2006 PFS final rule with comment period, section 5104 of the Deficit Reduction Act (DRA) of 2005 (Pub. L. 109171, February 8, 2006), was enacted which amended section 1848(d) of the statute. As a result of this statutory change we maintained the CY 2005 CF of $37.8975 for CY 2006.
We also note that the FiveYear Review of Work Relative Value Units Under the Physician Fee Schedule and Proposed Changes to the Practice Expense Methodology proposed notice appeared in the Federal Register on June 29, 2006 (71 FR 37170). In that notice, we proposed revisions to work RVUs affecting payment for physicians' services. The revisions reflect changes in medical practice, coding changes, and new data on relative value components that affect the relative amount of physician work required to perform each service, as required by the statute. We also proposed revisions to our methodology for calculating PE RVUs, including changes based on supplemental survey data for PE. This revised methodology would be used to establish payment for services beginning January 1, 2007.
In this final rule with comment period, we are responding to the comments received on that notice. To the extent that comments received were outside the scope of the proposed notice, they are not addressed in this rule.
Work RVU revisions will be fully implemented for services furnished
to Medicare beneficiaries on or after January 1, 2007. The changes in
PE methodology will be phasedin over a 4year period; although, as we
gain experience with the new methodology, we will reexamine this policy
beginning next year and propose necessary revisions through future rulemaking.
II. Provisions of the Proposed Rule
A. ResourceBased Practice Expense (PE) Relative Value Units (RVUs)
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 resourcebased system for determining PE RVUs for each physician's service. Until that time, PEs 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 resourcebased 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 phasedin 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 resourcebased PE RVUs, the Secretary must:
Beginning in CY 1999, we began the 4year transition to resource based PE RVUs. In CY 2002, the resourcebased PE RVUs were fully transitioned.
1. Current Methodology
The following sections discuss the current PE methodology. a. Data Sources
There are two primary data sources used to calculate PE. The AMA's Socioeconomic Monitoring System (SMS) survey data are used to develop the PE per hour (PE/HR) for each specialty. The second source of data used to calculate PE was originally developed by the Clinical Practice Expert Panels (CPEP). The CPEP data include the supplies, equipment and staff times specific to each procedure.
The AMA developed the SMS survey in 1981 and discontinued it in
1999. Beginning in 2002, we incorporated the 1999 SMS survey data into
our calculation of the PE RVUs, using a 5year average of SMS survey
data. (See Revisions to Payment Policies and FiveYear Review of and
Adjustments to the Relative Value Units Under the Physician Fee
Schedule for CY 2002 final rule, published November 1, 2001 (66 FR
55246) (hereinafter referred to as CY 2002 PFS final rule).) The SMS PE
survey data are adjusted to a common year, 1995. The SMS data provide the following six categories of PE costs:
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, (May 3, 2000, 65 FR 25664).) 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 CPEPs consisted of panels of physicians, practice administrators, and nonphysicians (registered nurses (RNs), for example) who were nominated by physician specialty societies and other groups. There were 15 CPEPs consisting of 180 members from more than 61 specialties and subspecialties. Approximately 50 percent of the panelists were physicians.
The CPEPs identified specific inputs involved in each physician'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 multispecialty 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
To establish PE RVUs for specific services, it is necessary to establish the direct and indirect PE associated with each service. Our current approach allocates aggregate specialty practice costs to specific procedures and, thus, is often referred to as a ``topdown'' approach. The specialty PEs are derived from the AMA's SMS survey and supplementary survey data. The PEs for a given specialty are allocated to the services furnished by that specialty on the basis of the direct input data and work RVUs assigned to each CPT code. The specific process is outlined in the June 29, 2006 proposed notice (71 FR 37242). c. Other Methodological Issues: Nonphysician Work Pool (NPWP)
As an interim measure, until we could further analyze the effect of the topdown methodology on the Medicare payment for services with no physician work (including the technical components (TCs) of radiation oncology, radiology and other diagnostic tests), we created a separate PE pool for these services. However, any specialty society could request that its services be removed from the nonphysician work pool (NPWP). The specific steps for the NPWP calculation are detailed in the June 29, 2006 proposed notice (71 FR 37243).
d. Facility/Nonfacility Costs
Procedures that can be furnished in a physician's office, as well as in a hospital, have two PE RVUs: facility and nonfacility. The non facility 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 the PE RVU 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 fee schedule), the PE RVUs are generally lower for services provided in the facility setting.
