[Federal Register Volume 73, Number 130 (Monday, July 7, 2008)]
[Proposed Rules]
[Pages 38502-38881]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-14949]



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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 405, 409, 410 et al.



Medicare Program; Revisions to Payment Policies Under the Physician Fee 
Schedule and Other Revisions to Part B for CY 2009; and Revisions to 
the Amendment of the E-Prescribing Exemption for Computer Generated 
Facsimile Transmissions; Proposed Rule

  Federal Register / Vol. 73, No. 130 / Monday, July 7, 2008 / Proposed 
Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 409, 410, 411, 414, 415, 424, 485, and 486

[CMS-1403-P]
RIN 0938-AP18


Medicare Program; Revisions to Payment Policies Under the 
Physician Fee Schedule and Other Revisions to Part B for CY 2009; and 
Revisions to the Amendment of the E-Prescribing Exemption for Computer 
Generated Facsimile Transmissions; Proposed Rule

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would address proposed changes to Medicare 
Part B payment policy. We are proposing these changes to ensure that 
our payment systems are updated to reflect changes in medical practice 
and the relative value of services. This proposed rule also discusses 
refinements to resource-based practice expense (PE) relative value 
units (RVUs); geographic practice cost indices (GPCI) changes; 
malpractice RVUs; requests for additions to the list of telehealth 
services; several coding issues; payment for covered outpatient drugs 
and biologicals; the competitive acquisition program (CAP); application 
of health professional shortage area (HPSA) bonus payments; payment for 
renal dialysis services; performance standards for mobile independent 
diagnostic testing facilities; and physician and nonphysician 
practitioners furnishing diagnostic testing services; a solicitation 
for comments regarding the use of the Federal Payment Levy Program to 
recover delinquent Federal tax debts; a proposed amendment to the 
exemption for computer-generated facsimile transmissions from the 
National Council for Prescription Drug Programs (NCPDP) SCRIPT standard 
for transmitting prescription and certain prescription-related 
information for Part D covered drugs prescribed for Part D eligible 
individuals; conforming and clarifying changes for comprehensive 
outpatient rehabilitation facilities (CORFs); revisions for 
rehabilitation agencies; therapy-related technical corrections; the 
physician quality reporting initiative; physician self-referral issues 
and anti-markup; beneficiary signature for nonemergency ambulance 
transport; the chiropractic services demonstration; educational 
requirements for nurse practitioners and clinical nurse specialists; 
qualifications of portable x-ray supplier personnel; the expiration of 
provisions of the Medicare, Medicaid, and SCHIP Extension Act of 2007; 
bonus payments for long ambulance transports; the annual update for 
clinical laboratory fees under the clinical laboratory fee schedule; 
physician certification/recertification for home health services; a 
prohibition concerning providers of sleep tests; organ retrieval; a 
revision to the ``Appeals of CMS or CMS contractor Determinations When 
a Provider or Supplier Fails to Meet the Requirements for Medicare 
Billing Privileges'' final rule; and, potentially misvalued services 
under the physician fee schedule.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than August 29, 2008.

ADDRESSES: In commenting, please refer to file code CMS-1403-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on this 
regulation to Follow the instructions for ``Comment or Submission'' and 
enter the filecode to find the document accepting comments.
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-1403-P, P.O. Box 8013, Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments (one 
original and two copies) to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1403-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to either of the following addresses:
    a. Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201.

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

    b. 7500 Security Boulevard, Baltimore, MD 21244-1850.

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

    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by mailing your 
comments to the addresses provided at the end of the ``Collection of 
Information Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
    Pam West, (410) 786-2302, for issues related to practice expense.
    Rick Ensor, (410) 786-5617, for issues related to practice expense 
methodology.
    Stephanie Monroe, (410) 786-6864, for issues related to malpractice 
RVUs.
    Esther Markowitz, (410) 786-4595, for issues related to telehealth 
services.
    Craig Dobyski, (410) 786-4584, for issues related to geographic 
practice cost indices.
    Ken Marsalek, (410) 786-4502, for issues related to the multiple 
procedure payment reduction for diagnostic imaging.
    Catherine Jansto, (410) 786-7762, or Cheryl Gilbreath, (410) 786-
5919, for issues related to payment for covered outpatient drugs and 
biologicals.
    Edmund Kasaitis, (410) 786-0477, or Bonny Dahm (410) 786-4006, for 
issues related to the Competitive Acquisition Program (CAP) for Part B 
drugs.
    Corrine Axelrod, (410) 786-5620, for issues related to Health 
Professional Shortage Area Bonus Payments.

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    Henry Richter, (410) 786-4562, for issues related to payments for 
end-stage renal disease facilities.
    August Nemec, (410) 786-0612, for issues related to independent 
diagnostic testing facilities and enrollment issues; and the revision 
to the ``Appeals of CMS or CMS contractor Determinations When a 
Provider or Supplier Fails to Meet the Requirements for Medicare 
Billing Privileges'' final rule.
    Lisa Ohrin, (410) 786-4565, for issues related to incentive payment 
and shared saving programs.
    Don Romano, (410) 786-1401, for issues related to anti-markup 
provisions.
    Diane Stern, (410) 786-1133, for issues related to the quality 
reporting system for physician payment for CY 2009.
    Andrew Morgan, (410) 786-2543, for issues related to the e-
prescribing exemption for computer generated fax transmissions.
    Terri Harris, (410) 786-6830, for issues related to payment for 
comprehensive outpatient rehabilitation facilities (CORFs).
    Lauren Oviatt, (410) 786-4683, for issues related to CORF 
conditions of coverage.
    Trisha Brooks, (410) 786-4561, for issues related to personnel 
standards for portable x-ray suppliers.
    David Walczak, (410) 786-4475, for issues related to beneficiary 
signature for non-emergency ambulance transport services.
    Jean Stiller, (410) 786-0708, for issues related to the prohibition 
concerning providers of sleep tests
    Mark Horney, (410) 786-4554, for issues related to the solicitation 
for comments and data pertaining to physician organ retrieval services.
    Diane Milstead, (410) 786-3355, or Gaysha Brooks, (410) 786-9649, 
for all other issues.

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this rule to assist us in fully considering issues 
and developing policies. You can assist us by referencing the file code 
[CMS-1403-P] and the specific ``issue identifier'' that precedes the 
section on which you choose to comment.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Table of Contents

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

I. Background
    A. Development of the Relative Value System
    1. Work RVUs
    2. Practice Expense Relative Value Units (PE RVUs)
    3. Resource-Based Malpractice RVUs
    4. Refinements to the RVUs
    5. Adjustments to RVUs are Budget Neutral
    B. Components of the Fee Schedule Payment Amounts
    C. Most Recent Changes to the Fee Schedule
II. Provisions of the Proposed Regulation
    A. Resource-Based Practice Expense (PE) Relative Value Units 
(RVUs)
    1. Current Methodology
    2. PE Proposals for CY 2009
    B. Geographic Practice Cost Indices (GPCIs): Locality Discussion
    C. Malpractice RVUs (TC/PC issue)
    D. Medicare Telehealth Services
    E. Specific Coding Issues related to Physician Fee Schedule
    F. Part B Drug Payment
    1. Average Sales Price (ASP) Issues
    2. Competitive Acquisition Program (CAP) Issues
    G. Application of the HPSA Bonus Payment
    H. Provisions Related to Payment for Renal Dialysis Services 
Furnished by End-Stage Renal Disease (ESRD) Facilities
    I. Independent Diagnostic Testing Facility (IDTF) Issues
    J. Physician and Nonphysician Practitioner (NPP) Enrollment 
Issues
    K. Proposed Amendment to the Exemption for Computer-Generated 
Facsimile Transmission from the National Council for Prescription 
Drug Programs (NCPDP) SCRIPT Standard for Transmitting Prescription 
and Certain Prescription-Related Information for Part D Eligible 
Individuals
    L. Comprehensive Outpatient Rehabilitation Facilities (CORF) and 
Rehabilitation Agency Issues
    M. Technical Corrections for Therapy-Related Issues
    N. Physician Self-Referral and Anti-Markup Issues
    O. Physician Quality Reporting Initiative
    P. Discussion of Chiropractic Services Demonstration
    Q. Educational Requirements for Nurse Practitioners and Clinical 
Nurse Specialists
    R. Portable X-Ray Issue
    S. Expiring Provisions and Related Discussions
    T. Other Issues
    1. Physician Certification (G0180) and Recertification (G0179) 
for Medicare-Covered Home Health Services under a Home Health Plan 
of Care (POC) in the Home Health Prospective Payment System (HH PPS)
    2. Prohibition Concerning Providers of Sleep Tests
    3. Beneficiary Signature for Nonemergency Ambulance Transport 
Services
    4. Solicitation of Comments and Data Pertaining to Physician 
Organ Retrieval Services
    5. Revision to the ``Appeals of CMS or CMS contractor 
Determinations When a Provider or Supplier Fails to Meet the 
Requirements for Medicare Billing Privileges'' Final Rule
III. Potentially Misvalued Services under Physician Fee Schedule
IV. Collection of Information Requirements
V. Response to Comments
VI. Regulatory Impact Analysis
Regulation Text
    Addendum A--Explanation and Use of Addendum B
    Addendum B--2009 Relative Value Units and Related Information 
Used in Determining Medicare Payments for 2008
    Addendum C--[Reserved for Final Rule]
    Addendum D--Proposed 2009 Geographic Adjustment Factors (GAFs)
    Addendum E--Proposed 2009* Geographic Practice Cost Indices 
(GPCIs) by State and Medicare Locality
    Addendum F--Multiple Procedure Reduction Code List
    Addendum G--FY 2009 Wage Index for Urban Areas Based On CBSA 
Labor Market Areas (ESRD)
    Addendum H--FY 2009 Wage Index based on CBSA Labor Market Areas 
for Rural Areas (ESRD)

Acronyms

    In addition, because of the many organizations and terms to 
which we refer by acronym in this final rule with comment period, we 
are listing these acronyms and their corresponding terms in 
alphabetical order below:
ACC American College of Cardiology
ACR American College of Radiology
AFROC Association of Freestanding Radiation Oncology Centers
AHA American Heart Association

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AHRQ [HHS'] Agency for Healthcare Research and Quality
AIDS Acquired immune deficiency syndrome
AMA American Medical Association
AMP Average manufacturer price
AOA American Osteopathic Association
ASC Ambulatory surgical center
ASP Average sales price
ASRT American Society of Radiologic Technologists
ASTRO American Society for Therapeutic Radiology and Oncology
ATA American Telemedicine Association
AWP Average wholesale price
BBA Balanced Budget Act of 1997 (Pub. L. 105-33)
BBRA [Medicare, Medicaid and State Child Health Insurance Program] 
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection 
Act of 2000 (Pub. L. 106-554)
BLS Bureau of Labor Statistics
BN Budget neutrality
CABG Coronary artery bypass graft
CAD Coronary artery disease
CAH Critical access hospital
CAHEA Committee on Allied Health Education and Accreditation
CAP Competitive acquisition program
CBSA Core-Based Statistical Area
CCHIT Certification Commission for Healthcare Information Technology
CEAMA Council on Education of the American Medical Association
CF Conversion factor
CfC Conditions for Coverage
CFR Code of Federal Regulations
CKD Chronic kidney disease
CLFS Clinical laboratory fee schedule
CMA California Medical Association
CMP Civil money penalty
CMS Centers for Medicare & Medicaid Services
CNS Clinical nurse specialist
CoP Condition of participation
CORF Comprehensive Outpatient Rehabilitation Facility
CPAP Continuous positive air pressure
CPEP Clinical Practice Expert Panel
CPI Consumer Price Index
CPI-U Consumer price index for urban customers
CPT [Physicians'] Current Procedural Terminology (4th Edition, 2002, 
copyrighted by the American Medical Association)
CRT Certified respiratory therapist
CY Calendar year
DHS Designated health services
DME Durable medical equipment
DMEPOS Durable medical equipment, prosthetics, orthotics, and 
supplies
DNP Doctor of Nursing Practice
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)
DSMT Diabetes self-management training
E/M Evaluation and management
EDI Electronic data interchange
EEG Electroencephalogram
EHR Electronic health record
EKG Electrocardiogram
EMG Electromyogram
EOG Electro-oculogram
EPO Erythopoeitin
ESRD End-stage renal disease
FAX Facsimile
FDA Food and Drug Administration (HHS)
FFS Fee-for-service
FMS [Department of the Treasury's] Financial Management Service
FPLP Federal Payment Levy Program
FR Federal Register
GAF Geographic adjustment factor
GAO General Accounting Office
GPO Group purchasing organization
GPCI Geographic practice cost index
HAC Hospital-acquired conditions
HCPAC Health Care Professional Advisory Committee
HCPCS Healthcare Common Procedure Coding System
HCRIS Healthcare Cost Report Information System
HH PPS Home Health Prospective Payment System
HHA Home health agency
HHRG Home health resource group
HHS [Department of] Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191)
HIT Health information technology
HITSP Healthcare Information Technology Standards Panel
HIV Human immunodeficiency virus
HPSA Health Professional Shortage Area
HRSA Health Resources Services Administration (HHS)
ICF Intermediate care facilities
ICR Information collection requirement
IDTF Independent diagnostic testing facility
IFC Interim final rule with comment period
IPPS Inpatient prospective payment system
IRS Internal Revenue Service
IVIG Intravenous immune globulin
IWPUT Intra-service work per unit of time
JRCERT Joint Review Committee on Education in Radiologic Technology
MA Medicare Advantage
MA-PD Medicare Advantage-Prescription Drug Plans
MedCAC Medicare Evidence Development and Coverage Advisory Committee 
(formerly the Medicare Coverage Advisory Committee (MCAC))
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MIEA-TRHCA Medicare Improvements and Extension Act of 2006 (that is, 
Division B of the Tax Relief and Health Care Act of 2006 (TRHCA) 
(Pub. L. 109-432)
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (Pub. L. 108-173)
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 
110-173)
MNT Medical nutrition therapy
MP Malpractice
MPPR Multiple procedure payment reduction
MQSA Mammography Quality Standards Act of 1992 (Pub. L. 102-539)
MRA Magnetic resonance angiography
MRI Magnetic resonance imaging
MS-DRG Medicare Severity-Diagnosis related group
MSA Metropolitan statistical area
NCD National Coverage Determination
NCPDP National Council for Prescription Drug Programs
NDC National drug code
NISTA National Institute of Standards and Technology Act
NP Nurse practitioner
NPI National Provider Identifier
NPP Nonphysician practitioner
NQF National Quality Forum
NTTAA National Technology Transfer and Advancement Act of 1995 (Pub. 
L. 104-113)
OACT [CMS'] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act
OIG Office of Inspector General
OMB Office of Management and Budget
ONC [HHS'] Office of the National Coordinator for Health Information 
Technology
OPPS Outpatient prospective payment system
OSA Obstructive Sleep Apnea
OSCAR Online Survey and Certification and Reporting
P4P Pay for performance
PA Physician assistant
PC Professional component
PCF Patient compensation fund
PDP Prescription drug plan
PE Practice expense
PE/HR Practice expense per hour
PEAC Practice Expense Advisory Committee
PECOS Provider Enrollment, Chain, and Ownership System
PERC Practice Expense Review Committee
PFS Physician Fee Schedule
PIM [Medicare] Program Integrity Manual
PLI Professional liability insurance
POC Plan of care
PPI Producer price index
PPS Prospective payment system
PQRI Physician Quality Reporting Initiative
PRA Paperwork Reduction Act
PSA Physician scarcity areas
PSG Polysomnography
PT Physical therapy
RFA Regulatory Flexibility Act
RIA Regulatory impact analysis
RN Registered nurse
RNAC Reasonable net acquisition cost
RRT Registered respiratory therapist
RUC [AMA's Specialty Society] Relative (Value) Update Committee
RVU Relative value unit
SBA Small Business Administration
SGR Sustainable growth rate
SLP Speech-language pathology
SMS [AMA's] Socioeconomic Monitoring System
SNF Skilled nursing facility
SOR System of record
TC Technical Component
TIN Tax identification number
TRHCA Tax Relief and Health Care Act of 2006 (Pub. L. 109-432)
UPMC University of Pittsburgh Medical Center
USDE United States Department of Education
VBP Value-based purchasing
WAMP Widely available market price

I. Background

    [If you choose to comment on issues in this section, please include 
the

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

A. Development of the Relative Value System

1. Work RVUs
    The concepts and methodology underlying the PFS were enacted as 
part of the Omnibus Budget Reconciliation Act (OBRA) of 1989 (Pub. L. 
101-239), and OBRA 1990, (Pub. L. 101-508). The final rule, published 
on November 25, 1991 (56 FR 59502), set forth the fee schedule for 
payment for physicians' services beginning January 1, 1992. Initially, 
only the physician work RVUs were resource-based, and the PE and 
malpractice RVUs were based on average allowable charges.
    The physician work RVUs established for the implementation of the 
fee schedule in January 1992 were developed with extensive input from 
the physician community. A research team at the Harvard School of 
Public Health developed the original physician work RVUs for most codes 
in a cooperative agreement with the Department of Health and Human 
Services (DHHS). In constructing the code-specific vignettes for the 
original physician work RVUs, Harvard worked with panels of experts, 
both inside and outside the Federal government, and obtained input from 
numerous physician specialty groups.
    Section 1848(b)(2)(B) of the Act specifies that the RVUs for 
anesthesia services are based on RVUs from a uniform relative value 
guide. We established a separate conversion factor (CF) for anesthesia 
services, and we continue to utilize time units as a factor in 
determining payment for these services. As a result, there is a 
separate payment methodology for anesthesia services.
    We establish physician work RVUs for new and revised codes based on 
recommendations received from the American Medical Association's (AMA) 
Specialty Society Relative Value Update Committee (RUC).
2. Practice Expense Relative Value Units (PE RVUs)
    Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 
103-432), enacted on October 31, 1994, amended section 
1848(c)(2)(C)(ii) of the Act and required us to develop resource-based 
PE RVUs for each physician's service beginning in 1998. We were to 
consider general categories of expenses (such as office rent and wages 
of personnel, but excluding malpractice expenses) comprising PEs.
    Section 4505(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 
105-33), amended section 1848(c)(2)(C)(ii) of the Act to delay 
implementation of the resource-based PE RVU system until January 1, 
1999. In addition, section 4505(b) of the BBA provided for a 4-year 
transition period from charge-based PE RVUs to resource-based RVUs.
    We established the resource-based PE RVUs for each physician's 
service in a final rule, published November 2, 1998 (63 FR 58814), 
effective for services furnished in 1999. Based on the requirement to 
transition to a resource-based system for PE over a 4-year period, 
resource-based PE RVUs did not become fully effective until 2002.
    This resource-based system was based on two significant sources of 
actual PE data: The Clinical Practice Expert Panel (CPEP) data; and the 
AMA's Socioeconomic Monitoring System (SMS) data. The CPEP data were 
collected from panels of physicians, practice administrators, and 
nonphysicians (for example, registered nurses (RNs)) nominated by 
physician specialty societies and other groups. The CPEP panels 
identified the direct inputs required for each physician's service in 
both the office setting and out-of-office setting. We have since 
refined and revised these inputs based on recommendations from the RUC. 
The AMA's SMS data provided aggregate specialty-specific information on 
hours worked and PEs.
    Separate PE RVUs are established for procedures that can be 
performed in both a nonfacility setting, such as a physician's office, 
and a facility setting, such as a hospital outpatient department. The 
difference between the facility and nonfacility RVUs reflects the fact 
that a facility typically receives separate payment from Medicare for 
its costs of providing the service, apart from payment under the PFS. 
The nonfacility RVUs reflect all of the direct and indirect PEs of 
providing a particular service.
    Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113) directed the Secretary of Health and Human Services 
(the Secretary) to establish a process under which we accept and use, 
to the maximum extent practicable and consistent with sound data 
practices, data collected or developed by entities and organizations to 
supplement the data we normally collect in determining the PE 
component. On May 3, 2000, we published the interim final rule (65 FR 
25664) that set forth the criteria for the submission of these 
supplemental PE survey data. The criteria were modified in response to 
comments received, and published in the Federal Register (65 FR 65376) 
as part of a November 1, 2000 final rule. The PFS final rules published 
in 2001 and 2003, respectively, (66 FR 55246 and 68 FR 63196) extended 
the period during which we would accept these supplemental data through 
March 1, 2005.
    In CY 2007 PFS final rule with comment period (71 FR 69624), we 
revised the methodology for calculating PE RVUs beginning in CY 2007 
and provided for a 4-year transition for the new PE RVUs under this new 
methodology. We will continue to evaluate this policy and proposed 
necessary revisions through future rulemaking.
3. Resource-Based Malpractice (MP) RVUs
    Section 4505(f) of the BBA amended section 1848(c) of the Act 
requiring us to implement resource-based malpractice (MP) RVUs for 
services furnished on or after 2000. The resource-based MP RVUs were 
implemented in the PFS final rule published November 2, 1999 (64 FR 
59380). The MP RVUs were based on malpractice insurance premium data 
collected from commercial and physician-owned insurers from all the 
States, the District of Columbia, and Puerto Rico.
4. Refinements to the RVUs
    Section 1848(c)(2)(B)(i) of the Act requires that we review all 
RVUs no less often than every 5 years. The first 5-Year Review of the 
physician work RVUs was published on November 22, 1996 (61 FR 59489) 
and was effective in 1997. The second 5-Year Review was published in 
the CY 2002 PFS final rule with comment period (66 FR 55246) and was 
effective in 2002. The third 5-Year Review of physician work RVUs was 
published in the CY 2007 PFS final rule with comment period (71 FR 
69624) and was effective on January 1, 2007. (Note: Additional codes 
relating to the third 5-

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Year Review of physician work RVUs were addressed in the CY 2008 PFS 
final rule with comment period (72 FR 66360).)
    In 1999, the AMA's RUC established the Practice Expense Advisory 
Committee (PEAC) for the purpose of refining the direct PE inputs. 
Through March 2004, the PEAC provided recommendations to CMS for over 
7,600 codes (all but a few hundred of the codes currently listed in the 
AMA's Current Procedural Terminology (CPT) codes). As part of the CY 
2007 PFS final rule with comment period (71 FR 69624), we implemented a 
new methodology for determining resource-based PE RVUs and are 
transitioning this over a 4-year period.
    In the CY 2005 PFS final rule with comment period (69 FR 66236), we 
implemented the first 5-Year Review of the MP RVUs (69 FR 66263).
5. Adjustments to RVUs are Budget Neutral
    Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments 
in RVUs for a year may not cause total PFS payments to differ by more 
than $20 million from what they would have been if the adjustments were 
not made. In accordance with section 1848(c)(2)(B)(ii)(II) of the Act, 
if adjustments to RVUs cause expenditures to change by more than $20 
million, we make adjustments to ensure that expenditures do not 
increase or decrease by more than $20 million.
    As explained in the CY 2007 PFS final rule with comment period (71 
FR 69624), due to the increase in work RVUs resulting from the third 5-
Year Review of physician work RVUs, we applied a separate budget 
neutrality (BN) adjustor to the work RVUs for services furnished during 
2007. This approach is consistent with the method we use to make BN 
adjustments to the PE RVUs to reflect the changes in these PE RVUs.

B. Components of the Fee Schedule Payment Amounts

    To calculate the payment for every physician's service, the 
components of the fee schedule (physician work, PE, and MP RVUs) are 
adjusted by a geographic practice cost index (GPCI). The GPCIs reflect 
the relative costs of physician work, PE, and malpractice insurance in 
an area compared to the national average costs for each component.
    RVUs are converted to dollar amounts through the application of a 
CF, which is calculated by CMS' Office of the Actuary (OACT).
    The formula for calculating the Medicare fee schedule payment 
amount for a given service and fee schedule area can be expressed as:

Payment = [(RVU work x budget neutrality adjustor (round product to two 
decimal places) x GPCI work) + (RVU PE x GPCI PE) + (RVU malpractice x 
GPCI malpractice)] x CF.

C. Most Recent Changes to the Fee Schedule

    The CY 2008 PFS final rule with comment period (72 FR 66222) 
addressed certain provisions of Division B of the Tax Relief and Health 
Care Act of 2006--Medicare Improvements and Extension Act of 2006 (Pub. 
L. 109-432) (MIEA-TRHCA), and made other changes to Medicare Part B 
payment policy to ensure that our payment systems are updated to 
reflect changes in medical practice and the relative value of services. 
The CY 2008 PFS final rule with comment period also discussed 
refinements to resource-based PE RVUs; GPCI changes; malpractice RVUs; 
requests for additions to the list of telehealth services; several 
coding issues including additional codes from the 5-Year Review; 
payment for covered outpatient drugs and biologicals; the competitive 
acquisition program (CAP); clinical lab fee schedule issues; payment 
for end-stage renal dialysis (ESRD) services; performance standards 
facilities; expiration of the physician scarcity area (PSA) bonus 
payment; conforming and clarifying changes for comprehensive outpatient 
rehabilitation facilities (CORFs); a process for updating the drug 
compendia; physician self-referral issues; beneficiary signature for 
ambulance transport services; durable medical equipment (DME) update; 
the chiropractic services demonstration; a Medicare economic index 
(MEI) data change; technical corrections; standards and requirement 
related to therapy services under Medicare Parts A and B; revisions to 
the ambulance fee schedule; the ambulance inflation factor for CY 2008; 
and an amendment to the e-prescribing exemption for computer-generated 
facsimile transmissions
    We also finalized the calendar year (CY) 2007 interim RVUs and 
issued interim RVUs for new and revised procedure codes for CY 2008.
    In accordance with section 1848(d)(1)(E)(i) of the Act, we also 
announced that the PFS update for CY 2008 is -10.1 percent, the initial 
estimate for the sustainable growth rate (SGR) for CY 2008 is 2.2 
percent and the CF for CY 2008 is $34.0682. However, subsequent to 
publication of the CY 2008 PFS final rule with comment period, section 
101(a) of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. 
L. 110-173) (MMSEA) was enacted on December 29, 2007 and provided for a 
0.5 percent update to the conversion factor for the period beginning 
January 1, 2008 and ending June 30, 2008. Therefore, for the first half 
of 2008 (that is, January through June), the Medicare PFS conversion 
factor was $38.0870. For the remaining portion of 2008 (July through 
December), the Medicare PFS conversion factor will be $34.0682 (as 
published in the 2008 PFS final rule with comment period).

II. Provisions of the Proposed Regulation

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

    [If you choose to comment on issues in this section, please include 
the caption ``RESOURCE-BASED PE RVUs'' at the beginning of your 
comments.]
    Practice expense (PE) is the portion of the resources used in 
furnishing the service that reflects the general categories of 
physician and practitioner expenses, such as office rent and personnel 
wages but excluding malpractice expenses, as specified in section 
1848(c)(1)(B) of the Act.
    Section 121 of the Social Security Amendments of 1994 (Pub. L. 103-
432), enacted on October 31, 1994, required CMS to develop a 
methodology for a resource-based system for determining PE RVUs for 
each physician's service. Until that time, PE RVUs were based on 
historical allowed charges. This legislation stated that the revised PE 
methodology must consider the staff, equipment, and supplies used in 
the provision of various medical and surgical services in various 
settings beginning in 1998. The Secretary has interpreted this to mean 
that Medicare payments for each service would be based on the relative 
PE resources typically involved with furnishing the service.
    The initial implementation of resource-based PE RVUs was delayed 
from January 1, 1998, until January 1, 1999, by section 4505(a) of the 
BBA. In addition, section 4505(b) of the BBA required that the new 
payment methodology be phased in over 4 years, effective for services 
furnished in CY 1999, and fully effective in CY 2002. The first step 
toward implementation of the statute was to adjust the PE values for 
certain services for CY 1998. Section 4505(d) of the BBA required that, 
in developing the resource-based PE RVUs, the Secretary must--

[[Page 38507]]

     Use, to the maximum extent possible, generally-accepted 
cost accounting principles that recognize all staff, equipment, 
supplies, and expenses, not solely those that can be linked to specific 
procedures and actual data on equipment utilization.
     Develop a refinement method to be used during the 
transition.
     Consider, in the course of notice and comment rulemaking, 
impact projections that compare new proposed payment amounts to data on 
actual physician PE.
    In CY 1999, we began the 4-year transition to resource-based PE 
RVUs utilizing a ``top-down'' methodology whereby we allocated 
aggregate specialty-specific practice costs to individual procedures. 
The specialty-specific PEs were derived from the American Medical 
Association's (AMA's) Socioeconomic Monitoring Survey (SMS). In 
addition, under section 212 of the BBRA, we established a process 
extending through March 2005 to supplement the SMS data with data 
submitted by a specialty. The aggregate PEs for a given specialty were 
then allocated to the services furnished by that specialty on the basis 
of the direct input data (that is, the staff time, equipment, and 
supplies) and work RVUs assigned to each CPT code.
    For CY 2007, we implemented a new methodology for calculating PE 
RVUs. Under this new methodology, we use the same data sources for 
calculating PE, but instead of using the ``top-down'' approach to 
calculate the direct PE RVUs, under which the aggregate direct and 
indirect costs for each specialty are allocated to each individual 
service, we now utilize a ``bottom-up'' approach to calculate the 
direct costs. Under the ``bottom up'' approach, we determine the direct 
PE by adding the costs of the resources (that is, the clinical staff, 
equipment, and supplies) typically required to provide each service. 
The costs of the resources are calculated using the refined direct PE 
inputs assigned to each CPT code in our PE database, which are based on 
our review of recommendations received from the AMA's Relative Value 
Update Committee (RUC). For a more detailed explanation of the PE 
methodology see the June 29, 2006 proposed notice (71 FR 37242) and the 
CY 2007 PFS final rule with comment period (71 FR 69629).
1. Current Methodology
a. Data Sources for Calculating Practice Expense
    The AMA's SMS survey data and supplemental survey data from the 
specialties of cardiothoracic surgery, vascular surgery, physical and 
occupational therapy, independent laboratories, allergy/immunology, 
cardiology, dermatology, gastroenterology, radiology, independent 
diagnostic testing facilities (IDTFs), radiation oncology, and urology 
are used to develop the PE per hour (PE/HR) for each specialty. For 
those specialties for which we do not have PE/HR, the appropriate PE/HR 
is obtained from a crosswalk to a similar specialty.
    The AMA developed the SMS survey in 1981 and discontinued it in 
1999. Beginning in 2002, we incorporated the 1999 SMS survey data into 
our calculation of the PE RVUs, using a 5-year average of SMS survey 
data. (See the CY 2002 PFS final rule with comment period (66 FR 
55246).) The SMS PE survey data are adjusted to a common year, 2005. 
The SMS data provide the following six categories of PE costs:
     Clinical payroll expenses, which are payroll expenses 
(including fringe benefits) for nonphysician clinical personnel.
     Administrative payroll expenses, which are payroll 
expenses (including fringe benefits) for nonphysician personnel 
involved in administrative, secretarial, or clerical activities.
     Office expenses, which include expenses for rent, mortgage 
interest, depreciation on medical buildings, utilities, and telephones.
     Medical material and supply expenses, which include 
expenses for drugs, x-ray films, and disposable medical products.
     Medical equipment expenses, which include depreciation, 
leases, and rent of medical equipment used in the diagnosis or 
treatment of patients.
     All other expenses, which include expenses for legal 
services, accounting, office management, professional association 
memberships, and any professional expenses not previously mentioned in 
this section.
    In accordance with section 212 of the BBRA, we established a 
process to supplement the SMS data for a specialty with data collected 
by entities and organizations other than the AMA (that is, those 
entities and organizations representing the specialty itself). (See the 
Criteria for Submitting Supplemental Practice Expense Survey Data 
interim final rule with comment period (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 with comment period (68 FR 63196) (hereinafter referred to as CY 
2004 PFS final rule with comment period).
    The direct cost data for individual services were originally 
developed by the Clinical Practice Expert Panels (CPEP). The CPEP data 
include the supplies, equipment, and staff times specific to each 
procedure. The CPEPs consisted of panels of physicians, practice 
administrators, and nonphysicians (for example, RNs) who were nominated 
by physician specialty societies and other groups. There were 15 CPEPs 
consisting of 180 members from more than 61 specialties and 
subspecialties. Approximately 50 percent of the panelists were 
physicians.
    The CPEPs identified specific inputs involved in each physician's 
service provided in an office or facility setting. The inputs 
identified were the quantity and type of nonphysician labor, medical 
supplies, and medical equipment.
    In 1999, the AMA's RUC established the Practice Expense Advisory 
Committee (PEAC). From 1999 to March 2004, the PEAC, a multi-specialty 
committee, reviewed the original CPEP inputs and provided us with 
recommendations for refining these direct PE inputs for existing CPT 
codes. Through its last meeting in March 2004, the PEAC provided 
recommendations for over 7,600 codes which we have reviewed and almost 
all of which we have accepted. As a result, the current PE inputs 
differ markedly from those originally recommended by the CPEPs. The 
PEAC has now been replaced by the Practice Expense Review Committee 
(PERC), which acts to assist the RUC in recommending PE inputs.
b. Allocation of PE to Services
    The aggregate level specialty-specific PEs are derived from the 
AMA's SMS survey and supplementary survey data. To establish PE RVUs 
for specific services, it is necessary to establish the direct and 
indirect PE associated with each service.
    (i) Direct costs. The direct costs are determined by adding the 
costs of the resources (that is, the clinical staff, equipment, and 
supplies) typically required to provide the service. The costs of these 
resources are calculated from the refined direct PE inputs in our PE 
database. These direct inputs are then scaled to the current aggregate 
pool of direct PE RVUs. The aggregate pool

[[Page 38508]]

of direct PE RVUs can be derived using the following formula:

(PE RVUs x physician CF) x (average direct percentage from SMS / 
(Supplemental PE/HR data)).

    (ii) Indirect costs. The SMS and supplementary survey data are the 
source for the specialty-specific aggregate indirect costs used in our 
PE calculations. Then, we allocate the indirect costs to the code level 
on the basis of the direct costs specifically associated with a code 
and the maximum of either the clinical labor costs or the physician 
work RVUs. For calculation of the 2009 PE RVUs, we are proposing to use 
the 2007 procedure-specific utilization data crosswalked to 2008 
services. To arrive at the indirect PE costs--
     We apply a specialty-specific indirect percentage factor 
to the direct expenses to recognize the varying proportion that 
indirect costs represent of total costs by specialty. For a given 
service, the specific indirect percentage factor to apply to the direct 
costs for the purpose of the indirect allocation is calculated as the 
weighted average of the ratio of the indirect to direct costs (based on 
the survey data) for the specialties that furnish the service. For 
example, if a service is furnished by a single specialty with indirect 
PEs that were 75 percent of total PEs, the indirect percentage factor 
to apply to the direct costs for the purposes of the indirect 
allocation would be (0.75 / 0.25) = 3.0. The indirect percentage factor 
is then applied to the service level adjusted indirect PE allocators.
     We use the specialty-specific PE/HR from the SMS survey 
data, as well as the supplemental surveys for cardiothoracic surgery, 
vascular surgery, physical and occupational therapy, independent 
laboratories, allergy/immunology, cardiology, dermatology, radiology, 
gastroenterology, IDTFs, radiation oncology, and urology. (Note: For 
radiation oncology, the data represent the combined survey data from 
the American Society for Therapeutic Radiology and Oncology (ASTRO) and 
the Association of Freestanding Radiation Oncology Centers (AFROC)). As 
discussed in the CY 2008 PFS final rule with comment period (72 FR 
66233), the PE/HR survey data for radiology is weighted by practice 
size. We incorporate this PE/HR into the calculation of indirect costs 
using an index which reflects the relationship between each specialty's 
indirect scaling factor and the overall indirect scaling factor for the 
entire PFS. For example, if a specialty had an indirect practice cost 
index of 2.00, this specialty would have an indirect scaling factor 
that was twice the overall average indirect scaling factor. If a 
specialty had an indirect practice cost index of 0.50, this specialty 
would have an indirect scaling factor that was half the overall average 
indirect scaling factor.
     When the clinical labor portion of the direct PE RVU is 
greater than the physician work RVU for a particular service, the 
indirect costs are allocated based upon the direct costs and the 
clinical labor costs. For example, if a service has no physician work 
and 1.10 direct PE RVUs, and the clinical labor portion of the direct 
PE RVUs is 0.65 RVUs, we would use the 1.10 direct PE RVUs and the 0.65 
clinical labor portions of the direct PE RVUs to allocate the indirect 
PE for that service.
c. Facility/Nonfacility Costs
    Procedures that can be furnished in a physician's office, as well 
as in a hospital or facility setting, have two PE RVUs: Facility and 
nonfacility. The nonfacility setting includes physicians' offices, 
patients' homes, freestanding imaging centers, and independent 
pathology labs. Facility settings include hospitals, ambulatory 
surgical centers (ASCs), and skilled nursing facilities (SNFs). The 
methodology for calculating PE RVUs is the same for both facility and 
nonfacility RVUs, but is applied independently to yield two separate PE 
RVUs. Because the PEs for services provided in a facility setting are 
generally included in the payment to the facility (rather than the 
payment to the physician under the PFS), the PE RVUs are generally 
lower for services provided in the facility setting.
d. Services With Technical Components (TCs) and Professional Components 
(PCs)
    Diagnostic services are generally comprised of two components: A 
professional component (PC) and a technical component (TC), both of 
which may be performed independently or by different providers. When 
services have TCs, PCs, and global components that can be billed 
separately, the payment for the global component equals the sum of the 
payment for the TC and PC. This is a result of using a weighted average 
of the ratio of indirect to direct costs across all the specialties 
that furnish the global components, TCs, and PCs; that is, we apply the 
same weighted average indirect percentage factor to allocate indirect 
expenses to the global components, PCs, and TCs for a service. (The 
direct PE RVUs for the TC and PC sum to the global under the bottom-up 
methodology.)
e. Transition Period
    As discussed in the CY 2007 PFS final rule with comment period (71 
FR 69674), we are implementing the change in the methodology for 
calculating PE RVUs over a 4-year period. During this transition 
period, the PE RVUs will be calculated on the basis of a blend of RVUs 
calculated using our methodology described previously in this section 
(weighted by 25 percent during CY 2007, 50 percent during CY 2008, 75 
percent during CY 2009, and 100 percent thereafter), and the CY 2006 PE 
RVUs for each existing code. PE RVUs for codes that are new during this 
period will be calculated using only the current PE methodology and 
will be paid at the fully transitioned rate.
f. PE RVU Methodology
    The following is a description of the PE RVU methodology.
(i) Setup File
    First, we create a setup file for the PE methodology. The setup 
file contains the direct cost inputs, the utilization for each 
procedure code at the specialty and facility/nonfacility place of 
service level, and the specialty-specific survey PE per physician hour 
data.
(ii) Calculate the Direct Cost PE RVUs
    Sum the costs of each direct input.
    Step 1: Sum the direct costs of the inputs for each service. The 
direct costs consist of the costs of the direct inputs for clinical 
labor, medical supplies, and medical equipment. The clinical labor cost 
is the sum of the cost of all the staff types associated with the 
service; it is the product of the time for each staff type and the wage 
rate for that staff type. The medical supplies cost is the sum of the 
supplies associated with the service; it is the product of the quantity 
of each supply and the cost of the supply. The medical equipment cost 
is the sum of the cost of the equipment associated with the service; it 
is the product of the number of minutes each piece of equipment is used 
in the service and the equipment cost per minute. The equipment cost 
per minute is calculated as described at the end of this section.
    Apply a BN adjustment to the direct inputs.
    Step 2: Calculate the current aggregate pool of direct PE costs. To 
do this, multiply the current aggregate pool of total direct and 
indirect PE costs (that is, the current aggregate PE RVUs multiplied by 
the CF) by the average direct PE percentage from the SMS and 
supplementary specialty survey data.
    Step 3: Calculate the aggregate pool of direct costs. To do this, 
for all PFS

[[Page 38509]]

services, sum the product of the direct costs for each service from 
Step 1 and the utilization data for that service.
    Step 4: Using the results of Step 2 and Step 3 calculate a direct 
PE BN adjustment so that the proposed aggregate direct cost pool does 
not exceed the current aggregate direct cost pool and apply it to the 
direct costs from Step 1 for each service.
    Step 5: Convert the results of Step 4 to an RVU scale for each 
service. To do this, divide the results of Step 4 by the Medicare PFS 
CF.
(iii) Create the indirect PE RVUs
    Create indirect allocators.
    Step 6: Based on the SMS and supplementary specialty survey data, 
calculate direct and indirect PE percentages for each physician 
specialty.
    Step 7: Calculate direct and indirect PE percentages at the service 
level by taking a weighted average of the results of Step 6 for the 
specialties that furnish the service. Note that for services with TCs 
and PCs we are calculating the direct and indirect percentages across 
the global components, PCs, and TCs. That is, the direct and indirect 
percentages for a given service (for example, echocardiogram) do not 
vary by the PC, TC and global component.
    Step 8: Calculate the service level allocators for the indirect PEs 
based on the percentages calculated in Step 7. The indirect PEs are 
allocated based on the three components: the direct PE RVU, the 
clinical PE RVU, and the work RVU.
    For most services the indirect allocator is: indirect percentage * 
(direct PE RVU/direct percentage) + work RVU.
    There are two situations where this formula is modified:
     If the service is a global service (that is, a service 
with global, professional, and technical components), then the indirect 
allocator is: indirect percentage * (direct PE RVU/direct percentage) + 
clinical PE RVU + work RVU.
     If the clinical labor PE RVU exceeds the work RVU (and the 
service is not a global service), then the indirect allocator is: 
indirect percentage * (direct PE RVU/direct percentage) + clinical PE 
RVU.

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

    )For presentation purposes in the examples in Table 1, the formulas 
were divided into two parts for each service. The first part does not 
vary by service and is the indirect percentage * (direct PE RVU/direct 
percentage). The second part is either the work RVU, clinical PE RVU, 
or both depending on whether the service is a global service and 
whether the clinical PE RVU exceeds the work RVU (as described earlier 
in this step).
    Apply a BN adjustment to the indirect allocators.
    Step 9: Calculate the current aggregate pool of indirect PE RVUs by 
multiplying the current aggregate pool of PE RVUs by the average 
indirect PE percentage from the physician specialty survey data. This 
is similar to the Step 2 calculation for the direct PE RVUs.
    Step 10: Calculate an aggregate pool of proposed indirect PE RVUs 
for all PFS services by adding the product of the indirect PE 
allocators for a service from Step 8 and the utilization data for that 
service. This is similar to the Step 3 calculation for the direct PE 
RVUs.
    Step 11: Using the results of Step 9 and Step 10, calculate an 
indirect PE adjustment so that the aggregate indirect allocation does 
not exceed the available aggregate indirect PE RVUs and apply it to 
indirect allocators calculated in Step 8. This is similar to the Step 4 
calculation for the direct PE RVUs.
    Calculate the Indirect Practice Cost Index.
    Step 12: Using the results of Step 11, calculate aggregate pools of 
specialty-specific adjusted indirect PE allocators for all PFS services 
for a specialty by adding the product of the adjusted indirect PE 
allocator for each service and the utilization data for that service.
    Step 13: Using the specialty-specific indirect PE/HR data, 
calculate specialty-specific aggregate pools of indirect PE for all PFS 
services for that specialty by adding the product of the indirect PE/HR 
for the specialty, the physician time for the service, and the 
specialty's utilization for the service.
    Step 14: Using the results of Step 12 and Step 13, calculate the 
specialty-specific indirect PE scaling factors as under the current 
methodology.
    Step 15: Using the results of Step 14, calculate an indirect 
practice cost index at the specialty level by dividing each specialty-
specific indirect scaling factor by the average indirect scaling factor 
for the entire PFS.
    Step 16: Calculate the indirect practice cost index at the service 
level to ensure the capture of all indirect costs. Calculate a weighted 
average of the practice cost index values for the specialties that 
furnish the service. (NOTE: For services with TCs and PCs, we calculate 
the indirect practice cost index across the global components, PCs, and 
TCs. Under this method, the indirect practice cost index for a given 
service (for example, echocardiogram) does not vary by the PC, TC and 
global component.)
    Step 17: Apply the service level indirect practice cost index 
calculated in Step 16 to the service level adjusted indirect allocators 
calculated in Step 11 to get the indirect PE RVU.
(iv) Calculate the Final PE RVUs
    Step 18: Add the direct PE RVUs from Step 6 to the indirect PE RVUs 
from Step 17.
    Step 19: Calculate and apply the final PE BN adjustment by 
comparing the results of Step 18 to the current pool of PE RVUs. This 
final BN adjustment is required primarily because certain specialties 
are excluded from the PE RVU calculation for rate-setting purposes, but 
all specialties are included for purposes of calculating the final BN 
adjustment. (See ``Specialties excluded from rate-setting calculation'' 
below in this section.)
(v) Setup File Information
     Specialties excluded from rate-setting calculation: For 
the purposes of calculating the PE RVUs, we exclude certain specialties 
such as midlevel practitioners paid at a percentage of the PFS, 
audiology, and low volume specialties from the calculation. These 
specialties are included for the purposes of calculating the BN 
adjustment.
     Crosswalk certain low volume physician specialties: 
Crosswalk the utilization of certain specialties with relatively low 
PFS utilization to the associated specialties.
     Physical therapy utilization: Crosswalk the utilization 
associated with all physical therapy services to the specialty of 
physical therapy.
     Identify professional and technical services not 
identified under the usual TC and 26 modifiers: Flag the services that 
are PC and TC services, but do not use TC and 26 modifiers (for 
example, electrocardiograms). This flag associates the PC and TC with 
the associated global code for use in creating the indirect PE RVU. For 
example, the professional service code 93010 is associated with the 
global code 93000.
     Payment modifiers: Payment modifiers are accounted for in 
the creation of the file. For example, services billed with the 
assistant at surgery modifier are paid 16 percent of the PFS amount for 
that service; therefore, the utilization file is modified to only 
account for 16 percent of any service that contains the assistant at 
surgery modifier.

[[Page 38510]]

     Work RVUs: The setup file contains the work RVUs from this 
proposed rule.
(vi) Equipment Cost per Minute
    The equipment cost per minute is calculated as:

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

Where:

minutes per year = maximum minutes per year if usage were continuous 
(that is, usage = 1); 150,000 minutes.
usage = equipment utilization assumption; 0.5.
price = price of the particular piece of equipment.
interest rate = 0.11.
life of equipment = useful life of the particular piece of 
equipment.
maintenance = factor for maintenance; 0.05.


    Note: To illustrate the PE calculation, in Table 1 we have used 
the conversion factor (CF) of $34.0682 which was published in the CY 
2008 PFS final rule with comment period.


[[Page 38511]]



                                                                                                      Table 1.--Calculation of PE RVUs Under Methodology for Selected Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     99213 Office         33533 CABG,                                                                     93000 ECG,
                                                 Step                    Source                  Formula              visit, est       arterial, single    71020 Chest x-ray   71020TC Chest x-    7102026 Chest x-        complete       93005 ECG, tracing   93010 ECG, report
                                                                                                                      Nonfacility          Facility           Nonfacility       ray Nonfacility     ray Nonfacility       Nonfacility         Nonfacility         Nonfacility
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Labor cost (Lab).................  Step 1.................  AMA....................  .......................              $13.32              $77.52               $5.74               $5.74                 $--               $6.12               $6.12                 $--
(2) Supply cost (Sup)................  Step 1.................  AMA....................  .......................               $2.98               $7.34               $3.39               $3.39                 $--               $1.19               $1.19                 $--
(3) Equipment cost (Eqp).............  Step 1.................  AMA....................  .......................               $0.19               $0.65               $8.17               $8.17                 $--               $0.12               $0.12                 $--
(4) Direct cost (Dir)................  Step 1.................  .......................  =(1)+(2)+(3)...........              $16.50              $85.51              $17.31              $17.31                 $--               $7.43               $7.43                 $--
(5) Direct adjustment (Dir Adj)......  Steps 2-4..............  See footnote*..........  .......................               0.592               0.592               0.592               0.592               0.592               0.592               0.592               0.592
(6) Adjusted labor...................  Steps 2-4..............  =Lab*Dir Adj...........  =(1)*(5)...............               $7.88              $45.88               $3.40               $3.40                 $--               $3.62               $3.62                 $--
(7) Adjusted supplies................  Steps 2-4..............  =Sup*Dir Adj...........  =(2)*(5)...............               $1.77               $4.34               $2.01               $2.01                 $--               $0.71               $0.71                 $--
(8) Adjusted equipment...............  Steps 2-4..............  =Eqp*Dir Adj...........  =(3)*(5)...............               $0.12               $0.39               $4.84               $4.84                 $--               $0.07               $0.07                 $--
(9) Adjusted direct..................  Steps 2-4..............  .......................  =(6)+(7)+(8)...........               $9.76              $50.61              $10.24              $10.24                 $--               $4.40               $4.40                 $--
(10) Conversion Factor (CF)..........  Step 5.................  MFS....................  .......................            $34.0682            $34.0682            $34.0682            $34.0682            $34.0682            $34.0682            $34.0682            $34.0682
(11) Adj. labor cost converted.......  Step 5.................  =(Lab*Dir Adj)/CF......  =(6)/(10)..............               $0.23               $1.35               $0.10               $0.10                 $--               $0.11               $0.11                 $--
(12) Adj. supply cost converted......  Step 5.................  =(Sup*Dir Adj)/CF......  =(7)/(10)..............               $0.05               $0.13               $0.06               $0.06                 $--               $0.02               $0.02                 $--
(13) Adj. equip cost converted.......  Step 5.................  =(Eqp*Dir Adj)/CF......  =(8)/(10)..............               $0.00               $0.01               $0.14               $0.14                 $--               $0.00               $0.00                 $--
(14) Adj. direct cost converted......  Step 5.................  .......................  =(11)+(12)+(13)........               $0.29               $1.49               $0.30               $0.30                 $--               $0.13               $0.13                 $--
(15) Wrk RVU* Wrk Scaler.............  Setup File.............  MFS....................  .......................               $0.81              $29.62               $0.19                 $--               $0.19               $0.15                 $--               $0.15
(16) Dir--pct........................  Steps 6, 7.............  Surveys................  .......................               33.8%               32.6%               40.7%               40.7%               40.7%               37.7%               37.7%               37.7%
(17) Ind--pct........................  Steps 6, 7.............  Surveys................  .......................               66.2%               67.4%               59.3%               59.3%               59.3%               62.3%               62.3%               62.3%
(18) Ind. Alloc. formula (1st part)..  Step 8.................  See Step 8.............  .......................    ((14)/(16))*(17)    ((14)/(16))*(17)    ((14)/(16))*(17)    ((14)/(16))*(17)    ((14)/(16))*(17)    ((14)/(16))*(17)    ((14)/(16))*(17)    ((14)/(16))*(17)
(19) Ind. Alloc. (1st part)..........  Step 8.................  .......................  See (18)...............               $0.56               $3.07               $0.44               $0.44                 $--               $0.21               $0.21                 $--
(20) Ind. Alloc. formulas (2nd part).  Step 8.................  See Step 8.............  .......................                (15)                (15)           (15)+(11)                (11)                (15)           (15)+(11)                (11)                (15)
(21) Ind. Alloc. (2nd part)..........  Step 8.................  .......................  See (20)...............               $0.81              $29.62               $0.29               $0.10               $0.19               $0.25               $0.11               $0.15
(22) Indirect Allocator (1st+2nd)....  Step 8.................  .......................  =(19)+(21).............               $1.37              $32.69               $0.73               $0.53               $0.19               $0.47               $0.32               $0.15
(23) Indirect Adjustment (Ind Adj)...  Steps 9-11.............  See footnote**.........  .......................               0.364               0.364               0.364               0.364               0.364               0.364               0.364               0.364
(24) Adjusted Indirect Allocator.....  Steps 9-11.............  =Ind Alloc * Ind Adj...  .......................               $0.50              $11.89               $0.26               $0.19               $0.07               $0.17               $0.12               $0.05
(25) Ind.Practice Cost Index (PCI)...  Steps 12-16............  See Steps 12-16........  .......................              $0.973              $0.934              $1.075              $1.075              $1.075              $1.281              $1.281              $1.281
(26) Adjusted Indirect...............  Step 17................  = Adj. Ind Alloc*PCI...  =(24)*(25).............               $0.49              $11.11               $0.28               $0.21               $0.07               $0.22               $0.15               $0.07
(27) PE RVU..........................  Steps 18-19............  =(Adj Dir+Adj Ind)       =((14)+(26)) *budn.....               $0.77              $12.60               $0.59               $0.51               $0.07               $0.35               $0.28               $0.07
                                                                 *budn.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\*\ The direct adj = [current pe rvus * CF * avg dir pct] / [sum direct inputs] = [Step 2] / [Step 3].
\**\ The indirect adj = [current pe rvus * avg ind pct] / [sum of ind allocators] = [Step 9]/[Step 10.
Note: Final PE RVU in Table 1, row 27, may not match Addendum B due to rounding.


[[Page 38512]]

2. PE Proposals for CY 2009
a. RUC Recommendations for Direct PE Inputs
    The RUC provided recommendations for PE inputs for the codes listed 
in the Table 2.

               Table 2.--Codes With RUC PE Recommendations
------------------------------------------------------------------------
         CPT \1\ code                         Description
------------------------------------------------------------------------
29805........................  Shoulder arthroscopy, dx.
29830........................  Elbow arthroscopy.
29840........................  Wrist arthroscopy
29870........................  Knee arthroscopy, dx.
29900........................  Mcp joint arthroscopy, dx.
90465........................  Immune admin 1 inj, <8 yrs.
90466........................  Immune admin addl inj, <8 y.
90467........................  Immune admin o/n, addl <8 yrs.
90468........................  Immune admin o/n, addl <8 y.
90471........................  Immunization admin.
90472........................  Immunization admin, each admin
90473........................  Immune admin oral/nasal
90474........................  Immune admin oral/nasal addl.
93510........................  Left heart catheterization.
96405........................  Chemo intralesional, up to 7.
96406........................  Chemo intralesional over 7.
96440........................  Chemotherapy, intracavitary.
96445........................  Chemotherapy, intracavitary.
96450........................  Chemotherapy, into CNS.
96542........................  Chemotherapy injection.
99174........................  Ocular photoscreening.
99185........................  Regional hypothermia.
99186........................  Total body hypothermia.
------------------------------------------------------------------------
\1\ CPT codes and descriptions are copyright 2008 American Medical
  Association.

    We are in agreement with the RUC recommendations, (including the 
recommendation that no change be made to the direct inputs for CPT 
93510, a cardiac catheterization code), except for inclusion of the 
clinical staff time related to quality activities for the following 
immunization codes: CPT codes 90465, 90466, 90467, 90468, 90471, 90472, 
90473 and 90474. While we allow this time for mammography services due 
to the specific regulatory requirements required by the Mammography 
Quality Standards Act of 1992 (Pub. L. 102-539) (MQSA), such MQSA time 
is not a regulatory requirement for immunization services.
b. Equipment Time-in-Use
    The formula for estimating the cost per minute for equipment is 
based upon a variety of factors, including the cost of the equipment, 
useful life, interest rate, maintenance cost, and utilization. The 
purpose of this formula is to identify an estimated cost per minute for 
the equipment that can be multiplied by the time the equipment is in 
use to obtain an estimated per use equipment cost to develop the 
resource-based PE RVU.
    In calculating the estimated cost per minute for services that are 
in use 24 hours per day for 7 days per week, we have assumed that the 
maximum amount of time that the equipment can be in use is 
approximately 525,000 minutes (that is, 525,000 minutes = (24 hours per 
day) x (7 days per week) x (52 weeks per year) x (60 minutes per 
hour)).
    For CY 2008, we used 525,000 minutes to calculate the per minute 
equipment cost for the equipment used in CPT code 93012, Telephonic 
transmission of post-symptom electrocardiogram rhythm strip(s), 24-hour 
attended monitoring, per 30 day period of time; tracing only and CPT 
code 93271, Patient demand single or multiple event recording with 
presymptom memory loop, 24-hour attended monitoring, per 30 day period 
of time; monitoring, receipt of transmissions, and analysis. Based on 
information presented to us by a provider group suggesting that the 
equipment was in use continuously, we determined that this equipment is 
used 24 hours a day, 7 days a week. Thus, we assigned the equipment a 
100 percent usage rate. However, in subsequent discussions with a 
provider group, we determined that, although there may be a 100 percent 
usage rate for a particular month, this does not correspond to a 100 
percent usage rate for a year. Therefore, for CY 2009 we are proposing 
to apply our standard utilization rate of 50 percent to the 525,000 
maximum minutes of use, consistent with our utilization rate assumption 
for other equipment. This results in 262,500 minutes (that is, 262,500 
= 525,000 x 0.50) of average use over the course of the year.
    In the CY 2008 PFS rule, we used 43,200 minutes (60 minutes per 
hour x 24 hours per day x 30 days per month) to estimate the per use 
cost of the equipment in these monthly services. We are continuing to 
use 43,200 minutes in determining the equipment cost per use for these 
codes. The PE RVUs would increase from 5.28 to 5.98 as a result of this 
change.
c. Change to PE Database Inputs for Certain Cardiac Stress Tests
    The direct PE inputs for CPT code 93025, Microvolt T-wave alternans 
for assessment of ventricular arrhythmias, for clinical labor are not 
consistent with the other cardiac stress tests, CPT codes 93015, 
Cardiovascular stress test using maximal or submaximal treadmill or 
bicycle exercise, continuous electrocardiographic monitoring, and/or 
pharmacological stress; with physician supervision, with interpretation 
and report, and 93017, Cardiovascular stress test using maximal or 
submaximal treadmill or bicycle exercise, continuous 
electrocardiographic monitoring, and/or pharmacological stress; tracing 
only, without interpretation and report. These codes were refined by 
the PEAC in January 2002, the same year that CPT code 93025 was 
implemented. Because of this overlap in timing, the codes that the PEAC 
refined utilize registered nurses (RNs) while CPT 93025 uses a 
``blend'' of RNs and physicians.
    To provide consistency across the family, we are proposing to 
designate the RN as the labor type for CPT code 93025. In addition, we 
are proposing to add the specific Micro-volt T-wave testing equipment, 
priced at $40,000, to replace the two different cardiac stress testing 
treadmill devices that are currently assigned to this code and 
reflected in the PE database. We are also proposing to assign the 
service period time, 53 minutes, to the exam table and the Micro-volt 
T-wave testing treadmill because neither piece of equipment is 
available for use by others during the testing interval. The T-wave 
stress test must be done in quiet room. Using this rationale for the 
other two stress testing CPT codes (that is, 93015 and 93017), we are 
also proposing to revise the PE database for these services and 
allocate the 55-minute service period time to the exam table and the 
stress testing equipment rather than the 41 minutes currently assigned.
d. Revisions to Sec.  414.22(b)(5)(i) Concerning Practice Expense
    Current regulations at Sec.  414.22(b)(5)(i) provide an explanation 
of the two levels of PE RVUs--facility and nonfacility--that are used 
in determining payment under the PFS. Section 414.22(b)(5)(i)(A) 
discusses facility PE RVUs and Sec.  414.22 (b)(5)(i)(B) discusses 
nonfacility PE RVUs. Language in each of these sections incorrectly 
implies that the facility PE RVU is lower than or equal to the 
nonfacility PE RVUs. However, there are some instances where the 
facility PE RVUs may actually be greater than the nonfacility PE RVUs. 
In order to address this inaccuracy, we are proposing to revise Sec.  
414.22(b)(5)(i) (A) and (B) to remove this language.

B. Geographic Practice Cost Indices (GPCI): Locality Discussion

    [If you choose to comment on issues in this section, please include 
the caption ``GPCI: LOCALITY DISCUSSION'' at the beginning of your 
comments.]
1. Update
    Section 1848(e)(1)(A) of the Act requires us to develop separate 
Geographic Practice Cost Indices

[[Page 38513]]

(GPCIs) to measure resource cost differences among localities compared 
to the national average for each of the three fee schedule components 
(work, PE and malpractice). While requiring that the PE and malpractice 
GPCIs reflect the full relative cost differences, section 
1848(e)(1)(A)(iii) of the Act requires that the physician work GPCIs 
reflect only one-quarter of the relative cost differences compared to 
the national average.
    Section 1848(e)(1)(C) of the Act requires us to review and, if 
necessary, adjust the GPCIs at least every 3 years. This section also 
specifies that if more than 1 year has elapsed since the last GPCI 
revision, we must phase in the adjustment over 2 years, applying only 
one-half of any adjustment in each year. As discussed in the CY 2008 
PFS final rule with comment period (72 FR 66243), in CY 2008 we 
established new GPCIs for each Medicare locality and implemented them. 
The CY 2008 adjustment to the GPCIs reflected the first year of the 2-
year phase-in.
    We note that the proposed CY 2009 physician work GPCIs do not 
reflect the 1.000 floor that was in place during CY 2006 through June 
30, 2008. As discussed in section II.S. of this preamble, ``Expiring 
Provisions and Related Discussion'', the 1.000 work GPCI floor expired 
as of January 1, 2008 in accordance with section 102 of the MIEA-TRHCA. 
However, section 103 of the MMSEA extended application of 1.000 floor 
to the physician work GPCI through June 30, 2008. See Addenda D and E 
for the proposed CY 2009 GPCIs and summarized geographic adjustment 
factors (GAFs).
    For a detailed explanation of how the GPCI update was developed, 
see the CY 2008 PFS final rule with comment period (72 FR 66244).
2. Payment Localities
a. Background
    As stated above in this section, section 1848(e)(1)(A) of the Act 
requires us to develop separate GPCIs to measure resource cost 
differences among localities compared to the national average for each 
of the three fee schedule components (work, PE, and malpractice). 
Payments under the PFS are based on the relative resources required to 
provide services, and are adjusted for differences in resource costs 
among payment localities using the GPCIs. As a result, PFS payments 
vary between localities. Although the PFS payment for a particular 
service is actually adjusted by applying a GPCI to each fee schedule 
component, for purposes of discussion and comparison, we calculate a 
geographic adjustment factor (GAF) for each locality. These GAFs 
reflect a weighted average of the GPCIs within the locality and can be 
used as a general proxy for area practice costs. A GAF is calculated to 
reflect a summarization of the GPCIs, (which is used only to make 
comparisons across localities). The GAFs are not an absolute measure of 
actual costs, nor are they used to calculate PFS payments. Rather, they 
are a tool that can be used as a proxy for differences in the cost of 
operating a medical practice among various geographic areas (for 
example counties) for the purpose of assessing the potential impact of 
alternative locality configurations.
    Prior to 1992, Medicare payments for physicians' services were made 
on the basis of reasonable charges. Payment localities were established 
under the reasonable charge system by local Medicare carriers based on 
their knowledge of local physician charging patterns and economic 
conditions. A total of 210 localities were developed; including 22 
``Statewide'' localities where all areas within a State (whether urban 
or rural) received the same payment amount for a given service. These 
localities changed little between the inception of Medicare in 1966 and 
the beginning of the PFS. Following the inception of the PFS, we 
acknowledged that there was no consistent geographic basis for these 
localities and that they did not reflect the significant economic and 
demographic changes that had taken place since 1966. As a result, a 
study was begun in 1994 which culminated in a comprehensive locality 
revision which was implemented in 1997.
    The 1997 payment locality revision was based and built upon the 
prior locality structure. The 22 previously existing Statewide 
localities remained Statewide localities. New localities were 
established in the remaining 28 States by comparing the area cost 
differences (using the GAFs as a proxy for costs) of the localities 
within these States. We ranked the existing localities within these 
States by GAFs in descending order. The GAF of the highest locality 
within a State was compared to the weighted average GAF of other 
localities. If the differences between these GAFs exceeded 5 percent, 
the highest locality remained a distinct locality. If the GAFs 
associated with all the localities in a State did not vary by at least 
5 percent, the State became a Statewide locality. If the highest 
locality remained a distinct locality, the process was repeated for the 
second highest locality and so on until the variation among remaining 
localities fell below the 5 percent threshold. The rest of the 
localities within the State were combined into a single rest-of-State 
locality as their costs were relatively homogeneous. The revised 
locality structure (which is the one currently in use) reduced the 
number of localities from 210 to 89. The number of Statewide localities 
increased from 22 to 34. The development of the current locality 
structure is described in detail in the CY 1997 PFS proposed rule (61 
FR 34615) and the final rule (61 FR 59494).
    Although there have been no changes to the locality structure since 
1997, we have considered and proposed making changes in recent years. 
As we have frequently noted, any changes to the locality configuration 
must be made in a budget neutral manner. Therefore, changes in 
localities can lead to significant redistributions in payments. For 
many years, we have not considered making changes to localities without 
the support of a State Medical Association, which we believed would 
demonstrate consensus for the change among the professionals who would 
be affected. However, we recognize that over time changes in 
demographics or local economic conditions may lead us to conduct a more 
comprehensive examination of existing payment localities.
Payment Locality Approaches Discussed in the CY 2008 PFS Proposed Rule
    For the past several years, we have been involved in discussions 
with California physicians and their representatives about recent 
shifts in relative demographics and economic conditions among a number 
of counties within the current California payment locality structure. 
In the CY 2008 proposed rule, we described three options for changing 
the payment localities in California. A detailed discussion of the 
options for changing the payment localities in California may be found 
in both the CY 2008 PFS proposed rule and final rule with comment 
period (72 FR 38139 and 72 FR 66245, respectively).
    After evaluating the comments on these options, which included 
MedPAC's two suggestions for developing changes in payment localities 
for the entire country (not just California), other States expressing 
interest in having their payment localities reconfigured, and the 
California Medical Association's decision not to endorse any option, we 
decided not to proceed with any of the alternatives we presented. We 
explained in the CY 2008 final rule with comment period (72 FR 66248) 
that we intend to

[[Page 38514]]

conduct a thorough analysis of potential approaches to reconfiguring 
localities and would address this issue again in future rulemaking. We 
also noted that some commenters wanted us to consider a national 
reconfiguration of localities rather than just making changes one State 
at a time.
b. Alternative Payment Locality Approaches
    As a follow-up to the CY 2008 PFS final rule with comment period, 
we have contracted with Acumen, LLC to conduct a preliminary study of 
several options for revising the payment localities. To that end, we 
are currently reviewing several alternative approaches for 
reconfiguring payment localities on a nationwide basis. However, our 
study of possible alternative payment locality configurations is in the 
early stages of development. The discussion that follows provides a 
brief description of the alternative payment locality configurations 
currently under consideration. An interim report on the results of this 
research will be posted on the CMS Web site following the publication 
of this proposed rule.
    At this time, we are not proposing to make any changes to our 
payment localities. When we are ready to propose a change to the 
locality configuration, we will provide extensive opportunities for 
public comment (for example, town hall meetings or open door forums, as 
well as soliciting public comments in a proposed rule) before 
implementing any change. If we would make changes to the locality 
structure, we anticipate applying any locality reconfiguration 
uniformly to all States.

Option 1: CMS Core Based Statistical Area (CBSA) Payment Locality 
Configuration

    Option 1 would use the Office of Management and Budget (OMB's) 
Metropolitan Statistical Area (MSA) designations for the payment 
locality configuration. MSAs would be considered as urban core-based 
statistical areas (CBSAs). Micropolitan Areas (as defined by OMB) and 
rural areas would be considered as non-urban (rest of State) CBSAs. 
This approach would be consistent with the inpatient hospital 
prospective payment system (IPPS) pre-reclassification CBSA assignments 
and with the geographic payment adjustments used in other payment 
systems such as ESRD facilities, SNFs, ASCs, and home health agencies 
(HHAs). Under this method, GPCI payment localities would be defined by 
MSAs (urban CBSAs) and ``rest of State'' areas (non-urban CBSAs) and 
the number of localities would increase.

Option 2: Separate High Cost Counties From Existing Localities

    This method for reconfiguring payment localities was suggested by 
MedPAC as part of its comments on the CY 2008 PFS proposed rule. Under 
this approach, we would begin with the existing 89 GPCI localities and 
create new localities based on an iterative comparison process using 
the GAF as a proxy for costs. (As discussed above, the GAF is used as a 
general proxy for area practice costs. The GAFs are used only to make 
comparisons across localities or other geographic subdivision and do 
not reflect an absolute measure of costs.) For example, the county with 
the highest GAF in a given locality is compared to the average GAF for 
all other counties in the locality. If the GAF for the highest county 
exceeds the average GAF for all other counties in the locality by more 
than 5 percent, the highest county is assigned its own locality. The 
GAF of the second highest county is then compared to the average GAF 
for all other remaining counties in the locality. If the GAF for the 
second highest county exceeds the average GAF for the other remaining 
counties by more than 5 percent, the second highest county is also 
assigned its own locality. The process is repeated for the next highest 
county(ies) until the difference between the GAF for the highest 
remaining county and the average GAF for the other remaining counties 
is less than 5 percent. This approach is similar to an option we 
presented last year for California except that under this option, the 
GAF of higher counties is compared to the average GAF of all other 
remaining lower GAF counties, rather than to the entire locality's GAF. 
As such, this approach would remove higher cost counties from their 
existing locality structure and they would each be placed into their 
own locality.

Option 3: Separate MSAs From Statewide Localities

    Option 3 was also suggested by MedPAC. This alternative for payment 
locality configuration begins with Statewide localities (for every 
State) and creates separate localities for higher cost (higher GAF) 
MSAs. Under this approach, localities are determined within each State 
based on the same iterative process as described above in option 2. The 
GAF of the highest MSA in a given State is compared to the average GAF 
of all other areas within the State. For example, the highest cost MSA 
would be compared to an average GAF for all other MSAs in the State and 
the counties in the ``rest of State'' area. If the GAF of the highest 
MSA is more than 5 percent greater than the average GAF for all other 
areas in that State, then the highest MSA becomes a separate locality. 
This iterative process continues with the second highest MSA. The 
process stops when the GAF of the highest remaining MSA is not more 
than 5 percent greater than the average of the other remaining areas 
within the State. This option is similar to option 2; however, it 
removes higher cost MSAs from the ``rest of State'' locality rather 
than removing higher cost counties from their existing payment 
locality.

Option 4: Group Counties Within a State Into Locality Tiers Based on 
Costs

    This approach combines counties within a State into tiers (or 
groupings) based on similar GAFs. (This alternative is similar to an 
option we considered for California last year). Under this approach, 
counties in each State are sorted in descending order by GAFs. The 
highest county GAF is compared to the second highest. If the difference 
is less than 5 percent, the counties are included in the same locality. 
The third highest county GAF is then compared to the highest county 
GAF. This process continues until a county has a GAF difference from 
the highest county GAF that is more than 5 percent. When this occurs, 
that county becomes the highest county in a new payment locality and 
the process is repeated for all counties in the State. This methodology 
creates tiers of counties (within each State) that may or may not be 
contiguous but share similar practice costs.
c. Solicitation of Comments
    As noted earlier in this section, we will be posting an interim 
report of our locality study on the CMS Web site after publication of 
this proposed rule. Information on how to access the report will be 
made available through the PFS home page on the CMS Web site at http://www.cms.hhs.gov/PhysicianFeeSched/. Additionally, we plan to update our 
Web site periodically as our research progresses.
    We encourage interested parties to submit comments on the options 
presented both here and in our interim report to the address for 
comments listed on our Web site. We are also interested in receiving 
comments and suggestions on other potential alternative locality 
configurations (in addition to the options described in this section). 
Additionally, we are requesting comments on the administrative and 
operational issues associated with the various options under 
consideration. As previously discussed, we are not

[[Page 38515]]

proposing any changes to the payment locality configurations at this 
time. When we are ready to propose any changes to the locality 
configuration, we will provide extensive opportunities for public 
comment (for example, town hall meetings or open door forums) on 
specific proposals before implementing any change.

C. Malpractice RVUs (PC/TC Issue)

    [If you choose to comment on issues in this section, please include 
the caption ``MALPRACTICE RVUs'' at the beginning of your comments.]
    In the CY 1992 PFS final rule (56 FR 59527), we described in detail 
how malpractice (MP) RVUs are calculated for each physicians' service 
and, when professional liability insurance (PLI) premium data are not 
available, how we crosswalk or assign RVUs to services. Following the 
initial calculation of resource-based MP RVUs, the MP RVUs are then 
subject to review by CMS at 5-year intervals. Reviewing the MP RVUs 
every 5 years ensures that the MP relative values reflect any 
marketplace changes in the physician community's ability to acquire 
PLI. However, there are codes that define certain radiologic services 
that have never been part of the MP RVU review process. The MP RVUs 
initially assigned to these codes have not been revised because there 
is a lack of suitable data on the cost of PLI for technical staff or 
imaging centers (where most of these services are performed).
    In the CY 2008 PFS proposed rule (72 FR 38143), we noted that the 
PLI workgroup, a subset of the Relative Value Update Committee (RUC) of 
the AMA, brought to our attention the fact that there are approximately 
600 services that have technical component (TC) MP RVUs that are 
greater than the professional component (PC) MP RVUs. Suggesting that 
it is illogical for the MP RVUs for the TC of a service to be higher 
than the MP RVUs for the PC, the PLI workgroup requested that we make 
changes to these MP RVUs.
    We responded that we would like to develop a resource-based 
methodology for the technical portion of these MP RVUs; but that we did 
not have data to support any such change. We asked for information 
about how, and if, technicians employed by facilities purchase PLI or 
how their professional liability is insured. We also asked for comments 
on what types of PLI are carried by facilities that perform these 
technical services.
    In comments submitted in response to the proposed rule, the 
American College of Cardiology (ACC) suggested that we ``flip'' the MP 
RVUs between the PCs and TCs. This proposal would reduce the MP RVUs 
for the TC and increase the MP RVUs for the PC. We also received 
comments from the American College of Radiology (ACR) suggesting that 
we make the TC RVUs equal to the PC RVUs. The ACR stated that there was 
clearly some professional liability associated with these codes and 
using the resource-based MP RVUS of the PC maintains the resource-based 
methodology and eliminates the logical inequities of the TC having more 
RVUs than the PC.
    The AMA's PLI workgroup recommended that we reduce the MP RVUs for 
the TC for these codes to zero. The workgroup suggested that there are 
no identifiable separate costs for professional liability for the TC. 
The workgroup also recommended that the MP RVUs removed from the TC for 
these codes be redistributed across all physicians' services.
    In the CY 2008 PFS final rule with comment period (72 FR 66248), we 
stated, in response to the suggestions from the AMA, ACR, and ACC, that 
we that we did not believe it would be appropriate to ``flip'' the PC 
and TC MP RVU values because the professional part of the MP RVUs have 
undergone a resource-based review, are derived from actual data, and 
are consistent with the resource-based methodology for PFS payments. We 
also stated that we would not simply equalize the PC and TC RVU values 
because we had no data to demonstrate that the MP costs for the 
technical portion of these services are the same as the professional 
portion. In response to the suggestion of the PLI workgroup, we stated 
that we are not able to evaluate whether sufficient data exists or to 
make a judgment on the RUC's assertion that there are no such 
identifiable costs (and therefore, no data are available).
    We also received several comments supporting our decision to 
examine the possibility of developing a resource-based methodology for 
the technical portion of the MP RVUs. The commenters supported the 
collection and analysis of appropriate MP premium data before making 
any changes to the MP RVU distribution. In response, in the CY 2008 PFS 
final rule with comment period, we stated that we would continue to 
solicit, collect, and analyze appropriate data on this subject and that 
when we had sufficient information we would be better able to make a 
determination as to what, if any, changes should be made, and that we 
would propose any changes in future rulemaking.
    The issue of assigning MP RVUs for the TC of certain services 
continues to be a source of concern for several physician associations 
and for CMS. We did not receive a response to our request for 
additional data on this issue. This issue is one of importance to CMS 
because the lack of available PLI data affects our ability to make a 
resource-based evaluation of the TC MP RVUs for these codes. As part of 
our work to update the MP RVUs in CY 2010, we will instruct our 
contractor to research available data sources for the MP costs 
associated with the TC portion of these codes. We will also ask the 
contractor to look at what is included in general liability insurance 
versus PLI for physicians and other professional staff. If data sources 
are available, we will instruct the contractor to gather the data so we 
will be ready to implement revised MP RVUs for the TC of these codes in 
conjunction with the update of MP RVUs for the PCs in 2010.

D. Medicare Telehealth Services

    [If you choose to comment on issues in this section, please include 
the caption ``MEDICARE TELEHEALTH SERVICES'' at the beginning of your 
comments.]
1. Requests for Adding Services to the List of Medicare Telehealth 
Services
    Section 1834(m)(4)(F) of the Act defines telehealth services as 
professional consultations, office visits, and office psychiatry 
services, and any additional service specified by the Secretary. In 
addition, the statute required us to establish a process for adding 
services to or deleting services from the list of telehealth services 
on an annual basis.
    In the December 31, 2002 Federal Register (67 FR 79988), we 
established a process for adding services to or deleting services from 
the list of Medicare telehealth services. This process provides the 
public an ongoing opportunity to submit requests for adding services. 
We assign any request to make additions to the list of Medicare 
telehealth services to one of the following categories:
     Category #1: Services that are similar to professional 
consultations, office visits, and office psychiatry services. In 
reviewing these requests, we look for similarities between the proposed 
and existing telehealth services for the roles of, and interactions 
among, the beneficiary, the physician (or other practitioner) at the 
distant site and, if necessary, the telepresenter. We also look for 
similarities in the telecommunications system used to deliver the 
proposed service, for example, the use of interactive audio and video 
equipment.