2. Proposals for Revising the PE Methodology
We have three major goals for our resourcebased PE methodology:
In the CY 2006 PFS proposed rule (70 FR 45764), we proposed the
following changes to the PE methodology that we believed would help in achieving these three major goals:
We also proposed an indirect PE methodology that was to assign to each service the higher of the current indirect PE RVUs or the indirect PE RVUs calculated using the supplementary survey data.
In the CY 2006 PFS final rule with comment period (70 FR 70116), we withdrew these proposals primarily because a programming error for the indirect PE RVU calculation had led to the publication of inaccurate proposed PE RVUs. On February 15, 2006, we sponsored a PE Town Hall Meeting and invited the public, including all specialty representatives to attend. At this meeting, we supplied a detailed description of the bottomup approach to the calculation of resourcebased PE RVUs. Three examples were examined in detail that illustrated the impact of the various assumptions that could be used under a bottomup approach. We specifically requested input from all interested parties on possible changes to our PE methodology, including the move to a bottomup approach and the various methods of calculating indirect PE.
We reviewed the approximately 35 comments that we received in
response to our solicitation. Many of the comments were combined
efforts from related specialty organizations. Additionally, the AMA RUC also supplied a letter that captured the
[[Page 69631]]
comments of nearly 30 specialty organizations. The following is a
summary of the comments received as a result of the February 15, 2006 PE Town Hall meeting.
After considering these comments, we made the following proposals for direct PEs in the June 29, 2006 proposed notice (71 FR 37245). a. Use a Bottomup Method to Calculate the Direct PEs
We believe that we have consistently made a good faith effort to ensure fairness in our PE RVUsetting system by using the best data available at any one time. The reason we did not adopt the bottomup methodology originally proposed in 1997 and instead adopted the top down methodology finalized in 1998 was because we recognized the concerns among the physician community that the resource input data developed in 1995 by the CPEP were less reliable than the aggregate specialty cost data derived from the SMS process.
However, the situation has now changed. The PEAC/PERC/RUC has completed the refinement of the original CPEP data and we believe that the refined PE inputs now, in general, accurately capture the relative direct costs of PFS services. Conversely, although we have now accepted supplementary survey data from 13 specialties, we have not received updated aggregate cost data from most specialties. Thus, we believe that, in the aggregate, the refined direct input data represent more reliably the relative direct cost PE inputs for physicians' services.
Therefore, instead of using the topdown approach to calculate the direct PE RVUs, where the aggregate CPEP/RUC costs for each specialty are scaled to match the aggregate SMS costs, we proposed to adopt a bottomup method of determining the relative direct costs for each service. Under this method, the direct costs would be 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 the resources, in turn, would be calculated from the refined direct PE inputs in our PE database.
We believe that this proposed change, which was welcomed by most
commenters in the CY 2006 PFS proposed rule, will lead to greater
stability and accuracy in the PE portion of our payment system.
Currently, under the topdown methodology, the need to scale the CPEP
costs to equal the SMS costs has meant that any changes in the direct
PE inputs for one service often leads to unexpected results for other
services where the inputs have not been altered. In addition, the current PE RVUs for a procedure do not necessarily change
proportionately with changes in the direct inputs, creating possible
anomalous values. We believe that our proposed bottomup methodology
would resolve these issues, so that changes in the PE RVUs would be more intuitive and would result in fewer surprises.
b. Use the PE/HR Data from the 7 Surveys We Have Previously Accepted
and, in addition, Use the PE/HR Data from the Survey Submitted by the
National Coalition of Quality Diagnostic Imaging Services (NCQDIS)
As explained in the CY 2005 PFS final rule with comment period (69 FR 66242), we received surveys from the American College of Cardiology (ACC), the American College of Radiology (ACR), and the American Society for Therapeutic Radiology and Oncology (ASTRO) by March 1, 2004. The data submitted by the ACC and the ACR met our criteria. However, as requested by the ACC and the ACR, we deferred using their data until issues related to the NPWP could be addressed. (The survey data from ASTRO did not meet the precision criteria established for supplemental surveys; therefore, we did not accept or use it in the calculation of PE RVUs for 2005.)
In March 2005, we also received surveys from the Association of Freestanding Radiation Oncology Centers (AFROC), the American Urological Association (AUA), the American Academy of Dermatology (AAD), the Joint Council of Allergy, Asthma, and Immunology (JCAAI), the NCQDIS, and a joint survey from the American Gastroenterological Association (AGA), the American Society of Gastrointestinal Endoscopy (ASGE) and the American College of Gastroenterology (ACG).