[[Page 38516]]

     Category #2: Services that are not similar to the current 
list of telehealth services. Our review of these requests includes an 
assessment of whether the use of a telecommunications system to deliver 
the service produces similar diagnostic findings or therapeutic 
interventions as compared with the face-to-face ``hands on'' delivery 
of the same service. Requestors should submit evidence showing that the 
use of a telecommunications system does not affect the diagnosis or 
treatment plan as compared to a face-to-face delivery of the requested 
service.
    Since establishing the process, we have added the following to the 
list of Medicare telehealth services: psychiatric diagnostic interview 
examination; ESRD services with two to three visits per month and four 
or more visits per month (although we require at least one visit a 
month to be furnished in-person ``hands on'', by a physician, clinical 
nurse specialist (CNS), nurse practitioner (NP), or physician assistant 
(PA) to examine the vascular access site); individual medical nutrition 
therapy; and the neurobehavioral status exam.
    Requests to add services to the list of Medicare telehealth 
services must be submitted and received no later than December 31 of 
each calendar year to be considered for the next rulemaking cycle. For 
example, requests submitted before the end of CY 2007 are considered 
for the CY 2009 proposed rule. For more information on submitting a 
request for an addition to the list of Medicare telehealth services, 
visit our Web site at www.cms.hhs.gov/telehealth/.
2. Submitted Requests for Addition to the List of Telehealth Services
    We received the following requests in CY 2007 for additional 
approved services to become effective for CY 2009: (1) Diabetes self-
management training (DSMT); and (2) critical care services. In 
addition, in the CY 2008 PFS final rule with comment period (72 FR 
66250), we committed to continuing to evaluate last year's request to 
add subsequent hospital care to the list of approved telehealth 
services. The following is a discussion of these requests.
a. Diabetes Self-Management Training (DSMT)
    The American Telemedicine Association (ATA) and the Marshfield 
Clinic submitted a request to add diabetes self-management training 
(DSMT) (as represented by Healthcare Common Procedure Coding System 
(HCPCS) codes G0108 and G0109) to the list of approved telehealth 
services. In the CY 2006 PFS proposed rule (70 FR 45787) and final rule 
with comment period (70 FR 70157), we did not approve a previous 
request to add DSMT to the list of approved telehealth services. We 
approved a request to add individual medical nutrition therapy (MNT) to 
the list of approved telehealth services.
    The current request asks us to evaluate and approve individual and 
group DSMT as Category 1 services because they are comparable to MNT. 
The requesters believe that MNT and DSMT are similar because both are 
designed to provide education in the primary care setting and to 
facilitate behavior modification on the part of the patient. The 
requesters asked us to examine the clinical outcomes of providing the 
service and evidence-based practice in determining whether the codes 
should be added to the list of approved telehealth services. The 
requesters also asked us to examine whether DSMT is appropriate care by 
those standards (clinical outcomes and evidence-based practice), and 
they provided evidence that DSMT has a direct effect on reducing HbA1c 
levels and improves outcomes for patients.
CMS Review
    The requesters specifically asked us to evaluate DSMT as a Category 
1 service based on clinical outcomes and evidence-based practice. This 
approach does not match the criteria we use to assign services to 
Category 1. To determine whether to assign a request to Category 1, we 
look for similarities between the service that is being considered for 
addition and existing telehealth services for the roles of, and 
interactions among, the beneficiary, the physician (or other 
practitioner) at the distant site and, if necessary, the telepresenter. 
Analysis of clinical outcomes and evidence-based practice alone are not 
sufficient to assign services to Category 1.
    The requesters believe that DSMT services can be considered and 
approved for telehealth as Category 1 services because they are 
comparable to MNT services approved for telehealth. Section 414.65 
provides for the payment of individual MNT furnished via telehealth. 
Group MNT is not an approved telehealth service, so it cannot be used 
as a point of comparison for group DSMT (as represented by HCPCS code 
G0109). Moreover, as noted in our previous review of DSMT, group 
counseling services have a different interactive dynamic between the 
physician or practitioner at the distant site and beneficiary at the 
originating site as compared to services on the current list of 
Medicare telehealth services (70 FR 45787 and 70 FR 70157). Since the 
interactive dynamic of group DSMT is not similar to individual MNT or 
any other service currently approved for telehealth, we believe that 
group DSMT must be evaluated as a category 2 service.
    Section 1861(qq) of the Act provides that DSMT (which can be either 
a group or individual service) involves educational and training 
services to ensure therapy compliance or to provide necessary skills 
and knowledge to participate in managing the condition, including the 
skills necessary for the self-administration of injectable drugs. We 
believe individual DSMT is not analogous to individual MNT because of 
the element of skill-based training that is encompassed within 
individual DSMT, but is not an aspect of individual MNT (or any other 
services currently approved for telehealth). Due to the statutory 
requirement that DSMT services include teaching beneficiaries the 
skills necessary for the self-administration of injectable drugs, we 
believe that DSMT, whether provided to an individual or a group, must 
be evaluated as a category 2 service.
    Because we consider individual and group DSMT to be category 2 
services, we need to evaluate whether these are services for which 
telehealth can be an adequate substitute for a face-to-face encounter. 
Most of the studies cited by the requesters focused on the value of 
DSMT in helping individuals with diabetes achieve successful health-
related outcomes. Some of these studies documented clinical outcomes 
and evidence-based practice of the appropriateness of DSMT in treating 
diabetes, but they did not provide comparative analysis demonstrating 
that DSMT provided via telehealth is equivalent to the face-to-face 
delivery of such services. As such, these studies were not relevant to 
this review.
    One study cited by the requesters which analyzed diabetes care 
provided via telehealth defined telehealth technologies to consist of 
messaging and monitoring devices. The telehealth technologies utilized 
in this study do not correspond with our definitions of telehealth as 
specified in Sec.  410.78.
    Another study cited by the requesters as examining the 
effectiveness of diabetes management provided via telehealth was 
intended to help diabetic participants manage their care with the help 
of a home-based telehealth support system. The study's authors note 
some interesting correlations that were observed without any claim of 
reliability or validity, and the study's

[[Page 38517]]

authors clearly state that no causal relationships can be referred from 
the data.
    A third study cited by the requesters compared diabetes education 
provided through telemedicine technology to diabetes education provided 
in-person. The study design did not include training patients in the 
self-administration of injectable drugs, which is one of the elements 
of DSMT under section 1861(qq) of the Act. The success of one diabetes 
educator in teaching the self-administration of insulin to one of the 
participants was anecdotal; no conclusive evidence was provided that 
insulin administration can routinely be taught effectively as a 
telehealth service.
    After reviewing these studies, we determined that we do not have 
sufficient comparative analysis or other compelling evidence that 
either individual or group DSMT delivered via telecommunications is 
equivalent to DSMT delivered face-to-face. We do not find evidence that 
providing DSMT via telehealth is an adequate substitute for the face-
to-face encounter between the practitioner and the patient. Therefore, 
we are not proposing to add individual and group DSMT (as described by 
HCPCS codes G0108 and G0109) to the list of approved telehealth 
services.
b. Critical Care Services
    The University of Pittsburgh Medical Center (UPMC) submitted a 
request to add critical care services (as defined by HCPCS codes 99291 
and 99292) as a ``Category 1'' service. The requester draws 
similarities to the evaluation and management (E/M) consultation 
services currently approved for telehealth. The requester noted that 
the primary difference between critical care and other E/M services 
already approved for telehealth is that critical care is specific to 
patients with vital organ failure. Anecdotally, UPMC has found that the 
use of telecommunications systems and software gives critically injured 
or ill patients (specifically stroke patients) timely access to highly 
specialized physicians. According to the request, UPMC physicians are 
able to give ``an equally effective examination, spend the same amount 
of time with the patient and develop the same course of treatment just 
as if they were bedside.''
CMS Review
    The acuity of a critical care patient is significantly greater than 
the acuity generally associated with patients receiving the E/M 
services approved for telehealth. Because of the acuity of critically 
ill patients, we do not consider critical care services similar to any 
services on the current list of Medicare telehealth services. 
Therefore, we believe critical care must be evaluated as a Category 2 
service.
    Because we consider critical care services to be Category 2, we 
need to evaluate whether these are services for which telehealth can be 
an adequate substitute for a face-to-face encounter. We have no 
evidence suggesting that the use of telehealth could be a reasonable 
surrogate for the face-to-face delivery of this type of care. As such, 
we do not propose to add critical care services (as defined by HCPCS 
codes 99291 and 99292) to the list of approved telehealth services.
c. Subsequent hospital care
    Prior to 2006, follow-up inpatient consultations (as described by 
CPT codes 99261 through 99263) were approved for telehealth. CPT 2006 
deleted the follow-up inpatient consultation codes and advised 
practitioners instead to bill for these services using the codes for 
subsequent hospital care (as described by CPT codes 99231 through 
99233). For CY 2006, we removed the deleted codes for follow-up 
inpatient consultations from the list of approved telehealth services.
    In the CY 2008 PFS proposed rule (72 FR 38144) and final rule with 
comment period (72 FR 66250), we discussed a request we received from 
the ATA to add subsequent hospital care to the list of approved 
telehealth services. Because there is currently no method for 
practitioners to bill for follow-up inpatient consultations delivered 
via telehealth, the ATA requested that we approve use of the subsequent 
hospital care codes to bill follow-up inpatient consultations furnished 
via telehealth, as well as to bill for subsequent hospital care 
services furnished via telehealth that are related to the ongoing E/M 
of the hospital inpatient (72 FR 66250). Since the subsequent hospital 
care codes describe a broader range of services than follow-up 
inpatient consultation, including some services that may not be 
appropriate for addition to the list of telehealth services, we did not 
add subsequent hospital care to the list of approved telehealth 
services. Instead, we committed to continue to evaluate whether, and if 
so, by what mechanism subsequent hospital care could be approved for 
telehealth when used for follow-up inpatient consultations (72 FR 
66249).
CMS Review
    We considered the possibility of approving subsequent hospital care 
for telehealth with specific limitations, for example, approving 
subsequent hospital care for telehealth only when the codes are used 
for follow-up inpatient consultations. Given the potential acuity level 
of the patient in the hospital setting, we remain concerned that 
practitioners could misuse the codes and provide a broader range of 
subsequent hospital care services via telehealth than was formerly 
approved for telehealth with the follow-up inpatient consultation 
codes, including the on-going, day-to-day E/M of a hospital inpatient. 
(For a discussion of these issues, see 72 FR 38144 and 66249.) We were 
also concerned that it could be difficult to implement sufficient 
controls and monitoring to ensure that the telehealth use of the codes 
for subsequent hospital care is limited to the delivery of services 
that were formerly described as follow-up inpatient consultations.
    We have considered this issue further, and for CY 2009, we are 
proposing to create a new series of HCPCS codes for follow-up inpatient 
telehealth consultations. Practitioners would use these codes to submit 
claims to their Medicare contractors for payment of follow-up inpatient 
consultations provided via telehealth. The new HCPCS codes will be 
limited to the range of services included in the scope of the previous 
CPT codes for follow-up inpatient consultations, and the descriptions 
will be modified to limit the use of such services for telehealth. The 
HCPCS codes will clearly designate these as follow-up inpatient 
consultations provided via telehealth, and not subsequent hospital care 
used for inpatient visits. Utilization of these codes would allow us to 
provide payment for these services, as well as enable us to monitor 
whether the codes are used appropriately. We also propose to establish 
the RVUs for these services at the same level as the RVUs established 
for subsequent hospital care (as described by CPT codes 99231 through 
99233). We believe this is appropriate because a physician or 
practitioner furnishing a telehealth service is paid an amount equal to 
the amount that would have been paid if the service had been furnished 
without the use of a telecommunication system. Since physicians and 
practitioners furnishing follow-up inpatient consultations in a face-
to-face encounter must continue to utilize subsequent hospital care 
codes (as described by CPT codes 99231 through 99233), we believe it is 
appropriate to set the RVUs for the new telehealth G codes at the same 
level as for the subsequent hospital care codes.
    As defined below in this section, we are proposing to create HCPCS 
codes

[[Page 38518]]

specific to the telehealth delivery of follow-up inpatient 
consultations solely to re-establish the ability for practitioners to 
provide and bill for follow-up inpatient consultations delivered via 
telehealth. These codes are intended for use by practitioners serving 
beneficiaries located at qualifying originating sites (as defined in 
Sec.  410.78) requiring the consultative input of physicians who are 
not available for a face-to-face encounter. These codes are not 
intended to include the ongoing E/M of a hospital inpatient.
    Claims for follow-up inpatient telehealth consultations will be 
submitted to the contractors that process claims for the service area 
where the physician or practitioner who furnishes the service is 
located. Physicians/practitioners must submit the appropriate HCPCS 
procedure code for follow-up inpatient telehealth consultations along 
with the ``GT'' modifier (``via interactive audio and video 
telecommunications system''). By coding and billing the ``GT'' modifier 
with the inpatient follow-up inpatient telehealth consultation codes, 
the distant site physician/practitioner certifies that the beneficiary 
was present at an eligible originating site when the telehealth service 
was furnished. (See the CMS Internet-Only Medicare Claims Processing 
Manual, Pub. 100-04, Chapter 15, Section 190.6.1 for instructions for 
submission of interactive telehealth claims.)
    In the case of Federal telemedicine demonstration programs 
conducted in Alaska or Hawaii, store and forward technologies may be 
used as a substitute for an interactive telecommunications system. 
Covered store and forward telehealth services are billed with the 
``GQ'' modifier, ``via asynchronous telecommunications system.'' By 
using the ``GQ'' modifier, the distant site physician/practitioner 
certifies that the asynchronous medical file was collected and 
transmitted to him or her at the distant site from a Federal 
telemedicine demonstration project conducted in Alaska or Hawaii. (See 
the CMS Internet-Only Medicare Claims Processing Manual, Pub. 100-04, 
Chapter 15, Section 190.6.2 for instructions for submission of 
telehealth store and forward claims.)
Follow-Up Inpatient Telehealth Consultations Defined
    Follow-up inpatient telehealth consultations are consultative 
visits furnished via telehealth to complete an initial consultation or 
subsequent consultative visits requested by the attending physician. 
The initial inpatient consultation may have been provided in person or 
via telehealth. The conditions of payment for follow-up inpatient 
telehealth consultations, including qualifying originating sites and 
the types of telecommunications systems recognized by Medicare, are 
subject to the provisions of Sec.  410.78. Payment for these services 
is subject to the provisions of Sec.  414.65.
    We are proposing to describe follow-up inpatient telehealth 
consultations to include monitoring progress, recommending management 
modifications, or advising on a new plan of care in response to changes 
in the patient's status. Counseling and coordination of care with other 
providers or agencies would be included as well, consistent with nature 
of the problem(s) and the patient's needs. The physician or 
practitioner who furnishes the inpatient follow-up consultation via 
telehealth may not be the physician of record or the attending 
physician, and the follow-up inpatient consultation would be distinct 
from the follow-up care provided by a physician of record or the 
attending physician. If a physician consultant has initiated treatment 
at an initial consultation and participates thereafter in the patient's 
ongoing care management, such care would not be included in the 
definition of a follow-up inpatient consultation and is not appropriate 
for delivery via telehealth.
    Payment for follow-up telehealth inpatient consultations would 
include all consultation-related services furnished before, during, and 
after communicating with the patient via telehealth. Pre-service 
activities would include, but would not be limited to, reviewing 
patient data (for example, diagnostic and imaging studies, interim lab 
work) and communicating with other professionals or family members. 
Intra-service activities must include at least two of the three key 
elements described below for each procedure code. Post-service 
activities would include, but would not be limited to, completing 
medical records or other documentation and communicating results of the 
consultation and further care plans to other health care professionals. 
No additional E/M service could be billed for work related to a follow-
up inpatient telehealth consultation.
    Follow-up inpatient telehealth consultations could be provided at 
various levels of complexity. To reflect this, we propose to establish 
three codes.
    Practitioners taking a problem-focused interval history, conducting 
a problem-focused examination, and engaging in medical decision-making 
that is straightforward or of low complexity, would bill a limited 
service, using HCPCS GXX14. At this level of service, practitioners 
would typically spend 15 minutes communicating with the patient via 
telehealth.
    Practitioners taking an expanded focused interval history, 
conducting an expanded problem-focused examination, and engaging in 
medical decision-making that is of moderate complexity, would bill an 
intermediate service using HCPCS GXX15. At this level of service, 
practitioners would typically spend 25 minutes communicating with the 
patient via telehealth.
    Practitioners taking a detailed interval history, conducting a 
detailed examination, and engaging in medical decision-making that is 
of high complexity, would bill a complex service, using HCPCS GXX16. At 
this level of service, practitioners would typically spend 35 minutes 
or more communicating with the patient via telehealth.
    We are proposing to establish the following HCPCS codes to describe 
follow-up inpatient consultations approved for telehealth:
     GXX14, Follow-up inpatient telehealth consultation, 
limited, typically 15 minutes communicating with the patient via 
telehealth.
     GXX15, Follow-up inpatient telehealth consultation, 
intermediate, typically 25 minutes communicating with the patient via 
telehealth.
     GXX16, Follow-up inpatient telehealth consultation, 
complex, typically 35 minutes or more communicating with the patient 
via telehealth.

E. Specific Coding Issues Related to the Physician Fee Schedule

    [If you choose to comment on issues in this section, please include 
the caption ``CODING ISSUES'' at the beginning of your comments.]
1. Payment for Preadministration-Related Services for Intravenous 
Infusion of Immune Globulin
    Immune globulin is a complicated biological product that is 
purified from human plasma obtained from human plasma donors. Its 
purification is a complex process that occurs along a very long 
timeline, and therefore, only a small number of manufacturers provide 
commercially available products. In past years, there have been issues 
reported with the supply of intravenous immune globulin (IVIG) due to 
numerous factors including decreased manufacturing capacity, increased 
usage, more sophisticated

[[Page 38519]]

processing steps, and low demand for byproducts from IVIG 
fractionation.
    The Medicare payment rates for IVIG products are established 
through the Part B average sales price (ASP) drug methodology. Payment 
for administration of the IVIG is made separately under the PFS. IVIG 
administration is billed using the CPT codes for the first hour and, as 
needed, additional hour CPT infusion codes for therapeutic, 
prophylactic, and diagnostic services.
    In addition, a separate payment has been made under the PFS and the 
Hospital Outpatient Prospective Payment System (OPPS) for IVIG 
preadministration-related services since 2006. Separate payment for the 
preadministration-related services was implemented in 2006 largely 
because of reported instability in the IVIG marketplace due, in part, 
to the implementation of the new ASP payment methodology for IVIG 
drugs.
    As discussed in the CY 2006 PFS final rule with comment period (70 
FR 70219 through 70220), at that time the IVIG marketplace was one in 
which a significant portion of IVIG products previously available in CY 
2005 were being discontinued and other products were expected to enter 
the market over the next year. For CY 2006, there were only 2 HCPCS 
codes describing all IVIG products based on either lyophilized 
(powdered) or liquid preparation.
    To continue to ensure appropriate access to IVIG, in CY 2006 during 
this short-term period of market instability for IVIG, we temporarily 
initiated a separate payment to physicians to reflect the additional 
resources that may have been associated with locating and acquiring 
adequate IVIG product and preparing for an office infusion of IVIG.
    In order to address what was considered to be an impermanent period 
of market instability, we created a separate G-code, G0332, IVIG 
preadministration-related services for intravenous infusion of 
immunoglobulin, per infusion encounter. As discussed in the CY 2006 PFS 
final rule with comment period, we expected the IVIG marketplace to 
stabilize through 2006 and that the atypical preadministration-related 
services relating to IVIG would be temporary and no longer necessary 
for physicians' offices that provided IVIG infusions to patients.
    However, in the CY 2007 PFS final rule with comment period (71 FR 
69678), we decided to continue the IVIG preadministration-related 
services payment for an additional year to help ensure patient access 
to IVIG. We stated in that rule that we were anticipating the results 
of the HHS Office of Inspector General (OIG) study on the availability 
and pricing of IVIG before changing this policy. In addition, we 
continued to receive comments from stakeholders that some beneficiaries 
were experiencing IVIG access issues such as delayed treatments and 
site of service shifts.
    In the CY 2008 PFS proposed rule (72 FR 38146), we proposed to 
continue payment for G0332 through CY 2008 at the same level of PE RVUs 
as CY 2007. We referred to the OIG final report published in April 2007 
titled, ``Intravenous Immune Globulin: Medicare Payment and 
Availability'' (OEI-03-05-00404). The OIG had conducted this study at 
the request of the Members of the Congressional subcommittees on Health 
within the House Energy and Commerce and Ways and Means Committees. The 
OIG examined the current state of IVIG which included analyzing the 
payment and supply. Specifically, the OIG determined whether hospitals 
and physicians could purchase IVIG at prices below the Medicare payment 
amounts in 2005 and 2006 and whether IVIG was readily available to 
physicians and distributors in 2005 and 2006.
    The OIG found that for the third quarter of 2006, just over half of 
IVIG sales to hospitals and physicians were at prices below Medicare 
payment amounts. Relative to the previous three quarters, this 
represented a substantial increase of the percentage of sales with 
prices below Medicare amounts. During the third quarter of 2006, 56 
percent of IVIG sales to hospitals and over 59 percent of IVIG sales to 
physicians by the largest three distributors occurred at prices below 
the Medicare payment amounts. The findings of the OIG report suggest 
that stability in the IVIG market had improved in late 2006. No other 
comprehensive studies have been presented to show continued instability 
in market conditions or systematic problems with patient access.
    Recent IVIG drug coding revisions and reporting have contributed to 
increased payments for IVIG products and, we believe, improved market 
stability. Beginning on July 1, 2007, six new HCPCS codes for specific 
IVIG products were adopted to implement separate payment for these 
products. From July 2007 to April 2008, the weighted average increase 
in payment, based on allowed charges by IVIG product code, was 2.9 
percent for all liquid IVIG products and 3.4 percent for all IVIG 
products, both liquid and powder.
    IVIG utilization continues to increase. National claims history 
data show allowed utilization in physicians' offices (that is, units of 
IVIG paid) increased from slightly over 3,000,000 units in 2006 to 
slightly over 3,600,000 units in 2007.
    We continue to meet with representatives of the IVIG industry to 
discuss their concerns regarding the pricing of IVIG and Medicare 
beneficiary access to this important therapy. No additional studies 
have been published since the OIG report of April 2007 on IVIG pricing, 
supply or patient access issues with IVIG. We have reviewed national 
claims data for IVIG drug utilization, as well as utilization of the 
preadministration-related service codes. This data show modest 
increases in the utilization of IVIG drugs and the preadministration-
related service code which suggests that pricing and access may be 
improving.
    The G-code payment for IVIG preadministration-related services was 
intended to be a temporary stopgap policy. We continued these temporary 
payments for 3 years because we had received reports of market 
disruptions and were concerned about ensuring beneficiary access to 
these drugs. However, we now believe that the transient market 
conditions that led us to adopt the payment for IVIG preadministration-
related services have improved. Therefore, we are proposing to 
discontinue separate payment for IVIG preadministration-related 
services by means of code G0332 furnished on or after January 1, 2009. 
The treatment of these services under the OPPS will be addressed 
separately in the OPPS proposed rule.
2. Multiple Procedure Payment Reduction for Diagnostic Imaging
    In general, we price diagnostic imaging procedures in the following 
three ways:
     The professional component (PC) represents the physician's 
interpretation (PC-only services are billed with the 26 modifier).
     The technical component (TC) represents PE and includes 
clinical staff, supplies, and equipment (TC-only services are billed 
with the TC modifier).
     The global service represents both PC and TC.
    Effective January 1, 2006, we implemented a multiple procedure 
payment reduction (MPPR) on certain diagnostic imaging procedures (71 
FR 48982 through 49252 and 71 FR 69624 through 70251). When two or more 
procedures within one of 11 imaging code families are furnished on the 
same patient in a single session, the TC of the highest priced 
procedure is paid at 100

[[Page 38520]]

percent and the TC of each subsequent procedure is paid at 75 percent 
(a 25 percent reduction). The reduction does not apply to the PC.
    It is necessary to periodically update the list of codes subject to 
the MPPR to reflect new and deleted codes. We are proposing to subject 
several additional procedures to the MPPR. Six procedures represent 
codes newly created since the MPPR list was established. Four 
additional procedures have been identified as similar to procedures 
currently subject to the MPPR. We are also removing CPT 76778, a 
deleted code, from the list. Table 3 contains the proposed additions to 
the list. After we adopted the MPPR, section 5102 of the Deficit 
Reduction Act of 2005 (Pub. L. 109-171) (DRA) exempted the expenditure 
reductions resulting from this policy from the statutory budget 
neutrality requirement; therefore, we are proposing that expenditure 
reductions resulting from these changes be exempt from budget 
neutrality. (See section VI., Regulatory Impact Analysis, for a 
discussion of budget neutrality.) The complete list of procedures 
subject to the MPPR is in Addendum F of this proposed rule.

                     Table 3.--Procedures Proposed for Multiple Procedure Payment Reduction
----------------------------------------------------------------------------------------------------------------
            Code                     Short descriptor                             Code family
----------------------------------------------------------------------------------------------------------------
70336.......................  mri, temporomandibular          Family 5 MRI and MRA (Head/Brain/Neck).
                               joint(s).
70554.......................  Fmri brain by tech............  Family 5 MRI and MRA (Head/Brain/Neck).
75557.......................  Cardiac mri for morph.........  Family 4 MRI and MRA (Chest/Abd/Pelvis).
75559.......................  Cardiac mri w/stress img......  Family 4 MRI and MRA (Chest/Abd/Pelvis).
75561.......................  Cardiac mri for morph w/dye...  Family 4 MRI and MRA (Chest/Abd/Pelvis).
75563.......................  Cardiac mri w/stress img & dye  Family 4 MRI and MRA (Chest/Abd/Pelvis).
76776.......................  Us exam k transpl w/doppler...  Family 1 Ultrasound (Chest/Abdomen/Pelvis--Non-
                                                               Obstetrical).
76870.......................  Us exam, scrotum..............  Family 1 Ultrasound (Chest/Abdomen/Pelvis--Non-
                                                               Obstetrical).
77058.......................  Mri, one breast...............  Family 4 MRI and MRA (Chest/Abd/Pelvis).
77059.......................  Mri, both breasts.............  Family 4 MRI and MRA (Chest/Abd/Pelvis).
----------------------------------------------------------------------------------------------------------------

3. Proposed HCPCS Code for Prostate Saturation Biopsies
    Prostate Saturation Biopsy is a technique currently described by 
Category III CPT code 0137T, Biopsy, prostate, needle, saturation 
sampling for prostate mapping. Typically, this service entails 40 to 80 
core samples taken from the prostate under general anesthesia. 
Currently, the biopsies are reviewed by a pathologist and this service 
is captured under CPT code 88305, Surgical pathology, gross and 
microscopic examination, which is separately billed by the physician 
for each core sample taken. CPT Code 88305 has a physician work value 
of 0.75 and a total nonfacility payment rate of $102.83. We believe 
that paying individually for review of each core sample submitted 
grossly overpays for the pathological interpretation and report for 
this service.
    We are proposing the following four G codes to more accurately 
represent the pathologic evaluation, interpretation, and report for 
this service:
     GXXX1, Surgical pathology, gross and microscopic 
examination for prostate needle saturation biopsy sampling, 1-20 
specimens
     GXXX2, Surgical pathology, gross and microscopic 
examination for prostate needle saturation biopsy sampling, 21-40 
specimens.
     GXXX3, Surgical pathology, gross and microscopic 
examination for prostate needle saturation biopsy sampling, 41-60 
specimens.
     GXXX4, Surgical pathology, gross and microscopic 
examination for prostate needle saturation biopsy sampling, greater 
than 60 specimens.
    We are proposing to carrier price these codes. We will gather 
information regarding the laboratory and clinical staff resources 
required to value these services.

F. Part B Drug Payment

1. Average Sales Price (ASP) Issues
    [If you choose to comment on issues in this section, please include 
the caption ``ASP ISSUES'' at the beginning of your comments.]
    Medicare Part B covers a limited number of prescription drugs and 
biologicals. For the purposes of this proposed rule, the term ``drugs'' 
will hereafter refer to both drugs and biologicals, unless otherwise 
specified. Medicare Part B covered drugs not paid on a cost or 
prospective payment basis generally fall into the following three 
categories:
     Drugs furnished incident to a physician's service.
     DME drugs.
     Drugs specifically covered by statute (certain 
immunosuppressive drugs, for example).
    Beginning in CY 2005, the vast majority of Medicare Part B drugs 
not paid on a cost or prospective payment basis are paid under the ASP 
methodology. The ASP methodology is based on data submitted to us 
quarterly by manufacturers. In addition to the payment for the drug, 
Medicare currently pays a furnishing fee for blood clotting factors, a 
dispensing fee for inhalation drugs, and a supplying fee to pharmacies 
for certain Part B drugs.
    In this section, we discuss recent statutory changes to the ASP 
methodology and other drug payment issues.
a. Determining the Payment Amount Based on ASP Data
    The methodology for developing Medicare drug payment allowances 
based on the manufacturers' submitted ASP data is specified in 42 CFR, 
part 414, subpart K. We initially established this regulatory text in 
the CY 2005 PFS

[[Page 38521]]

final rule with comment period (69 FR 66424). We further described the 
formula we use to calculate the payment amount for each Billing code in 
the CY 2006 PFS proposed rule (70 FR 45844) and final rule with comment 
period (70 FR 70217) With the enactment of the MMSEA, the formula we 
use changed beginning April 1, 2008. Section 112(a) of the MMSEA 
requires us to calculate payment amounts using a specified volume-
weighting methodology. In addition, section 112(b) of the MMSEA sets 
forth a special rule for determining the payment amount for certain 
inhalation drugs.
    For each billing code, we calculate a volume-weighted, ASP-based 
payment amount using the ASP data submitted by manufacturers. 
Manufacturers submit ASP data to us at the 11-digit National Drug Code 
(NDC) level, including the number of units of the 11-digit NDC sold and 
the ASP for those units. We determine the number of billing units in an 
NDC based on the amount of drug in the package. For example: A 
manufacturer sells a box of 4 vials of a drug. Each vial contains 20 
milligrams (mg). The billing code is per 10 MG. The number of billing 
units in this NDC for this billing code is (4 vials x 20 mg)/10 mg = 8 
billable units.
    Prior to April 1, 2008, we used the following three-step formula to 
calculate the payment amount for each billing code. First, we converted 
the manufacturer's ASP for each NDC into the ASP per billing unit by 
dividing the manufacturer's ASP for that NDC by the number of billing 
units in that NDC. Then, we summed the product of the ASP per billing 
unit and the number of units of the 11-digit NDC sold for each NDC 
assigned to the billing code. Then, we divided this total by the sum of 
the number of units of the 11-digit NDC sold for each NDC assigned to 
the billing code.
    Beginning April 1, 2008, we use a two-step formula to calculate the 
payment amount for each billing code. We sum the product of the 
manufacturer's ASP and the number of units of the 11-digit NDC sold for 
each NDC assigned to the billing and payment code, and then divide this 
total by the sum of the product of the number of units of the 11-digit 
NDC sold and the number of billing units in that NDC for each NDC 
assigned to the billing and payment code.
    Prior to April 1, 2008, manufacturers' ASP data for smaller and 
larger package sizes were given the same weight in our calculation of 
the payment amounts; that is, the ASP for one vial was weighted the 
same as the ASP for a box of 10 vials. For payment amounts in effect on 
or after April 1, 2008, manufacturers' ASPs for larger package sizes 
have greater impact on the payment amounts and their ASPs for smaller 
package sizes have less; that is, the ASP for a box of 10 vials is 
given 10 times the weight of a package containing a single vial. The 
payment allowance limits published on our Web site for dates of service 
on or after April 1, 2008 are determined using the new volume-weighting 
methodology and include application of the special payment rule 
described in the following paragraph. (See our Web site at http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/01a_2008aspfiles.asp#TopOfPage.)
    In addition to the formula change, the MMSEA established a special 
payment rule for certain inhalation drugs furnished through an item of 
durable medical equipment (DME). The ``grandfathering'' provision in 
section 1847A(c)(6)(C)(ii) of the Act requires that certain drugs be 
treated as multiple source drugs for purposes of calculating the 
payment allowance limits. Section 112(b) of the MMSEA requires that, 
effective April 1, 2008, the payment amount for inhalation drugs 
furnished through an item of DME is the lesser of the amount determined 
by applying the grandfathering provision or by not applying that 
provision. We reviewed our payment determinations effective January 1, 
2008 to identify the drugs subject to this special rule, and 
implemented this new requirement in accordance with the statutory 
implementation date of April 1, 2008. We identified that albuterol and 
levalbuterol, in both the unit dose and concentrated forms, are subject 
to the special payment rule. At this time, we have not identified other 
inhalation drugs furnished through an item of DME to which section 
112(b) of the MMSEA applies.
    The provisions in section 112 of the MMSEA are self-implementing 
for services on and after April 1, 2008. Because of the limited time 
between enactment and the implementation date, it was not practical to 
undertake and complete rulemaking on this issue prior to implementing 
the required changes. Inclusion of this topic in this proposed rule, is 
our first opportunity to propose conforming changes to the regulatory 
text at Sec.  414.904. We propose to revise paragraphs (a) and (e) to 
codify the changes to the determination of payment amounts as required 
by section 112 of the MMSEA. We are soliciting comments on the proposed 
regulatory text that appears elsewhere in this proposed rule.
b. Average Manufacturer Price (AMP)/ Widely Available Market Prices 
(WAMP)
    Section 1847A(d)(1) of the Act states that ``the Inspector General 
of HHS shall conduct studies, which may include surveys to determine 
the widely available market prices (WAMP) of drugs and biologicals to 
which this section applies, as the Inspector General, in consultation 
with the Secretary, determines to be appropriate.'' Section 1847A(d)(2) 
of the Act states that, ``Based upon such studies and other data for 
drugs and biologicals, the Inspector General shall compare the ASP 
under this section for drugs and biologicals with--
     The WAMP for such drugs and biologicals (if any); and
     The average manufacturer price (AMP) (as determined under 
section 1927(k)(1) of the Act for such drugs and biologicals.''
    Section 1847A(d)(3)(A) of the Act states that, ``The Secretary may 
disregard the average sales price (ASP) for a drug or biological that 
exceeds the WAMP or the AMP for such drug or biological by the 
applicable threshold percentage (as defined in subparagraph (B)).'' The 
applicable threshold percentage is specified in section 
1847A(d)(3)(B)(i) of the Act as 5 percent for CY 2005. For CY 2006 and 
subsequent years, section 1847A(d)(3)(B)(ii) of the Act establishes 
that the applicable threshold percentage is ``the percentage applied 
under this subparagraph subject to such adjustment as the Secretary may 
specify for the WAMP or the AMP, or both.'' In CY 2006 through CY 2008, 
we specified an applicable threshold percentage of 5 percent for both 
the WAMP and AMP. We based this decision on the limited data available 
to support a change in the current threshold percentage.
    For CY 2009, we propose to specify an applicable threshold 
percentage of 5 percent for the WAMP and the AMP. At present, the OIG 
is continuing its ongoing comparison of both the WAMP and the AMP. 
Furthermore, information on how recent changes to the ASP weighting 
methodology may affect the comparison of WAMP/AMP to ASP is not 
available at this time. Since we do not have data suggesting a more 
appropriate level at this time, we believe that continuing the 5 
percent applicable threshold percentage for both the WAMP and AMP is 
appropriate for CY 2009.
    As we noted in the CY 2008 PFS final rule with comment period (72 
FR 66259), we understand that there are complicated operational issues

[[Page 38522]]

associated with potential payment substitutions. We will continue to 
proceed cautiously in this area and provide stakeholders, particularly 
manufacturers of drugs impacted by potential price substitutions, with 
adequate notice of our intentions regarding such, including the 
opportunity to provide input with regard to the processes for 
substituting the WAMP or the AMP for the ASP. As part of our approach, 
we intend to develop a better understanding of the issues that may be 
related to certain drugs for which the WAMP and AMP may be lower than 
the ASP over time.
    We welcome comments on our proposal to continue the applicable 
threshold at 5 percent for both the WAMP and AMP for CY 2009.
2. Competitive Acquisition Program (CAP) Issues
    [If you choose to comment on issues in this section, please include 
the caption ``CAP ISSUES'' at the beginning of your comments.]
    Section 303(d) of the MMA requires the implementation of a 
competitive acquisition program for certain Medicare Part B drugs not 
paid on a cost or prospective payment system basis. The provisions for 
acquiring and billing drugs under the CAP were described in the 
Competitive Acquisition of Outpatient Drugs and Biologicals Under Part 
B proposed rule (March 4, 2005, 70 FR 10746) and the interim final rule 
(July 6, 2005, 70 FR 39022), and certain provisions were finalized in 
the CY 2006 PFS final rule with comment period (70 FR 70236). The CY 
2007 PFS final rule with comment period (70 FR 66260) then finalized 
portions of the July 6, 2005 IFC that had not already been finalized.
    The CAP is an alternative to the ASP (buy and bill) methodology of 
obtaining certain Part B drugs used incident to physicians' services. 
Physicians who choose to participate in the CAP obtain drugs from 
vendors selected through a competitive bidding process and approved by 
CMS. Under the CAP, physicians agree to obtain all of the approximately 
190 drugs on the CAP drug list from an approved CAP vendor. A vendor 
retains title to the drug until it is administered, bills Medicare for 
the drug, and bills the beneficiary for cost sharing amount once the 
drug has been administered. The physician bills Medicare only for 
administering the drug to the beneficiary. The CAP currently operates 
with a single CAP drug category. CAP claims processing began on July 1, 
2006.
    After the CAP was implemented, section 108 of the MIEA-TRHCA made 
changes to the CAP payment methodology. Section 108(a)(2) of the MIEA-
TRHCA requires the Secretary to establish (by program instruction or 
otherwise) a post-payment review process (which may include the use of 
statistical sampling) to assure that payment is made for a drug or 
biological only if the drug or biological has been administered to a 
beneficiary. The Secretary is required to recoup, offset, or collect 
any overpayments. This statutory change took effect on April 1, 2007. 
Conforming changes were proposed in the CY 2008 PFS proposed rule (72 
FR 38153) and finalized in the CY 2008 PFS final rule with comment 
period (72 FR 66260).
    In this section, we are proposing several refinements to the CAP 
regarding the annual CAP payment amount update mechanism, the 
definition of a CAP physician, the restriction on physician 
transportation of CAP drugs, and the dispute resolution process. Our 
proposed refinements are based on the operational experience we have 
gained since the implementation of the program and we believe that they 
will improve this relatively new and growing program. Although we are 
currently evaluating bids for CY 2009 through CY 2011 approved CAP 
vendor contracts, we do not believe that the proposals in this rule 
will conflict with the evaluation of bids or the performance of the CAP 
vendor contracts because we do not expect these proposals to change the 
way payment is made under the CAP, to significantly change how 
prospective vendors are expected to furnish drugs under the CAP, or to 
significantly affect the number of participating CAP physicians.
a. Annual CAP Payment Amount Update Mechanism
    Payment amounts for drugs furnished during the first year of an 
approved CAP vendor's contract are set through a competitive process 
using bidders' prices and limited by the ASP based payment amount. This 
process was described in detail in the July 6, 2005 IFC (70 FR 39069 
through 39078). Section 414.906(c) provides for updates to an approved 
CAP vendor's payment amounts based on the vendor's reasonable net 
acquisition costs (RNAC).
    In the July 6, 2005 IFC, we described a two-step process to 
recompute the single price for each drug in the single drug category if 
there is a change in the costs reported by a particular vendor. We 
stated that ``we would adjust the bid price that the vendor originally 
submitted by the percentage change indicated in the cost information 
that the vendor disclosed. Next, we would recompute the single price 
for the drug as the median of all of these adjusted bid prices'' (70 FR 
39076). The two-step process contemplated that there would be more than 
one approved CAP vendor at the time prices were to be adjusted and that 
no successful bidders would choose not to participate in the CAP.
    However, during the first round of CAP contracting after offering 
more than one contract, we entered a contract with only one bidder. 
Thus, during the 2008 price update calculation process, we developed an 
approach to account for the lack of RNAC data for bidders who chose not 
to participate in the CAP. We believe that the approach we used to 
adjust prices for the 2008 contract year is consistent with Sec.  
414.906(c) and with the July 6, 2005 IFC because it retains a two step 
calculation based on the approved CAP vendors' RNAC, as well as the 
calculation of a median of adjusted bid prices.
    This approach was posted on the Approved CAP Vendor page of the CMS 
Web site at http://www.cms.hhs.gov/CompetitiveAcquisforBios/15_Approved_Vendor.asp . The percent change in RNAC for 2008 was 
calculated based on data supplied by the approved CAP vendor. This 
percent change in RNAC was used as a proxy for the percent change in 
RNAC for successful bidders that chose not to become approved CAP 
vendors.
    We are proposing to continue using this approach for future CAP 
payment amount updates where the number of approved CAP vendors is less 
than the number of successful bidders. We would continue to use the 
average of the approved CAP vendor-supplied RNAC data as a proxy for 
data from vendors who bid successfully but are not participating in the 
CAP. For example, if the payment amounts for the first year of a CAP 
contract are based on five successful bidders, but only four have 
signed contracts to supply drugs under the CAP (that is, there are four 
approved CAP vendors), only RNAC data collected from the four approved 
CAP vendors would be used to calculate the percent change in the RNAC. 
The average of the four approved CAP vendors' adjusted payment amounts 
would be used as a proxy for the RNAC of the successful bidder that is 
not participating in the CAP. The updated CAP payment amount would then 
be calculated as the median of the five data points (one data point for 
each approved CAP vendor's updated payment amount, and one data point 
calculated using the average of the approved CAP vendor's RNAC). 
Similarly, if there were five successful bidders but only three chose

[[Page 38523]]

to become approved CAP vendors, the average of the three approved CAP 
vendors' RNAC would be the proxy for the RNAC of the two bidders who 
did not participate. The median of those five data points would become 
the updated CAP payment amount.
    We believe this approach would provide us with a flexible method 
for updating CAP prices that is consistent with our original policy as 
stated in the July 6, 2005 IFC, but that accounts for bidders or 
approved CAP vendors who are not participating in the program at the 
time the price updates are calculated. This would include bidders who 
choose not to participate at the beginning of a contract and those who 
drop out later. Our proposal clarifies the approach used to calculate 
the RNAC and does not seek to alter the general approach to the payment 
calculation update described in the July 6, 2005 IFC and existing 
regulation text. We welcome comments on this approach.
b. Definition of a CAP Physician
    In the July 6, 2005 IFC, we stated that section 1847B of the Act 
most closely describes a system for the provision of and the payment 
for drugs provided incident to a physician's service (70 FR 39026). In 
the CY 2006 PFS final rule with comment period (70 FR 70258), we stated 
that for the purposes of the CAP, a physician includes all 
practitioners that meet the definition of a ``physician'' in section 
1861(r) of the Act. This definition includes doctors of medicine, 
osteopathy, dental surgery, dental medicine, podiatry, and optometry, 
as well as chiropractors. However, this definition does not include 
other health care professionals, such as NPs, CNSs, and other 
professions such as PAs who may be able to legally prescribe 
medications and enroll in Medicare. Our 2005 CAP definition was not 
intended to exclude these practitioners who are appropriately billing 
Medicare for legally prescribed medications administered in a capacity 
that would be classified as incident to a physician's services if the 
medications were administered by a physician. We are concerned that the 
existing CAP definition of a physician is unnecessarily restrictive and 
could potentially affect access to the CAP for a small segment of 
providers that should be eligible for participation in the CAP in 
situations where they currently bill Medicare separately and 
appropriately.
    Therefore, we are proposing to further clarify that, for the 
purposes of the CAP, the definition of a physician includes all 
practitioners that meet the definition of a ``physician'' in section 
1861(r) of the Act, as well as practitioners (such as NPs, CNSs and 
PAs) described in section 1861(s)(2)(K) of the Act and other 
practitioners who legally prescribe drugs associated with services 
under section 1861(s) of the Act if those services and the associated 
drugs are covered when furnished incident to a physician's service. 
While we believe that most practitioners described in section 
1861(s)(2)(K) of the Act would bill under specific physician provider 
numbers, it is not our intent to exclude practitioners who are able to 
bill independently for drugs associated with services that are covered 
when provided by a physician and legally authorized to be performed.
    Our proposal is specific to the Part B Drug CAP and does not affect 
the definition of physician in section 1861(r) of the Act, or the 
definition of Medical and Other Health Services described in section 
1861(s) of the Act. This proposal also does not seek to expand the 
scope of the CAP beyond what has been described in previous rules, 
other than to clarify that a small number of providers who are enrolled 
in Medicare, and who legally prescribe drugs associated with services 
under section 1861(s) of the Act and can be paid by Medicare may elect 
to participate in the CAP if billing independently. In short, the CAP 
remains at this time a program that provides Part B drugs furnished 
incident to a physician's services.
    We anticipate that a small number of NPs, CNSs, and PAs would be 
affected by the implementation of this proposal. We seek comment on how 
this clarification would affect the various professions that bill 
Medicare for drugs furnished incident to services that are typically 
provided by a physician. If this provision is implemented, we believe 
that the total number of CAP participants would not increase by more 
than 1 percent, and we seek comment on level of interest associated 
with the implementation of this proposal.
c. Easing the Restriction on Physician Transport of CAP Drugs Between 
Practice Locations
    Although section 1847B(b)(4)(E) of the Act provides for the 
shipment of CAP drugs to settings other than a participating CAP 
physician's office under certain conditions, in initially implementing 
the CAP, we did not propose to implement the CAP in alternative 
settings. In the July 6, 2005 IFC (70 FR 39047), we described both 
comments that supported the idea of allowing participating CAP 
physicians to transport drugs to multiple office locations, and 
comments that raised concerns about the risk of damaging a drug that 
has not been kept under appropriate conditions while being transported. 
Specifically, one commenter pointed out that a physician may have 
several practice locations. If the beneficiary should change his or her 
site of treatment from the one to which the vendor originally shipped 
the drug, the physician would need an appropriate way of transporting 
the drugs from one location to another. Some potential vendors stated 
that, while drugs were being transported to an alternate location, 
spoilage and breakage could occur. They expressed concern that because 
the vendor retains ownership of the drug until it is administered to 
the beneficiary, they could be held liable if the drug deteriorates and 
is administered to the beneficiary in substandard condition.
    Ultimately, we implemented the CAP with a restriction that CAP 
drugs be shipped directly to the participating CAP physician, as stated 
in Sec.  414.906(a)(4), and that participating CAP physicians may not 
transport CAP drugs from one location to another, as stated in Sec.  
414.908(a)(3)(xii).
    However, we were aware that physicians may desire to administer 
drugs in alternative settings. Therefore, in the July 6, 2005 IFC, we 
sought comment on how this could be accommodated under the CAP in a way 
that addresses the potential vendors' concerns about product integrity 
and damage to the approved CAP vendors' property (70 FR 39048). We 
discussed comments submitted in response to the July 6, 2005 IFC in the 
CY 2008 PFS proposed rule (72 FR 38158). Several comments suggested 
either easing or removing the restriction on transporting drugs to 
other locations. Commenters believed that physicians, particularly 
those who specialize in oncology, and their staff are knowledgeable 
about drug stability and handling, and therefore, were capable of 
assuming this responsibility. Other commenters indicated that 
transporting the drug to another office location may allow for 
flexibility in scheduling patient visits.
    We also received several comments discussing the impact of CAP 
delivery times on rural clinics and offices with satellite locations. 
Many of these responses discussed how easing the restriction on 
transporting CAP drugs between locations would be welcome in rural 
areas and for satellite offices with limited hours where personnel may 
not always be available to receive CAP drug shipments.
    We also requested comments in the CY 2008 PFS proposed rule (72 FR 
38157) on the potential feasibility of easing the restriction on 
transporting

[[Page 38524]]

CAP drugs where this is permitted by State law and other applicable 
laws and regulations. We asked commenters to consider how such a policy 
could be constructed so that the approved CAP vendor could retain 
control over how the drugs that it owns are handled. We also requested 
comments on other issues that we should take into account concerning 
transportation of CAP drugs between the practice locations listed on a 
physician's CAP election agreement form. Additionally, we also 
solicited comments on the following areas for consideration in the 
possible development of future proposals:
     How to structure requirements so that drugs are not 
subjected to conditions that will jeopardize their integrity, stability 
or sterility while being transported, and steps to keep transportation 
activities consistent with all applicable laws and regulations;
     Whether any agreement allowing participating CAP 
physicians to transport CAP drugs to alternate practice locations 
should be voluntary. This means that approved CAP vendors would not be 
required to offer such an agreement and physicians who participate in 
the CAP would not be required to accept such an offer; and
     Whether such an agreement should be documented in writing, 
and whether it is necessary to create any restrictions on which CAP 
drugs could be transported.
    We responded to submitted comments in the CY 2008 PFS final rule 
with comment period (72 FR 66268). Several comments supported the 
concept of easing the restriction on transporting CAP drugs if this 
could be done safely, and if changes were consistent with applicable 
rules, regulations, and within the limitations of product stability and 
integrity. The restriction on transporting CAP drugs was perceived as a 
barrier to physician participation in the program. One commenter stated 
that elimination of the restriction would result in the same 
flexibility as the ASP (buy and bill) method of acquiring drugs. 
Another commenter expressed a strong desire to implement these changes 
promptly.
    A few commenters also cautioned us to implement appropriate 
safeguards if we chose to ease the transportation restriction. One 
commenter asked that the safeguards be available for public scrutiny 
before they are implemented. Conversely, other commenters stated that 
the risk of damage to CAP drugs would be minimal since a physician and 
his or her staff are knowledgeable about a given drug's stability, 
handling, and transportation requirements.
    We are mindful of the concerns expressed by the commenters and are 
now proposing to permit transport of CAP drug between a participating 
CAP physician's practice locations subject to voluntary agreements 
between the approved CAP vendor and the participating CAP physician. We 
propose that such agreements must comply with all applicable State and 
Federal laws and regulations and product liability requirements, and be 
documented in writing.
    We would like to reiterate the voluntary nature of these proposed 
agreements. Approved CAP vendors would not be required to offer and 
participating CAP physicians would not be required to accept such 
agreements when selecting an approved CAP vendor. An approved CAP 
vendor may not refuse to do business with a participating CAP physician 
because the participating CAP physician has declined to enter into such 
an agreement with the approved CAP vendor. Furthermore, we are not 
seeking to define which CAP drugs may be subject to the proposed 
voluntary agreements. In other words, each approved CAP vendor could 
specify which CAP drug(s) could be transported.
    However, our proposal contains certain limitations. In previous 
rulemaking, we have described requirements for voluntary agreements 
between approved CAP vendors and participating CAP physicians. In the 
July 6, 2005 IFC (70 FR 39050) and the CY 2006 PFS final rule (70 FR 
70251 through 70252), we stated that we will not dictate the breadth of 
use or the specific obligations contained in voluntary arrangements 
between approved CAP vendors and physicians, other than to note that 
they must comply with applicable law and to prohibit approved CAP 
vendors from coercing participating CAP physicians into entering any of 
these arrangements. Parties to such arrangements must also ensure that 
the arrangements do not violate the physician self-referral (``Stark'') 
prohibition (section 1877 of the Act), the Federal anti-kickback 
statute (section 1128B(b) of the Act), or any other Federal or State 
law or regulation governing billing or claims submission. We propose to 
apply these standards to any agreement for the transport of CAP drugs.
    We are also particularly concerned about opportunities for 
disruption in the drug's chain of custody and appropriate storage and 
handling conditions that may ultimately affect patient care or increase 
the risk of drug theft or diversion. Therefore, in order to maintain 
safety and drug integrity in the CAP and to protect against the 
fraudulent diversion of CAP drugs, we propose that any voluntary 
agreements between an approved CAP vendor and a participating CAP 
physician regarding the transportation of CAP drug must include 
requirements that drugs are not subjected to conditions that will 
jeopardize their integrity, stability, and/or sterility while being 
transported. We welcome comments on these issues, including the 
identification who may transport the drugs, how documentation of 
transportation activities could be accomplished, and how the oversight 
of such agreements will be carried out.
    In conclusion, we believe that this proposal to ease the 
restriction on transporting CAP drugs between a participating CAP 
physician's practice locations--when agreed upon by the participating 
CAP physician and the approved CAP vendor--will make the CAP more 
flexible and ultimately more appealing to participating CAP physicians. 
Additionally, we believe that this proposal will facilitate the 
participation of CAP physicians who have office locations in rural 
areas and/or have satellite offices with limited hours. Moreover, we 
believe that this proposal will promote beneficiary care, particularly 
for beneficiaries who live in rural locations. Since physicians would 
be able to transport CAP drugs to another office location in accordance 
with a voluntary agreement with their approved CAP vendor, 
beneficiaries would have more flexibility in scheduling the location of 
their appointments. We invite comments about this proposal.
d. Dispute Resolution Process
    Section 1847B of the Act is generally silent with regard to the 
treatment of disputes surrounding the delivery of drugs and the denial 
of drug claims. However, section 1847B(b)(2)(A)(ii)(II) of the Act does 
contain a reference to a grievance process that is included among the 
quality and service requirements that must be met by approved CAP 
vendors. In the July 6, 2005 IFC (70 FR 39054 through 39058), we 
described the process for the resolution of participating CAP 
physicians' drug quality and service complaints and vendors' complaints 
regarding noncompliant participating CAP physicians. We encouraged 
participating CAP physicians, beneficiaries, and vendors to use 
informal communication as a first step to resolve service-related 
administration issues. However, we recognized that certain disputes 
would require a more structured approach, and therefore, we established 
processes under Sec.  414.916 and Sec.  414.917.

[[Page 38525]]

1. Termination of CAP Drug Shipments to Suspended CAP Physicians
    Section 414.916 provides a mechanism for approved CAP vendors to 
address noncompliance problems with CAP physicians. As stated at Sec.  
414.916(a), ``Cases of an approved CAP vendor's dissatisfaction with 
denied drug claims are resolved through a voluntary alternative dispute 
resolution process delivered by the designated carrier, and a 
reconsideration process provided by CMS.'' Once the decision is made to 
suspend a participating CAP physician's CAP election agreement, the 
participating CAP physician will be suspended from the CAP as described 
in Sec.  414.916(b)(3).
    Physicians whose participation in the CAP has been suspended are 
not eligible to receive CAP drugs. This is implied in Sec.  
414.906(a)(4), which speaks of approved CAP vendors providing CAP drugs 
directly to ``[a] participating CAP physician.'' However, we believe 
that the clarity of our dispute resolution regulations would be 
improved if this drug delivery issue were stated explicitly. Therefore, 
we are proposing to revise Sec.  414.916 to specify that approved CAP 
vendors shall not deliver CAP drugs to participating CAP physicians 
whose participation in the CAP has suspended after an initial 
determination by CMS. This suspension in drug shipment would also apply 
to physicians engaged in the reconsideration process outlined in Sec.  
414.916(c). We are also making a conforming change in the regulation 
text in Sec.  414.914(f)(12). These changes are in accord with the 
underlying intent of Sec.  414.916, namely to provide a mechanism for 
vendors to address noncompliance problems with CAP physicians, and we 
believe that these changes will increase the clarity of our 
regulations. We note that the participating CAP physicians who are 
suspended from participation in the CAP will be able to obtain drugs 
and bill for them under the ASP payment system provided they have not 
been excluded from participation in Medicare and/or their billing 
privileges have not been revoked. We welcome comments about this 
proposal.
2. Approved CAP Vendor's Status During the Reconsideration Process
    Section 414.917 pertains to the dispute resolution process for 
participating CAP physicians. As discussed in the July 6, 2005 IFC (70 
FR 39057 through 39058), if a physician finds an approved CAP vendor's 
service or the quality of a CAP drug supplied by the approved CAP 
vendor to be unsatisfactory, then the physician may address the issues 
first through the approved CAP vendor's grievance process, and second 
through an alternative dispute resolution process administered by the 
designated carrier and CMS. In turn, the designated carrier would 
gather information about the issue as outlined in Sec.  414.917(b)(2) 
and make a recommendation to CMS on whether the approved CAP vendor has 
been meeting the service and quality obligations of its CAP contract. 
We would then review and act on that recommendation after gathering any 
necessary, additional information from the participating CAP physician 
and approved CAP vendor. If we suspend an approved CAP vendor's CAP 
contract for noncompliance or terminate the CAP contract in accordance 
with Sec.  414.914(a), the approved CAP vendor may request a 
reconsideration in accordance with Sec.  414.917(c).
    In the July 6, 2005 IFC (70 FR 39058), we indicated that the 
approved CAP vendor's participation in the CAP would be suspended while 
the approved CAP vendor's appeal of our decision is pending. This 
suspended status is also implied in Sec.  414.917(c)(9), which states 
that the ``approved CAP vendor may resume participation in CAP'' if the 
final reconsideration determination is favorable to the approved CAP 
vendor. In order to improve the clarity of our regulations, we propose 
to indicate that the approved CAP vendor's contract will remain 
suspended during the reconsideration period in Sec.  414.917. We 
believe this proposed technical change is consistent with basic 
contracting concepts and with our current practices for the CAP. We 
invite comments regarding this proposed clarification.

G. Application of the HPSA Bonus Payment

    [If you choose to comment on issues in this section, please include 
the caption ``HPSA BONUS PAYMENT'' at the beginning of your comments.]
    Section 1833(m) of the Act provides for an additional 10 percent 
bonus payment for physicians' services furnished in a year to a covered 
individual in an area that is designated as a geographic Health 
Professional Shortage Area (HPSA) as identified by the Secretary prior 
to the beginning of such year. The statute indicates that the HPSA 
bonus payment will be made for services furnished during a year in 
areas that have been designated as HPSAs prior to the beginning of that 
year. As a result, the HPSA bonus payment is made for physicians' 
services furnished in an area designated as of December 31 of the prior 
year, even if the area's HPSA designation is removed during the current 
year. However, for physicians' services furnished in areas that are 
designated as geographic HPSAs after the beginning of a year, the HPSA 
bonus payment is not made until the following year, if the area is 
still designated as of December 31 of that year.
    In the CY 2005 PFS final rule with comment period (69 FR 66297), we 
stated that determination of zip codes for automatic HPSA bonus payment 
will be made on an annual basis and that there would be no updates to 
the zip code file during the year. We also stated that physicians 
furnishing covered services in ``newly designated'' HPSAs may add a 
modifier to their Medicare claims to collect the HPSA bonus payment 
until our next annual posting of zip codes for which automatic payment 
of the bonus will be made.
    In Sec.  414.67, we are proposing to revise our regulations to 
clarify that physicians who furnish services in areas that are 
designated as geographic HPSAs as of December 31 of the prior year but 
not included on the list of zip codes for automated HPSA bonus payments 
should use the AQ modifier to receive the HPSA bonus payment.

H. Provisions Related to Payment for Renal Dialysis Services Furnished 
by End-Stage Renal Disease (ESRD) Facilities

    [If you choose to comment on issues in this section, please include 
the caption ``ESRD PROVISIONS'' at the beginning of your comments.]
    Since August 1, 1983, payment for dialysis services furnished by 
end-stage renal disease (ESRD) facilities has been based on a composite 
rate payment system that provides a fixed, prospectively determined 
amount per dialysis treatment, adjusted for geographic differences in 
area wage levels. In accordance with section 1881(b)(7) of the Act, 
separate composite rates have been established for hospital-based and 
independent ESRD facilities. The composite rate is designed to cover a 
package of goods and services needed to furnish dialysis treatments 
that include, but not be limited to, certain routinely provided drugs, 
laboratory tests, supplies, and equipment. Unless specifically included 
in the composite rate, other injectable drugs and laboratory tests 
medically necessary for the care of the dialysis patient are separately 
billable. Effective on August 1, 1983, the base composite rates per 
treatment were $123 for independent ESRD facilities and $127 for 
hospital-based ESRD facilities. The Congress has enacted a number of

[[Page 38526]]

adjustments to the composite rate since that time. The current 2008 
base composite rates are $132.49 for independent ESRD facilities and 
$136.68 for hospital-based ESRD facilities.
    Section 623 of the MMA amended section 1881 of the Act to require 
changes to the composite rate payment methodology, as well as to the 
pricing methodology for separately billable drugs and biologicals 
furnished by ESRD facilities.
    Section 1881(b)(12) of the Act, as added by the MMA, requires the 
establishment of a basic case-mix adjusted prospective payment system 
(PPS) that include services comprising the composite rate and an add-on 
to the composite rate component for the difference between current 
payments for separately billed drugs and the revised drug pricing 
specified in the statute. In addition, section 1881(b)(12) of the Act 
requires that the composite rate be adjusted for a number of patient 
characteristics (case-mix) and section 1881(b)(12)(D) of the Act gives 
the Secretary discretion to revise the wage indices and the urban and 
rural definitions used to develop them. Finally, section 1881(b)(12)(E) 
of the Act imposes a budget neutrality (BN) adjustment, so that 
aggregate payments under the basic case-mix adjusted composite payment 
system for CY 2005 equals the aggregate payments for the same period if 
section 1881(b)(12) of the Act does not apply.
    Before January 1, 2005, payment to both independent and hospital-
based facilities for the anti-anemia drug, erythropoietin (EPO) was 
established under section 1881(b)(11) of the Act at $10.00 per 1,000 
units. For independent ESRD facilities, payment for all other 
separately billable drugs and biologicals are based on the lower of 
actual charges or 95 percent of the average wholesale price (AWP). 
Hospital-based ESRD facilities were paid based on the reasonable cost 
methodology for separately billed drugs and biologicals (other than 
EPO) furnished to dialysis patients. Changes to the payment methodology 
for separately billed ESRD drugs and biologicals that were established 
by the MMA effective January 1, 2005, are described in sections II.H.1. 
and II.H.2. These changes affected payments in both CY 2005 and CY 
2006.
    In addition, section 623(f)(1) of the MMA directs the Secretary to 
submit a Report to Congress detailing the elements and features for the 
design and implementation of a bundled PPS for services furnished by 
ESRD facilities to Medicare beneficiaries. This bundled PPS is a 
different way of payment for ESRD services since it includes not only 
composite rate services, but could also include separately billable 
drugs (including EPO), laboratory tests, and other separately billable 
items into one PPS payment rate. The Report to Congress was released 
February 20, 2008.
1. CY 2005 Revisions
    In the CY 2005 PFS final rule with comment period (69 FR 66319 
through 66334), we implemented section 1881(b) of the Act, as amended 
by section 623 of the MMA, and revised payments to ESRD facilities. 
These revisions were effective January 1, 2005, and included 
implementation of a case-mix adjusted payment system that incorporated 
services that comprise the composite rate; an update of 1.6 percent to 
the composite rate component of the payment system; and a drug add-on 
adjustment of 8.7 percent to the composite rate to account for the 
difference between pre-MMA payments for separately billable drugs and 
payments based on revised drug pricing for 2005 which used acquisition 
costs. Effective April 1, 2005, the CY 2005 PFS final rule with comment 
period also implemented case-mix adjustments to the composite rate for 
certain patient characteristics (that is, age, low body mass index, and 
body surface area).
    In addition, to implement section 1881(b)(13) of the Act, we 
revised payments for drugs billed separately by independent ESRD 
facilities, paying for the top 10 ESRD drugs based on acquisition costs 
(as determined by the OIG) and for other separately billed drugs at the 
average sales price +6 percent (hereafter referred to as ASP+6 
percent). Hospital-based ESRD facilities continued to receive cost-
based payments for all separately billable drugs and biologicals except 
for EPO which was paid based on average acquisition costs.
2. CY 2006 Revisions
    In the CY 2006 PFS final rule with comment period (70 FR 70161), we 
implemented additional revisions to payments to ESRD facilities under 
section 623 of the MMA. For CY 2006, we further revised the drug 
payment methodology applicable to drugs furnished by ESRD facilities. 
All separately billed drugs and biologicals furnished by both hospital-
based and independent ESRD facilities are now paid based on ASP+6 
percent.
    We recalculated the 2005 drug add-on adjustment to reflect the 
difference in payments between the pre-MMA AWP pricing and the revised 
pricing based on ASP+6 percent. The recalculation did not affect the 
actual add-on adjustment applied to payments in 2005, but provided an 
estimate of what the adjustment would have been had the 2006 payment 
methodology been in effect in CY 2005. The drug add-on adjustment was 
then updated to reflect the expected growth in expenditures for 
separately billable drugs in CY 2006.
    As of January 1, 2006, we also implemented a revised geographic 
adjustment authorized by section 1881(b)(12) of the Act. As part of 
that change, we--
     Revised the labor market areas to incorporate the Core-
Based Statistical Area (CBSA) designations established by the Office of 
Management and Budget (OMB);
     Eliminated the wage index ceiling and reduced the floor to 
0.8500; and
     Revised the labor portion of the composite rate to which 
the geographic adjustment is applied.
    We also provided a 4-year transition from the previous wage-
adjusted composite rates to the current wage-adjusted rates. For CY 
2006, 25 percent of the payment is based on the revised geographic 
adjustments, and the remaining 75 percent of payment is based on the 
old metropolitan statistical area-based (MSA-based) payments.
    In addition, section 5106 of the DRA provided for a 1.6 percent 
update to the composite rate component of the basic case-mix adjusted 
payment system, effective January 1, 2006. As a result, the base 
composite rate was increased to $130.40 for independent ESRD facilities 
and $134.53 for hospital-based facilities. For 2006, the drug add-on 
adjustment (including the growth update) was 14.5 percent.
3. CY 2007 Updates
    In the CY 2007 PFS final rule with comment period (71 FR 69681), we 
implemented the following updates to the basic case-mix adjusted 
payment system:
     An update to the wage index adjustments to reflect the 
latest hospital wage data, including a BN adjustment of 1.052818 to the 
wage index for CY 2007.
     A method to annually calculate the growth update to the 
drug add-on adjustment required by section 1881(b)(12) of the Act, as 
well as a growth update to the drug add-on adjustment of 0.5 percent 
for CY 2007. Therefore, effective January 1, 2007 the drug add-on 
adjustment was increased to 15.1 percent.
    In addition, section 103 of the MIEA-TRHCA established a 1.6 
percent update to the composite rate portion of the payment system, 
effective April 1, 2007.

[[Page 38527]]

Therefore, the current base composite rate is $132.49 for independent 
facilities and $136.68 for hospital-based facilities. Also, the effect 
of this increase in the composite rate portion of the payment system 
was a reduction in the drug add-on adjustment to 14.9 percent, 
effective April 1, 2007. Since the statutory increase only applied to 
the composite rate, this adjustment to the drug add-on percent was 
needed to maintain the drug add-on amount constant.
4. CY 2008 Updates
    In the CY 2008 PFS final rule with comment period (72 FR 66280), we 
implemented the following updates to the basic case-mix adjusted 
payment system:
     A growth update to the drug add-on adjustment of 0.5 
percent. As a result, the drug add-on adjustment to the composite 
payment rate increased from 14.9 percent to 15.5 percent.
     An update to the wage index adjustments to reflect the 
latest hospital wage data, including a BN adjustment of 1.055473 to the 
wage index for CY 2008.
    For CY 2008, consistent with the transition blends announced in the 
CY 2006 PFS final rule with comment period (70 FR 70170), we 
implemented the third year of the transition to the CBSA-based wage 
index. In addition, the wage index floor was reduced from 0.8000 to 
0.7500. After applying a BN adjustment of 1.055473, the wage index 
floor was 0.7916.
5. Provisions of This Proposed Rule
    For CY 2009, we are proposing the following updates to the 
composite rate payment system:
     A growth update to the drug add-on adjustment to the 
composite rates;
     An update to the wage index adjustment to reflect the 
latest available wage data, including a revised BN adjustment;
     The completion of the 4-year transition from the previous 
wage-adjusted composite rates to the CBSA wage-adjusted rates, where 
payment will be based on 100 percent of the revised geographic 
adjustments; and
     A reduction of the wage index floor from 0.7500 to 0.7000.
a. Proposed Growth Update to the Drug Add-on Adjustment to the 
Composite Rates
    Section 623(d) of the MMA added section 1881(b)(12)(B)(ii) of the 
Act which requires establishing an add-on to the composite rate to 
account for changes in the drug payment methodology stemming from 
enactment of the MMA. Section 1881(b)(12)(c) of the Act provides that 
the drug add-on must reflect the difference in aggregate payments 
between the revised drug payment methodology for separately billable 
ESRD drugs and the AWP payment methodology. In 2005, we generally paid 
for ESRD drugs based on average acquisition costs. Thus the difference 
from AWP pricing was calculated using acquisition costs. However, in 
2006 when we moved to ASP pricing for ESRD drugs, we recalculated the 
difference from AWP pricing using ASP prices.
    In addition, section 1881(b)(12)(F) of the Act requires that, 
beginning in CY 2006, we establish an annual update to the drug add-on 
to reflect estimated growth in expenditures for separately billable 
drugs and biologicals furnished by ESRD facilities. This growth update 
applies only to the drug add-on portion of the case-mix adjusted 
payment system.
    The CY 2008 drug add-on adjustment to the composite rate is 15.5 
percent. The drug add-on adjustment for CY 2008 incorporates an 
inflation adjustment of 0.5 percent. This computation is explained in 
detail in the CY 2008 PFS final rule with comment period (72 FR 66280 
through 66282).
(i) Estimating Growth in Expenditures for Drugs and Biologicals for CY 
2009
    Section 1881(b)(12)(F) of the Act specifies that the drug add-on 
update must reflect ``the estimated growth in expenditures for drugs 
and biologicals (including erythropoietin) that are separately billable 
* * *'' By referring to ``expenditures'', we stated previously that we 
believe the statute contemplates that the update would account for both 
increases in drug prices, as well as increases in utilization of those 
drugs.
    In the CY 2007 PFS final rule with comment period (71 FR 69682), we 
established an interim methodology for annually estimating the growth 
in ESRD drugs and biological expenditures that uses the Producer Price 
Index (PPI) for pharmaceuticals as a proxy for pricing growth in 
conjunction with 2 years of ESRD drug data to estimate per patient 
utilization growth. We indicated that this methodology would be used to 
update the drug add-on to the composite rate until such time that we 
had sufficient ESRD drug expenditure data to project the growth in ESRD 
drug expenditure beginning in CY 2010.
    However, upon further contemplation, we believe that a better 
interpretation of the statutory reference to growth in expenditures 
contemplates that we would consider any change in drug pricing or 
utilization, not only increases, as we develop the update to the drug 
add-on adjustment. We have completed an analysis of ASP prices for ESRD 
drugs from 2006 through 2008, which shows a declining trend in ASP 
pricing for ESRD drugs. Accordingly, we are concerned that the use of 
the PPI as a proxy for ESRD drug pricing growth may no longer be 
appropriate. This is because the PPI is a general measure for all drugs 
and does not reflect price changes specific to ESRD drugs. We continue 
to lack sufficient expenditure data for trend analysis purposes. Given 
that we do have sufficient ASP pricing information on ESRD drug prices 
to establish a price forecast specific to ESRD drugs, and since this 
forecast is based on actual ESRD drug pricing data, we believe it is a 
more accurate measure of the price component changes for purposes of 
estimating the growth in total expenditures for ESRD drugs for 2009. 
Accordingly, for CY 2009, we propose revising the interim methodology 
for estimating the growth in ESRD drug expenditures by using ASP 
pricing to estimate the price component of the update calculation.
    As detailed below in this section, we are proposing for CY 2009 to 
estimate price growth using historical ASP pricing data for ESRD drugs 
for CY 2006 through CY 2008 and to estimate growth in per patient 
utilization of drugs by using ESRD facility historical drug expenditure 
data for CY 2006 and CY 2007.
(ii) Estimating Growth in ESRD Drug Prices
    To estimate price growth we used ASP pricing data for the four 
quarters of 2006 and 2007, and the two available quarters of 2008. We 
anticipate having at least three quarters of 2008 data available in 
time for the final rule. We calculated the weighted price change, for 
the original top ten ESRD drugs for which we had acquisition pricing, 
plus Aranesp. Tables 4 and 5 show the average ASP drug prices and the 
2007 weights used. In CY 2006 and CY 2007 we calculated a weighted 
average price reduction of 1.8 percent. We also calculated a weighted 
average price reduction of 2.1 percent between CY 2007 and CY 2008. The 
overall average price reduction is 1.9 percent over the 3-year period, 
thus, the proposed weighted average ESRD drug pricing change projected 
for CY 2009 is a reduction of 1.9 percent.

[[Page 38528]]



          Table 4.--CY 2006, 2007 and 2008 ESRD Drug ASP Prices
------------------------------------------------------------------------
             Independent drugs                2006      2007      2008
------------------------------------------------------------------------
EPO.......................................      9.46      9.17      9.02
Paricalcitol..............................      3.81      3.79      3.86
Sodium-ferric-glut........................      4.88      4.76      4.82
Iron-sucrose..............................      0.36      0.37      0.36
Levocarnitine.............................      9.44      8.07      5.81
Doxercalciferol...........................      2.97      2.68      2.60
Calcitriol................................      0.55      0.54      0.38
Iron-dextran..............................     11.94     11.69     11.61
Vancomycin................................      3.23      3.43      3.29
Alteplase.................................     31.63     33.21     33.28
Aranesp...................................      3.01      3.29      2.83
------------------------------------------------------------------------


           Table 5.--CY 2007 Drug Weights for ESRD Facilities
------------------------------------------------------------------------
                                                           2007 weights
                    Independent drugs                        (percent)
------------------------------------------------------------------------
EPO.....................................................            69.5
Paricalcitol............................................            11.7
Sodium-ferric-glut......................................             2.5
Iron-sucrose............................................             6.1
Levocarnitine...........................................             0.2
Doxercalciferol.........................................             2.8
Calcitriol..............................................             0.1
Iron-dextran............................................             0.0
Vancomycin..............................................             0.1
Alteplase...............................................             1.0
Aranesp.................................................             6.0
------------------------------------------------------------------------

(iii) Estimating Growth in Per Patient Drug Utilization
    To isolate and project the growth in per patient utilization of 
ESRD drugs for CY 2009, we must remove the enrollment and price growth 
components from the historical drug expenditure data and consider the 
residual utilization growth. As discussed previously in this section, 
we propose to use ESRD facility drug expenditure data from CY 2006 and 
CY 2007 to estimate per patient utilization growth for CY 2009.
    First we had to estimate the total drug expenditures for all ESRD 
facilities. For this proposed rule, we used the final CY 2006 ESRD 
claims data and the latest available CY 2007 ESRD facility claims, 
updated through December 31, 2007 (that is, claims with dates of 
service from January 1 through December 31, 2007, that were received, 
processed, paid, and passed to the National Claims History File as of 
December 31, 2007). For the CY 2009 PFS final rule, we plan to use 
additional updated CY 2007 claims with dates of service for the same 
time period. This updated CY 2007 data file will include claims 
received, processed, paid, and passed to the National Claims History 
File as of June 30, 2008.
    While the December 2007 update of CY 2007 claims used in this 
proposed rule is the most current available claims data, we recognize 
that it does not reflect a complete year, as claims with dates of 
service towards the end of the year have not all been processed. To 
more accurately estimate the update to the drug add-on, aggregate drug 
expenditures are required. Based on an analysis of the 2006 claims 
data, we inflated the CY 2007 drug expenditures to estimate the June 
30, 2008 update of the 2007 claims file. We used the relationship 
between the December 2006 and the June 2007 versions of 2006 claims to 
estimate the more complete 2007 claims available in June 2008 and 
applied that ratio to the 2007 claims data from the December 2007 
claims file. We did this separately for EPO, the other top 10 
separately billable drugs, and the remaining separately billable drugs 
for independent and hospital-based ESRD facilities. We are using the 
top 11 drugs since they represent 99.7 percent of total expenditures in 
CY 2007 for separately billable drugs furnished to ESRD patients. All 
components were then combined to estimate aggregate CY 2007 ESRD drug 
expenditures. The net adjustment to the CY 2007 claims data was an 
increase of 12.6 percent to the 2007 expenditure data. This adjustment 
allows us to more accurately compare the 2006 and 2007 data to estimate 
utilization growth.
    The next step is to remove the enrollment and price growth 
components from that total. As discussed previously in this section, in 
developing the per patient utilization growth for this proposed rule, 
we limited our analysis to the latest 2 years of available ESRD 
facility drug data (that is, 2006 and 2007). We believe that per 
patient utilization growth between these years would be a better proxy 
for future growth, as it best represents current utilization trends.
    To calculate the per patient utilization growth, we removed the 
enrollment component by using the growth in enrollment data between CY 
2006 and CY 2007. This was approximately 3 percent. To remove the price 
effect we used the calculated weighted change between CY 2006 and CY 
2007 ASP pricing for the top eleven ESRD drugs. We weighted the 
differences using 2007 ESRD facility drug expenditure data. Table 4 
shows the CY 2007 weights for each of the top eleven ESRD drugs billed 
by ESRD facilities.
    This process led to an overall 1.8 percent reduction in price 
between CY 2006 and CY 2007.
    After removing the enrollment and price effects from the 
expenditure data, the residual growth would reflect the per patient 
utilization growth. To do this, we divided the product of the 
enrollment growth of 3 percent (1.03) and the price reduction of 1.8 
percent (1.00 - 0.018 = 0.982) into the total drug expenditure change 
between 2006 and 2007 of 0 percent (1.00 - 0.00 = 1.00). The result is 
a utilization factor equal to 0.99 (1.00/(1.03 * 0.982) = 0.99).
    Since we observed a 1 percent drop in per patient utilization of 
drugs between 2006 and 2007, we are projecting a 1 percent drop in per 
patient utilization for ESRD facilities in CY 2009.
b. Applying the Proposed Growth Update to the Drug Add-on Adjustment
    In CY 2006, we applied the projected growth update percentage to 
the total amount of drug add-on dollars established for CY 2005 to 
establish a dollar amount for the CY 2006 growth update. In addition, 
we projected the growth in dialysis treatments for CY 2006 based on the 
projected growth in ESRD enrollment. We divided the projected total 
dialysis treatments for CY 2006 into the projected dollar amount of the 
CY 2006 growth to develop the per treatment growth update amount. This 
growth update amount, combined with the CY 2005 per treatment drug add-
on amount, resulted in an average drug add-on amount per treatment of 
$18.88 (or a 14.5 percent adjustment to the composite rate) for CY 
2006.
    In the CY 2007 PFS final rule with comment period (71 FR 69684), we

[[Page 38529]]

revised our update methodology by applying the growth update to the per 
treatment drug add-on amount. That is, for CY 2007, we applied the 
growth update factor of 4.03 percent to the $18.88 per treatment drug 
add-on amount for an updated amount of $19.64 per treatment (71 FR 
69684). For CY 2008, the per treatment drug add-on amount was updated 
to $20.33.
    As discussed in detail below, for CY 2009, we are proposing no 
update to the per treatment drug add-on amount of $20.33 established in 
CY 2008.
c. Proposed Update to the Drug Add-on Adjustment
    As discussed previously in this section, we estimate a 1 percent 
reduction in per patient utilization of ESRD drugs for CY 2009. Also, 
using historical ESRD drug pricing data specific to ESRD drugs, we 
project a 1.9 percent reduction in ESRD drug prices for CY 2009. To 
compute this estimate, we used ASP pricing data for the four quarters 
of 2006 and 2007, and the two available quarters of 2008. We calculated 
the weighted price change for the top ten ESRD drugs plus Aranesp over 
the period. Tables 4 and 5 show the average ASP drug prices and the 
2007 weights used. As shown in Table 4, to the extent there were price 
changes during the trending period, increases as well as decreases have 
been reflected in the overall weighted average price reduction of 1.9 
percent over the 3-year period. Had we continued to use the PPI for 
prescription drugs in our computation of the drug add-on update, the 
price component would have been a projected increase of 3.8 percent. 
Given the observed decline in ASP pricing for ESRD drugs, we believe 
the continued use of the PPI as a price proxy would have significantly 
overstated the price component of our computation of the projected 
change in per patient ESRD drug expenditures for CY 2009. This is 
because the PPI is a more general measure of price change for all drugs 
and does not reflect price changes specific to the drugs provided by 
ESRD facilities.
    Therefore, we are projecting that the combined growth in per 
patient utilization and pricing for CY 2009 would result in a negative 
update equal to -2.9 percent. (0.99 * 0.981 = 0.971). However, as 
indicated above, we are proposing no update to the drug add-on 
adjustment.
    We believe this approach is consistent with the language under 
section 1881(b)(12)(F) of the Act which states in part that ``the 
Secretary shall annually increase'' the drug add-on amount based on the 
growth in expenditures for separately billed ESRD drugs. Our 
understanding of the statute contemplates ``annually increase'' to mean 
a positive or zero update to the drug add-on. Therefore, we propose to 
apply a zero update and to maintain the $20.33 per treatment drug add-
on amount for CY 2009 that reflects a proposed 15.5 percent drug add-on 
adjustment to the composite rate for CY 2009.
    However, we also believe that an alternative reading of the statute 
is possible. We believe that the Congress may not have intended to 
provide an increase in the drug add-on adjustment in a year where the 
projected growth in expenditures for separately billable ESRD drugs is 
declining. There is potentially a gap in the statute, which specifies 
an ``increase'' to the drug add-on adjustment based upon the 
``estimated growth in expenditures for drugs and biologicals'' that are 
separately billed ESRD drugs. However, an ``increase'' cannot be 
implemented when estimated ``growth'' is negative.
    To resolve this seeming contradiction, another approach to the zero 
percent update that we are proposing would be to apply an adjustment of 
less than 1.0 to the drug add-on adjustment. Under this approach, for 
CY 2009, we would ``increase'' the drug add-on adjustment by 0.971. 
Applying the 0.971 increase to the $20.33 per treatment adjustment 
would yield a drug add-on amount of $19.74 per treatment, which 
represents a 0.4 percent decrease in the CY 2008 drug add-on percentage 
of 15.5 percent. As such, the proposed drug add-on adjustment to the 
composite rate for CY 2009 would be 15.0 percent.
    We are seeking public comment on our proposal of a zero update, as 
well as the alternative approach presented above, so that we can make 
an informed decision with respect to the final update to the CY 2009 
drug add-on adjustment to the composite rate.
    Had we selected the other option of continuing to use the PPI for 
prescription drugs as a proxy for ESRD drug prices instead of using ASP 
pricing data, the resulting update factor would have been a 2.6 percent 
increase to the CY 2008 average per treatment drug add-on amount of 
$20.33, resulting in a weighted average increase to the composite rate 
of $0.57 or a 0.4 percent increase in the CY 2008 drug add-on 
percentage of 15.5 percent. As discussed above, however, we believe the 
PPI overstates the changes in ESRD drug prices given the observed trend 
in declining prices for those drugs over the past several years.
    We note that for the CY 2010 update to the drug add-on adjustment 
we expect to estimate the growth in ESRD drug expenditures using 3 
years' worth of ASP-based historical ESRD drug expenditure data that 
will be available at that time. This data will be used to conduct a 
trend analysis to estimate the growth in ESRD drug expenditures for CY 
2010. As we discussed earlier with respect to computing the 2009 
estimated growth in drug prices, to the extent there are price changes 
during the trending period, past increases as well as decreases would 
be reflected in future trend analyses and in future updates to the drug 
add-on adjustment.
d. Proposed Update to the Geographic Adjustments to the Composite Rates
    Section 1881(b)(12)(D) of the Act, as amended by section 623(d) of 
the MMA, gives the Secretary the authority to revise the wage indexes 
previously applied to the ESRD composite rates. The purpose of the wage 
index is to adjust the composite rates for differing wage levels 
covering the areas in which ESRD facilities are located. The wage 
indexes are calculated for each urban and rural area. In the CY 2006 
PFS final rule with comment period (70 FR 70167), we announced our 
adoption of the OMB CBSA-based geographic area designations to develop 
revised urban/rural definitions and corresponding wage index values for 
purposes of calculating ESRD composite rates. In addition, we generally 
have followed wage index policies related to these definitions as used 
under the inpatient hospital prospective payment system (IPPS), but 
without regard to any approved geographic reclassification authorized 
under sections 1886(d)(8) and (d)(10) of the Act or other provisions 
that only apply to hospitals paid under the IPPS (70 FR 70167). For 
purposes of the ESRD wage index methodology, the hospital wage data we 
use is pre-classified, pre-floor hospital data and unadjusted for 
occupational mix.
i. Updates to Core-Based Statistical Area (CBSA) Definitions
    In the CY 2006 PFS final rule with comment period (70 FR 70167), we 
announced our adoption of the OMB's CBSA-based geographic area 
designations to develop revised urban/rural definitions and 
corresponding wage index values for purposes of calculating ESRD 
composite rates. OMB's CBSA-based geographic area designations are 
described in OMB Bulletin 03-04, originally issued June 6, 2003, and is 
available online at http://www.whitehouse.gov/omb/bulletins/b03-04.html. In addition, OMB has published subsequent bulletins

[[Page 38530]]

regarding CBSA changes, including changes in CBSA numbers and titles. 
We wish to point out that this and all subsequent ESRD rules and 
notices are considered to incorporate the CBSA changes published in the 
most recent OMB bulletin that applies to the hospital wage index used 
to determine the current ESRD wage index. The OMB bulletins may be 
accessed online at http://www.whitehouse.gov/omb/bulletins/index.html.
ii. Updated Wage Index Values
    In the CY 2007 PFS final rule with comment period (71 FR 69685), we 
stated that we intended to update the ESRD wage index values annually. 
The current ESRD wage index values for CY 2008 were developed from FY 
2004 wage and employment data obtained from the Medicare hospital cost 
reports. As we indicated, the ESRD wage index values are calculated 
without regard to geographic classifications authorized under sections 
1886(d)(8) and (d)(10) of the Act and utilize pre-floor hospital data 
that is unadjusted for occupational mix. To calculate the ESRD wage 
index, hospital wage index data for FY 2004 for all providers in each 
urban/rural geographic area are combined. The sum of the wages for all 
providers in each geographic area was divided by the total hours for 
all providers in each area. The result is the average hourly hospital 
wage for that geographic locale. The ESRD wage index was computed by 
dividing the average hourly hospital wage for each geographic area by 
the national average hourly hospital wage. The final step was to 
multiply each wage index value by the ESRD wage index budget neutrality 
factor.
    We propose to use the same methodology for CY 2009, with the 
exception that FY 2005 hospital data will be used to develop the CY 
2009 wage index values. The CY 2009 ESRD wage index budget neutrality 
factor is 1.056672. (See section H.5.d.iii. of this proposed rule for 
details about this adjustment.) For a detailed description of the 
development of the proposed CY 2009 wage index values based on FY 2005 
hospital data, see the FY 2009 ``Proposed Changes to the Hospital 
Inpatient Prospective Payment Systems (IPPS) and Fiscal Year 2009 
Rates'' proposed rule (73 FR 23630). Section III G. (Computation of the 
Proposed FY 2009 Unadjusted Wage Index) of the preamble to that 
proposed rule describes the cost report schedules, line items, data 
elements, adjustments, and wage index computations. The wage index data 
affecting ESRD composite rates for each urban and rural locale may also 
be accessed on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp. The wage data are located in the 
section entitled, ``FY 2009 Proposed Rule Occupational Mix Adjusted and 
Unadjusted Average Hourly Wage and Pre-reclassified Wage Index by 
CBSA.''
(A) Fourth Year of the Transition
    In the CY 2006 PFS final rule with comment period (70 FR 70169), we 
indicated that we would apply a 4-year transition period to mitigate 
the impact on the composite rates resulting from our adoption of CBSA-
based geographic designations. Beginning January 1, 2006, during each 
year of the transition, an ESRD facility's wage-adjusted composite rate 
(that is, without regard to any case-mix adjustments) is a blend of its 
old MSA-based wage-adjusted payment rate and its new CBSA-based wage 
adjusted payment rate for the transition year involved. For each 
transition year, the share of the blended wage-adjusted base payment 
rate that is derived from the MSA-based and CBSA-based wage index 
values is shown in Table 6. In CY 2006, the first year of the 
transition, we implemented a 75/25 blend. In CY 2007, the second year 
of the transition, we implemented a 50/50 blend. In CY 2008, the third 
year of the transition, we implemented a 25/75 blend. Consistent with 
the transition blends announced in the CY 2006 PFS final rule with 
comment period (70 FR 70170), in CY 2009, we are proposing that each 
ESRD facility's composite payment rate will be based entirely on the 
CBSA-based wage index.
    In CY 2006, we eliminated the wage index cap of 1.30 and stated 
that we would implement a gradual reduction in the wage index floor of 
0.90. Prior to January 1, 2006, the wage indexes were restricted to 
values no less than 0.90 and no greater than 1.30, meaning that 
payments to facilities in areas where labor costs fell below 90 percent 
of the national average, or exceeded 130 percent of that average, were 
not adjusted beyond the 90 percent or 130 percent level. Although we 
stated that the ESRD wage index values should not be constrained by the 
application of floors and ceilings, we also expressed concern that the 
immediate elimination of the floor could adversely affect ESRD 
beneficiary access to care. Therefore, we reduced the floor to 0.85 in 
CY 2006, to 0.80 in CY 2007, and to 0.75 in CY 2008.
    For CY 2009, we are proposing to reduce the wage index floor to 
0.70. For this final year of the transition (CY 2009), we believe that 
a reduction to 0.70 is appropriate as we continue to reassess the need 
for a wage index floor in future years. We believe that a gradual 
reduction in the floor is still needed to ensure patient access to 
dialysis in areas that have low wage index values, especially Puerto 
Rico, and to prevent sudden adverse effects to the payment system. 
However, we note that our goal is the eventual elimination of all wage 
index floors.
    The wage index floors, caps, and blended shares of the composite 
rates applicable to all ESRD facilities for CY 2006 through CY 2008, 
and the proposed floor and blended share applicable for CY 2009, are 
shown in Table 6. They are identical to the values shown in Table 10 of 
the CY 2007 PFS final rule with comment period (71 FR 69686) for the 
applicable years.

                                      Table 6.--Wage Index Transition Blend
----------------------------------------------------------------------------------------------------------------
                                                                                            Old MSA    New CBSA
                  CY payment                     Floor                Ceiling              (percent)   (percent)
----------------------------------------------------------------------------------------------------------------
2006.........................................       0.85  None...........................         75          25
2007.........................................       0.80  None...........................         50          50
2008.........................................       0.75  None...........................         25          75
2009.........................................     * 0.70  None...........................          0         100
----------------------------------------------------------------------------------------------------------------
* Each wage index floor is multiplied by a BN adjustment factor. For CY 2009 the BN adjustment is 1.056672
  resulting in an actual wage index floor of 0.7397.


[[Page 38531]]

    Because CY 2009 is the final year of the 4-year transition period, 
each ESRD facility's composite payment rate will be based entirely on 
its applicable new CBSA-based wage index value.
(B) Wage Index Values for Areas With No Hospital Data
    In CY 2006, while adopting the CBSA designations, we identified a 
small number of ESRD facilities in both urban and rural geographic 
areas where there are no hospital wage data from which to calculate 
ESRD wage index values. The affected areas were rural Massachusetts, 
rural Puerto Rico, and the urban area of Hinesville, GA (CBSA 25980). 
For CY 2006, CY 2007, and CY 2008, we calculated the ESRD wage index 
values for those areas as follows:
     For rural Massachusetts, because we had not determined a 
reasonable wage proxy, we used the FY 2005 wage index value in CY 2006 
and CY 2007.
     For rural Puerto Rico, the situation was similar to rural 
Massachusetts. However, because all geographic areas in Puerto Rico 
were subject to the wage index floor in CY 2006, CY 2007, and CY 2008, 
we applied the ESRD wage index floor to rural Puerto Rico as well.
     For the urban area of Hinesville, GA, we calculated the CY 
2006, CY 2007, and CY 2008 wage index value based on the average wage 
index value for all urban areas within the State of Georgia.
    For CY 2008, we adopted an alternative methodology for establishing 
a wage index value for rural Massachusetts. Because we used the same 
wage index value for 2 years with no update, we believed it was 
appropriate to establish a methodology which employed reasonable proxy 
data for rural areas (including rural Massachusetts) and also permitted 
annual updates to the wage index based on that proxy data. For rural 
areas without hospital wage data, we used the average wage index values 
from all contiguous CBSAs as a reasonable proxy for that rural area.
    In determining the imputed rural wage index, we interpreted the 
term ``contiguous'' to mean sharing a border. In the case of 
Massachusetts, the entire rural area consists of Dukes and Nantucket 
Counties. We determined that the borders of Dukes and Nantucket 
counties are contiguous with Barnstable and Bristol counties. We are 
proposing to use the same methodology for CY 2009. Under this 
methodology, the CY 2009 proposed wage index values for the counties of 
Barnstable (CBSA 12700, Barnstable Town, MA-1.2624) and Bristol (CBSA 
39300, Providence-New Bedford-Fall River, RI-MA-1.0573) were averaged 
resulting in an imputed proposed wage index value of 1.1599 for rural 
Massachusetts in CY 2009.
    For rural Puerto Rico, we continued to apply the wage index floor 
in CY 2008. Because all areas in Puerto Rico that have a wage index 
were eligible for the ESRD wage index floor of 0.75, we applied that 
floor to ESRD facilities located in rural Puerto Rico. For CY 2009, all 
areas in Puerto Rico that have a wage index are eligible for the 
proposed ESRD wage index floor of 0.70. Therefore, we propose to 
continue applying the proposed ESRD wage index floor of 0.70 to 
facilities that are located in rural Puerto Rico.
    For Hinesville, GA (CBSA 25980), which is an urban area without 
specific hospital wage data, we propose to apply the same methodology 
used to impute a wage index value that we used in CY 2006, CY 2007, and 
CY 2008. Specifically, we utilize the average wage index value for all 
urban areas within the State of Georgia. That results in a proposed CY 
2009 wage index value of 0.9123 for the Hinesville-Fort Stewart GA 
CBSA.
    In the CY 2008 PFS final rule with comment period (72 FR 66283), we 
stated that we would continue to evaluate existing hospital wage data 
and possibly wage data from other sources such as the Bureau of Labor 
Statistics, to determine if other methodologies might be appropriate 
for imputing wage index values for areas without hospital wage data for 
CY 2009 and subsequent years. To date, no data from other sources, 
superior to that currently used in connection with the IPPS wage index 
has emerged. Therefore, for ESRD purposes, we continue to believe this 
is an appropriate policy.
(C) Evaluation of Wage Index Policies Adopted in the FY 2008 IPPS Final 
Rule
    We also stated that we planned to evaluate any policies adopted in 
the FY 2008 IPPS final rule (72 FR 47130, 47337 through 47338) that 
affect the wage index, including how we treat certain New England 
hospitals under section 601(g) of the Social Security Amendments of 
1983 (Pub. L. 98-21). This is relevant for the ESRD composite payment 
system, because the ESRD wage index is calculated using the same urban/
rural classification system and computation methodology applicable 
under the IPPS, except that it is not adjusted for occupational mix and 
does not reflect geographic classifications authorized under sections 
1886(d)(8) and (d)(12) of the Act. We use the hospital wage index with 
this modification because it is the best available measure effective of 
urban and rural differences in labor costs among dialysis facilities. 
Accordingly, in the following sections, we summarize the wage index 
changes implemented in connection with the IPPS, as they affect the 
ESRD wage index used under the composite payment system.
(1) CY 2009 Classification of Certain New England Counties
    We are addressing the change in the treatment of ``New England 
deemed counties'' (that is, those counties in New England listed in 
Sec.  412.64(b)(1)(ii)(B) that were deemed to be part of urban areas 
under section 601(g) of the Social Security Amendments of 1983), that 
were made in the FY 2008 IPPS final rule with comment period (72 FR 
47337 through 47338). These counties include the following: Litchfield 
County, Connecticut; York County, Maine; Sagadahoc County, Maine; 
Merrimack County, New Hampshire; and Newport County, Rhode Island. Of 
these five ``New England deemed counties'', three (York County, 
Sagadahoc County, and Newport County) are also included in the MSAs 
defined by OMB, and therefore, used in the calculations of the urban 
hospital wage index values reflected in the ESRD composite payment 
rates. The remaining two, Litchfield County and Merrimack County, are 
geographically located in areas that are considered ``rural'' under the 
current IPPS and ESRD composite payment system labor market 
definitions, but have been previously deemed urban under the IPPS in 
certain circumstances, as discussed below.
    In the FY 2008 IPPS final rule with comment period, for purposes of 
IPPS, Sec.  412.64(b)(1)(ii)(B) was revised such that the two ``New 
England deemed counties'' that are still considered rural under the OMB 
definitions (Litchfield County, CT and Merrimack County, NH) are no 
longer considered urban effective for discharges occurring on or after 
October 1, 2007, and therefore, are considered rural in accordance with 
Sec.  412.64(b)(1)(ii)(C). However, for purposes of payment under the 
IPPS, acute-care hospitals located within those areas are treated as 
being reclassified to their deemed urban areas effective for discharges 
occurring on or after October 1, 2007 (see 72 FR 473337 through 47338). 
We note that the ESRD composite payment system does not provide for 
such geographic reclassification. Also, in the FY 2008 IPPS final rule 
with comment period (72 FR 47338), we explained that we have limited 
this policy change for the ``New England deemed counties'' only to IPPS 
hospitals, and any change to non-IPPS provider wage indexes would be

[[Page 38532]]

addressed in the respective payment system rules. Accordingly, we are 
taking this opportunity to clarify the treatment of ``New England 
deemed counties'' under the ESRD composite payment system in this 
proposed rule.
    As discussed above, for purposes of the ESRD wage index, we have 
recognized the OMB's CBSA designations, as well as generally following 
the policies under IPPS with regard to the definitions for ``urban'' 
and ``rural'' for the wage index. Historical changes to the labor 
market area/geographic classifications and annual updates to the wage 
index values under the composite payment system are made effective 
January 1 each year. When we established the most recent composite 
payment system update, effective for dialysis services provided on or 
after January 1, 2008, we considered the ``New England deemed 
counties'' (including Litchfield County, CT and Merrimack County, NH) 
as urban for CY 2008, as evidenced by the inclusion of Litchfield 
County as one of the constituent counties of urban CBSA 25540 
(Hartford-West Hartford-East Hartford, CT), and the inclusion of 
Merrimack County as one of the constituent counties of urban CBSA 31700 
(Manchester-Nashua, NH).
    Litchfield County, CT and Merrimack County, NH are not considered 
``urban'' under Sec.  412.64(b)(1)(ii)(A) through (B) as revised under 
the FY 2008 IPPS final rule and, therefore, are considered ``rural'' 
under Sec.  412.64(b)(1)(ii)(C). Accordingly, to reflect our general 
policy for ESRD wage index, these two counties will be considered 
``rural'' under the ESRD composite payment system effective with the 
next update of the payment rates on January 1, 2009, and will no longer 
be included in urban CBSA 25540 (Hartford-West Hartford-East Hartford, 
CT) and urban CBSA 31700 (Manchester-Nashua, NH), respectively. We note 
that this policy is consistent with our other policy of not taking into 
account IPPS geographic reclassifications in determining payments under 
the composite payment system.
(2) Multi-Campus Hospital Wage Index Data
    In the CY 2008 ESRD composite payment system final rule (72 FR 
66280), we established ESRD wage index values for CY 2008 calculated 
from the same data (collected from cost reports submitted by hospitals 
for cost reporting periods beginning during FY 2004) used to compute 
the FY 2008 acute care hospital inpatient wage index, without taking 
into account geographic reclassification under sections 1886(d)(8) and 
(d)(10) of the Act. However, the IPPS policy that apportions the wage 
data for multi-campus hospitals was not finalized before the ESRD 
composite payment system final rule. Therefore the CY 2008 ESRD wage 
index values reflected the IPPS wage data are based on a hospital's 
actual location without regard to the urban or rural designation of any 
related or affiliated provider. Accordingly, all wage data from 
different campuses of a multi-campus hospital were included in the 
calculation of the CBSA wage index of the main hospital. The ESRD wage 
index values applicable for services provided on or after January 1, 
2008 through December 31, 2008 are shown in Addendum G for urban areas 
and Addendum H for rural areas (72 FR 66552 through 66574) of the CY 
2008 PFS final rule with comment period.
    We are continuing to use IPPS data for CY 2009 because we believe 
that in the absence of dialysis facility specific wage data, using the 
hospital inpatient wage data is appropriate and reasonable for the ESRD 
composite payment system. We note that the IPPS wage data used to 
determine the proposed CY 2009 ESRD wage index values were computed 
from wage data submitted by hospitals for cost reporting periods 
beginning in FY 2005 and reflect our policy adopted under the IPPS 
beginning in FY 2008, which apportions the wage data for multi-campus 
hospitals located in different labor market areas, CBSAs, to each CBSA 
where the campuses are located (see the FY 2008 IPPS final rule with 
comment period (72 FR 47317 through 47320)). Specifically, for the 
proposed CY 2009 ESRD composite payment system, the wage index was 
computed using IPPS wage data (published by hospitals for cost 
reporting periods beginning in 2005, as with the FY 2009 IPPS wage 
index), which allocated salaries and hours to the campuses of two 
multi-campus hospitals with campuses that are located in different 
labor areas; one in Massachusetts and the other is Illinois. The ESRD 
wage index values proposed for CY 2009 in the following CBSAs are 
affected by this policy: Boston-Quincy, MA (CBSA 14484), Providence-New 
Bedford-Falls River, RI-MA (CBSA 39300), Chicago-Naperville-Joliet, IL 
(CBSA 16974), and Lake County-Kenosha County, IL-WI (CBSA 29404). 
Please refer to Addendums G and H of this proposed rule.
    In summary, for CY 2009, we propose to use the FY 2009 wage index 
data (collected from cost reports submitted by hospitals for cost 
reporting periods beginning during FY 2005) to compute the ESRD 
composite payment rates effective beginning January 1, 2009. These data 
reflect the multi-campus and New England deemed counties policies 
discussed above.
iii. Budget Neutrality Adjustment
    Section 1881(b)(12)(E)(i) of the Act, as added by section 623(d) of 
the MMA, requires any revisions to the ESRD composite rate payment 
system as a result of the MMA provision (including the geographic 
adjustment) be made in a budget neutral manner. This means that 
aggregate payments to ESRD facilities in CY 2008 should be the same as 
aggregate payments that would have been made if we had not made any 
changes to the geographic adjusters. We note that this BN adjustment 
only addresses the impact of changes in the geographic adjustments. A 
separate BN adjustment was developed for the case-mix adjustments 
currently in effect. As we are not proposing any changes to the case-
mix measures for CY 2009, the current case-mix BN adjustment will 
remain in effect for CY 2009. As in CY 2008, for CY 2009, we again 
propose to apply a BN adjustment factor (1.056672) directly to the ESRD 
wage index values. As explained in the CY 2007 PFS final rule with 
comment period (71 FR 69687 through 69688), we believe this is the 
simplest approach because it allows us to maintain our base composite 
rates during the transition from the current wage adjustments to the 
revised wage adjustments described previously in this section. Because 
the ESRD wage index is only applied to the labor-related portion of the 
composite rate, we computed the BN adjustment factor based on that 
proportion (53.711 percent).
    To compute the proposed CY 2009 wage index BN adjustment factor 
(1.056672), we used the FY 2005 pre-floor, pre-reclassified, non-
occupational mix-adjusted hospital data to compute the wage index 
values, 2007 outpatient claims (paid and processed as of December 31, 
2007), and geographic location information for each facility which may 
be found through the Dialysis Facility Compare Web page on the CMS Web 
site at http://www.cms.hhs.gov/DialysisFacilityCompare/. The FY 2005 
hospital wage index data for each urban and rural locale by CBSA may 
also be accessed on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp. The wage index data are located in the 
section entitled, ``FY 2009 Proposed Rule Occupational Mix Adjusted and 
Unadjusted Average Hourly Wage and Pre-Reclassified Wage Index by 
CBSA.''

[[Page 38533]]

    Using treatment counts from the 2007 claims and facility-specific 
CY 2008 composite rates, we computed the estimated total dollar amount 
each ESRD provider would have received in the CY 2008 (the 3rd year of 
the 4-year transition). The total of these payments became the target 
amount of expenditures for all ESRD facilities for CY 2009. Next, we 
computed the estimated dollar amount that would have been paid to the 
same ESRD facilities using the proposed ESRD wage index for CY 2009 
(the 4th year of the 4-year transition). The total of these payments 
became the fourth year new amount of wage-adjusted composite rate 
expenditures for all ESRD facilities.
    After comparing these two dollar amounts (target amount divided by 
the 4th year new amount), we calculated an adjustment factor that, when 
multiplied by the applicable CY 2009 ESRD proposed wage index value, 
would result in aggregate payments to ESRD facilities that will remain 
within the target amount of composite rate expenditures. When making 
this calculation, the ESRD wage index floor value of 0.7000 is used 
whenever appropriate. The proposed BN adjustment factor for the CY 2009 
wage index is 1.056672.
    To ensure BN, we also must apply the BN adjustment factor to the 
proposed wage index floor of 0.7000 which results in a proposed 
adjusted wage index floor of 0.7397 (0.7500 x 1.056672) for CY 2009.
iv. ESRD Wage Index Tables
    The proposed 2009 wage index tables are located in Addenda G and H 
of this proposed rule.
v. Application of the Hospital-Acquired Conditions Payment Policy for 
IPPS Hospitals to Other Settings
    Value-based purchasing (VBP) ties payment to performance through 
the use of incentives based on measures of quality and cost of care. 
The implementation of VBP is rapidly transforming CMS from being a 
passive payer of claims to an active purchaser of higher quality, more 
efficient health care for Medicare beneficiaries. Our VBP initiatives 
include hospital pay for reporting (the Reporting Hospital Quality Date 
for the Annual Payment Update Program), physician pay for reporting 
(the Physician Quality Reporting Initiative), home health pay for 
reporting, the Hospital VBP Plan Report to Congress, and various VBP 
demonstration programs across payment settings, including the Premier 
Hospital Quality Incentive Demonstration and the Physician Group 
Practice Demonstration.
    The preventable hospital-acquired conditions (HAC) payment 
provision for IPPS hospitals is another of our value-based purchasing 
initiatives. The principal behind the HAC payment provision (Medicare 
not paying more for healthcare-associated conditions) could be applied 
to the Medicare payment systems for other settings of care. Section 
1886(d)(4)(D) of the Act requires the Secretary to select for the HAC 
IPPS payment provision conditions that are: (1) High cost, high volume, 
or both; (2) assigned to a higher paying MS-DRG when present as a 
secondary diagnosis; and (3) could reasonably have been prevented 
through the application of evidence-based guidelines. Beginning October 
1, 2008, Medicare can no longer assign an inpatient hospital discharge 
to a higher paying MS-DRG if a selected HAC condition was not present 
on admission. That is, the case will be paid as though the secondary 
diagnosis was not present. Medicare will continue to assign a discharge 
to a higher paying Medicare Severity-Diagnosis Related Group (MS-DRG) 
if a selected condition was present on admission.
    The broad principle articulated in the HAC payment provision for 
IPPS hospitals--Medicare not paying for healthcare-associated 
conditions--could potentially be applied to other Medicare payment 
systems for conditions that occur in settings other than IPPS 
hospitals. Other possible settings of care include, but are not limited 
to: Hospital outpatient departments; SNFs; HHAs; ESRD facilities; and 
physician practices. The implementation would be different for each 
setting, as each payment system is different and the reasonable 
preventability through the application of evidence-based guidelines 
would vary for candidate conditions over the different settings. 
However, alignment of incentives across settings of care is an 
important goal for all of our VBP initiatives, including the HAC 
provision.
    A related application of the broad principle behind the HAC payment 
provision for IPPS hospitals could be considered through Medicare 
secondary payer policy by requiring the provider that failed to prevent 
the occurrence of a preventable condition in one setting to pay for all 
or part of the necessary follow up care in a second setting. This would 
help shield the Medicare program from inappropriately paying for the 
downstream effects of a preventable condition acquired in the first 
setting but treated in the second setting.
    We note that we are not proposing new Medicare policy in this 
discussion of the possible application of HACs payment policy for IPPS 
hospitals to other settings, as some of these approaches may require 
new statutory authority. We are seeking public comment on the 
application of the preventable HACs payment provision for IPPS 
hospitals to other Medicare payment systems. We look forward to working 
with stakeholders in the fight against healthcare-associated 
conditions.

I. Independent Diagnostic Testing Facility (IDTF) Issues

    [If you choose to comment on issues in this section, please include 
the caption ``INDEPENDENT DIAGNOSTIC TESTING FACILITIES'' at the 
beginning of your comments.]
    In the CY 2007 and 2008 PFS final rules with comment period, we 
established performance standards for suppliers enrolled in the 
Medicare program as an IDTF (71 FR 69695 and 72 FR 66285). These 
standards were established to improve the quality of care for 
diagnostic testing furnished to Medicare beneficiaries by a Medicare 
enrolled IDTF and to improve our ability to verify that these suppliers 
meet minimum enrollment criteria to enroll or maintain enrollment in 
the Medicare program. These performance standards were established at 
Sec.  410.33. In this proposed rule, we are again proposing to expand 
on the quality and program safeguard activities that we implemented 
previously.
1. Improving Quality of Diagnostic Testing Services Furnished by 
Physician and Nonphysician Practitioner Organizations
    During the CY 2008 PFS proposed rule comment period, we received 
comments requesting that we require that the IDTF performance standards 
adopted in Sec.  410.33, including prohibitions regarding the sharing 
of space and leasing/sharing arrangements, apply to physicians and 
nonphysician practitioners (NPPs) who are performing diagnostic testing 
services for Medicare beneficiaries, and who have enrolled in the 
Medicare program as a clinic, group practice, or physician office. The 
commenters stated that standards for imaging services were not applied 
consistently for all imaging centers and that two distinct compliance 
and regulatory standards would emerge depending on how the similarly 
situated imaging centers were enrolled. In addition, one commenter 
stated that we should not prohibit space sharing when done with an 
adjoining physician practice or radiology group that is an owner of an 
IDTF.

[[Page 38534]]

    In response to the public comments, we are concerned that--
     Certain physician entities, including physician group 
practices, and clinics, can enroll as a group practice or clinic and 
provide diagnostic testing services without the benefit of qualified 
nonphysician personnel, as defined in Sec.  410.33(c), to conduct 
diagnostic testing.
     Some physician entities expect to furnish diagnostic 
testing services for their own patients and the general public and are 
making the decision to enroll as a group or clinic thereby 
circumventing the performance standards found in the IDTF requirements 
in Sec.  410.33.
     Some physician organizations are furnishing diagnostic 
tests using mobile equipment provided by an entity that furnishes 
mobile diagnostic services.
    We are proposing certain exceptions to the established performance 
standards found in Sec.  410.33(g) because we believe that physician 
organizations already meet or exceed some of these standards. For 
example, their liability insurance coverage usually far exceeds the 
$300,000 per incident threshold, and there are a host of ways in which 
patient may issue clinical complaints concerning their physicians. In 
addition, we believe that compliance with some of the performance 
standards would be costly and burdensome and possibly limit beneficiary 
access, particularly in rural or medically underserved areas. For these 
reasons, we propose not to require physician entities to comply with 
the following standards:
     Maintaining additional comprehensive liability insurance 
for each practice location as required under Sec.  410.33(g)(6).
     Maintaining a formal clinical complaint process as 
required under Sec.  410.33(g)(8).
     Posting IDTF standards as required under Sec.  
410.33(g)(9).
     Maintaining a visible sign posting business hours as 
required under Sec.  410.33(g)(14)(ii).
     Separately enrolling each practice location as required 
under Sec.  410.33(g)(15)(i).
    Accordingly, we are proposing to add Sec.  410.33(j) which states 
that, ``A physician or NPP organization (as defined in Sec.  424.502) 
furnishing diagnostic testing services, except diagnostic mammography 
services: (1) Must enroll as an independent diagnostic testing facility 
for each practice location furnishing these services; and (2) is 
subject to the provisions found in Sec.  410.33, except for Sec.  
410.33(g)(6), Sec.  410.33(g)(8), Sec.  410.33(g)(9), Sec.  
410.33(g)(14)(ii), and Sec.  410.33(g)(15)(i). As discussed in section 
II.J. of this preamble, we propose to define a ``physician or 
nonphysician practitioner organization'' as any physician or NPP entity 
that enrolls in the Medicare program as a sole proprietorship or 
organizational entity such as a clinic or group practice.
    We maintain that this enrollment requirement is necessary to ensure 
that beneficiaries are receiving the quality of care that can only be 
administered by appropriately licensed or credentialed nonphysician 
personnel as described in Sec.  410.33(c). Moreover, we propose that 
physician or NPP organizations that do not enroll as an IDTF and meet 
the provisions at Sec.  410.33 may be subject to claims denial for 
diagnostic testing services or a revocation of their billing 
privileges.
    We are soliciting comments on whether we should consider 
establishing additional exceptions to the established performance 
standards in Sec.  410.33(g) for physician and NPP organizations 
furnishing diagnostic testing services.
    While we believe that most physician and NPP organizations utilize 
nonphysician personnel described in Sec.  410.33(c) to furnish 
diagnostic testing services, we are also soliciting comments on whether 
physician or NPPs conduct diagnostic tests without benefit of qualified 
nonphysician personnel and under what circumstances the testing occurs.
    While we are proposing to apply the IDTF requirement to all 
diagnostic testing services furnished in physicians' offices, we are 
considering whether to limit this enrollment requirement to less than 
the full range of diagnostic testing services, such as to procedures 
that generally involve more costly testing and equipment. We seek 
comment about whether the policy should apply only to imaging services 
or whether it should also include other diagnostic testing services 
such as electrocardiograms or other diagnostic testing services 
frequently furnished by primary care physicians. Within the scope of 
imaging services, we seek comment about whether the policy should be 
limited to advanced diagnostic testing procedures which could include 
diagnostic magnetic resonance imaging, computed tomography, and nuclear 
medicine (including positron emission tomography), and other such 
diagnostic testing procedures described in section 1848(b)(4)(B) of the 
Act (excluding X-ray, ultrasound, and fluoroscopy). We are also 
soliciting comments on what would be appropriate criteria to limit this 
provision.
    Finally, since this change, if adopted, would take time to 
implement for suppliers that have enrolled in the Medicare program, we 
are proposing an effective date of September 30, 2009, rather than the 
effective date of the final rule. For newly enrolling suppliers, the 
effective date of this rule would be January 1, 2009.
2. Mobile Entity Billing Requirements
    To ensure that entities furnishing mobile services are providing 
quality services and are billing for the diagnostic testing services 
they furnish to Medicare beneficiaries, we are proposing a new 
performance standard for mobile entities at Sec.  410.33(g)(16), which 
would require that entities furnishing mobile diagnostic services 
enroll in Medicare and bill directly for the mobile diagnostic services 
that they furnish, regardless of where the services are performed. We 
believe that entities furnishing mobile diagnostic services to Medicare 
beneficiaries must be enrolled in the Medicare program, comply with the 
IDTF performance standards, and directly bill Medicare for the services 
they render.
    While we understand that a mobile entity can furnish diagnostic 
testing services in various types of locations, we believe that it is 
essential that mobile entities use qualified physicians or nonphysician 
personnel to perform diagnostic testing procedures and that the 
enrolled mobile supplier bill for the services rendered. We maintain 
that it is essential to our program integrity and quality improvement 
efforts that an entity furnishing mobile diagnostic testing services 
comply with the performance standards for IDTFs and bill the Medicare 
program directly for the services provided to Medicare beneficiaries.
    Since we believe that most mobile entities are already billing for 
the services they furnish, whether the service was provided in a fixed-
based location or in a mobile facility, this proposed provision, if 
adopted, would be effective with the effective date of the final rule.
3. Revocation of Enrollment and Billing Privileges of IDTFs in the 
Medicare Program
    Historically, we have allowed IDTFs whose Medicare billing numbers 
have been revoked to continue billing for services furnished prior to 
revocation for up to 27 months after the effective date of the 
revocation. Since we believe that permitting this extensive billing 
period poses a significant risk to the Medicare program, we are 
proposing to limit the claims submission timeframe

[[Page 38535]]

after revocation. In Sec.  424.535(g), we are proposing that a revoked 
IDTF must submit all outstanding claims for not previously submitted 
items and services furnished within 30 calendar days of the revocation 
effective date. We maintain that this change is necessary to limit the 
Medicare program exposure to future vulnerabilities from physician and 
NPP organizations and individual practitioners that have had their 
billing privileges revoked. Accordingly, this proposed change would 
allow a Medicare contractor to conduct focused medical review on the 
claims submitted during the claims filing period to ensure that each 
claim is supported by medical documentation that the contractor can 
verify. We maintain that focused medical review of these claims will 
ensure that Medicare only pays for services furnished by a physician or 
NPP organization or individual practitioner and that these entities and 
individuals receive payment in a timely manner. In addition, we are 
also proposing to amend Sec.  424.44(a)(3) to account for this 
provision related to the requirements for the timely filing of claims. 
The timely filing requirements in Sec.  424.44(a)(1) and (a)(2) will no 
longer apply to physician and NPP organizations, physicians, NPPs and 
IDTFs whose billing privileges have been revoked by CMS.

J. Physician and Nonphysician Practitioner (NPP) Enrollment Issues

    [If you choose to comment on issues in this section, please include 
the caption ``PHYSICIAN AND NONPHYSICIAN PRACTITIONER ENROLLMENT 
ISSUES'' at the beginning of your comments.]
1. Effective Date of Medicare Billing Privileges
    In accordance with Sec.  424.510, physician and NPP organizations 
(that is, groups, clinics, and sole owners) and individual 
practitioners including physicians and NPPs, operating as sole 
proprietorships or reassigning their benefits to a physician and 
nonphysician organization may submit claims as specified in Sec.  
424.44 after they are enrolled in the Medicare program. This provision 
permits newly enrolled physician and NPP organizations and individual 
practitioners, as well as existing physicians and nonphysician 
organizations and individual practitioners to submit claims for 
services for services that were rendered prior to the date of filing or 
the date the applicant received billing privileges to participate in 
the Medicare program.
    For the purposes of this proposed rule, we believe that a NPP 
includes, but is not limited to, the following individuals: 
Anesthesiology assistants, audiologists, certified nurse midwifes, 
certified registered nurse anesthetists, clinical social workers, NPs, 
occupational therapists in private practice, physical therapists in 
private practice, PAs, clinical psychologists, psychologists billing 
independently, and registered dieticians or nutrition professionals.
    Once enrolled, physician and NPP organizations and individual 
physicians and NPPs, depending on their effective date of enrollment, 
may retroactively bill the Medicare program for services that were 
rendered up to 27 months prior to being enrolled to participate in the 
Medicare program. For example, if a supplier is enrolled in the 
Medicare program in December 2008 with an approval date back to October 
2006, that supplier could retrospectively bill for services furnished 
to Medicare beneficiaries as early as October 1, 2006.
    Currently, physician and NPP organizations and individual 
practitioners, including physicians and NPPs, are not prohibited from 
billing Medicare prior to their enrollment date. Therefore, it is 
possible that the physician and NPP organizations and individual 
practitioners who meet our program requirements on the date of 
enrollment may not have met those same requirements prior to the date 
of enrollment, even though that supplier could bill Medicare and 
receive payments for services rendered up to 27 months prior to their 
enrolling in the Medicare program. We are concerned that some physician 
and NPP organizations and individual practitioners may bill Medicare 
for services when they are not meeting our other program requirements, 
including those related to providing beneficiary protections, such as 
Advance Beneficiary Notices.
    We are seeking public comment on two approaches for establishing an 
effective date for Medicare billing privileges for physician and NPP 
organizations and for individual practitioners.
    The first approach would establish the initial enrollment date for 
physician and NPP organizations and for individual practitioners, 
including physician and NPPs, as the date of approval by a Medicare 
contractor. This approach would prohibit physician and NPP 
organizations and individual practitioners from billing for services 
rendered to a Medicare beneficiary before they are approved and 
enrolled by a designated Medicare contractor to participate in the 
Medicare program and Medicare billing privileges are conveyed to their 
National Provider Identifier (NPI). The date of approval is the date 
that a designated Medicare contractor determines that the physician or 
NPP organizations or individual practitioner meets all Federal and 
State requirements for their supplier type.
    Given this first approach, in Sec.  424.520, we may implement 
regulations text that reads similar to ``the effective date of billing 
privileges for physician and NPP organizations and individual 
practitioners, including physicians and NPPs, is the date a Medicare 
contractor conveys billing privileges to an NPI.''
    We believe that this approach--
     Prohibits physician and NPP organizations and individual 
practitioners from receiving payments before a Medicare contractor 
conveys Medicare billing privileges to an NPI (69 FR 3434);
     Is consistent with our requirements in Sec.  489.13 for 
those providers and certain suppliers that require a State survey prior 
to being enrolled and the requirements for durable medical equipment, 
prosthetics, orthotics, and supplies (DMEPOS) suppliers in Sec.  
424.57(b)(2);
     Is consistent with our requirements for providers 
identified in Sec.  400.202 and surveyed suppliers are allowed to bill 
for service only after they are approved to participate in the Medicare 
program. Surveyed suppliers are suppliers who have been certified by 
either CMS or a State certification agency and are in compliance with 
Medicare requirements. Surveyed suppliers may include ASCs or portable 
x-ray suppliers; and
     Ensures that we are able to verify a supplier's 
qualifications, including meeting any performance standards before 
payment for services can occur.
    The second approach would establish the initial enrollment date for 
physician and NPP organizations and individual practitioners, including 
physician and NPPs, as the later of: (1) The date of filing of a 
Medicare enrollment application that was subsequently approved by a 
fee-for-service (FFS) contractor; or (2) the date an enrolled supplier 
first started rendering services at a new practice location. The date 
of filing the enrollment application is the date that the Medicare FFS 
contractor receives a signed Medicare enrollment application that the 
Medicare FFS contractor is able to process to approval. This option 
would allow a supplier that is already seeing non-Medicare patients to 
start billing for Medicare patients beginning on the day they submit an 
enrollment application that can be fully processed. In contrast to the 
first option,

[[Page 38536]]

a newly enrolling physician and NPP organizations and individual 
practitioners or physician and NPP organizations and individual 
practitioners that are establishing or changing a practice location 
would be allowed to bill the Medicare program for services furnished to 
Medicare beneficiaries on or after the date of filing if a Medicare 
contractor approves Medicare billing privileges and conveys billing 
privileges to an NPI. It is also important to note that if a Medicare 
contractor rejects or denies an enrollment application, then the 
physician or NPP organization or individual practitioner is at risk of 
not receiving payment for any services furnished after the date of 
filing.
    Given this second approach, in Sec.  424.520, we may implement 
regulations text that reads similar to ``the effective date of billing 
privileges for physician and NPP organizations and for individual 
practitioners, physicians and NPPs, is the later of--(1) The filing 
date of the Medicare enrollment application that was subsequently 
approved by an FFS contractor; or (2) The date that the physician or 
NPP organization or individual practitioner first furnished services at 
a new practice location.''
    We believe that this approach--
     Prohibits physician and NPP organizations and individual 
practitioners, including physician and NPPs, from receiving payments 
before a Medicare contractor conveys Medicare billing privileges to an 
NPI (69 FR 3434);
     Is consistent with our requirements found at Sec.  
410.33(i) that limit the retrospective billing for IDTFs and ensures 
that Medicare billing privileges are conveyed to physician and NPP 
organizations and to individual physician and NPPs in a similar manner 
similar to IDTFs; and
     Addresses the public's concern regarding contractor 
processing timeliness while appropriately ensuring that Medicare 
payments are made to physician and NPP organizations and to individual 
physician and NPPs who have enrolled in a timely manner.
    We maintain that it is not possible to verify that a supplier has 
met all of Medicare's enrollment requirements prior to submitting an 
enrollment application. Therefore, the Medicare program should not be 
billed for services before the later of the two dates that a physician 
or NPP organization, physician or NPP has submitted an enrollment 
application that can be fully processed or when the enrolled supplier 
is open for business.
    To assist physician and NPP organizations and individual 
practitioners in enrolling and updating their existing enrollment 
record, we established Internet-based enrollment process known as 
Internet-based Provider Enrollment, Chain and Ownership System (PECOS). 
Internet-based PECOS is available to physician and NPP organizations 
and individual practitioners in all States, except California, 
Missouri, and New York, in early CY 2009. We expect that Internet-based 
PECOS will be available to physician and NPP organizations and 
individual practitioners in California, Missouri, and New York by 
September 30, 2009.
    By using Internet-based PECOS, we expect that physician and NPP 
organizations and individual practitioners will be able reduce the time 
necessary to enroll in the Medicare program or make a change in their 
Medicare enrollment record by reducing common errors in the application 
submission process. We expect that Medicare contractors will fully 
process most complete Internet-based PECOS enrollment applications 
within 30 to 45 calendar days compared to 60 to 90 calendar days in the 
current paper-based enrollment process. Thus, if physician and NPP 
organizations and individual practitioners enroll in the Medicare 
program or make a change in their existing Medicare enrollment using 
Internet-based PECOS and submit required supporting documentation, 
including a signed certification statement, licensing and education 
documentation, and, if necessary, the electronic funds transfer 
authorization agreement (CMS-588) 45 days before their effective date, 
a Medicare contractor should be able to process the enrollment 
application without a delay in payment.
    The date of filing for Internet-based PECOS will be the date the 
Medicare FFS contractor receives all of the following: (1) A signed 
certification statement; (2) an electronic version of the enrollment 
application; and (3) a signature page that the Medicare FFS contractor 
processes to approval.
    In Sec.  424.502, we are also proposing to define a physician and 
NPP organization to mean any physician or NPP entity that enrolls in 
the Medicare program as a sole proprietorship or organizational entity 
such as clinic or group practice. In addition to establishing 
organizational structure as a sole proprietorship, physicians and NPPs 
are able to establish various organizational relationships including 
corporations, professional associations, partnerships, limited 
liability corporations and subchapter S corporations. We believe that 
proposed definition above would include sole proprietorships that 
receive a type 1 NPI and any organizational entity that is required to 
obtain a type 2 NPI.
2. Medicare Billing Privileges and Existing Tax Delinquency
    The Government Accountability Office (GAO) found that over 21,000 
of the physicians, health professionals, and suppliers paid under 
Medicare Part B during the first 9 months of calendar year 2005 had tax 
debts totaling over $1 billion. The GAO report titled, ``Medicare, 
Thousands of Medicare Part B Providers Abuse the Federal Tax System 
(GAO-07-587T)'' found abusive and potentially criminal activity, 
including failure to remit to IRS individual income taxes or payroll 
taxes or both withheld from their employees.
    While we do not currently consider whether an individual physician, 
NPP currently enrolled in the Medicare program has delinquent tax debts 
with the Internal Revenue Service (IRS), we do consider whether a 
physician or NPP was convicted of a Federal or State felony offense, 
including income tax evasion, that we have determined to be detrimental 
to the best interest of the Medicare program. Moreover, if a physician 
or NPP was convicted of Federal or State felony offense within the 10 
years preceding enrollment or revalidation of enrollment that we 
determined to be detrimental to the best interest of the Medicare 
program, we could deny or revoke the Medicare billing privileges of the 
physician or NPP.
    The Financial Management Service (FMS), a bureau of the Department 
of Treasury, initiated the Federal Payment Levy Program (FPLP) portion 
of the Continuous Levy Program in July 2000 to recover delinquent 
Federal tax debts. The FPLP is a program whereby delinquent Federal 
income tax debts are collected by levying non-tax payments, as 
authorized by the Taxpayer Relief Act of 1997 (Pub. L. 105-34). The 
FPLP includes vendor and Social Security benefit payments, and Medicare 
payments. It is accomplished through a process of matching delinquent 
debtor data with payment record data. This automated collection of debt 
at the time of payment occurs after the delinquent taxpayer has been 
afforded due process, in accordance with the Internal Revenue Code.
    In July 2000, the IRS in conjunction with the Department of 
Treasury's FMS started the FPLP which is authorized by section 6331(h) 
of the Internal Revenue Code as prescribed by section 1024 of

[[Page 38537]]

the Taxpayer Relief Act of 1997. Through this program, the IRS can 
collect overdue taxes through a continuous levy on certain Federal 
payments disbursed by FMS; it generally allows Medicare to match a 
claim to a delinquent taxpayer, offset the payment, and recover a 
percentage of the amount due.
    The FPLP is a collection and enforcement tool used by the IRS for 
individuals that have received all requisite notification of tax 
delinquency and who have either exhausted or neglected to use their 
respective appeal rights; therefore, the FPLP is only applied after all 
previous IRS collections efforts have failed. Accordingly, the FPLP is 
an automated levy program where certain delinquent taxpayers are 
systematically matched and levied on their Federal payments disbursed 
by Treasury's FMS.
    In 2001, we implemented the FPLP process for Medicare Part C and 
vendor payments, and in FY 2009, we will implement the FPLP process for 
payments made to providers and suppliers reimbursed under Part A and 
Part B of the Medicare program. However, the FPLP does not allow CMS to 
offset a payment when an individual reassigns his or her benefits to a 
third-party, such as a group practice where an existing Federal tax 
delinquency exists.
    Consistent with statutory authority found under sections 
1866(j)(1)(A) and 1871 of the Act, we believe that we have the 
authority to establish and make changes to the enrollment process for 
providers and suppliers of service. Accordingly, to ensure that the 
Federal government is able to recoup delinquent Federal tax debts from 
physicians and NPPs who are enrolled in the Medicare program and are 
receiving payments, we are considering revoking the billing privileges 
for those individuals for which a tax delinquency exists and we are 
unable to directly levy future payments through the FPLP. While we are 
not proposing this change in this year's PFS, we will consider 
proposing this type of change in a future rulemaking effort after we 
have implemented the FPLP process, monitored and evaluated the 
implementation of FPLP process, and analyzed the potential impact of 
this change on physician and NPPs who are subject to the FPLP but that 
we are unable to directly levy future payments through the FPLP. In 
addition, we expect to conduct outreach regarding our implementation in 
advance of implementing the FPLP in FY 2009.
    We believe that this change, if proposed and adopted, would 
prohibit an individual with a tax delinquency from shielding their 
future payments through reassignment of benefits to a third party. 
Finally, since the tax delinquency is incurred by an individual who has 
reassigned his or her benefits to a third party, we do not believe that 
it is appropriate to take action against the third-party. We believe 
that this is consistent with the protections already afforded to an 
individual by the IRS but ensures that Medicare does not enroll or 
allow continued enrollment to an individual with serious tax 
delinquency.
    We maintain that it is essential that a physician or NPP resolve 
any existing Federal tax delinquency before entering the Medicare 
program. This will ensure that the Medicare program is not making 
payment to an individual who has not met his or her obligation to pay 
their tax debts.
    Finally, we are soliciting comments on whether we should consider 
revoking a physician billing privileges or taking some other type of 
administrative action when a physician or NPP has a Federal tax 
delinquency that can not be levied through the FPLP process. We are 
also soliciting comments on whether we should consider revoking the 
billing privileges of an organizational entity or taking some other 
type of administrative action against organizational entities when the 
owners of an organizational entity have a Federal tax delinquency that 
can not be levied through the FPLP process.
3. Denial of Enrollment in the Medicare Program (proposed Sec.  
424.530(a)(6) and (a)(7))
    Currently, owners, authorized officials, and delegated officials of 
a physician and NPP organizations and individual practitioners, 
including physicians and NPPs, can obtain additional billing privileges 
by establishing a new tax identification number (TIN), reassigning 
benefits to another entity, or by submitting an enrollment application 
as another provider or supplier type even though the entity for which 
the provider or supplier rendered services and has had its billing 
privileges revoked, suspended, or has an outstanding Medicare 
overpayment. Absent a reason to reject or deny a Medicare enrollment 
application, the Medicare FFS contractor is required to approve the 
enrollment application for a provider or supplier who meets all other 
Federal and State enrollment requirements for their provider or 
supplier type.
    By submitting and having an enrollment application (for example, an 
initial application or a change of ownership) with a new TIN, some 
physician and NPP organizations and individual practitioners are able 
to circumvent existing Medicare revocation, payment suspension, 
overpayment recovery, and medical review processes by obtaining 
additional Medicare billing privileges. By obtaining additional billing 
privileges for multiple locations, these providers and suppliers are 
able to discontinue the use of the NPI that has an administrative 
action against it and bill and receive payment under another NPI.
    Consistent with Sec.  405.371, we will impose a payment suspension 
when we possesses reliable information that an overpayment or fraud, or 
willful misrepresentation exist, or that payments to be made may not be 
correct. While providers and suppliers do not have formal appeal rights 
to a payment suspension determination, providers and suppliers can 
submit a rebuttal to CMS' payment suspension determination. We believe 
that it is essential that we resolve the payment suspension 
determination before we grant additional billing privileges to these 
providers or suppliers. In concert with Sec.  405.372(c), once a 
payment suspension has been terminated, providers and suppliers may 
then apply for billing privileges.
    Moreover, we are obligated to recover Medicare overpayments as 
expeditiously as possible. Providers and suppliers can pay the debt or 
Medicare can reduce present or future Medicare payments and applying 
the amount withheld to the indebtedness. When we identify an 
overpayment and provide notice of the overpayment, physician and NPP 
organizations and individual practitioners are given an opportunity to 
appeal the determination. Under certain conditions the overpayment 
collection process is suspended during the appeals process. However, if 
the physician and NPP organization or individual practitioner does not 
appeal the overpayment determination, the overpayment determination is 
upheld on appeal, we will initiate a recovery action. However, in some 
cases, physician and NPP organizations or individual practitioners will 
try to circumvent the recovery process by seeking additional billing 
privileges and billing under the new billing number.
    Accordingly, we propose to add a new Sec.  424.530(a)(6) and (a)(7) 
to deny enrollment applications for additional Medicare billing 
privileges if the physician or NPP organization or individual 
practitioner has an active payment suspension or has an existing 
overpayment that has not been repaid. We are proposing that a Medicare 
FFS

[[Page 38538]]

contractor be allowed to deny enrollment applications from those 
authorized officials, delegated officials, owners, and individual 
practitioners that own a supplier or provider at the time of filing 
until such time as the administrative action is terminated or the 
Medicare overpayment has been repaid in full. Specifically, we are 
proposing to deny enrollment to any current owner (as defined in Sec.  
424.502), physician, or NPP, who is participating in the Medicare 
program and is under a current Medicare payment suspension.
    We believe that the change to our denial policy would help protect 
the Medicare program from unscrupulous or problematic physician and NPP 
organizations and individual practitioners. Moreover, this change would 
allow--(1) Medicare FFS contractors to improve customer service to all 
providers and suppliers that are already enrolled in the Medicare 
program; (2) facilitate the enrollment of all providers and suppliers 
seeking to enroll in the Medicare program for the first time; and (3) 
expand on existing efforts to process changes in a timely manner and 
provide better customer service.
4. Reporting Requirements for Providers and Suppliers (proposed Sec.  
424.516 and Sec.  424.535(a)(10))
    Currently, Sec.  424.520(b) requires that providers and suppliers, 
except DMEPOS and IDTF suppliers, report to CMS most changes to the 
information furnished on the enrollment application and furnish 
supporting documentation within 90 calendar days of the change (changes 
in ownership must be reported within 30 days). As specified in Sec.  
424.57(c)(2), DMEPOS suppliers, have only 30 calendar days to submit 
changes of information to CMS. As specified in Sec.  410.33(g)(2), 
IDTFs, must report changes in ownership, changes in location, changes 
in general supervision, and adverse legal actions within 30 calendar 
days. All other changes to the enrollment application must be reported 
within 90 days.
    While physician and NPP organizations and individual practitioners 
are required to report changes within 90 days of the reportable event, 
in many cases, there is little or no incentive for them to report a 
change that may adversely affect their ability to continue to receive 
Medicare payments. For example, physician and NPP organizations and 
individual practitioners purposely may fail to report a felony 
conviction or other adverse legal action, such as a revocation or 
suspension of a license to a provider of health care by any State 
licensing authority, or a revocation or suspension of accreditation, 
because reporting this action may result in the revocation of their 
Medicare billing privileges. Thus, unless CMS or our designated 
contractor becomes aware of the conviction or adverse legal action 
through other means, the change may never be reported by a physician 
and NPP organization or individual practitioner. Alternatively, if CMS 
or our designated contractor becomes aware of the conviction or adverse 
legal action after the fact, we lack the regulatory authority to 
collect overpayments for the period in which the physician and NPP 
organizations and individual practitioners should have had their 
billing privileges revoked.
    Since we believe that physician and NPP organizations and 
individual practitioners must furnish updates to their Medicare 
enrollment information in a timely manner, we are proposing a new Sec.  
424.516(d) which would establish more stringent reporting requirements 
for physician NPP organizations and individual practitioners. (We are 
proposing to redesignate Sec.  424.520 as Sec.  424.516 and amend the 
provisions in new Sec.  424.516.) In addition to a change of ownership 
(as currently specified in redesignated Sec.  424.516(d)(1)(i)), we are 
proposing to add Sec.  424.516(d)(1)(ii) that requires all physician 
and NPP organizations and individual practitioners to notify CMS' 
designated contractor of any adverse legal action within 30 days. 
Adverse legal actions include, but are not limited to, felonies, 
license suspensions, and the Office of the Inspector General (OIG) 
exclusion or debarment. We believe that a physician and NPP 
organizations and individual practitioner's failure to comply with the 
reporting requirements within the time frames described above may 
result in the revocation of Medicare billing privileges and a Medicare 
overpayment from the date of the reportable change. Specifically, we 
believe that an adverse legal action may preclude payment, and thus, 
establish an overpayment from the date of the adverse action. As such, 
we believe that physician and NPP organizations and individual 
practitioners should not be allowed to retain any reimbursement they 
receive after the adverse legal action.
    We believe that it is essential that this type of change be 
reported in a timely manner (that is within 30 days). For example, if 
CMS or our designated contractor determines in February 2008 that a 
physician failed to notify Medicare about an adverse legal action that 
occurred on June 30, 2007, that physician may be subject to an 
overpayment for all Medicare payments beginning June 30, 2007 and have 
its Medicare billing privileges revoked effective retroactively back to 
June 30, 2007 as well.
    Additionally, we are proposing to add a requirement for change in 
location at Sec.  424.516(d)(1)(iii). Since a change in location may 
impact the amount of payment for services rendered by placing the 
physician and NPP organizations and individual practitioners into a new 
CBSA. We believe that it is essential that physician and NPP 
organizations and individual practitioners report changes in practice 
location including those that impact the amount of payments they 
receive within a timely period (that is, 30 days). However, unlike an 
adverse legal action, which may preclude all payments if reported, 
failure to report a change in practice location may impact the amount 
of payment, not whether a physician and NPP organizations and 
individual practitioners may be eligible to receive payments. 
Accordingly, we believe that failing to report changes in practice 
location would result in an overpayment for the difference in payment 
rates retroactive to the date the change in practice location occurred 
and may result in the revocation of Medicare billing privileges. For 
example, if a physician and NPP organization moves its practice 
location in New York, from urban Herkimer County to Hamilton County or 
Lewis County, which are both rural, but fails to update its provider 
enrollment information; then it would no longer be able to receive the 
higher payment rate associated with Herkimer County. We believe that 
reporting these types of changes is essential for making correct and 
appropriate payments.
    We are proposing to add Sec.  424.535(a)(9) which would specify 
that failure to comply with the reporting requirements specified in 
Sec.  424.516(d) would be a basis for revocation. Additionally, we are 
proposing in Sec.  424.565(a), ``Failure to comply with the reporting 
requirements specified in Sec.  424.516(d) would result in a Medicare 
overpayment from the date of an adverse legal action or a change in 
practice location.'' In this situation, an overpayment for failure to 
timely report these changes would be calculated back to the date of the 
adverse legal action or the date of the change in practice location. 
Once an overpayment has been assessed, we will follow the overpayment 
regulations established at 42 CFR Part 405 subpart C. We previously 
addressed these procedures in Chapter 4 of the Medicare Financial 
Management Manual (IOM Manual 100-

[[Page 38539]]

06). Lastly, collection of overpayments related to Sec.  
424.516(d)(1)(iii) would not begin until after the effective date of 
the final rule.
    Since it is essential that physician and NPP organizations and 
individual practitioners notify their designated contractor of these 
types of reportable events in a timely manner and to ensure that the 
provider or supplier continues to be eligible for payment, we believe 
that it is essential that we establish an overpayment from the time of 
the reportable event. We believe that establishing an overpayment and 
revocation of billing privileges for noncompliance from the time of the 
reportable event would provide the supplier with a compelling incentive 
to report reportable changes in the 30-day reporting period.
    In addition, if CMS or our designated contractor determines that a 
physician and NPP organization or an individual practitioner has moved 
and has not reported the reportable event within the 30-day reporting 
period, CMS or our designated contractor would impose an overpayment, 
if applicable, and revoke billing privileges for a period of not less 
than one year.
5. Maintaining Ordering and Referring Documentation
    We are proposing to add a new Sec.  424.516(f) that would specify, 
``A provider or supplier is required to maintain ordering and referring 
documentation, including the NPI, received from a physician or eligible 
NPP. Physicians and NPPs are required to maintain written ordering and 
referring documentation for 10 years from the date of service.'' We 
believe that it is essential that providers and suppliers maintain 
documentation regarding the specific service ordered or referred to a 
Medicare beneficiary by a physician or NPP as defined in section 
1842(b)(18)(c) of the Act (which includes but is not limited to nurse 
practitioners, and physician assistants). We believe that ordering and 
referring documentation maintained by a provider or supplier must match 
the information on the Medicare claims form. Additionally, we are 
proposing to add Sec.  424.535(a)(10) that would state that failure to 
comply with the documentation requirements specified in Sec.  
424.516(f) as a reason for revocation. For example, a lab submits a 
claim with Dr. Smith's NPI (1234512345) in the ordering and referring 
section of the claim form. The number submitted on the claim form 
should match the documentation in the provider or supplier's records. 
In addition, we are codifying the requirement to maintain ordering and 
referring documentation as required in the Medicare Program Integrity 
Manual (PIM) Publication 100-08, Chapter 5. While the PIM currently 
requires that providers and suppliers maintain ordering and referring 
documentation for 7 years from the date of payment, we believe that the 
industry generally maintains documentation from the date of service. 
Accordingly, since there may be a delay in claims payment for up to 27 
months from the date of service, we believe that it would be 
administratively less burdensome for providers and suppliers to 
maintain ordering and referring documentation for 10 years from the 
date of service, rather than requiring providers and suppliers to 
maintain ordering and referring documentation associated with the date 
of payment.
    We maintain that a provider or supplier should retain the necessary 
ordering and referring documentation received from physicians and NPPs 
as defined in section 1842(b)(18)(c) of the Act to assure themselves 
that coverage criterion for an item has been met. If the information in 
the patient's medical record does not adequately support the medical 
necessity for the item, the supplier would be liable for the dollar 
amount involved unless a properly executed Advance Beneficiary Notice 
of possible denial has been obtained.
6. Revocation of Enrollment and Billing Privileges in the Medicare 
Program (proposed Sec.  424.535(g))
    Historically, we have allowed providers and suppliers whose 
Medicare billing numbers have been revoked to continue billing for 
services furnished prior to revocation for up to 27 months after the 
effective date of the revocation. Since we believe this extensive 
billing period poses significant risk to Medicare program, we are 
proposing to limit the claims submission timeframe after revocation. In 
Sec.  424.535(g), we are proposing that revoked physician and NPP 
organizations and individual practitioners, including physicians and 
NPPs, must submit all outstanding claims not previously submitted 
within 30 calendar days of the revocation effective date. We maintain 
that this change is necessary to limit the Medicare program exposure to 
future vulnerabilities from physician and NPP organizations and 
individual practitioners that have had their billing privileges 
revoked. We know that some physician and NPP organizations and 
individual practitioners are able to create false documentation to 
support claims payment. Accordingly, this proposed change would allow a 
Medicare contractor to conduct focused medical review on the claims 
submitted during the claims filing period to ensure that each claim is 
supported by medical documentation that the contractor can verify. We 
maintain that focused medical review of these claims will ensure that 
Medicare only pays for furnished services by a physician organization 
or individual practitioner and that these entities and individuals 
receive payment in a timely manner. Since a physician organization or 
individual practitioner generally submit claims on a nexus to the date 
of service, we believe that this proposed change will not impose a 
significant burden on physician organizations or individual 
practitioners. In addition, we are also proposing to add Sec.  
424.44(a)(3) to account for this provision related to the requirements 
for the timely filing of claims.
7. Technical Changes to Regulations Text
    We propose to make the following technical changes:
     Existing Sec.  424.510(d)(8) would be redesignated as 
Sec.  424.517. This proposed revision would separate our ability to 
conduct onsite reviews from the provider and supplier enrollment 
requirements.
     Existing Sec.  424.520 would be revised and redesignated 
as Sec.  424.516. This proposed redesignation would move the additional 
provider and supplier enrollment requirements so that these 
requirements immediately follow the provider and supplier enrollment 
requirements.
     In new Sec.  424.520, we would specify the effective dates 
for Medicare billing privileges for the following entities: Surveyed, 
certified, or accredited providers and suppliers; IDTFs; and DMEPOS 
suppliers.
     In Sec.  424.530, the phrase ``in the Medicare program'' 
would be added to the section heading to remain consistent with other 
headings in the subpart.

K. Proposed Amendment to the Exemption for Computer-Generated Facsimile 
Transmission From the National Council for Prescription Drug Programs 
(NCPDP) SCRIPT Standard for Transmitting Prescription and Certain 
Prescription-Related Information for Part D Eligible Individuals

    [If you choose to comment on issues in this section, please include 
the caption ``COMPUTER-GENERATED FAX TRANSMISSIONS'' at the beginning 
of your comments.]

[[Page 38540]]

1. Legislative History
    Section 101 of the MMA amended title XVIII of the Act to establish 
a voluntary prescription drug benefit program. Prescription Drug Plan 
(PDP) sponsors and Medicare Advantage (MA) organizations offering 
Medicare Advantage-Prescription Drug Plans (MA-PDs) and other Medicare 
Part D sponsors are required to establish electronic prescription drug 
programs to provide for electronic transmittal of certain information 
to the prescribing provider and dispensing pharmacy and dispenser. This 
includes information about eligibility, benefits (including drugs 
included in the applicable formulary, any tiered formulary structure 
and any requirements for prior authorization), the drug being 
prescribed or dispensed and other drugs listed in the medication 
history, as well as the availability of lower cost, therapeutically 
appropriate alternatives (if any) for the drug prescribed. Section 101 
of the MMA established section 1860D-4(e)(4)(D) of the Act, which 
directed the Secretary to issue uniform standards for the electronic 
transmission of such data.
    There is no requirement that prescribers or dispensers implement e-
prescribing. However, prescribers and dispensers who electronically 
transmit prescription and certain other prescription-related 
information for covered drugs prescribed for Medicare Part D eligible 
individuals, directly or through an intermediary, are required to 
comply with any applicable final standards that are in effect. For a 
complete discussion of the statutory basis for the e-prescribing 
portions of this proposed rule and the statutory requirements at 
section 1860D-4(e) of the Act, please refer to the ``Background'' 
section of the E-Prescribing and the Prescription Drug Program proposed 
rule published in the February 4, 2005 Federal Register (70 FR 6256)
2. Regulatory History
a. Foundation Standards and Exemption for Computer-Generated Facsimiles 
(Faxes)
    In the E-Prescribing and the Prescription Drug Program final rule 
(70 FR 67568, November 7, 2005), we adopted the National Council for 
Prescription Drug Programs (NCPDP) SCRIPT standard, Implementation 
Guide, Version 5, Release 0 (Version 5.0), May 12, 2004, excluding the 
Prescription Fill Status Notification Transaction (and its three 
business cases which include the following: Prescription Fill Status 
Notification Transaction-Filled; Prescription Fill Status Notification 
Transaction-Not Filled; and Prescription Fill Status Notification 
Transaction-Partial Fill) hereafter referred to as ``NCPDP SCRIPT 
5.0,'' as the standard for communicating prescriptions and 
prescription-related information between prescribers and dispensers. 
Subsequently, in the June 23, 2006 Federal Register (71 FR 36020), we 
published an interim final rule with comment period (IFC) that 
maintained NCPDP SCRIPT 5.0 as the adopted standard, but allowed for 
the voluntary use of a subsequent backward compatible version of the 
standard, NCPDP SCRIPT 8.1. In the April 7, 2008 Federal Register , we 
published a final rule (73 FR 18918) that finalized the June 23, 2006 
IFC; effective April 1, 2009, we will retire the NCPDP SCRIPT 5.0 and 
adopt NCPDP SCRIPT 8.1 as the standard. Hereafter we refer to these 
standards as ``NCPDP SCRIPT.''
    The November 7, 2005 final rule also established an exemption to 
the requirement to utilize the NCPDP SCRIPT standard for entities that 
transmit prescriptions or prescription-related information for Part D 
covered drugs prescribed for Part D eligible individuals by means of 
computer-generated facsimiles (faxes generated by one computer and 
electronically transmitted to another computer or fax machine which 
prints out or displays an image of the prescription or prescription-
related information). Providers and dispensers who use this technology 
are not compliant with the NCPDP SCRIPT standard. The exemption was 
intended to allow such providers and dispensers time to upgrade to 
software that utilizes the NCPDP SCRIPT standard, rather than forcing 
them to revert to paper prescribing.
b. Amendment of Exemption
    In the CY 2008 PFS proposed rule (72 FR 38194), we proposed to 
revise Sec.  423.160(a)(3)(i) to eliminate the computer-generated fax 
exemption to the NCPDP SCRIPT standard for the communication of 
prescription or certain prescription-related information between 
prescribers and dispensers for the transactions specified in Sec.  
423.160(b)(1)(i) through (xii).
    Since computer-generated faxing retains some of the disadvantages 
of paper prescribing (for example, the administrative cost of keying 
the prescription into the pharmacy system and the related potential for 
data entry errors that may impact patient safety), we believed it was 
important to take steps to encourage prescribers and dispensers to move 
toward use of NCPDP SCRIPT. We believed the elimination of the 
computer-generated fax exemption would encourage prescribers and 
dispensers using this computer-generated fax technology to, where 
available, utilize true e-prescribing (electronic data interchange 
using the NCPDP SCRIPT standard) capabilities.
    We also believed that it might encourage those without such 
capabilities to upgrade their current software products, or, where 
upgrades are not available, to switch to new products that would enable 
true e-prescribing. In addition, because the elimination of the 
computer-generated facsimile exemption would encourage those 
prescribers that are already using e-prescribing software that is 
capable of true e-prescribing to utilize those capabilities, we 
believed that the elimination of the computer-generated fax exemption 
would increase the number of NCPDP SCRIPT transactions fairly 
significantly in a relatively short time period, and that this could, 
in turn, create a ``tipping point'' that could create economic 
incentives for independent pharmacies to adopt NCPDP SCRIPT capable 
software to begin to exchange true e-prescribing transactions with 
their prescriber partners.
    We proposed to eliminate the computer-generated fax exemption 
effective 1 year after the effective date of the CY 2008 PFS final rule 
(that is, January 1, 2009). We believed that this would provide 
sufficient notice to prescribers and dispensers who would need to 
implement or upgrade e-prescribing software to look for products and 
upgrades that are capable of generating and receiving transactions that 
utilize NCPDP SCRIPT. It would also afford current e-prescribers time 
to work with their trading partners to eventually eliminate computer-
to-fax transactions. We also believed the elimination of the exemption 
for computer-generated faxing would encourage e-prescribers and 
dispensers to move as quickly as possible to use of the NCPDP SCRIPT 
standard with what we perceived to be minimal impact.
    We solicited comments on the impact of the proposed elimination of 
this exemption. Several commenters concurred with our proposal to 
eliminate the exemption for computer-generated faxes. The commenters 
indicated that lifting the exemption for computer-generated faxes would 
act as an incentive to move prescribers and dispensers toward true e-
prescribing (electronic data interchange using the NCPDP SCRIPT 
standard). Less than half of the commenters disagreed with

[[Page 38541]]

our proposal to eliminate the exemptions for computer-generated faxes, 
citing concerns about increased hardware/software costs, transaction 
fees, certification and other activation costs. Some commenters agreed 
that many prescribers who are already e-prescribing likely already 
possessed the ability to generate NCPDP SCRIPT compliant transactions 
using their software or could comply by obtaining a version upgrade 
under their maintenance agreements. Many commenters suggested that we 
continue to allow for the use of computer-generated faxes in the case 
of transmission failure and network outages.
    During the CY 2008 PFS proposed rule comment period, we received 
several comments that indicated that the elimination of the exemption 
could be problematic in certain e-prescribing transactions, namely 
prescription refill requests, but only one of those commenters offered 
substantiation to support this assertion. Absent receipt of substantial 
industry feedback on the impact of the elimination of computer-
generated facsimiles on prescription refill requests, and not 
considering these comments about prescription refill requests to 
constitute widespread concern regarding the prescription refill request 
function, in the CY 2008 PFS final rule with comment period (72 FR 
66396), we amended the exemption to permit the use of computer-
generated facsimiles only in cases of temporary or transient network 
transmission failures. Taken in the aggregate, we determined that the 
1-year time period was adequate time during which providers and 
dispensers would have the opportunity to convert to conducting true e-
prescribing and that costs would be mitigated due to the growing volume 
of e-prescriptions and practice of e-prescribing, with a commensurate 
reduction in transmission, software and other costs during that 1-year 
time period. These changes were to become effective in January 2009.
3. Proposal
    Following the publication of the CY 2008 PFS final rule with 
comment period, we received additional information regarding how the 
elimination of the exemption for computer-generated faxes would 
adversely impact the electronic transmission of prescription refill 
requests. These commenters relayed that the elimination of the 
exemption would force dispensers who e-prescribe and use these 
transactions to revert to paper prescribing. These commenters 
substantiated their assertions by providing us with more specific 
information regarding the economic and workflow impacts associated with 
the elimination of computer-generated faxes that was not forthcoming in 
the prior public comment period for the proposed rule. We also received 
unsolicited comments on this issue during the comment period for the 
November 16, 2007 proposed rule (72 FR 64900). In light of this new 
information, we are now re-examining this issue in this proposed rule.
    Dispensers have indicated that they use computer-generated 
facsimiles for the majority of prescription refill requests, in 
particular when communicating with prescribers that have not adopted e-
prescribing. Currently, regardless of how the initial prescription was 
received by the pharmacy (that is, orally, via e-prescribing, 
telephone, paper, or fax) nearly all prescription refill requests from 
chain pharmacies to prescribers are sent electronically, either via an 
e-prescribing application or via computer-generated facsimile. When a 
prescription is received by a dispenser electronically, the 
prescription refill request is sent to the prescriber via the same 
technology. However, where the dispenser knows that the prescriber 
lacks e-prescribing capability or has not activated it, or where the 
prescriber does not respond to the request sent to his or her 
prescribing device, the prescription refill request is sent or re-sent 
via computer-generated facsimile. Commenters stated that the vast 
majority of computer-generated facsimiles sent today from prescribers 
to pharmacies are not electronic data interchange (EDI) transmissions, 
but usually prescription refill requests sent from pharmacies to 
prescribers who do not conduct true e-prescribing and, in many cases, 
do not engage in any electronic transactions at all. One national drug 
store chain estimates that it produces approximately 150,000 computer-
generated facsimile prescription refill requests every day.
    The workflow and process for filling prescription would be 
significantly disrupted if these computer-generated facsimile 
transmissions were prohibited. Dispensers and other staff would be 
forced to revert back to making phone calls or using a stand-alone 
facsimile machine to contact prescribers each time a refill is 
requested. Commenters indicated that not only is this counterproductive 
to the advances and efficiencies made in pharmacy practice, it would 
impose an undue administrative burden on dispensing pharmacies and 
pharmacists.
    In light of this additional information regarding the larger than 
anticipated impact of the elimination of computer--generated facsimiles 
for the prescription refill request transaction, we propose to further 
amend the computer-generated facsimile exemption to also allow for an 
exemption from the NCPDP SCRIPT standards for electronic prescription 
refill request transactions that are conducted by computer-generated 
facsimiles when the prescriber is incapable of receiving electronic 
transmissions using the NCPDP SCRIPT standard. We propose to retain the 
current exemption in instances of temporary network transmission 
failures. We propose that this change will be effective January 1, 
2009. We will periodically revisit the exemption for the purpose of 
ultimately eliminating it for the prescription refill request 
transaction as described in Sec.  423.160(b)(1)(vii), and solicit 
comments regarding what constitutes an adequate time to allow the 
industry to transition to the use of the NCPDP SCRIPT standard.
    We are also soliciting comments on the impact of the proposed 
exclusion of the prescription refill request transaction from this 
exemption. Specifically, we are soliciting information on any other e-
prescribing transaction that may be similarly adversely impacted by the 
elimination of computer-generated facsimiles. As the use of e-
prescribing increases, the need for computer-generated facsimiles in 
Part D e-prescribing would decrease, except in cases of temporary or 
transient network transmission failures. We believe that this proposal 
to allow computer-generated facsimiles for the prescription refill 
request transaction, and in cases of network transmission failures, 
would not slow the ongoing adoption of e-prescribing using NCPDP SCRIPT 
enabled transactions, and that the industry should continue to move as 
quickly as possible to use of the NCPDP SCRIPT standard.