All the surveys, with the exception of the survey from NCQDIS, met our criteria. Therefore, we proposed in the CY 2006 PFS proposed rule (70 FR 45775) to use the survey data from all the surveys meeting our criteria in the calculation of PE RVUs for 2006; but, as discussed in the CY 2006 PFS final rule with comment period (70 FR 70116) and [[Page 69632]]
above in this section, this proposal was not finalized.
We contracted with the Lewin Group (Lewin) to evaluate whether the supplemental survey data that were submitted met our criteria and to make recommendations to us regarding their suitability for use in calculating PE RVUs. As described in the CY 2006 PFS proposed rule (70 FR 45775), Lewin recommended blending the radiation oncology data from the AFROC survey data with the ASTRO survey data submitted in 2004 to calculate the PE/HR. According to Lewin, the goal of the AFROC survey was to represent the population of freestanding radiation oncology centers only. To develop an overall average for the radiation oncology PE pool, Lewin recommended we use the AFROC survey for freestanding radiation oncology centers, and the hospitalbased subset of last year's ASTRO survey. We agreed that this blending of the AFROC and ASTRO data was a reasonable way to calculate an average PE/HR that fully reflects the practice of radiation oncology in all settings. Blending the survey data overcame the initial problem that the ASTRO data do not meet the precision criteria as discussed in the CY 2005 PFS final rule (69 FR 66242). In addition, as discussed in the CY 2006 PFS proposed rule (70 FR 45776), blending of the data allowed for a broader base of radiation oncology providers to be represented.
Also, as discussed in the CY 2006 PFS proposed rule (70 FR 45764), Lewin indicated that the survey data submitted by the NCQDIS on independent diagnostic testing facilities (IDTFs) did not meet our precision criterion. However, upon further analysis, Lewin agreed with NCQDIS' determination that the inclusion of one inaccurate record skewed the findings outside the acceptable precision range. Lewin recalculated the precision level at 8.1 percent of the mean PE/HR (weighted by the number of physicians in the practice). Lewin indicated that the level of precision for the total PE/HR satisfies the level of precision requirement, and recommended acceptance of the survey.
We proposed to use the PE/HR data from all of these surveys, including the NCQDIS survey, in the calculation of the PE RVUs for 2007. For radiation oncology, we proposed to use the new PE/HR derived from combining the AFROC and ASTRO survey data, as recommended by Lewin. The proposed figures for PE per physician hour were listed in Table 52 in the June 29, 2006 proposed notice (71 FR 37246).
Section 303(a)(1)(B) of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108173)
added section 1848(c)(2)(I) of the Act to require CMS to use survey
data submitted by a specialty group where at least 40 percent of the
specialty's payments for Part B services are attributable to the
administration of drugs in 2002 to adjust PE RVUs for drug
administration services. The statute applies to surveys that include
expenses for the administration of drugs and biologicals, and were
received by March 1, 2005 for determining the CY 2006 PE RVUs. Section
303(a)(1)(A)(ii) of the MMA also added section 1848(c)(2)(B)(iv)(II) of
the Act to provide an exemption from budget neutrality (BN) in 2005 and
2006 for any additional expenditures resulting from the use of these
surveys. In the Changes to Medicare Payment for Drugs and Physician Fee
Schedule Payments for CY 2004 interim final rule published January 7,
2004 (69 FR 1084), we stated that the specialties of urology,
gynecology, and rheumatology meet this criteria. As described in the CY
2006 PFS final rule with comment period (70 FR 70116), we accepted for
the purposes of calculating the 2006 PE RVUs for drug administration
services the new survey data from the AUA and exempted from the BN
adjustment any impacts of accepting these data for purposes of calculating PE RVUs for drug administration services.
(Note: Rheumatology and gynecology did not submit supplemental survey data.)
c. Eliminate the NPWP and Calculate the PE RVUs for all Services Using the Same Methodology
Primarily because of the lack of representative SMS data or accurate direct cost inputs for specialties such as radiology and radiation oncology, the adoption of the topdown approach necessitated the creation of the NPWP. This separate work pool was created to allocate PE RVUs for TC codes and codes that are not furnished by physicians and, thus, have no work RVUs. In the CY 2000 Physician Fee Schedule; Payment Policies and Relative Value Unit Adjustment final rule, we indicated that ``the purpose of this pool was only to protect the (TC) services from the substantial decreases'' caused by inaccurate CPEP data and the lack of physician work RVU in the allocation of the indirect costs (64 FR 59406). Unfortunately, the services priced by the NPWP methodology have proven to be especially vulnerable to any change in the work pool's composition. This has led to significant fluctuations from yeartoyear in the PE RVUs calculated for these services.