L. Comprehensive Outpatient Rehabilitation Facilities (CORF) and 
Rehabilitation Agency Issues

    [If you choose to comment on issues in this section, please include 
the caption ``CORF AND REHABILITATION ISSUES'' at the beginning of your 
comments.]
    Comprehensive outpatient rehabilitation facilities (CORFs) and 
rehabilitation agencies are Medicare providers that are certified to 
provide certain rehabilitation services. Currently covered CORF 
clinical services and rehabilitation agency services are paid through 
the PFS.

[[Page 38542]]

    In the CY 2008 PFS final rule with comment period (72 FR 66222 and 
66399), we revised the CORF regulations at 42 CFR parts 410 and 413 to 
ensure that the regulations reflected the statutory requirements 
applicable to CORFs under sections 1834(k) and 1861(cc) of the Act. 
Many of these changes were technical in nature. Specifically, the 
regulatory changes: (1) Revised the definitions of physicians' 
services, respiratory therapy services, social services and 
psychological services, nursing services, drugs and biologicals, and 
supplies and durable medical equipment and home environment evaluation; 
(2) amended the payment provisions for CORF services; and (3) made 
other clarifications and changes to the conditions for coverage for 
CORF services.
    In this CY 2009 PFS proposed rule, we address the comments received 
in response to the CY 2008 final rule with comment (72 FR 66222), as 
well as add new provisions and revise some provisions. We welcome your 
comments on all of these proposed changes.
1. Personnel Qualifications
    We stated in the CY 2008 PFS final rule with comment period that we 
would propose updated qualifications for respiratory therapists in 
future rulemaking (72 FR 66297). It has been our policy that only the 
respiratory therapist (and not the respiratory therapy technician), who 
possesses the educational qualifications necessary to provide the level 
of respiratory therapy services required, is permitted to provide 
respiratory therapy in a CORF setting.
    In the CY 2008 PFS final rule with comment period, we received a 
comment indicating that our regulations were outdated and did not 
conform to current respiratory therapy professional standards. The 
American Association for Respiratory Care (AARC) believes that the 
terms ``certified respiratory therapist (CRT)'' and the ``registered 
respiratory therapist (RRT)'' have replaced the terms ``respiratory 
therapy technician'' and ``respiratory therapist,'' respectively. In 
addition, the qualifications for CRTs and RRTs differ from those 
applicable to respiratory therapy technicians and respiratory 
therapists. The CRT designation is awarded after an individual 
successfully passes the entry-level respiratory therapy examination. In 
order to be eligible for the RRT examination, an individual must be a 
graduate of an advanced level respiratory therapy educational program 
and have obtained the RRT credential.
    For CY 2009, we are proposing to revise Sec.  485.70(j)--setting 
forth the personnel qualifications for respiratory therapists in 
CORFs-- to be consistent with current qualification requirements for 
RRTs, as recommended by the AARC.
    We are also proposing to delete Sec.  485.70(k), which sets forth 
personnel qualifications for CRTs (previously referred to as 
respiratory therapy technicians) in CORFs. In the past, we have not 
reimbursed CORFs for respiratory therapy services provided by 
respiratory therapy technicians or CRTs, and we believe that removing 
the technician definition would clarify our position. We believe that 
current medical standards continue to require that the provision of 
skilled respiratory therapy services to patients in the CORF setting be 
furnished by RRTs. While CRTs furnish general respiratory care 
procedures and may assume some clinical responsibility for specified 
respiratory care modalities involving the application of therapeutic 
techniques under the supervision of an RRT or a physician, the 
educational qualifications that a RRT possesses allow him or her to 
evaluate, treat, and manage patients of all ages with respiratory 
illnesses. RRTs participate in patient education, implement respiratory 
care plans, apply patient-driven protocols, follow evidence-based 
clinical practice guidelines, and participate in health promotion, 
disease prevention, and disease management. RRTs also may be required 
to exercise considerable independent judgment.
    This was implemented in the CY 2002 PFS final rule with comment 
period (66 FR 55246 and 55311) and the CY 2003 PFS final rule with 
comment period (67 FR 79966 and 79999) when we developed and discussed 
G codes, CORF respiratory therapy services, and specifically recognized 
the RRT as the appropriate level of personnel to provide these CORF 
services. Finally, the CORF regulations at Sec.  485.58(d)(4) state 
that as a condition of participation for CORFs, CORF personnel must 
meet the qualifications described at Sec.  485.70.
    For CY 2009, to maintain consistency in the conditions of 
participation for both CORFs, home health agencies (HHAs), and other 
outpatient service providers, we are proposing to amend the material 
addressing personnel qualifications in Sec.  485.70. Specifically, we 
are amending paragraphs Sec.  485.70(c) and Sec.  485.70(e) by 
referencing the personnel qualifications for HHAs at Sec.  484.4. This 
change would align CORF personnel requirements not only with HHA 
requirements, but also with other regulations in Part 485 addressing 
provision of physical therapy, speech-language pathology, and 
occupational therapy services. We welcome your comments on these 
proposed changes.
    Also, at 485.58(a)(1)(i), we propose to amend the duties of a CORF 
physician to include medical supervision of nonphysician staff. This 
change conforms to changes made to the CORF conditions for coverage in 
the CY 2008 PFS final rule with comment period. We believe that adding 
medical supervision of nonphysician staff to the duties of CORF 
physicians more accurately reflects the duties and responsibilities of 
the CORF physician. We also believe that this change could increase the 
quality of care provided to patients of CORFs. We welcome your comments 
on this proposed change.
2. Social and Psychological Services
    In the CY 2008 PFS final rule with comment period (72 FR 66297), we 
clarified that all CORF services, including social and psychological 
services, must directly relate to or further the rehabilitation goals 
established in the physical therapy, occupational therapy, speech-
language pathology, or respiratory therapy plan of treatment. We 
believe that using a full range of clinical social and psychological 
CPT codes to describe CORF social and psychological services is 
inappropriate because social and psychological CORF services do not 
include independent clinical treatment of mental, psychoneurotic, and 
personality disorders. CPT codes 96150 through 96154 and CPT code range 
90801 through 90899 are inappropriate for CORF use because all of these 
CPT codes represent full-scale clinical treatment for these disorders. 
As we stated last year, we believe that for purposes of providing care 
in a CORF, social and psychological services should represent only case 
management and patient assessment components as they relate to the 
rehabilitation treatment plan (72 FR 66297 through 66298). 
Consequently, after notice and comment, we changed our policy and 
payment for CORF social and psychological services; these services may 
no longer address a CORF patient's mental health diagnoses except 
insofar as they relate directly to other services provided by the CORF.
    We specified in the CY 2008 final rule with comment period (72 FR 
66298) that only the CPT code 96152 for health and behavior 
intervention (with the patient) could be used to bill for CORF social 
and psychological services. This code is part of a series of codes that 
was created by CPT in 2002 to address health and behavior assessment 
issues. These

[[Page 38543]]

services are offered to patients who present with established illnesses 
or symptoms, who are not diagnosed with mental illness, and may benefit 
from evaluations that focus on the biopsychosocial factors related to 
the patient's physical health status, such as patient adherence to 
medical treatment, symptom management and expression, health-promoting 
behaviors, health-related risk-taking behaviors, and overall adjustment 
to medical illness. We also adopted the more limited definition of CORF 
social and psychological services, in our revised regulations at Sec.  
410.100(h) (72 FR 66399). The regulations state that, social and 
psychological services include the assessment and treatment of an 
individual's mental and emotional functioning and the response to and 
rate of progress as it relates to the individual's rehabilitation plan 
of treatment, including physical therapy services, occupational therapy 
services, speech-language pathology services and respiratory therapy 
services.
    We also noted that a HCPCS G-code could more accurately describe 
these unique CORF services, but believed that it was inappropriate to 
create such a G-code in the final rule with comment period without 
first proposing to do so in proposed rulemaking.
    Therefore, for CY 2009, we are proposing to create a CORF specific 
G-code, GXXX5, Social work and psychological services, directly 
relating to and/or furthering the patient's rehabilitation goals, each 
15 minutes, face-to face; individual (services provided by a CORF-
qualified social worker or psychologist in a CORF), to accurately 
describe the unique social and psychological services provided by CORF 
staff and to establish appropriate payment for these services. We 
propose to use salary and wage data from the Bureau of Labor and 
Statistics to institute a blended social worker/psychologist clinical 
labor category using a price per minute rate of $0.45 for the practice 
expense component of GXXX5. We would assign a malpractice RVU of 0.01. 
Because the services described by GXXX5 are solely furnished by a CORF 
social worker or clinical psychologist, and not by a physician, we 
would not allocate a work RVU for these services.
    We also propose to revise Sec.  410.100(h) to delete the reference 
to ``and treatment.'' As discussed above and in the CY 2008 PFS final 
rule with comment period (72 FR 66297), we believe all CORF services, 
including social and psychological services, must directly relate to or 
further the rehabilitation goals established in the physical therapy, 
occupational therapy, speech-language pathology, or respiratory therapy 
plan of treatment. Accordingly, social and psychological CORF services 
do not include clinical treatment of mental, psychoneurotic, and 
personality disorders. We are concerned that the phrase ``and 
treatment'' currently included in the definition of CORF social and 
psychological services may be misconstrued to include social and 
psychological services for the independent clinical treatment of mental 
illness. Therefore, we propose to delete this language in order to 
clarify that only those social and psychological services that relate 
directly to a rehabilitation plan of treatment and the associated 
rehabilitation goals are considered CORF social and psychological 
services.
    We also propose to remove Sec.  410.155(b)(1)(ii) regarding the 
application of mental health limitations to CORF social and 
psychological services. As stated, CORF services, including social and 
psychological services, must directly relate to or further the 
rehabilitation goals established in the physical therapy, occupational 
therapy, speech-language pathology, or respiratory therapy plan of 
treatment. In the CY 2008 PFS final rule with comment period (72 FR 
66400), we stated that CORF services must be furnished under a written 
plan of treatment that indicates the diagnosis and rehabilitation 
goals, and prescribes the type, amount, frequency, and duration of the 
skilled rehabilitation services, including physical therapy, 
occupational therapy, speech-language pathology and respiratory therapy 
services. Section 410.155(b) specifies that the mental health payment 
limitation applies when there is a diagnosis of mental, psychoneurotic, 
and personality disorders (mental disorders identified by a diagnosis 
code within the range of 290 through 319) prior to beginning services. 
Under our revised definition, CORF social and psychological services 
must directly relate to the physical therapy or other rehabilitation 
plan of treatment and its associated goals. Since these patients are 
receiving CORF services because they have a need for skilled 
rehabilitation services, any social and psychological services provided 
in a CORF under Sec.  410.100(h) must include an assessment of the 
individual's mental and emotional functioning exclusively as such 
functioning relates to their rehabilitation plan of treatment. In our 
view, such services provided in a CORF are not ``treatment of mental, 
psychoneurotic, and personality disorders of an individual'' as set out 
in section 1833(c) of the Act, so that the statutory mental health 
payment limitations do not apply. We are proposing changes to Sec.  
410.155(b) to reflect our view regarding the limited nature of these 
services.
3. CORF Conditions of Participation
    In the CY 2008 final rule with comment period (72 FR 66400), we 
finalized changes to the CORF coverage and payment rules. However, all 
conforming regulations in the CORF Conditions of Participation (CoPs) 
were not updated at that time.
    We are proposing to revise Sec.  485.58(e)(2). Section 485.58(e) 
currently provides that as a CoP, a CORF facility must provide all CORF 
services on its premises with the exception of-- (1) physical therapy, 
occupational therapy, and speech-language pathology services furnished 
away from the premises of the CORF, if Medicare payment is not 
otherwise made for these services; and (2) a single home visit for the 
purpose of evaluating the potential impact of the patient's home 
environment on the rehabilitation goals. We are proposing to clarify 
that the alternate premises for provision of physical therapy, 
occupational therapy, and speech-language pathology services may be the 
patient's home.
4. Extension Location
    We are proposing to add a definition for an ``extension location'' 
of a rehabilitation agency to the definitions at Sec.  485.703. While 
there are currently no provisions that allow rehabilitation agencies to 
offer services in an extension location, there are currently 2,875 
rehabilitation agency primary locations and 2,486 rehabilitation agency 
offsite practice locations. While our State Operations manual 
recognizes that these rehabilitation agency extension locations exist, 
it also includes language stating that the extension locations must 
meet applicable rehabilitation agency CoPs. However, it is difficult to 
apply CoP requirements to a location that currently is not identified 
in the CoPs. Creating a definition in the CoPs that applies to the 
extension locations will allow us to survey and monitor the care 
provided in these extension locations on a consistent basis.
    Therefore, we propose to define an extension location as: (1) A 
location or site from which a rehabilitation agency provides services 
within a portion of the total geographic area served by the primary 
site; (2) is part of the rehabilitation agency; and (3) is located

[[Page 38544]]

sufficiently close to share administration, supervision, and services 
in a manner that renders it unnecessary for the extension location to 
independently meet the conditions of participation as a rehabilitation 
agency. We welcome your comments on this proposed definition.
5. Emergency Care
    We are proposing to revise Sec.  485.711(c), Standard: Emergency 
care, to reflect current medical practice. We propose to remove the 
requirement that the rehabilitation agency provide for one or more 
doctors of medicine or osteopathy to be available on call to furnish 
necessary medical care in case of an emergency. We do not believe that 
the patients serviced by rehabilitation agencies regularly experience 
medical emergencies that necessitate the retention of an on-call 
physician.
    Therefore, we are proposing the revised standard to require each 
rehabilitation agency to establish procedures to be followed by 
personnel in an emergency to cover immediate care of the patient, 
persons to be notified, and reports to be prepared. We are soliciting 
comments on this proposal.
6. Technical Changes for Rehabilitation Agencies
    Under section 1861(p) of the Act, rehabilitation agencies are 
tasked with furnishing outpatient physical therapy and speech-language 
pathology services. Unlike CORFs, which provide comprehensive 
outpatient rehabilitation services, rehabilitation agencies primarily 
provide physical therapy services. Some of the other services offered 
by CORF, such as respiratory therapy and social services are outside 
the scope of rehabilitation agency practice.
    The current definition of rehabilitation agency at Sec.  485.703 
(paragraph (2)(ii) of the definition) requires that rehabilitation 
agencies provide social or vocational adjustment services. This 
requirement is outside of the rehabilitation agency's scope of practice 
and has caused confusion for these providers because we do not 
reimburse rehabilitation agencies for furnishing social or vocational 
services. Accordingly, in Sec.  485.703, we are proposing to delete the 
requirement in paragraph (2)(ii) of the rehabilitation agency 
definition requiring a rehabilitation agency to provide social or 
vocational services. We are also proposing to make a conforming change 
at Sec.  485.717.
    At Sec.  485.711(b)(3), we are proposing to remove the reference to 
Sec.  410.61(e), since Sec.  410.61(e) no longer exists in regulation.

M. Technical Corrections for Therapy-Related Issues

    [If you choose to comment on issues in this section, please include 
the caption ``THERAPY-RELATED ISSUES'' at the beginning of your 
comments.]
    We are proposing the following technical changes to the regulations 
concerning therapy services:
     In Sec.  409.17(a), we are proposing to delete the 
reference to paragraph (a)(1)(ii) which no longer exists.
     In Sec.  409.23, we are proposing to revise the title of 
this section from ``Physical, occupational and speech therapy'' to 
``Physical therapy, occupational therapy and speech-language pathology 
services.''

N. Physician Self-Referral and Anti-Markup Issues

    [If you choose to comment on issues in this section, please include 
the caption ``PHYSICIAN SELF-REFERRAL AND ANTI-MARKUP ISSUES'' at the 
beginning of your comments.]
1. Changes to Reassignment Rules Related to Diagnostic Tests (Anti-
Markup Provision)
a. CY 2008 PFS Final Rule With Comment Period
    The CY 2008 PFS final rule with comment period (72 FR 66222) 
amended the anti-markup provision in Sec.  414.50 for certain 
diagnostic tests. We revised the anti-markup provision to apply to the 
technical component (TC) of diagnostic tests that are ordered by the 
billing physician or other supplier (or ordered by a party related by 
common ownership or control to such physician or other supplier), when 
the TC is outright purchased or when the TC is not performed in the 
office of the billing physician or other supplier. We also imposed an 
anti-markup provision on the professional component (PC) of diagnostic 
tests that are ordered by the billing physician or other supplier (or 
ordered by a party related by common ownership or control to such 
physician or other supplier group), if the PC is outright purchased or 
if the PC is not performed in the office of the billing physician or 
other supplier. The anti-markup provision in Sec.  414.50 applies to 
the TCs and PCs of diagnostic tests covered under section 1861(s)(3) of 
the Act and paid for under 42 CFR part 414 (other than clinical 
diagnostic laboratory tests paid under section 1833(a)(2)(D) of the 
Act, which are subject to the special billing rules set forth in 
section 1833(h)(5)(A) of the Act). If a physician or other supplier 
bills for the TC or PC of a diagnostic test that was ordered by the 
physician or other supplier (or ordered by a party related to such 
physician or other supplier through common ownership or control) and 
the diagnostic test is either purchased from an outside supplier or 
performed at a site other than the office of the billing physician or 
other supplier, the payment to the billing physician or other supplier 
(less the applicable deductibles and coinsurance paid by the 
beneficiary or on behalf of the beneficiary) for the TC or PC of the 
diagnostic test may not exceed the lowest of the following amounts:
     The performing supplier's net charge to the billing 
physician or other supplier.
     The billing physician or other supplier's actual charge, 
or
     The fee schedule amount for the test that would be allowed 
if the performing supplier billed directly.
    In revised Sec.  414.50(a)(2)(iii), we defined the ``office of the 
billing physician or other supplier'' as medical office space where the 
physician or other supplier regularly furnishes patient care. For a 
billing physician or other supplier that is a physician organization 
(as defined at Sec.  411.351 of this chapter), the ``office of the 
billing physician or other supplier'' is space in which the physician 
organization provides substantially the full range of patient care 
services that the physician organization provides generally. (For 
purposes of the anti-markup provision, the office of a billing 
physician or other supplier has its common meaning--that is, it is 
space in which the physician or other supplier regularly furnishes 
patient care services, and does not include a ``centralized building'' 
as defined at Sec.  411.351).
    We effectuated our changes primarily by modifying Sec.  414.50, 
although we also modified Sec.  424.80 by adding paragraph (d)(3) to 
alert the reader that, in a case of the reassignment of the TC and/or 
PC of a diagnostic test, the reader should consult Sec.  414.50 to 
investigate whether the anti-markup provision applies to the TC and/or 
PC. We also amended the definition of ``entity'' at Sec.  411.351 to 
exclude a physician's practice when it bills Medicare for the PC of a 
diagnostic test in accordance with Sec.  414.50. (Prior to the CY 2008 
PFS final rule with comment period, the definition of ``entity'' at 
Sec.  411.351 excluded a physician's practice when it bills Medicare 
for the TC of a diagnostic test in accordance with Sec.  414.50.)

[[Page 38545]]

b. Revisions to Payment Policies Under the Physician Fee Schedule, and 
Other Part B Payment Policies for CY 2008; Delay of the Date of 
Applicability of the Revised Anti-Markup Provision for Certain Services 
Furnished in Certain Locations (Sec.  414.50) Final Rule (73 FR 404)
    Subsequent to the publication of the CY 2008 PFS final rule with 
comment period (72 FR 66222), we received informal comments from 
various stakeholders that stated that the application of the rule was 
unclear with respect to whether certain types of space arrangements 
meet the definition of the ``office of the billing physician or other 
supplier.'' Further, some of these stakeholders stated that patient 
access may be significantly disrupted due to the alleged inability of 
physician groups to render services in a cost-effective manner if 
medical office space that satisfies the ``same building'' test in Sec.  
411.355(b)(2)(i) of this chapter for purposes of the physician self-
referral rules in Part 411, Subpart J of this chapter, and other 
medical office space in which patients are seen and that complies with 
the physician self-referral rules, are subject to the anti-markup 
provision in revised Sec.  414.50. That is, physician groups stated 
that, in situations in which they are subject to the anti-markup 
provision and are limited to billing Medicare the net charge imposed by 
the performing supplier, they will not be able to continue to provide 
diagnostic testing services to the same extent that they are currently 
providing such services, because they will not be able to recoup their 
overhead costs.
    We were concerned that the definition of ``office of the billing 
physician or other supplier'' may not have been entirely clear and that 
it could have unintended consequences. Accordingly, in order for us to 
study the issues further, we issued a final rule entitled ``Revisions 
to Payment Policies Under the Physician Fee Schedule, and Other Part B 
Payment Policies for CY 2008; Delay of the Date of Applicability of the 
Revised Anti-Markup Provisions for Certain Services Furnished in 
Certain Locations (Sec.  414.50)'' (the ``Delay Rule''), which delayed, 
until January 1, 2009, the applicability of the revised anti-markup 
provision in Sec.  414.50, except for anatomic pathology diagnostic 
testing services furnished in space that: (1) Is utilized by a 
physician group practice as a ``centralized building'' for purposes of 
complying with the physician self-referral rules; and (2) does not 
qualify as a ``same building'' under Sec.  411.355(b)(2)(i) (73 FR 
404). We stated that, during this period, we planned to issue 
clarifying guidance as to what constitutes the ``office of the billing 
physician or other supplier'' or propose additional rulemaking, or 
both. Because anatomic pathology diagnostic testing arrangements 
precipitated our proposal for revision of the anti-markup provision and 
remained our core concern, we did not delay the date of applicability 
with respect to anatomic pathology diagnostic testing services 
furnished in certain space (as described above). In addition, we did 
not delay the applicability of the revised anti-markup rule for the TC 
of any purchased diagnostic test. The anti-markup prohibition for the 
TC of purchased diagnostic tests is longstanding and was incorporated 
into the expanded and revised provisions of Sec.  414.50. Accordingly, 
the regulation remained applicable to the TC of any purchased 
diagnostic test.
c. Challenge to the CY 2008 PFS Final Rule With Comment Period and the 
Subsequent Delay of the Date of Applicability Final Rule
    On January 25, 2008, a group of plaintiffs filed suit against the 
Secretary (Atlantic Urological Associates PA v. Leavitt, Civil Action 
No. 08-141-(RMC) (D.D.C.), challenging the validity of the CY 2008 PFS 
final rule with comment period and the subsequent Delay Rule, and 
asking the Court to enjoin the application of the CY 2008 PFS final 
rule with comment period as to them. The plaintiffs included the 
following: (1) Three urology physician group practices that own 
pathology laboratories; (2) a self-employed pathologist who performs 
testing services for other physician groups; (3) Uropath, LLC, a 
limited liability company that manages various pathology laboratories; 
and (4) Uropath's Director of Clinical Operations. The Secretary moved 
to dismiss the complaint for lack of standing and lack of jurisdiction. 
The Secretary agreed to withhold implementation of the anti-markup 
rule, as amended by the Delay Rule, for claims submitted between 
February 1, 2008 and April 1, 2008, so that the parties could fully 
brief the issues. Subsequently, a preliminary injunction was granted by 
the Court until the date of its final order.
    On May 5, 2008, the Court vacated the preliminary injunction order 
and granted the Secretary's motion to dismiss the suit. The Court found 
that the plaintiffs did not have standing to challenge the delay of the 
applicability of the anti-markup provisions for some arrangements. The 
Court further found that Uropath and its Director of Clinical 
Operations lacked standing to challenge either the CY 2008 PFS final 
rule with comment period or the subsequent Delay Rule due to the fact 
that they are not Medicare providers or suppliers and, thus, had no 
legally protected interest at stake. Finally, the Court found that, 
even if the plaintiffs had standing, the physician groups and the self-
employed pathologist must exhaust the administrative claims process 
before the matter could be heard in Federal court.
d. Specific Proposals
    As finalized in the CY 2008 PFS final rule with comment period, the 
anti-markup provision applies to the TCs or PCs of diagnostic tests 
that are either purchased from an outside supplier or are performed 
outside of the ``office of the billing physician or other supplier.''
    Here, we are proposing two alternative approaches for revising the 
anti-markup provision in Sec.  414.50. In addition, we are seeking 
comments regarding any other possible approaches that would address our 
concerns regarding overutilization motivated by the ability of a 
physician or physician organization to profit from diagnostic testing 
services not actually performed by or supervised by a physician who 
should be considered to ``share a practice'' with the billing physician 
or other supplier.
    Under our first proposal, the anti-markup provision in Sec.  414.50 
would apply in all cases where the PC or TC of a diagnostic testing 
service is either: (i) Purchased from an outside supplier or (ii) 
performed or supervised by a physician who does not share a practice 
with the billing physician or physician organization (as defined at 
Sec.  411.351). We would specify that a physician who is employed by or 
contracts with a single physician or physician organization shares a 
practice with that physician or physician organization. We believe that 
when a physician provides his or her efforts for a single physician 
organization (whether those efforts are full-time or part-time), he or 
she has a sufficient nexus with that practice to justify not applying 
the anti-markup provision as contemplated under section 1842(n)(1) of 
the Act. Under this proposal, a physician who is an employee of, or 
independent contractor with, more than one billing physician or 
physician organization would not ``share a practice'' for purposes of 
Sec.  414.50 with any of the physicians or physician organizations with 
which he or she is affiliated.

[[Page 38546]]

    We believe that this proposal offers a simpler, more bright-line 
approach preventing potentially abusive arrangements while preserving 
the viability of nonabusive arrangements involving diagnostic testing 
facilities that might not be considered to be in the ``office of the 
billing physician or other supplier,'' as defined under the current 
regulation (for example, a centralized laboratory staffed with full-
time employees that is used by a physician practice with multiple 
office locations, sometimes referred to as a ``hub and spoke'' 
arrangement). We are not proposing regulation text for this proposal.
    We recognize that circumstances may exist under which it is 
beneficial, if not necessary, for a physician to provide diagnostic 
testing services to more than one physician practice. For example, a 
physician in one practice may contract to provide physician services on 
a locum tenens basis to another practice while a physician in that 
practice is on vacation or maternity leave. We are interested in 
comments regarding whether and, if so, how we could permit a physician 
to provide occasional services outside of his or her physician 
organization without the secondary arrangement precluding the physician 
from ``sharing a practice'' with his or her physician organization for 
purposes of applying the anti-markup provision. We note that we do not 
consider providing services at a free clinic or moonlighting in a 
hospital emergency department or as a hospitalist to be ``sharing a 
practice.'' Such activity would not require the application of the 
anti-markup provisions with respect to the services the physician 
provides for his or her physician organization.
    Alternatively, we propose to maintain much of the current 
regulation text and its ``site-of-service'' approach to determine 
whether a physician ``shares a practice'' with the billing physician or 
other supplier. In other words, we are re-proposing to apply the anti-
markup provision to TCs and PCs of non-purchased tests that are 
performed outside the ``office of the billing physician or other 
supplier''. We are soliciting comments on whether this is the best 
approach or whether we should employ a different approach. As discussed 
in more detail below in this section, we are also proposing to amend 
Sec.  414.50 to: (1) Clarify that the ``office of the billing physician 
or other supplier'' includes space in which diagnostic testing is 
performed that is located in the same building in which the billing 
physician or other supplier regularly furnishes patient care (and to 
make two other revisions to the definition); (2) clarify that, with 
respect to TCs, the anti-markup provision applies if the TC is either 
conducted or supervised outside of the office of the billing physician 
or other supplier; (3) clarify that a TC of a diagnostic test is not 
purchased from an outside supplier if the TC is supervised by a 
physician located in the office of the billing physician or other 
supplier; (4) clarify that, for purposes of applying the payment 
limitation in Sec.  414.50(a)(1)(i) only, the ``performing supplier'' 
with respect to the TC is the physician who supervised the TC and, with 
respect to the PC, the ``performing supplier'' is the physician who 
performed the PC; (5) propose an exception for diagnostic tests ordered 
by a physician in a physician organization (as defined at Sec.  
411.351) that does not have any owners who have the right to receive 
profit distributions; and (6) solicit comments on how to define ``net 
charge'' and on whether we should delay beyond January 1, 2009 the 
application of the revisions made by the CY 2008 PFS final rule with 
comment period, or the proposed revisions (to the extent they are 
finalized), or both.
i. Definition of the ``Office of the Billing Physician or Other 
Supplier''
    We received informal comments from various stakeholders who alleged 
that the application of the CY 2008 PFS final rule with comment period 
was unclear with respect to whether certain types of space arrangements 
meet the definition of the ``office of the billing physician or other 
supplier.'' In addition, some of these stakeholders stated that patient 
access may be significantly disrupted due to the alleged inability of 
physician groups to render services in a cost-effective manner if the 
anti-markup provision applies to arrangements in which diagnostic 
testing services are performed in the same building as, but in space 
separate from, where patients are seen. Stakeholders pointed to 
arrangements in which the office where a physician group sees patients 
is located on, for example, the third floor of a medical arts building, 
but the diagnostic imaging services are housed, for example, in the 
basement of the building. Stakeholders also cited arrangements in which 
two or more group practices in the same building may share a lab or 
other diagnostic testing facility in that building.
    After further review, we are proposing to clarify the definition of 
``the office of the billing physician or supplier'' in Sec.  
414.50(a)(2)(iv) to include space, in which diagnostic testing services 
are performed, that is in the ``same building,'' (as defined at Sec.  
411.351), as where the ordering physician or other ordering supplier 
regularly furnishes patient care (and more specifically, for physician 
organizations, in the same building as where the ordering physician 
provides substantially the full range of patient care services that the 
ordering physician provides generally). Note that the definition of 
``same building'' at Sec.  411.351 specifically excludes a ``mobile 
vehicle, van, or trailer''. Therefore, diagnostic services provided in 
the parking lot of a building in which a physician group sees patients 
would be subject to the anti-markup provisions.
    We are soliciting comments that describe current business 
arrangements (such as those that take place on a ``campus'') and that 
suggest any additional or alternative criteria that would permit such 
arrangements to avoid application of the anti-markup provision while 
addressing our concerns for the potential for overutilization.
    We have received questions as to whether, for purposes of the 
definition of the ``office of the billing physician or other supplier'' 
a physician or other supplier may have more than one location at which 
it regularly furnishes patient care. We propose to clarify in Sec.  
414.50(a)(2)(iv) that it may. In addition, some stakeholders responded 
to the requirement that, with respect to a billing physician or other 
supplier that is a ``physician organization'', the ``office of the 
billing physician or other supplier'' is space in which the physician 
organization provides substantially the full range of patient care 
services that the physician organization provides generally. According 
to the stakeholders, a physician organization, such as a multi-
specialty physician group, may not provide substantially its full range 
of services at any one location, but rather may provide substantially 
the full range of services for a certain specialty in one location, 
substantially the full range of services for a second specialty in a 
second location, and so forth. In order to address this difficulty for 
physician organizations, we are proposing to revise Sec.  
414.50(a)(2)(iv) to read ``with respect to a billing physician or other 
supplier that is a physician organization (as defined at Sec.  411.351 
of this chapter), the ``office of the billing physician or other 
supplier'' is medical office space where the ordering physician 
provides substantially the full range of patient care services that the 
ordering physician provides generally.
    Examples of Application of Our Proposed Definition of the ``Office 
of the Billing Physician or Other Supplier''.

[[Page 38547]]

    We are providing the following examples in order to illustrate the 
effect of our proposals. For purposes of the following examples, assume 
that neither the TC nor the PC is purchased from an outside supplier.

    Example 1. A physician group practice treats patients in space 
located on one floor of a building, and, in that space, provides 
substantially the full range of services that it provides generally. 
The group practice conducts diagnostic testing on another floor of 
the same building. The anti-markup would not apply because the 
office of the billing physician or other supplier includes the space 
on both floors.
    Example 2. One or more physician group practices share space 
that is used for diagnostic testing and is located in the same 
building in which the group practices have their respective offices 
for seeing patients (and within those offices each group practice 
provides substantially the full range of patient care services that 
it provides generally). Again, the anti-markup provision would not 
apply because the office of the billing physician or other supplier 
(with respect to each group practice) includes the space on both 
floors.
    Example 3. A group practice treats patients in Buildings A, B 
and C. In each of its offices in Buildings A and B, the group 
practice provides substantially the full range of patient care 
services that it provides generally, but that is not true for space 
located in Building C. The group practice provides diagnostic 
testing services in Buildings B and C. If we finalize the definition 
of the ``office of the billing physician or other supplier'' to 
include space in which diagnostic testing is performed that is 
located in the same building as where the ordering physician or 
other ordering supplier regularly furnishes patient care, the anti-
markup provision would not apply to the diagnostic testing performed 
in Building B but would apply to the diagnostic testing performed in 
Building C.

    We recognize that, unlike the first alternative proposal described 
above, our second alternative proposal may adversely affect certain 
``hub and spoke'' and similar diagnostic testing services arrangements 
(see description above) in which a physician providing services in a 
centralized diagnostic testing facility owned by and serving a multi-
site group practice has a significant nexus to the physician 
organization that employs or contracts with the physician. Therefore, 
we are proposing to provide an exception in Sec.  414.50(b) to the 
anti-markup provision that would be applicable to diagnostic tests 
ordered by a physician in a physician organization that does not have 
any owners who have the right to receive profit distributions. The 
exception would not apply to TCs purchased from an outside supplier, in 
recognition of the statutory command in section 1842(n)(1) of the Act 
and our longstanding rule. We are seeking comments as to whether the 
exception is sufficient to address any potential impediments to 
nonabusive ``hub and spoke'' arrangements caused by this second 
alternative approach, whether the exception is too narrow or too broad, 
and whether an exception to the application of the anti-markup rule 
under this second alternative approach is necessary at all.
ii. Performed at a Site Other Than the Office of the Billing Physician 
or Other Supplier
    Section 414.50(a) provides that the anti-markup provision applies 
to the TC of a diagnostic test if the TC is performed outside of the 
office of the billing physician or other supplier. We propose to 
clarify that, if the TC is conducted outside of the office of the 
billing physician or other supplier, the anti-markup provision applies 
irrespective of whether the supervision takes place in the office of 
the billing physician or other supplier. We also propose to clarify 
that the anti-mark-up provision applies if the supervision of the TC 
takes place outside the office of the billing physician or other 
supplier, even if the TC is conducted in the office of the billing 
physician or other supplier. In other words, we would take the position 
that ``performance'' of the TC includes both the technician's work in 
conducting the test and the physician's supervision of the technician. 
Therefore, if either the conducting of the TC or the supervising of the 
TC takes place outside the office of the billing physician or other 
supplier, the anti-markup provision would apply.
iii. Outside Supplier
    In the CY 2008 PFS final rule with comment period, we defined an 
outside supplier as ``someone who is not an employee of the billing 
physician or other supplier and who does not furnish the test or 
interpretation to the billing physician under a reassignment that meets 
the requirements of Sec.  424.80'' (72 FR 66401). Subsequent to 
publication of the final rule with comment period, we received 
questions as to whether the TC of a diagnostic test would be purchased 
from an outside supplier if the technician conducting the TC is not an 
employee of the billing group but the physician supervising the 
technician is an employee or contractor of the billing group. We are 
proposing to provide in new Sec.  414.50(a)(2)(iii) that the TC of a 
diagnostic test is not purchased from an outside supplier if the TC is 
both conducted and supervised within the office of the billing 
physician or other supplier, and the supervising physician is an 
employee or independent contractor of the billing physician or other 
supplier. We believe that the presence of the technician and the 
supervising physician in the office of the billing physician or other 
supplier, and the fact that the supervising physician is an employee or 
independent contractor of the billing physician or other supplier may 
establish a sufficient nexus between the supervising physician and the 
billing physician or other supplier so as to constitute ``sharing a 
practice'' within the meaning of section 1842(n)1) of the Act. We are 
providing proposed regulatory text in new Sec.  414.50(a)(2)(iii) for 
this proposal. We are also making two alternative proposals (each 
without proposed regulatory text). We propose, in the first 
alternative, that if the TC is conducted by a technician who is not an 
employee of the billing supplier, the TC is considered to be purchased 
from an outside supplier, regardless of where the technician conducts 
the TC and notwithstanding the employment status of the supervising 
physician and the fact that the test is supervised in the office of the 
billing physician or other supplier. As a second alternative, we 
propose that, where the TC is conducted by a non-employee of the 
billing physician or other supplier and outside the office of the 
billing physician or other supplier, the TC nevertheless will not be a 
purchased test if the supervising physician is an employee or 
independent contractor of the billing physician or other supplier and 
performs the supervision in the office of the billing physician or 
other supplier. We note that, if we were to adopt this second 
alternative, the TC would still be subject to the anti-markup provision 
under our proposal that the anti-markup provision applies if either the 
conducting of the TC or the supervising of the TC takes place outside 
the office of the billing physician or other supplier, unless an 
exception applies (see section II.N.1.d.i. of this proposed rule).
iv. The Performing Supplier's Net Charge
    Section 414.50(a)(1) provides that, where the anti-markup provision 
applies, Medicare payment to the billing physician or other supplier is 
limited to the lowest of three specified amounts, one of which, in 
Sec.  414.50(a)(1)(i), is ``the performing supplier's net charge to the 
billing physician or other supplier.'' We have received comments 
concerning what the performing supplier's net charge would be in the 
situation in which a physician in a group practice

[[Page 38548]]

supervises the performance of a TC but the group practice bills for the 
TC directly, that is, without a reassignment from the supervising 
physician. Stakeholders have questioned whether there are two 
suppliers, that is, the physician supervising the TC and the group 
practice billing for it, or whether there is only one supplier, that 
is, the group practice, given that the supervising physician is not 
effecting a reassignment.
    We propose to clarify that for purposes of Sec.  414.50(a)(1)(i) 
only, the ``performing supplier'' of the TC is the physician who 
supervised the TC, and the ``performing supplier'' of the PC is the 
physician who performed the PC. Therefore, where the anti-markup 
provision applies, the billing physician or other supplier would need 
to determine what it paid the physician for supervising the TC or for 
performing the PC.
v. Specific Solicitation of Comments
    We are interested in receiving comments concerning the calculation 
of net charge for the PC when the anti-markup rules apply. In the CY 
2008 PFS final rule with comment period, commenters objected that it 
would be difficult to calculate the net charge of the performing 
supplier. We stated that we did not believe that most suppliers would 
experience significant difficulty in calculating the net charge, 
despite the fact that some physicians are paid an aggregate monthly or 
annual amount for their services. In addition, we stated that suppliers 
could also choose to restructure their arrangements so that the anti-
markup provision does not apply (72 FR 66318). Despite these responses 
in the final rule, we have received comments and questions concerning 
how to calculate the net charge. We are soliciting comments as to 
whether and how we should provide specific regulatory guidance for 
calculating the net charge.
    Commenters specifically stated that our decision to exclude the 
overhead costs of the billing supplier in the net charge would have a 
detrimental financial impact upon their practice and, ultimately, 
patient access to care. We are also soliciting comments on whether we 
should allow some overhead costs to be recovered by billing suppliers 
for services to which the anti-markup provision applies, and how our 
concerns about the potential for overutilization would be addressed if 
we were to allow some recovery of overhead.
    We note that several States have enacted direct billing laws, under 
which physicians (primarily pathologists) are required to directly bill 
payors for their services and are prohibited from reassigning their 
right to payment to the ordering supplier. We are soliciting comments 
on whether, in addition to or in lieu of, the anti-markup provision, we 
should prohibit reassignment in certain situations and require the 
physician supervising the TC or performing the PC to bill Medicare 
directly.
    Finally, we are soliciting comments on whether the revisions made 
by the CY 2008 PFS final rule with comment period should go into effect 
on January 1, 2009, as planned, and whether any proposals contained 
herein that may be finalized should go into effect on that date, or 
whether some or all of the revisions should be delayed past January 1, 
2009.
2. Exception for Incentive Payment and Shared Savings Programs 
(Proposed Sec.  411.357(x))
a. Background
    The Medicare program and private industry stakeholders are 
increasingly exploring the benefits of various types of gainsharing, 
pay-for-performance (``P4P''), value-based purchasing, and similarly-
styled programs that use economic incentives to foster high quality, 
cost-effective care. Many of these programs involve payments from 
hospitals to physicians. These payments potentially implicate the fraud 
and abuse laws, including the physician self-referral statute. Existing 
exceptions to the physician self-referral statute, while useful, may 
not be sufficiently flexible to encourage a variety of nonabusive and 
beneficial gainsharing, P4P, and similar programs.
    For this reason, as described in greater detail below, we are 
proposing a new, targeted exception to the physician self-referral 
statute for such programs. The design of the new exception presents a 
particular challenge: Crafting an exception that offers broad 
flexibility for innovative, effective programs, while at the same time 
protecting the Medicare program and beneficiaries from abuses. In 
reviewing various programs and industry suggestions, we have been 
struck by the considerable variety and complexity of existing 
arrangements, and the likelihood of continued future innovation in the 
structure and method of these programs. This variety and complexity 
make it difficult to craft a ``one-size-fits-all'' set of conditions 
that are sufficiently ``bright line'' to facilitate compliance and 
enforceability, yet sufficiently flexible to permit innovation without 
undue risk of program or patient abuse.
    The variety and complexity of these programs make them potential 
vehicles for the unscrupulous to disguise payments for referrals or 
compromise quality of care for patients in the interest of maximizing 
revenues. Therefore, our approach to drafting a proposed exception is a 
cautious one. Our proposal is relatively narrow, and we acknowledge at 
the outset that it is unlikely to cover as many arrangements as 
interested stakeholders would like. As described below, we are 
considering various ways that we might expand the proposed exception, 
if we can do so without a risk to the programs and their beneficiaries. 
We are interested in public comments specifically addressing areas of 
possible expansion, the potential abuses that could occur, and the 
conditions necessary to ensure that such expansion does not pose a risk 
of program or patient abuse. It is our goal to promulgate an exception 
that is as broad as possible consistent with the statutory requirement 
that any arrangement excepted under an exception issued using our 
authority in section 1877(b)(4) of the Act pose no risk of program or 
patient abuse. We note that section 1877 of the Act is not implicated 
by quality or cost savings programs that do not involve remuneration to 
physicians. Hospitals are free to implement quality protocols, cost 
savings measures, and the like without regard to section 1877 of the 
Act, provided that the arrangements do not involve financial 
relationships with referring physicians.
    Although ``gainsharing'' is commonly used to describe certain 
programs that seek to align physician behavior with the goals of a 
hospital by rewarding physicians for reaching predetermined performance 
outcomes, several types of programs exist for the purpose of achieving 
quality standards, generating cost savings, and reducing waste. In this 
proposed rule, we refer to these programs as ``incentive payment and 
shared savings programs.'' We describe below in more detail the 
characteristics of programs we consider to fall within these 
categories. Successful programs often result in improved quality 
outcomes or cost savings (or both) for the hospital sponsoring the 
program. To achieve these goals, hospitals make financial payments to 
the physicians whose efforts contribute to the success of the program. 
As noted above, these payments may implicate the physician self-
referral statute.
    Section 1877(a)(1) of the Act states that, except as provided in 
section 1877(b) of the Act, if a physician (or an immediate family 
member of such physician) has a financial relationship

[[Page 38549]]

with an entity, the physician may not make a referral to the entity for 
the furnishing of designated health services (DHS) for which payment 
otherwise may be made under title XVIII of the Act. The provision of 
monetary or nonmonetary remuneration by a hospital to a physician 
through a gainsharing arrangement or other incentive payment or shared 
savings program would constitute a financial relationship with an 
entity for purposes of the physician self-referral statute.
    Incentive payment and shared savings programs also potentially 
implicate two additional specific fraud and abuse statutes. First, 
sections 1128A(b)(1) and (b)(2) of the Act, commonly referred to as the 
Civil Monetary Penalty (CMP) statute, prohibit a hospital from 
knowingly making a payment directly or indirectly to a physician as an 
inducement to reduce or limit items or services furnished to Medicare 
or Medicaid beneficiaries under the physician's direct care, and a 
physician from knowingly accepting such payment. Second, these 
arrangements potentially implicate section 1128B(b) of the Act (the 
anti-kickback statute) if one purpose of the quality improvement or 
cost savings payment is to influence referrals of Federal health care 
program business.
i. Incentive Payment Programs
    ``Pay for performance'' (P4P), also known as quality-based 
purchasing, is a quality improvement and reimbursement methodology 
aimed at moving towards payments that create stronger financial support 
for patient focused, high value care. There are many models for 
financial and non-financial incentives used in P4P and other quality-
focused programs. We refer to these types of programs, which may be 
payer-based or provider-based, as ``incentive payment programs.'' 
Through collaborative efforts with a wide range of other public 
agencies and private organizations that have a common goal of improving 
quality and avoiding unnecessary health care costs, including the 
National Quality Forum (NQF), The Joint Commission, the National 
Committee for Quality Assurance (NCQA), the Agency for Healthcare 
Research and Quality (AHRQ), and the American Medical Association 
(AMA), we are developing and implementing a set of P4P initiatives to 
support quality improvement in the care of Medicare beneficiaries. The 
objective measures used in incentive payment programs to determine 
whether providers are offering high quality care are commonly referred 
to as ``quality standards.'' This term is also used in many provider-
based incentive payment programs. We use the term ``quality standards'' 
in this proposed rule as well.
    When payer-based, P4P attempts to use reimbursement to promote 
quality, efficiency in providing access to needed services, and 
successful outcomes. In many payer-based models, payers make available 
to hospitals financial incentives tied to achieving certain quality or 
performance goals (for example, adopting health information technology, 
furnishing preventive care services, achieving patient satisfaction 
targets, or measurably improving patient health indicators). Hospitals 
often need physician collaboration to meet performance goals. In order 
to align incentives, hospitals may want to share with physicians a 
portion of the P4P payments they receive from the payers. In the 
absence of or in addition to a payer-based incentive payment program, 
hospitals may also sponsor quality-focused programs in which objective 
improvements in quality or individual patient care outcomes are 
rewarded with payments to physicians responsible for the improvements.
    In both circumstances, payments made by a hospital to the 
physicians whose efforts promoted the achievement of targets (or 
benchmarks) for one or more performance measures create a financial 
relationship between the hospital and the physician that implicates the 
physician self-referral statute. These payments also potentially 
implicate the anti-kickback statute and the CMP statute. (We note that, 
depending on the nature of the performance measure, incentive payment 
programs might not implicate the CMP statute because they might not 
involve any reduction or limitation in patient care services.)
    Although properly structured incentive payment programs can enhance 
health care quality and efficiency, improperly structured programs pose 
significant risks of program or patient abuse, including adversely 
affecting patient care. Moreover, such programs could be vehicles to 
disguise payments for referrals, including incentives to steer 
healthier patients to the hospital offering the incentive payment 
program. Programs that cannot be adequately and accurately measured for 
quality would also pose a high risk of program or patient abuse. We 
observe that payer-based programs in which the performance measures are 
set by a wholly independent, arms-length party with a clear financial 
incentive to make P4P payments prudently may pose somewhat less risk 
than non-payer based programs, where there is no third-party payer that 
sets the performance measures and monitors compliance. We note further 
that payments made directly from a payer to a physician, at the payer's 
sole discretion, may not implicate the physician self-referral statute 
or other fraud and abuse statutes.
ii. Shared Savings Programs
    Many programs, such as ``gainsharing'' and other cost savings and 
waste reduction programs, seek to align physician economic incentives 
with those of hospitals by offering physicians a share of the 
hospitals' variable cost savings attributable to the physicians' 
efforts in controlling the costs of providing patient care. For 
purposes of this proposed rulemaking, we refer to these types of 
programs as ``shared savings programs.'' When a participating physician 
receives a portion of the cost savings attributable to his or her 
efforts in reducing waste and achieving the goals of a shared savings 
program, a financial relationship is created between the hospital 
sponsoring the shared savings program and the participating physician, 
and the physician self-referral statute is implicated.
    The Medicare Part A DRG system of hospital reimbursement, under 
which a hospital receives a prospectively determined, fixed payment 
that covers all hospital items and services provided to a Medicare 
beneficiary during his or her inpatient stay or outpatient service, 
provides a significant incentive for hospitals to control costs. 
Hospitals are also motivated to reduce costs because of the growth of 
managed care. However, because physicians are paid separately under 
Medicare Part B (and by many managed care and other payers), they do 
not share necessarily the hospital's motivation to control patient care 
costs. Physicians who perform their professional services at a hospital 
use the hospital's equipment, supplies and services, and prescribe 
drugs, devices and other items and services which the hospital must 
provide. In short, physicians are not financially at risk for the items 
and services that they use and prescribe, and therefore, do not have a 
financial stake in controlling the hospital's patient care costs.
    As part of many shared savings programs, physicians study how 
colleagues perform their procedures and then determine the best 
processes to adopt, in order to increase efficiency while ensuring 
quality. In other situations, outside experts are hired to analyze 
hospital and regional or national data to determine appropriate

[[Page 38550]]

opportunities for cost savings that do not jeopardize patient care. 
Shared savings programs are sometimes described as collaborations 
between physicians and hospitals to determine the best approach to 
providing quality patient care services. Shared savings programs have 
been recognized by stakeholders as an effective means of controlling 
costs, improving efficiency, and promoting quality in the delivery of 
health care services. Government stakeholders have recognized similar 
potential benefits when shared savings programs are properly structured 
to ensure compliance with Federal health care program requirements.
    Empirical evidence suggests that the goal of patient care quality 
maintenance or improvement can be achieved through a properly-designed 
shared savings program. An independent study of data from 13 separate, 
1-year gainsharing programs \1\ designed and administered by the 
organization responsible for the design of all of the gainsharing 
programs that, to date, have received favorable advisory opinions from 
OIG (see discussion below and in the FY 2009 Hospital IPPS proposed 
rule (73 FR 23692 through 23693)), found that the incentives for cost 
reduction in the gainsharing models studied did not result in 
reductions in quality and, for certain quality measures, resulted in 
improved quality of patient care. (See Jonathan D. Ketcham and Michael 
F. Furukawa ``Hospital-Physician Gainsharing in Cardiology.'' Health 
Affairs, Vol. 27, No. 3 (May/June 2008), 808.) Specifically, according 
to the study, gainsharing slowed the growth of average in-lab cost per 
coronary stent patient, reducing costs relative to non-gainsharing 
hospitals; yet, in-lab complications did not increase during 
gainsharing, and three complications significantly decreased. (Id. at 
808.) With respect to gainsharing's positive impact on patient care 
quality, the authors of the study asserted that the economic incentive 
for physicians participating in gainsharing programs to collaborate in 
defining and adopting best practices might improve the physicians' 
incorporation of clinical evidence into patient care decisionmaking. 
This is, at least in part, because the gainsharing programs studied 
provided participating physicians and physician organizations with 
information about other physicians' practice patterns. (Id. at 809.)
---------------------------------------------------------------------------

    \1\ Although we refer herein to ``shared savings programs,'' the 
study cited referred to these programs as ``gainsharing programs.'' 
We retain that nomenclature for purposes of discussing the study.
---------------------------------------------------------------------------

    Although properly structured shared savings programs may increase 
efficiency and reduce waste, thereby potentially increasing a 
hospital's profitability and contributing to quality of care, 
improperly designed or implemented programs pose the same risks of 
program or patient abuse described above in connection with incentive 
payment programs. Additional risk is posed by shared savings programs 
that reward physicians based on overall cost savings (for example, the 
amount by which the total costs attributable to a particular hospital 
department decreased from one year to the next) without accountability 
for specific cost reduction measures.
    We are concerned about physicians responding to a shared savings 
program by limiting their use of quality-improving but more costly 
devices, tests or treatments (``stinting''), by treating only healthier 
patients (``cherry picking''), by avoiding sicker patients 
(``steering'') at the hospital, or by discharging patients earlier than 
clinically indicated either to home or to post acute care settings 
(``quicker-sicker'' discharge). We are concerned also about 
arrangements which provide for payments in exchange for patient 
referrals or result in unfair competition among hospitals offering 
shared savings programs to foster physician loyalty and to attract more 
referrals. We are concerned that, because of pressures from competition 
or physicians, hospitals may increase the percentage of savings shared 
with the physicians, manipulate hospital accounts to generate phantom 
savings, or otherwise game the arrangement to generate income for 
referring physicians in order to retain them for or attract them to the 
hospital. (These same concerns may be present with incentive payment 
programs.) We are incorporating safeguards into the proposed exception 
that are intended to address these risks.
iii. DHHS Initiatives: Incentive Payment and Shared Savings Programs
    Patient care quality improvement is a laudable goal and a priority 
of the Department of Health and Human Services (the Department or 
DHHS). Patient care should be safe, effective, efficient, patient-
centered, timely and equitable. Establishing partnerships is a critical 
step towards achieving our goals of improving patient care quality and 
avoiding unnecessary costs. Incentive payment and shared savings 
programs, when properly structured, by design establish such 
partnerships.
    Since 1991, we have sponsored a variety of demonstration projects 
and other initiatives to explore the connection between payments and 
the quality of care. These initiatives include the evaluation of both 
gainsharing (in various forms) and P4P programs affecting providers of 
health care to beneficiaries in diverse care settings. Although we 
decline to provide detailed descriptions of individual initiatives 
here, gainsharing demonstrations include: (1) The Medicare 
Participating Heart Bypass Center Demonstration which was conducted to 
assess the feasibility and cost effectiveness of a negotiated all-
inclusive bundled payment arrangement for coronary artery bypass graft 
(CABG) surgery while maintaining high quality care; (2) a 3-year 
demonstration under section 1866C of the Act, which has been 
established, but not yet implemented, to test gainsharing models 
involving physicians, and collaborations between hospitals working with 
physicians, in a single geographic area to improve the quality of 
inpatient hospital care; and (3) a demonstration project under section 
5007 of the DRA that would involve arrangements between a hospital and 
physicians and practitioners under which the hospital provides 
remuneration (to certain physicians and to certain practitioners (as 
defined in 1842(b)(18)(C) of the Act)) that represents solely a share 
of the savings incurred directly as a result of collaborative efforts 
between the hospital and a particular physician (or practitioner) to 
improve overall quality and efficiency. In addition, we recently 
announced a new demonstration, the Acute Care Episode Demonstration, 
for hospitals to test the use of a bundled payment for both hospital 
and physician services for a select set of episodes of care (orthopedic 
and cardiac) to improve the quality of care delivered through Medicare 
FFS. We note that some of the demonstration programs are proceeding 
under a statutory provision that waived application of section 1877 of 
the Act, the anti-kickback statute, and the CMP statute.
    In addition to these gainsharing demonstrations, we have developed 
a number of P4P and other value-based purchasing initiatives across 
patient care settings, including: The Premier Hospital Quality 
Incentive Demonstration; the Medicare Care Management Performance 
Demonstration; the Home Health Pay-for-Performance Demonstration; and 
the Better Quality Information Pilots.

[[Page 38551]]

iv. Potential Statutory and Regulatory Applications to Incentive 
Payment and Shared Savings Programs
    Section 1877 of the Act, also known as the physician self-referral 
statute: (1) Prohibits a physician from making referrals for certain 
DHS payable by Medicare to an entity with which he or she (or an 
immediate family member) has a financial relationship (ownership, 
investment or compensation), unless an exception applies; and (2) 
prohibits the entity from filing claims with Medicare (or billing 
another individual, entity or third party payer) for those referred 
services. The statute establishes a number of specific exceptions and 
grants the Secretary the authority to create regulatory exceptions for 
financial relationships that pose no risk of program or patient abuse.
    A financial relationship is created where an incentive payment or 
shared savings program results in a direct or indirect payment from the 
hospital to a physician. Unless the arrangement satisfies the 
requirements of an applicable exception, the incentive payment or 
shared savings payment would violate the physician self-referral 
prohibition if the physician receiving the payment makes referrals for 
DHS to the hospital making the incentive payment or shared savings 
payment. In many cases, incentive payment and shared savings programs 
can be structured to satisfy the requirements of existing exceptions 
(for example, the exceptions for bona fide employment relationships, 
personal service arrangements, fair market value compensation, or 
indirect compensation arrangements). In some cases, no exception may be 
necessary (for example, incentive payments paid directly from a payer 
at the payer's sole discretion to a physician for the physician's 
efforts in improving quality). However, in other circumstances, the 
existing exceptions to the physician self-referral prohibition may not 
be sufficiently flexible to protect payments to physicians under 
incentive payment and shared savings programs.
    As noted above, incentive payment and shared savings programs also 
implicate two additional specific fraud and abuse statutes--the CMP 
statute and the anti-kickback statute. An incentive payment or shared 
savings program could run afoul of the anti-kickback statute if one 
purpose of the payment from the hospital to the physician is to 
influence referrals of Federal health care program business. In 
contrast, the intent of the parties does not dictate compliance with 
the physician self-referral statute. If an arrangement fails to satisfy 
all of the requirements of an exception, it would violate section 1877 
of the Act.
v. Solicitation of Comments in the FY 2009 Hospital Inpatient 
Prospective Payment System Proposed Rule
    In the FY 2009 IPPS proposed rule, we solicited comments as to 
whether we should issue an exception specific to gainsharing 
arrangements, which we stated ``typically refer[] to an arrangement 
under which a hospital gives physicians a share of the reduction in the 
hospital's costs (that is, the hospital's cost savings) attributable in 
part to the physicians' efforts'' (73 FR 23692). Although we noted 
general concerns with arrangements that involve the use of a 
percentage-based compensation formula (as many gainsharing arrangements 
involve), we solicited comments regarding a potential exception to the 
physician self-referral prohibition for gainsharing arrangements in 
recognition of ``the value to the Medicare program and its 
beneficiaries where the alignment of hospital and physician incentives 
results in improvements in quality of care'' (73 FR 23694). 
Specifically, we solicited comments on the following: (1) What types of 
requirements and safeguards should be included in any exception for 
gainsharing arrangements; and (2) whether certain services, clinical 
protocols, or other arrangements should not qualify for the exception 
(73 FR 23694).
b. Public Response to Solicitation of Comments
    The following discussion describes comments received in response to 
the solicitation of comments on gainsharing arrangements that we have 
reviewed to date. In addition, we have reviewed comments received in 
connection with our proposal in the CY 2008 PFS proposed rule to revise 
Sec.  411.354(d) to permit the use of percentage-based compensation 
formulae (such as the type often used for making cost sharing payments) 
for personally performed physician services only (72 FR 38184). In that 
proposal, we specifically noted that the revisions, if finalized, could 
potentially affect payment methodologies used in gainsharing programs. 
Generally, commenters strongly supported the establishment of an 
exception for gainsharing and other programs that compensate physicians 
and physician organizations for improving patient care quality and 
decreasing the cost of providing patient care when those achievements 
can be tied to the physician's or physician organization's 
participation in the program. Commenters urged that an exception 
contain safeguards to ensure patient access to necessary items and 
services, improve patient care quality, and avoid improper influencing 
of physician referral patterns due to the constraints or incentives of 
the program's design. One commenter suggested that the availability of 
the exception be contingent upon the parties obtaining a favorable 
advisory opinion from OIG prior to the implementation of the 
gainsharing program. In addition, commenters requested that an 
exception provide flexibility to allow an entity to design an incentive 
payment or shared savings program that is specific to the entity's 
goals and needs, as well as to modify the program as necessary. One 
commenter also provided recommendations regarding the types of cost 
savings measures (in addition to supply cost reduction measures) that 
should be addressed by the exception, as well as particular services, 
clinical protocols, and other arrangements that we should exclude from 
the protection of an exception for incentive payment and shared savings 
programs. The commenter suggested that an exception to the physician 
self-referral prohibition should permit more types of arrangements (and 
within additional medical specialties) than thus far have been 
explicitly approved in OIG advisory opinions. Specifically, the 
commenter urged that an exception for incentive payment and shared 
savings programs allow a program covered by the exception to reward: 
(1) Decreasing delays in patient care; (2) reconsidering ordering 
patterns for all types of testing and services (in order to reduce 
medically unnecessary services and reduce cost); (3) reducing 
consultation of other physicians when value is not added to the 
patient's care through the consultation; (4) establishing long-term 
management of chronic patient conditions; and (5) using alternative 
care (for example, outpatient care instead of inpatient care).
    Specific recommendations for safeguards to be included in an 
exception for incentive payments and shared savings programs included: 
(1) Permitting the duration of the program to exceed 1 year (the term 
of the arrangements approved under the OIG advisory opinions to date); 
(2) requiring mechanisms to ensure that the program will not affect 
patient care in an adverse manner; (3) limitations on the amount of 
payments to participating physicians; (4) requiring periodic review of 
the impact of the program on clinical care;

[[Page 38552]]

(5) a written agreement that clearly identifies the services or actions 
for which payment may be made to the participating physicians; (6) 
permitting payments only for documented and verified quality 
improvement and waste or cost reduction; (7) determining compensation 
to participating physicians (or a formula for such compensation) prior 
to the implementation of the program or the physician's participation 
in the program, and prohibiting modification to the compensation during 
the term of the arrangement; (8) requiring written disclosure regarding 
the program to all patients affected by the program to promote 
transparency and accountability; and (9) prohibiting payment to a 
physician or physician organization that is determined in any way based 
on a reduction in the length of stay for hospital patients.
c. Proposal
    Although we solicited comments in the FY 2009 IPPS proposed rule 
regarding an exception to the physician self-referral prohibition for 
gainsharing arrangements (73 FR 23692), we believe that a broader 
exception that includes incentive payment programs is needed to 
facilitate the full array of nonabusive, beneficial incentive payment 
and shared savings programs that we consider important for promoting 
the highest quality of care for our beneficiaries while achieving cost 
savings for the program. Section 1877(b)(4) of the Act authorizes the 
Secretary to create regulatory exceptions for financial relationships 
that he determines do not pose a risk of program or patient abuse. 
Therefore, using our authority under section 1877(b)(4) of the Act, we 
are proposing here an exception in new Sec.  411.357(x) for payments 
provided to a physician participant in an incentive payment or shared 
savings program that includes certain safeguards and satisfies certain 
conditions.
i. General Considerations With Respect to the Proposed Exception
    As we described above in greater detail, we have concerns about 
physicians responding to incentive payment and shared savings programs 
by stinting, cherry picking, steering, and making quicker-sicker 
discharges. The criteria included in the proposed exception are focused 
on three aspects that we consider critical to a properly structured, 
nonabusive incentive payment or shared savings program: transparency, 
quality controls (for example, controls to prevent reductions in 
resource utilization that lead to a diminution in quality), and 
safeguards against payments for referrals (or influencing referrals). 
We are proposing requirements with respect to the structure of the 
incentive payment and shared savings program itself, limitations and 
conditions regarding the payments provided to the physicians 
participating in the program, and requirements for the arrangement 
between the hospital and the physicians participating in the program. 
We are seeking comments on each requirement in the exception, as well 
as comments regarding the exception in its entirety. With respect to 
the latter, we are interested in comments regarding the effect of 
incentive payment and shared savings programs on marketplace 
competition, specifically with regard to whether shared savings 
programs that include product standardization measures disadvantage 
small manufacturers of items, supplies and devices due to the selection 
and preferred utilization of a limited number of items, supplies and 
devices included in the shared savings program, the ordering of which 
qualifies for program payments. (We note that, although we expect that 
the initial selection of the preferred products would be based on 
clinical efficacy, safety and medical appropriateness, we recognize 
that the final selection of products in a product standardization 
program is likely to be based on price when quality and utility are 
comparable). We are interested in comments on how product 
standardization can be achieved without limiting patient access to 
items, supplies and devices considered beneficial to improved patient 
care. We are also concerned about the potential for fraud and abuse if 
manufacturers attempt to influence the design or implementation of 
hospital incentive payment or shared savings programs.
    We note that, for most of the requirements and safeguards discussed 
in this proposal, we have proposed regulation text. However, we have 
not provided proposed regulation text for a limited number of the 
proposed requirements and safeguards described, but rather have 
solicited comments regarding how best to incorporate them into the 
regulatory text of the exception.
    We are proposing a single set of requirements that would apply 
equally to incentive payment and shared savings programs. In many 
cases, programs may include both patient care quality measures and cost 
savings measures, or a particular performance measure may be both a 
quality measure and cost savings measure. We believe that one set of 
requirements would ease administration and assist with hospitals' and 
physicians' compliance efforts. Further, similar risks of program or 
patient abuse exist regardless of whether a hospital pays a physician a 
share of its internal cost savings, a share of external funds earned by 
meeting quality goals (in a payer-sponsored program), or a share of its 
general revenues to promote quality. We are interested in comments with 
respect to whether separate exceptions for incentive payment programs 
and shared savings programs would be preferable and, if so, how they 
should be structured, and which requirements should appear in each.
    The requirements of the proposed exception include a number of 
program integrity safeguards, consistent with our longstanding concern, 
first noted in the Phase I final rule with comment period, that a 
patient's choice can be affected when physicians steer patients to less 
convenient or lower quality items or services because the physicians 
are sharing profits with, or receiving remuneration from, the provider 
(63 FR 1659 and 1662). We are also concerned about systems that 
incentivize the delivery of less expensive care at the cost of patient 
care quality and systems that limit patient access to beneficial new 
technology. The proposed exception prohibits payment to physicians 
based in whole or in part on a reduction in the length of stay for a 
particular patient or in the aggregate for the hospital operating the 
program. However, we recognize that reduced length of stay may occur as 
an incidental effect of quality improvement efforts.
ii. Scope of the Proposed Exception
    As noted above, we used the term ``incentive payment and shared 
savings program'' to encompass a wide variety of gainsharing and P4P 
programs. We do not propose to limit the exception to traditional 
gainsharing programs or supply cost/waste reduction programs. We are 
seeking comments regarding whether this approach is too limited or 
expansive, and whether different terminology would better describe the 
range of nonabusive programs we intend to cover under the proposed 
exception.
    Our proposed exception protects only incentive payment and shared 
savings programs offered by hospitals. It is our understanding that 
these arrangements are the most common, and, as described above, are 
the type with which we have the most experience. We are concerned that, 
unlike hospitals that are reimbursed on a prospective payment basis, 
other types of providers and suppliers that are reimbursed on a fee 
schedule or other FFS basis might have an incentive to create quality 
measures that mandate the furnishing of more

[[Page 38553]]

items and services, without regard to costs to the Medicare program or 
its beneficiaries. In many cases, it might be relatively easy to 
characterize a program that offers beneficiaries more items and 
services as a ``quality'' incentive program, even in the absence of 
actual quality improvement. However, we are soliciting comments on 
whether incentive payment or shared savings programs (or similar 
programs) offered by other DHS entities should be protected and under 
what circumstances. In particular, we are interested in comments 
regarding the structure and design of non-hospital arrangements and the 
safeguards that we could include in an exception to meet the statutory 
standard of no risk of program or patient abuse.
    We are proposing to protect remuneration only in the form of cash 
(or cash equivalent) payments made by a hospital. Nonmonetary 
remuneration, such as additional staff members or new equipment, 
offered to reward achievement of quality or cost savings goals would 
not be protected. In addition, the proposed exception would be limited 
to payments to physicians who actually participate (``participating 
physicians'') in the achievement of the patient care quality measures 
or cost savings measures (collectively referred to in this proposal as 
the ``performance measures'') that are the subject of the particular 
program. We note that the physician self-referral statute applies only 
to physicians. Nothing in this proposal is intended to limit or 
prohibit the participation of NPPs in incentive payment and shared 
savings programs. Moreover, the participation of NPPs in an incentive 
payment or shared savings program would not require the protection of 
an exception to the physician self-referral prohibition unless the 
practitioner's referrals are directed by, controlled by, or attributed 
to a physician with whom or for whom the practitioner works.
    We are proposing that protected payments could be made to 
participating physicians individually or to physician organizations 
composed entirely of participating physicians (referred to in this 
proposal as ``qualified physician organizations'') (for example, a 
group practice composed entirely of cardiac surgeons participating in a 
cardiac surgery shared savings program could be a qualified physician 
organization). With respect to qualified physician organizations, we 
are considering whether such organizations could include physicians who 
are eligible to participate in the program, even if the individual 
physicians elect not to participate in the program (for example, a 
group practice composed entirely of cardiac surgeons could be a 
qualified physician organization in a cardiac surgery shared savings 
program, even if some surgeons elect not to participate in the 
program). As discussed further below, qualified physician organizations 
would need to distribute incentive or shared savings payments received 
from the hospital on a per capita basis to the physicians in the 
physician organization who participated in the incentive payment or 
shared savings program. In any case, payments made to physicians who 
refer patients to the hospital but do not otherwise participate in the 
program would not be protected. For example, payments to cardiac 
surgeons for changing their operating room procedures would be 
protected (provided that all of the other requirements of the exception 
were satisfied), whereas payments to the cardiologists who referred the 
patients for cardiac surgery but did not perform the surgery or 
contribute to the achievement of the performance measures through their 
personal efforts would not be protected.
iii. Requirements Related to the Design of an Incentive Payment or 
Shared Savings Program
    To be protected, the incentive payment or shared savings program 
must be a documented program that seeks to achieve the improvement of 
quality of hospital patient care services through changes in physician 
clinical or administrative practices or actual cost savings for the 
hospital resulting from the reduction of waste or changes in physician 
clinical or administrative practices, without an adverse affect on or 
diminution in the quality of hospital patient care services.
    We are proposing to require that, in order for payments made as 
part of an incentive payment or shared savings program to qualify for 
the protection of the exception, the program must include patient care 
quality or cost savings measures (or both) supported by objective, 
independent medical evidence indicating that the measures would not 
adversely affect patient care. Specifically, all performance measures 
must use an objective methodology, be verifiable, be supported by 
credible medical evidence, and be individually tracked. The measures 
must reasonably relate to the hospital's practices and patient 
population. In the interest of creating clear, bright-line rules, we 
are proposing specifically that patient care quality measures be listed 
in CMS' Specifications Manual for National Hospital Quality Measures. 
In the alternative, rather than require programs to include the patient 
care quality measures listed in CMS' Specifications Manual for National 
Hospital Quality Measures, we would deem such measures to satisfy that 
requirement.
    With respect to cost savings measures, we are proposing to require 
that cost savings measures included in the incentive payment or shared 
savings program use an objective methodology, be verifiable, be 
supported by credible medical evidence indicating that the measures 
would not adversely affect patient care, be individually tracked, and 
reasonably relate to the services provided. We are seeking comment 
regarding this approach and the described alternative for patient care 
quality measures in general, and we are interested specifically in 
comments regarding other appropriate performance measures (or lists of 
performance measures, particularly with respect to cost savings 
measures to the extent such a list might exist) that might be deemed to 
satisfy such a requirement if we finalize this alternative proposal, as 
well as whether parties could satisfy this requirement by including 
criteria deemed by the Secretary in an advisory opinion to meet the 
requirement. We are including this requirement to safeguard against 
programs that incorporate sham standards that are designed to reward 
physicians for referrals rather than the achievement of legitimate 
benchmarks for quality maintenance or improvement or cost savings. We 
believe that appropriate performance measures should derive from broad, 
objective, widely-recognized criteria and not merely result from the 
subjective views of the parties to the arrangement. We also are 
proposing a specific requirement that the program ensure that the 
quality of patient care services is not impacted adversely as a result 
of the program.
    We are proposing that an incentive payment or shared savings 
program must be reviewed prior to implementation of the program and at 
least annually thereafter to ascertain the program's impact on the 
quality of patient care services provided by the hospital. We believe 
that such vigilance is critical to ensure that quality of hospital 
patient care is not impacted adversely. Under this proposal, the 
reviews must be conducted by a person or organization with relevant 
clinical expertise, and they must be independent medical reviews. By 
``independent medical reviews,'' we mean reviews by an individual or 
organization that is not: (1) Affiliated with the hospital operating 
the program under review; (2) not affiliated with any

[[Page 38554]]

participating physician or with any physician organization with which a 
participating physician is affiliated; and (3) at the time of the 
review, not participating in any incentive payment or shared savings 
program operated by the hospital. We are seeking comments specifically 
regarding the appropriate frequency for review of incentive payment and 
shared savings programs to ensure that quality of hospital patient care 
is not impacted adversely and to protect against program or patient 
abuse. We are also seeking comments addressing the circumstances, if 
any, under which the periodic review could be conducted by an 
individual or organization that does not fall within the definition of 
``independent medical review'' outlined above.
    Any reviews would need to be objective, accurate and complete and 
result in written findings. We are proposing that the initial and 
periodic reviews should be contemporaneously documented, and that all 
documentation related to the incentive payment or shared savings 
program and the reviews thereof be made available to the Secretary upon 
request. We are further proposing that incentive payment and shared 
savings programs must provide for immediate and appropriate corrective 
action in the event a periodic review reveals an adverse impact on 
quality. Corrective actions could include termination of the program, 
removal of the relevant measure from the program, removal of the 
relevant measure from the calculation of physician payments, or 
termination of the physician from the program. We are considering 
whether corrective actions could also include modification of a 
performance measure and, if so, under what conditions. However, we 
would prohibit the discontinuation of a performance measure for the 
purpose of increasing the payment to the participating physicians in 
the next period. Also, although we do not want to encourage practice 
patterns that result in reduced or poor quality patient care, we do not 
believe it is appropriate to permit the discontinuation of a 
performance measure because the participating physicians are unable to 
earn a shared savings payment related to that measure. We are 
interested in comments addressing the appropriate corrective actions 
and how best to incorporate a corrective action requirement into the 
regulatory text of the exception.
    We are proposing to require that participation in the program be 
limited to those physicians who are members of the hospital's medical 
staff at the commencement of the program. We believe that this would 
protect against abusive programs that serve as inducements to attract 
physicians from competing hospitals. However, we are soliciting 
comments on whether and, if so, how a physician who joins the medical 
staff at the hospital as part of the normal cycle of workforce demands 
for care delivery could be permitted to participate in an incentive 
payment or shared savings program (either individually or as part of a 
qualified physician organization, as described below) that began before 
he or she joined the medical staff of the hospital. We are also 
proposing that physicians participating in an incentive payment or 
shared savings program, or in a particular performance measure or 
measures within an incentive payment or shared savings program, must do 
so in ``pools'' of five or more participating physicians among whom the 
aggregate incentive payment available for, or cost savings that result 
from, the efforts of the physicians in the ``pool'' with respect to a 
particular measure would be shared on a per capita basis. A qualified 
physician organization could itself constitute an eligible pool, 
provided that it is comprised of at least five participating 
physicians. Otherwise, participating physicians in the qualified 
physician organization would need to be grouped by the hospital into 
pools of at least five participating physicians.
    The distribution of incentive payment and shared savings program 
payments must be supported by written documentation. As an additional 
safeguard, we are proposing to require that physician ``pools'' be 
formed at the commencement of the program. We are interested in 
comments about our proposal to require hospitals to create pools for 
purposes of physician participation in incentive payment and shared 
savings programs and the minimum number of physicians needed to 
comprise a ``pool'' that adequately reduces the risk of program or 
patient abuse. Specifically, we are interested in comments on whether 
and, if so, how we should address the ``pooling'' of funds for payment 
purposes in an incentive payment or shared savings program targeted at 
a specific medical specialty or hospital department in which the 
physicians on the medical staff in that specialty or department or in 
the physician organization total fewer than five physicians.
    We are proposing also that a hospital may not determine eligibility 
for physician participation in a program based on the volume or value 
of referrals or other business generated between the parties. We are 
also considering, and soliciting comments about, conditioning 
protection under the exception on the hospital offering the opportunity 
to participate in the incentive payment or shared savings to all 
physicians on the medical staff who belong to the department or 
practice in the specialty relevant to the program (for example, the 
opportunity to participate in a shared savings program for cardiac 
surgery would have to be offered to all cardiac surgeons on the 
hospital's medical staff).
    To qualify for protection under the proposed exception, an 
incentive payment or shared savings program may not limit the 
discretion of physicians to make medically appropriate decisions for 
their patients, including, but not limited to, decisions about tests, 
treatments, procedures, services, supplies or discharge. Although 
incentive payment and shared savings programs may condition program 
payments on particular physician choices, to be protected under the 
proposed exception, such programs could not limit other choices for 
which physicians would not receive program payments. In particular, a 
hospital must not limit the availability of any specific item, supply 
or device, including new technology that is linked through objective 
evidence to improved outcomes and is clinically appropriate for a 
particular patient, and must permit individual physicians access to the 
same selection of items, supplies and devices that was available to 
them prior to the physician's participation in the program. We are not 
requiring physician access to items, supplies and devices that were not 
available prior to the commencement of the incentive payment or shared 
savings program. Rather, a hospital must make available to a 
participating physician at least the same selection available to the 
physician prior to his or her participation in the incentive payment or 
shared savings program, which already may have been restricted by 
hospital policy, but without payment to physicians based on such 
situations.
    We recognize that some shared savings programs are designed to 
channel the physician's selection of physician preference items toward 
a limited number of choices; however, we believe that, to safeguard the 
program and its beneficiaries against abuse, physicians participating 
in a shared savings program must have access to items or supplies that 
they deem medically necessary for an individual patient's care. This 
would include new technology, provided that it meets the same Federal 
regulatory standards (for example, approval by the Food and Drug 
Administration (FDA) and

[[Page 38555]]

Medicare or Medicaid coverage decisions) as the items or supplies 
included in the program. By including this requirement, we intend that 
programs would ensure access to clinically appropriate new technology 
while, at the same time, protect patient safety. For example, if a 
program includes three alternative, FDA-approved devices for a 
particular procedure, the hospital sponsoring the program could limit 
access to new technology that is experimental (that is, not FDA-
approved), but could not limit access to FDA-approved alternative 
devices/technology. We note also that items, supplies and devices in a 
product standardization program (that is a cost savings action under a 
shared savings program) should not be selected on the basis of a 
participating physician's ownership or investment interest in, or 
compensation arrangement with, the manufacturer or distributor of the 
item, supply or device, or his or her interest in a group purchasing 
organization (GPO) that arranges for the purchase of the item, supply 
or device. In this regard, we would strongly recommend, and may 
require, that such physicians be barred from participating in any 
manner in the design or implementation of an incentive payment or 
shared savings program that involves items, supplies or devices in 
which the physician has a financial interest. We are proposing that a 
physician (or qualified physician organization) could not receive a 
payment under an incentive payment or shared savings program for the 
use of an item, supply or device if he or she (or the qualified 
physician organization) has an ownership or investment interest in, or 
a compensation arrangement with, a manufacturer or distributor of the 
item, supply or device, or GPO that arranges for the purchase of the 
item, supply or device.
    iv. Requirements Related to Payments Made Under an Incentive 
Payment or Shared Savings Program
    To reduce the risk that incentive or shared savings program 
payments might be used to encourage or reward referrals to the hospital 
or provide incentives to engage in other abusive practices, such as 
stinting or cherry picking, we are proposing that payments made to 
physicians participating in the incentive payment or shared savings 
program be distributed on a per capita basis. We are interested in 
public comments that may outline alternate approaches to the per capita 
payment model for the distribution of incentive payments or shared 
savings payments, such as paying a physician more or less according to 
whether he or she contributed more or less to the achievement of the 
performance measures included in the incentive payment or shared 
savings program.
    We believe that safeguards are necessary to ensure that incentive 
payment and shared savings programs do not result in altered referral 
patterns and to reduce the risk that programs will become vehicles used 
to reward referring physicians. To address this, we are proposing that 
remuneration paid to a participating physician or a qualified physician 
organization may not include any amount that takes into account the 
provision a greater volume of Federal health care patient procedures or 
services than the volume provided by the participating physician or 
qualified physician organization during the period of the same length 
immediately preceding the commencement of the program as that covered 
by the payment. We are interested in comments regarding whether and, if 
so, how to account for volume changes due to market forces and 
physician practice growth.
    We are also proposing that the amount of the remuneration paid to 
the physician or qualified physician organization be limited in 
duration and amount. With respect to duration, we are proposing that 
protected programs be no shorter than 1 year and no longer than 3 
years. With respect to a limit on the amount of payments, we are 
proposing two types of limits, which we might adopt separately or 
together.
    First, we are proposing a limit on payments expressed as a set 
percentage of the savings available to the hospital as a result of the 
changes in clinical or administrative practices of the participating 
physicians. Although not incorporated into the proposed regulation 
text, we are specifically considering a flat 50 percent limit on the 
sharing of cost savings (regardless of the length of the program), and 
are considering whether to require ``re-basing,'' depending on the 
length of the program. We are interested in comments regarding whether 
this ``cap'' on payments is appropriate, too high, or too low. We are 
interested also in comments regarding whether and, if so, how we should 
limit payments under a multi-year incentive payment or shared savings 
program to an amount that would be actuarially equivalent to the amount 
of the payments made under a 1-year program. We are considering also 
``scaled'' limits for programs longer than 1 year. Under the scaled 
limits approach, we would not require re-basing (as further described 
below), but would require that payments to physicians decrease over the 
course of the performance measure. For purposes of calculating the 
actual payments to the physician, we are proposing that cost savings be 
measured by comparing the hospital's actual acquisition costs for the 
items and supplies or costs of delivering the specified services that 
are subject to the incentive payment or shared savings program to the 
hospital's baseline costs for the same items, supplies or services 
during the 1-year period immediately preceding the commencement of the 
program.
    Second, we are proposing a limit on payments to address the risk 
that physicians will continue to receive financial rewards for already 
implemented changes in clinical or administrative practices. This 
second limit would require that payments made under an incentive 
payment or shared savings program must take into account any payments 
that have already been made for performance measures already achieved 
(``re-basing''). We are considering a re-basing approach under which, 
at the end of year one, the hospital would re-base performance measures 
such that available payment would be based on the difference between 
the hospital's then-current level for a particular performance measure 
and the goal established for that performance measure. This approach 
would apply similarly to incentive payments made exclusively for 
improvements in patient care quality that are unrelated to the 
achievement of cost savings. We are soliciting comments specifically as 
to whether requiring the re-basing of ``quality-only'' payments is a 
necessary safeguard against program or patient abuse, or whether a 
different approach for limiting such payments could be implemented that 
would safeguard against risk to the Medicare program or its 
beneficiaries. We are also soliciting comments on whether we should 
require re-basing at all and, if so, under what parameters and whether 
parties should be free to choose the frequency of the payment and re-
basing periods under the incentive payment or shared savings program. 
In no event would a hospital be permitted to increase the incentive 
payment or shared savings payment potentially available to physicians 
as a result of the re-basing.
    By way of illustration, assume that one objective cost saving 
measure in the program is to decrease from 80 percent utilization of a 
specified item during a particular surgical procedure (the hospital's 
historical utilization rate for the item) to 20 percent utilization 
(the national average for utilization of the item). Under an approach 
that requires re-basing, if, after completion of the first

[[Page 38556]]

year of the program, the hospital's utilization of the specified item 
decreased to 60 percent of surgical procedures, for year 2 of the 
arrangement, the participating physicians could receive payment only 
for any reduction below 60 percent utilization of the specified item, 
that is, the new ``historical'' baseline utilization rate would be 60 
percent and all cost savings and waste reduction for the upcoming year 
would be measured against the new baseline utilization rate. If, after 
completion of year one, the hospital's utilization of the specified 
item increased to 90 percent, the hospital would be prohibited from re-
basing the utilization rate higher than the initial 80 percent 
utilization rate determined at the commencement of the incentive 
payment or shared savings program. The participating physicians would, 
in the aggregate, be eligible to receive as a shared savings payment 
the same percentage of cost savings throughout the term of the program.
    Using the same figures, under an approach that requires scaling of 
the payments over the course of the arrangement, the physicians 
participating in the program would be eligible for a decreasing 
percentage of cost savings over the course of the arrangement. Assume, 
for example, we adopted an approach that permitted shared savings 
payments of up to 50 percent for year one, up to 35 percent for year 
two, and up to 20 percent for year three. If a particular cost savings 
measure generated savings of $100,000 the first year, $150,000 the 
second year, and $200,000 the third year (all relative to the 
historical baseline utilization rate established at commencement of the 
program), the participating physicians would be eligible for a total of 
50 percent of $100,000 (or $50,000) the first year, a total of 35 
percent of $150,000 (or $52,500) the second year, and 20 percent of 
$200,000 (or $40,000) the third year. We are also considering 
protecting programs in which dollar limits are expressed as fixed 
dollar amounts rather than percentages.
    Each of the approaches described above could be adopted to the 
exclusion of or in concert with each other. We are interested in 
comments regarding whether the exception should include one or more of 
the payment limit alternatives, as well as comments regarding other 
appropriate limitations for the amount and nature of the payments made 
under an incentive payment or shared savings program. Regardless of 
which approach we adopt, we are proposing to require that payments 
based on cost savings be calculated on the hospital's actual 
acquisition costs for the items at issue, as well as the costs involved 
in providing the specified services and that they be calculated on the 
basis of all patients, regardless of insurance coverage (subject to the 
cap on payment for Federal health care program beneficiaries described 
above). We are seeking comments regarding whether these conditions are 
appropriate and whether we should permit modification under other or 
different circumstances.
    We do not intend to protect arrangements in which physicians 
receive payments for actions taken that result in a reduction below a 
predetermined target. For example, in the first hypothetical (under the 
required re-basing approach), no payments could be made for reductions 
below 20 percent utilization. We intend to require that the target 
thresholds use objective historical and clinical measures that are 
reasonably related to the practices and the patient population at the 
hospital. We are mindful that some performance measures may not be 
amendable to such utilization ``floors'' or ``ceilings.'' We are 
considering including comparable safeguards for measures that may not 
be readily amenable to percentage ``floors'' and ``ceilings'', such as 
measures related to product substitution and product standardization. 
For example, the fact that the substitution of one product for another 
would not adversely impact quality might need to be supported by 
substantial objective medical evidence. We are soliciting comments on 
what kinds of quality controls are appropriate for performance measures 
that are not amendable to utilization ``floors'' and ``ceilings.'' We 
are considering whether and, if so, how this concern can be addressed 
by requiring that the parties obtain a fully independent clinical 
review by a qualified party of the program measures prior to 
implementing the program. We are soliciting comments on appropriate 
quality safeguards in such situations.
    We recognize that parties might want to structure arrangements so 
that payments are made by the hospital to a physician organization that 
would not meet our proposed definition of a qualified physician 
organization. This might be the case if incentive payment or shared 
savings payments are made by a hospital to a multi-specialty physician 
practice composed of participating and non-participating physicians 
(for example, a group composed of cardiac surgeons and cardiologists, 
in the case of a cardiac surgery shared savings program). We are 
considering whether to extend the proposed exception to cover payments 
from a hospital to such physician organizations and, if so, under what 
conditions we could do so that would pose no risk of program or patient 
abuse. We are concerned that payments made to such physician 
organizations may become conduits to reward non-participating 
physicians for referrals. On the other hand, we recognize that programs 
structured so that hospitals make payments to physician organizations 
rather than to individual physicians may be administratively easier for 
hospitals to operate. (We note that, in some cases, payments from 
hospitals to physician organizations that are not qualified physician 
organizations might fit in the existing exception for indirect 
compensation arrangements, depending on the circumstances.)
    We are considering several options to address this issue. First, we 
are considering an approach that would allow hospitals to make 
incentive payment or shared savings payments to individual physicians 
indirectly by passing the payment through the physician's physician 
organization. Under this approach, the total amount of the payment 
earned by the physician under the incentive payment or shared savings 
program would need to be passed through to the physician, except 
amounts required for income tax and other regular withholding. Under 
this approach, the physician organization would simply operate as a 
pass-through entity. The physician organization would be prohibited 
from retaining any portion of the incentive payment or shared savings 
payment (except, potentially, for required withholdings to be paid on 
behalf of the participating physician). We are soliciting comments 
about this approach and what types of payments the physician 
organization could withhold (for example, whether the physician 
organization should be permitted to withhold required contributions to 
a qualified retirement plan).
    We are concerned about the difficulty hospitals might encounter in 
ensuring that the physician organization accurately and fully passes 
through the full payment to the participating physician, and we are 
concerned about the risk of fraud and abuse if the payment mechanism 
were manipulated so that the physician organization retains a portion 
of the payments for its own benefit. Such gaming of the payment 
structure could result in improper remuneration from the hospital to 
the physician organization for referrals (and would not fit in the 
proposed or any other exception to section 1877 of the Act). We are 
interested in comments about how to

[[Page 38557]]

craft safeguards for the exception to prevent this type of potential 
abuse. In this regard, we are considering requiring that the physician 
organization document all amounts received and distributed to 
participating physicians, as well as any income tax or regular 
withholding payments made on behalf of the participating physician. In 
addition, we would require that the physician organization's 
obligations with respect to ``pass through'' payments be included in 
the written agreement between the parties and that the physician 
organization be a signatory (in addition to the hospital and the 
participating physician) to the agreement. We are soliciting comment on 
these and any other safeguards necessary to ensure that payments are 
appropriately passed through to participating physicians.
    Second, we are considering whether, without posing a risk of 
program or patient abuse, we could expand the definition of a 
``qualified physician organization'' to which protected payments can be 
made to include physician organizations comprised of some physicians 
who are not participating physicians. This approach, if implemented, 
would have the effect of protecting payments made directly to such 
physician organizations (rather than directly to individual physicians 
or ``passed through'' the physician organization), provided that all 
other requirements of the exception were satisfied. We would adopt this 
approach only if we could do so in a manner that would not result in 
payments to physicians whose only contributions to the hospital's 
incentive payment or shared savings program are potential referrals. If 
we expand the definition of a qualified physician organization, we 
envision a requirement that would permit only participating physicians 
to share in the incentive or shared savings payments. Our concerns 
described above about the difficulty hospitals would experience in 
monitoring the payments and the risk of manipulation to benefit 
referral source physicians or the physician organization as a whole are 
heightened with this approach. If we were to adopt this approach, we 
would include the proposed safeguards described above in connection 
with the pass-through payments proposal. In any event, we do not intend 
to protect arrangements that reward passive physicians who receive 
payments but do not participate in the achievement of the patient care 
quality or cost savings measure goals.
    One benefit of protecting programs that are structured so that 
payments are made from the hospital to a physician organization would 
be to avoid potential confusion that might be caused by the physician 
``stand in the shoes'' provisions in Sec.  411.354(c)(2) (under which a 
physician is considered to have the same compensation arrangements with 
the same parties and on the same terms as his or her physician 
organization with respect to whether remuneration is permissible under 
an exception). We are interested in comments on the relationship of the 
proposed exception to the ``stand in the shoes'' provisions. We are 
also interested in comments regarding whether the new exception, if 
adopted, should be included in Sec.  411.357, or whether it would be 
preferable to include it in Sec.  411.355 or elsewhere in the physician 
self-referral regulatory scheme.
v. Requirements Related to the Arrangement Between a Hospital and the 
Participating Physician or Qualified Physician Organization
    We are proposing to include in the exception certain criteria that 
are common to most of the exceptions to the physician self-referral 
prohibition for compensation arrangements, namely, that the arrangement 
be set out in writing, signed by the parties, have a minimum term of 1 
year and a maximum term of 3 years, and specify compensation that is 
set in advance, does not vary during the term of the arrangement, and 
is not determined in a manner that takes into account the volume or 
value of referrals or other business generated between the parties. We 
are proposing to require that the written agreement between the 
hospital offering the program and the physicians participating in the 
program document the performance measures against which the performance 
of the participating physicians will be measured. In addition, we are 
proposing that each performance measure (including, for example, 
specific cost savings measures) and the payments resulting from the 
achievement of established targets must be delineated separately and 
clearly. We believe transparency is crucial to ensure that the 
incentive payment or shared savings program does not pose a risk of 
program or patient abuse. However, we are interested in comments 
regarding whether and, if so, how total (or ``global'') savings for a 
particular department or service line can be included in the program 
and sufficiently monitored, accounted for, and distributed so as not to 
pose a risk of program or patient abuse and to permit transparency of 
the program.
    As in all exceptions issued using our authority under section 
1877(b)(4) of the Act, we are proposing to include a requirement that 
the arrangement does not violate the anti-kickback statute or any 
Federal or State law or regulation governing billing or claims 
submission. This is necessary to ensure that the arrangement does not 
pose a risk of program or patient abuse, the standard for all 
exceptions issued using this authority.
    In order to promote transparency and foster accountability, we are 
proposing to require that the arrangement between the parties require 
written disclosure to patients affected by the program regarding the 
nature of the program and the physician's or qualified physician 
organization's participation in the program prior to admission to the 
hospital, or, if pre-admission disclosure is not feasible, prior to the 
procedure or other treatment to which the program is applicable. 
Affected patients include those patients whose patient care at the 
hospital relates to any of the measures that are part of the program. 
For example, a patient being admitted to a hospital for cardiac surgery 
should receive a disclosure if the hospital operates an incentive 
payment or shared savings program related to cardiac surgery and his or 
her physician participates in that program. We are considering whether 
patients should be permitted to opt out of a measure that might 
otherwise apply to their care and are seeking comments regarding 
whether and how this would work in practice.
    Finally, we are proposing the following additional safeguards. We 
are interested in comments regarding how to incorporate these 
requirements into the regulation text. First, to guard against cherry 
picking or other abuse, the case severity, and the ages and payers of 
the patient population treated by the participating physician under the 
arrangement must be monitored using generally-accepted standards. The 
monitoring could be conducted by an independent outside party or by a 
committee composed of representatives of the hospital and participating 
physicians. If there are significant changes from the hospital's 
historical measures, the physician at issue must be terminated from 
participation in the arrangement. The monitor should also assess these 
characteristics in the aggregate across all participating physicians; 
if there are significant changes, the program should be terminated. 
Second, physicians are only eligible for payments that are related to 
their own efforts, combined with the efforts of the other physicians in 
their

[[Page 38558]]

pool, at meeting cost savings measures or achieving patient care 
quality measures; that is, a physician is eligible to receive only a 
per capita share of that portion of an available incentive payment or 
shared savings payment attributable to the efforts of his or her pool. 
Third, all measures should be uniformly applied to all patients 
including Medicare beneficiaries (that is, the measures should not be 
applied disproportionately to Medicare beneficiaries). Procedures or 
treatments subject to the incentive payment or shared savings program 
should not be performed disproportionally on Federal health care 
program beneficiaries. We are also considering and interested in 
comments regarding a requirement that the hospital offering an 
incentive payment or shared savings program audit the calculation of 
cost savings and payments made under the program. To this end, we are 
interested in comments regarding the formality of such an audit; that 
is, should we permit the hospital to complete the audit internally, or 
should we require an independent financial audit of the books and 
records related to the incentive payment or shared savings program.
    We would also require that incentive payment and shared savings 
programs must not involve the counseling or promotion of a business 
arrangement or other activity that violates any Federal or State law. 
In addition, we are proposing that the full range of documentation 
developed and maintained in connection with compliance with the new 
exception be retained and made available to the Secretary upon request.

O. Physician Quality Reporting Initiative (PQRI)

    [If you choose to comment on issues in this section, please include 
the caption ``PQRI'' at the beginning of your comments.]
1. Program Background and Statutory Authority
a. Division B of the Tax Relief and Health Care Act of 2006--Medicare 
Improvements and Extension Act of 2006 (MIEA-TRHCA): Requirements for 
the PQRI Program
    Section 101(b) of the MIEA-TRHCA amended section 1848 of the Act by 
adding subsection (k). Section 1848(k)(1) of the Act requires the 
Secretary to implement a system for the reporting by eligible 
professionals of data on quality measures as described in section 
1848(k)(2) of the Act. Section 101(b) authorizes the Secretary to 
specify the form and manner for data submission by program instruction 
or otherwise which may include submission of such data on Part B 
claims. Section 1848(k)(3)(B) of the Act specifies that for the purpose 
of the quality reporting system, eligible professionals include 
physicians, other practitioners as described in section 1842(b)(18)(C) 
of the Act, physical and occupational therapists, and qualified speech-
language pathologists. Section 101(c) of the MIEA-TRHCA, as amended by 
the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-
173) (MMSEA), authorizes ``Transitional Bonus Incentive Payments for 
Quality Reporting'' in 2007 and 2008, for satisfactory reporting of 
quality data, as defined by section 101(c)(2) of the MIEA-TRHCA. We 
have named this quality reporting system, the ``Physician Quality 
Reporting Initiative (PQRI)'' for ease of reference.
b. PQRI for 2007
    For 2007, the Secretary is authorized to pay an incentive payment 
equal to 1.5 percent of the estimated total allowed charges for all 
covered professional services furnished during the reporting period. 
The reporting period for the PQRI for 2007 is defined by MIEA-TRHCA as 
the period beginning on July 1, 2007, and ending on December 31, 2007. 
For 2007, PQRI data submission was limited to claims-based submission 
based upon specifications and instructions posted on the CMS Web site 
for 74 PQRI measures.
    Preliminary PQRI participation information through November 2007 
indicates that approximately 100,000 professionals, or about 16 
percent, of eligible professionals who could have reported quality data 
on one or more of the 74 2007 PQRI quality measures submitted PQRI 
quality data at least once during the 2007 reporting period. This 
number includes professionals from all 50 States, the District of 
Columbia, Puerto Rico, and the Virgin Islands. In our regions with the 
highest participation, reporting rates are approaching 20 percent, with 
some States achieving reporting rates of around 30 percent. Nationally, 
there were above average rates of participation by eligible 
professionals furnishing services relevant to the following three types 
of care: anesthesia services; eye care; and emergency care. 
Participation rates have trended upwards during the 2007 reporting 
period. Based on expanded measures, new reporting options and other 
factors, we anticipate that trend will continue for 2008. Further 
details of the PQRI for 2007 are provided on the PQRI section of the 
CMS Web site at: http://www.cms.hhs.gov/PQRI/33_2007_General_Info.asp#TopOfPage. Incentive payments and access to confidential 
reports on measures reporting rates and measures performance rates for 
2007 are scheduled to begin in mid-July 2008.
c. PQRI for 2008
    Section 1848(k)(2)(B)(ii) of the Act, as added by the MIEA-TRHCA, 
required the Secretary to publish a proposed set of quality measures 
for 2008 by August 15, 2007 and provide for a period of public comment. 
Section 1848(k)(2)(B)(i) of the Act, as added by the MIEA-TRHCA 
provides that for purposes of reporting data on quality measures for 
covered professional services furnished in 2008, such measures shall be 
measures that have been endorsed or adopted by a consensus 
organization, such as the National Quality Forum (NQF) or the AQA 
Alliance (AQA), that include measures that have been submitted by a 
physician specialty, and that the Secretary identifies as having used a 
consensus-based process for developing such measures. In addition, the 
measures shall include structural measures, such as the use of 
electronic health records (EHRs) and electronic prescribing technology.
    In the CY 2008 PFS proposed rule (72 FR 38196 through 38199), we 
provided a detailed discussion of the MIEA-TRHCA requirements and the 
PQRI. We explained our interpretation of applicable statutory and 
government-wide policies relevant to defining a consensus-based measure 
development process, as well as our policy for determining which 
measures meet requirements for inclusion in PQRI for 2008.
    To meet the MIEA-TRHCA requirement to publish proposed 2008 PQRI 
measures by August 15, 2007, we published 148 proposed 2008 PQRI 
quality measures in the CY 2008 PFS proposed rule (72 FR 38199 through 
38202). We invited comments on the proposed measures and on our plans 
to explore mechanisms for submission of electronic clinical performance 
measurement information and summary measure results information 
extracted from EHRs and clinical data registries.
    In the CY 2008 PFS final rule with comment period (72 FR 66336 
through 66359), we responded to public comments received on the PQRI 
section of the CY 2008 PFS proposed rule (72 FR 38196 through 38204) 
and we finalized 119 measures that we determined under the MIEA-TRHCA 
and other applicable statutory requirements to be appropriate for

[[Page 38559]]

eligible professionals to use to submit such data under the 2008 PQRI. 
In addition, we described our plans to test quality measures data 
submission mechanisms, other than claims, based on clinical data 
registries and EHRs in 2008.
    The 2008 measures specifications are available on the PQRI section 
of the CMS Web site at http://www.cms.hhs.gov/PQRI/15_MeasuresCodes.asp#TopOfPage. These detailed specifications include 
instructions for reporting and identify the circumstances in which each 
measure is applicable.
d. Extension of and Enhancements to the PQRI Program Authorized by the 
MMSEA
    The MMSEA, which was enacted on December 29, 2007, authorizes us to 
make incentive payments for satisfactorily reporting quality measures 
data on covered professional services furnished in 2008 equal to 1.5 
percent of the estimated total allowed charges for all covered 
professional services furnished during the reporting period. For 2008, 
the reporting period is defined to mean the entire calendar year. In 
addition, while MIEA-TRHCA established a cap on incentive payments for 
the 2007 PQRI, based on an average per measure payment amount, there is 
no cap on incentive payments under MMSEA for the 2008 PQRI.
    MMSEA also introduced enhancements that result in more 
opportunities for eligible professionals to participate in the PQRI for 
2008. For 2008 and 2009, section 101(c)(5)(F) of the MIEA-TRHCA, as 
added by the MMSEA, requires the Secretary to establish alternative 
reporting periods and alternative criteria for satisfactorily 
submitting data on quality measures through medical registries and for 
reporting groups of measures. For 2008, these alternative reporting 
periods and reporting criteria were posted on April 16, 2008 in ``2008 
PQRI: Establishment of Alternative Reporting Periods and Reporting 
Criteria'' document found on the PQRI section of the CMS Web site at 
http://www.cms.hhs.gov/PQRI/Downloads/2008PQRIalterrptperiods.pdf. They 
supplement the single reporting period and the reporting criteria 
previously set forth in the CY 2008 PFS final rule with comment period 
(72 FR 66357 through 66359) which were limited to claims-based 
submission of individual 2008 PQRI measures.
    For 2008, each eligible professional who satisfactorily reports 
under any of the options set forth in the ``2008 PQRI: Establishment of 
Alternative Reporting Periods and Reporting Criteria'' document or for 
the reporting period and under the reporting criteria set forth in the 
CY 2008 PFS final rule with comment period will be eligible for a 1.5 
percent incentive payment for services furnished during the applicable 
reporting period. An eligible professional may potentially qualify as 
satisfactorily reporting under more than one of the reporting criteria 
and for more than one reporting period. However, this will result in 
only one incentive payment for 2008, which will be equivalent to 1.5 
percent of allowed charges for PFS covered professional services 
furnished during the longest reporting period for which the eligible 
professional satisfactorily reports.
e. PQRI for 2009
    Section 1848(k)(2)(B)(ii) of the Act, as amended by the MMSEA, 
requires the Secretary to publish a proposed set of quality measures 
that would be appropriate for eligible professionals to use to submit 
data in 2009 in the Federal Register by August 15, 2008. Such measures 
shall be measures that have been endorsed or adopted by a consensus 
organization, such as the NQF or the AQA, that include measures that 
have been submitted by a physician specialty, and that the Secretary 
identifies as having used a consensus-based process for developing such 
measures. In addition, the measures shall include structural measures, 
such as the use of EHRs and electronic prescribing technology.
    The measures proposed for the 2009 PQRI are outlined in section 
II.O.4. of this proposed rule, ``Proposed 2009 PQRI Quality Measures.'' 
Section 1848(k)(2)(B)(iii) of the Act, as amended by the MMSEA, 
requires the Secretary to publish the final set of measures in the 
Federal Register no later than November 15, 2008. The final set of 2009 
PQRI quality measures will be identified in the CY 2009 PFS final rule 
with comment period.
    The MIEA-TRHCA does not statutorily define a specific reporting 
period for 2009. However, as for 2008, the Secretary is required to 
establish alternative reporting periods and alternative reporting 
criteria for reporting measures groups and for registry-based reporting 
for 2009. For the 2009 PQRI, we propose to define the reporting period 
for PQRI to mean the entire 2009 calendar year but also propose 
additional reporting options for satisfactorily reporting quality 
measures data based on alternative reporting criteria and reporting 
periods authorized by MMSEA for measures groups and registry-based 
reporting, which are described in section II.O.2. of this proposed 
rule, ``Satisfactory Reporting Criteria and Reporting Periods--
Reporting Options in the 2009 PQRI.''
    Unlike 2007 and 2008, MIEA-TRHCA does not authorize an incentive 
payment for PQRI for 2009. Currently, no legislation exists that 
authorizes us to make incentive payments for satisfactorily reporting 
data on quality measures for services furnished in 2009 or beyond. 
Given that currently there is no specific authorization for an 
incentive payment for the 2009 PQRI, meeting the satisfactory reporting 
criteria of this proposed rule will not result in an incentive payment 
for satisfactorily reporting data for covered professional services 
furnished in 2009.
2. Satisfactory Reporting Criteria and Reporting Periods--Reporting 
Options in the 2009 PQRI
    For the 2009 PQRI, we propose to define the reporting period to 
mean the entire year (January 1, 2009--December 31, 2009.) We also 
propose to establish two alternative reporting periods: (1) January 1, 
2009 through December 31, 2009; and (2) July 1, 2009 through December 
31, 2009 for reporting measures groups and for registry-based 
reporting. As proposed, this results in several reporting options 
available to eligible professionals that vary by the reporting 
mechanism selected. We believe that the availability of several 
reporting options will increase opportunities for eligible 
professionals to satisfactorily report quality data for the PQRI and 
will augment the amount of information submitted about the quality of 
care provided by eligible professionals to Medicare beneficiaries. The 
reporting mechanisms and reporting options proposed for the 2009 PQRI 
are described in the following section.
a. Claims-Based Submission of Data for Reporting Individual Measures
    Under Section 101(c)(2) of the MIEA-TRHCA the criteria for 
satisfactorily submitting data on quality measures require the 
reporting of at least three applicable measures in at least 80 percent 
of the cases in which the measure is reportable. If fewer than three 
measures are applicable to the services of the professional, only data 
on applicable measures are required to be submitted.
    For the 2009 PQRI, we propose to retain these criteria for claims-
based reporting of individual measures for the January 1, 2009--
December 31, 2009 reporting period. As summarized in Table 7, an 
eligible professional could

[[Page 38560]]

meet the criteria for satisfactorily reporting quality data by 
reporting at least three applicable measures (or one to two measures if 
fewer than three measures apply) for at least 80 percent of the cases 
in which each measure is reportable, during January 1, 2009 through 
December 31, 2009.

     Table 7:--Proposed 2009 PQRI Claims-Based Reporting Options for
                           Individual Measures
------------------------------------------------------------------------
       Reporting mechanism        Reporting criteria   Reporting period
------------------------------------------------------------------------
Claims-based reporting..........  At least 3 PQRI     January 1, 2009-
                                   measures, or 1-2    December 31, 2009
                                   measures if fewer
                                   than 3 apply to
                                   the eligible
                                   professional, for
                                   80% of applicable
                                   Medicare Part B
                                   FFS patients of
                                   each eligible
                                   professional.
------------------------------------------------------------------------

b. Satisfactory Reporting of Data on Quality Measures and Reporting 
Periods for Measures Groups, Through Claims-Based Reporting and 
Registry-Based Reporting
    Section 101(c)(5)(F) of the MIEA-TRHCA, as added by the MMSEA, 
requires that for the 2008 and 2009 PQRI the Secretary establish 
alternative reporting periods and alternative criteria for 
satisfactorily reporting groups of measures. In establishing these 
alternatives, CMS has labeled these groups of measures ``measures 
groups.'' We define ``measures groups'' as a subset of PQRI measures 
that have a particular clinical condition or focus in common. The 
denominator definition and coding of the measures group identifies the 
condition or focus that is shared across the measures within a 
particular measures group.
    We believe that reporting measures groups is an important step to 
advance the PQRI program toward a more holistic and comprehensive 
assessment of patient care. By addressing several aspects of care for a 
particular clinical condition or clinical focus, measures groups 
results can help assure that patients are receiving a range of care 
appropriate for a given clinical condition or clinical focus. Because 
of this, we believe that groups of measures may often provide more 
meaningful information about the care being furnished to Medicare 
beneficiaries than can individual measures in isolation. Measures 
groups also allow physicians and other eligible professionals to more 
broadly demonstrate their clinical performance for particular services 
and thereby provide a better basis for comparison among professionals. 
Measures groups can also decrease complexity of reporting by 
identifying related measures applicable to the same services furnished 
to the same beneficiaries by the same professional and highlighting a 
common set of denominator codes across all the measures of a group that 
help identify those patients.
    As described in the ``2008 PQRI: Establishment of Alternative 
Reporting Periods and Reporting Criteria'' document (http://www.cms.hhs.gov/PQRI/Downloads/2008PQRIalterrptperiods.pdf ), there are 
four measures groups for the 2008 PQRI: (1) Diabetes Mellitus, (2) End-
Stage Renal Disease (ESRD), (3) Chronic Kidney Disease (CKD), and (4) 
Preventive Care. For the 2009 PQRI, we propose to expand the available 
measures groups to a total of nine, as well as propose a variety of 
reporting options for reporting on measures groups. In addition to 
carrying forward three of the four 2008 measures groups, we propose to 
add six new measures groups for the 2009 PQRI. The ESRD Measures Group 
for the 2008 PQRI is not being proposed for 2009 because one of the 
measures in the group is no longer NQF-endorsed and there are no other 
ESRD measures proposed for the 2009 PQRI that could be added to this 
group. We propose to retain the remaining three measures in the 2008 
ESRD measures group to be available to be reported individually in the 
2009 PQRI.
    Similar to the 2008 measures groups, we propose that the measures 
that make up five of these new measures groups could be reported either 
individually or as part of a measures group. These five new measures 
groups address the following:
    (1) Coronary artery bypass graft (CABG) surgery;
    (2) Coronary artery disease (CAD);
    (3) Rheumatoid arthritis;
    (4) Human immunodeficiency virus (HIV)/acquired immune deficiency 
syndrome (AIDS); and
    (5) Perioperative care.
    We also propose one new measures group for the 2009 PQRI in which 
the measures would be reportable only as a measures group, not as 
individual measures. This measures group addresses quality of services 
furnished to treat back pain. The measures proposed for inclusion in 
each of the proposed 2009 measures groups are listed in section II.O.4. 
of this proposed rule, ``Proposed 2009 PQRI Quality Measures.''
    We welcome comments on these proposed new measures groups, 
including suggestions for other measures groups based on individual 
measures included in the proposed 2009 PQRI measure set. For the 2009 
PQRI, measures groups must contain at least 4 measures. All measures in 
each measures group suggested by commenters must be included in the 
proposed measures cited in section II.O.4. of this proposed rule, 
``Proposed 2009 PQRI Quality Measures.'' The individual measures 
included in the final measures groups for the 2009 PQRI will be limited 
to those which are included in the final set of measures for PQRI 2009, 
as identified in the CY 2009 PFS final rule with comment period.
    As in the 2008 PQRI, we are proposing for the 2009 PQRI that 
measures groups be reported through claims-based or registry-based 
submission for the 2009 PQRI. The form and manner of quality data 
submission for 2009 measures groups will be posted on the PQRI section 
of the CMS Web site at http://www.cms.hhs.gov/pqri no later than 
December 31, 2008, and will detail specifications and specific 
instructions for reporting measures groups via claims and registry-
based reporting. Please note that detailed measure specifications and 
instructions for submitting data on those 2009 measures groups that 
were also included as 2008 PQRI measures groups may be updated or 
modified prior to 2009. Therefore, the 2009 PQRI measure specifications 
for any given measures group may be different from specifications and 
submission instructions for the same measures group used for 2008. 
Additionally, the specifications for measures groups will not 
necessarily contain all the specification elements of each individual 
measure making up the measures group. This is based on the need for a 
common set of denominator specifications for all the measures

[[Page 38561]]

making up a measures group in order to define the applicability of the 
measures group. Therefore, the specifications and instructions for 
measures groups will be provided separately from the specifications and 
instructions for the individual 2009 PQRI measures.
    For the 2009 PQRI, we are proposing three options for 
satisfactorily reporting measures groups using claims-based reporting 
and three options for satisfactorily reporting measures groups using 
registry-based submission. The proposed options for satisfactorily 
reporting on measures groups are described in Table 8. The details of 
the requirements for registries are contained in section II.O.2.c., 
``Registry-Based Submission for Reporting Individual Measures.''

   Table 8.--Proposed 2009 PQRI Reporting Options for Measures Groups
------------------------------------------------------------------------
      Reporting mechanism         Reporting criteria    Reporting period
------------------------------------------------------------------------
Claims-based reporting........  One Measures Group for  January 1, 2009-
                                 30 Consecutive          December 31,
                                 Medicare Part B FFS     2009.
                                 Patients.
Claims-based reporting........  One Measures Group for  January 1, 2009-
                                 80% of applicable       December 31,
                                 Medicare Part B FFS     2009.
                                 patients of each
                                 eligible professional
                                 (with a minimum of 30
                                 patients during the
                                 reporting period).
Claims-based reporting........  One Measures Group for  July 1, 2009-
                                 80% of applicable       December 31,
                                 Medicare Part B FFS     2009.
                                 patients of each
                                 eligible professional
                                 (with a minimum of 15
                                 patients during the
                                 reporting period).
Registry-based reporting......  One Measures Group for  January 1, 2009-
                                 30 Consecutive          December 31,
                                 Patients. Patients      2009.
                                 may include, but may
                                 not be exclusively,
                                 non-Medicare patients.
Registry-based reporting......  One Measures Group for  January 1, 2009-
                                 80% of applicable       December 31,
                                 Medicare Part B FFS     2009.
                                 patients of each
                                 eligible professional
                                 (with a minimum of 30
                                 patients during the
                                 reporting period).
Registry-based reporting......  One Measures Group for  July 1, 2009-
                                 80% of applicable       December 31,
                                 Medicare Part B FFS     2009.
                                 patients of each
                                 eligible professional
                                 (with a minimum of 15
                                 patients during the
                                 reporting period).
------------------------------------------------------------------------

    There are two basic criteria for satisfactory reporting of measures 
groups. For claims-based reporting, the two criteria are: (1) The 
reporting of quality data for 30 consecutive Medicare Part B FFS 
patients for one measures group for which the measures group is 
applicable during a full-year reporting period; or (2) the reporting of 
quality data for at least 80 percent of Medicare Part B FFS patients 
for whom the measures group is applicable (with a minimum number of 
patients commensurate with the reporting period duration). For 
registry-based submission, the two criteria are: (1) The reporting of 
quality measures results and numerator and denominator data for 30 
consecutive patients for one measures group for which the measures 
group is applicable during a full-year reporting period; or (2) the 
reporting of quality measures results and numerator and denominator 
data for at least 80 percent of patients for whom the measures group is 
applicable (with a minimum number of patients commensurate with the 
reporting period duration).
    The 30 consecutive patients reporting criteria apply only to the 
entire year (January 1, 2009 through December 31, 2009) reporting 
period, but apply to both claims-based submission and registry-based 
submission mechanisms. While claims are submitted to CMS on Medicare 
patients only (for claims-based reporting), consecutive patients for 
registry-based submission for the January 1, 2009 through December 31, 
2009 reporting period may include some, but may not be exclusively, 
non-Medicare patients. We include this limited option to report quality 
measures results and numerator and denominator data on quality measures 
that includes non-Medicare patients for registry-based submission 
because of the desirability of assessing the overall care provided by a 
professional rather than just that provided to a certain subset of 
patients, and the benefit of having a larger number of patients on 
which to assess quality.
    We propose that the alternative criteria for measures groups based 
on reporting on 80 percent of patients for which one measures group be 
applicable for the January 1, 2009 through December 31, 2009 reporting 
period (with a minimum of 30 patients) and to the July 1, 2009 through 
December 31, 2009 reporting periods (with a minimum of 15 patients) and 
for either claims-based or registry-based reporting of measures groups.
    We have included the reporting option for 30 consecutive patients 
(for claims-based reporting, the consecutive patients must all be 
Medicare FFS patients) as a means to achieve a reasonably valid sample 
of patients for performance rate calculation yet place an upper limit 
on the number of patients on which reporting would be required, 
compared to the 80 percent of patients criteria. However, unlike 2008, 
we do not propose an option for 15 consecutive patients for the 6-month 
reporting period. While we do not have the results of the 2008 
reporting, we are concerned that samples of fewer than 30 consecutive 
patients may be insufficient to calculate comparable performance rates 
across eligible professionals furnishing comparable services. We expect 
additional experience with PQRI reporting to clarify optimal sample 
sizes and reporting criteria for use in future reporting periods. We 
invite comments on our proposed use of the consecutive patient 
reporting criteria and on the use of 30 consecutive patients (for 
claims-based reporting, the consecutive patients must all be Medicare 
FFS patients) as the required sample under these criteria during the 
full-year 2009 reporting period.
c. Registry-Based Submission for Reporting Individual Measures
    Under section 1848(k)(4) of the Act, ``as part of the publication 
of proposed and final quality measures for 2008 under clauses (i) and 
(iii) of paragraph (2)(B), the Secretary shall address a

[[Page 38562]]

mechanism whereby an eligible professional may provide data on quality 
measures through an appropriate medical registry.'' In the CY 2008 PFS 
final rule with comment period, we described using different options to 
test the receipt of data from registries in 2008 (72 FR 66350 through 
66352). The two options being tested in 2008 are data submission 
options 2 and 3 as described in the CY 2008 PFS final rule with comment 
period (72 FR 66352). This testing process is ongoing, but submissions 
for the testing process are expected to conclude by September 1, 2008. 
Information regarding the registry submission testing process is 
available on the CMS Web site at http://www/cms.hhs.gov/PQRI/20_Reporting.asp#TopOfPage.
    As we indicated previously, section 101(c)(5)(F) of the MIEA-TRHCA, 
as added by MMSEA, authorizes us to establish alternative criteria for 
satisfactorily reporting PQRI quality data through medical registries 
for 2008 and 2009. For 2008, we have established the requirements a 
registry must meet to qualify to submit data on quality measures on 
behalf of eligible professionals seeking incentive payments in 2008. 
The data to be submitted includes the reporting and performance rates 
on PQRI measures or PQRI measures groups; and, numerators and 
denominators for the reporting rates and performance rates. The 
requirements that we established for 2008 include a registry self-
nomination process. The document ``2008 PQRI Registry Requirements for 
Submission Under New Options'' describes the requirements for a 
registry to qualify to submit under the registry-based reporting 
alternatives for 2008. This document is available on the PQRI section 
of the CMS Web site at http://www/cms.hhs.gov/PQRI/20_Reporting.asp#TopOfPage. On or before August 31, 2008, we will announce 
the names of self-nominated registries that are determined by CMS to 
meet necessary technical and other requirements to submit quality 
measures results and numerator and denominator data on quality measures 
on behalf of eligible professionals seeking an incentive under the 
alternative reporting periods and criteria applicable to registry-based 
submission for reporting quality measures on services furnished during 
2008.
    For 2009, we propose that eligible professionals would be able to 
report 2009 PQRI quality measures data through a qualified clinical 
registry by authorizing or instructing the registry to submit quality 
measures results and numerator and denominator data on quality measures 
to CMS on their behalf. As for 2008, the data to be submitted for 2009 
includes the reporting and performance rates on PQRI measures or PQRI 
measures groups; and, numerators and denominators for the reporting 
rates and performance rates. To do so, eligible professionals would 
need to enter into and maintain an appropriate legal arrangement with 
an eligible clinical registry. Such arrangements would provide for the 
registry's receipt of patient-specific data from the eligible 
professional and the registry's disclosure of quality measures results 
and numerator and denominator data on behalf of the eligible 
professional to CMS for the PQRI. Thus, the registry would act as a 
HIPAA Business Associate and agent of the eligible professional. Such 
agents are referred to as ``data submission vendors.'' Such ``data 
submission vendors'' would have the requisite legal authority to 
provide clinical registry data on behalf of the eligible professional 
to the Quality Reporting System developed in accordance with the 
statute. The registry, acting as such a data submission vendor, would 
submit registry-derived measures information to the CMS designated 
database within the Quality Reporting System, using a CMS-specified 
record layout. The record layout will be posted on the PQRI section of 
the CMS Web site at http://www.cms.hhs.gov/pqri as soon as practical, 
and no later than April 1, 2009.
    To maintain compliance with applicable statutes and regulations, 
including but not limited to the Health Insurance Portability and 
Accountability Act of 1996 (Pub. L. 104-191) (HIPAA), our program and 
its data system must maintain compliance with HIPAA requirements for 
requesting, processing, storing, and transmitting data. Eligible 
professionals that conduct HIPAA covered transactions also must 
maintain compliance with the HIPAA requirements.
    For the 2009 PQRI, we propose to continue the PQRI reporting 
criteria for satisfactorily reporting through registry-based submission 
of 3 or more individual PQRI quality measures data that are described 
in the ``2008 PQRI: Establishment of Alternative Reporting Periods and 
Reporting Criteria'' document (http://www.cms.hhs.gov/PQRI/Downloads/2008PQRIalterrptperiods.pdf). That is, we propose to accept quality 
measures results and numerator and denominator data on quality measures 
from registries that qualify as data submission vendors. We propose 
these criteria would be available for each of the two alternative 
reporting periods. Thus, the proposed reporting options for registry-
based submission of at least three individual PQRI measures are listed 
in Table 9.

Table 9.--Proposed 2009 PQRI Registry-Based Submission Reporting Options
                         for Individual Measures
------------------------------------------------------------------------
      Reporting mechanism         Reporting criteria    Reporting period
------------------------------------------------------------------------
Registry-based reporting......  At least 3 PQRI         January 1, 2009-
                                 measures for 80% of     December 31,
                                 applicable Medicare     2009.
                                 Part B FFS patients
                                 of each eligible
                                 professional.
Registry-based reporting......  At least 3 PQRI         July 1, 2009-
                                 measures for 80% of     December 31,
                                 applicable Medicare     2009.
                                 Part B FFS patients
                                 of each eligible
                                 professional.
------------------------------------------------------------------------

    As discussed in section II.O.2.b. of this proposed rule, 
``Satisfactory Reporting of Data on Quality Measures and Reporting 
Periods for Measures Groups, Through Claims-Based Reporting and 
Registry-Based Reporting,'' we also propose the three reporting options 
for registry-based submission of quality measures results and numerator 
and denominator data on PQRI measures groups summarized in Table 8.
    To submit on behalf of eligible professionals pursuing incentive 
payment for reporting clinical quality information on services 
furnished during 2008 for reporting both on individual measures and 
measures groups, we required registries to complete a self-nomination 
process and to meet certain technical and other requirements in order 
to be considered ``qualified'' to submit on behalf of eligible 
professionals pursuing the 2008 PQRI incentive payment. These 2008 
requirements are detailed in section (g) of the document titled: ``2008 
Physician

[[Page 38563]]

Quality Reporting Initiative: Establishment of Alternative Reporting 
Periods and Reporting Criteria,'' which is posted at http://www.cms.hhs.gov/PQRI/Downloads/2008PQRIalterrptperiods.pdf, and in a 
further document titled ``Registry Requirements to Qualify as an 
Acceptable Registry for Submission of PQRI Data On Behalf of Eligible 
Professionals Seeking Payment in 2008,'' which is posted at http://www.cms.hhs.gov/PQRI/Downloads/2008PQRIRegistryRequirements.pdf).
    For 2009, we propose to again require a self-nomination process 
based on meeting specific technical and other requirements in order to 
qualify to submit data on 2009 PQRI quality measures or measures groups 
on behalf of eligible professionals for services furnished in 2009. 
This self-nomination will be required regardless of whether or not the 
registry participated in any way in PQRI in 2008. As in 2008, we will 
make every effort to ensure that registries that are ``qualified'' will 
be able to successfully submit quality measures results and numerator 
and denominator data on PQRI quality measures or measures groups on 
behalf of their professionals. By listing a registry as ``qualified,'' 
however, we cannot guarantee or assume responsibility for the 
successful submission of data on PQRI quality measures or measures 
groups. We propose that the 2009 registry technical requirements will 
be substantially the same as for 2008. In general, to be considered 
qualified to submit individual quality measures on behalf of 
professionals wishing to report under the 2009 PQRI, a registry must:
     Have been in existence as of January 1, 2009.
     Be able to collect all needed data elements and calculate 
results for at least three measures in the 2009 PQRI program (according 
to the posted 2009 PQRI Measure Specifications).
     Be able to calculate and submit measure-level reporting 
rates by National Provider Identifier (NPI)/ Taxpayer Identification 
Number (TIN).
     Be able to calculate and submit measure-level performance 
rates by NPI/TIN.
     Be able to separate out and report on Medicare Fee For 
Service (Part B) patients only.
     Provide the Registry name.
     Provide the Reporting period start date (covers dates of 
services from).
     Provide the Reporting period end date (covers dates of 
services through).
     Provide the PQRI Measure Numbers.
     Provide the measure titles.
     Report the number of eligible instances (reporting 
denominator).
     Report the number of instances of quality service 
performed (numerator).
     Report the number of performance exclusions.
     Report the number of reported instances, performance not 
met (eligible professional receives credit for reporting, not for 
performance).
     Be able to transmit this data in a CMS-approved XML 
format.
     Comply with a secure method for data submission.
     Submit a ``validation strategy'' to CMS by May 31, 2009. A 
validation strategy ascertains whether eligible professionals have 
submitted accurately and on at least the minimum number (80 percent) of 
their eligible patients, visits, procedures, or episodes for a given 
measure. Acceptable validation strategies often include such provisions 
as the registry being able to conduct random sampling of their 
participants' data, but may also be based on other credible means 
verifying the accuracy of data content and completeness of reporting or 
adherence to a required sampling method.
     Be able to include in its overall submission whether the 
results for each NPI are validated by the registry.
     Enter into and maintain with its participating 
professionals an appropriate legal arrangement that provides for the 
registry's receipt of patient-specific data from the eligible 
professionals, as well as the registry's disclosure of quality measure 
results and numerator and denominator data on behalf of eligible 
professionals who wish to participate in the PQRI program.
     Obtain and keep on file signed documentation that each NPI 
whose data is submitted to the registry has authorized the registry to 
submit quality measures results and numerator and denominator data to 
CMS for the purpose of PQRI participation. This documentation must meet 
the standards of applicable law, regulations, and contractual business 
associate agreements.
     Provide CMS access (if requested) to review the Medicare 
beneficiary data on which 2009 PQRI registry-based submissions are 
founded.
     Provide the reporting option (reporting period and 
reporting criteria) that the eligible professional has satisfied or 
chosen.
     Registries must provide CMS an ``attestation statement'' 
which states that the quality measure results and numerator and 
denominator data provided to CMS are accurate and complete.
    In addition to the above, registries that wish to submit 2009 
quality measures information on behalf of their participating eligible 
professionals seeking to participate in the 2009 PQRI based on 
satisfying the criteria applicable to reporting of measures groups must 
be able to:
     Indicate whether each eligible professional within the 
registry who wishes to submit PQRI using the measure groups will be 
doing so for the 6- or 12-month period.
     Include only patients who were cared for during the 
twelve-month measurement period (reporting period) of January through 
December 2009 or the 6-month measurement period (reporting period) of 
July 2009 through December 2009.
     Agree that the registry's data may be inspected by CMS 
under our health oversight authority if non-Medicare patients are 
included in the consecutive patient group.
     Be able to report data on all of the measures in a given 
measures group and on either 30 consecutive patients from January 1 
through December 31, 2009 (note this consecutive patient count must 
include some Medicare beneficiaries) or on 80 percent of applicable 
Medicare Part B FFS patients for each eligible professional (with a 
minimum of 30 patients during the January 1, 2009 through December 31, 
2009 reporting period or a minimum of 15 patients during the July 1, 
2009 through December 31, 2009 reporting period).
     If reporting consecutive patients, provide the beginning 
date of service that initiates the count of 30 consecutive patients.
     Be able to report the number of Medicare Fee for Service 
patients and the number of Medicare Advantage patients that are 
included in the consecutive patients reported for a given measures 
group.
    However, for 2009, we may modify certain aspects of the registry 
technical requirements listed above, which are based on the 2008 
registry requirements that are described in the ``Registry Requirements 
to Qualify as an Acceptable Registry for Submission of PQRI Data On 
Behalf of Eligible Professionals Seeking Payment in 2008'' document 
available on the CMS Web site at http://www.cms.hhs.gov/PQRI/Downloads/2008PQRIRegistryRequirements.pdf) based on our experience during the 
2008 registry testing process and any comments received on the 2009 
registry technical requirements proposed above. We will post the final 
2009 registry technical requirements, including the

[[Page 38564]]

exact date by which registries that wish to qualify for 2009 must 
submit a self-nomination letter, on the PQRI section of the CMS Web 
site at http://www.cms.hhs.gov/pqri by November 15, 2008. We anticipate 
that registries that wish to self-nominate for 2009 will be required to 
do so by the end of the first quarter of 2009, but not later than the 
end of the second quarter of 2009.
    We invite comments on the proposed options for registry-based PQRI 
reporting of data on measures and measures groups for services 
furnished in 2009.
d. EHR-Based Submission for Reporting Individual Measures
    In addition to the testing of registry-based submission, we are 
currently preparing for testing the submission of clinical quality data 
extracted from EHRs for five 2008 PQRI measures. We anticipate this 
testing will begin July 1, 2008 and conclude by December 31, 2008. For 
the 2009 PQRI, we propose to accept PQRI data from EHRs for a limited 
subset of the proposed 2009 PQRI quality measures identified in Tables 
11 and 13 (section II.O.4., ``Proposed 2009 PQRI Quality Measures''), 
contingent upon the successful completion of our 2008 EHR data 
submission testing process and a determination that accepting data from 
EHRs on quality measures for the 2009 PQRI is practical and feasible. 
Provided our 2008 EHR data submission testing process is successful, we 
propose to begin accepting submission of clinical quality data 
extracted from EHRs on January 1, 2009 or as soon thereafter as is 
technically feasible. The date on which we would begin to accept 
quality data submission on services furnished in 2009 is contingent 
upon when we can have the necessary information technology 
infrastructure components and capacity in place and ready to accept 
data on a scale sufficient for national implementation of PQRI 
submission through this mechanism. (Because EHR-based data submission 
need not be accomplished concurrently with the dates services are 
furnished or billed, there is some latitude to begin accepting EHR-
extracted data later than January 1, 2009, without precluding accepting 
data for the proposed 2009 PQRI reporting periods.)
    The electronic specifications for the proposed 2009 PQRI measures 
identified in Tables 11 and 13 that are under consideration for EHR-
based submission in 2009 will be posted on a public Web site when 
available. We will broadly announce the availability and exact location 
of these specifications through familiar CMS communications channels 
including the PQRI section of the CMS Web site at http://www.cms.hhs.gov/pqri. The posting of the electronic specifications for 
any particular measure prior to publication of the final rule does not 
signify that the measure will be necessarily selected for the 2009 PQRI 
measure set, nor that EHR-based data submission will be accepted for 
that measure even if it may otherwise be included in the 2009 PQRI. 
However, by posting the specifications, we seek to allow sufficient 
time for EHR vendors to adapt their products to support EHR-based 
capture and submission of data for these measures prior to the start of 
any 2009 PQRI reporting periods.
    EHR vendors that would like to enable their customers to submit 
data on PQRI that is extracted from their customers' EHRs to the CMS-
designated clinical warehouse should update or otherwise assure that 
their EHR products capture and can submit the necessary data elements 
identified for measure specifications and technical specifications for 
EHR-based submission. We will use Certification Commission for 
Healthcare Information Technology (CCHIT) criteria and Secretarially-
recognized Healthcare Information Technology Standards Panel (HITSP) 
interoperability standards where possible and we encourage vendors to 
do so also. These are the specifications that will be available on a 
publicly accessible Web site to be identified by CMS.
    Prior to the beginning of EHR-based quality measures data 
submission for any 2009 PQRI reporting period, we will publish (through 
familiar mechanisms such as CMS e-mail lists and the PQRI section of 
the CMS Web site at http://www.cms.hhs.gov/pqri) information on the 
process eligible professionals will need to use to actually submit to 
the CMS-designated clinical data warehouse the 2009 PQRI quality 
measures data extracted from their practices' EHRs. The process will 
comply with applicable laws, regulations, and policies for privacy, 
data security, and interoperability--including but not limited to HIPAA 
requirements. The data submission process will also require that the 
persons (eligible professionals, other practice staff, or vendors 
acting on the professionals' behalf) who actually exchange data with 
the clinical warehouse system obtain and use an account (user 
identification and password) on a CMS-designated user authentication 
and identity management system. We will not charge 2008 or 2009 PQRI 
participants any processing or licensing fees to obtain or maintain the 
required user account. More details on the required account and how to 
obtain it will be published prior to January 1, 2009.
    We cannot assume responsibility for the successful submission of 
data from eligible professionals' EHRs. Any eligible professional 
wishing to submit PQRI data extracted from an EHR should contact the 
EHR product's vendor to determine if the product has been updated to 
facilitate PQRI quality measures data submission. Such professionals 
should also begin attempting submission promptly after CMS announces in 
early 2009 that the clinical data warehouse is ready to accept 2009 
PQRI quality measures data through the EHR mechanism in order to assure 
the professional has a reasonable period of time to work with his or 
her EHR and/or its vendor to correct any problems that may complicate 
or preclude successful quality measures data submission through that 
EHR.
    To maintain compliance with applicable statutes and regulations, 
including but not limited to HIPAA, our program and its data system 
must comply with applicable requirements for requesting, processing, 
storing, and transmitting data. Eligible professionals that conduct 
HIPAA covered transactions also must maintain compliance with the HIPAA 
requirements.
    We encourage the use of EHRs that have been certified by the CCHIT 
for data submission. CCHIT certified EHRs must meet specific standards 
for functionality, privacy, security and interoperability. More 
information about CCHIT certified EHRs can be found at http://www.cchit.org. However, we do recognize that there will be some 
eligible professionals who are using systems in specialties for which 
there are no appropriate CCHIT certified EHR systems, or who purchased 
and implemented their EHR prior to the availability of CCHIT 
certification. These programs must be capable of generating a 
medication list, generating a problem list and entering laboratory 
results as discrete searchable data elements to be able to be used for 
data submission under this reporting mechanism option.
    We propose to utilize as criteria for satisfactory submission of 
data for quality measures for covered professional services by EHR-
based submission for the 2009 PQRI the same criteria for successful 
reporting and the same reporting period that we propose for claims-
based submission of data for individual 2009 PQRI measures. The 
reporting criteria for EHR-based submission of individual PQRI measures 
are summarized in Table 10.

[[Page 38565]]



Table 10.--Proposed 2009 PQRI EHR-Based Submission Reporting Options for
                           Individual Measures
------------------------------------------------------------------------
      Reporting mechanism         Reporting criteria    Reporting period
------------------------------------------------------------------------
EHR-based reporting...........  At least 3 PQRI         January 1, 2009-
                                 measures, or 1-2        December 31,
                                 measures if less than   2009.
                                 3 apply to the
                                 eligible
                                 professional, for 80%
                                 of applicable
                                 Medicare Part B FFS
                                 patients of each
                                 eligible professional.
------------------------------------------------------------------------

    We do not propose any option to report measures groups through EHR-
based data submission on services furnished during 2009. Because EHR 
submission to CMS of data on quality measures is new to PQRI, for 2009 
we propose to make available only the criteria applicable to reporting 
of individual PQRI measures. We invite comments on the proposed use of 
EHR-based data submission for PQRI.
3. Statutory Requirements for Measures Included in the 2009 PQRI
a. Overview of Requirements for the 2009 PQRI Quality Measures
    Section 1848(k)(2)(B)(ii) of the Act, as added by the MMSEA, 
requires CMS to publish in the Federal Register no later than August 
15, 2008, a proposed set of quality measures that would be appropriate 
for eligible professionals to use to submit data in 2009. In examining 
the statutory requirements of section 1848(k)(2)(B)(i) of the Act, as 
amended by the MMSEA, we believe that the requirement that measures be 
endorsed or adopted by a consensus organization applies to each measure 
that would be included in the measure set for submitting quality data 
and/or quality measures results and numerator and denominator data on 
the quality measures on covered professional services furnished during 
2009. Likewise, the requirement for measures to have been developed 
using a consensus-based process (as identified by the Secretary) 
applies to each measure. By contrast, we do not interpret the provision 
requiring inclusion of measures submitted by a specialty to apply to 
each measure. Rather, we believe this requirement means that in 
endorsing or adopting measures, a consensus organization must include 
in its consideration process at least some measures submitted by one 
physician or organization representing a particular specialty.
    We also believe that under sections 1848(k)(2)(B)(ii) through (iii) 
of the Act, as amended by the MMSEA, the Secretary is given broad 
discretion to determine which quality measures meet the statutory 
requirements and are appropriate for inclusion in the final set of 
measures for 2009. We do not interpret sections 1848(k)(2)(B) of the 
Act to require that all measures that meet the basic requirements of 
section 1848(k)(2)(B)(i) of the Act must be included in the 2009 set of 
quality measures.
    We discuss in the following section the statutory requirements for 
consensus organizations and the use of a consensus-based process for 
developing quality measures as they relate to the requirements for the 
set of measures for 2009 in the context of other applicable Federal law 
and policy. More information on the measure development process in 
general is available on the CMS Web site at http://www.cms.hhs.gov/QualityInitiativesGenInfo. The next section also discusses the policies 
used in proposing the initial set of quality measures for eligible 
professionals for use in 2009 and the policies we are proposing to 
apply in publishing the final set.
b. Consensus Organizations and Consensus-Based Process for Developing 
Measures
    Consistent with the principle that measures used for 2009 be 
endorsed or adopted by a consensus organization and developed through 
the use of a consensus-based process, but without proposing that 2009 
PQRI measures be limited to those meeting the definition of a voluntary 
consensus standard under the National Technology Transfer and 
Advancement Act of 1995 (Pub. L. 104-113) (NTTAA), we interpret 
``consensus-based process for developing measures'' as used in section 
1848(k) of the Act and amended by MMSEA to encompass not only the basic 
development work of the formal measure developer, but also to include 
the achievement of consensus among stakeholders in the health care 
system. Consensus should be achieved based on at least a level of 
openness, balance of interest, and consensus reflected in the 
structures and processes of the NQF and AQA as of the date of enactment 
of MIEA-TRHCA, MMSEA, and the date of this proposed rule. More 
information on the structures and processes of the NQF and AQA can be 
found on the organizations' respective Web sites at http://www.qualityforum.org and http://www.ambulatoryqualityalliance.org.
    Based on the considerations discussed in the CY 2008 PFS proposed 
rule (72 FR 38196 through 38204), we are proposing to apply the 
following policies in identifying measures that meet the requirements 
for having used a consensus-based process for development and the 
requirement for having been endorsed or adopted by a consensus 
organization such as the NQF or AQA, and that are appropriate for 
inclusion as 2009 measures:
    (1) We continue to interpret ``a consensus-based development 
process'' as meaning that in addition to the measure development, the 
measure has achieved adoption or endorsement by a consensus 
organization having at least the basic characteristics of the AQA as a 
consensus organization as of December 2006, when the MIEA-TRHCA 
incorporating reference to AQA was passed and signed into law. Those 
basic characteristics include a comparable level of openness, balance 
of interest, and consensus-based on voting participation. As discussed 
above in this section and further clarified in points (3) and (5), we 
do not interpret ``consensus-based development process'' per section 
1848(k)(2)(B) of the Act to require that the consensus organization or 
process meet all of the criteria of the NTTAA and Office of Management 
and Budget Circular No. A-119 (OMB A-119) definition of a voluntary 
consensus standards body.
    (2) ``Voluntary consensus standard'' is interpreted to mean a 
voluntary consensus standard that has been endorsed as such by a 
consensus organization that meets the requirements of the NTTAA, as 
implemented by OMB A-119, for a voluntary consensus standards body.
    (3) Where there are available quality measures, and some of these 
measures meet the definition of ``voluntary consensus standards'' while 
others do not, those measures that meet the definition of ``voluntary 
consensus standards'' are preferred to other measures not meeting the 
requirements of the NTTAA.
    (4) In view of the preference for voluntary consensus standards, if 
a measure has been specifically

[[Page 38566]]

considered by NQF for possible endorsement, but NQF has declined to 
endorse it as of August 31, 2008, we are proposing not to include it in 
the final set of 2009 PQRI Quality Measures.
    (5) Although the AQA, as organized in December 2006, does not meet 
the requirements of the NTTAA for a voluntary consensus standards body, 
it is a consensus organization per section 1848(k)(2)(B) of the Act. In 
circumstances where no voluntary consensus standard (NQF-endorsed) 
measure is available, a quality measure that has been adopted by the 
AQA (or another consensus organization with comparable consensus-
organization characteristics) would meet the requirements under the Act 
and we propose that it would be appropriate for eligible professionals 
to use the measure to submit quality measures data and/or quality 
measures results and numerator and denominator data on quality 
measures, as appropriate.
    (6) We are unaware of other consensus organizations that are 
comparable to the NQF in terms of meeting the formal requirements of 
the NTTAA or of organizations other than AQA that do not strictly meet 
the requirements of the National Institute of Standards and Technology 
Act (NISTA) as amended by the NTTAA but that feature the breadth of 
stakeholder involvement in the consensus process necessary to meet the 
intent of the Act. However, the Act does not limit consensus 
organizations to the NQF or the AQA, nor restrict the field of 
potential consensus organizations. The Act, thereby, maintains 
flexibility in potential sources of measure consensus review, which is, 
like having multiple sources of measure development, key to maintaining 
a robust marketplace for development and review of quality measures.
    (7) The basic steps for developing measures applicable to 
physicians and other eligible professionals at the individual level may 
be carried out by a variety of different organizations. We do not 
interpret section 1848(k)(2)(B) of the Act to place special 
restrictions on the type or make up of the organizations carrying out 
this basic development of physician measures, such as restricting the 
initial development to physician-controlled organizations. Any such 
restriction would unduly limit the basic development of quality 
measures and the scope and utility of measures that may be considered 
for endorsement as voluntary consensus standards.
    (8) The policies we are proposing are based on the preference as 
articulated in NTTAA and OMB A-119 for ``voluntary consensus 
standards'' to government standards, and a preference for quality 
measures that have achieved broad consensus among stakeholders in the 
health care system. However, the Act does not require that quality 
measures meet the NTTAA or OMB A-119 definition of ``voluntary 
consensus standards'' to be used for PQRI.
4. Proposed 2009 PQRI Quality Measures
    The measures identified for use in PQRI in 2009 will be selected 
from those we propose in this rule and will be finalized as of the date 
the CY 2009 PFS final rule with comment period goes on display at the 
Office of the Federal Register. No changes (that is, additions or 
deletions of measures) will be made after publication of the CY 2009 
PFS final rule with comment period. However, as was the case for 2008, 
we may make modifications or refinements, such as revisions to measures 
titles and code additions, corrections, or revisions to the detailed 
specifications for the 2009 measures until the beginning of the 
reporting period. Such specification modifications may be made through 
the last day preceding the beginning of the reporting period. The 2009 
measures specifications will be available on the PQRI section of the 
CMS Web site at http://www.cms.hhs.gov/pqri when they are sufficiently 
developed or finalized. We are targeting finalization and publication 
of the detailed specifications for all 2009 PQRI measures on the PQRI 
section of the CMS Web site by November 15, 2008, and will in no event 
publish these specifications later than December 31, 2008. The detailed 
specifications will include instructions for reporting and identify the 
circumstances in which each measure is applicable.
    For 2009, we are proposing that final PQRI quality measures will be 
selected from the 175 measures listed in Tables 11 through 14, which 
fall into 4 broad categories as set forth below in this section. The 
four categories are the following:
    (1) 2008 PQRI Measures Proposed for 2009;
    (2) Additional Proposed NQF-endorsed Measures;
    (3) Additional Proposed AQA-adopted Measures; and
    (4) Measures Proposed for 2009 Contingent Upon NQF Endorsement or 
AQA Adoption by August 31, 2008. Given that no legislation currently 
exists that authorizes us to make incentive payments for satisfactorily 
reporting data on quality measures on services furnished in 2009 or 
beyond, we invite comments on the advisability of expanding the number 
of PQRI quality measures beyond the 119 measures in the 2008 PQRI 
quality measure set.
    In addition, we propose to carry forward three of the four measures 
groups we implemented in 2008. The measures proposed in eight of the 
nine total proposed measures groups are proposed to be available for 
reporting as individual measures or within measures groups and the 
measures in the ninth measures group (Back Pain) are proposed to be 
available for use in the 2009 PQRI solely within this proposed measures 
group. The measures proposed for inclusion in each of the proposed 2009 
measures groups are listed in Tables 15 through 23.
a. Considerations for Identifying Proposed 2009 PQRI Quality Measures
    We have applied several considerations in selecting measures to 
propose for the 2009 PQRI. We considered the following with respect to 
selecting the proposed measures for the 2009 PQRI:
    (1) Measures that satisfy statutory criteria for selection. For 
purposes of selecting the proposed 2009 PQRI measures, we considered 
those measures that met the requirements of section 1848(k)(2) of the 
Act and other requirements discussed in section II.O.3.b. of this 
proposed rule, ``Consensus Organizations and Consensus-Based Process 
for Developing Measures.''
    (2) Measures that are functional, which is to say measures that can 
be technically implemented within the capacity of the CMS 
infrastructure for data collection, analysis, and calculation of 
reporting and performance rates. This leads to preference for measures 
that reflect readiness for implementation, such as those that are 
currently in the 2008 PQRI program or have been through testing. The 
purpose of measure testing is to reveal the measure's strengths and 
weaknesses so that the limitations can be addressed and the measure 
refined and strengthened prior to implementation. For new measures, 
preference is given to those which can be most efficiently implemented 
for data collection and submission. For some measures that are useful, 
but where data submission is not feasible through all otherwise 
available PQRI reporting mechanisms, a measure may be included for 
reporting solely through specific reporting mechanism(s) in which its 
submission is feasible.
    (3) Measures that increase the scope of applicability of measures 
to services rendered to Medicare beneficiaries and expand opportunities 
for eligible

[[Page 38567]]

professionals to participate in PQRI (for example, clinical topics such 
as skin care, where there are no 2008 PQRI measures). We seek to 
achieve broad ability to assess the quality of care furnished to 
Medicare beneficiaries, and ultimately to compare performance among 
professionals. We seek to increase the circumstances where eligible 
professionals have at least three measures applicable to their practice 
and measures that help expand the number of measures groups with at 
least 4 measures in a group.
    (4) Measures that support CMS and HHS priorities for improved 
quality and efficiency of care for Medicare beneficiaries. These 
current and long term priority topics include: Prevention; chronic 
conditions; high cost and high volume conditions; elimination of health 
disparities; healthcare-associated infection and other conditions; 
improved care coordination; improved efficiency; improved patient and 
family experience of care; improved end-of-life/palliative care; 
effective management of acute and chronic episodes of care; reduced 
unwarranted geographic variation in quality and efficiency; and 
adoption and use of interoperable Health Information Technology (HIT).
    (5) Measures that are in, or facilitate, alignment with other 
Medicare, Medicaid, and SCHIP programs in furtherance of overarching 
healthcare goals.
    (6) Measures of various aspects of clinical quality including 
outcome measures, where appropriate and feasible, process measures, 
structural measures, efficiency measures and patient experience of 
care.
    In developing the list of proposed 2009 PQRI quality measures, we 
also have reviewed and considered measure suggestions including 
comments received in response to the CY 2008 PFS proposed rule and 
final rule with comment period, and inquiries and suggestions received 
through less formal venues, such as an invitation for measures 
suggestions posted on the CMS Web site in March 2008.
    We welcome comments on the implication of including or excluding 
any given measure or measures proposed herein in the final 2009 PQRI 
quality measure set and to our approach in selecting measures. We 
recognize that some commenters may also wish to recommend additional 
measures for inclusion in the 2009 PQRI measures that we have not 
herein proposed. While we welcome all constructive comments and 
suggestions, and may consider such recommended measures for inclusion 
in future measure sets for PQRI and/or other programs to which such 
measures may be relevant, we will not be able to consider such 
additional measures for inclusion in the 2009 measure set.
    As discussed above, section 1848(k)(2)(B)(ii) of the Act requires 
that the measures proposed for use in the 2009 PQRI be published in the 
Federal Register not later than August 15, 2008. We also are required 
by other applicable statutes to provide opportunity for public comment 
on provisions of policy or regulation that are established via notice 
and comment rulemaking. Measures that were not included in this 
proposed rule for inclusion in the 2009 PQRI that are recommended to 
CMS via comments on this proposed rule have not been placed before the 
public with opportunity for the public to comment on them within the 
rulemaking process. Even when measures have been published in the 
Federal Register , but in other contexts and not specifically proposed 
as PQRI measures, such publication does not provide true opportunity 
for public comment on those measures' potential inclusion in PQRI. 
Thus, such additional measures recommended via comments on this 
proposed rule cannot be included in the 2009 measure set. Section 
1848(k)(2)(B)(iii) of the Act requires that the measures be finalized 
via publication in the Federal Register not later than November 15, 
2008. However, as discussed above, we will consider comments and 
recommendations for measures, which may not be applicable to the final 
set of 2009 PQRI measures, for purposes of identifying measures for 
possible use in future years' PQRI or other initiatives to which those 
measures may be pertinent.
b. Proposed Measures Selected From the 2008 PQRI Quality Measures Set
    We are proposing to include in the 2009 PQRI quality measure set 
the 2008 PQRI measures identified in Table 11 contingent on NQF 
endorsement of each such included measure by August 31, 2008. All 2008 
PQRI measures have been adopted by the AQA and have been considered or 
are currently under consideration for endorsement by the NQF. Those 
2008 PQRI measures that have been specifically considered and declined 
for endorsement are not included in the list of proposed measures for 
2009. The six 2008 PQRI measures not included in the proposed measures 
for 2009 for this reason are: Measure 74, Radiation Therapy 
Recommended for Invasive Breast Cancer Patients who have Undergone 
Breast Conserving Surgery; Measure 75, Prevention of 
Ventilator-Associated Pneumonia--Head Elevation; Measure 80, 
Plan of Care for ESRD Patients with Anemia; Measure 103, 
Review of Treatment Options in Patients with Clinically Localized 
Prostate Cancer; Measure 129, Universal Influenza Vaccine 
Screening and Counseling; and Measure 133 Screening for 
Cognitive Impairment. Also, in some instances, those 2008 PQRI measures 
intended or requested by the measure developer to be retired from PQRI 
and replaced by new AQA-adopted or NQF-endorsed measures are not 
included in the list of proposed measures for 2009. The two 2008 PQRI 
measures not proposed for this reason are: Measure 4, 
Screening for Future Fall Risk; and Measure 88, Hepatitis A 
and B Vaccination in Patients with HCV.

             Table 11.--2008 PQRI Measures Proposed for 2009
------------------------------------------------------------------------
          Measure number and title                  Measure source
------------------------------------------------------------------------
1. Diabetes Mellitus: Hemoglobin A1c Poor    National Committee for
 Control in Diabetes Mellitus*.               Quality Assurance (NCQA).
2. Diabetes Mellitus: Low Density            NCQA.
 Lipoprotein (LDL-C) Control in Diabetes
 Mellitus*.
3. Diabetes Mellitus: High Blood Pressure    NCQA.
 Control in Diabetes Mellitus*.
5. Heart Failure: Angiotensin-Converting     American Medical
 Enzyme (ACE) Inhibitor or Angiotensin        Association-Physician
 Receptor Blocker (ARB) Therapy for Left      Consortium for Performance
 Ventricular Systolic Dysfunction (LVSD)*.    Improvement (AMA-PCPI).
6. Coronary Artery Disease (CAD): Oral       AMA-PCPI.
 Antiplatelet Therapy Prescribed for
 Patients with CAD*.
7. Coronary Artery Disease (CAD): Beta-      AMA-PCPI.
 Blocker Therapy for CAD Patients with
 Prior Myocardial Infarction (MI)*.
8. Heart Failure: Beta-Blocker Therapy for   AMA-PCPI.
 Left Ventricular Systolic Dysfunction
 (LVSD)*.