The major specialties comprising the NPWP (radiology, radiation oncology and cardiology) have now submitted supplemental survey data that we have accepted and proposed to use in their PE calculations. (See the discussion on supplementary surveys above in this section.) Now that we have representative aggregate PE data for these specialties, and with the completion of the refinement of the direct cost inputs, the continued necessity and equity of treating these technical services outside the PE methodology applied to other services is questionable.
Therefore, we proposed to eliminate the NPWP and to calculate the PE RVUs for the services currently in the work pool by the same methodology used for all other services. This would also allow the use of the refined CPEP/RUC data to price the direct costs of individual services, rather than utilizing the pre1998 chargebased PE RVUs. In addition, the revised methodology would lead to greater stability for the PE RVUs for these services and would lead to more intuitive results than have occurred with the NPWP methodology.
d. Modify the Current Indirect PE RVUs Methodology
As described previously, the SMS and supplementary survey data are
the source for the specialtyspecific aggregate indirect costs used in
our PE calculations. We then allocate the indirect costs to particular
codes on the basis of the direct costs allocated to a code and the work
RVUs. In the CY 2006 PFS proposed rule (70 FR 45764), we stated that we
had no information that would indicate that the current indirect PE
methodology is inaccurate. At that time, we also were not aware of any
alternative approaches or data sources that we could use to calculate
more appropriately the indirect PE, other than the new supplementary
survey data, which we proposed to incorporate into our PE calculations.
Therefore, in the CY 2006 PFS proposed rule, we proposed to use the
current indirect PEs in our calculation, incorporating the new survey
data into the codes furnished by the specialties submitting the surveys
(71 FR 45764). We also indicated in that same proposed rule that we
would welcome any suggestions that would assist us in further
refinement of this indirect PE methodology. For example, we were
considering whether we should continue to accept supplementary survey
data or whether it would be preferable and feasible to have an SMStype
survey of only indirect costs for all specialties, or whether a more formula
[[Page 69633]]
based methodology independent of the SMS should be adopted, perhaps
using the specialtyspecific indirecttototal cost percentage as a
basis of the calculation. For a prior discussion of many of the issues
associated with allocating indirect costs, please refer to the CY 2000
Physician Fee Schedule; Payment Policies and Relative Value Unit Adjustment proposed rule (63 FR 30823).
3. Specific Changes to the Indirect PE Methodology for CY 2007
a. Summary of the PE Proposals From the June 29, 2006 Proposed Notice
As a result of collaboration with the PFS community and public comments on this issue, in the June 29, 2006 proposed notice, we proposed the following modifications to the indirect PE methodology. (1) Indirect Percentage Factor: Use of the SpecialtySpecific Percentage that Indirect PEs Represent of Total PEs Based on the Survey Data
We currently allocate indirect expenses on the sum of the direct expenses and the work RVUs (converted to dollars by multiplying by the CF). We proposed to allocate indirect expenses by applying a specialty specific indirect percentage factor to the direct expenses to recognize the varying proportion that indirect costs represent of total costs by specialty. This will have the effect of relatively increasing the indirect expense allocation for services that are on average furnished by specialties with higher indirect PE percentages, and relatively decreasing the indirect expense allocation for services that are furnished by specialties with lower indirect PE percentages. For a given service, the specific indirect percentage factor to apply to the direct costs for the purpose of the indirect allocation will be 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. (2) Continued Use of the SpecialtySpecific Indirect Scaling Factors
As described earlier in this section, we incorporate the indirect
PE/HR surveys into the methodology through the use of specialty
specific indirect scaling factors. We would continue to use the
specialtyspecific indirect scaling factors; however, to apply them in
a simpler manner we proposed to create an index. This index would
reflect 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. The calculation and application of the indirect practice cost index is described in more detail below in this section.