[[Page 38568]]

 
9. Major Depressive Disorder (MDD):          NCQA.
 Antidepressant Medication During Acute
 Phase for Patients with MDD.
10. Stroke and Stroke Rehabilitation:        AMA-PCPI/NCQA.
 Computed Tomography (CT) or Magnetic
 Resonance Imaging (MRI) Reports.
11. Stroke and Stroke Rehabilitation:        AMA-PCPI/NCQA.
 Carotid Imaging Reports.
12. Primary Open Angle Glaucoma (POAG):      AMA-PCPI/NCQA.
 Optic Nerve Evaluation.
14. Age-Related Macular Degeneration (AMD):  AMA-PCPI/NCQA.
 Dilated Macular Examination.
18. Diabetic Retinopathy: Documentation of   AMA-PCPI/NCQA.
 Presence or Absence of Macular Edema and
 Level of Severity of Retinopathy.
19. Diabetic Retinopathy: Communication      AMA-PCPI/NCQA.
 with the Physician Managing Ongoing
 Diabetes Care.
20. Perioperative Care: Timing of            AMA-PCPI/NCQA.
 Antibiotic Prophylaxis--Ordering Physician.
21. Perioperative Care: Selection of         AMA-PCPI/NCQA.
 Prophylactic Antibiotic--First OR Second
 Generation Cephalosporin.
22. Perioperative Care: Discontinuation of   AMA-PCPI/NCQA.
 Prophylactic Antibiotics (Non-Cardiac
 Procedures).
23. Perioperative Care: Venous               AMA-PCPI/NCQA.
 Thromboembolism (VTE) Prophylaxis (When
 Indicated in ALL Patients).
24. Osteoporosis: Communication With the     AMA-PCPI/NCQA.
 Physician Managing Ongoing Care Post-
 Fracture.
28. Aspirin at Arrival for Acute Myocardial  AMA-PCPI/NCQA.
 Infarction (AMI).
30. Perioperative Care: Timing of            AMA-PCPI/NCQA.
 Prophylactic Antibiotics--Administering
 Physician.
31. Stroke and Stroke Rehabilitation: Deep   AMA-PCPI/NCQA.
 Vein Thrombosis Prophylaxis (DVT) for
 Ischemic Stroke or Intracranial Hemorrhage.
32. Stroke and Stroke Rehabilitation:        AMA-PCPI/NCQA.
 Discharged on Antiplatelet Therapy.
33. Stroke and Stroke Rehabilitation:        AMA-PCPI/NCQA.
 Anticoagulant Therapy Prescribed for
 Atrial Fibrillation at Discharge.
34. Stroke and Stroke Rehabilitation:        AMA-PCPI/NCQA.
 Tissue Plasminogen Activator (t-PA)
 Considered.
35. Stroke and Stroke Rehabilitation:        AMA-PCPI/NCQA.
 Screening for Dysphagia.
36. Stroke and Stroke Rehabilitation:        AMA-PCPI/NCQA.
 Consideration of Rehabilitation Services.
39. Screening or Therapy for Osteoporosis    AMA-PCPI/NCQA.
 for Women Aged 65 Years and Older.
40. Osteoporosis: Management Following       AMA-PCPI/NCQA.
 Fracture.
41. Osteoporosis: Pharmacologic Therapy....  AMA-PCPI/NCQA.
43. Coronary Artery Bypass Graft (CABG):     The Society of Thoracic
 Use of Internal Mammary Artery (IMA) in      Surgeons (STS).
 Isolated CABG Surgery.
44. Coronary Artery Bypass Graft (CABG):     STS.
 Preoperative Beta-Blocker in Patients with
 Isolated CABG Surgery.
45. Perioperative Care: Discontinuation of   AMA-PCPI/NCQA.
 Prophylactic Antibiotics (Cardiac
 Procedures).
46. Medication Reconciliation:               AMA-PCPI/NCQA.
 Reconciliation After Discharge from an
 Inpatient Facility.
47. Advance Care Plan......................  AMA-PCPI/NCQA.
48. Urinary Incontinence: Assessment of      AMA-PCPI/NCQA.
 Presence or Absence of Urinary
 Incontinence in Women Aged 65 Years and
 Older.
49. Urinary Incontinence: Characterization   AMA-PCPI/NCQA.
 of Urinary Incontinence in Women Aged 65
 Years and Older.
50. Urinary Incontinence: Plan of Care for   AMA-PCPI/NCQA.
 Urinary Incontinence in Women Aged 65
 Years and Older.
51. Chronic Obstructive Pulmonary Disease    AMA-PCPI.
 (COPD): Spirometry Evaluation.
52. Chronic Obstructive Pulmonary Disease    AMA-PCPI.
 (COPD): Bronchodilator Therapy.
53. Asthma: Pharmacologic Therapy..........  AMA-PCPI.
54. 12-Lead Electrocardiogram (ECG)          AMA-PCPI/NCQA.
 Performed for Non-Traumatic Chest Pain.
55. 12-Lead Electrocardiogram (ECG)          AMA-PCPI/NCQA.
 Performed for Syncope.
56. Community-Acquired Pneumonia (CAP):      AMA-PCPI/NCQA.
 Vital Signs.
57. Community-Acquired Pneumonia (CAP):      AMA-PCPI/NCQA.
 Assessment of Oxygen Saturation.
58. Community-Acquired Pneumonia (CAP):      AMA-PCPI/NCQA.
 Assessment of Mental Status.
59. Community-Acquired Pneumonia (CAP):      AMA-PCPI/NCQA.
 Empiric Antibiotic.
64. Asthma: Asthma Assessment..............  AMA-PCPI.
65. Treatment for Children with Upper        NCQA.
 Respiratory Infection (URI)--Avoidance of
 Inappropriate Use.
66. Appropriate Testing for Children with    NCQA.
 Pharyngitis.
67. Myelodysplastic Syndrome (MDS) and       AMA-PCPI/American Society
 Acute Leukemias: Baseline Cytogenetic        of Hematology (ASH).
 Testing Performed on Bone Marrow.
68. Myelodysplastic Syndrome (MDS):          AMA-PCPI/ASH.
 Documentation of Iron Stores in Patients
 Receiving Erythropoietin Therapy.
69. Multiple Myeloma: Treatment With         AMA-PCPI/ASH.
 Bisphosphonates.
70. Chronic Lymphocytic Leukemia (CLL):      AMA-PCPI/ASH.
 Baseline Flow Cytometry.
71. Breast Cancer: Hormonal Therapy for      AMAPCPI/American Society of
 Stage IC-III estrogen Receptor/              Clinical Oncology (ASCO)/
 Progesterone Receptor (ER/PR) Positive       National Comprehensive
 Breast Cancer.                               Cancer Network (NCCN).
72. Colon Cancer: Chemotherapy for Stage     AMA-PCPI/ASCO/NCCN.
 III Colon Cancer Patients.
73. Cancer: Plan for Chemotherapy            AMA-PCPI/ASCO.
 Documented.
76. Prevention of Catheter-Related           AMA-PCPI.
 Bloodstream Infections (CRBSI)--Central
 Venous Catheter Insertion Protocol.
77. Gastroesophageal Reflux Disease (GERD):  AMA-PCPI/NCQA.
 Assessment of GERD Symptoms in Patients
 Receiving Chronic Medication for GERD.
78. End-Stage Renal Disease (ESRD):          AMA-PCPI.
 Vascular Access for Patients Undergoing
 Hemodialysis.

[[Page 38569]]

 
79. End-Stage Renal Disease (ESRD):          AMA-PCPI.
 Influenza Vaccination in Patients with
 ESRD.
81. End-Stage Renal Disease (ESRD): Plan of  AMA-PCPI.
 Care for Inadequate Hemodialysis in ESRD
 Patients.
82. End-Stage Renal Disease (ESRD): Plan of  AMA-PCPI.
 Care for Inadequate Peritoneal Dialysis.
83. Hepatitis C: Testing for Chronic         AMA-PCPI.
 Hepatitis C--Confirmation of Hepatitis C
 Viremia.
84. Hepatitis C: Ribonucleic Acid (RNA)      AMA-PCPI.
 Testing Before Initiating Treatment.
85. Hepatitis C: HCV Genotype Testing Prior  AMA-PCPI.
 to Therapy.
86. Hepatitis C: Consideration for           AMA-PCPI.
 Antiviral Therapy in HCV Patients.
87. Hepatitis C: HCV Ribonucleic Acid (RNA)  AMA-PCPI.
 Testing at Week 12 of Treatment.
89. Hepatitis C: Counseling Regarding Risk   AMA-PCPI.
 of Alcohol Consumption.
90. Hepatitis C: Counseling of Patients      AMA-PCPI.
 Regarding Use of Contraception Prior to
 Starting Antiviral Therapy.
91. Acute Otitis Externa (AOE): Topical      AMA-PCPI.
 Therapy.
92. Acute Otitis Externa (AOE): Pain         AMA-PCPI.
 Assessment.
93. Acute Otitis Externa (AOE): Systemic     AMA-PCPI.
 Antimicrobial Therapy--Avoidance of
 Inappropriate Use.
94. Otitis Media with Effusion (OME):        AMA-PCPI.
 Diagnostic Evaluation--Assessment of
 Tympanic Membrane Mobility.
95. Otitis Media with Effusion (OME):        AMA-PCPI.
 Hearing Testing.
96. Otitis Media with Effusion (OME):        AMA-PCPI.
 Antihistamines or Decongestants--Avoidance
 of Inappropriate Use.
97. Otitis Media with Effusion (OME):        AMA-PCPI.
 Systemic Antimicrobials--Avoidance of
 Inappropriate Use.
98. Otitis Media with Effusion (OME):        AMA-PCPI.
 Systemic Corticosteroids--Avoidance of
 Inappropriate Use.
99. Breast Cancer Resection Pathology        AMA-PCPI/College of
 Reporting: pT Category (Primary Tumor) and   American Pathologists
 pN Category (Regional Lymph Nodes) with      (CAP).
 Histologic Grade.
100. Colorectal Cancer Resection Pathology   AMA-PCPI/CAP.
 Reporting: pT Category (Primary Tumor) and
 pN Category (Regional Lymph Nodes) with
 Histologic Grade.
101. Prostate Cancer: Appropriate Initial    AMA-PCPI.
 Evaluation.
102. Prostate Cancer: Avoidance of Overuse   AMA-PCPI.
 of Bone Scan for Staging Low-Risk Prostate
 Cancer Patients.
104. Prostate Cancer: Adjuvant Hormonal      AMA-PCPI.
 Therapy for High-Risk Prostate Cancer
 Patients.
105. Prostate Cancer: Three-Dimensional      AMA-PCPI.
 (3D) Radiotherapy.
106. Major Depressive Disorder (MDD):        AMA-PCPI.
 Diagnostic Evaluation.
107. Major Depressive Disorder (MDD):        AMA-PCPI.
 Suicide Risk Assessment.
108. Rheumatoid Arthritis: Disease           NCQA.
 Modifying Anti-Rheumatic Drug Therapy.
109. Osteoarthritis (OA): Function and Pain  AMA-PCPI.
 Assessment.
110. Preventive Care and Screening:          AMA-PCPI.
 Influenza Immunization for Patients >= 50
 Years Old.
111. Preventive Care and Screening:          NCQA.
 Pneumonia Vaccination for Patients 65
 years and Older.
112. Preventive Care and Screening:          NCQA.
 Screening Mammography*.
113. Preventive Care and Screening:          NCQA.
 Colorectal Cancer Screening*.
114. Preventive Care and Screening: Inquiry  AMA-PCPI.
 Regarding Tobacco Use.
115. Preventive Care and Screening:          NCQA.
 Advising Smokers to Quit.
116. Inappropriate Antibiotic Treatment for  NCQA.
 Adults with Acute Bronchitis--Avoidance of
 Inappropriate Use.
117. Diabetes Mellitus: Dilated Eye Exam in  NCQA.
 Diabetic Patient*.
118. Coronary Artery Disease (CAD):          AMA-PCPI.
 Angiotensin-Converting Enzyme (ACE)
 Inhibitor or Angiotensin Receptor Blocker
 (ARB) Therapy for Patients with CAD and
 Diabetes and/or Left Ventricular Systolic
 Dysfunction (LSVD)*.
119. Diabetes Mellitus: Urine Screening for  NCQA.
 Microalbumin or Medical Attention for
 Nephropathy in Diabetic Patients*.
120. Chronic Kidney Disease (CKD):           AMA-PCPI.
 Angiotensin-Converting Enzyme (ACE)
 Inhibitor or Angiotensin Receptor Blocker
 (ARB) Therapy.
121. Chronic Kidney Disease (CKD):           AMA-PCPI.
 Laboratory Testing (Calcium, Phosphorus,
 Intact Parathyroid Hormone (iPTH) and
 Lipid Profile).
122. Chronic Kidney Disease (CKD): Blood     AMA-PCPI.
 Pressure Management.
123. Chronic Kidney Disease (CKD): Plan of   AMA-PCPI.
 Care: Elevated Hemoglobin for Patients
 Receiving Erythropoiesis--Stimulating
 Agents (ESA).
124. Health Information Technology (HIT):    Quality Insights of
 Adoption/Use of Electronic Medical Records   Pennsylvania (QIP)/CMS.
 (EMR)*.
125. Health Information Technology (HIT):    QIP/CMS.
 Adoption/Use of Medication e-Prescribing*.
126. Diabetes Mellitus: Diabetic Foot and    American Podiatric Medical
 Ankle Care, Peripheral Neuropathy:           Association APMA.
 Neurological Evaluation.
127. Diabetes Mellitus: Diabetic Foot and    APMA.
 Ankle Care, Ulcer Prevention: Evaluation
 of Footwear.
128. Preventive Care and Screening: Body     QIP/CMS.
 Mass Index (BMI) Screening and Follow-Up.
130. Documentation and Verification of       QIP/CMS.
 Current Medications in the Medical Record.
131. Pain Assessment Prior to Initiation of  QIP/CMS.
 Patient Treatment.
132. Patient Co-Development of Treatment     QIP/CMS.
 Plan/Plan of Care.
134. Screening for Clinical Depression.....  QIP/CMS.
------------------------------------------------------------------------
* This measure is one fifteen measures for which data may potentially be
  accepted through the EHR mechanism in 2009.


[[Page 38570]]

    Please note that detailed measure specifications for 2008 PQRI 
measures may be updated or modified during the NQF endorsement process 
or for other reasons prior to 2009. The 2009 PQRI measure 
specifications for any given measure may, therefore, be different from 
specifications for the same measure used for 2008. Specifications for 
all 2009 measures, whether or not included in the 2008 PQRI program, 
must be obtained from the specifications document for 2009 measures, 
which will be available on the PQRI section of the CMS Web site on or 
before December 31, 2008.
c. Additional Proposed NQF-Endorsed Measures
    We propose to include in the 2009 PQRI quality measure set a number 
of measures endorsed by the NQF that were not included in the 2008 PQRI 
quality measures, which are identified in Table 12, provided that the 
measure retains NQF endorsement as of August 31, 2008 and its detailed 
specifications are completed and ready for implementation in PQRI by 
October 15, 2008. Besides having NQF endorsement, the development of a 
measure is considered complete for the purposes of the 2009 PQRI if by 
October 15, 2008--(1) the final, detailed specifications for use in 
data collection for PQRI have been completed and are ready for 
implementation, and (2) all of the Category II Current Procedural 
Terminology (CPT II) codes required for the measure have been 
established and will be effective for CMS claims data submission on or 
before January 1, 2009.
    Measures designated as T in Table 12 
indicate that the measure was included in the 2008 Measure Testing 
Process. For 2008, we implemented a measures testing process for eleven 
measures that had completed consensus adoption or endorsement but which 
were not included in the final measures for use in satisfying reporting 
criteria to earn an incentive under the 2008 PQRI. These 2008 test 
measures have completed measures and specification development, have, 
as of the publication of this proposed rule, been adopted by the AQA 
and/or endorsed by the NQF, and have available CPT II codes that permit 
claims-based data submission. For the 2008 Measure Testing Process, 
eligible professionals may report any of these test measures by 
submitting the quality data codes identified, and as directed, in the 
test measure specifications on Part B claims for dates of services from 
July 1, 2008 through September 30, 2008. No financial incentive is 
associated with the reporting of these test measures for 2008.
    We plan to analyze the number of quality data codes submitted for 
each specific test measure and engage in other summary analysis for the 
measures. No feedback reports regarding reporting and performance rates 
will be provided to eligible professionals who report on these test 
measures in 2008. Information from the analysis of the data submitted 
on the 2008 measure testing process will be utilized in a preliminary 
evaluation of the measures for data submission. This information can be 
used to inform us of a measure's readiness for implementation in future 
CMS programs.

          Table 12.--Additional Proposed NQF-Endorsed Measures
------------------------------------------------------------------------
               Measure title                        Measure source
------------------------------------------------------------------------
T142 Osteoarthritis (OA): Assessment for     AMA-PCPI.
 Use of Anti-Inflammatory or Analgesic Over-
 the-Counter (OTC) Medications.
Use of Imaging Studies in Low Back Pain....  NCQA.
Back Pain: Initial Visit...................  NCQA.
Back Pain: Physical Exam...................  NCQA.
Back Pain: Advice for Normal Activities....  NCQA.
Back Pain: Advice Against Bed Rest.........  NCQA.
Foot Exam..................................  NCQA.
Selection of Antibiotic Administration for   STS.
 Cardiac Surgery Patients.
Prolonged Intubation.......................  STS.
Deep Sternal Wound Infection Rate..........  STS.
Stroke/Cerebrovascular Accident............  STS.
Post-operative Renal Insufficiency.........  STS.
Surgical Re-exploration....................  STS.
Anti-platelet Medications at Discharge.....  STS.
Beta Blockade at Discharge.................  STS.
Anti-lipid Treatment at Discharge..........  STS.
Hemodialysis Vascular Access Decision-       Society for Vascular
 making by Surgeons to Maximize Placement     Surgeons (SVS).
 of Autogenous Arterial Venous Fistula.
------------------------------------------------------------------------

d. Additional Proposed AQA-Adopted Measures
    As discussed in section II.O.3.b. of this proposed rule, Consensus 
Organizations and Consensus-Based Process for Developing Measures, in 
circumstances where no NQF-endorsed measure is available, a quality 
measure that has been adopted by the AQA would also meet the 
requirements of section 1848(k)(2)(B)(i) of the Act. As such, we 
propose to include in the final 2009 PQRI quality measure set measures 
adopted by AQA that have not yet been reviewed or endorsed by the NQF 
and that were not included in the final set of 2008 PQRI quality 
measures.
    We propose to include in the 2009 PQRI quality measures each of the 
AQA-adopted measures identified in Table 13, provided that, as of 
August 31, 2008, the measure retains AQA adoption, has not been 
reviewed and declined for endorsement by NQF, and its detailed 
specifications are completed and ready for implementation in PQRI by 
October 15, 2008. Besides being adopted by the AQA, a measure is 
considered ready for implementation for the purposes of the 2009 PQRI 
if by October 15, 2008--(1) the final, detailed specifications for use 
of the measure in data collection for PQRI have been completed and are 
ready for implementation, and (2) all of the CPT II codes required for 
the measure have been established and will be effective for CMS claims 
data submission on or before January 1, 2009. As explained above in 
section II.O.4.c., ``Additional Proposed NQF-Endorsed Measures,'' 
measures designated as T in Table 13 
indicate that the measure is one of eleven measures included in the 
2008 Measure Testing Process. As also explained above in

[[Page 38571]]

section II.O.4.c., ``Additional Proposed NQF-Endorsed Measures,'' 
measures in the table below that are not designated as 
T are not part of the 2008 PQRI measures 
testing activity. Such measures may have CPT II codes identified or 
specified, but those codes may or may not be recognized as active, 
valid codes in the Medicare claims-processing system.

           Table 13.--Additional Proposed AQA-Adopted Measures
------------------------------------------------------------------------
               Measure title                        Measure source
------------------------------------------------------------------------
T135 Chronic Kidney Disease (CKD):           AMA-PCPI.
 Influenza Immunization*.
T136 Melanoma: Follow-Up Aspects of Care...  AMA-PCPI/NCQA.
T137 Melanoma: Continuity of Care--Recall    AMA-PCPI/NCQA.
 System.
T138 Melanoma: Coordination of Care........  AMA-PCPI/NCQA.
T139 Cataracts: Comprehensive Preoperative   AMA-PCPI/NCQA.
 Assessment for Cataract Surgery with
 Intraocular Lens (IOL) Placement.
T140 Age-Related Macular Degeneration        AMA-PCPI/NCQA.
 (AMD): Counseling on Antioxidant
 Supplement.
T141 Primary Open-Angle Glaucoma (POAG) :    AMA-PCPI/NCQA.
 Reduction of Intraocular Pressure (IOP) by
 15% OR Documentation of a Plan of Care.
T143 Cancer Care: Medical and Radiation--    AMA-PCPI.
 Plan of Care for Pain.
T144 Radiology: Computed Tomography (CT)     AMA-PCPI/NCQA.
 Radiation Dose Reduction.
T145 Radiology: Exposure Time Reported for   AMA-PCPI/NCQA.
 Procedures Using Fluoroscopy.
Cancer Care: Pain Intensity Quantified.....  AMA-PCPI.
Radiology: Inappropriate Use of ``Probably   AMA-PCPI.
 Benign'' Assessment Category in
 Mammography Screening.
Coronary Artery Disease (CAD): Lipid         AMA-PCPI.
 Profile in Patients with CAD.
Chronic Kidney Disease (CKD): Referral for   AMA-PCPI.
 Arteriovenous (AV) Fistula.
Osteoporosis: Counseling for Vitamin D,      AMA-PCPI.
 Calcium Intake, and Exercise.
Falls: Plan of Care........................  AMA-PCPI.
Falls: Risk Assessment.....................  AMA-PCPI.
Cancer Care: Radiation Dose Limits to        AMA-PCPI.
 Normal Tissues.
Hepatitis C: Hepatitis A Vaccination.......  AMA-PCPI.
Hepatitis C: Hepatitis B Vaccination.......  AMA-PCPI.
Cancer Care: Recording of Clinical Stage     STS.
 for Lung Cancer and Esophageal Cancer.
------------------------------------------------------------------------
*This measure is one fifteen measures for which data may potentially be
  accepted through the EHR mechanism in 2009.

e. Additional Proposed Measures Contingent Upon NQF Endorsement or AQA 
Adoption by August 31, 2008
    We are proposing to include in the 2009 PQRI measure set certain 
measures that are not yet NQF-endorsed or AQA-adopted, provided that 
the measure will be so endorsed or adopted as of August 31, 2008, and 
its detailed specifications are completed and ready for implementation 
in PQRI by October 15, 2008.
    The measures we propose to include in the 2009 PQRI quality measure 
set are identified in Table 14. Besides being NQF-endorsed or AQA-
adopted, a measure is considered ready for implementation for the 
purposes of the 2009 PQRI if by October 15, 2008--(1) the final, 
detailed specifications for use of the measure in data collection for 
PQRI have been completed and are ready for implementation, and (2) all 
of the CPT II codes required for the measure have been established and 
will be effective for CMS claims based submission on or before January 
1, 2009.

Table 14.--Measures Proposed for 2009 Contingent Upon NQF Endorsement or
                     AQA Adoption by August 31, 2008
------------------------------------------------------------------------
               Measure title                        Measure source
------------------------------------------------------------------------
Nuclear Medicine: Correlation with Existing  AMA-PCPI.
 Imaging Studies for all Patients
 Undergoing Bone Scintigraphy.
Unhealthy Alcohol Use: Screening & Brief     AMA-PCPI.
 counseling.
Lipid Screening............................  AMA-PCPI.
Pediatric ESRD: Adequacy of Hemodialysis...  AMA-PCPI.
Pediatric ESRD: Influenza Immunization.....  AMA-PCPI.
Rheumatoid Arthritis: Tuberculosis           AMA-PCPI.
 Screening.
Rheumatoid Arthritis: Appropriate Use of     AMA-PCPI.
 Biologic Disease Modifying Anti-Rheumatic
 Drugs (DMARDs).
Rheumatoid Arthritis: Periodic Assessment    AMA-PCPI.
 of Disease Activity.
Rheumatoid Arthritis: Functional Limitation  AMA-PCPI.
 Assessment.
Rheumatoid Arthritis: Assessment and         AMA-PCPI.
 Classification of Disease Prognosis.
Rheumatoid Arthritis: Glucocorticoid         AMA-PCPI
 Management.
Endoscopy & Polyp Surveillance:              AMA-PCPI.
 Surveillance Colonoscopy Interval in
 Patients with History of Adenomatous
 Polyps.
Chronic Wound Care: Use of Compression       AMA-PCPI.
 System in Patients with Venous Ulcers.
Chronic Wound Care: Offloading of Diabetic   AMA-PCPI.
 Foot Ulcers.
HIV/AIDS: CD4+ Cell Count or CD4+            AMA-PCPI/NCQA.
 Percentage.
HIV/AIDS: Pneumocystis Jiroveci Pneumonia    AMA-PCPI/NCQA.
 (PCP) Prophylaxis.
HIV/AIDS: Adolescent and Adult Patients      AMA-PCPI/NCQA.
 with HIV/AIDS who are Prescribed Potent
 Antiretroviral Therapy.
HIV/AIDS: HIV RNA Control After Six Months   AMA-PCPI/NCQA.
 of Potent Antiretroviral Therapy.

[[Page 38572]]

 
Diabetes Mellitus: Diabetic Foot and Ankle   APMA
 Care, Peripheral Arterial Disease--Ankle
 Brachial Index.
Participation by Physician or Other          CMS
 Clinician in a Systematic Clinical
 Database Registry that includes Consensus
 Endorsed Quality Measures.
Elder Maltreatment Screen and Follow-up      QIP/CMS.
 Plan.
Chiropractic Care..........................  QIP/CMS.
Palliative Care: Dyspnea Screening and       NCQA
 Management.
Endarterectomy: Peri-operative Anti-         SVS.
 platelet Therapy for Patients Undergoing
 Carotid Endarterectomy (CEA).
Endarterectomy: Postoperative Stroke or      SVS
 Death in Asymptomatic Patient Undergoing
 Carotid Endarterectomy (CEA).
Endarterectomy: Use of Patch During          SVS
 Conventional Endarterectomy.
------------------------------------------------------------------------

f. Measures Proposed for Inclusion in 2009 Measures Groups
    As discussed previously in this section, we propose to retain three 
of the four 2008 PQRI measures groups for the 2009 PQRI--(1) Diabetes 
Mellitus, (2) CKD, and (3) Preventive Care. We also are not proposing 
to retain all of the measures contained in those groups as 2009 PQRI 
measures. In some cases, we may propose different or additional 
measures for inclusion in a particular measures group for use in 2009, 
compared to 2008. Therefore, the composition of the Diabetes Mellitus, 
CKD, and Preventive Care measures groups may be different for the 2009 
PQRI than for the 2008 PQRI. The measures proposed for inclusion in the 
2009 Diabetes Mellitus, CKD, and Preventive Care measures groups are 
listed in Tables 15 through 17.
    Some measures proposed for inclusion in a 2009 measures group are 
current 2008 PQRI measures. The title of each such measure is preceded 
with its PQRI Measure Number in Tables 15 through 23. The PQRI Measure 
Number is a unique identifier assigned by CMS to all measures in the 
PQRI measure set. Once a PQRI Measure Number is assigned to a measure, 
it will not be used again, even if the measure is subsequently retired 
from the PQRI measure set. Measures that are not preceded by a number 
have never been part of a PQRI measure set. As with measures group 
reporting in the 2008 PQRI, each eligible professional electing to 
report a group of measures for 2009 must report all measures in the 
group that are applicable to each patient or encounter to which the 
measures group applies at least up to the minimum number of patients 
required by applicable reporting criteria (described above in section 
II.O.2.b., Satisfactory Reporting of Data on Quality Measures and 
Reporting Periods for Measures Groups, Through Claims-Based Reporting 
and Registry-Based Reporting'').

 Table 15.--Measures Proposed for 2009 Diabetes Mellitus Measures Group
------------------------------------------------------------------------
               Measure title                        Measure source
------------------------------------------------------------------------
1. Diabetes Mellitus: Hemoglobin A1c Poor    NCQA.
 Control in Diabetes Mellitus.
2. Diabetes Mellitus: Low Density            NCQA.
 Lipoprotein (LDL-C) Control in Diabetes
 Mellitus.
3. Diabetes Mellitus: High Blood Pressure    NCQA.
 Control in Diabetes Mellitus.
117. Diabetes Mellitus: Dilated Eye Exam in  NCQA.
 Diabetic Patient.
119. Diabetes Mellitus: Urine Screening for  NCQA.
 Microalbumin or Medical Attention for
 Nephropathy in Diabetic Patients.
Foot Exam..................................  NCQA.
------------------------------------------------------------------------


        Table 16.--Measures Proposed for 2009 CKD Measures Group
------------------------------------------------------------------------
               Measure title                        Measure source
------------------------------------------------------------------------
120. Chronic Kidney Disease (CKD):           AMA-PCPI.
 Angiotensin-Converting Enzyme (ACE)
 Inhibitor or Angiotensin Receptor Blocker
 (ARB) Therapy.
121. Chronic Kidney Disease (CKD):           AMA-PCPI.
 Laboratory Testing (Calcium, Phosphorus,
 Intact Parathyroid Hormone (iPTH) and
 Lipid Profile).
122. Chronic Kidney Disease (CKD): Blood     AMA-PCPI.
 Pressure Management.
123. Chronic Kidney Disease (CKD): Plan of   AMA-PCPI.
 Care: Elevated Hemoglobin for Patients
 Receiving Erythropoiesis--Stimulating
 Agents (ESA).
------------------------------------------------------------------------


  Table 17.--Measures Proposed for 2009 Preventive Care Measures Group
------------------------------------------------------------------------
               Measure title                        Measure source
------------------------------------------------------------------------
39. Screening or Therapy for Osteoporosis    AMA-PCPI/NCQA.
 for Women Aged 65 Years and Older.
48. Urinary Incontinence: Assessment of      AMA-PCPI/NCQA.
 Presence or Absence of Urinary
 Incontinence in Women Aged 65 Years and
 Older.
110. Preventive Care and Screening:          AMA-PCPI.
 Influenza Immunization for Patients = 50
 Years Old.
111. Preventive Care and Screening:          NCQA.
 Pneumonia Vaccination for Patients 65
 years and Older.

[[Page 38573]]

 
112. Preventive Care and Screening:          NCQA.
 Screening Mammography.
113. Preventive Care and Screening:          NCQA.
 Colorectal Cancer Screening.
114. Preventive Care and Screening: Inquiry  AMA-PCPI.
 Regarding Tobacco Use.
115. Preventive Care and Screening:          NCQA.
 Advising Smokers to Quit.
128. Preventive Care and Screening: Body     QIP/CMS.
 Mass Index (BMI) Screening and Follow-Up.
------------------------------------------------------------------------

    In addition to these three measures groups retained from 2008 with 
applicable modifications, there are six new measures groups proposed 
for the 2009 PQRI: (1) CABG Surgery; (2) CAD; (3) Rheumatoid Arthritis; 
(4) HIV/AIDS; (5) Perioperative Care; and (6) Back Pain. Each of the 
proposed measures groups contains at least four PQRI measures. Except 
for the Back Pain measures group, all measures included in a measures 
group can be reported individually or as part of a group. Measures in 
the Back Pain measures group will be reportable only as a part of this 
measures group.
    Tables 18 through 23 list the measures proposed for inclusion in 
each of these new measures groups. The final composition of measures 
groups for the 2009 PQRI will be contingent upon the final measures for 
the 2009 PQRI and will be finalized in the CY 2009 PFS final rule with 
comment period. We invite comments on the measures proposed for 
inclusion in the measures groups proposed for 2009.

        Table 18.--Measures Proposed for 2009 CABG Measures Group
------------------------------------------------------------------------
               Measure title                        Measure source
------------------------------------------------------------------------
43. Coronary Artery Bypass Graft (CABG):     STS.
 Use of Internal Mammary Artery (IMA) in
 Isolated CABG Surgery.
44. Coronary Artery Bypass Graft (CABG):     STS.
 Preoperative Beta-Blocker in Patients with
 Isolated CABG Surgery.
Selection of Antibiotic Administration for   STS.
 Cardiac Surgery Patients.
Prolonged Intubation.......................  STS.
Deep Sternal Wound Infection Rate..........  STS.
Stroke/Cerebrovascular Accident............  STS.
Post-operative Renal Insufficiency.........  STS.
Surgical Re-exploration....................  STS.
Anti-platelet Medications at Discharge.....  STS.
Beta Blockade at Discharge.................  STS.
Anti-lipid Treatment at Discharge..........  STS.
------------------------------------------------------------------------


        Table 19.--Measures Proposed for 2009 CAD Measures Group
------------------------------------------------------------------------
               Measure title                        Measure source
------------------------------------------------------------------------
6. Coronary Artery Disease (CAD): Oral       AMA-PCPI.
 Antiplatelet Therapy Prescribed for
 Patients with CAD.
7. Coronary Artery Disease (CAD): Beta-      AMA-PCPI.
 Blocker Therapy for CAD Patients with
 Prior Myocardial Infarction (MI).
18. Coronary Artery Disease (CAD):           AMA-PCPI.
 Angiotensin-Converting Enzyme (ACE)
 Inhibitor or Angiotensin Receptor Blocker
 (ARB) Therapy for Patients with CAD and
 Diabetes and/or Left Ventricular Systolic
 Dysfunction (LSVD).
Lipid Screening............................  AMA-PCPI.
------------------------------------------------------------------------


   Table 20.--Measures Proposed for 2009 Rheumatoid Arthritis Measures
                                  Group
------------------------------------------------------------------------
               Measure title                        Measure source
------------------------------------------------------------------------
108. Rheumatoid Arthritis: Disease           AMA-PCPI.
 Modifying Anti-Rheumatic Drug Therapy.
Rheumatoid Arthritis: Tuberculosis           AMA-PCPI.
 Screening.
Rheumatoid Arthritis: Appropriate Use of     AMA-PCPI.
 Biologic Disease Modifying Anti-Rheumatic
 Drugs (DMARDs).
Rheumatoid Arthritis: Periodic Assessment    AMA-PCPI.
 of Disease Activity.
Rheumatoid Arthritis: Functional Limitation  AMA-PCPI.
 Assessment.
Rheumatoid Arthritis: Assessment and         AMA-PCPI.
 Classification of Disease Prognosis.
Rheumatoid Arthritis: Glucocorticoid         AMA-PCPI.
 Management.
------------------------------------------------------------------------


      Table 21.--Measures Proposed for 2009 HIV/AIDS Measures Group
------------------------------------------------------------------------
               Measure title                        Measure source
------------------------------------------------------------------------
HIV/AIDS: CD4+ Cell Count or CD4+            AMA-PCPI/NCQA.
 Percentage.
HIV/AIDS: Pneumocystis Jiroveci Pneumonia    AMA-PCPI/NCQA.
 (PCP) Prophylaxis.

[[Page 38574]]

 
HIV/AIDS: Adolescent and Adult Patients      AMA-PCPI/NCQA.
 with HIV/AIDS who are Prescribed Potent
 Antiretroviral Therapy.
HIV/AIDS: HIV RNA Control After Six Months   AMA-PCPI/NCQA.
 of Potent Antiretroviral Therapy.
------------------------------------------------------------------------


 Table 22.--Measures Proposed for 2009 Perioperative Care Measures Group
------------------------------------------------------------------------
               Measure title                        Measure source
------------------------------------------------------------------------
20. Perioperative Care: Timing of            AMA-PCPI/NCQA.
 Antibiotic Prophylaxis--Ordering Physician.
21. Perioperative Care: Selection of         AMA-PCPI/NCQA.
 Prophylactic Antibiotic--First OR Second
 Generation Cephalosporin.
22. Perioperative Care: Discontinuation of   AMA-PCPI/NCQA.
 Prophylactic Antibiotics (Non-Cardiac
 Procedures).
23. Perioperative Care: Venous               AMA-PCPI/NCQA.
 Thromboembolism (VTE) Prophylaxis (When
 Indicated in ALL Patients).
------------------------------------------------------------------------


     Table 23.--Measures Proposed for 2009 Back Pain Measures Group
------------------------------------------------------------------------
               Measure title                        Measure source
------------------------------------------------------------------------
Use of Imaging Studies in Low Back Pain....  NCQA.
Back Pain: Initial Visit...................  NCQA.
Back Pain: Physical Exam...................  NCQA.
Back Pain: Advice for Normal Activities....  NCQA.
Back Pain: Advice Against Bed Rest.........  NCQA.
------------------------------------------------------------------------

g. Quality Measures Reviewed and Not Proposed for 2009 PQRI
    In developing the list of proposed 2009 PQRI quality measures, we 
have reviewed both formal and informal measure suggestions ranging from 
comments received in response to the CY 2008 PFS proposed rule and 
final rule with comment period to inquiries and suggestions received 
through less formal venues, including but not limited to an invitation 
posted on the CMS Web site in March 2008 for suggestions of measures 
for consideration for potential inclusion in PQRI. For those quality 
measures reviewed but not included in the list of proposed 2009 PQRI 
quality measures, we may consider including such measures in a 2009 
Measure Testing Process similar to the 2008 Measure Testing Process 
described above.
    Measures selected for inclusion in the 2009 Measure Testing Process 
will be limited to measures that have completed development, including 
having achieved consensus endorsement or adoption, and for which CPT II 
codes are available by January 1, 2009. The 2009 Measure Testing 
Process is planned for April 1, 2009 through June 30, 2009. We plan to 
analyze the number of quality data codes submitted for the specific 
test measures and engage in other summary analysis for the measures. No 
calculations will be made at the individual or physician level.
    As discussed previously, no legislation exists that authorizes us 
to make incentive payments for satisfactorily reporting data on quality 
measures on services furnished in 2009. No financial incentive payment 
will be associated with the reporting of these test measures for 2009. 
Information from this analysis of the data submitted on measures 
identified for the 2009 Measure Testing Process will be utilized in a 
preliminary evaluation of the measures. This information can be used to 
inform us of a measure's readiness for implementation in future CMS 
programs.
5. Summary of Program Considerations for the PQRI in 2009 and Beyond
    In summary, we have invited public comment on the following areas 
for the 2009 PQRI through this proposed rule:
     Implications of including or excluding any given measure 
from the set of proposed 2009 quality measures as listed in Tables 11, 
12, 13, and 14. Suggestions to include measures for the 2009 PQRI other 
than those we have proposed for inclusion will not be considered for 
2009. However, any such suggestions may be considered in future years 
for use in PQRI or for other initiatives to which those measures may be 
pertinent.
     The new measures groups proposed for 2009 including 
suggestions for other measures groups based on individual measures 
included in the proposed 2009 PQRI measures set.
     The proposed use of the consecutive patient reporting 
criteria for measures groups.
     The proposed use of 30 consecutive patients as the 
required sample under the consecutive patient reporting criteria during 
the full-year 2009 reporting period.
     The proposed options and planned use of registries for 
registry-based quality measures results and numerator and denominator 
data on quality measures data reporting to PQRI in 2009.
     The advisability of expanding the number of PQRI quality 
measures beyond the 119 measures in the 2008 PQRI quality measures set 
given that there is no specific authorization for an incentive payment 
for the 2009 PQRI and beyond.
6. Uses of PQRI Information
    On August 22, 2006, President Bush issued an Executive Order, 
``Promoting Quality and Efficient Health Care in Federal Government 
Administered or Sponsored Health Care Programs,'' which requires the 
Federal Government, to the extent permitted by law, to--
     Ensure that Federal health care programs promote quality 
and efficient delivery of health care using interoperable health 
information technology, transparency regarding health care quality and 
price, and better incentives for program beneficiaries, enrollees, and 
providers.

[[Page 38575]]

     Make relevant information available to these 
beneficiaries, enrollees, and providers in a readily useable manner and 
in collaboration with similar initiatives in the private sector and 
non-Federal public sector.
    To support this mandate, the Secretary has embraced ``four 
cornerstones'' for building a value-driven health care system:
    (1) Connecting the health system through the use of interoperable 
health information technology;
    (2) Measuring and publishing information about quality;
    (3) Measuring and publishing information about price; and
    (4) Using incentives to promote high-quality and cost-effective 
care (see http://www.hss.gov/valuedriven).
    Building on these four cornerstones, we have articulated a vision 
for health care--the right care, for every person, every time. To 
achieve this vision, we seek to implement policies that will promote 
the delivery of care that is safe, effective, timely, patient-centered, 
efficient, and equitable. In working to achieve this vision, and in 
support of the four cornerstones, we have launched an initiative, of 
which PQRI is a part, directed toward measuring the quality of care for 
services provided to Medicare beneficiaries and to make such 
information publicly available. We currently have Web pages at http://www.medicare.gov for the public reporting of quality data for hospitals 
(Hospital Compare), dialysis facilities (Dialysis Facility Compare), 
nursing homes (Nursing Home Compare) and home health facilities (Home 
Health Compare). On these Web pages, we make performance results on 
standardized quality measures for the various facilities publicly 
available. This information is used by the facilities for their own 
quality improvement purposes, by the public to make informed healthcare 
decisions, and, in some cases, for our payment incentive programs that 
are designed to promote the delivery of high quality services and to 
ensure high value for Medicare beneficiaries. To date, we have not made 
information on the quality of care for services provided by physicians 
to Medicare beneficiaries publicly available. However, we are 
contemplating a similar ``Physician Compare'' Web site that would 
enhance the information found on the Physician Directory (see http://www.medicare.gov/Physician/Home.asp?bhcp=1) to include information 
about the quality of care and value for services provided by 
professionals to Medicare beneficiaries in the future. There are a 
variety of data sources that could provide quality of care, value, and 
other information for services provided by professionals to Medicare 
beneficiaries that could be used to develop a Physician Compare Web 
site.
    With respect to the PQRI, the data on PQRI quality measures is 
submitted at the individual (that is, NPI) level by physicians and 
other eligible professionals. Such data could be the basis for public 
reporting of quality measurement performance results at either the 
individual or group (that is, TIN) level. Our plans with respect to 
public reporting of PQRI data have been a subject of public interest. 
In response to public comments received on the issue of public 
reporting of PQRI data, we stated in the CY 2008 PFS final rule with 
comment period (72 FR 66337) that ``[w]e do not at this time plan to 
make results publicly available in a format or with content that would 
enable identification of individual professionals or specific 
practices' specific reporting or performance results. We have not made 
a determination as to the most appropriate venue(s) for making PQRI 
evaluation information available to the public.''
    Nevertheless, in 2007, we published a notice of a new system of 
records (SOR) under the Privacy Act entitled, ``Performance Measurement 
and Reporting System,'' System No. 09-70-0584 (72 FR 52133 through 
52140) for the public release of PQRI data. Under the SOR we 
established a routine use that would enable us to make individual 
physician-level performance measurement results information available 
to Medicare beneficiaries, by posting it on a public Web site and by 
various other methods of data dissemination, which may include 
performance information that is reported by physicians pursuant to 
PQRI.
    Although not required by the statute authorizing PQRI we have, from 
the beginning, regarded providing physicians and other eligible 
professionals an opportunity to review their data on reporting rates 
and performance rates on PQRI quality measures as an important aspect 
of the program. This derives from the fundamental interest in quality 
improvement that underlies the program. Thus, we included a 
confidential feedback mechanism for physicians as part of the Physician 
Voluntary Reporting Program which preceded PQRI. We extended and 
expanded the confidential feedback mechanism for the 2007 PQRI. These 
feedback reports are scheduled to be available starting in mid-July 
2008 at the time the incentive payments for 2007 PQRI are made. The 
feedback reports will not only assist eligible professionals in quality 
improvement but will also provide us with an important source of input 
for evaluation of PQRI measures, the performance calculation methods, 
and the PQRI program. For the 2008 PQRI data that is currently being 
submitted, we will continue to provide a confidential feedback process. 
For the 2008 PQRI data, consistent with information that we have 
previously provided, we do not intend to publicly report performance 
results at the individual or group level; but we may publicly report 
the names of eligible professionals who report and/or satisfactorily 
report quality data under the 2008 PQRI.
    As part of our broader goal to measure and make the quality of care 
for services provided to Medicare beneficiaries publicly available and 
in support of the four cornerstones, we anticipate making information 
on the quality of care for services provided by professionals to 
Medicare beneficiaries publicly available in the future. In future 
years, we will also explore using information collected from the PQRI, 
including performance results, for this purpose. To assist us in 
determining the most appropriate uses of PQRI data, we invite comments 
on the following issues:
     Ways to effectively engage eligible professionals, 
consumers, and other stakeholders in the development and evaluation of 
a valid and reliable public reporting system related to professional 
services provided to Medicare beneficiaries.
     The venue and format for how PQRI information should be 
made publicly available.
     Types of data that would be most useful and meaningful to 
consumers (for example, reporting results and/or performance results).
     Types of data that would be most useful and meaningful for 
professionals.
     Level at which PQRI information should be publicly 
reported (that is, at the individual professional, or NPI, level or the 
group, or TIN, level).
     Types of PQRI measures and/or measures groups that would 
be most useful and meaningful to consumers.
     Types of PQRI measures and/or measures groups that would 
be most useful and meaningful to professionals.
     Review of the data to be publicly reported by eligible 
professionals.

P. Discussion of Chiropractic Services Demonstration

[If you choose to comment on issues in this section, please include the 
caption ``CHIROPRACTIC SERVICES

[[Page 38576]]

DEMONSTRATION'' at the beginning of your comments.]

    In the CY 2006, CY 2007, and CY 2008 PFS final rules with comment 
period (70 FR 70266, 71 FR 69707, 72 FR 66325, respectively), we 
included a discussion of the 2-year chiropractic services demonstration 
that ended on March 31, 2007. This demonstration was required by 
section 651 of the MMA to evaluate the feasibility and advisability of 
covering chiropractic services under Medicare. These services extended 
beyond the current coverage for manipulation to care for 
neuromusculoskeletal conditions typical among eligible beneficiaries, 
and covered diagnostic and other services that a chiropractor was 
legally authorized to perform by the State or jurisdiction in which the 
treatment was provided. The demonstration was conducted in four sites, 
two rural and two urban. The demonstration was required to be budget 
neutral as the statute requires the Secretary to ensure that the 
aggregate payment made under the Medicare program does not exceed the 
amount which would be paid in the absence of the demonstration.
    Ensuring budget neutrality requires that the Secretary develop a 
strategy for recouping funds should the demonstration result in costs 
higher than those that would occur in the absence of the demonstration. 
As we stated in the CY 2006 and CY 2007 PFS final rules with comment 
period, we would make adjustments to the chiropractor fees under the 
Medicare PFS to recover aggregate payments under the demonstration in 
excess of the amount estimated to yield budget neutrality. We will 
assess budget neutrality by determining the change in costs based on a 
pre- and post-comparison of aggregate payments and the rate of change 
for specific diagnoses that were treated by chiropractors and 
physicians in the demonstration sites and control sites. Because the 
aggregate payments under the expanded chiropractor services may have an 
impact on other Medicare expenditures, we will not limit our analysis 
to reviewing only chiropractor claims.
    Any needed reduction to chiropractor fees under the PFS would be 
made in the CY 2010 and CY 2011 physician fee schedules as it will take 
approximately 2 years after the demonstration ends to complete the 
claims analysis. If we determine that the adjustment for BN is greater 
than 2 percent of spending for the chiropractor fee schedule codes 
(comprised of the 3 currently covered CPT codes 98940, 98941, and 
98942), we would implement the adjustment over a 2-year period. 
However, if the adjustment is less than 2 percent of spending under the 
chiropractor fee schedule codes, we would implement the adjustment over 
a 1-year period. We intend to provide a detailed analysis of budget 
neutrality and the proposed offset during the CY 2010 PFS rulemaking 
process.

Q. Educational Requirements for Nurse Practitioners and Clinical Nurse 
Specialists

[If you choose to comment on issues in this section, please include the 
caption ``EDUCATIONAL REQUIREMENTS FOR NURSE PRACTITIONERS AND CLINICAL 
NURSE SPECIALISTS'' at the beginning of your comments.]

    We are proposing a technical correction to the nurse practitioner 
(NP) qualifications at Sec.  410.75(b) to require that, in order for NP 
services furnished by an individual to be covered by Medicare, a NP who 
obtains Medicare billing privileges as a NP for the first time ever on 
or after January 1, 2003, must be a registered professional nurse who 
is authorized by State law to practice as a NP, must be nationally 
certified as a NP, and must have a master's degree in nursing. The 
current NP qualification standards under these Federal regulations 
include progressive requirements, but not entirely date specific. The 
absence of a date specification for each of the qualification standards 
could allow nurses who have never been enrolled under Medicare and 
obtained Medicare billing privileges as a NP an opportunity to enroll 
as a NP after January 1, 2003 without a master's degree in nursing. 
Such an enrollment would be contrary to our policy, as explained 
further below.
    We discussed the NP qualifications and our intent to move 
progressively toward requiring a master's degree in nursing as the 
standard for all new NPs enrolling and participating under the Medicare 
Part B benefit for NPs in our July 22, 1999 proposed rule (64 FR 39625) 
and the subsequent final rule (64 FR 59411). We stated under this final 
rule that, ``the requirement that a NP applying for a Medicare billing 
number for the first time must have a master's degree in nursing as of 
January 1, 2003, will provide NPs without a master's degree with enough 
time to earn such a degree. We believe it is reasonable to require 
ultimately, a master's degree as the minimum educational level for new 
practitioners independently treating beneficiaries and directly billing 
the Medicare program.''
    We are also proposing to amend the requirement in our regulations 
at Sec.  410.75(b)(4) that NPs must have a master's degree in nursing 
in order to also recognize a Doctor of Nursing Practice (DNP) doctoral 
degree (which can be obtained without a master's degree in nursing). In 
addition, we are proposing to amend a similar qualification standard 
for clinical nurse specialists (CNSs) at Sec.  410.76(b)(2) that 
requires advanced practice nurses (APNs) to have a master's degree in a 
defined clinical area of nursing from an accredited educational 
institution in order to allow CNSs, alternatively, to meet these 
requirements with a DNP doctoral degree.
    We are aware that some educational institutions are offering 
programs to prospective NPs and CNSs that allow students who complete 
these nursing education programs to move from a baccalaureate degree in 
nursing directly to the doctoral degree in nursing where they earn a 
terminal clinical doctoral degree titled the DNP. Therefore, some APNs 
who earn the DNP degree do not receive a master's degree in nursing 
even though they will have met all of the educational requirements for 
a master's degree in nursing, in addition to the preparation that 
merits them the DNP degree. We note that an April 2, 2008 article in 
the Wall Street Journal stated that by the year 2015, the American 
Association of Colleges of Nursing aims to make the doctoral degree the 
standard for all new APNs. We believe that it is logical for Medicare 
Part B to recognize APNs with more extensive education and training. 
Therefore, we propose to permit qualified APNs with the DNP degree to 
enroll and receive Medicare Part B payment as NPs and CNSs.

R. Portable X-Ray Issue

[If you choose to comment on issues in this section, please include the 
caption ``PORTABLE X-RAY ISSUE'' at the beginning of your comments.]

    The Conditions for Coverage (CfC) for Portable X-Ray services are 
authorized by section 1861(s)(3) of the Act and were adopted January 
1969. These requirements have, for the most part, been subjected to 
minimal modification over the years.
    The current requirements in our regulations at Sec.  486.104 
(Qualifications, orientation, and health of technical personnel) are 
inconsistent with existing professional standards of practice and 
training requirements. Specifically, the current qualification 
requirements for x-ray personnel in Sec.  486.104(a)(1), (a)(2), and 
(a)(3) rely on credentialing activities from the Council on Education 
of the American Medical Association (CEAMA) and the American

[[Page 38577]]

Osteopathic Association (AOA) which no longer approve formal training 
programs for x-ray technology and have not done so since 1992.
    Beginning in 1976, the Joint Review Committee on Education in 
Radiologic Technology (JRCERT) worked in collaboration with the 
Committee on Allied Health Education and Accreditation (CAHEA) of the 
American Medical Association (AMA) to accredit programs. However, the 
CAHEA was dissolved by the AMA in 1992 and JRCERT subsequently sought 
approval from the United States Department of Education (USDE) to 
approve and accredit x-ray technology programs. Approval was granted to 
JRCERT by the USDE in 1992. JRCERT is now the only accrediting entity 
that approves these programs; however, JCERT is not a recognized 
accrediting body under the current regulation at Sec.  486.104.
    Before an x-ray technology program can be approved by JRCERT, the 
American Society of Radiologic Technologists (ASRT) must approve the 
program's curriculum. Prior to 1992, the curriculum for x-ray 
technology programs was based on 24 months, which is reflected in the 
current regulations at Sec.  486.104. ASRT no longer bases its 
evaluation on program duration, but rather on program requirements. 
Thus, a program could be less than 24 months in duration and still be 
eligible for JRCERT approval and accreditation if its curriculum was 
ASRT approved. Because Sec.  486.104(a)(1) reflects the outdated 24-
month standard, some x-ray technicians who actually meet community 
standards for education and training do not meet Medicare standards as 
they stand.
    Since the current Medicare requirements in Sec.  486.104(a)(1) are 
outdated, referring organizations that no longer perform the stated 
function and requiring a specific duration of training that is no 
longer the community standard, we are proposing to revise the 
regulation to reflect the current requirements. References to schools 
approved by the CEAMA or the AOA will be deleted, and approval by 
JRCERT will be added. In addition, we propose that the requirement for 
formal training of not less than 24 months in duration be deleted, 
since this criterion is not part of the criteria established by 
entities that evaluate and approve x-ray technology programs since 
1993.
    We propose to retain the 24 month criterion in Sec.  486.104(a)(2) 
and (a)(3) (affecting persons obtaining training prior to July 1, 1966) 
as program duration was one determinant of program quality at that 
time. To address those who completed their training after July 1, 1966 
but before January 1, 1993, the time period during which CEAMA and the 
AOA were approving training programs, we propose the addition of a new 
paragraph Sec.  486.104(a)(4) to this section. This addition will 
reflect the standards for credentialing activities during this time 
frame.

S. Expiring Provisions and Related Discussions

[If you choose to comment on issues in this section, please include the 
caption ``EXPIRING PROVISIONS'' at the beginning of your comments.]
1. Physician Fee Schedule Update
    As discussed in the CY 2008 PFS final rule with comment period, the 
update formula for payment for services under the PFS resulted in a 
reduction of 10.1 percent in the conversion factor (CF) for CY 2008. 
Section 101 of the MMSEA provides for a 0.5 percent increase in the CF 
for the period beginning on January 1, 2008 and ending on June 30, 
2008, resulting in a CF of $38.0870. For the remaining portion of 2008 
(July 1 through December 31, 2008), under current law the CF will 
reflect the -10.1 percent update, and the CF will be $34.0682, as 
published in the CY 2008 PFS final rule with comment period (72 FR 
66222). This represents a 10.6 percent reduction from the payments in 
the first half of 2008. Section 101 of the MMSEA also modifies the 
Physician Quality Reporting System for CY 2008 and 2009.
2. Medicare Incentive Payment for Physician Scarcity Areas
    Section 1833(u) of the Act provides for a 5 percent incentive 
payment to physicians furnishing services in physician scarcity areas 
(PSAs) for physicians' services furnished on or after January 1, 2005, 
and before January 1, 2008. In the CY 2008 PFS final rule with comment 
period (72 FR 66293), we provided notification that these incentive 
payments authorized by section 1833(u) of the Act would no longer be 
made for services furnished on or after January 1, 2008. Section 102 of 
the MMSEA provides for an extension of these bonus payments through 
June 30, 2008. During this 6-month extension period, the MMSEA required 
that we use the primary care scarcity counties and specialty care 
scarcity counties that we were using for purposed of these incentive 
payments on December 31, 2007.
    Because under current law the provisions of section 1833(u) of the 
Act do not apply to services furnished after June 30, 2008, we are 
providing notice that these 5 percent incentive payments will no longer 
be made for services furnished on or after July 1, 2008.
3. Extension of Floor for Work GPCI
    As discussed in the CY 2008 PFS final rule with comment period (72 
FR 66243), section 102 of the MIEA-TRHCA requires application of a 
1.000 floor on the work GPCI in fee schedule areas where the work GPCI 
is less than 1.000. This provision concerning the work GPCI was set to 
expire on December 31, 2007. Section 103 of the MMSEA provides for an 
extension of this 1.000 floor on the work GPCI through June 30, 2008. 
Under current law, the 1.000 floor on the work GPCI will no longer be 
used to calculate payment for services furnished on after July 1, 2008.
4. Extension of Treatment of Certain Physician Pathology Services Under 
Medicare
    The technical component (TC) of physician pathology services refers 
to the preparation of the slide involving tissue or cells that a 
pathologist will interpret. In contrast, the pathologist's 
interpretation of the slide is the professional component (PC) service. 
If the PC service is furnished by the hospital pathologist for a 
hospital patient, it is separately billable. If the independent 
laboratory's pathologist furnishes the PC service, it is usually billed 
with the TC service as a combined service.
    Section 542 of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (Pub. L. 106-554) (BIPA) 
established the billing exception that allowed certain qualified 
independent laboratories to continue to bill the carrier under the PFS 
for the TC of physician pathology services furnished to a hospital 
patient. In order to bill in this manner, an independent laboratory 
must have had an arrangement with a hospital in effect as of July 22, 
1999 under which the laboratory furnished the TC physician pathology 
service to a hospital patient and submitted claims to the carrier for 
payment. Through subsequent legislation (that is, section 732 of the 
MMA and section 104 of the MIEA-TRHCA), this provision had been 
extended through 2007. If the independent laboratory did not qualify 
under this provision, then it must continue to bill the hospital and 
receive payment from that hospital. As a result of this provision, the 
TC of physician pathology services could be reimbursed differently 
depending on the status of the laboratory.
    In the CY 2008 PFS final rule with comment period (72 FR 66355),

[[Page 38578]]

consistent with section 104 of the MIEA-TRHCA, we amended Sec.  
415.130(d) to reflect that for services furnished after December 31, 
2007, an independent laboratory may not bill the carrier for the 
technical component of physician pathology services furnished to a 
hospital inpatient or outpatient. Section 104 of the MMSEA allows 
independent laboratories to continue to bill the carrier for the TC of 
physician pathology services for hospital inpatients or outpatients 
through June 30, 2008. We are amending Sec.  415.130(d) to reflect this 
change.
5. Therapy Cap and Extension of Exceptions Process
    Section 1833(g)(1) of the Act applies an annual per beneficiary 
combined cap beginning January 1, 1999, on outpatient physical therapy 
and speech-language pathology services, and a similar separate cap on 
outpatient occupational therapy services. These caps apply to expenses 
incurred for the respective therapy services under Medicare Part B, 
with the exception of therapy services furnished as outpatient hospital 
services.
    As discussed in the CY 2008 PFS final rule with comment period (72 
FR 66356), an exceptions process for the therapy caps, which was 
authorized by section 5107 of the DRA, was extended through December 
31, 2007 by section 201 of the MIEA-TRHCA. Section 105 of the MMSEA 
provides for a further extension of this exceptions process through the 
first 6 months of CY 2008 (that is, on or before June 30, 2008).
    In accordance with the statute, we will continue to implement 
therapy caps, but the exceptions process will no longer be applicable, 
for services furnished beginning on July 1, 2008. The dollar amount of 
the therapy caps in CY 2009 will be the CY 2008 rate ($1,810) increased 
by the percentage increase in the MEI as required by section 1833(g)(2) 
of the Act.
    6. Bonus Payment for Long Ambulance Transports
    Section 414 of the MMA added section 1834(l)(11) of the Act which 
requires that, ``[i]n the case of ground ambulance services furnished 
on or after July 1, 2004, and before January 1, 2009, regardless of 
where the transportation originates, the fee schedule established under 
this subsection shall provide that, with respect to the payment rate 
for mileage for a trip above 50 miles the per mile rate otherwise 
established shall be increased by \1/4\ of the payment per mile 
otherwise applicable to miles in excess of 50 miles in such trip.'' 
Section 1834(l)(11) of the Act was implemented in Sec.  414.610(c)(7), 
which states that for services furnished during the period July 1, 2004 
through December 31, 2008, each loaded ambulance mile greater than 50 
miles (that is, 51 miles and greater) for ambulance transports 
originating in either urban areas or in rural areas is paid at a rate 
that is 25 percent higher than otherwise would be applicable under 
Sec.  414.610.
    Because the provisions of section 1834(l)(11) of the Act do not 
apply to services furnished on or after January 1, 2009, we are 
providing a reminder that the 25 percent bonus payments provided under 
section 1834(l)(11) of the Act, and under Sec.  414.610(c)(7), will no 
longer be paid for services furnished on or after January 1, 2009.
7. Clinical Laboratory Fee Schedule (CLFS) Update Factor
    Outpatient clinical laboratory services are paid under the clinical 
laboratory fee schedule (CLFS) in accordance with section 1833(h) of 
the Act. Under section 1833 (a)(1)(D) of the Act, payment is the lesser 
of the following: The amount billed; the local fee for a geographic 
area; or a national limit. In accordance with the statute, the national 
limits are set at a percent of the median for all local fee schedule 
amounts for each laboratory test code. While section 1833(h)(2)(A)(i) 
of the Act specifies that the fees are to be updated for inflation 
based on the Consumer Price Index for All Urban Consumers (CPI-U), the 
Congress modified the update to zero percent for CY 2004 through CY 
2008. Beginning January 1, 2009, this freeze expires. As a result, for 
CY 2009, the CLFS will be updated by the percentage increase in the 
CPI-U using the 12-month period ending with June of the previous year.
    At this time, the CPI-U for the 12-month period ending June 30, 
2008 is not available. We do not undertake notice and comment 
rulemaking to announce the CLFS update factor because the statute 
specifies the methods of computation of annual inflation updates, and 
we have no discretion in that matter. Thus, we merely apply the update 
methods specified in the statute. We will announce the CLFS update 
factor via CMS instructions by including a section in our annual CLFS 
Change Request instruction and by including the information on the CMS 
Clinical Laboratory Fee Schedule Web site in approximately November of 
each year so that the industry can remain aware of future CLFS update 
factors.

T. Other Issues

1. Physician Certification (G0180) and Recertification (G0179) for 
Medicare-Covered Home Health Services Under a Home Health Plan of Care 
(POC) in the Home Health Prospective Payment System (HH PPS)
[If you choose to comment on issues in this section, please include the 
caption ``OTHER ISSUES--PHYSICIAN CERTIFICATION/RECERTIFICATION'' at 
the beginning of your comments.]
a. Background
    Under the home health benefit, the statute requires that the 
physician review the plan of care (POC) for the home health eligible 
beneficiary. Sections 1814(a)(2)(C) and 1835(a)(2)(A) of the Act 
require that a plan for furnishing home health services to such 
individuals has been established and that plan is periodically reviewed 
by a physician for Medicare payment to be made. Section 409.43(e) more 
specifically states that a home health POC must be reviewed, signed, 
and dated by the physician who reviews the POC (as specified in Sec.  
409.42(b)) in consultation with agency clinical staff at least every 60 
days (or more frequently as specified in Sec.  409.43(e)(i) through 
(iii)). Additionally, Sec.  424.22(b) states that a recertification is 
required at least every 60 days, preferably at the time the plan is 
reviewed, and must be signed by the physician who reviews the home 
health POC. These schedules, for the review of the POC and the 
recertification, coordinate well with the 60-day episode payment unit 
under the home health prospective payment system (HH PPS). In 
implementing the statutory requirement as well as these regulations, we 
believed that these requirements would encourage enhanced physician 
involvement in the home health POC and patient management, and would 
include more direct ``in-person'' patient encounters (as logistically 
feasible).
    Currently, physicians are paid for both the certification and 
recertification of the home health POC under HCPCS codes G0180 and 
G0179, respectively. The basis for the payment amounts of these 
physicians' services is the relative resources in RVUs required to 
furnish these services. We believe physician involvement is key to 
maintaining quality of care under the HH PPS and payment for the 
required physician certification and recertification of home health 
POCs reflects this.
    In the HH PPS proposed rule published in the October 28, 1999 
Federal Register (64 FR 58196), we had also proposed to require the 
physician

[[Page 38579]]

to certify the appropriate case-mix weight/home health resource group 
(HHRG) as part of the required physician certification of the plan of 
care. This reflected our belief that the physician should be more 
involved in the decentralized delivery of home health services. 
However, in the final rule published in the July 3, 2000 Federal 
Register (65 FR 41163), we did not finalize that proposal and decided 
to focus our attention on physician certification and education in 
order to better involve the physician in the delivery of home health 
services.
b. Solicitation of Comments
    It has come to our attention that there exists a vast array of 
differing levels of physician involvement in the certification and 
recertification of home health POCs. Although some physicians do have 
direct contact with their patients in the delivery of these services, 
we believe a significant number of physicians provide only a brief, 
albeit thorough, review of the home health POC, without any direct 
contact with the patient. Still, other physicians are involved to an 
even lesser degree in their review of the home health POC and/or direct 
contact with the patient in the delivery of these services. We continue 
to believe that the active involvement of the physician including ``in-
person'' contact with the patient in the certification, 
recertification, and review of the home health POC is essential for 
delivery of high quality home health services to Medicare 
beneficiaries.
    To that end, we are exploring a couple of different options. First, 
we are considering a review of the RVUs associated with the 
certification (G0180) and recertification (G0179) of the home health 
POC. As a result of that review, the payment amounts to physicians 
could be reduced based on a more accurate determination of the actual 
RVUs required to provide these services. Because we continue to believe 
that the active involvement of the physician is important in delivering 
these home health services, reducing the payment for these services may 
not encourage physicians to spend additional time reviewing and 
modifying beneficiaries' home health plans of care to assure that the 
plan addresses all of the beneficiaries' needs. We are also considering 
proposing new requirements to ensure more active physician involvement 
in the certification and recertification of the home health patient's 
POC, for example, a requirement for ``direct'' patient contact with the 
physician. We are specifically soliciting comments on these policy 
options in an effort to gather more information on this issue, and any 
other possible underlying issues that may exist.
2. Prohibition Concerning Providers of Sleep Tests
    [If you choose to comment on issues in this section, please include 
the caption ``OTHER ISSUES-SLEEP TESTS'' at the beginning of your 
comments.]
a. Background
    Obstructive Sleep Apnea Hypopnea Syndrome, also known as 
Obstructive Sleep Apnea (OSA), is the most common of the three 
different forms of sleep apnea (obstructive, central, or mixed). OSA is 
associated with significant morbidity and mortality, including 
excessive daytime sleepiness, concentration difficulty, cardiovascular 
disease, and stroke. Untreated OSA is associated with a ten-fold 
increase in the risk of motor vehicle accidents.
    Diagnostic tests for OSA are based on detection of abnormal sleep 
patterns using sleep test devices that record a variety of 
cardiorespiratory and neurophysiologic signals during sleep time called 
polysomnography (PSG). Historically, such sleep tests have been 
furnished in a sleep laboratory attended by a sleep technologist. More 
recently, portable sleep test devices have been developed for the 
diagnosis of OSA in the home (either attended or unattended). Sleep 
test devices are classified into four types based primarily on the 
extent of sleep pattern data recorded. The most comprehensive is 
designated Type I: attended in-facility PSG. The remaining three types 
concern portable sleep test devices developed for the diagnosis of OSA 
and used both in attended and unattended settings, often in the home. 
Type II devices have a minimum of 7 monitored channels; for example, 
electroencephalogram (EEG), electro-oculogram (EOG), electromyogram 
(EMG), electrocardiogram (EKG)-heart rate, airflow, respiratory effort, 
and oxygen saturation. Type III devices have a minimum of 4 monitored 
channels including ventilation or airflow, at least two channels of 
respiratory movement or respiratory movement and airflow, heart rate or 
EKG, and oxygen saturation. Type IV devices do not meet the technical 
criteria defining the other types, and many measure only one or two 
parameters, for example, oxygen saturation or airflow, but some Type IV 
devices measure three or more parameters. There are other technologies 
that do not readily fall into the classification above.
    Sleep testing, like other diagnostic tests, is subject to the 
provisions in Sec.  410.32. Thus, it must be ordered by the physician 
who is treating the beneficiary for a specific medical problem and who 
uses the results in the management of the beneficiary's specific 
medical problem. Sleep testing must be furnished under the required 
level of supervision by a physician. If the sleep testing is furnished 
by an independent diagnostic testing facility (IDTF) the provisions of 
Sec.  410.33 also apply.
    A number of treatment approaches have been recommended for persons 
diagnosed with OSA, depending on severity of the disorder and other 
clinical factors. Patients with moderate to severe OSA are usually 
treated at first with continuous positive air pressure (CPAP) devices. 
The regular use of a CPAP device in these cases has been shown to 
improve excessive sleepiness, cognitive performance, and quality of 
life.
    A CPAP device is an item of durable medical equipment (DME) used in 
the home that typically uses air pressure to maintain an open airway 
and improve airflow to the lungs.
    Medicare currently provides national coverage of CPAP only for 
beneficiaries whose diagnosis of OSA meets the criteria described in 
the national coverage determination at 240.4 of the National Coverage 
Determinations (NCD) Manual. We recently published a revised NCD that 
expands coverage of CPAP devices to beneficiaries when OSA has been 
diagnosed by specified home sleep testing. Prior Medicare policy had 
covered CPAP devices only for beneficiaries whose OSA had been 
diagnosed by facility-based attended PSG. During the process leading to 
the revised policy, we received many public comments expressing concern 
that financial incentives would lead to abusive practices that would 
harm Medicare beneficiaries and threaten the integrity of the Medicare 
program. These concerns were expressed not only with respect to home 
sleep tests, but also those performed in sleep laboratories and other 
facilities. Therefore, we are proposing to implement a provision that 
would limit potential abusive practices by removing a significant 
financial incentive for those practices.
b. Regulatory proposal
    Based on public comment and prior agency experience, we believe 
that the interests of beneficiaries and the Medicare program can be 
harmed if the provider of a diagnostic test has a vested interest in 
the outcome of the test itself. In the specific context of this 
proposed

[[Page 38580]]

rule, we believe that the individual or entity that directly or 
indirectly administers the sleep test and/or provides the sleep test 
device used to administer the sleep test (referred to hereinafter as 
the `provider of the sleep test') has a self-interest in the result of 
that test if that provider, or its affiliate, is also the supplier of 
the CPAP device.''
    This provides incentive to test more frequently or less frequently 
than is medically necessary and to interpret a test result with a bias 
that favors self-interest.
    Current medical evidence persuasively demonstrates that treatment 
with a CPAP device is safe for patients who have OSA. Similar evidence 
is lacking for treatment with a CPAP device of persons who do not in 
fact have obstructive sleep apnea. A test interpreted with bias or 
reported falsely may mislead the beneficiary's treating physician and 
divert the beneficiary from medically appropriate treatment. Moreover, 
supplying a medically unnecessary CPAP device is a waste of Medicare 
trust funds.
    Based on section 1871(a)(1) of the Act, which provides the 
Secretary with the authority to ``prescribe such regulations as may be 
necessary to carry out the administration of the insurance programs 
under this title,'' and due to our concerns with respect to the 
potential for unnecessary utilization of sleep tests, we are proposing 
to prohibit payment to the supplier of the CPAP device when such 
supplier, or its affiliate, is directly or indirectly the provider of 
the sleep test that is used to diagnose a Medicare beneficiary with 
OSA.
    As alternatives we had considered requiring pre-authorization for 
sleep tests or modifying payments for the services when they are 
furnished by the same entity but believe these options would either 
generate undue burden on both the Medicare beneficiary and the claims 
processing systems or be administratively burdensome.
    Therefore, we are proposing to revise the durable medical 
equipment, prosthetics, orthotics, and supplies (DMEPOS) supplier 
enrollment safeguards set forth at Sec.  424.57 to protect the Medicare 
program and its beneficiaries from fraudulent or abusive practices that 
may be related to CPAP devices. We are proposing to add new definitions 
to paragraph (a) to define ``sleep test'' and ``CPAP device'' and to 
add a new paragraph (f), which would establish a specific payment 
prohibition that would not allow the supplier to receive Medicare 
payment for a CPAP device if that supplier, or its affiliate, is 
directly or indirectly the provider of the sleep test used to diagnose 
a beneficiary with OSA.
3. Beneficiary Signature for Nonemergency Ambulance Transport Services
    [If you choose to comment on issues in this section, please include 
the caption ``OTHER ISSUES-BENEFICIARY SIGNATURE'' at the beginning of 
your comments.]
    In the CY 2008 PFS final rule with comment period, we created an 
additional exception to the beneficiary signature requirements, in 
Sec.  424.36(b)(6), for emergency ambulance transports (72 FR 66406). 
The exception allows ambulance providers and suppliers to sign on 
behalf of the beneficiary, at the time of transport, provided that 
certain documentation requirements are met. To take advantage of the 
new exception, an ambulance provider or supplier must maintain in its 
files: (1) A contemporaneous statement, signed by an ambulance employee 
who is present during the trip, that the beneficiary was mentally or 
physically incapable of signing (and that no other authorized person 
was available or willing to sign); (2) documentation as to the date, 
time and place of transport; and (3) either a signed contemporaneous 
statement from the receiving facility that documents the name of the 
beneficiary and the date and time the beneficiary was received by that 
facility, or a secondary form of verification from the facility that is 
received at a later date.
    In the CY 2008 PFS final rule with comment period, we clarified 
that, apart from the new exception in Sec.  424.36(b)(6), where a 
beneficiary is unable to sign a claim at the time the service is 
rendered, ambulance providers and suppliers are required to use 
reasonable efforts to follow-up with the beneficiary and obtain his or 
her signature before submitting the claim with a signature from one of 
the individuals or entities specified in Sec.  424.36(b)(1) through 
(b)(5) (72 FR 66324). We further clarified that only providers of 
services, and not ambulance suppliers, can take advantage of Sec.  
424.36(b)(5), which states that a representative of the provider or of 
the nonparticipating hospital may sign on behalf of the beneficiary if 
the provider or nonparticipating hospital was unable to have a claim 
signed in accordance with Sec.  424.36(b)(1) through (b)(4) (72 FR 
66322).
    Subsequent to publication of the CY 2008 PFS final rule with 
comment period, ambulance provider and supplier stakeholders requested 
that we extend the exception in Sec.  424.36(b)(6) to nonemergency 
ambulance transports in instances where the beneficiary is physically 
or mentally incapable of signing. These stakeholders stated that there 
are many nonemergency transports for which a beneficiary is physically 
or mentally incapable of signing a claim form. For example, 
stakeholders asserted that beneficiaries residing in long term care 
facilities often need to be transported for nonemergency medical 
treatment, yet may be incapable of signing the claim due to physical or 
mental ailments, such as Alzheimer's disease or other forms of 
dementia. In these instances, there may be no other individual who is 
immediately available and authorized to sign the claim as specified in 
Sec.  424.36(b).
    Because we anticipate that there would be little or no increased 
risk of fraud or program abuse in extending the exception in Sec.  
424.36(b)(6) to include nonemergency transports, we are proposing to do 
so through a revision of the language in Sec.  424.36(b)(6) to refer 
specifically to nonemergency transports. We are also proposing to add 
language to Sec.  424.36(a) to clarify that, apart from the use of the 
exception in Sec.  424.36(b)(6), providers and suppliers must make 
reasonable efforts to obtain the beneficiary's signature before relying 
on one of the exceptions in Sec.  424.36(b). We note that Sec.  
424.36(b)(5) specifies that a provider may not invoke the exception to 
sign a claim on behalf of a beneficiary unless it is unable to have one 
of the persons specified in Sec.  424.36(b)(1) through (b)(4) sign the 
claim. Finally, given that most claims are submitted electronically, we 
are proposing to amend Sec.  424.36(a) to define ``claim'' for purposes 
of the beneficiary signature requirements as the claim form itself or a 
form that contains adequate notice to the beneficiary or other 
authorized individual that the purpose of the signature is to authorize 
a provider or supplier to submit a claim to Medicare for specified 
services furnished to the beneficiary.
4. Solicitation of Comments and Data Pertaining to Physician Organ 
Retrieval Services
    [If you choose to comment on issues in this section, please include 
the caption ``OTHER ISSUES--ORGAN RETRIEVAL'' at the beginning of your 
comments.]
    Since 1987, we have limited the amount an OPO may reimburse a 
physician for cadaveric kidney donor retrieval services. Chapter 27 of 
the Provider Reimbursement Manual (CMS-Pub. 15-1) limits the payment to 
a physician for cadaveric kidney retrieval

[[Page 38581]]

to $1,250 per donor (one or two kidneys). Although the payments made to 
physicians for organ retrieval services associated with other types of 
organ transplants have increased, kidney retrieval rates have remained 
at $1,250. We have received several requests to change the amount we 
pay for kidney retrievals. To date, we do not have data upon which to 
base a change in payment.
    In order to determine fair and reasonable payment for cadaveric 
organ retrieval services, we are soliciting public comments and data 
that are reflective of organ retrieval service costs. We are not 
limiting our solicitation to costs associated with kidney retrieval 
services, but are interested in receiving comments and data pertaining 
to retrieval services for all types of organs. We may use this 
information to determine the extent to which a recalculation of the 
payment for cadaveric organ retrieval services performed by a physician 
is warranted and to inform any future rulemaking on this subject. Any 
future rulemaking would provide for notice and public comment.
5. Revision to the ``Appeals of CMS or CMS Contractor Determinations 
When a Provider or Supplier Fails to Meet the Requirements for Medicare 
Billing Privileges'' Final Rule
    [If you choose to comment on issues in this section, please include 
the caption ``OTHER ISSUES--REVISIONS TO APPEALS FINAL RULE'' at the 
beginning of your comments.]
    In the June 27, 2008 Federal Register, we published the ``Appeals 
of CMS or CMS Contractor Determinations When a Provider or Supplier 
Fails to Meet the Requirements for Medicare Billing Privileges'' final 
rule. In Sec.  405.874(b)(2), we stated, ``The revocation of a 
provider's or supplier's billing privileges is effective 30 days after 
CMS or the CMS contractor mails notice of its determination to the 
provider or supplier. A revocation based on Federal exclusion or 
debarment is effective with the date of the exclusion or debarment.''
    During the 30 days after CMS or our contractor mails a revocation 
notice to a provider or supplier, the provider or supplier is afforded 
the opportunity to submit a corrective action plan. A corrective action 
plan gives a provider or supplier an opportunity to provide evidence 
that demonstrates that the provider or supplier is in compliance with 
Medicare requirements. Moreover, a provider or supplier can use a 
corrective action plan to correct the deficiency without filing an 
appeal under 42 CFR part 498, and remain in the Medicare program when 
the provider demonstrates that the provider or supplier is in 
compliance with Medicare requirements and the Medicare contractor 
accepts the corrective action plan. In those situations where a 
provider or supplier submits an acceptable corrective action plan, the 
provider or supplier maintains their billing privileges and the 
revocation determination is not implemented.
    We maintain that providers or suppliers are able to provide 
sufficient evidence through a corrective action plan that demonstrates 
that they are in compliance with Medicare requirements when CMS or our 
contractor imposes a revocation based on certain types of adverse 
actions such as a Federal exclusion or debarment. Accordingly, 
consistent with revoking billing privileges with the date of exclusion 
or debarment, we believe that similarly situated revocations such as 
felony convictions and license suspension or revocation do not lend 
themselves to a corrective action plan and that the revocation should 
be effective with the date of the felony conviction or the license 
suspension or revocation. Moreover, we maintain that when CMS or our 
contractor determines that a provider or supplier, including a DMEPOS 
supplier, is no longer operating at the practice location provided to 
Medicare on a paper or electronic Medicare enrollment application that 
the revocation should be effective with the date that CMS or our 
contractor determines that the provider or supplier is no longer 
operating at the practice location.
    Further, while we do not believe that revocations based on felony 
convictions, license suspension or revocation, or a revocation based on 
a provider or a supplier no longer being operational at a specific 
practice location, lend themselves to a corrective action plan, we 
believe that these providers and suppliers should be afforded appeal 
rights in 42 CFR part 498. We believe that the appeals process will 
permit a provider or supplier who believes that CMS or our contractor 
has made an incorrect decision regarding revocation based on Federal 
exclusion or debarment, felony conviction, license suspension or 
revocation, or when we have determined that the provider or supplier is 
no longer operating at the practice location, the opportunity to have 
CMS or our contractor reconsider its initial revocation determination.
    Accordingly, we are proposing to revise Sec.  405.874(b)(2) from 
``The revocation of provider's or supplier's billing privileges is 
effective 30 days after CMS or the CMS contractor mails notice of its 
determination to the provider or supplier. A revocation based on 
Federal exclusion or debarment is effective with the date of the 
exclusion or debarment.'' to ``The revocation of a provider's or 
supplier's billing privileges is effective 30 days after CMS or the CMS 
contractor mails notice of its determination to the provider or 
supplier, except if the revocation is based on Federal exclusion or 
debarment, felony conviction, license suspension or revocation, or the 
practice location is determined by CMS or its contractor not to be 
operational. When a revocation is based on an exclusion or debarment, 
Federal exclusion or debarment, felony conviction, license suspension 
or revocation, or the practice location is determined by CMS or its 
contractor not to be operational, the revocation is effective with the 
date of exclusion or debarment, felony conviction, license suspension 
or revocation or the date that CMS or its contractor determined that 
the provider or supplier was no longer operational.''
    In addition, to ensure consistency, we are proposing to revise 
Sec.  424.535(f) from ``Revocation becomes effective within 30 days of 
the initial revocation notification.'' to ``Revocation becomes 
effective 30 days after CMS or the CMS contractor mails notice of its 
determination to the provider or supplier, except if the revocation is 
based on Federal exclusion or debarment, felony conviction, license 
suspension or revocation, or the practice location is determined by CMS 
or its contractor not to be operational. When a revocation is based on 
an exclusion or debarment, Federal exclusion or debarment, felony 
conviction, license suspension or revocation, or the practice location 
is determined by CMS or its contractor not to be operational, the 
revocation is effective with the date of exclusion or debarment, felony 
conviction, license suspension or revocation or the date that CMS or 
its contractor determined that the provider or supplier was no longer 
operational.''
    We believe that these changes will ensure that providers and 
suppliers are afforded due process rights under 42 CFR part 498, but 
also ensure that Medicare is not making or continuing to make payments 
to providers and suppliers who are no longer eligible to receive 
payments.
    We are soliciting comments on whether we should establish an 
expedited reconsideration process for providers and suppliers for when 
we issue a revocation for the following reasons: (1) Federal debarment 
or exclusion, (2) felony conviction, (3)

[[Page 38582]]

license suspension or revocation, or (4) when CMS or our contractor 
determines that the provider is not operational at the practice 
location provided to Medicare and the provider or supplier furnishes 
sufficient evidence to demonstrate that CMS or our contractor made a 
factual error when issuing the initial revocation determination.
    We believe that establishing an expedited reconsideration process 
will afford providers and suppliers with an administrative remedy 
similar to a corrective action plan, but allow CMS or our contractor to 
establish an effective date of revocation on the date of notification. 
In addition, we are soliciting comments on whether CMS or our 
contractors should consider processing expedited reconsiderations 
within a specified time period such as 30 days of the date the provider 
or supplier furnishes sufficient evidence to make a reconsideration 
determination.

III. Potentially Misvalued Services Under the Physician Fee Schedule

    [If you choose to comment on issues in this section, please include 
the caption ``POTENTIALLY MISVALUED SERVICES UNDER THE PFS'' at the 
beginning of your comments.]

A.Valuing Services Under the Physician Fee Schedule

    The American Medical Association's Relative Value System Update 
Committee (RUC) provides recommendations to CMS for the valuation of 
new and revised codes, as well as codes identified as misvalued under 
the Five-Year Review of Work. On an ongoing basis, the RUC's Practice 
Expense (PE) Subcommittee reviews direct PE (clinical staff, medical 
supplies, medical equipment) for individual services and examines the 
many broad and methodological issues relating to the development of PE 
RVUs.
    There has been considerable concern expressed by the Medicare 
Payment Advisory Commission (MedPAC), the Congress, and other 
stakeholders in accurate pricing under the PFS. Despite the large 
increase in work RVUs for many medical visits during the last Five-Year 
Review of physician work, there continues to be concern that the 
presence of many overvalued procedures within the physician fee 
schedule disadvantages primary care services and creates distortion in 
the PFS. Critics have stated the relative imbalance in the number of 
codes for which the work RVUs are increased rather than decreased in 
the three Five-Year Reviews of work RVUs.
    The RUC has created the Five-Year Review Identification Workgroup 
to respond to these concerns regarding the valuation of codes. The 
workgroup has identified some potentially misvalued codes through 
several vehicles, namely, identifying codes with site of service 
anomalies, high intra-service work per unit time (IWPUT), and services 
with high volume growth. We plan to address the RUC's recommendations 
from the February and April 2008 meetings for codes with site of 
service anomalies in the CY 2009 PFS final rule in a manner consistent 
with the way we address other RUC recommendations. Each year in the PFS 
final rule with comment period, we describe the RUC's recommendations, 
state whether or not we accept them, and provide a rationale for our 
decision. The values for these services will be published as interim 
values for 2009.
    We believe that there are certain steps we can take to help address 
the issue of potentially misvalued services. The following is a summary 
of these approaches:
1. Updating High Cost Supplies
    We are proposing to create a process to update the prices for high 
cost supply items that are paid under the PE methodology.
    The RUC and MedPAC have recommended that we establish an update 
process, at least every 5 years, to ensure the accuracy and 
completeness of the direct PE inputs. Both organizations have suggested 
that an update process for the new, higher-priced supply items should 
occur more frequently because prices for these items may decrease over 
time as competition increases. The RUC specifically requested the 
review of higher-price supply items (over $200) and that the re-pricing 
be carried out on an annual basis. In the CY 2006 and CY 2007 PFS 
proposed rule and final rule with comment period, we expressed concern 
that submitting more recent and reliable documentation for supply 
prices may be burdensome to the physician specialties involved.
    Upon further review of this issue and examination of the PE 
database, we believe that the burden would be minimal and the result 
would be to better ensure that we are paying properly for these 
supplies. Therefore, we are proposing a process to update high cost 
supplies every 2 years. We would specifically focus on the supplies 
that cost $150 or more of which there are currently 65 supplies which 
are listed in Table 24. Every other year we would identify supply items 
in the PE database costing over $150 and list these supplies in the 
proposed rule. We would request that the specialty societies or other 
relevant organizations provide acceptable documentation supporting the 
pricing for the supply item during the 60-day comment period. Since it 
may not be necessary to require an annual price update for each supply 
item over $150, we are proposing to revalue the list of high cost 
supply items on a biennial basis, but are interested in receiving 
comments concerning this proposed timeframe.
    Pricing for these higher-priced supplies would need to be supported 
by valid, reliable documentation that reflects the typical price in the 
marketplace. For the past several years in the proposed rule and final 
rule with comment period, we have outlined examples of acceptable 
documentation which include a detailed description (including system 
components), sources, and current pricing information, such as copies 
of catalog pages, hard copies from specific web pages, invoices, and 
quotes from manufacturer, vendors or distributors. Documentation that 
does not include specific pricing information such as phone numbers and 
addresses of manufacturer, vendors or distributors; Web site links 
without pricing information would not be acceptable.
    If such acceptable documentation was not received within the 60-day 
comment period for the proposed rule, we would apply prices that we 
were able to obtain through the use of searches for retail pricing on 
the internet, supply catalogs or other sources available to determine 
the appropriate cost. We would use the lowest price identified by these 
sources.
    In future years, we may consider initiating additional reviews of 
supplies that cost less than this amount.
    We would also be interested in receiving comments on alternatives 
that could be used to update pricing information in the absence of 
information provided by the specialty societies and organizations.

[[Page 38583]]



                            Table 24.--Top 65 High Cost Supplies Over $150--Supplies Needing Specialty Input for Price Update
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Quantity
       CMS supply code           Supply description             Unit           Unit price      per        Cost per     CPT \1\      Medical specialties
                                                                                            procedure    procedure       code
--------------------------------------------------------------------------------------------------------------------------------------------------------
SA087.......................  tray, RTS applicator     item.................       $2,550            1       $2,550        19296  General Surgery.
                               (MammoSite).
SL209.......................  array kit, GenoSensor..  item.................        2,121         0.16       339.36        88386  Independent Labs.
SD109.......................  probe, radiofrequency,   item.................        1,995            1        1,995       50592,  Diagnostic Radiology,
                               3 array (StarBurstSDE).                                                                    32998,   Urology,
                                                                                                                           20982   Interventional
                                                                                                                                   Radiology.
                              catheter, CVA, system,   item.................        1,750            2        3,500        36566  General Surgery,
                               tunneled w-port, dual                                                                               Thoracic Surgery.
                               (LifeSite).
                              stent, vascular,         kit..................        1,645          1.5      2467.50       37205,  Cardiology, Diagnostic
                               deployment system,                                                                          32506   Radiology, Vascular
                               Cordis SMART.                                                                                       Surgery.
                              probe, cryoablation      item.................        1,589            1        1,589        19105  General Surgery.
                               (Visica ICE 30 or 40).
SA092.......................  kit, gene, MLL fusion..  kit..................        1,395         0.25       348.75        88385  Independent Labs.
                              catheter, intradiscal    item.................        1,380            1        1,380       22526,  Orthopedic Surgery,
                               (spineCATH).                                                                                22527   Neurosurgery,
                                                                                                                                   Diagnostic Radiology,
                                                                                                                                   Interventional
                                                                                                                                   Radiology.
SD186.......................  plasma LDL adsorption    item.................        1,300            1        1,300        36516  Internal Medicine,
                               column (Liposorber).                                                                                Cardiology.
SD215.......................  probe, endometrial       item.................        1,250            1        1,250        58356  OBGYN.
                               cryoablation (Her
                               Option).
SA075.......................  kit, hysteroscopic       kit..................        1,245            1        1,245        58565  OBGYN.
                               tubal implant for
                               sterilization.
                              probe, cryoablation,     item.................        1,175          2.5      2937.50        50593  Urology, Diagnostic
                               renal.                                                                                              Radiology.
SD185.......................  plasma antibody          item.................        1,150            1        1,150        36515  Rheumatology, Internal
                               adsorption column                                                                                   Medicine, Nephrology.
                               (Prosorba).
SA036.......................  kit, transurethral       kit..................        1,149            1        1,149        53850  Urology.
                               microwave
                               thermotherapy.
SD177.......................  hysteroscope, ablation   item.................        1,146            1        1,146        58563  OBGYN.
                               device.
SA037.......................  kit, transurethral       kit..................        1,050            1        1,050        53852  Urology.
                               needle ablation (TUNA).
SA024.......................  kit, photopheresis       kit..................          858            1          858        36522  Dermatology and
                               procedure.                                                                                          Pathology.
SF030.......................  laser tip, diffuser      item.................          850            1          850       52647,  Urology.
                               fiber.                                                                                      52648
SA091.......................  tray, scoop, fast track  tray.................          750            1          750        31730  General Surgery,
                               system.                                                                                             Pulmonology.
SD018.......................  catheter, balloon,       tray.................          727            1          727        58353  OBGYN.
                               thermal ablation
                               (Thermachoice).
SD155.......................  catheter, RF endovenous  item.................          725            1          725        36475  General Surgery,
                               occlusion.                                                                                          Vascular Surgery.
SD191.......................  plate, surgical,         item.................          719            1          719       21125,  Maxillofacial Surgery,
                               reconstruction, left,                                                                      21127,   Otolaryngology,
                               5 x 16 hole.                                                                                21215   Oncology Surgery.
SA039.......................  kit, vertebroplasty      kit..................          696          1.5        1,044       22520,  Diagnostic Radiology,
                               (LP2, CDO).                                                                                 22521   Interventional
                                                                                                                                   Radiology,
                                                                                                                                   Orthopedics.
SA038.......................  kit, transurethral       kit..................          650            1          650        53853  Urology.
                               water-induced
                               thermotherapy.
SA025.......................  kit, PICC with subcut    kit..................          586            1          586       36570,  General Surgery,
                               port.                                                                                      36571,   Diagnostic Radiology.
                                                                                                                           36585
SD073.......................  fiducial screws (set of  item.................          558            1          558       77011,  Diagnostic Radiology,
                               4 uou).                                                                                     77301   Otolaryngology, IDTF.
SA074.......................  kit, endovascular laser  kit..................          519            1          519        36478  General Surgery,
                               treatment.                                                                                          Vascular Surgery,
                                                                                                                                   Diagnostic Radiology.
SA011.......................  kit, CVA catheter,       kit..................          495            1          495       36560,  General Surgery,
                               tunneled, with subcut                                                                      36561,   Vascular Surgery,
                               port.                                                                                      36563,   Diagnostic Radiology,
                                                                                                                          36582,   Pediatric Medicine.
                                                                                                                           36583

[[Page 38584]]

 
SA015.......................  kit, for percutaneous    kit..................       487.50            1       487.50       36870,  Diagnostic Radiology,
                               thrombolytic device                                                                        37184,   Vascular Surgery,
                               (Trerotola).                                                                               37186,   Cardiology,
                                                                                                                          37187,   Interventional
                                                                                                                           37188   Radiology.
SD058.......................  electrode, grid........  item.................          475            1          475        95829  General Practice.
SA093.......................  kit, priming, random...  kit..................          463         0.16        74.08       88385,  Independent Labs,
                                                                                                                           88386   Pediatric Medicine.
SA005.......................  kit, capsule endoscopy   kit..................          450            1          450        91110  Gastroenterology.
                               w-application supplies
                               (M2A).
                              kit, capsule, ESO,       kit..................          450            1          450        91111  Gastroenterology.
                               endoscopy w-
                               application supplies
                               (ESO).
SD151.......................  catheter, balloon, low   item.................       431.50            2          863       35470,  Cardiology, Vascular
                               profile PTA.                                                                               35471,   Surgery.
                                                                                                                           35474
SD193.......................  plate, surgical, rigid   item.................          389            1          389       21461,  Oral Surgery,
                               comminuted fracture.                                                                        21462   Maxillofacial
                                                                                                                                   Surgery.
SD020.......................  catheter, CVA,           item.................          355            1          355        36565  General Surgery,
                               tunneled, dual (Tesio).                                                                             Vascular Surgery.
SD154.......................  catheter, microcatheter  item.................       337.88            1       337.88       36217,  Diagnostic Radiology,
                               (selective 3rd order).                                                                     36247,   Vascular Surgery,
                                                                                                                           37210   Cardiology.
SA077.......................  kit, pleural catheter    kit..................          329            1          329        32550  Thoracic Surgery,
                               insertion.                                                                                          Diagnostic Radiology.
SH079.......................  collagen, dermal         item.................          317            1          317        52330  Urology.
                               implant (2.5ml uou)
                               (Contigen).
SA010.......................  kit, CVA catheter,       kit..................          308            1          308       36557,  General Surgery,
                               tunneled, without port-                                                                    36558,   Interventional
                               pump.                                                                                       36581   Radiology, Diagnostic
                                                                                                                                   Radiology, Pediatric
                                                                                                                                   Medicine, Nephrology.
                              catheter, balloon,       item.................          306            1          306        68816  ?
                               lacrimal.
SA022.......................  kit, percutaneous neuro  kit..................          305            1          305       63610,  Urology, OBGYN,
                               test stimulation.                                                                           64561   Anesthesiology.
SF028.......................  laser tip (single use).  item.................          290            1          290       30117,  Urology,
                                                                                                                          52214,   Otolaryngology.
                                                                                                                          52224,
                                                                                                                           52317
SA020.......................  kit, loop snare          kit..................          275            1          275       36595,  Diagnostic Radiology.
                               (Microvena).                                                                                37203
                              agent, embolic, 2 ml     unit.................          258            5        1,290        37210  Diagnostic Radiology,
                               uou.                                                                                                Interventional
                                                                                                                                   Radiology.
SD152.......................  catheter, balloon, PTA.  item.................       243.50            2          487       35472,  Cardiology, Vascular
                                                                                                                          35473,   Surgery, Diagnostic
                                                                                                                          35475,   Radiology,
                                                                                                                          35476,   Nephrology.
                                                                                                                          G0392,
                                                                                                                           G0393
                              stent, ureteral, w-      item.................          235            1          235        52332  Urology.
                               guidewire, 3cm
                               flexible tip.
SD189.......................  plate, surgical, mini-   item.................          226            1          226        21208  Plastic Surgery, Oral
                               compression, 4 hole.                                                                                Surgery.
SD207.......................  suture device for        item.................          225            1          225       37184,  Diagnostic Radiology,
                               vessel closure                                                                              37205   Vascular Surgery,
                               (Perclose A-T).                                                                                     Cardiology.
SD204.......................  sensor, pH capsule       item.................          225            1          225        91035  Gastroenterology.
                               (Bravo).

[[Page 38585]]

 
SD207.......................  suture device for        item.................          225            1          225       35470,  Cardiology, Vascular
                               vessel closure                                                                             35471,   Surgery, Diagnostic
                               (Perclose A-T).                                                                            35472,   Radiology,
                                                                                                                          35473,   Nephrology,
                                                                                                                          35474,   Interventional
                                                                                                                          35475,   Radiology.
                                                                                                                          37187,
                                                                                                                          37188,
                                                                                                                           G0392
SD072.......................  eyelid weight implant,   item.................       217.50            1       217.50        67912  Ophthalmology,
                               gold.                                                                                               Otolaryngology.
SD216.......................  catheter, balloon,       item.................          217            1          217       91040,  Colorectal Surgery,
                               esophageal or rectal                                                                        91120   Gastroenterology,
                               (graded distention                                                                                  Physician Assistants.
                               test).
SD094.......................  Mammotome probe........  item.................          200            1          200        19103  Diagnostic Radiology,
                                                                                                                                   General Surgery.
                              tube, jejunostomy......  item.................          195            1          195       49441,  Gastroenterology.
                                                                                                                          49446,
                                                                                                                          49451,
                                                                                                                           49452
SL225.......................  gas, nitogen, ultra-     item.................       189.87         0.03         5.58       88385,  Independent Labs.
                               high purity                                                                                 88386
                               (compressed), grade
                               5.0.
SD023.......................  catheter, enteroclysis.  item.................       183.01            1       183.01       74251,  Cardiovascular and
                                                                                                                          74260,   Interventional
                                                                                                                          89100,   Radiology, Diagnostic
                                                                                                                          89105,   Radiology, Neurology,
                                                                                                                          89130,   Pulmonary, Pathology.
                                                                                                                          89132,
                                                                                                                          89135,
                                                                                                                          89136,
                                                                                                                          89140,
                                                                                                                           89141
SD175.......................  guidewire, steerable     item.................          180            1          180       36217,  Diagnostic Radiology,
                               (Transcend).                                                                               36247,   Interventional
                                                                                                                          37205,   Radiology,
                                                                                                                          37206,   Cardiology, Vascular
                                                                                                                          37210,   Surgery, General
                                                                                                                          49440,   Surgery.
                                                                                                                          49441,
                                                                                                                          49442,
                                                                                                                          49446,
                                                                                                                          49450,
                                                                                                                          49451,
                                                                                                                          49452,
                                                                                                                           49460
SC085.......................  tubing set, plasma       item.................       173.33            1       173.33        36514  Hemotology,
                               exchange.                                                                                           Nephrology.
SD019.......................  catheter, balloon,       item.................          166            3          498       43456,  Colorectal Surgery,
                               ureteral-GI                                                                                45303,   Gastroenterology,
                               (strictures).                                                                              45340,   General Surgery.
                                                                                                                          45386,
                                                                                                                           46604
SD218.......................  stent, ureteral,         item.................          162            1          162       50382,  Diagnostic Radiology,
                               without guidewire.                                                                          50385   Interventional
                                                                                                                                   Radiology.
SD205.......................  sheath, endoscope        item.................          154            1          154        31620  Pulmonary Medicine.
                               ultrasound balloon.
SL055.......................  DNA stain kit (per       item.................          150            1          150        88358  Independent Labs.
                               test).
SF029.......................  laser tip, bare (single  item.................          150            1          150       46917,  Colorectal Surgery,
                               use).                                                                                       46924   General Surgery.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ CPT codes and descriptions only are copyright 2008 American Medical Association. All Rights Reserved. Applicable FARS/DFARS apply.


[[Page 38586]]

2. Review of Services Often Billed Together and the Possibility of 
Expanding the Multiple Procedure Payment Reduction (MPPR) to Additional 
Non-Surgical Procedures
    We have a longstanding policy of reducing payment for multiple 
surgical procedures performed on the same patient, by the same 
physician, on the same day. The policy is largely based on the 
efficiencies recognized in practice expenses for pre- and post-surgical 
services. Originally, payment was made in full for the highest priced 
procedure; at 50 percent for the second highest price procedure; and at 
25 percent for the third through fifth procedures. In 1995, the policy 
was revised to pay the highest priced procedure in full and at 50 
percent for the second through fifth procedures (59 FR 32767 through 
32768 and 59 FR 63423 through 63426).
    In 1995, the MPPR policy was also extended to six nuclear medicine 
diagnostic procedures performed on the same patient on the same day. 
Payment is made in full for the highest priced procedure, and at 50 
percent for the second procedure. Prior to that time, no payment was 
generally made for the second procedure. We also indicated that we 
would consider applying the multiple procedure policy to other 
diagnostic tests in the future (59 FR 32769 and 59 FR 63427 through 
63428).
    In 2006, the policy was extended to certain diagnostic imaging 
procedures performed on contiguous areas of the body. In such cases, 
most clinical labor activities and most supplies are not performed or 
furnished twice. The payment reduction applies to 100 procedure codes 
within 11 families of codes. When two or more procedures within a 
family are performed on the same patient in a single session, the TC of 
the highest priced procedure is paid at 100 percent; the TC of each 
subsequent procedure is paid at 75 percent. The reduction does not 
apply to the PC (70 FR 45849 through 45851 and 70 FR 70261 through 
70265).
    Some observers have raised concerns that there may be inequities 
between specialties in the current coding and payment system regarding 
the extent to which there are opportunities for additional coding and 
payment for services performed on the same day. Physicians in some 
specialties, such as primary care physicians, typically bill for their 
services using evaluation and management (E/M) codes that represent a 
fairly broad package of services (that include a significant amount of 
pre- and post-service care, including coordination of care). Likewise, 
a significant portion of services performed by specialties such as 
general or cardiac surgeons are reported and paid through comprehensive 
global surgery policies which also include pre- and post-service work, 
reducing the possibilities for additional billings. In contrast, many 
other services under the PFS are paid for using codes that represent 
much smaller units of service, and in many cases the codes and payment 
amounts might represent fairly small portions of the total service 
provided on the same day.
    We plan to perform a data analysis of non-surgical CPT codes that 
are often billed together (for example, 60 to 70 percent of the time) 
to determine if there are inequities in PFS payments that are a result 
of variations between services in the comprehensiveness of the codes 
used to report the services or in the payment policies applied to each 
(for example, global surgery, MPPRs). As noted above, clinical labor 
activities, supplies and equipment may not be performed or furnished 
twice when multiple procedures are performed.
    We invite comments and suggestions from the RUC and others on this 
important issue. As a result of reviewing the data and any suggestions 
we receive regarding these concerns, we may consider developing 
proposals to either bundle additional services or expand the 
application of the MPPR to additional procedures. Any proposed changes 
will be made through rulemaking and be subject to public comment at a 
later date.

B. Requested Approaches for the RUC to Utilize

    We have also identified methods that we are requesting the RUC 
undertake to assist in identifying potentially misvalued services 
including: (1) Review the Fastest Growing Procedure Codes; (2) Review 
Harvard-Valued Codes; and (3) Review PE RVUs.
1. Review the Fastest Growing Procedure Codes
    We have identified the fastest growing services as measured by 
growth in utilization from CY 2004 through CY 2007. The codes we 
identified were the following:
     Those that represent services that had three consecutive 
years of 10 percent (or more) annual growth in allowed services;
     Excluded if there was less than $1 million in 2007 allowed 
charges; and
     Included if still active in 2008.
    This analysis has resulted in the identification of over 100 
procedure codes, which are shown in Table 25. Some of the identified 
services are new, while others have been in the clinical arena for a 
number of years. These codes may warrant a reassessment to determine 
why there has been an increase in utilization. There may be a clinical 
rationale or there may have been changes in the relative resources 
involved with furnishing the service.
    We have requested that the RUC immediately begin a review of the 
fastest growing services by examining the codes listed in Table 25, 
Fastest Growing Procedure Codes. We will work with the RUC on 
prioritizing the review of these codes.

                                                       Table 25.--Fastest Growing Procedure Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Annual       Annual       Annual
                                                         Allowed     Growth in    growth in    growth in    growth in    Screening criteria used by the
                                                         charges      allowed      allowed      allowed      allowed       AMA/RUC for codes  reviewed
      CPT \1\/HCPCS code             Description           2007       services     services     services     services     between  September 2007-April
                                                        (millions)   2004-2007       2005         2006         2007                   2008
                                                                     (percent)    (percent)    (percent)    (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
10022.........................  Fna w/image..........          $12           88           31           21           19  ................................
13121.........................  Repair of wound or              23           45           15           14           11  ................................
                                 lesion.
14021.........................  Skin tissue                     12           49           15           13           15  Site of Service Anomaly.
                                 rearrangement.
14300.........................  Skin tissue                     13           49           14           12           16  Site of Service Anomaly.
                                 rearrangement.
15740.........................  Island pedicle flap              6           63           26           11           17  Site of Service Anomaly.
                                 graft.

[[Page 38587]]

 
19295.........................  Place breast clip,               9           43           10           13           14  ................................
                                 percut.
20551.........................  Inj tendon origin/               7          101           17           21           41  ................................
                                 insertion.
20926.........................  Removal of tissue for            4           63           10           16           27  ................................
                                 graft.
22214.........................  Revision of lumbar               2          110           34           19           32  ................................
                                 spine.
22533.........................  Lat lumbar spine                 1          584          163           81           44  ................................
                                 fusion.
22843.........................  Insert spine fixation            3           55           20           15           13  ................................
                                 device.
22849.........................  Reinsert spinal                  2          116           47           18           24  ................................
                                 fixation.
22851.........................  Apply spine prosth              24           65           29           12           13  ................................
                                 device.
23430.........................  Repair biceps tendon.            3           90           29           21           21  ................................
23472.........................  Reconstruct shoulder            23           74           32           13           16  ................................
                                 joint.
26480.........................  Transplant hand                  3           57           26           11           12  ................................
                                 tendon.
27245.........................  Treat hip fracture...           88           68           27           18           12  High IWPUT.
27370.........................  Injection for knee x-            2          173           48           59           16  High Volume Growth.
                                 ray.
29822.........................  Shoulder arthroscopy/            3           77           24           20           19  ................................
                                 surgery.
29827.........................  Arthroscop rotator              43           90           33           21           18  ................................
                                 cuff repr.
31579.........................  Diagnostic                       8           51           15           14           15  ................................
                                 laryngoscopy.
32663.........................  Thoracoscopy,                    4          102           35           18           27  ................................
                                 surgical.
33213.........................  Insertion of pulse              16           63           24           14           15  ................................
                                 generator.
35470.........................  Repair arterial                  9          132           38           35           25  ................................
                                 blockage.
35474.........................  Repair arterial                 19           49           17           16           11  ................................
                                 blockage.
36248.........................  Place catheter in                1           70           22           20           15  ................................
                                 artery.
36516.........................  Apheresis, selective.            2          274           75           35           58  ................................
37765.........................  Phleb veins extrem 10-           3          158           76           25           17  High Volume Growth
                                 20.
37766.........................  Phleb veins extrem               3          200           94           23           26  High Volume Growth.
                                 20+.
38571.........................  Laparoscopy,                     2          295           49           69           57  ................................
                                 lymphadenectomy.
43236.........................  Uppr gi scope w/                 2           61           26           15           11  ................................
                                 submuc inj.
43242.........................  Uppr gi endoscopy w/             7           74           26           19           16  ................................
                                 us fn bx.
43259.........................  Endoscopic ultrasound            7           42           14           12           11  ................................
                                 exam.
44205.........................  Lap colectomy part w/           11          106           53           17           16  ................................
                                 ileum.
44207.........................  L colectomy/                     9          142           67           24           17  ................................
                                 coloproctostomy.
44970.........................  Laparoscopy,                     7           51           21           13           10  ................................
                                 appendectomy.
45381.........................  Colonoscopy,                     6          105           36           23           22  ................................
                                 submucous inj.
47490.........................  Incision of                      3           42           10           14           13  ................................
                                 gallbladder.
50542.........................  Laparo ablate renal              1          128           54           34           11  ................................
                                 mass.
50548.........................  Laparo remove w/                 2           56           18           13           17  ................................
                                 ureter.
50605.........................  Insert ureteral                  1           66           17           15           23  ................................
                                 support.
51772.........................  Urethra pressure                11           76           31           18           14  Codes Reported Together.
                                 profile.
55866.........................  Laparo radical                  18          329           87           55           48  New Technology.
                                 prostatectomy.
61793.........................  Focus radiation beam.           13           53           15           16           15  ................................
61795.........................  Brain surgery using              4           46           13           17           11  ................................
                                 computer.
63056.........................  Decompress spinal                6           58           21           11           18  ................................
                                 cord.

[[Page 38588]]

 
63650.........................  Implant                          9          159           47           29           37  Site of Service Anomaly.
                                 neuroelectrodes.
63655.........................  Implant                          2          106           29           23           30  ................................
                                 neuroelectrodes.
63660.........................  Revise/remove                    2           81           29           19           17  Site of Service Anomaly.
                                 neuroelectrode.
63685.........................  Insrt/redo spine n               3          125           53           24           19  Site of Service Anomaly.
                                 generator.
64415.........................  N block inj, brachial            6           56           22           12           15  ................................
                                 plexus.
64445.........................  N block inj, sciatic,            6           75           22           22           18  ................................
                                 sng.
64447.........................  N block inj fem,                 5          116           57           16           19  ................................
                                 single.
64448.........................  N block inj fem, cont            6          232           86           35           33  Site of Service Anomaly/High
                                 inf.                                                                                    Volume Growth.
64483.........................  Inj foramen epidural           157           62           24           15           14  ................................
                                 l/s.
64484.........................  Inj foramen epidural            46           75           34           15           13  ................................
                                 add-on.
64555.........................  Implant                          6         1498           63          135          316  High Volume Growth.
                                 neuroelectrodes.
64561.........................  Implant                          3          169           15           25           86  ................................
                                 neuroelectrodes.
64622.........................  Destr paravertebrl              32           89           32           24           15  High Volume Growth.
                                 nerve l/s.
64626.........................  Destr paravertebrl               8          109           34           22           29  High Volume Growth.
                                 nerve c/t.
64627.........................  Destr paravertebral n            7          109           35           24           25  High Volume Growth.
                                 add-on.
65780.........................  Ocular reconst,                  3          200           46           60           28  ................................
                                 transplant.
66982.........................  Cataract surgery,              148          103           34           27           19  High IWPUT.
                                 complex.
67028.........................  Injection eye drug...          151          883          202          112           54  High Volume Growth.
69100.........................  Biopsy of external               7           52           18           14           13  ................................
                                 ear.
69801.........................  Incise inner ear.....            3           54           13           16           17  ................................
70496.........................  Ct angiography, head.           11          184           61           42           24  High Volume Growth.
70498.........................  Ct angiography, neck.           18          216           70           50           23  High Volume Growth.
71250.........................  Ct thorax w/o dye....          140           42           15           11           11  ................................
71275.........................  Ct angiography, chest           56          115           51           23           16  ................................
72125.........................  Ct neck spine w/o dye           29          102           30           26           23  ................................
72128.........................  Ct chest spine w/o               6           71           23           20           16  ................................
                                 dye.
72191.........................  Ct angiograph pelv w/           15          146           55           36           17  High Volume Growth.
                                 o & w/dye.
72192.........................  Ct pelvis w/o dye....          135           40           13           12           11  ................................
72194.........................  Ct pelvis w/o & w/dye           72           78           29           22           13  Codes Reported Together.
73200.........................  Ct upper extremity w/            6           60           22           13           17  ................................
                                 o dye.
73218.........................  Mri upper extremity w/           8           58           23           12           15  ................................
                                 o dye.
73580.........................  Contrast x-ray of                2          183           58           56           15  High Volume Growth.
                                 knee joint.
73700.........................  Ct lower extremity w/           13           57           22           15           12  ................................
                                 o dye.
74175.........................  Ct angio abdom w/o &            27          123           50           31           13  ................................
                                 w/dye.
75635.........................  Ct angio abdominal              16          251           71           66           23  High Volume Growth.
                                 arteries.
76513.........................  Echo exam of eye,                1          420           17          187           55  High Volume Growth.
                                 water bath.
76536.........................  Us exam of head and             28           51           20           13           11  ................................
                                 neck.
76880.........................  Us exam, extremity...           14           58           23           13           13  ................................
77301.........................  Radiotherapy dose               81           94           35           22           17  ................................
                                 plan, imrt.
77418.........................  Radiation tx                   681          111           37           25           24  ................................
                                 delivery, imrt.

[[Page 38589]]

 
77781.........................  High intensity                   8          144           35           42           27  ................................
                                 brachytherapy.
77782.........................  High intensity                   3          189           51           36           41  High Volume Growth.
                                 brachytherapy.
90471.........................  Immunization admin...           20          213           77           41           25  CMS Request--Practice Expense
                                                                                                                         Review.
92135.........................  Ophth dx imaging post          246          104           32           23           25  ................................
                                 seg.
92136.........................  Ophthalmic biometry..           57           78           34           17           14  ................................
92285.........................  Eye photography......           10           53           21           11           14  ................................
92587.........................  Evoked auditory test.            2           64           22           14           18  ................................
92986.........................  Revision of aortic               1           90           26           17           29  ................................
                                 valve.
93308.........................  Echo exam of heart...            6           45           17           11           11  ................................
93613.........................  Electrophys map 3d,              6          117           33           33           23  ................................
                                 add-on.
93652.........................  Ablate heart                     2           70           17           18           23  ................................
                                 dysrhythm focus.
93743.........................  Analyze ht pace                 38          139           52           29           22  ................................
                                 device dual.
93922.........................  Extremity study......           43           53           21           13           12  ................................
93976.........................  Vascular study.......            9           38           10           11           12  ................................
93990.........................  Doppler flow testing.            3          111           35           26           24  ................................
94681.........................  Exhaled air analysis,            8          141           52           27           24  High Volume Growth.
                                 o2/co2.
94762.........................  Measure blood oxygen             6          125           46           30           19  ................................
                                 level.
95922.........................  Autonomic nerv                   3          247           74           48           35  High Volume Growth.
                                 function test.
95956.........................  Eeg monitoring, cable/           4          102           50           12           21  ................................
                                 radio.
96567.........................  Photodynamic tx, skin            2          479          115           72           57  High Volume Growth.
96920.........................  Laser tx, skin < 250             3          137           16           50           36  ................................
                                 sq cm.
96921.........................  Laser tx, skin 250-              1          213           44           67           30  High Volume Growth.
                                 500 sq cm.
G0179.........................  MD recertification              52           59           19           19           12  ................................
                                 HHA PT.
G0181.........................  Home health care                31           49           15           17           11  ................................
                                 supervision.
G0237.........................  Therapeutic procd                2          264           69           64           32  High Volume Growth.
                                 strg endur.
G0238.........................  Oth resp proc, indiv.            3          944          407           77           17  High Volume Growth.
G0249.........................  Provide test                     4          325          117           75           12  High Volume Growth.
                                 material, equipm.
G0268.........................  Removal of impacted              4           57           27           11           11  ................................
                                 wax md.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ CPT codes and descriptions only are copyright 2008 American Medical Association. All Rights Reserved. Applicable FARS/DFARS apply.

2. Review Harvard-Valued Codes
    Currently, there are approximately 2900 codes that were originally 
valued using Harvard data and which have not subsequently been 
evaluated by the RUC. These codes represent about $5.0 billion in 
annual spending under the PFS and are still being paid on RVUs that 
were determined almost 20 years ago. Reviewing these codes will ensure 
that they are valued based upon the most up to date clinical practice 
and that they are not creating inappropriate incentives.
    We have requested the RUC to undertake an ongoing (multi-year) 
effort to review the Harvard-valued codes that have not subsequently 
been evaluated by the RUC. As part of our request, we requested that 
the initial focus be given to high-volume, low intensity codes. We look 
forward to receiving the recommendations from the RUC.
3. Review PE RVUs
    Practice expenses represent about 44 percent of total relative 
values for physicians' services. Indirect PEs are allocated in some 
measure based on direct PE inputs. Thus, ensuring the accuracy of 
direct PE inputs and that they are in agreement with the clinical 
aspects specific to each procedure may aid in the identification of 
misvalued services. We have requested that the RUC continue the review 
of direct PE inputs. We request that the initial focus be given to the 
high-volume codes where the PE payments are significantly increasing 
during the transition to the new PE methodology.
    We recognize that the work outlined here will require significant 
effort by the RUC and specialty societies but believe

[[Page 38590]]

that this work is necessary to improve the PFS. We expect that all 
reviews and changes to RVUs would be conducted in tandem with our 
established regulatory process such as the annual review of new/revised 
codes and the Five-Year Review.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information (COI) requirement is 
submitted to the Office of Management and Budget (OMB) for review and 
approval. In order to fairly evaluate whether an information collection 
should be approved by OMB, section 3506(c)(2)(A) of the Paperwork 
Reduction Act of 1995 requires that we solicit comment on the following 
issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs):

A. ICRs Regarding Independent Diagnostic Testing Facility (Sec.  
410.33)

    Section 410.33(j) states that a physician or NPP organization 
furnishing diagnostic testing services, except diagnostic mammography 
services, must enroll as an IDTF for each practice location furnishing 
these services. The burden associated with this requirement is the time 
and effort for a physician group practice or clinic to enroll each of 
the practice locations in the Medicare program. To enroll in the 
program, the physician or NPP organization must complete a Medicare 
enrollment application, the CMS-855B. The burden associated with 
completing and submitting this application is currently approved under 
OMB control number 0938-0685 with an expiration date of February 28, 
2011.

B. ICRs Regarding Exception to the Referral Prohibition Related to 
Compensation Arrangements (Sec.  411.357)

    As discussed in section II.N. of the preamble of this proposed 
rule, proposed Sec.  411.357(x) would set forth an exception for 
incentive payment and shared savings programs. The programs would 
involve improvement of quality of hospital patient care services 
through changes in physician clinical or administrative practices or 
actual cost savings for the hospital resulting from reduction of waste 
or changes in physician clinical or administrative practices, without 
an adverse affect or diminution in quality of hospital patient care 
services. The hospital-administered program would be required to have 
performance measures that would be individually tracked and monitored 
throughout the term of the arrangement. In addition, the program would 
be required to have at least five physicians participating in each 
performance measure and the program would be required to undergo 
periodic independent medical review (once prior to the commencement of 
the program and annually thereafter) for its impact (or potential 
impact) on the quality of patient care services provided at the 
hospital. We anticipate that many hospitals seeking to create new 
incentive payment or shared savings programs would structure those 
arrangements to comply with the requirements set forth in Sec.  
411.357(x).
    We have no way of knowing for certain the number of hospitals that 
currently utilize incentive payment or shared savings programs nor the 
nature and/or type of existing programs. However, we are aware that the 
Office of the Inspector General has issued 10 advisory opinions to date 
approving proposed incentive payment or shared savings programs from 
entities. While the OIG opinions were limited to specific arrangements, 
they did not afford providers any protection from the physician self-
referral regulations. Based on information furnished by one private 
industry consulting firm, we are aware of approximately 50 incentive 
payment, shared savings or related programs currently in operation. We 
have also received anecdotal information from industry stakeholders 
that the number of programs in operation may be as high as 100. 
Therefore, we estimate that there are approximately 75 incentive 
payment, shared savings or similar programs currently in operation.
    We believe that this proposed exception, if finalized, would result 
in an increase in the number of hospitals that would create these types 
of programs. We clarify that this collection of information burden 
would pertain to hospitals seeking to develop or modify incentive 
payment or shared savings programs. For purposes of this requirement, 
we are estimating that 150 hospitals would avail themselves of this 
proposed exception.
    Proposed Sec.  411.357(x)(1) and (2) specifies the elements that 
would be required in an incentive payment or shared savings program, 
including the determination of performance measures, and target 
measures to be achieved under the program. In addition, proposed Sec.  
411.357(x)(11) would require that payments made to a physician must not 
be based on patient care quality improvements or cost savings that were 
achieved during a prior period of the arrangement. To the extent that a 
hospital elected to distribute payments to physicians more frequently 
than the term of the agreement (for example, a 3-year arrangement that 
provides payment on an annual basis), these payments would be required 
to take into account previous payments made for performance measures 
already achieved. We believe that the burden associated with the 
provisions listed in Sec.  411.357(x)(1) through (2) and Sec.  
411.357(x)(11) would involve the time and effort each hospital would 
put forth into creating its program, and would vary greatly, depending 
upon the performance measures (clinical or administrative practices), 
size of the program, the number of physicians or other medical staff 
participating in the creation of the program, and the methods used for 
physician payment. We estimate 100 burden hours for the development of 
each incentive payment or shared savings program including, but not 
limited to, the professional services of the following individuals; 
attorneys, medical directors, accountants, and database administrators. 
The total burden associated with this requirement would be 150 
hospitals x 100 hours = 15,000 burden hours.
    Proposed Sec.  411.357(x)(5) would require independent medical 
review of a hospital's incentive payment or shared savings program's 
impact on the quality of patient care services provided at the 
hospital. In addition, corrective action would be required in instances 
where the independent medical review indicates a diminution in the 
quality of patient care services. The review would be required to take 
place prior to commencement of the program and at least annually 
thereafter. The burden associated with the requirements in proposed 
Sec.  411.357(x)(5) would be the time and effort necessary for a 
hospital to obtain, both prior to and during the term of the program, a 
written independent medical review of the program and follow up on any 
recommended corrective action. We believe it would take 20 hours for 
each

[[Page 38591]]

hospital to initially obtain independent expert medical review. 
Thereafter, the independent medical review that would be required to be 
conducted periodically is estimated to impose a burden on the hospital 
of 10 hours. The total burden associated with this requirement would be 
150 hospitals x 20 hours for the first year of a program and 150 
hospitals x 10 hours annually thereafter = 4500 hours, assuming 
hospitals, on average, implement a 2-year incentive payment or shared 
savings program.
    Proposed Sec.  411.357(x)(7) would require hospitals to provide 
written disclosure to patients affected by the program regarding the 
program and the physician's participation in the program. The burden 
associated with this requirement would be time and effort necessary for 
the hospital to provide disclosure in writing to patients that would be 
affected by the program. We believe that it would take each hospital 1 
hour to draft a standard disclosure. In addition, we believe it would 
take each hospital 1 minute to provide the written disclosure to 
potentially all patients. Based on anecdotal accounts of the number of 
patients involved historical gainsharing programs, we estimate that 
each hospital would need to provide standard disclosure to 
approximately 5,000 patients. However, we recognize that hospital size 
and patient volume will vary significantly from program to program. The 
total burden associated with this requirement would be 150 hospitals x 
1 hour = 150 hours to draft a standard disclosure. We estimate the 
burden of providing the disclosure to patients to be (150 hospitals x 
(1 minute/60 minutes/hour) x 5,000 patients) = 12,500 hours. The total 
burden associated with the requirements contained in Sec.  
411.357(x)(7) is 12,650 hours.
    Section 411.357(x)(8) would require that the incentive payment or 
shared savings program arrangements be set out in writing, signed by 
the parties, and specify the basis for the remuneration. Each specific 
performance measure and the resulting payment (or formula for payment) 
must also be clearly and separately identified. In addition, Sec.  
411.357(x)(15) would require that the hospital maintain accurate and 
contemporaneous documentation of the incentive payment or shared 
savings program and make documentation available to the Secretary upon 
request.
    The burden associated with the requirements listed in Sec.  
411.357(x)(8) through (10) and Sec.  411.357(x)(15) would be the time 
and effort necessary to draft an arrangement with the aforementioned 
information. While these requirements are subject to the PRA, we 
believe the burden associated with drafting and maintaining written 
arrangements detailing conditions of remuneration would be part of 
usual and customary business practices and thereby exempt from the PRA 
under 5 CFR 1320.3(b)(2).

C. ICRs Regarding Dispute Resolution and Process for Suspension or 
Termination of Approved CAP Contract and Termination or Physician 
Participation Under Exigent Circumstances (Sec.  414.917).

    Section 414.917(b)(4) states that an approved CAP vendor may appeal 
a termination by requesting a reconsideration. The burden associated 
with this requirement is the time and effort necessary to submit a 
reconsideration request to CMS. While this requirement is subject to 
the PRA, the associated burden is exempt under 5 CFR 1320.4(a)(2). 
Information collected as part of an administrative action is not 
subject to the PRA.

D. ICRs Regarding Additional Provider and Supplier Requirements for 
Enrolling and Maintaining Active Enrollment Status in the Medicare 
Program (Sec.  424.516).

    Section 424.516(d) discusses the reporting requirements for 
physician groups/organizations, physicians and NPPs. Specifically, the 
aforementioned providers must report to CMS, within 30 days the 
information listed in Sec.  424.516(d)(1). Additionally, all other 
changes in enrollment must be reported within 90 days.
    Section 424.516(e) addresses the reporting requirements for all 
other providers and suppliers. Providers not mentioned in Sec.  
424.516(a) through (d) must report to CMS, within 30 days, changes of 
ownership, including changes in authorized official(s) or delegated 
official(s). All other changes in enrollment must be reported within 90 
days.
    The burden associated with the requirements contained in Sec.  
424.516(d) through (e) is the time and effort necessary to report the 
applicable information to CMS. While this requirement is subject to the 
PRA, we have no way to accurately quantify the number of submissions. 
Each submission will be reviewed on a case-by-case basis.
    Section Sec.  424.516(d) states providers or suppliers are required 
to maintain ordering and referring documentation, including the NPI, 
received from a physician or eligible NPP for 10 years from the date of 
service. Physicians and NPPs are required to maintain written ordering 
and referring documentation for 10 years from the date of service. The 
burden associated with these recordkeeping requirements is the time and 
effort associated with maintaining the aforementioned documentation for 
10 years. While these requirements are subject to the PRA, we believe 
the burden is exempt because the requirement is part of a usual and 
customary business practice. As stated in 5 CFR 1320.3(b)(2), the time, 
effort, and financial resources necessary to comply with a COI that 
would be incurred by persons in the normal course of their activities 
(for example, in compiling and maintaining business records) is not 
subject to the PRA.

                         Table 26.--Estimated Annual Reporting and Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
                                                                                    Burden per
      Regulation section(s)         OMB control     Respondents      Responses       response      Total annual
                                        No.                                           (hours)     burden (hours)
----------------------------------------------------------------------------------------------------------------
Sec.   410.33...................       0938-0685         400,000         400,000             2.5       1,001,503
Sec.   411.357(x)(1-2) and              0938-New             150             150             100          15,000
 (x)(11)........................
Sec.   411.357(x)(5)............        0938-New             150             150              20           4,500
                                  ..............             150             150              10           1,500
Sec.   411.357(x)(7)............        0938-New             150             150               1             150
                                  ..............             150         750,000          .01666          12,500
                                 -------------------------------------------------------------------------------
    Total.......................  ..............         400,150       1,150,150       133.51666       1,035,153
----------------------------------------------------------------------------------------------------------------


[[Page 38592]]

    This proposed rule imposes COI requirements as outlined in the 
regulation text and specified above. However, this proposed rule also 
makes reference to several associated information collections that are 
not discussed in the regulation text. The following is a discussion of 
these collections, which have already received OMB approval.
Part B Drug Payment
    Section II.F.1 of the preamble of this proposed rule discusses 
payment for Medicare Part B drugs and biologicals under the ASP 
methodology. Drug manufacturers are required to submit ASP data to us 
on a quarterly basis. The collection of ASP data imposes a reporting 
requirement on the public. The burden associated with this requirement 
is the time and effort required by manufacturers of Medicare Part B 
drugs and biologicals to calculate, record, and submit the required 
data to CMS. While the burden associated with this requirement is 
subject to the PRA, it is currently approved under OMB control number 
0938-0921, with an expiration date of May 31, 2009.
Competitive Acquisition Program (CAP)
    Section II.F.2. of this proposed rule discusses the Part B CAP 
issues. While we are not imposing any new burden, it should be noted 
that all of the information collection components of the CAP have been 
reviewed and approved by OMB. They are approved under OMB control 
numbers, 0938-0987, 0938-0955, and 0938-0954 with expiration dates of 
April 30, 2009, August 31, 2009, and July 31, 2008, respectively.
Physician Quality Reporting Initiative
    Section II.O. of the preamble discusses the background of the 
reporting initiative and provides information about the measures 
available to eligible professionals who choose to participate in PQRI. 
Section 1848(k)(1) of the Act requires the Secretary to implement a 
system for the reporting by eligible professionals of data on quality 
measures.
    As stated in section II.O.1, eligible professionals include 
physicians, other practitioners as described in section 1842(b)(18)(c) 
of the Act, physical and occupational therapists, and qualified speech-
language pathologists. This is a voluntary reporting initiative. 
Eligible professionals may choose whether to participate and 
satisfactorily submit data on quality measures for covered professional 
services.
    The burden associated with the requirements of this voluntary 
reporting initiative is the time and effort associated with eligible 
professionals identifying applicable PQRI quality measures for which 
they can report the necessary information.
    In addition, for claims-based reporting, eligible professionals 
must gather the required information, select the appropriate quality 
data codes, and include the appropriate quality data codes on the 
claims they submit for payment. The PQRI will collect quality-data 
codes as additional (optional) line items on the existing HIPAA 
transaction 837-P and/or CMS Form 1500. We do not anticipate any new 
forms and no modifications to the existing transaction or form. We also 
do not anticipate changes to the 837-P or CMS Form 1500 for CY 2009.
    Because this is a voluntary program, it is impossible to estimate 
with any degree of accuracy how many eligible professionals will opt to 
participate in the PQRI in CY 2009. Moreover, the time needed for an 
eligible professional to review the quality measures and other 
information, select measures applicable to his or her patients and the 
services he or she furnishes to them, and incorporate the use of 
quality data codes into the office work flows is expected to vary along 
with the number of measures that are potentially applicable to a given 
professional's practice.
    We estimate that the additional time required to put quality data 
codes on each claim is not a material increment to the time required to 
code the claim for payment. The total estimated annual burden for this 
requirement will also vary along with the volume of claims on which 
quality data is reported.
    For registry-based reporting, there would be no additional burden 
for eligible professionals to report data to a registry as eligible 
professionals are not required to report data to registries to 
participate in the PQRI and more than likely would already be reporting 
data to the registry. Little, if any, additional data would need to be 
reported to the registry for purposes of participation in the 2009 
PQRI. However, eligible professionals would need to authorize or 
instruct the registry to submit quality measures results and numerator 
and denominator data on quality measures to CMS on their behalf. We 
estimate that the time and effort associated with this would be 
approximately 5 minutes for each eligible professional that wishes to 
authorize or instruct the registry to submit quality measures results 
and numerator and denominator data on quality measures to CMS on their 
behalf.
    Similarly, registries are not required to participate in this 
voluntary initiative. Registries interested in submitting quality 
measures results and numerator and denominator data on quality measures 
to CMS on their participants' behalf would need to complete a self-
nomination process in order to be considered ``qualified'' to submit on 
behalf of eligible professionals.
    The burden associated with the registry-based submission 
requirements of this voluntary reporting initiative is the time and 
effort associated with the registry calculating quality measure results 
from the data submitted to the registry by its participants and 
submitting the quality measures results and numerator and denominator 
data on quality measures to CMS on behalf of their participants. The 
time needed for a registry to review the quality measures and other 
information, calculate the measures results, and submit the measures 
results and numerator and denominator data on the quality measures on 
their participants behalf is expected to vary along with the number of 
eligible professionals reporting data to the registry and the number of 
applicable measures. However, we believe that registries already 
perform many of these activities for their participants. The number of 
measures that the registry intends to report to CMS and how similar the 
registry's measures are to CMS' PQRI measures will determine the time 
burden to the registry.
    For EHR-based submission, the eligible professional must review the 
quality measures on which we will be accepting PQRI data extracted from 
EHRs, select the appropriate quality measures, extract the necessary 
clinical data from his or her EHR, and submit the necessary data to the 
CMS-designated clinical warehouse. Because this manner of reporting 
quality data to CMS is new to PQRI for 2009 and participation in this 
reporting initiative is voluntary, it is impossible to estimate with 
any degree of accuracy how many eligible professionals will opt to 
participate in the PQRI through the EHR mechanism in CY 2009. Similar 
to the burden associated with claims-based reporting of quality data, 
the time needed for an eligible professional to review the quality 
measures and other information, select measures applicable to his or 
her patients and the services he or she furnishes to them, is expected 
to vary along with the number of measures that are potentially 
applicable to a given professional's practice. Once the EHR is 
programmed by the vendor to allow data

[[Page 38593]]

submission to CMS, the burden to the eligible professional should be 
minimal.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Mail copies to the address specified in the ADDRESSES section of 
this proposed rule and to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Room 10235, New Executive 
Office Building, Washington, DC 20503, Attn: CMS Desk Officer, [CMS-
1403-P], Fax (202) 395-6974.

V. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

VI. Regulatory Impact Analysis

    [If you choose to comment on issues in this section, please include 
the caption ``IMPACT'' at the beginning of your comments.]
    We have examined the impact of this rule as required by Executive 
Order 12866 on regulatory planning and review (September 30, 1993, as 
further amended), the Regulatory Flexibility Act (RFA) (September 19, 
1980 Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Order 12866 (as amended by Executive Order 13258 and 
13422), directs agencies to assess all costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). A regulatory impact analysis (RIA) must be 
prepared for major rules with economically significant effects ($100 
million or more in any one year). As indicated in more detail below in 
this regulatory impact analysis, we estimate that the PFS provisions 
included in this proposed rule will redistribute more than $100 million 
in 1 year. We estimate that this rulemaking is ``economically 
significant'' as measured by the $100 million threshold, and hence also 
a major rule under the Congressional Review Act. Accordingly, we have 
prepared a RIA that to the best of our ability presents the costs and 
benefits of the rulemaking.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses and other small entities, if a rule has a 
significant impact on a substantial number of small entities. For 
purposes of the RFA, we estimate that most hospitals and most other 
providers are small entities as that term is used in the RFA (including 
small businesses, nonprofit organizations, and small governmental 
jurisdictions). Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$6.5 million to $31.5 million in any 1 year (for further information, 
see the Small Business Administration's regulation at 70 FR 72577, 
December 6, 2005.) Individuals and States are not included in the 
definition of a small entity. The RFA requires that we analyze 
regulatory options for small businesses and other entities. We prepare 
a regulatory flexibility analysis unless we certify that a rule would 
not have a significant economic impact on a substantial number of small 
entities. The analysis must include a justification concerning the 
reason action is being taken, the kinds and number of small entities 
the rule affects, and an explanation of any meaningful options that 
achieve the objectives with less significant adverse economic impact on 
the small entities.
    For purposes of the RFA, physicians, NPPs, and suppliers including 
IDTFs are considered small businesses if they generate revenues of $6.5 
million or less. Approximately 95 percent of physicians are considered 
to be small entities. There are about 980,000 physicians, other 
practitioners, and medical suppliers that receive Medicare payment 
under the PFS.
    The CAP provides alternatives to physicians who do not wish to 
purchase drugs directly or collect coinsurance. The impact of the CAP 
provisions on an individual physician is dependent on whether the drugs 
they provide to Medicare beneficiaries are included in the list of CAP 
drugs and whether the physician chooses to obtain drugs administered to 
Medicare beneficiaries through the CAP. The proposed CAP provisions in 
this proposed rule will also have a potential impact on entities that 
are involved in the dispensing or distribution of drugs, plan to become 
approved CAP vendors, or are approved CAP vendors.
    For purposes of the RFA, approximately 80 percent of clinical 
diagnostic laboratories are considered small businesses according to 
the Small Business Administration's size standards. These are posted on 
the following Web site: http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf .
    In addition, most ESRD facilities are considered small entities for 
purposes of the RFA, either based on nonprofit status or by having 
revenues of $6.5 million to $31.5 million or less in any year. We 
consider a substantial number of entities to be affected if the 
proposed rule is estimated to impact more than 5 percent of the total 
number of small entities. Based on our analysis of the 926 nonprofit 
ESRD facilities considered small entities in accordance with the above 
definitions, we estimate that the combined impact of the proposed 
changes to payment for renal dialysis services included in this 
proposed rule would have a 0.2 percent increase in overall payments 
relative to current overall payments. The majority of small entities 
would experience impacts of less than 3 percent of total revenues. We 
note that although the overall effect of the wage index changes is 
budget neutral, there are increases and decreases based on the location 
of individual facilities. The analysis and discussion provided in this 
section, as well as elsewhere in this proposed rule, complies with the 
RFA requirements.
    For the e-prescribing provisions, physician practices and 
independent pharmacies are considered small entities.
    Because we acknowledge that many of the affected entities are small 
entities, the analysis discussed throughout the preamble of this 
proposed rule constitutes our initial regulatory flexibility analysis 
for the remaining provisions. Therefore, we are soliciting comments on 
our estimates and analysis of the impact of this proposed rule on those 
small entities.
    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis if a rule may have a significant impact on the 
operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside a metropolitan 
statistical area and has fewer than 100 beds. We have determined that 
this proposed rule would have minimal impact on small hospitals located 
in rural areas. Of the 196 hospital-based

[[Page 38594]]

ESRD facilities located in rural areas, only 40 are affiliated with 
hospitals with fewer than 100 beds.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2008, that 
threshold is approximately $130 million. This proposed rule will not 
mandate any requirements for State, local, or tribal governments. 
Medicare beneficiaries are considered to be part of the private sector 
for this purpose. A discussion concerning the impact of this rule on 
beneficiaries is found later in this section.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. The e-prescribing portions of this proposed rule present 
a potential Federalism implication. No State categorically bars e-
prescribing, but the scope and substance of State laws varies widely 
among the States. In recent years, many States have more actively 
legislated in this area. Should a State law be contrary to the Part D 
e-prescribing standards, or should it restrict the ability to carry out 
the Medicare Part D e-prescribing program, the MMA provides for 
preemption of that State law at section 1860D-4(e)(5) of the Act. It 
provides:

    (5) Relation to State Laws. The standards promulgated under the 
subsection shall supersede any State law or regulation that--
    (A) Is contrary to the standards or restricts the ability to 
carry out this part; and
    (B) Pertains to the electronic transmission of medication 
history and of information on eligibility, benefits, and 
prescriptions with respect to covered part D drugs under this part.

    For the reasons given above, we have determined that States would 
not incur any direct costs as a result of this proposed rule. However, 
as mandated by section 1860D-4(e) of the Act, and under Executive Order 
13132, we are required to minimize the extent of preemption, consistent 
with achieving the objectives of the Federal statute, and to meet 
certain other conditions. We believe that, taken as a whole, this 
proposed rule would meet these requirements.
    We have prepared the following analysis, which, together with the 
information provided in the rest of this preamble, meets all assessment 
requirements. The analysis explains the rationale for and purposes of 
this proposed rule; details the costs and benefits of the rule; 
analyzes alternatives; and presents the measures we propose to use to 
minimize the burden on small entities. As indicated elsewhere in this 
proposed rule, we propose a variety of changes to our regulations, 
payments, or payment policies to ensure that our payment systems 
reflect changes in medical practice and the relative value of services. 
We provide information for each of the policy changes in the relevant 
sections of this proposed rule. We are unaware of any relevant Federal 
rules that duplicate, overlap or conflict with this proposed rule. The 
relevant sections of this proposed rule contain a description of 
significant alternatives if applicable.

A. RVU Impacts

1. Resource-Based Work and PE RVUs
    Section 1848(c)(2)(B)(ii) of the Act requires that increases or 
decreases in RVUs may not cause the amount of expenditures for the year 
to differ by more than $20 million from what expenditures would have 
been in the absence of these changes. If this threshold is exceeded, we 
make adjustments to preserve budget neutrality (BN). In the CY 2007 PFS 
final rule with comment period, the $4 billion impact of changes in 
work RVUs resulting from the 5-Year Review required that a BN 
adjustment be made.
    As stated in the CY 2007 PFS final rule with comment period, the 
work adjustor for 2008, was approximately 0.8806. Since there are no 
additional work RVU changes associated with the 5-Year Review of work 
RVUs, the work adjustor will remain at 0.8806. Table 27 shows the 
specialty-level impact of the work and PE RVU changes. This rule 
proposes the PE RVUs for CY 2009 which is the third year of a four-year 
transition to fully implemented resource based PE RVUs. There are no 
changes in work RVUs proposed in this rule. The process for changes in 
work RVUs is to publish these changes as interim final in the final 
rule with comment published later in the year.
    Our estimates of changes in Medicare revenues for PFS services 
compare payment rates for CY 2008 with proposed payment rates for CY 
2009 using CY 2007 Medicare utilization for all years. We are using CY 
2007 Medicare claims processed and paid through March 30, 2008, that we 
estimate are 98 percent complete. To the extent that there are year-to-
year changes in the volume and mix of services provided by physicians, 
the actual impact on total Medicare revenues will be different than 
those shown in Table 27. The payment impacts reflect averages for each 
specialty based on Medicare utilization. The payment impact for an 
individual physician would be different from the average, based on the 
mix of services the physician provides. The average change in total 
revenues would be less than the impact displayed here because 
physicians furnish services to both Medicare and non-Medicare patients 
and specialties may receive substantial Medicare revenues for services 
that are not paid under the PFS. For instance, independent laboratories 
receive approximately 80 percent of their Medicare revenues from 
clinical laboratory services that are not paid under the PFS.
    Table 27 shows only the payment impact on PFS services. The 
following is an explanation of the information presented in Table 27.
     Specialty: The physician specialty or type of 
practitioner/supplier.
     Allowed Charges: Allowed charges are the Medicare Fee 
Schedule amounts for covered services and include coinsurance and 
deductibles (which are the financial responsibility of the 
beneficiary). These amounts have been summed across all services 
provided by physicians, practitioners, or suppliers within a specialty 
to arrive at the total allowed charges for the specialty.
     Impact of PE RVU changes. The impact is shown for both 
2009, which is the third year of the 4-year transition using the new 
methodology, and the fully implemented 2010 PE RVUs.

[[Page 38595]]



                     Table 27.--Total Allowed Charge Impact for Practice Expense RVU Changes
----------------------------------------------------------------------------------------------------------------
                                                                                     Impact of PE RVU changes
                                                                                 -------------------------------
                            Specialty                                 Allowed        2009 (PE      2010 (PE full
                                                                   charges (mil)  trans. year 3)    implement.)
                                                                                     (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
1 TOTAL.........................................................         $68,076               0               0
2 ALLERGY/IMMUNOLOGY............................................             157               1               2
3 ANESTHESIOLOGY................................................           1,579              -1              -2
4 CARDIAC SURGERY...............................................             327              -1              -1
5 CARDIOLOGY....................................................           6,535              -1              -2
6 COLON AND RECTAL SURGERY......................................             112               1               2
7 CRITICAL CARE.................................................             181               0              -1
8 DERMATOLOGY...................................................           2,159               3               5
9 EMERGENCY MEDICINE............................................           1,962               0               0
10 ENDOCRINOLOGY................................................             317               0               0
11 FAMILY PRACTICE..............................................           4,396               0               1
12 GASTROENTEROLOGY.............................................           1,545               1               3
13 GENERAL PRACTICE.............................................             692               0               0
14 GENERAL SURGERY..............................................           1,974               0               0
15 GERIATRICS...................................................             142               0               0
16 HAND SURGERY.................................................              73              -1              -2
17 HEMATOLOGY/ONCOLOGY..........................................           1,709               0              -1
18 INFECTIOUS DISEASE...........................................             455               1               1
19 INTERNAL MEDICINE............................................           8,727               0               0
20 INTERVENTIONAL RADIOLOGY.....................................             196              -1              -2
21 NEPHROLOGY...................................................           1,510              -1              -3
22 NEUROLOGY....................................................           1,231               0               0
23 NEUROSURGERY.................................................             510              -1              -1
24 NUCLEAR MEDICINE.............................................              66               0              -1
25 OBSTETRICS/GYNECOLOGY........................................             520               0               0
26 OPHTHALMOLOGY................................................           4,202              -1              -1
27 ORTHOPEDIC SURGERY...........................................           2,877               0              -1
28 OTOLARYNGOLOGY...............................................             824              -1              -1
29 PATHOLOGY....................................................             833               0              -1
30 PEDIATRICS...................................................              59               0               1
31 PHYSICAL MEDICINE............................................             697              -1              -1
32 PLASTIC SURGERY..............................................             236               0               1
33 PSYCHIATRY...................................................             927               1               1
34 PULMONARY DISEASE............................................           1,496               0               1
35 RADIATION ONCOLOGY...........................................           1,591              -1              -1
36 RADIOLOGY....................................................           4,697               0               1
37 RHEUMATOLOGY.................................................             439               0              -1
38 THORACIC SURGERY.............................................             353              -1              -1
39 UROLOGY......................................................           1,804               0               0
40 VASCULAR SURGERY.............................................             575               0               0
41 AUDIOLOGIST..................................................              28             -10             -20
42 CHIROPRACTOR.................................................             620              -1              -2
43 CLINICAL PSYCHOLOGIST........................................             456              -2              -4
44 CLINICAL SOCIAL WORKER.......................................             301              -2              -3
45 NURSE ANESTHETIST............................................             670               0               0
46 NURSE PRACTITIONER...........................................             781               0               1
47 OPTOMETRY....................................................             719               0               0
48 ORAL/MAXILLOFACIAL SURGERY...................................              31               1               3
49 PHYSICAL/OCCUPATIONAL THERAPY................................           1,458               1               3
50 PHYSICIAN ASSISTANT..........................................             580               0               1
51 PODIATRY.....................................................           1,433               2               4
52 DIAGNOSTIC TESTING FACILITY..................................           1,029              -1              -1
53 INDEPENDENT LABORATORY.......................................             754               5              11
54 PORTABLE X-RAY SUPPLIER......................................              51               2              5
----------------------------------------------------------------------------------------------------------------
*Components may not sum to total due to rounding.

2. Adjustments for Payments for Imaging Services
    Section 5102 of the Deficit Reduction Act of 2005 (Pub. L. 109-171) 
(DRA) exempts the estimated savings from the application of the OPPS-
based payment limitation on the TC for PFS imaging services from the 
PFS BN requirement. We estimate that the combined impact of the current 
BN exemptions instituted by section 5102 of the DRA, the proposed 
addition of 10 services and the removal of 1 deleted service from the 
list of services subject to the MPPR for diagnostic imaging services, 
and the proposed payment revisions to OPPS payment amounts (which serve 
as a cap on the TCs under the PFS) would result in no measurable 
changes in the specialty specific impacts for 2009. In addition, while 
the MPPR was implemented administratively, section 5102 of the Deficit 
Reduction Act of 2005 subsequently provided for the exemption of 
reduced expenditures resulting from this policy from the statutory BN 
requirement. We would

[[Page 38596]]

exempt from budget neutrality the reduced expenditures resulting from 
the additional 10 services proposed to be added and the 1 service 
proposed to be removed from the list of services subject to the MPPR 
list. See Table 3 in Section E.2. of this proposed rule for a listing 
of those services which are being added and removed from the list of 
services subject to the MPPR.
3. Combined Impact
    Table 28 shows the specialty-level impact of the proposed work and 
PE RVU changes, and our most recent estimate (-5.4 percent) of the CY 
2009 Medicare PFS update.
    As indicated in Table 28, our estimates of changes in Medicare 
revenues for PFS services compare payment rates for CY 2008 with 
proposed payment rates for CY 2009 using CY 2007 Medicare utilization 
crosswalked to 2008 services. To the extent that there are year-to-year 
changes in the volume and mix of services provided by physicians, the 
actual impact on total Medicare revenues will be different than those 
shown in Table 28. The payment impacts reflect averages for each 
specialty based on Medicare utilization. The payment impact for an 
individual physician would be different from the average, based on the 
mix of services the physician provides.
    Table 28 shows only the payment impact on PFS services. The 
following is an explanation of the information represented in Table 28.
     Specialty: The physician specialty or type of 
practitioner/supplier.
     Allowed Charges: Allowed charges are the Medicare Fee 
Schedule amounts for covered services and include copayments and 
deductibles (which are the financial responsibility of the 
beneficiary). These amounts have been summed across all services 
provided by physicians, practitioners, or suppliers with a specialty to 
arrive at the total allowed charges for the specialty.
     Impact of the 2009 Work RVU (including the proposed 
addition of 10 services and deletion of 1 service from the list of 
services subject to the multiple procedure payment reduction for 
diagnostic imaging services)and PE RVU proposed changes using the 
methodology finalized in the CY 2007 PFS final rule with comment period 
and the revised data sources discussed in this proposed rule.
     CY 2009 Update: The percentage decrease in allowed charges 
attributed to the estimated CY 2009 PFS conversion factor update (-5.4 
percent).
     Combined impact with CY 2009 update: The CY 2009 
percentage decrease in allowed charges attributed to the impact of the 
work and PE RVU changes and the CY 2009 update.

             Table 28.--Combined CY 2009 Medicare Physician Fee Schedule Total Allowed Charge Impact
----------------------------------------------------------------------------------------------------------------
                                                                            Impact of                  Combined
                                                                Allowed    work and PE  2009 Update  impact with
                          Specialty                             charges        RVU         (Cur.       CY 2009
                                                                 (mil)       changes*      Law)**     update***
                                                                            (percent)    (percent)    (percent)
----------------------------------------------------------------------------------------------------------------
1. TOTAL....................................................      $68,076            0           -5           -5
2. ALLERGY/IMMUNOLOGY.......................................          157            1           -5           -4
3. ANESTHESIOLOGY...........................................        1,579           -1           -5           -6
4. CARDIAC SURGERY..........................................          327           -1           -5           -6
5. CARDIOLOGY...............................................        6,535           -1           -5           -7
6. COLON AND RECTAL SURGERY.................................          112            1           -5           -5
7. CRITICAL CARE............................................          181            0           -5           -6
8. DERMATOLOGY..............................................        2,159            3           -5           -3
9. EMERGENCY MEDICINE.......................................        1,962            0           -5           -6
10. ENDOCRINOLOGY...........................................          317            0           -5           -5
11. FAMILY PRACTICE.........................................        4,396            0           -5           -5
12. GASTROENTEROLOGY........................................        1,545            1           -5           -4
13. GENERAL PRACTICE........................................          692            0           -5           -5
14. GENERAL SURGERY.........................................        1,974            0           -5           -5
15. GERIATRICS..............................................          142            0           -5           -5
16. HAND SURGERY............................................           73           -1           -5           -6
17. HEMATOLOGY/ONCOLOGY.....................................        1,709            0           -5           -6
18. INFECTIOUS DISEASE......................................          455            1           -5           -5
19. INTERNAL MEDICINE.......................................        8,727            0           -5           -5
20. INTERVENTIONAL RADIOLOGY................................          196           -1           -5           -6
21. NEPHROLOGY..............................................        1,510           -1           -5           -7
22. NEUROLOGY...............................................        1,231            0           -5           -6
23. NEUROSURGERY............................................          510           -1           -5           -6
24. NUCLEAR MEDICINE........................................           66            0           -5           -6
25. OBSTETRICS/GYNECOLOGY...................................          520            0           -5           -6
26. OPHTHALMOLOGY...........................................        4,202           -1           -5           -6
27. ORTHOPEDIC SURGERY......................................        2,877            0           -5           -6
28. OTOLARYNGOLOGY..........................................          824           -1           -5           -6
29. PATHOLOGY...............................................          833            0           -5           -6
30. PEDIATRICS..............................................           59            0           -5           -5
31. PHYSICAL MEDICINE.......................................          697           -1           -5           -6
32. PLASTIC SURGERY.........................................          236            0           -5           -5
33. PSYCHIATRY..............................................          927            1           -5           -5
34. PULMONARY DISEASE.......................................        1,496            0           -5           -5
35. RADIATION ONCOLOGY......................................        1,591           -1           -5           -6
36. RADIOLOGY...............................................        4,697            0           -5           -5
37. RHEUMATOLOGY............................................          439            0           -5           -6
38. THORACIC SURGERY........................................          353           -1           -5           -6
39. UROLOGY.................................................        1,804            0           -5           -5
40. VASCULAR SURGERY........................................          575            0           -5           -5

[[Page 38597]]

 
41. AUDIOLOGIST.............................................           28          -10           -5          -16
42. CHIROPRACTOR............................................          620           -1           -5           -6
43. CLINICAL PSYCHOLOGIST...................................          456           -2           -5           -7
44. CLINICAL SOCIAL WORKER..................................          301           -2           -5           -7
45. NURSE ANESTHETIST.......................................          670            0           -5           -6
46. NURSE PRACTITIONER......................................          781            0           -5           -5
47. OPTOMETRY...............................................          719            0           -5           -6
48. ORAL/MAXILLOFACIAL SURGERY..............................           31            1           -5           -4
49. PHYSICAL/OCCUPATIONAL THERAPY...........................        1,458            1           -5           -4
50. PHYSICIAN ASSISTANT.....................................          580            0           -5           -5
51. PODIATRY................................................        1,433            2           -5           -4
52. DIAGNOSTIC TESTING FACILITY.............................        1,029           -1           -5           -6
53. INDEPENDENT LABORATORY..................................          754            5           -5            0
54. PORTABLE X-RAY SUPPLIER.................................           51            2           -5           -3
----------------------------------------------------------------------------------------------------------------
*PE changes are CY 2009 third year transition changes. For fully implemented CY 2010 PE changes see Table 27.
**Under current law, the payment rates will decrease by -10.6 on July 1, 2008, in addition to the -5.4 CY 2009
  update.
***Components may not sum to total due to rounding. Impacts as of May 20, 2008.

    Table 29 shows the estimated impact on total payments for selected 
high-volume procedures of all of the changes discussed previously. We 
selected these procedures because they are the most commonly provided 
by a broad spectrum of physician specialties. There are separate 
columns that show the change in the facility rates and the nonfacility 
rates. For an explanation of facility and nonfacility PE refer to 
Addendum A of this proposed rule.

                   Table 29.--Impact of Proposed Rule and Estimated Physician Update on Proposed 2009 Payment for Selected Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Facility                             Nonfacility
                                                                           -----------------------------------------------------------------------------
             CPT 1/HCPCS                MOD            Description                        Proposed 3    Percent                  Proposed 3    Percent
                                                                               2008 2        2009        change       2008 2        2009        change
--------------------------------------------------------------------------------------------------------------------------------------------------------
11721................................  .....  Debride nail, 6 or more.....       $24.53       $22.88           -7       $35.43       $34.48           -3
17000................................  .....  Destruct premalg lesion.....        41.56        40.93           -2        60.30        60.59            0
27130................................  .....  Total hip arthroplasty......     1,195.11     1,118.97           -6           NA           NA           NA
27244................................  .....  Treat thigh fracture........       963.45       898.53           -7           NA           NA           NA
27447................................  .....  Total knee arthroplasty.....     1,283.69     1,198.90           -7           NA           NA           NA
33533................................  .....  CABG, arterial, single......     1,659.12     1,537.94           -7           NA           NA           NA
35301................................  .....  Rechanneling of artery......       934.83       870.17           -7           NA           NA           NA
43239................................  .....  Upper GI endoscopy, biopsy..       140.36       136.33           -3       294.35       282.00           -4
66821................................  .....  After cataract laser surgery       223.15       210.45           -6       238.14       223.99           -6
66984................................  .....  Cataract surg w/iol, 1 stage       560.08       525.00           -6           NA           NA           NA
67210................................  .....  Treatment of retinal lesion.       488.20       460.22           -6       507.96       477.30           -6
71010................................  .....  Chest x-ray.................           NA           NA           NA        22.83        20.95           -8
71010................................     26  Chest x-ray.................         7.84         7.41           -5         7.84         7.41           -5
77056................................  .....  Mammogram, both breasts.....           NA           NA           NA        93.69        93.78            0
77056................................     26  Mammogram, both breasts.....        37.48        36.10           -4        37.48        36.10           -4
77057................................  .....  Mammogram, screening........           NA           NA           NA        73.93        70.58           -5
77057................................     26  Mammogram, screening........        30.32        29.01           -4        30.32        29.01           -4
77427................................  .....  Radiation tx management, x5.       158.42       151.47           -4       158.42       151.47           -4
78465................................     26  Heart image (3d), multiple..        66.43        64.78           -2        66.43        64.78           -2
88305................................     26  Tissue exam by pathologist..        32.36        29.97           -7        32.36        29.97           -7
90801................................  .....  Psy dx interview............       112.08       103.45           -8       131.50       126.98           -3
90862................................  .....  Medication management.......        39.18        36.74           -6        46.67        46.09           -1
90935................................  .....  Hemodialysis, one evaluation        58.26        54.14           -7           NA           NA           NA
92012................................  .....  Eye exam established pat....        38.50        36.74           -5        62.69        59.30           -5
92014................................  .....  Eye exam & treatment........        59.28        56.40           -5        90.96        86.05           -5
92980................................  .....  Insert intracoronary stent..       721.22       699.36           -3           NA           NA           NA

[[Page 38598]]

 
93000................................  .....  Electrocardiogram, complete.        20.78        18.37          -12        20.78        18.37          -12
93010................................  .....  Electrocardiogram report....         7.50         7.41           -1         7.50         7.41           -1
93015................................  .....  Cardiovascular stress test..        93.01        89.27           -4        93.01        89.27           -4
93307................................     26  Echo exam of heart..........        42.24        40.93           -3        42.24        40.93           -3
93510................................     26  Left heart catheterization..       215.65       204.97           -5       215.65       204.97           -5
98941................................  .....  Chiropractic manipulation...        25.55        24.17           -5        29.64        27.72           -6
99203................................  .....  Office/outpatient visit, new        58.60        55.11           -6        81.42        77.03           -5
99213................................  .....  Office/outpatient visit, est        37.48        35.77           -5        53.49        51.24           -4
99214................................  .....  Office/outpatient visit, est        58.60        55.76           -5        80.40        77.03           -4
99222................................  .....  Initial hospital care.......       104.59        98.94           -5           NA           NA           NA
99223................................  .....  Initial hospital care.......       153.65       145.67           -5           NA           NA           NA
99231................................  .....  Subsequent hospital care....        31.68        30.29           -4           NA           NA           NA
99232................................  .....  Subsequent hospital care....        56.55        53.82           -5           NA           NA           NA
99233................................  .....  Subsequent hospital care....        81.08        77.35           -5           NA           NA           NA
99236................................  .....  Observ/hosp same date.......       179.20       167.91           -6           NA           NA           NA
99239................................  .....  Hospital discharge day......        83.13        78.32           -6           NA           NA           NA
99243................................  .....  Office consultation.........        83.13        78.96           -5       109.36       104.10           -5
99244................................  .....  Office consultation.........       130.14       124.40           -4       160.12       152.44           -5
99253................................  .....  Inpatient consultation......        97.09        92.82           -4           NA           NA           NA
99254................................  .....  Inpatient consultation......       140.02       134.39           -4           NA           NA           NA
99283................................  .....  Emergency dept visit........        52.81        49.31           -7           NA           NA           NA
99284................................  .....  Emergency dept visit........        97.44        92.17           -5           NA           NA           NA
99291................................  .....  Critical care, first hour...       182.61       171.13           -6       224.51       209.81           -7
99292................................  .....  Critical care, add'l 30 min.        91.64        85.73           -6       100.16        93.46           -7
99348................................  .....  Home visit, est patient.....           NA           NA           NA        68.14        64.46           -5
99350................................  .....  Home visit, est patient.....           NA           NA           NA       139.34       130.53           -6
G0008................................  .....  Admin influenza virus vac...           NA           NA           NA        18.40        18.37            0
G0317................................  .....  ESRD related svs 4+mo 20+yrs       245.63       227.21           -7       245.63       227.21          -7
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ CPT codes and descriptions are copyright 2008 American Medical Association. All Rights Reserved. Applicable FARS/DFARS apply.
\2\ Based on CF of 34.0682 published in the CY 2008 PFS Final rule with comment period (72 FR 66222). Used for PFS payment for services beginning July
  1, 2008 through December 31, 2008.
\3\ Based upon proposed -5.4 percent reduction in Conversion Factor.