(3) Use of the Clinical Labor Costs in the Indirect Allocation for a
Service When the Clinical Labor Costs are Greater than the Physician Work RVU
We have received numerous comments that services with little or no physician work RVUs are disadvantaged under our current indirect allocation methodology based on the direct costs and the work RVUs. In response to these comments, when the clinical labor portion of the direct PE RVU is greater than the physician work RVU for a particular service, we proposed to allocate on the direct costs and the clinical labor costs. For example, if a service has no physician work, if the direct PE RVU is 1.10 and if the clinical labor portion of the direct PE RVU is 0.65 RVUs, we would use the 1.10 direct PE RVUs and the 0.65 clinical labor portion of the direct PE RVUs for the indirect PE allocation for that service. As another example, if the physician work RVUs for a service are 0.25, if the direct PE RVU is 1.10 and if the clinical labor portion of the direct PE RVU is 0.65 RVUs, we would use the 1.10 direct PE RVUs and the 0.65 clinical labor RVUs for the indirect allocation for that service. We would not use the 0.25 physician work RVUs for the indirect PE allocation since the 0.65 clinical labor RVUs are greater than the 0.25 physician work RVUs. (4) Use of 2005 Utilization Data in the Indirect PE RVU Calculation
Under the current PE methodology, we predominately use the 1997
2000 utilization data in the calculation of the indirect PE RVUs when
the service existed during 19972000 or the first year of utilization
data if the service did not exist during that time period. We used
those years of utilization data primarily to increase the yeartoyear
stability of the PE RVUs. With the changes we proposed to PE RVUs, in
particular the elimination of the NPWP, we will increase the yearto
year stability of the PE RVUs. We believe it is now appropriate to use
updated utilization data in the calculation of the indirect PEs. We
believe the other proposed changes in the PE methodology would help
obtain the yeartoyear stability we were attempting to achieve by
continuing to use the older utilization data. Additionally, the use of
more current utilization data would reflect the more current practice
patterns. We proposed to use the 2005 utilization data in the
calculation of the 2007 indirect PE RVUs. We also sought comments on
whether the utilization data should be updated yearly, which would
increase the accuracy of the PE calculations, or less often, which would increase the stability of the PE RVUs.
(5) Elimination of the Special Methodologies for Services with
Technical Components (TCs) and Professional Components (PCs)
Under the PFS, when services have TC, PC, and global components that can be billed separately, the payment for the global component equals the sum of the payment for the TC and PCs. Under the current PE methodology, the different mix of specialties that furnish the global, TC and PCs can cause the PE RVUs, otherwise created by the methodology, to fail to add together properly; that is, the global component does not equal the sum of the PC and TCs. The global component might exceed the sum of the TC and PCs or it might be less than the sum of the TC and PCs. We ensure that the TC and PCs add to the global component in one of two ways. For services in the NPWP, we set the PE RVUs for the global component equal to the sum of the PC PE RVU and the TC PE RVU. For services outside the NPWP, we set the PE RVUs for the TC equal to the difference between the global PE RVUs and the PC RVUs.
With our proposed change to a bottomup methodology for the direct PEs, there will be no weighted averaging of the direct cost inputs necessary to create the direct PE RVUs and, therefore, the direct PE RVUs for the PC and TCs would sum to the global component. Under the current methodology, as a result of the process used to ensure the PC and TCs sum to the global, RVUs for a service with a global component can be either more or less than the RVUs that would have been calculated for the service if the PC and TCs did not have to sum to the global.
Given the proposed change to bottomup methodology and the elimination of the NPWP, we believe it is
[[Page 69634]]
inappropriate to have codes for which the global, and the TC and PCs
are assigned RVUs that are either less than or greater than the
methodology would otherwise produce, and thus, are paid at a rate that
is either less than or greater than the methodology would otherwise
specify. (See section II.A.1. of this final rule with comment period
for the discussion of the current methodology.) Therefore, we proposed
that in the calculation of
FOR FURTHER INFORMATION CONTACT Pam West, (410) 786-2302 (for issues related to practice expense).
Stephanie Monroe, (410) 7866864 (for issues related to the geographic practice cost index).
Craig Dobyski, (410) 7864584 (for issues related to list of telehealth services).
Roberta Epps, (410) 7864503 (for issues related to diagnostic imaging services).
Bill Larson, (410) 7864639 (for issues related to coverage of bone mass measurement and addition of ultrasound screening for abdominal aortic aneurysm to the ``Welcome to Medicare'' benefit).
Dorothy Shannon, (410) 7863396 (for issues related to the outpatient therapy cap).
Catherine Jansto, (410) 7867762 (for issues related to payment for covered outpatient drugs and biologicals).
Henry Richter, (410) 7864562 (for issues related to payments for endstage renal disease facilities).
Fred Grabau, (410) 7860206 (for issues related to private contracts and optout provision).
David Walczak, (410) 7864475 (for issues related to reassignment provisions).
August Nemec, (410) 7860612 (for issues related to independent diagnostic testing facilities).
Anita Greenberg, (410) 7864601 (for issues related to the clinical laboratory fee schedule).
James Menas, (410) 7864507 (for issues related to payment for physician pathology services).
Anne Tayloe, (410) 7864546; or
[[Page 69625]]
Glenn McGuirk, (410) 7865723 (for issues related to the ambulance fee schedule.
Diane Milstead, (410) 7863355 or Gaysha Brooks, (410) 7869649 (for all other issues).
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