B. Telehealth

    In section II.D. of this proposed rule, we are proposing to create 
HCPCS codes specific to the telehealth delivery of follow up inpatient 
consultations. The new HCPCS codes will be limited to the range of 
services included in the scope of deleted CPT codes previously approved 
for telehealth, with the descriptions modified to limit the use of such 
services for telehealth. Utilization of these codes would allow us to 
provide payment for follow-up inpatient telehealth consultations, as 
well as enable us to monitor whether the codes are used appropriately.
    The total annual Medicare payment amount for telehealth services 
(including the originating site facility fee) is approximately $2 
million. Previous additions to the list of Medicare telehealth services 
have not resulted in a significant increase in Medicare program 
expenditures. While we believe that the addition of follow-up inpatient 
telehealth consultation services to the approved telehealth service 
list will enable more beneficiaries to access to these services, we do 
not anticipate that this proposed change will have a significant 
budgetary impact on the Medicare program.

C. Payment for Covered Outpatient Drugs and Biologicals

1. ASP Issues
    The proposed changes discussed in section II.F.1. of this proposed 
rule with respect to payment for covered outpatient drugs and 
biologicals, are estimated to have no impact on Medicare expenditures.
2. CAP Issues
    This proposed rule contains proposals and seeks comment on certain 
aspects of the CAP, specifically the annual CAP payment amount update 
mechanism, the definition of a CAP physician, easing the restriction on 
physician transport of CAP drugs between practice locations, and the 
dispute resolution process. Several of these minor refinements may 
improve compliance, promote program flexibility, improve the quality 
and potentially the number of services for participating CAP 
physicians, and increase available choices for participating CAP 
physicians. We anticipate that these changes associated with the CAP 
will not result in significant additional cost savings or increases 
relative to the ASP payment system.

D. Application of the HPSA Bonus Payment

    As discussed in section II.G. of this proposed rule, there are no 
program cost savings or increased expenditures associated with this 
change; however, we expect that the regulation will increase the number 
of physicians who receive the bonus automatically, while decreasing the 
number of physicians required to use modifier in order to receive the 
payment. It will also provide assurance to physicians and eligible 
recipients, for example health care facilities that bill under the CAH 
II method, in qualified areas that they will

[[Page 38599]]

receive the HPSA bonus payment throughout the calendar year.

F. Provisions Related to Payment for Renal Dialysis Services Furnished 
by End-Stage Renal Disease (ESRD) Facilities

    The ESRD-related provisions in this proposed rule are discussed in 
section II.H. of this proposed rule. To understand the impact of the 
proposed changes affecting payments to different categories of ESRD 
facilities, it is necessary to compare estimated payments under the 
current year (CY 2008 payments) to estimated payments under the 
revisions to the composite rate payment system (CY 2009 payments) as 
discussed in section II.H. of this proposed rule. To estimate the 
impact among various classes of ESRD facilities, it is imperative that 
the estimates of current payments and proposed payments contain similar 
inputs. Therefore, we simulated payments only for those ESRD facilities 
that we are able to calculate both current 2008 payments and proposed 
2009 payments.
    ESRD providers were grouped into the categories based on 
characteristics provided in the Online Survey and Certification and 
Reporting (OSCAR) file and the most recent cost report data from the 
Healthcare Cost Report Information System (HCRIS). We also used the 
December 2007 update of CY 2007 National Claims History file as a basis 
for Medicare dialysis treatments and separately billable drugs and 
biologicals. While the December 2007 update of the 2007 claims is not 
complete, we wanted to use the most recent data available, and plan to 
use an updated version of the 2007 claims file for the final rule. Due 
to data limitations, we are unable to estimate current and proposed 
payments for 80 of the 4866 ESRD facilities that bill for ESRD dialysis 
treatments.
    Table 30 shows the impact of this year's proposed changes to CY 
2009 payments to hospital-based and independent ESRD facilities. The 
first column of Table 30 identifies the type of ESRD provider, the 
second column indicates the number of ESRD facilities for each type, 
and the third column indicates the number of dialysis treatments.
    The fourth column shows the effect of the proposed change to the 
wage index floor as it affects the composite rate payments to ESRD 
facilities for CY 2009. The fourth column compares aggregate ESRD wage 
adjusted composite rate payments in the fourth year of the transition 
(CY 2009) using the CY 2009 wage index with a 0.75 floor compared to 
aggregate ESRD wage adjusted composite rate payments in the fourth year 
of the transition (CY 2009) using the CY 2009 wage index with a 0.70 
floor. Note that the fourth column only includes the effect of the 
proposed change to the wage index floor and does not include the 
effects of other wage index changes, such as, moving from the third to 
fourth year of the transition and updated wage index values from CY 
2008 to CY 2009.
    The fifth column shows the effect of all proposed changes to the 
ESRD wage index for CY 2009 as it affects the composite rate payments 
to ESRD facilities. It is inclusive of the changes in the fourth 
column. The fifth column compares aggregate ESRD wage adjusted 
composite rate payments in the fourth year of the transition (CY 2009) 
to aggregate ESRD wage adjusted composite rate payments in the third 
year of the transition (CY 2008). In the fourth year of the transition 
(CY 2009), ESRD facilities receive 100 percent of the CBSA wage 
adjusted composite rate and 0 percent of the MSA wage adjusted 
composite rate. In the third year of the transition, ESRD facilities 
receive 75 percent of the CBSA wage adjusted composite rate and 25 
percent of the MSA wage adjusted composite rate. The overall effect to 
all ESRD providers in aggregate is zero because the proposed CY 2009 
ESRD wage index has been multiplied by a BN adjustment factor to comply 
with the statutory requirement that any wage index revisions be done in 
a manner that results in the same aggregate amount of expenditures as 
would have been made without any changes in the wage index.
    The sixth column shows the overall effect of the proposed changes 
in composite rate payments to ESRD providers. The overall effect is 
measured as the difference between the proposed CY 2009 payment with 
all changes as proposed in this rule and current CY 2008 payment. This 
payment amount is computed by multiplying the wage adjusted composite 
rate with the drug add-on for each provider times the number of 
dialysis treatments from the CY 2007 claims. The CY 2009 proposed 
payment is the transition year 4 wage-adjusted composite rate for each 
provider (with the 15.5 percent drug add-on) times dialysis treatments 
from CY 2007 claims. The CY 2008 current payment is the transition year 
3 wage-adjusted composite rate for each provider (with the current 15.5 
percent drug add-on) times dialysis treatments from CY 2007 claims.
    The overall impact to ESRD providers in aggregate is 0.0 percent. 
This zero update corresponds to the proposed 0.0 percent update to the 
drug add-on. The variation shown in column 6 is due to variation in 
changes in the wage index (column 5). All provider types receive the 
same 0.0 percent increase to the drug add-on.

   Table 30.--Impact of CY 2009 Proposed Changes in Payments to Hospital-Based and Independent ESRD Facilities
         [Percent change in composite rate payments to ESRD facilities (both program and beneficiaries)]
----------------------------------------------------------------------------------------------------------------
                                                            Number of
                                                            dialysis      Effect of     Effect of
                                              Number of    treatments    changes in    changes in      Overall
                                             facilities        (in       floor only    wage index    effect \3\
                                                            millions)        \1\           \2\
----------------------------------------------------------------------------------------------------------------
All Providers.............................         4,786          32.7           0.0           0.0           0.0
    Independent...........................         4,231          29.4           0.0           0.0           0.0
    Hospital Based........................           555           3.2           0.0           0.3           0.3
By Facility Size:
    Less than 5000 treatments.............         1,941           5.7           0.0          -0.1          -0.1
    5000 to 9999 treatments...............         1,905          13.7           0.0           0.0           0.0
    Greater than 9999 treatments..........           940          13.2           0.0           0.0           0.0
Type of Ownership:
    Profit................................         3,860          26.8           0.0          -0.1          -0.1
    Nonprofit.............................           926           5.9           0.0           0.2           0.2
By Geographic Location:
    Rural.................................         1,298           6.8           0.0          -0.4          -0.4

[[Page 38600]]

 
    Urban.................................         3,488          25.8           0.0           0.1           0.1
By Region:
    New England...........................           153           1.1           0.0           1.2           1.2
    Middle Atlantic.......................           556           4.1           0.0           0.1           0.1
    East North Central....................           756           5.2           0.0          -1.0          -1.0
    West North Central....................           362           1.8           0.0           0.0           0.0
    South Atlantic........................          1090           7.5           0.0          -0.1          -0.1
    East South Central....................           375           2.5           0.0          -1.0          -1.0
    West South Central....................           664           4.7           0.0          -0.5          -0.5
    Mountain..............................           255           1.5           0.0           0.0           0.0
    Pacific...............................           541           4.1           0.0           2.1           2.1
    Puerto Rico...........................            34           0.4          -3.1          -4.6          -4.6
----------------------------------------------------------------------------------------------------------------
\1\ This column only shows the effect of the proposed wage index floor changes on ESRD providers for CY2009.
  Composite rate payments computed using the CY2009 wage index with a 0.75 floor are compared to composite rate
  payments using the CY2009 wage index with a 0.70 floor.
\2\ This column shows the overall effect of wage index changes on ESRD providers. Composite rate payments
  computed using the current wage index are compared to composite rate payments using the CY2009 wage index
  changes.
\3\ This column shows the percent change between CY2009 and CY2008 composite rate payments to ESRD facilities.
  The CY2009 payments include the CY2009 wage adjusted composite rate, and the 15.5 percent drug add-on times
  treatments. The CY2008 payments to ESRD facilities includes the CY2008 wage adjusted composite rate and the
  15.5 percent drug add-on times treatments.

G. IDTF Issues

    We believe that our proposals regarding IDTFs as discussed in 
Section II.I. of this proposed rule would have minimal budgetary 
impact. However, we believe that these changes are necessary to ensure 
that only IDTFs enrolled in the Medicare program are billing for the 
services provided and that the services are provided by properly 
qualified individuals. Additionally, the provisions in this rule would 
require physicians, NPPs, and physician or NPP groups to enroll as an 
IDTF when they are performing diagnostic testing procedures. This 
requirement would help ensure that properly qualified individuals are 
performing these diagnostic testing procedures. Also, we believe that 
the proposed IDTF provisions contained in this rule will help ensure 
that beneficiaries receive quality care regardless of the setting in 
which they are provided. We are unable to determine the extent that 
IDTFS and physicians, NPPs, and physician or NPP groups currently 
providing diagnostic testing procedures will be unable to meet these 
requirements and therefore have their billing privileges revoked or be 
denied enrollment into the Medicare program. However, we do not believe 
that beneficiary access to these services will be affected.

H. Physician and Nonphysician Practitioner Enrollment Issues

    We believe that our proposals regarding physicians, NPPs, and 
physician and nonphysician groups as discussed in section II.J. of this 
proposed rule would have minimal budgetary impact.
    As a result of currently not having quantifiable data, we cannot 
effectively derive an estimate of the monetary impacts of these 
provisions. Accordingly, we are seeking public comment so that the 
public may provide any data available that provides a calculable impact 
or any alternative to the proposed provisions.

I. Proposed Amendment to the Exemption for Computer-Generated Facsimile 
Transmissions From the NCPDP SCRIPT Standard for Transmitting 
Prescription and Certain Prescription-Related Information for Part D-
Covered Drugs Prescribed to Part D Eligible Individuals

    The amendment to the exemption for computer-generated facsimiles 
from the NCPDP SCRIPT Standard under the Medicare Part D e-prescribing 
provisions is discussed in section II.K. of this rule. E-prescribing 
Part D covered drugs to Part D eligible individuals is voluntary for 
providers and dispensers. The MMA only requires that if prescribers and 
dispensers choose to e-prescribe, that they use the standards adopted 
by the Secretary for those specific e-prescribing transactions. The 
proposed amendment to the exemption for computer-generated faxing from 
the NCPDP SCRIPT standard only affects pharmacies that already conduct 
e-prescribing using products that generate facsimiles.
    This proposed amendment of the exemption for computer-generated 
facsimiles to include prescription refill requests sent from dispensers 
to providers who do not possess the capability to conduct electronic 
refill request transactions using the NCPDP SCRIPT standard will not 
affect non-NCPDP SCRIPT enabled prescribers. Prescribers that currently 
e-prescribe using NCPDP SCRIPT would continue to receive refill 
requests electronically. Prescribers that currently e-prescribe with 
computer-generated faxes using a system that can utilize the NCPDP 
SCRIPT standard will simply turn that function on, and receive refill 
request transactions using the NCPDP SCRIPT standard in place of the 
computer-generated facsimiles that they used to receive. Prescribers 
that do not have the capacity to use NCPDP SCRIPT standard would 
continue to receive computer-generated facsimiles. Moreover, the 
proposed amendment would not impose costs on dispensers, as they would 
be permitted to continue using computer-generated facsimiles with 
partners that cannot conduct electronic refill request transactions 
using the NCPDP SCRIPT standard. The proposed amendment will have 
direct benefits for dispensers. One national drug store chain estimated 
that its stores generate 150,000 non-EDI prescription refill requests 
each day. If the computer-generated facsimile exemption were not 
modified as proposed here these dispensers would have to revert to 
paper/phone calls in instances in which a provider is not able to 
accept electronic refill requests

[[Page 38601]]

utilizing the NCPDP SCRIPT standard. One chain pharmacy has relayed 
that moving forward with the scheduled elimination of the computer-
generated faxing exception to the NCPDP SCRIPT standard in all 
instances other than transmission failures and similar communication 
problems of temporary or transient nature would result in approximately 
105,000 initial paper facsimiles and 45,000 initial phone calls/oral 
scripts per day. They also consider a 2 percent facsimile failure rate 
that translates into phone calls, or approximately 2,100 additional 
phone calls per day. Ten percent of all phone calls require a second 
call back, or 4,710 call backs per day. Therefore, without further 
modification of computer-generated facsimiles exception, as of January 
1, 2009 this national drug store chain would have to make a total of 
51,810 additional phone calls for prescription refill requests per day. 
They estimate the cost of reverting to paper facsimiles, including 
purchasing fax machines, labor, paper, printing, hardware and service 
costs at over $12.5 million a year. They also estimate the cost per 
year of phone calls, including an average of 4 minutes per call, labor 
and telecommunication costs, at more than $78 million per year, for a 
total cost for faxes and phone calls of $88.8 million per year.\2\
---------------------------------------------------------------------------

    \2\ CVS/Caremark Discussion Points on E-Fax Ruling Exceptions, 
January 3, 2007.
---------------------------------------------------------------------------

    Another national drug store chain offered a similar analysis. They 
estimated that a prescription refill request undertaken by telephone 
takes 1.43 minutes longer to complete than one initiated by computer-
generated facsimile. Without further modification of the computer-
generated facsimile exception, as of January 1, 2009 this national drug 
store chain would have to replace the more than 123 million computer-
generated facsimile refill requests that are made each year with phone 
calls or paper faxes. They estimate that this would result in 9.2 lost 
hours of staff time per store per week, resulting in $88 million in 
additional costs, based on a blended payroll rate of pharmacists and 
staff. Extrapolating this cost across the entire pharmacy industry 
based on this commenter's market share, they estimated an impending 
pharmacy industry loss of at least $520 million unless the computer-
generated facsimile exception is further modified.\3\
---------------------------------------------------------------------------

    \3\ December 22, 2007 correspondence from Walgreen's to CMS re: 
CMS-1385-FC, Final Rule with Comment Period: Amendment of the E-
Prescribing Exemption for Computer-Generated Facsimile 
Transmissions.
---------------------------------------------------------------------------

    According to industry reports in 2006 approximately 3.309 billion 
prescriptions \4\ were filled by retail dispensers, and according to 
CMS data, in 2006, approximately 825,000,000 Part D claims 
(prescription drug events) were finalized and accepted for payment,\5\ 
or approximately 25 percent of the total prescriptions filled that 
year. Thus, $130 million of the $520 million total loss estimated above 
would be attributable to Medicare Part D claims. We invite comments on 
these savings and loss assumptions estimates and assumptions.
---------------------------------------------------------------------------

    \4\ http://www.statehealthfacts.org.
    \5\ CMS, November 16, 2007 Proposed Rule, 72 FR 64913.
---------------------------------------------------------------------------

    We also assume that expanding the computer-generated facsimile 
exception to allow for computer-generated faxing in instances in which 
the provider is incapable of receiving electronic refill request 
transactions using the NCPDP SCRIPT standard would result in improved 
patient satisfaction through timely prescription refill request 
authorizations from prescribers, and maintenance of existing workflows 
at both the prescriber and dispenser ends.

J. CORF Issues

    The revisions to the CORF regulations discussed in section II.L. of 
this proposed rule update the regulations for consistency with the PFS 
payment rules and make additional changes to the conditions of 
participation to reflect industry standards. These revisions will help 
to clarify payment and operational requirements for CORF services and 
are expected to have minimal impact on Medicare expenditures.

K. Therapy Issues

    The revisions to the therapy regulations discussed in section II.M. 
of this proposed rule make technical corrections and update the 
regulations and are expected to have minimal impact on Medicare 
expenditures.

L. Physician Self-Referral Provisions

1. Incentive Payment and Shared Savings Programs
    Our proposal in section II.N. of this proposed rule would provide 
an exception to the physician self-referral statute to permit incentive 
payments between physicians and entities furnishing designated health 
services (DHS), provided that certain conditions are satisfied. We are 
not proposing to implement new incentive payment and shared savings 
programs, but merely are proposing an exception in Sec.  411.357(x) 
that would allow for remuneration provided by a hospital to a physician 
or to a qualified physician organization under an incentive payment or 
shared savings program that satisfies certain conditions. We believe 
that this exception would remove a barrier to participation in certain 
incentive payment and shared savings programs that may exist currently. 
We recognize the potential for an indirect, unquantifiable increase in 
the number of incentive payment and shared savings programs that, as a 
result of this exception, will be permitted to function as originally 
intended. However, because the purpose of incentive payment and shared 
savings programs is to increase quality while decreasing cost, we do 
not believe that our proposal would have a budgetary impact.
2. Anti-Markup Provisions
    We anticipate that our proposal in section II.N. of this proposed 
rule concerning the anti-markup provisions in Sec.  414.50 would result 
in savings to the program by reducing overutilization and anti-
competitive business arrangements. We cannot gauge with any certainty 
the extent of these savings to the Medicare program.

M. Physician Quality Reporting Initiative

    As discussed section II.O. of this proposed rule, the proposed 2009 
PQRI measures satisfy the requirement of section 1848(k)(2)(B)(ii) of 
the Act that the Secretary publish in the Federal Register by August 
15, 2008 a proposed set of measures that the Secretary determines would 
be appropriate for eligible professionals to use to submit data to the 
Secretary in 2009. As discussed in section II.O. of this proposed rule, 
we are also offering options in 2009 for reporting some of the 2009 
PQRI measures via submission of data to a clinical registry, options 
for reporting some of the 2009 PQRI measures via EHR-based submission, 
and options for reporting on measures groups rather than individual 
measures. Although there may be some cost incurred for maintaining the 
measures and their associated code sets, and for expanding an existing 
clinical data warehouse to accommodate registry-based data submission, 
we do not anticipate a significant cost impact on the Medicare program.

N. Educational Requirements for Nurse Practitioners and Clinical Nurse 
Specialists

    We anticipate that there are no program cost savings or increased 
expenditures associated with the proposed changes discussed in section 
II.Q. of this proposed rule. However, we

[[Page 38602]]

expect that the technical correction to the NP qualifications will make 
the regulations comport with the agency's intent to require a master's 
degree in nursing as the minimum educational level for new 
practitioners independently treating beneficiaries and directly billing 
the Medicare program. Also, the proposed changes to the NP and CNS 
educational requirement to include the DNP doctoral degree will help to 
eliminate any concern or confusion for contractors and the nursing 
industry about whether APNs with doctoral degrees in nursing (but 
without a master's degree in nursing) meet our program qualifications.

O. Portable X-Ray Personnel Qualifications

    We anticipate that there are no program cost savings or increased 
expenditures associated with the proposed changes discussed in section 
II.R. of this proposed rule; however, we expect that the revisions to 
the regulations will have a positive impact on patient care.

P. Prohibition Concerning Providers of Sleep Tests

    The proposal contained in section II.T.2 of this proposed rule will 
reduce Medicare Trust Fund vulnerability to fraud and abuse and protect 
Medicare Beneficiaries from the burden of unnecessary sleep testing and 
unnecessary exposure to a medical device. This prohibition will have no 
effect on most providers as most providers are not DMEPOS suppliers who 
would be supplying CPAP devices. Only providers or other entities that 
perform both sleep testing and supply CPAP machines to beneficiaries 
they have tested will be impacted.

Q. Beneficiary Signature Requirements for Nonemergency Ambulance 
Services

    We believe that our proposal in section II.T.3. of this proposed 
rule for allowing the ambulance provider or supplier to sign the claim 
on behalf of the beneficiary with respect to nonemergency transport 
services, provided that certain conditions are satisfied, would have no 
budgetary impact.

R. Revision to the ``Appeals of CMS or CMS Contractor Determinations 
When a Provider or Supplier Fails to Meet the Requirements for Medicare 
Billing Privileges'' Final Rule

    We expect that the proposal in section II.T.5. of this proposed 
rule will have an impact on an unknown number of persons and entities; 
however, we believe that this provision will impact only a small number 
of providers and suppliers whose billing privileges are revoked due to 
felony convictions, license suspensions or revocation, or because the 
provider or supplier is no longer operating at a practice location 
provided to Medicare. We also believe that while this provision changes 
the effective date of revocation for certain providers and supplier 
that are no longer in compliance with Medicare enrollment requirements, 
this provision does not expand or change our revocation authority.
    As a result of not having quantifiable data for the providers and 
suppliers that meet the proposed criteria for immediate revocation, we 
cannot effectively derive an estimate of the monetary impacts of this 
provision. Accordingly, we are seeking public comment so that the 
public may provide any data available that provides a calculable impact 
or any alternative to the proposed provision.

S. Alternatives Considered

    This proposed rule contains a range of policies, including some 
provisions related to specific MMA provisions. The preamble provides 
descriptions of the statutory provisions that are addressed, identifies 
those policies when discretion has been exercised, presents rationale 
for our decisions and, where relevant, alternatives that were 
considered.

T. Impact on Beneficiaries

    There are a number of changes made in this proposed rule that would 
have an effect on beneficiaries. In general, we believe these changes, 
including the refinements of the PQRI with its focus on measuring, 
submitting, and analyzing quality data, the modifications to personnel 
qualifications and the application of certain IDTF standards to 
physician and NPPs office practices will have a positive impact and 
improve the quality and value of care provided to Medicare 
beneficiaries.
    We do not believe that beneficiaries will experience drug access 
issues as a result of the proposed changes with respect to Part B drugs 
and CAP and discontinuation of payment for preadministration services 
associated with IVIG.
    As explained in more detail subsequently in this section, the 
regulatory provisions may affect beneficiary liability in some cases. 
Most changes in aggregate beneficiary liability from a particular 
provision would be a function of the coinsurance (20 percent if 
applicable for the particular provision after the beneficiary has met 
the deductible) and the effect of the aggregate cost (savings) of the 
provision on the standard calculation of the Medicare Part B premium 
rate (generally 25 percent of the provision's cost or savings). In 
2009, total cost sharing (coinsurance and deductible) per Part B 
enrollee associated with physician fee schedule services is estimated 
to be $558. In addition, the portion of the 2009 standard monthly Part 
B premium attributable to PFS services is estimated to be $32.50.
    To illustrate this point, as shown in Table 26, the 2008 national 
payment amount in the nonfacility setting for CPT code 99203 (Office/
outpatient visit, new), is $81.42 which means that currently (July 1 
through December 31) a beneficiary is responsible for 20 percent of 
this amount, or 16.28. Based on this proposed rule, the 2009 national 
payment amount in the nonfacility setting for CPT code 99203, as shown 
in Table 29, is $77.03 which means that, in 2009, the beneficiary 
coinsurance for this service would be $15.41.
    Proposed policies discussed in this rule that do affect overall 
spending, such as the proposed additions to the list of codes that are 
subject to the multiple procedure payment reduction for diagnostic 
imaging, would similarly impact beneficiaries' coinsurance.

U. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 31, we have 
prepared an accounting statement showing the classification of the 
expenditures associated with this proposed rule. This estimate includes 
the incurred benefit impact associated with the estimated CY 2009 PFS 
update, shown in this proposed rule, based on the 2008 Trustees Report 
baseline. All estimated impacts are classified as transfers.

[[Page 38603]]



      Table 31.--Accounting Statement: Classification of Estimated
                  Expenditures From CY 2008 to CY 2009
                              [In billions]
------------------------------------------------------------------------
             Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers....  Estimated decrease in expenditures
                                     of $5.9 billion.
From Whom To Whom?................  Federal Government to physicians,
                                     other practitioners and suppliers
                                     who receive payment under the
                                     Medicare Physician Fee Schedule;
                                     ESRD Medicare Providers; and
                                     Medicare suppliers billing for Part
                                     B drugs and for Medicare Part D.
------------------------------------------------------------------------

    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 409

    Health facilities, Medicare.

42 CFR Part 410

    Health facilities, Health professions, Kidney diseases, 
Laboratories, Medicare, Reporting and recordkeeping requirements, Rural 
areas, X-rays.

42 CFR Part 411

    Kidney diseases, Medicare, Physician referral, Reporting and 
recordkeeping requirements.

42 CFR Part 414

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 415

    Health facilities, Health professions, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 424

    Emergency medical services, Health facilities, Health professions, 
Medicare, Reporting and recordkeeping requirements.

42 CFR Part 485

    Grant programs--health, Health facilities, Medicaid, Medicare, 
Reporting and recordkeeping requirements.

42 CFR Part 486

    Grant programs--health, Health facilities, Medicare, Reporting and 
recordkeeping requirements, X-rays.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth 
below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

    1. The authority citation for part 405 continues to read as 
follows:

    Authority: Secs. 1102, 1861, 1862(a), 1871, 1874, 1881, and 
1886(k) of the Social Security Act (42 U.S.C. 1302, 1395x, 1395y(a), 
1395hh, 1395kk, 1395rr and 1395ww(k)), and sec. 353 of the Public 
Health Service Act (42 U.S.C. 263a).

Subpart H--Appeals Under the Medicare Part B Program

    2. Section 405.874, as amended on June 27, 2008 (73 FR 36448) is 
amended by revising paragraph (b)(2) to read as follows:


Sec.  405.874  Appeals of CMS or a CMS contractor.

* * * * *
    (b) * * *
    (2) Effective date of revocation. The revocation of a provider's or 
supplier's billing privileges is effective 30 days after CMS or the CMS 
contractor mails notice of its determination to the provider or 
supplier, except if the revocation is based on a Federal exclusion or 
debarment, felony conviction, license suspension or revocation, or the 
practice location is determined by CMS or its contractor not to be 
operational. When a revocation is based on a Federal exclusion or 
debarment, felony conviction, license suspension or revocation, or the 
practice location is determined by CMS or its contractor not to be 
operational, the revocation is effective with the date of exclusion or 
debarment, felony conviction, license suspension or revocation or the 
date that CMS or its contractor determined that the provider or 
supplier was no longer operational.
* * * * *

PART 409--HOSPITAL INSURANCE BENEFITS

    3. The authority citation for part 409 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart B--Inpatient Hospital Services and Inpatient Critical 
Access Hospital Services

    4. Section 409.17 is amended by revising paragraph (a)(1) to read 
as follows:


Sec.  409.17  Physical therapy, occupational therapy, and speech-
language pathology services.

    (a) * * *
    (1) Except as specified in this section, physical therapy, 
occupational therapy, or speech-language pathology services must be 
furnished by qualified physical therapists, physical therapist 
assistants, occupational therapists, occupational therapy assistants, 
or speech-language pathologists who meet the requirements specified in 
part 484 of this chapter.
* * * * *

Subpart C--Posthospital SNF Care

    5. Section 409.23 is amended by revising the section heading to 
read as follows:


Sec.  409.23  Physical therapy, occupational therapy and speech-
language pathology.

* * * * *

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

    6. The authority citation for part 410 continues to read as 
follows:

    Authority: Secs. 1102, 1834, 1871, and 1893 of the Social 
Security Act (42 U.S.C. 1302, 1395m, 1395hh, and 1395ddd).

Subpart B--Medical and Other Health Services

    7. Section 410.33 is amended by adding paragraphs (a)(3), (g)(16), 
and (j) to read as follows:


Sec.  410.33  Independent diagnostic testing facility.

    (a) * * *
    (3) Advanced diagnostic testing procedures. Advanced diagnostic 
testing procedures include diagnostic magnetic resonance imaging, 
computed

[[Page 38604]]

tomography, nuclear medicine (including positron emission tomography), 
and other such diagnostic testing procedures described in section 
1848(b)(4)(B) of the Act (excluding X-ray, ultrasound, and 
fluoroscopy).
* * * * *
    (g) * * *
    (16) Enrolls and bills Medicare for all mobile diagnostic services 
that it furnishes, regardless of whether the services are furnished in 
a mobile or fixed base location, including a physician office or fixed-
based IDTF.
* * * * *
    (j) A physician or nonphysician practitioner organization (as 
defined in Sec.  424.502) furnishing diagnostic testing services, 
except diagnostic mammography services:
    (1) Must enroll as an IDTF for each practice location furnishing 
these services; and
    (2) Is subject to the provisions in Sec.  410.33, except for Sec.  
410.33(g)(6), Sec.  410.33(g)(8), Sec.  410.33(g)(9), Sec.  
410.33(g)(14)(ii), and Sec.  410.33(g)(15)(i).
    8. Section 410.75 is amended by revising paragraph (b) to read as 
follows:


Sec.  410.75  Nurse practitioners' services.

* * * * *
    (b) Qualifications. For Medicare Part B coverage of his or her 
services, a nurse practitioner must be a registered professional nurse 
who is authorized by the State in which the services are furnished to 
practice as a nurse practitioner in accordance with State law, and must 
meet one of the following--
    (1) Obtained Medicare billing privileges as a nurse practitioner 
for the first time on or after January 1, 2003 and meets the following 
requirements:
    (i) Be certified as a nurse practitioner by a recognized national 
certifying body that has established standards for nurse practitioners.
    (ii) Possess a master's degree in nursing or a Doctor of Nursing 
Practice (DNP) doctoral degree.
    (2) Obtained Medicare billing privileges as a nurse practitioner 
for the first time before January 1, 2003, and meets the standards in 
paragraph (b)(1)(i) of this section.
    (3) Obtained Medicare billing privileges as a nurse practitioner 
for the first time before January 1, 2001.
* * * * *
    9. Section 410.76 is amended by revising paragraph (b)(2) to read 
as follows:


Sec.  410.76  Clinical nurse specialists' services.

* * * * *
    (b) * * *
    (2) Have a master's degree in a defined clinical area of nursing 
from an accredited educational institution or a Doctor of Nursing 
Practice (DNP) doctoral degree; and
* * * * *
    10. Section 410.78 is amended by revising the introductory text of 
paragraph (b) to read as follows:


Sec.  410.78  Telehealth services.

* * * * *
    (b) General rule. Medicare Part B pays for office and other 
outpatient visits, professional consultation, psychiatric diagnostic 
interview examination, individual psychotherapy, pharmacologic 
management, end-stage renal disease-related services included in the 
monthly capitation payment (except for one visit per month to examine 
the access site), individual medical nutrition therapy, the 
neurobehavioral status exam, and follow-up telehealth consultations 
furnished by an interactive telecommunications system if the following 
conditions are met:
* * * * *

Subpart D--Comprehensive Outpatient Rehabilitation Facility (CORF) 
Services

    11. Section 410.100 is amended by revising paragraphs (e)(1) and 
(h) to read as follows:


Sec.  410.100  Included services.

* * * * *
    (e) * * *
    (1) Respiratory therapy services are services provided by a 
respiratory therapist for the assessment, treatment, and monitoring of 
patients with deficiencies or abnormalities of cardiopulmonary 
function.
* * * * *
    (h) Social and psychological services.
    Social and psychological services include the assessment of an 
individual's mental and emotional functioning, and the individual's 
response and rate of progress as they relate to the individual's 
rehabilitation plan of treatment, including physical therapy services, 
occupational therapy services, speech-language pathology services and 
respiratory therapy services.
* * * * *

Subpart I--Payment of SMI Benefits

    12. Section 410.155 is amended by--
    A. Revising paragraph (b)(1).
    B. Adding paragraph (b)(2)(vi).
    The revisions and additions are to read as follows:


Sec.  410.155  Outpatient mental health treatment limitation.

* * * * *
    (b) Application of the limitation.
    (1) Services subject to the limitation. Except as specified in 
paragraph (b)(2) of this section, the services furnished by physicians 
and other practitioners, whether furnished directly or as an incident 
to those practitioners' services are subject to the limitation if they 
are furnished in connection with the treatment of a mental, 
psychoneurotic, or personality disorder (that is, any condition 
identified by a diagnosis code within the range of 290 through 319) and 
are furnished to an individual who is not an inpatient of a hospital.
    (2) * * *
    (vi) CORF social and psychological services (as defined at Sec.  
410.100(h) of this subpart) furnished by a CORF.
* * * * *

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 
PAYMENT

    13. The authority citation for part 411 continues to read as 
follows:

    Authority: Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877 
of the Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-
152, 1395hh, and 1395nn).

Subpart J--Financial Relationships Between Physicians and Entities 
Furnishing Designated Health Services

    14. Section 411.351 is amended by adding the following definition 
in alphabetical order:


Sec.  411.351  Definitions.

* * * * *
    Qualified physician organization means a physician organization 
comprised entirely of physicians participating in the same incentive 
payment or shared savings program.
* * * * *
    15. Section 411.357 is revised by adding paragraph (x) to read as 
follows:


Sec.  411.357  Exceptions to the referral prohibition related to 
compensation arrangements.

* * * * *
    (x) Incentive Payment and Shared Savings Programs. Remuneration in 
the form of cash or cash equivalent payments, but not including 
nonmonetary remuneration, provided by a hospital to a physician on the 
hospital's medical staff or to a qualified physician organization (as 
defined at Sec.  411.351) pursuant to an arrangement between the 
hospital and the physician or qualified physician organization, if all 
of the following conditions are met:

[[Page 38605]]

    (1) The remuneration is provided as part of a documented incentive 
payment or shared savings program to achieve--
    (i) The improvement of quality of hospital patient care services 
through changes in physician clinical or administrative practices; or
    (ii) Actual cost savings for the hospital resulting from the 
reduction of waste or changes in physician clinical or administrative 
practices, without an adverse effect on or diminution in the quality of 
hospital patient care services.
    (2) The incentive payment or shared savings program identifies 
patient care quality measures or cost saving measures (for purposes of 
this paragraph, collectively, ``performance measures'') or both that--
    (i) Use an objective methodology, are verifiable, are supported by 
credible medical evidence, and are individually tracked;
    (ii) Are reasonably related to the hospital's or comparable 
hospitals' practices and patient population;
    (iii) With respect to patient care quality measures, are listed in 
CMS' Specification Manual for National Hospital Quality Measures; and
    (iv) Are monitored throughout the term of the arrangement to 
protect against inappropriate reductions or limitations in patient care 
services.
    (3) The incentive payment or shared savings program establishes--
    (i) Baseline levels for the performance measures using the 
hospital's historical and clinical data; and
    (ii) Target levels for the performance measures that are developed 
by comparing historical data for the hospital's practices and patient 
population to national or regional data for comparable hospitals' 
practices and patient populations; and
    (iii) Thresholds above or below which no payments will accrue to 
physicians.
    (4) At least five physicians participate in each performance 
measure (the ``participating physician pool''). Physicians 
participating in the incentive payment or shared savings program 
(``participating physicians'') must be on the medical staff of the 
hospital at the commencement of the program, and may not be selected in 
a manner that takes into account the volume or value of referrals or 
other business generated between the parties. A hospital may elect to 
make an incentive payment or shared savings program available to 
physicians in a particular department or specialty, provided that the 
hospital offers the opportunity to participate in the incentive payment 
or shared savings program to all physicians in the department or 
specialty on the same terms and conditions.
    (5) The incentive payment or shared savings program requires 
independent medical review of the program's impact on the quality of 
patient care services provided at the hospital and corrective action if 
the independent medical review indicates a diminution in the quality of 
hospital patient care services. The independent medical review must be 
completed prior to the commencement of the incentive payment or shared 
savings program (with respect to the program's potential impact on the 
quality of patient care services provided at the hospital) and at least 
annually thereafter. For purposes of this paragraph, ``independent 
medical review,'' means written review by an individual or organization 
that is--
    (i) Not affiliated with the hospital;
    (ii) Not affiliated with any participating physician or any 
physician organization to which any participating physician belongs; 
and
    (iii) At the time of the review, not participating in any incentive 
payment or shared savings program at the hospital.
    (6) Under the incentive payment or shared savings program--
    (i) Physicians must have access to the same selection of items, 
supplies or devices as was available at the hospital prior to the 
commencement of the program, and must not be restricted in their 
ability to make medically appropriate decisions for their patients, 
including, but not limited to, decisions about tests, treatments, 
procedures, services, supplies or discharge;
    (ii) The hospital may not make a payment to a participating 
physician or a qualified physician organization for the use of an item, 
supply or device if the physician or qualified physician organization 
has an ownership or investment interest in, or a compensation 
arrangement with, the manufacturer, distributor or group purchasing 
organization that arranges for the purchase of the item, supply or 
device; and
    (iii) The hospital may not limit the availability of new technology 
that--
    (A) Is linked through objective evidence to improved outcomes and 
is clinically appropriate for a particular patient; and
    (B) Meets the same Federal regulatory standards as technology 
available under the incentive payment or shared savings program (for 
example, approval by the Food and Drug Administration and Medicare or 
Medicaid coverage decisions).
    (7) The hospital provides effective prior written notice to 
patients affected by the incentive payment or shared savings program 
that--
    (i) Identifies the physicians participating in the program;
    (ii) Discloses that participating physicians receive payments for 
meeting targets for performance measures; and
    (iii) Describes the performance measures in a manner reasonably 
designed to inform patients about the program.
    (8) The arrangement is set out in writing, is signed by the 
parties, and specifies the remuneration (or a formula for the 
remuneration) in detail sufficient to be independently verified, 
including a comprehensive description of the incentive payment or 
shared savings program in which the physician is participating, the 
applicable baseline measures, and the targets for performance measures 
to be achieved by the participating physician. To satisfy this 
requirement, each specific performance measure and the resulting 
payment (or a formula for the resulting payment) to the participating 
physician or qualified physician organization must be clearly and 
separately identified.
    (9) The performance measures provided for under the arrangement do 
not involve the counseling or promotion of a business arrangement or 
other activity that violates any Federal or State law and, in the 
aggregate, are reasonable and necessary for the legitimate business 
purposes of the arrangement.
    (10) The term of the arrangement is for no less than 1 year and no 
more than 3 years.
    (11) Payments must take into account previous payments made for 
performance measures already achieved to ensure that the participating 
physician or qualified physician organization does not receive payment 
related to patient care quality improvements or cost savings that were 
achieved during a prior period of the arrangement. No payment may be 
made for the achievement of cost savings that results in a diminution 
in hospital patient care quality with respect to that performance 
measure.
    (12) Payments are limited in duration and amount. For purposes of 
calculating the actual payments to the physician, cost savings are 
measured by comparing the hospital's actual acquisition costs for the 
items and supplies or costs of providing the specified services that 
are subject to the shared savings program to the hospital's baseline 
costs for the same items, supplies or services during the 1-year period 
immediately preceding the commencement of the program.
    (13) The remuneration to be paid over the term of the arrangement 
(or the formula for the remuneration) is--

[[Page 38606]]

    (i) Set in advance, does not vary during the term of the 
arrangement, and is not determined in a manner that takes into account 
the volume or value of referrals or other business generated between 
the parties;
    (ii) Not based in whole or in part on a reduction in the length of 
stay for a particular patient or in the aggregate for the hospital;
    (iii) Distributed to the physicians in each participating physician 
pool or in each qualified physician organization if the qualified 
physician organization consists of at least five participating 
physicians on a per capita basis with respect to each performance 
measure; and
    (iv) Paid directly to participating physicians or qualified 
physician organizations.
    (14) The remuneration paid to a participating physician or 
qualified physician organization may not include any amount that takes 
into account the provision of a greater volume of Federal health care 
patient procedures or services than the volume provided by the 
participating physician or qualified physician organization during the 
period of the same length immediately preceding the commencement of the 
program as that covered by the payment.
    (15) The hospital maintains accurate and contemporaneous 
documentation of the incentive payment or shared savings program and 
makes such documentation available to the Secretary upon request, 
including, but not limited to, the following:
    (i) The written agreement between the parties;
    (ii) The basis for the selection of the performance measures;
    (iii) The selection and qualifications of the individual or 
organization designated as the independent medical reviewer;
    (iv) The written findings of the independent medical reviewer;
    (v) Corrective actions taken by the hospital based on the written 
findings of the independent medical reviewer (or any other review 
indicating that corrective action was needed);
    (vi) The amount and calculation of payments made under the 
incentive payment or shared savings program, including the hospital's 
projected and actual acquisition costs where relevant;
    (vii) The re-basing of performance measures; and
    (viii) The written notification provided to hospital patients.
    (16) The arrangement does not violate the anti-kickback statute 
(section 1128B(b) of the Social Security Act) or any Federal or State 
law or regulation governing billing or claims submission.

PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES

    16. The authority citation for part 414 continues to read as 
follows:

    Authority: Secs. 1102, 1871, and 1881(b)(l) of the Social 
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(l)).

Subpart B--Physicians and Other Practitioners

    17. Section 414.22 is amended by revising paragraphs (b)(5)(i)(A) 
and (B) to read as follows:


Sec.  414.22  Relative value units (RVUs).

* * * * *
    (b) * * *
    (5) * * *
    (i) * * *
    (A) Facility practice expense RVUs. The facility practice expense 
RVUs apply to services furnished to patients in the hospital, skilled 
nursing facility, community mental health center, or in an ambulatory 
surgical center.
    (B) Nonfacility practice expense RVUs. The nonfacility practice 
expense RVUs apply to services performed in a physician's office, a 
patient's home, a nursing facility, or a facility or institution other 
than a hospital or skilled nursing facility, community mental health 
center, or ASC.
* * * * *
    18. Section 414.50 is amended by--
    A. Revising paragraph (a) introductory text.
    B. Revising paragraphs (a)(1)(i), (a)(2)(ii) and (iii).
    C. Redesignating paragraph (b) as paragraph (c).
    D. Adding new paragraphs (a)(2)(iv) and (b).
    The revisions and additions read as follows:


Sec.  414.50  Physician or other supplier billing for diagnostic tests 
performed or interpreted by an outside supplier or at a site other than 
the office of the billing physician or other supplier.

    (a) General rules. Except as provided for in paragraph (b) of this 
section, for services covered under section 1861(s)(3) of the Act--
    (1) * * *
    (i) The performing supplier's net charge to the billing physician 
or other supplier's actual charge. For purposes of this paragraph 
(a)(1) only, with respect to the TC, the performing supplier is the 
physician who supervised the TC, and with respect to the PC, the 
performing supplier is the physician who performed the PC.
* * * * *
    (2) * * *
    (ii) An ``outside supplier'' does not include a physician who is an 
employee or independent contractor of the billing physician or other 
supplier and who furnishes the test or interpretation to the billing 
physician or other supplier under a reassignment that meets the 
requirements of Sec.  424.80 of this subchapter;
    (iii) The TC of a diagnostic test is not subject to paragraph (a) 
if the TC is both conducted and supervised within the office of the 
billing physician or other supplier and the supervising physician is an 
employee or independent contractor of the billing physician or other 
supplier.
    (iv) The ``office of the billing physician or other supplier'' is 
any medical office space, regardless of number of locations, in which 
the ordering physician or other ordering supplier regularly furnishes 
patient care, and includes space where the billing physician or other 
supplier furnishes diagnostic testing, if the space is located in the 
same building (as defined in Sec.  411.351) in which the ordering 
physician or other ordering supplier regularly furnishes patient care. 
With respect to a billing physician or other supplier that is a 
physician organization (as defined in Sec.  411.351 of this chapter), 
the ``office of the billing physician or other supplier'' is space in 
which the ordering physician provides substantially the full range of 
patient care services that the ordering physician provides generally.
    (b) Exception. Except with respect to the purchase of a TC from an 
outside supplier, the requirements of paragraph (a) of this section do 
not apply to diagnostic tests ordered by a physician in a physician 
organization that does not have any owners who have the right to 
receive profit distributions.
* * * * *
    19. Section 414.65 is amended by revising paragraph (a)(1) to read 
as follows:


Sec.  414.65  Payment for telehealth services.

    (a) * * *
    (1) The Medicare payment amount for office or other outpatient 
visits, consultation, individual psychotherapy, psychiatric diagnostic 
interview examination, pharmacologic management, end-stage renal 
disease related services included in the monthly capitation payment 
(except for one visit per month to examine the access site), and 
individual medical nutrition therapy furnished via an interactive 
telecommunications system is equal to the current fee schedule amount 
applicable for the service of the physician or practitioner. The 
Medicare

[[Page 38607]]

payment amount for follow-up inpatient telehealth consultations 
furnished via an interactive telecommunications system is equal to the 
current fee schedule amount applicable to subsequent hospital care 
provided by a physician or practitioner.
* * * * *
    20. Section 414.67 is amended by adding paragraph (d) to read as 
follows:


Sec.  414.67  Incentive payments for Health Professional Shortage 
Areas.

* * * * *
    (d) HPSA bonuses are payable for services furnished by physicians 
in areas designated as HPSAs as of December 31 of the prior year. 
Physicians furnishing services in areas that are designated as HPSAs 
prior to the beginning of the year but not included on the published 
list of zip codes for which automated HPSA bonus payments are made 
should use the AQ modifier to receive the HPSA bonus payment.

Subpart K--Payment for Drugs and Biologicals Under Part B

    21. Section 414.904 is amended by revising paragraphs (b)(2), 
(c)(2), (d)(3), and (e)(1) to read as follows:


Sec.  414.904  Average sales price as the basis for payment.

* * * * *
    (b) * * *
    (2) Calculation of the average sales price.
    (i) For dates of service before April 1, 2008, the average sales 
price is determined by--
    (A) Computing the sum of the products (for each National Drug Code 
assigned to the drug products) of the manufacturer's average sales 
price and the total number of units sold; and
    (B) Dividing that sum by the sum of the total number of units sold 
for all NDCs assigned to the drug products.
    (ii) For dates of service on or after April 1, 2008, the average 
sales price is determined by--
    (A) Computing the sum of the products (for each National Drug Code 
assigned to such drug products) of the manufacturer's average sales 
price, determined by the Secretary without dividing such price by the 
total number of billing units for the National Drug Code for the 
billing and payment code and the total number of units sold; and
    (B) Dividing the sum determined under clause (A) by the sum of the 
products (for each National Drug Code assigned to such drug products) 
of the total number of units sold and the total number of billing units 
for the National Drug Code for the billing and payment code.
    (iii) For purposes of this subsection and subsection (c), the term 
billing unit means the identifiable quantity associated with a billing 
and payment code, as established by CMS.
    (c) * * *
    (2) Calculation of the average sales price.
    (i) For dates of service before April 1, 2008, the average sales 
price is determined by--
    (A) Computing the sum of the products (for each National Drug Code 
assigned to the drug product) of the manufacturer's average sales price 
and the total number of units sold; and
    (B) Dividing that sum by the sum of the total number of units sold 
for all NDCs assigned to the drug product.
    (ii) For dates of service on or after April 1, 2008, the average 
sales price is determined by--
    (A) Computing the sum of the products (for each National Drug Code 
assigned to such drug products) of the manufacturer's average sales 
price, determined by the Secretary without dividing such price by the 
total number of billing units for the National Drug Code for the 
billing and payment code and the total number of units sold; and
    (B) Dividing the sum determined under clause (A) by the sum of the 
products (for each National Drug Code assigned to such drug products) 
of the total number of units sold and the total number of billing units 
for the National Drug Code for the billing and payment code.
    (d) * * *
    (3) Widely available market price and average manufacturer price. 
If the Inspector General finds that the average sales price exceeds the 
widely available market price or the average manufacturer price by 5 
percent or more in CYs 2005, 2006, 2007, 2008 and 2009, the payment 
limit in the quarter following the transmittal of this information to 
the Secretary is the lesser of the widely available market price or 103 
percent of the average manufacturer price.
    (e) * * *
    (1) * * *
    (i) Treatment of Certain Drugs. Beginning with April 1, 2008, the 
payment amount for--
    (A) Each single source drug or biological described in section 
1842(o)(1)(G) that is treated as a multiple source drug because of the 
application of section 1847A(c)(6)(C)(ii) is the lower of--
    (1) The payment amount that would be determined for such drug or 
biological applying section 1847A(c)(6)(C)(ii); or
    (2) The payment amount that would have been determined for such 
drug or biological if section 1847A(c)(6)(C)(ii) were not applied.
    (B) A multiple source drug described in section 1842(o)(1)(G) 
(excluding a drug or biological that is treated as a multiple source 
drug because of the application of section 1847A(c)(6)(C)(ii)) is the 
lower of--
    (1) The payment amount that would be determined for such drug or 
biological taking into account the application of section 
1847A(c)(6)(C)(ii); or
    (2) The payment amount that would have been determined for such 
drug or biological if section 1847A(c)(6)(C)(ii) were not applied.
* * * * *
    22. Section 414.908 is amended by revising paragraph (a)(3)(xii) to 
read as follows:


Sec.  414.908  Competitive acquisition program.

    (a) * * *
    (3) * * *
    (xii) Agrees not to transport CAP drugs from one practice location 
or place of service to another location except in accordance with a 
written agreement between the participating CAP physician and the 
approved CAP vendor that requires that drugs are not subjected to 
conditions that will jeopardize their integrity, stability, and/or 
sterility while being transported.
* * * * *
    23. Section 414.914 is amended by revising paragraph (f)(12) to 
read as follows:


Sec.  414.914  Terms of contract.

* * * * *
    (f) * * *
    (12) Supply CAP drugs upon receipt of a prescription order to all 
participating CAP physicians who have selected the approved CAP vendor, 
except when the conditions of paragraph (h) of this section or Sec.  
414.916(b) are met;
* * * * *
    24. Section 414.916 is amended by--
    A. Redesignating paragraph (b)(4) as (b)(5).
    B. Adding new paragraph (b)(4).
    The addition reads as follows:


Sec.  414.916  Dispute resolution for vendors and beneficiaries.

* * * * *
    (b) * * *
    (4) Upon notification from CMS of a participating CAP physician's 
suspension from the program, the approved CAP vendor shall cease 
delivery of CAP drugs to the suspended

[[Page 38608]]

participating CAP physician until the suspension has been lifted.
* * * * *
    25. Section 414.917 is amended by revising paragraph (b)(4) to read 
as follows:


Sec.  414.917  Dispute resolution and process for suspension or 
termination of approved CAP contract and termination of physician 
participation under exigent circumstances.

* * * * *
    (b) * * *
    (4) The approved CAP vendor may appeal that termination by 
requesting a reconsideration. A determination must be made as to 
whether the approved CAP vendor has been meeting the service and 
quality obligations of its CAP contract. The approved CAP vendor's 
contract will remain suspended during the reconsideration process.
* * * * *

PART 415--SERVICES FURNISHED BY PHYSICIANS IN PROVIDERS, 
SUPERVISING PHYSICIANS IN TEACHING SETTINGS, AND RESIDENTS IN 
CERTAIN SETTINGS

    26. The authority citation for part 415 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart C--Part B Carrier Payments for Physician Services to 
Beneficiaries in Providers


Sec.  415.130  [Amended]

    27. In Sec.  415.130(d), the phrase ``December 31, 2007'' is 
removed and the phrase ``June 30, 2008'' is added in its place.

PART 424--CONDITIONS FOR MEDICARE PAYMENT

    28. The authority citation for part 424 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart C--Claims for Payment

    29. Section 424.36 is amended by revising paragraphs (a) and (b)(6) 
introductory text to read as follows:


Sec.  424.36  Signature requirements.

    (a) General rule. The beneficiary's own signature is required on 
the claim unless the beneficiary has died or the provisions of 
paragraphs (b), (c), or (d) of this section apply. In order to utilize 
one of the provisions of paragraph (b)(1) through (b)(5), the provider, 
or where applicable, the supplier, must make reasonable efforts to 
obtain the signature of the beneficiary. For purposes of this section, 
``the claim'' includes the actual claim form or such other form that 
contains adequate notice to the beneficiary or other authorized 
individual that the purpose of the signature is to authorize a provider 
or supplier to submit a claim to Medicare for specified services 
furnished to the beneficiary.
    (b) * * *
    (6) An ambulance provider or supplier with respect to emergency or 
non-emergency ambulance transport services, if the following conditions 
and documentation requirements are met.
* * * * *
    30. Section 424.44 is amended by adding paragraph (a)(3) to read as 
follows:


Sec.  424.44  Time limits for filing claims.

    (a) * * *
    (3) Within 30 calendar days of the effective date of a revocation 
of Medicare billing privileges as defined in Sec.  424.535 for 
physician or nonphysician practitioner organizations, physicians, 
nonphysician practitioners or independent diagnostic testing 
facilities.
* * * * *

Subpart D--To Whom Payment Is Ordinarily Made

    31. Section 424.57 is amended by--
    A. Amending paragraph (a) by adding the definitions of ``Continuous 
positive airway pressure (CPAP)'' and ``Sleep test'' in alphabetical 
order.
    B. Adding new paragraph (f).
    The revisions and additions read as follows:


Sec.  424.57  Special payment rules for items furnished by DMEPOS 
suppliers and issuance of DMEPOS supplier billing privileges.

    (a) * * *
    Continuous positive airway pressure (CPAP) device means a machine 
that introduces air into the breathing passages at pressures high 
enough to overcome obstructions in the airway in order to improve 
airflow. The airway pressure delivered into the upper airway is 
continuous during both inspiration and expiration.
* * * * *
    Sleep test means an attended or unattended diagnostic clinical test 
whether performed in or out of a sleep laboratory. The ``provider of 
the sleep test'' is the individual or entity that directly or 
indirectly administers the sleep test and/or provides the sleep test 
device used to administer the sleep test.
* * * * *
    (f) Payment prohibition. A supplier cannot receive Medicare payment 
for a CPAP device if that supplier, or its affiliate, is directly or 
indirectly the provider of the sleep test used to diagnose a 
beneficiary with obstructive sleep apnea.

Subpart P--Requirements for Establishing and Maintaining Medicare 
Billing Privileges

    32. Section 424.502 is amended by adding the definition ``Physician 
or nonphysician practitioner organization'' in alphabetical order to 
read as follows:


Sec.  424.502  Definitions.

* * * * *
    Physician or nonphysician practitioner organization means any 
physician or nonphysician practitioner entity that enrolls in the 
Medicare program as a sole proprietorship or organizational entity such 
as clinic or group practice.
* * * * *


Sec.  424.510  [Amended]

    33. In Sec.  424.510, paragraph (d)(8) is removed.
    34. Section 424.516 is added to read as follows:


Sec.  424.516  Additional provider and supplier requirements for 
enrolling and maintaining active enrollment status in the Medicare 
program.

    (a) Certifying compliance. CMS enrolls and maintains an active 
enrollment status for a provider or supplier when that provider or 
supplier certifies that it meets, and continues to meet, and CMS 
verifies that it meets, and continues to meet, all of the following 
requirements:
    (1) Compliance with title XVIII of the Act and applicable Medicare 
regulations.
    (2) Compliance with Federal and State licensure, certification, and 
regulatory requirements, as required, based on the type of services or 
supplies the provider or supplier type will furnish and bill Medicare.
    (3) Not employing or contracting with individuals or entities that 
meet either of the following conditions:
    (i) Excluded from participation in any Federal health care 
programs, for the provision of items and services covered under the 
programs, in violation of section 1128A(a)(6) of the Act.
    (ii) Debarred by the General Services Administration (GSA) from any 
other Executive Branch procurement or nonprocurement programs or 
activities, in accordance with the Federal Acquisition and Streamlining 
Act of

[[Page 38609]]

1994, and with the HHS Common Rule at 45 CFR part 76.
    (b) Reporting requirements Independent Diagnostic Testing 
Facilities (IDTFs). IDTF reporting requirements are specified in Sec.  
410.33(g)(2) of this part.
    (c) Reporting requirements DMEPOS suppliers. DMEPOS reporting 
requirements are specified in Sec.  424.57(c)(2).
    (d) Reporting requirements for physician and nonphysician 
practitioner organizations (NPP), physicians and nonphysician 
practitioners. Physician groups/organizations, physicians and 
nonphysician practitioners must report to CMS the following information 
within the specified timeframes:
    (1) Within 30 days--
    (i) A change of ownership;
    (ii) Any adverse legal action; or
    (iii) Change in practice location.
    (2) All other changes in enrollment must be reported within 90 
days.
    (e) Reporting requirements for all other providers and suppliers. 
Provider and suppliers not identified in paragraphs (a) through (d) of 
this section, must report to CMS the following information within the 
specified timeframes:
    (1) Within 30 days for a change of ownership, including changes in 
authorized official(s) or delegated official(s);
    (2) All other changes to enrollment must be reported within 90 
days.
    (f) Maintaining documentation. A provider or supplier is required 
to maintain ordering and referring documentation, including the NPI, 
received from a physician or eligible nonphysician practitioner for 10 
years from the date of service. Physicians and nonphysician 
practitioners are required to maintain written ordering and referring 
documentation for 10 years from the date of service.
    35. Section 424.517 is added to read as follows:


Sec.  424.517  Onsite review.

    (a) CMS reserves the right, when deemed necessary, to perform 
onsite review of a provider or supplier to verify that the enrollment 
information submitted to CMS or its agents is accurate and to determine 
compliance with Medicare enrollment requirements. Site visits for 
enrollment purposes do not affect those site visits performed for 
establishing compliance with conditions of participation. Based upon 
the results of CMS's onsite review, the provider may be subject to 
denial or revocation of Medicare billing privileges as specified in 
Sec.  424.530 or Sec.  424.535 of this part.
    (1) Medicare Part A providers. CMS determines, upon on-site review, 
that the provider meets either of the following conditions:
    (i) Is unable to furnish Medicare-covered items or services.
    (ii) Has failed to satisfy any of the Medicare enrollment 
requirements.
    (2) Medicare Part B providers. CMS determines, upon review, that 
the supplier meets any of the following conditions:
    (i) Is unable to furnish Medicare-covered items or services.
    (ii) Has failed to satisfy any or all of the Medicare enrollment 
requirements.
    (iii) Has failed to furnish Medicare covered items or services as 
required by the statute or regulations.
    (b) [Reserved]
    36. Section 424.520 is revised to read as follows:


Sec.  424.520  Effective date of Medicare billing privileges.

    (a) Surveyed, certified or accredited providers and suppliers. The 
effective date for billing privileges for providers and suppliers 
requiring State survey, certification or accreditation is specified in 
Sec.  489.13 of this chapter. If a provider or supplier is seeking 
accreditation from a CMS-approved accreditation organization, the 
effective date is specified in Sec.  489.13(d).
    (b) Independent Diagnostic Testing Facilities. The effective date 
for billing privileges for IDTFS is specified in Sec.  410.33(i) of 
this part.
    (c) DMEPOS suppliers. The effective date for billing privileges for 
DMEPOS suppliers is specified in Sec.  424.57(b) of this subpart and 
section 1834(j)(1)(A) of the Act.
    37. Section 424.530 is amended by--
    A. Revising the section heading as set forth below.
    B. Adding paragraphs (a)(6) and (a)(7).
    The revision and additions read as follows:


Sec.  424.530  Denial of enrollment in the Medicare program.

    (a) * * *
    (6) Overpayment. The current owner (as defined in Sec.  424.502), 
physician or nonphysician practitioner has an existing overpayment at 
the time of filing of an enrollment application.
    (7) Payment suspension. The current owner (as defined in Sec.  
424.502), physician or nonphysician practitioner has been placed under 
a Medicare payment suspension as defined in Sec.  405.370 through Sec.  
405.372 of this subchapter.
* * * * *
    38. Section 424.535 is amended by--
    A. Reserving paragraph (a)(8).
    B. Adding paragraphs (a)(9), (a)(10), and (g).
    C. Revising paragraph (f).
    The additions and revision read as follows:


Sec.  424.535  Revocation of enrollment and billing privileges in the 
Medicare program.

    (a) * * *
    (8) [Reserved]
    (9) Failure to report. The provider or supplier did not comply with 
the reporting requirements specified in Sec.  424.516(d)(1)(ii) and 
(iii) of this subpart.
    (10) Failure to document. The provider or supplier did not comply 
with the documentation requirements specified in Sec.  424.516(f) of 
this subpart.
* * * * *
    (f) Effective date of revocation. Revocation becomes effective 30 
days after CMS or the CMS contractor mails notice of its determination 
to the provider or supplier, except if the revocation is based on 
Federal exclusion or debarment, felony conviction, license suspension 
or revocation, or the practice location is determined by CMS or its 
contractor not to be operational. When a revocation is based on a 
Federal exclusion or debarment, felony conviction, license suspension 
or revocation, or the practice location is determined by CMS or its 
contractor not to be operational, the revocation is effective with the 
date of exclusion or debarment, felony conviction, license suspension 
or revocation or the date that CMS or its contractor determined that 
the provider or supplier was no longer operational.
    (g) Submission of claims for services furnished before revocation. 
A physician organization, physician, nonphysician practitioner or 
independent diagnostic testing facility must submit all claims for 
items and services furnished within 30 calendar days of the effective 
date of revocation.
    39. Section 424.565 is added to read as follows:


Sec.  424.565  Overpayment.

    Failure to report. A physician or nonphysician practitioner 
organization, physician or nonphysician practitioner that does not 
comply with the reporting requirements specified in Sec.  
424.516(d)(1)(ii) and (iii) of this subpart is assessed an overpayment 
back to the date of the adverse legal action or change in practice 
location. Overpayments are processed in accordance with Part 405, 
Subpart C of this chapter.

[[Page 38610]]

PART 485--CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS

    40. The authority citation for part 485 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395(hh)).

Subpart B--Conditions of Participation: Comprehensive Outpatient 
Rehabilitation Facilities

    41. Section 485.58 is amended by revising the introductory text and 
paragraphs (a)(1)(i), and (e)(2) to read as follows:


Sec.  485.58  Condition of participation: Comprehensive rehabilitation 
program.

    These services must be furnished by personnel that meet the 
qualifications set forth in Sec.  485.70 and must be consistent with 
the plan of treatment and the results of comprehensive patient 
assessments.
    (a) * * *
    (1) * * *
    (i) Provide, in accordance with accepted principles of medical 
practice, medical direction, medical care services, consultation, and 
medical supervision of nonphysician staff;
* * * * *
    (e) * * *
    (2) Exceptions. Physical therapy, occupational therapy, and speech-
language pathology services may be furnished away from the premises of 
the CORF including the individual's home when payment is not otherwise 
made under Title XVIII of the Act. In addition, a single home 
environment evaluation is covered if there is a need to evaluate the 
potential impact of the home environment on the rehabilitation goals. 
The single home environment evaluation requires the presence of the 
patient and the physical therapist, occupational therapist, or speech-
language pathologist, as appropriate.
* * * * *
    42. Section 485.70 is amended by--
    A. Revising paragraphs (c), (e), and (j).
    B. Removing paragraph (k).
    C. Redesignating paragraphs (l) and (m) as paragraphs (k) and (l), 
respectively.
    The revision reads as follows:


Sec.  485.70  Personnel qualifications.

* * * * *
    (c) An occupational therapist and an occupational therapy assistant 
must meet the qualifications in Sec.  484.4 of this chapter.
* * * * *
    (e) A physical therapist and a physical therapist assistant must 
meet the qualifications in Sec.  484.4 of this chapter.
* * * * *
    (j) A registered respiratory therapist must--
    (1) Be licensed by the State in which practicing, if applicable; 
and
    (2) Must meet one of the following requirements:
    (i) Has successfully completed the requirements of the Commission 
on the Accreditation of Allied Health Education Programs (CAAHEP) for 
the Advanced Level Therapist and the registry examinations administered 
by the National Board for Respiratory Care.
    (ii) Has successfully completed the requirements of the Commission 
on the Accreditation of Allied Health Education Programs (CAAHEP) for 
the Advanced Level Therapist and is eligible to take the registry 
examination for registered respiratory therapists administered by the 
National Board for Respiratory Therapy, Inc.
    (iii) Has equivalent training and experience as determined by the 
National Board for Respiratory Therapy, Inc. and be eligible to take 
the registry examination for registered respiratory therapists 
administered by the National Board for Respiratory Therapy, Inc.
* * * * *

Subpart H--Conditions of Participation for Clinics, Rehabilitation 
Agencies, and Public Health Agencies as Providers of Outpatient 
Physical Therapy and Speech-Language Pathology Services

    43. Section 485.703 is amended by--
    A. Adding the definition, ``Extension location,'' in alphabetical 
order.
    B. Revising paragraph (2) of the definition of ``rehabilitation 
agency.''
    The addition and revision read as follows:


Sec.  485.703  Definitions.

* * * * *
    Extension location. A location or site from which a rehabilitation 
agency provides services within a portion of the total geographic area 
served by the primary site. The extension location is part of the 
rehabilitation agency. The extension location is located sufficiently 
close to share administration, supervision, and services in a manner 
that renders it unnecessary for the extension location to independently 
meet the conditions of participation as a rehabilitation agency.
* * * * *
    Rehabilitation agency. An agency that--
* * * * *
    (2) Provides at least physical therapy or speech-language pathology 
services.
* * * * *
    44. Section 485.711 is amended by revising paragraphs (b)(3) and 
(c) to read as follows:


Sec.  485.711  Condition of participation: Plan of care and physician 
involvement.

* * * * *
    (b) * * *
    (3) The plan of care and results of treatment are reviewed by the 
physician or by the individual who established the plan at least as 
often as the patient's condition requires, and the indicated action is 
taken. (For Medicare patients, the plan must be reviewed by a 
physician, nurse practitioner, clinical nurse specialist, or physician 
assistant at least every 30 days.)
* * * * *
    (c) Standard: Emergency care. The established procedures to be 
followed by personnel in an emergency cover immediate care of the 
patient, persons to be notified, and reports to be prepared.
    45. Section 485.717 is revised to read as follows:


Sec.  485.717  Condition of participation: Rehabilitation program.

    This condition and standards apply only to a rehabilitation 
agency's own patients, not to patients of hospitals, skilled nursing 
facilities (SNFs), or Medicaid nursing facilities (NFs) to whom the 
agency furnishes services. The hospital, SNF, or NF is responsible for 
ensuring that qualified staff furnish services for which they arrange 
or contract for their patients. The rehabilitation agency provides 
physical therapy and speech-language pathology services to all of its 
patients who need them.
    (a) Standard: Qualification of staff. The agency's therapy services 
are furnished by qualified individuals as direct services and services 
provided under contract.
    (b) Standard: Arrangements for services. If services are provided 
under contract, the contract must specify all of the following:
    (1) Term of the contract.
    (2) The manner of termination or renewal.
    (3) Provisions stating that the agency retains responsibility for 
the control and supervision of the services.

PART 486--CONDITIONS FOR COVERAGE OF SPECIALIZED SERVICES FURNISHED 
BY SUPPLIERS

    46. The authority citation for part 486 continues to read as 
follows:


[[Page 38611]]


    Authority: Secs. 1102, 1138, and 1871 of the Social Security Act 
(42 U.S.C. 1302, 1320b-8, and 1395hh) and section 371 of the Public 
Health Service Act (42 U.S.C 273).

Subpart C--Conditions for Coverage: Portable X-Ray Services

    47. Section 486.104 is amended by--
    A. Revising the introductory text of paragraph (a).
    B. Revising paragraph (a)(1).
    C. Adding paragraph (a)(4).
    The revision and addition read as follows:


Sec.  486.104  Condition for coverage: Qualifications, orientation and 
health of technical personnel.

* * * * *
    (a) Standard-qualifications of technologists. All operators of the 
portable X-ray equipment meet the requirements of paragraph (a)(1) or 
(4) of this section:
    (1) Successful completion of a program of formal training in X-ray 
technology in a school approved by the Joint Review Committee on 
Education in Radiologic Technology (JRCERT), or have earned a 
bachelor's or associate degree in radiologic technology from an 
accredited college or university.
* * * * *
    (4) For those whose training was completed prior to January 1, 
1993, successful completion of a program of formal training in X-ray 
technology in a school approved by the Council on Education of the 
American Medical Association, or by the American Osteopathic 
Association is acceptable.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: June 9, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: June 23, 2008.
Michael O. Leavitt,
Secretary.

    Note: These addenda will not appear in the Code of Federal 
Regulations.

Addendum A: Explanation and Use of Addenda B

    The addenda on the following pages provide various data 
pertaining to the Medicare fee schedule for physicians' services 
furnished in 2009. Addendum B contains the RVUs for work, non-
facility PE, facility PE, and malpractice expense, and other 
information for all services included in the PFS.
    In previous years, we have listed many services in Addendum B 
that are not paid under the PFS. To avoid publishing as many pages 
of codes for these services, we are not including clinical 
laboratory codes or the alpha-numeric codes (Healthcare Common 
Procedure Coding System (HCPCS) codes not included in CPT) not paid 
under the PFS in Addendum B.

Addendum B--2009 Relative Value Units and Related Information Used in 
Determining Medicare Payments for 2009

    This addendum contains the following information for each CPT 
code and alpha-numeric HCPCS code, except for: Alpha-numeric codes 
beginning with B (enteral and parenteral therapy), E (durable 
medical equipment), K (temporary codes for nonphysicians' services 
or items), or L (orthotics); and codes for anesthesiology. Please 
also note the following:
     An ``NA'' in the ``Non-facility PE RVUs'' column of 
Addendum B means that CMS has not developed a PE RVU in the non-
facility setting for the service because it is typically performed 
in the hospital (for example, an open heart surgery is generally 
performed in the hospital setting and not a physician's office). If 
there is an ``NA'' in the non-facility PE RVU column, and the 
contractor determines that this service can be performed in the non-
facility setting, the service will be paid at the facility PE RVU 
rate.
     Services that have an ``NA'' in the ``Facility PE 
RVUs'' column of Addendum B are typically not paid using the PFS 
when provided in a facility setting. These services (which include 
``incident to'' services and the technical portion of diagnostic 
tests) are generally paid under either the outpatient hospital 
prospective payment system or bundled into the hospital inpatient 
prospective payment system payment.
    1. CPT/HCPCS code. This is the CPT or alpha-numeric HCPCS number 
for the service. Alpha-numeric HCPCS codes are included at the end 
of this addendum.
    2. Modifier. A modifier is shown if there is a technical 
component (modifier TC) and a professional component (PC) (modifier-
26) for the service. If there is a PC and a TC for the service, 
Addendum B contains three entries for the code. A code for: The 
global values (both professional and technical); modifier-26 (PC); 
and, modifier TC. The global service is not designated by a 
modifier, and physicians must bill using the code without a modifier 
if the physician furnishes both the PC and the TC of the service.
    Modifier-53 is shown for a discontinued procedure, for example a 
colonoscopy that is not completed. There will be RVUs for a code 
with this modifier.
    3. Status indicator. This indicator shows whether the CPT/HCPCS 
code is in the PFS and whether it is separately payable if the 
service is covered.
    A = Active code. These codes are separately payable under the 
PFS if covered. There will be RVUs for codes with this status. The 
presence of an ``A'' indicator does not mean that Medicare has made 
a national coverage determination regarding the service. Carriers 
remain responsible for coverage decisions in the absence of a 
national Medicare policy.
    B = Bundled code. Payments for covered services are always 
bundled into payment for other services not specified. If RVUs are 
shown, they are not used for Medicare payment. If these services are 
covered, payment for them is subsumed by the payment for the 
services to which they are incident (an example is a telephone call 
from a hospital nurse regarding care of a patient).
    C = Carriers price the code. Carriers will establish RVUs and 
payment amounts for these services, generally on an individual case 
basis following review of documentation, such as an operative 
report.
    D* = Deleted/discontinued code.
    E = Excluded from the PFS by regulation. These codes are for 
items and services that CMS chose to exclude from the fee schedule 
payment by regulation. No RVUs are shown, and no payment may be made 
under the PFS for these codes. Payment for them, when covered, 
continues under reasonable charge procedures.
    F = Deleted/discontinued codes. (Code not subject to a 90-day 
grace period.) These codes are deleted effective with the beginning 
of the year and are never subject to a grace period. This indicator 
is no longer effective beginning with the 2005 fee schedule as of 
January 1, 2005.
    G = Code not valid for Medicare purposes. Medicare uses another 
code for reporting of, and payment for, these services. (Codes 
subject to a 90-day grace period.) This indicator is no longer 
effective with the 2005 PFS as of January 1, 2005.
    H* = Deleted modifier. For 2000 and later years, either the TC 
or PC shown for the code has been deleted and the deleted component 
is shown in the database with the H status indicator.
    I = Not valid for Medicare purposes. Medicare uses another code 
for the reporting of, and the payment for these services. (Codes not 
subject to a 90-day grace period.)
    L = Local codes. Carriers will apply this status to all local 
codes in effect on January 1, 1998 or subsequently approved by 
central office for use. Carriers will complete the RVUs and payment 
amounts for these codes.
    M = Measurement codes, used for reporting purposes only. There 
are no RVUs and no payment amounts for these codes. Medicare uses 
them to aid with performance measurement. No separate payment is 
made. These codes should be billed with a zero (($0.00) charge and 
are denied) on the MPFSDB.
    N = Non-covered service. These codes are noncovered services. 
Medicare payment may not be made for these codes. If RVUs are shown, 
they are not used for Medicare payment.
    R = Restricted coverage. Special coverage instructions apply. If 
the service is covered and no RVUs are shown, it is carrier-priced.
    T = There are RVUs for these services, but they are only paid if 
there are no other services payable under the PFS billed on the same 
date by the same provider. If any other services payable under the 
PFS are billed on the same date by the same provider, these services 
are bundled into the service(s) for which payment is made.
    X = Statutory exclusion. These codes represent an item or 
service that is not within the statutory definition of ``physicians' 
services'' for PFS payment purposes. No

[[Page 38612]]

RVUs are shown for these codes, and no payment may be made under the 
PFS. (Examples are ambulance services and clinical diagnostic 
laboratory services.)
    4. Description of code. This is an abbreviated version of the 
narrative description of the code.
    5. Physician work RVUs. These are the RVUs for the physician 
work for this service in 2009. Note: The separate BN adjustor is not 
reflected in these physician work RVUs.
    6. Fully implemented non-facility practice expense RVUs. These 
are the fully implemented resource-based PE RVUs for non-facility 
settings.
    7. Transitional Non-facility practice expense RVUs. These are 
the 2009 resource-based PE RVUs for non-facility settings.
    8. Fully implemented facility practice expense RVUs. These are 
the fully implemented resource-based PE RVUs for facility settings.
    9. Transitional facility practice expense RVUs. These are the 
2009 resource-based PE RVUs for facility settings.
    10. Malpractice expense RVUs. These are the RVUs for the 
malpractice expense for the service for 2009.
    11. Global period. This indicator shows the number of days in 
the global period for the code (0, 10, or 90 days). An explanation 
of the alpha codes follows:
    MMM = Code describes a service furnished in uncomplicated 
maternity cases including antepartum care, delivery, and postpartum 
care. The usual global surgical concept does not apply. See the 1999 
Physicians' Current Procedural Terminology for specific definitions.
    XXX = The global concept does not apply.
    YYY = The global period is to be set by the carrier (for 
example, unlisted surgery codes).
    ZZZ = Code related to another service that is always included in 
the global period of the other service. (Note: Physician work and PE 
are associated with intra service time and in some instances in the 
post service time.
    *Codes with these indicators had a 90-day grace period before 
January 1, 2005.

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 [FR Doc. E8-14949 Filed 6-30-08; 8:45 am]
BILLING CODE 4120-01-C